Transportation Asset Management Webinar Series Webinar 28: Financial Plans

Transcription

1 Transportation Asset Management Webinar Series Webinar 28: Financial Plans Sponsored by FHWA and AASHTO Webinar 28 October 11,

2 FHWA-AASHTO Asset Management Webinar Series This is the 28 th in a webinar series that has been running for five years Webinars are held every two months, on topics such as offsystem assets, asset management plans, asset management and risk management, and more Submit your questions using the webinar s Q&A feature Next webinar Wednesday December 13, :00 PM EST Elements of a Transportation Asset Management Plan: TAM Process Improvements 2

3 Welcome FHWA and the AASHTO Sub-Committee on Asset Management are pleased to sponsor this webinar Sharing knowledge is a critical component of advancing asset management practice This webinar provides information from state DOT, private sector, and national-level research perspectives 3

4 TAM Financial Plan & Investment Strategies States required to prepare transportation asset management plans for NHS pavement and bridges: Must include a financial plan that spans at least ten years and identifies funding and costs over that time Must include investment strategies for improving or preserving asset condition and achieving targets FHWA defines financial plan as: a long-term plan spanning 10 years or longer, presenting a State DOT s estimates of projected available financial resources and predicted expenditures in major asset categories that can be used to achieve State DOT targets for asset condition during the plan period, and highlighting how resources are expected to be allocated based on asset strategies, needs, shortfalls, and agency policies. FHWA defines investment strategies as: a set of strategies that result from evaluating various levels of funding to achieve State DOT targets for asset condition and system performance effectiveness at a minimum practicable cost while managing risks. 4

5 Available Resources TAMP Financial Plan Interim Guidance FHWA Asset Management Financial Report Series NHI asset management financial planning webbased course (instructor-led course to follow ) Visit FHWA s Asset Management homepage to learn more: 5

6 Webinar Overview Today s presentation includes three perspectives on TAMP development, focusing on TAM financial plans and investment strategies Each of our presenters is helping to advance the state of the practice We will hear about the challenges and opportunities related to developing a transportation asset management plan and TAM financial plan We will hear about current national-level research, relevant to those agencies engaged in this work Presentations will highlight both successful approaches and some important lessons learned 6

7 Learning Objectives Building working knowledge of key concepts and definitions relevant to TAM financial plans and investment strategies Understanding specific approaches to bringing these elements together in the process of developing a TAMP that meets federal requirements Beginning to apply this knowledge in order to answer: How can agencies develop appropriate estimates of future costs and funding? How can states develop financial plans and investment strategies based on the data available? What are the key lessons-learned for agencies seeking to develop an asset management plan that meets federal requirements? SHARE LESSONS LEARNED, IDEAS, KNOWLEDGE!!! 7

8 Webinar Agenda 2:00 Webinar Introduction and Overview Hyun-A Park (Spy Pond Partners, LLC) 2:15 Topic Introduction and Update on NCHRP Project 19-12: Guide for Financial Planning and Management in Support of Transportation Asset Management Bill Robert (Spy Pond Partners, LLC) 2:35 Colorado Perspective William Johnson (Colorado Department of Transportation) 2:55 Oklahoma Perspective Matthew Swift (Oklahoma Department of Transportation) 3:15 Q&A and Wrap Up 8

9 Introduction to TAMP Financial Planning and Overview of NCHRP Project October 11, 2017 Spy Pond Partners, LLC

10 Agenda TAMP Financial Planning Requirements NCHRP Project Overview NCHRP Guide Contents NCHRP Web Tool 10

11 TAMP Financial Plan Definition a long-term plan spanning 10 years or longer, presenting a State DOT s estimates of projected available financial resources and predicted expenditures in major asset categories that can be used to achieve State DOT targets for asset condition during the plan period, and highlighting how resources are expected to be allocated based on asset strategies, needs, shortfalls, and agency policies. Source: 23 CFR

12 Required Financial Plan Components Estimated cost of expected future work by year and work type Estimated funding levels that are expected to be reasonably available by year Identification of anticipated funding sources Estimated value of pavement and bridge assets and the needed investment on an annual basis to maintain the value of these assets 12

13 TAMP Investment Strategies Definition a set of strategies that result from evaluating various funding levels of funding to achieve State DOT targets for asset condition and system performance effectiveness at a minimum practicable cost while managing risks. Source: 23 CFR

14 Required Investment Strategies Components Description of how the investment strategies are influenced by: Performance gap analysis Life cycle planning Risk management analysis Anticipated available funding and estimated cost of expected future work types 14

