Asset Management Program:How Your PWS Can Make Effective Use of a Regulatory Obligation

December 2017

TMACOG Water Supply Committee

Agenda

Asset Management from a National Perspective

Robert Stevenson, Principal - Arcadis

Asset Management Rules Overview

Susan Schell - Ohio EPA

Asset Management Program

Preparation/Implementation

Cheryl Green, P.E. - Hull & Associates

Asset Management from a National PerspectiveRobert Stevenson, PrincipalArcadis

4

Typical Drivers in the US are Evolving…

Capital

Budgets

• “Wish list”

• Unaffordable

Capital Budgets

State/Federal

Requirements

• NPDES permits

and consent

decrees

• SRF loans

Bond

Rating

• Rating agencies

starting to look

for it

Technology

Issues

• Incomplete data

sets

• Poor hierarchies

• Lack of value

$

5

Asset Management Trend for the US

• US EPA mandating asset management plans

through administrative orders

• Several states are promoting asset management

requirements

• Permits

• SRF funding

• Principal forgiveness

• Grants

6

AWWA Survey of Asset Management Requirements for State Revolving Funds and Other Programs

Water Resources Reform and Develop Act (WRRDA) of 2014

• Requires Fiscal Sustainability Plans (FSPs) for Clean Water

SRF Loan Recipients

FSP Requirements Asset Management

• Inventory of critical assets

• Evaluation of condition and performance of assets

• Plan for maintaining, repairing, or replacing assets

• Plan for funding these activities

• Certification of consideration and implementation of

energy and water conservations

7

AWWA Asset Management Committee Survey

• Understand different ways that States are promoting asset management

• Understand how to better support utilities in their efforts to improve asset

management

• Present AWWA and Asset Management Committee members as resources for States

Clean

WaterDrinking

Water

8

Life-Cycle Costing / Repair vs. Replace

Other States Proposed Asset Management Plan Requirements

New Jersey (Required for Drinking and Clean Water)

Asset Inventory and Condition Assessment

Level of Service / Key Performance Indicators

Identify Critical Assets / Criticality and Vulnerability

Financial Planning / Long-Term Funding

9

Other States Proposed Asset Management Plan Requirements

Municipal Sewage System Asset

Management (MSSAM) GuideNY

Stormwater, Asset

Management, and Wastewater

(SAW) ProgramMI

FLAMP Required to Receive State

Revolving Funding

10

Ohio EPA Asset Management Plan Requirements (Senate Bill 2)

An Inventory and Evaluation of all

Assets

Operation and Maintenance

Programs

An Emergency Preparedness and

Contingency Planning Program

Criteria and Timelines for Infrastructure

Rehabilitation and Replacement

Approved Capacity Projections and Capital Improvement Planning

A Long-Term Funding Strategy to Support Asset

Management Plan

Implementation

Public Water System Plan

Deadline is October 2018

Asset Management ProgramRule Overview from Ohio EPA

Susan K. SchellEnvironmental ManagerOhio EPA Division of Drinking and Ground Waters

SB2 Asset Management Provisions

• Components:

– Inventory and evaluation of all assets

– Operation and maintenance programs

– Emergency preparedness and contingency planning program

– Criteria and timelines for infrastructure rehabilitation and replacement

– Approved capacity projections and capital improvement planning

– Long-term funding strategy to support asset management program implementation

Draft Asset Management Rules

• We have drafted rules to address the managerial, technical and financial capability of all water systems

• We will follow our typical rulemaking process, including early stakeholder outreach and public comment

• Written asset management programs required by October 1, 2018 for all water systems

• Submission of the written asset management program will only be upon the Director’s request.

Managerial Capability

• Documentation of ownership

• Documentation of a certified operator

• Brief non-technical description of the water system

Managerial Capability

• Operating plan

• Written procedures

• Inventory of external contacts

• Internal contracting and purchasing procedures (routine and emergency)

Technical Capability

• Map – use the lead map they already have and build on it!

• Inventory of assets

• Evaluation of assets

• Level of service goals

• Metrics

Technical Capability

• Operation and maintenance programs

• Approved capacity projections

• Criteria and timeline for rehabilitation and replacement

• Capital improvement plan

Financial Capability

• Systems need to have an operating budget ratio greater than 1.0

• Operating budget ratio is defined as the revenues received divided by the cost of operation of the water system

• Current water rate ordinance and triennial water rate evaluation

• Documentation of all customers billed per metered water usage

Pulling It All Together

• Most systems have a lot of this information, they just need to write it down and gather it in one place

• Systems can do a lot of this without outside help, saving them money and helping them understand their system better

• An asset management program is more than just a tracking system

• They don’t have to have a software system to track everything, but it helps for more complex systems

What Can Asset Management Do for a Water System?

