Transcript Harold W. Worrall, PhD, PE - trans

Toll Road Asset Management and the
Linkage to Finance
Transportation Innovations, Inc.
7/28/2015
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US Toll Roads
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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.
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Taking an Assessment
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Measures of comparability
Strategic planning process
Asset management practices
Financial planning process
Financial position
Capital program development
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Revenue Per Lane Mile
Revenue per Lane Mile (Thousand $)
$159
Ohio Turnpike
New York Thruway
$180
$227
Penn. Turnpike
Mass. Turnpike
$242
Florida’s Turnpike
$342
New Jersey Turnpike
$407
Illinois Tollway
$-
$416
$100
$200
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$300
$400
$500
O&M Staff/Costs Comparisons
# of Staff per Lane Mile
O&M Costs per Lane Mile
O&M workers per lane mile
Mass.
Turnpike
0.63
Penn.
Turnpike
0.66
Ohio
Turnpike
0.69
Illinois
Tollway
0.76
New York
State…
0.00
0.79
0.20
0.40
0.60
0.80
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Snow and Ice Removal
Penn. Turnpike
$3,071
Mass Turnpike
$4,149
New York State Thruway
$5,374
Ohio Turnpike
$5,409
New Jersey Turnpike
$-
$6,042
$1,000
$2,000
$3,000
$4,000
$5,000
Snow and Ice Removal per Lane Mile
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$6,000
$7,000
Revenue / Maintenance Costs
Gross Revenue/Operations & Maintenance
Expenses (per lane mile)
Mass.Turnpike
1.50
Penn. Turnpike
1.64
New York Thuway
1.68
New Jersey Turnpike
1.79
1.95
Ohio Turnpike
2.40
Illinois Tollway
3.90
Florida's Turnpike
0.00
1.00
7
2.00
3.00
4.00
5.00
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
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Strategy, Asset Management
and Measurement
Good strategic planning, performance measurement and asset
management processes reinforce each other.
Strategic
Planning
Asset
Management
Performance
Measurement
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Recommended Framework
The Board
5-10
years
Strategic
Plan
Establish
Executive Action Plan
4-5
years
Executive Team
Develop Business Plans and
Annual Contracts Program
Set Performance Targets
Division and
Department Heads
Performance Reports and Reviews
10
1-2
years
Qrtrly
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
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Financial Model
General Assumptions
Strategic Plans
Capital Budget
Requirements
Board/Staff
Fin. Advisor
Engineers
Traffic Engr.
Interest Rates
Debt Service Reports
Model Output
Bank Line / Commercial
Paper Program
Bond Issuance
Capital Budget Reports
Existing Debt Service
Projected O & M
Expense
Capital Cost
Const. Schedules
Projected Toll
Revenues
Capital
Planning
Model
Sources and
Uses
of Funds
Revenue /
Integrated
Planning
Model
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Debt Service Reports
(Financial Capacity)
Preserving the Asset and Financing
Improvements
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Preserving the asset
– Asset Condition
– Maintenance program
– Rehabilitation component of the capital program
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Determine the ability to fund operating programs and issue
new debt
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Determine the need for toll increases in the future
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Develop the ability to test various scenarios on a long term
basis
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Financial Assessment
10-Year Financial Capacity Projection
$800.0
2.50
New
Planned
Debt
$700.0
2.00
$500.0
1.50
$400.0
1.00
$300.0
Coverage Ratio
Millions of Dollars
$600.0
Existing
Debt
Service
Net
Revenue
Coverage
Covenant
$200.0
0.50
$100.0
$-
0.00
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Fiscal Year
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Debt
Service
Coverage
Ratio
Best Practices
• Benefits of good Asset Management practices:
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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:
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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;
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Considerations for Improving
Asset Management
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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.
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Best Practices
Best practices of nine forerunners in a 2007 AASHTO study of project delivery
statistics from 20 DOTs
Cost Performance Best Practices:
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Learn from past mistakes;
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Leadership must care about controlling project costs.
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Accurate estimates come from well coordinated construction
and pre-construction processes.
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Measure cost performance monthly or quarterly against
stated goals.
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Track causes of overruns and make sure that information gets
shared.
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Use monthly progress meetings to keep staff accountable.
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Do not wait until a project is over to measure performance.
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Link performance to pay; create an incentive program for
managers or departments that contain costs.
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Externally mandated performance targets always help.
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Employ Value Engineering in construction contracts.
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Maintain dialogue with the contractor community to build
partnerships.
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Hold contractors accountable, especially when issues recur.
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Encourage team-based, multi-disciplinary project development
processes.
Schedule Performance Best Practices:
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Invite input from construction managers on construction schedule
estimates.
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Recruit and retain skilled staff.
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Learn as much as you can about surface and subsurface conditions
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Set project schedules based on reality-checked unit production times
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Conduct overall constructability reviews
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Measure and acknowledge on-schedule performance
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Track causes of delays and make sure that information gets shared.
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Use monthly progress reports to keep staff accountable.
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Consider paying for utility relocation if it will reduce costly delays.
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Give contractors sliding windows for completing projects.
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Have mandatory pre-bid meeting for large projects to improve bid quality.
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Gather contractor input on new specs and/ or do pilot projects to see if they
work before widespread deployment.
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Give contractor incentives for early completion.
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Hold contractors accountable, especially when issues recur.
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Take care of ROW, permits and utilities before construction begins.
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