15 NCHRP Project Objectives Prepare a guidebook that supports efficient use of resources and helps agencies meet requirements for transportation asset management plan (TAMP) financial plans Provide direction on: The estimated cost of expected future work to implement investment strategies in the TAMP The estimated funding levels expected to be available to address the costs of future work types Identification of anticipated funding sources An estimate of the value of the agency's pavement and bridge assets and the investment needed to maintain the value of these assets in order to ensure financial sustainability 15

16 NCHRP Project Team Spy Pond Partners KPMG University of Texas, Center for Transportation Research 16

17 NCHRP Project Tasks Phase I Kickoff and Fact Finding Task 1. Discuss the Work Plan and Technical Issues Task 2. Conduct Literature Review of Available Guidance/Practice Task 3. Develop Annotated Guidebook Outline and Interim Report Phase II Initial Draft Guidebook and Stakeholder Consultation Task 4. Deliver the 1st Draft Guidebook and Interim Report Phase III Field Validation and Final Guidebook Task 5. Field Validate the Draft Guidebook Task 6. Deliver the 2nd Draft Guidebook and Report Task 7. Deliver All Final Products 17

18 NCHRP Project Current Status Submitted first draft of the guide in January 2017 Recent activities focused on Task 5 Field Validation Field validation test with two states (Colorado and Minnesota) Additional case studies profiling examples of relevant practices Now finalizing the second draft of the guidance Comments on the first draft Results of Task 5 Web tool description Expect to complete the project in 2017, publish in

19 NCHRP Project Guide Structure 19

20 Sources & Uses Basic Assumptions Sources will at a minimum include federal and state funds Many agencies will limit their TAMP to capital funds but some may include maintenance/operating funds as well Important to document assumptions concerning maintenance and operations even if this is not explicitly included in the TAMP May be a challenge to establish uses by NHS vs.non-nhs Asset type Action/investment type 20

21 Sources & Uses Fundamentals Discussed in the Guide Sources Federal funds State funds Toll revenues Bonds Other Uses Asset management uses Capital vs. non-capital expenses Fixed vs. variable costs Selecting sources and uses for a financial plan 21

22 Sources & Uses Recommended Steps 1. Determine the scope of the TAMP 2. Establish sources 3. Establish uses 4. Structure the sources and uses list 5. Validate the list 6. Document constraints 7. Document assumptions about fixed costs 22

23 Financial Forecasting Basic Assumptions DOTs already project financial resources when developing STIPs, however STIPs projections are more limited in scope 6 years rather than 10 Not delineated by NHS/non-NHS May or may not include all of the sources and uses relevant to the TAMP (e.g., may not include all maintenance funds) 23

24 Financial Forecasting Fundamentals Discussed in the Guide Forecasting sources Trend extrapolation Expert analysis Econometric models Forecasting uses summarizes FHWA guidance regarding financial forecasts Documenting assumptions Treatment of inflation Handling of uncertainty 24

25 Financial Forecasting Recommended Steps 1. Establish roles and responsibilities 2. Review prior forecasts 3. Forecast revenues 4. Forcecast non-asset management uses 5. Determine available funding for asset management uses 6. Document key assumptions 25

26 Investment Strategies & Scenarios Basic Assumptions The TAMP financial plan and investment strategy are tightly linked Final financial plan is the result of the investment strategy rather than an input to its development Need to accommodate various approaches to investment strategies Top down approach emphasizing use of management system Bottom up approach based selecting projects across asset/investment types Two scenarios required at a minimum expected funding and funding required to achieve agency goals Agency may wish to examine other scenarios 26

27 Investment Strategies & Scenarios Fundamentals Discussed in the Guide Role of management systems Cross-asset resource allocation Multi-objective decision analysis (MODA) Delphi approach Other considerations Scenario planning Organizing investment categories Project types and complexity 27

28 Investment Strategies & Scenarios Recommended Steps 1. Define investment scenarios 2. Identify current and planned projects 3. Use management systems to predict future conditions 4. Perform initial budget allocation 5. Identify candidate projects 6. Select projects 7. Revise prediction of future condition 8. Finalize funding levels by use 9. Perform gap assessment 10. Document assumptions and investment strategy 28

29 Asset Valuation Basic Assumptions DOTs already perform some form of asset valuation to comply with GASB 34 Most agencies use the standard approach of calculating historic costs and depreciating these using straight line depreciation The GASB 34 modified approach in theory provides a direct calculation of the cost to maintain value Approach used to asset valuation for the TAMP may differ from that used for GASB 34 reporting 29

