Toll Road Asset Management and the Linkage to Finance

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Nov 18, 2013 (3 years and 8 months ago)

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Toll Road Asset Management and the
Linkage to Finance

Transportation Innovations, Inc.

11/19/2013

1

US Toll Roads


Many were built 30
-
50 years ago and portions are nearing
the end of their productive lifecycle; as a result, capital
and maintenance costs are accelerating.


Many agencies are fiscally constrained and operating in a
political environment that where no ribbons are cut for
maintenance


Lower VMT and lower returns on investments are
reducing agency revenues.


Some have inflexible labor agreements in place that may
limit the ability to contract out services or cross
-
utilize
staff.

2

Taking an Assessment


Measures of comparability


Strategic planning process


Asset management practices


Financial planning process


Financial position


Capital program development

3

Revenue Per Lane Mile

4

Revenue per Lane Mile (Thousand $)
$416
$407
$342
$242
$227
$180
$159
$-
$100
$200
$300
$400
$500
Illinois Tollway
New Jersey Turnpike
Florida’s Turnpike
Mass. Turnpike
Penn. Turnpike
New York Thruway
Ohio Turnpike

O&M Staff/Costs Comparisons

# of Staff per Lane Mile

O&M Costs per Lane Mile

5

0.00
0.20
0.40
0.60
0.80
New York
State…
Illinois
Tollway
Ohio
Turnpike
Penn.
Turnpike
Mass.
Turnpike
0.79

0.76

0.69

0.66

0.63

O&M workers per lane mile

Snow and Ice Removal

6

$
-
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
New Jersey Turnpike
Ohio Turnpike
New York State Thruway
Mass Turnpike
Penn. Turnpike
$6,042
$5,409
$5,374
$4,149
$3,071
Snow and Ice Removal per Lane Mile
Revenue / Maintenance Costs

7

Gross Revenue/Operations & Maintenance
Expenses (per lane mile)
3.90
2.40
1.95
1.79
1.68
1.64
1.50
0.00
1.00
2.00
3.00
4.00
5.00
Florida's Turnpike
Illinois Tollway
Ohio Turnpike
New Jersey Turnpike
New York Thuway
Penn. Turnpike
Mass.Turnpike
Strategic Planning and Asset
Management



Governing Board needs to lead strategic planning


The agency needs:


An integrated financial planning model


An asset management program that supports
rehabilitation scope development to optimize investment
decisions


A capital planning and maintenance program that is tied
to the ability to finance


Management processes and integrated systems

8

Strategy, Asset Management

and Measurement

Asset
Management
Performance
Measurement
Strategic
Planning
9

Good strategic planning, performance measurement and asset
management processes reinforce each other.

Recommended Framework


Performance Reports and Reviews
Develop Business Plans and
Annual Contracts Program
Set Performance Targets
Establish
Executive Action Plan
Strategic

Plan
5
-
10
years
4
-
5
years
1
-
2
years
Qrtrly
10

The Board

Executive Team

Division and

Department Heads

Steps to an Integrated

Approach


The Governing Board should lead an effort to
develop a strategic plan that establishes a
vision and guiding principles


Develop a implementation plan for the
strategic initiatives


Asset management


Maintenance program


Capital program


Financial plan


Establish performance measures

11

Financial
Model



12

Capital

Planning

Model

Interest Rates

Bond Issuance

Existing Debt Service

Projected O & M
Expense

Capital Cost

Const. Schedules

Bank Line / Commercial

Paper Program

Capital Budget Reports

Sources and
Uses

of Funds

Projected Toll

Revenues

Debt Service Reports

General Assumptions

Strategic Plans

Capital Budget

Requirements

Board/Staff

Fin. Advisor

Engineers

Traffic Engr.

Model Output


Revenue /

Debt Service Reports


(Financial Capacity)

Integrated


Planning


Model

Preserving the Asset and Financing
Improvements


Preserving the asset


Asset Condition


Maintenance program


Rehabilitation component of the capital program


Determine the ability to fund operating programs and issue
new debt


Determine the need for toll increases in the future


Develop the ability to test various scenarios on a long term
basis

13

Financial Assessment

10-Year Financial Capacity Projection
$-
$100.0
$200.0
$300.0
$400.0
$500.0
$600.0
$700.0
$800.0
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Fiscal Year
Millions of Dollars
0.00
0.50
1.00
1.50
2.00
2.50
Coverage Ratio
New
Planned
Debt
Existing
Debt
Service
Net
Revenue
Coverage
Covenant
Debt
Service
Coverage
Ratio
14

Best Practices


Benefits of good Asset Management practices:


Builds objective case for additional funding


Empowers defensible & efficient decision
-
making


Improves financial stability (and bond ratings);


Increases sustainability and efficiency;


Characteristics of good Asset Management:


Is customized; Allows evolution & incremental implementation;


Encompasses many business processes & specific assets;


Draws from economics as well as engineering;


Is strategic (Policy
-
driven / Performance
-
based) & long
-
range;


Provides complete & up
-
to
-
date information (for all audiences);


Is followed by solid project delivery & monitoring;

15

Considerations for Improving

A
sset Management


Conduct Asset Management Business Improvement Study


Conduct comprehensive valuation of unconstrained asset
needs and strategy for communicating need to audiences


Document the project prioritization process.


Establish equipment utilization standards


Implement decision support tools


Communicate project prioritization & progress


Review and monitor regular progress against established
performance measures.

16

Best Practices

17

Best practices of nine forerunners in a 2007 AASHTO study of project delivery
statistics from 20 DOTs


Cost Performance Best Practices:


Learn from past mistakes;


Leadership must care about controlling project costs.


Accurate estimates come from well coordinated construction
and pre
-
construction processes.


Measure cost performance monthly or quarterly against
stated goals.


Track causes of overruns and make sure that information gets
shared.


Use monthly progress meetings to keep staff accountable.


Do not wait until a project is over to measure performance.


Link performance to pay; create an incentive program for
managers or departments that contain costs.


Externally mandated performance targets always help.


Employ Value Engineering in construction contracts.


Maintain dialogue with the contractor community to build
partnerships.


Hold contractors accountable, especially when issues recur.


Encourage team
-
based, multi
-
disciplinary project development
processes.


Schedule Performance Best Practices:


Invite input from construction managers on construction schedule
estimates.


Recruit and retain skilled staff.


Learn as much as you can about surface and subsurface conditions


Set project schedules based on reality
-
checked unit production times


Conduct overall constructability reviews


Measure and acknowledge on
-
schedule performance


Track causes of delays and make sure that information gets shared.


Use monthly progress reports to keep staff accountable.


Consider paying for utility relocation if it will reduce costly delays.


Give contractors sliding windows for completing projects.


Have mandatory pre
-
bid meeting for large projects to improve bid quality.


Gather contractor input on new specs and/ or do pilot projects to see if they
work before widespread deployment.


Give contractor incentives for early completion.


Hold contractors accountable, especially when issues recur.


Take care of ROW, permits and utilities before construction begins.