• Can help raise capital to improve infrastructure

• Operation and maintenance on a frequency that makes sense to get the maximum life of the assets

• Replace assets when condition warrants it, not just because they’re old, helps prioritize projects

• Set aside reserves to replace critical infrastructure in emergencies

What Can Asset Management Do for a Water System?

• Allows a system to plan ahead for future improvements and adjust rates gradually to meet future financial needs

• Allows a system to adequately address the health, safety and welfare of their customers

• Establishes real costs of infrastructure if replacement needed, adequate insured $$$

Implementation Plan

• At the time of sanitary surveys, inspectors will initially be asking to see some basic components, such as asset inventory, maps, level of service goals, metrics, etc.

• We are developing guidance for systems, expectations will vary based on system type and complexity

• We are developing templates for very small systems

Funding for Asset Management

• Planning loans are available

• Terms of 5 years at 0% interest

• Potential for $10,000 in principal forgiveness

Resources

Asset Management Webpage:http://epa.ohio.gov/ddagw/pws.aspx#113435168-asset-management

Susan K. SchellManager, Engineering & Infrastructure

Section(614) 752-9725

Susan.Schell@epa.ohio.gov

Asset Management Program: Preparation and Implementation

Cheryl Green, P.E. Hull & Associates

Core Components

Asset Management

Life Cycle Costing

Long Term

Funding

Asset Inventory

Level of Service

Asset Criticality

Asset Inventory:

Assets of a public water system

ALL components that are required to maintain level of service

source water

storage

pipes operators

hydrants and valves

treatment plant

• Complete an asset inventory

• Asset data and condition

• Asset criticality

Asset Inventory:

Asset map and database management

Where are your assets

located?

Lead Map?

Asset location/

condition / inventory

not static

Consider a GIS-based

system

USEPA CUPP$ for small

systems

Level of Service (LOS)

Define the primary objectives of the Utility

Develop goals that…

Meet requirements of regulators

Meet the expectations and demands of the

customer

S.M.A.R.T. Goals

Specific

Measurable

Attainable

Realistic

Time-based

Goals

Examples of measurable LOSs

Water quality

Service capacity

Pressure

Examples of LOS goals

Reduce Cost/ million gallons produced

Accumulate $XXX in reserve fund by year 20XX

Document testing/maintenance for 95% of all assets

Examples of Metrics

Water loss < 20%

Operating ratio of 1.2 (revenue/cost to operate)

System pressure > 20 psi

Goals

Level of Service (LOS)

By William Croyle, California Department of Water Resources - California Department of Water

Resources -https://scontent.fmuc2-1.fna.fbcdn.net/v/t1.0-

9/16730609_10154430795287449_8360716524217440974_n.jpg?oh=297cdb5f045032a9da809b7919

bc071b&oe=59331622, Public Domain,

https://commons.wikimedia.org/w/index.php?curid=56253570

Asset Criticality

Not all assets are created equal

Consider which assets are critical to maintaining system performance

Two major factors to consider

Likelihood of failure

Consequence of failure

Risk = Likelihood x Consequence

Likelihood of Failure

Age/ condition of

asset

Operation and

maintenance history

Asset use

Soil characteristics

Consequence of

Failure

Public Health Impact

Social Impact

Environmental Impact

Reduction in Level of

Service

Cost of Repair /

Replacement

Asset Risk Matrix

Aging pump

Booster pumps

New plant equipment

Reservoir spillway

Aging hydrants

New water main valve

Conse

quence o

f Failure

Likelihood of Failure

Out of

Water

Normal

operation

Very

UnlikelyCertain

Life Cycle Costs

An example from the roadway

maintenance department…

3412/8/2017

Life Cycle Costs

Must determine levels of acceptable risk

Number of customers served ( > 100)

Types of customers (i.e. hospital, school, industry)

Public safety

High Risk (Critical) Assets

Replace prior to end of estimated useful life.

“We are not willing to accept much risk that this

asset will fail.”

Low Risk (non-critical) Assets

Run until failure occurs, then replace.

“We can accept the risk (or certainty) that this

asset will fail.”

Long Term Funding

Develop a Capital Improvement

Plan (CIP), including…

5, 10, and 20 year projections for

major asset replacements

Detailed cost estimates for asset

replacements

Plan to establish reserve

accounts to fund replacements

Long Term Funding

Rate Analysis

Utilities need to make sure their

rates match the true life cycle

costs of their asset inventory

Rates must cover annual operating

expenses, as well as provide funds

for repairs, rehabilitations, and

replacements of assets.

Use Grants / Loans for significant

capital Improvements

CIP Fund

Loans

Grants

Bonds

Funding Sources

3812/8/2017

Quest

ions