30 Asset Valuation Fundamentals Discussed in the Guide GASB 34 and accounting terms GASB 34 Accounting terms and methods Alternatives to the GASB 34 standard approach GASB 34 modified approach Depreciated replacement cost Economic value Market value Selecting the best approach Risk and sustainability Customer and stakeholder communication Rationale for use of depreciated replacement cost 30

31 Asset Valuation Recommended Steps 1. Obtain or calculate the GASB 34 value 2. Calculate depreciated replacement cost 3. Vet the methods 4. Document the calculation using the preferred method 5. Incorporate into the 10-year financial plan 31

32 NCHRP Project TAMP Financial Planner Web toolkit to help support TAMP financial planning Use cases supported Defining sources and uses Communicating projected revenues and expenditures Calculating asset value using the replacement value approach Visualizations Flow diagram illustrating an agency s current budget by source and use Pie charts and bar charts illustrating projected revenues and expenditures Pie charts illustrating asset replacement value and current asset value 32

33 TAMP Financial Planner Example Configuration Screen 33

34 TAMP Financial Planner Example Data Entry 34

35 TAMP Financial Planner Example Results 35

36 TAMP Financial Plan October

37 CDOT Overview $1.43 BILLION BUDGET 2

38 Overview 3

39 RB AMP Content: TAMP Overview Executive Summary 1: Introduction 2: Value to Citizens 3: Asset Inventory and Condition 4: Asset Management Performance Measures and Targets 5: Current Asset Management Processes 6: Life Cycle Cost Considerations 7: Incorporating Risk into the Asset Management Program 8: Financial Plan 9: Investment Strategies 10: Asset Management Gap Assessment 11: Asset Management Implementation Plan 12: RB AMP Governance Appendices Assets Included: Pavement, Structures, Culverts, MLOS, Buildings, ITS Equipment, Roadway Equipment, Tunnels, and Rockfall Mitigation Sites 4

40 Initial Development 5

41 CDOT TAMP Financial Planning Chapter Overview Historic Funding Levels analysis of the past 10 years of total funding and TAM specific funding. Revenue Overview describes the fees and taxes that flow to CDOT. Includes summary of the Colorado Bridge Enterprise and explanation of expenditure based programming. Funds Expected To Be Available for Asset Management Future Funding By Asset Type planning budgets Financial Sustainability informed by previous sections Investment Strategies covered in separate chapter. Description of the business rules for treatment selection and prioritization Performance Metrics covered in separate chapter. 6

42 Historic Funding Levels Obtained from past budgets. 7

43 Revenue Overview 8

44 Program Distribution Covers expected TAM funds, future funding by asset type, and financial sustainability. 9

45 Investment Strategies 10

46 Performance Metrics 11

47 Things Missing Asset Valuation Previous study: Use value of the Highway system in Colorado: $55 Billion in 2011 & supports 128,000 jobs. More recently Asset valuation is the process of estimating the current monetary value of an agency s assets. Asset values deteriorate during service due to ageing, usage, damage, and obsolescence. Usually, current asset value is not equal to replacement costs. It accounts deterioration. It does not also include Use/Service Values. 12

48 Things Missing Valuation General Approach Reviewed industry/other agency practices. Compared alternative approaches to valuation. Evaluated existing Asset information and data. The recommended approach is: Current Asset Value Gross Replacement Cost adjusted for: Age Condition Quality/Features Obsolescence Inflation Other factors The methodology is different from GASB34. 13

49 Things Missing Financial Risks Consequence Score Other Considerations Risk Level Asset Class Event/Occurrence Likelihood Safety Mobility Asset Damage Other Financial Impact Funding Insurance Regulatory Political Reputation Risk Score Risk Management Strategy (Treat, Tolerate, Transfer, Terminate) Benefit in % Risk Score Reduction Annual Cost of Strategy -- $mm Owner Agency All With limited and variable funding CDOT may not be able to meet CDOT established targets in the desired timeframe x x x x 19.5 Tolerate if we don't have funding to meet targets, we can only tolerate 0.0% 0.0 TC decision if CDOT does this Agency All Are the targets the right targets, and are the targets set by FHWA x x x x 19.5 Treat move funding from capacity projects or other assets or programs to meet these targets 50.0% TC decision if CDOT does this Agency All Reprioritization among programs x x x 10.4 Tolerate 0.0% 0.0 Exec Dir or Gov or TC Agency Agency All All Investment does not result in anticipated performance over time Local control of off system NHS segments (10% of the system), however CDOT is responsible for the meeting the overall statewide performance target for the system x x x x x x x 3.0 Treat actively evaluate investment and results over time and identify early warning signs that performance is appearing to be less than expected Treat by putting more of our money into our pavement and bridges to get the overall condition higher 50.0% 0.2 Asset Managers 40.0% 24.0 TC decision Agency All MPO selects a lower target (worse condition) than CDOT for on system roads in their boundary x x 2.2 Tolerate 0.0% 0.0 DTD Director 14

50 Implementation/Things That Changed TAM Budget Setting Process *Wideband Delphi Methodology Asset Investment Management System Performance Scenarios Planning Budget 15

51 Implementation/Things That Changed Project Selection Process need more than investment strategies. 16

52 Implementation/Things That Changed Metric Refinement 17

53 Implementation/Things That Changed 18

54 Other Notable Things Staff changes Last rat standing Documentation of process decisions/ fixes Communication most important is the history $ TAM is the largest construction pot at CDOT Effects of bonding initiatives Financial need for target achievement 19

55 Contact William Johnson Performance and Asset Management Branch Manager Risk-Based Asset Management Plan

56 ODOT TAMP Financial Planning FHWA/AASHTO TAM Webinar 28 October 11, 2017 Matthew Swift PE, MBA Strategic Asset & Performance Management Division Engineer Oklahoma Department of Transportation

57 Oklahoma Department of Transportation (ODOT) Transportation Asset Management Plan Project Objectives Develop the federally compliant Transportation Asset Management Plan (TAMP) Improve TAM practice throughout ODOT Identify strategies that will improve Oklahoma s asset performance given the resources available 37 37

58 ODOT Mission and Goals 38

59 ODOT Goal Infrastructure Preservation Oklahoma bridges have historically been ranked near bottom in national bridge condition reports. The DOT embarked on focused effort to address structurally deficient and functionally obsolete bridges. Oklahoma roads have evolved over time to support new vehicle types, heavier loads, increased traffic, and higher speeds. Preservation activities are necessary and a priority for Oklahoma to effectively manage the life-cycle of roads

60 TAM Mission Statement The ODOT Transportation Asset Management Program will optimize financial resources in a data-driven, risk-based decisionmaking process that maintains and improves the State s transportation infrastructure in a publically accountable manner. 40

61 TAMP Scope TAMP Assets Pavement Bridge 41

62 ODOT TAMP Project Phases Phase 1 (11/16 1/17) Current Practices, Systems, and Data Phase 2 (2/17 8/17) Desired Results and Priorities Phase 3 (9/17 4/18) TAMP Building and Roadmap Phase 4 (2/18 ongoing) TAMP Implementation 42

63 Sequence of Key Activities TAMP Workshops 1 TAM Primer 7 TAMP Building 2 Performance Measures 3 Pavement Management 6 Financial Planning 5 Risk Management 4 Bridge Management 43

64 Financial Plan and Investment Workshop July 25, 2017 Strategies

65 Financial Plan and Investment Strategies Workshop Historic Budget 45

66 Financial Plan and Investment Strategies Workshop Historic Budget (cont.) 46

67 Financial Plan and Investment Strategies Workshop All Project Spending PROGRAM Pavement Bridge Other NHS V. NON-NHS NHS Non-NHS Other 10% Pavement 42% Non-NHS 52% NHS 48% Bridge 48% 47

68 Financial Plan and Investment Strategies Workshop 2017 Construction Work Plan PROGRAM Pavement Bridge Other Other 18% Pavement 28% Bridge 54% 48

69 Financial Plan and Investment Strategies Workshop Sources: 10-Year Revenue Forecast 8-Year Construction Work Plan Description Sources Federal Funds Nat'l Hwy Perf Prgm Surf Trans Block Grant Toll Credits Other State Funds Income Tax (ROADS) Motor Fuel Tax Turnpike Other Total 1,534 1,577 1,577 1,576 1,574 1,572 1,571 1,566 1,563 1,562 49

70 Financial Plan and Investment Strategies Workshop Uses: Pavement + Bridge Baseline Division 1 Division 2 Division 3 Division 4 Division 5 Division 6 Division 7 Division 8 Total Pavement Major % 9.5% 9.6% 13.7% 21.7% 8.3% 6.3% 9.9% 20.9% 100.0% Pavement Major $ (Pavement Workshop) $ 49.2 $ 49.7 $ 70.9 $ $ 43.1 $ 32.5 $ 51.2 $ $ Pavement Major % 9.5% 9.6% 13.7% 21.7% 8.3% 6.3% 9.9% 20.9% 100.0% Pavement Major $ (Actual Historic) $ 31.9 $ 32.2 $ 46.0 $ 72.8 $ 28.0 $ 21.1 $ 33.2 $ 69.9 $ Pavement Minor % 9.0% 11.8% 13.9% 15.5% 13.9% 9.3% 10.6% 16.0% 100.0% Pavement Minor $ $ 10.5 $ 13.8 $ 16.3 $ 18.1 $ 16.3 $ 10.9 $ 12.4 $ 18.7 $ Bridge % 9.5% 9.6% 13.7% 21.7% 8.3% 6.3% 9.9% 20.9% 100.0% Bridge $ $ 45.3 $ 45.8 $ 65.3 $ $ 39.7 $ 29.9 $ 47.2 $ 99.3 $ CWP 9.5% 9.6% 13.7% 21.7% 8.3% 6.3% 9.9% 20.9% 100.0% CWP $ $ $ $ 1,384.0 $ $ $ $ 1,328.0 $ 6,364.0 CWP Annual Avg $ $ $ $ $ $ $ $ $

71 Financial Plan and Investment Strategies Workshop Uses: Available TAMP Funding = ~$1B Annual $ APP 12% Maint 8% CWP 80% CWP APP Maint 51

72 Financial Plan and Investment Strategies Workshop Pavement Needs Predicted Performance: Interstate (Stateline Baseline Budget) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Sum of Good LM Sum of Fair LM Sum of Poor LM Average of Wtd Avg PQI

73 Financial Plan and Investment Strategies Workshop Pavement Needs (cont.) Predicted Performance: Non- IS NHS (Statewide Baseline Budget) 100% 95 90% 80% 70% % 80 50% 40% 75 30% 20% 10% 0% Series1 Series2 Series3 Series

74 Financial Plan and Investment Strategies Workshop Pavement Needs (cont.) Predicted Performance: Non- NHS (Statewide Baseline Budget) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Series1 Series2 Series3 Series

75 Financial Plan and Investment Strategies Workshop Bridge Needs Average Condition - All Bridges - Existing Funding Percent of Area Poor Fair Good Year 55

76 Financial Plan and Investment Strategies Workshop Exercises 1. Baseline Spending, State of Good Repair Step 1: Review Baseline Assumptions & Allocations Step 2: Review Bridge and Pavement Results Step 3: Discuss ODOT s Desired State of Repair 2. Years of Drought 25% Budget Cuts Step 1: Review Years of Drought Assumptions & Allocations Step 2: Review Bridge and Pavement Results Step 3: Discuss ODOT s Reduced State of Repair 3. Division Level Investment Strategies Step 1: Field Division Level Analysis Step 2: Field Division Notebooks 56

77 Financial Plan and Investment Strategies Workshop Exercise Outcomes Baseline Spending, State of Good Repair Generally agree with performance forecasts Underlying data needs to improve Years of Drought 25% Budget Cuts Statewide forecast looks reasonable Division level forecasts need to be examined further due to unspent funds in some divisions Division Level Investment Strategies Focus on keeping interstates and freight corridors in good condition Support state target of 1% SD bridges Try to maintain pavement conditions Build program from the bottom up, using a combination of division notebooks, field recommendations, supplemental inspections, to scope projects 57

78 Funding Cuts

79 Oklahoma Transportation Commission Cuts Funding Reduction in state revenue forces cuts in transportation funding New eight year Construction Work Plan (CWP) approved on October 2, 2017 Project cuts and delays in new CWP NBIAS 59

80 Implications for the TAMP Rerun pavement and bridge scenarios with the new funding forecasts Review investment strategies Evaluate impacts of funding cuts Update information already generated for the financial plan After Financial Workshop in July, knew that a new funding forecast was being generated so development of the TAMP was put on hold until the new funding forecasts were known NBIAS 60

81 Oklahoma Department of Transportation TAMP Questions? Matthew Swift PE, MBA Strategic Asset & Performance Management Division Engineer Oklahoma Department of Transportation 200 NE 21st ST, Room 3-A7 Oklahoma City, OK Office (405) Cell (405) Fax (405)

82 Questions? Submit your questions using the webinar s Q&A feature 62

83 All webinars available online: Webinar 29 Elements of a Transportation Asset Management Plan: Process Improvements Wednesday, December 13, :00 PM EST 63