GASB#34 GASB#34 Asset ManagementAsset Management

TEAM Transportation FairTEAM Transportation Fair

Presentation by:Presentation by:

Charles J. Nemmers, P.E. Charles J. Nemmers, P.E.

October 8, 2004October 8, 2004 St. Louis, Missouri St. Louis, Missouri

Today’s Presentation:Today’s Presentation:

Define:Define: ” ”What is GASB#34 ? What is GASB#34 ?

Why Should I Care?”Why Should I Care?”

Why is it important Why is it important ““Why Worst First Is Worst”Why Worst First Is Worst”

Implement: Implement: ““Asset Management”Asset Management”

GASB #34GASB #34What is it? What is it?

Why should I care?Why should I care?

GASBGASB Government Accounting Standards Government Accounting Standards

BoardBoard NOT a government agencyNOT a government agency

Sets standards for States and Local Sets standards for States and Local entitiesentities

Basis of audit opinionsBasis of audit opinions

#34#34 ““Basic Financial Statements and Basic Financial Statements and

Management’s Discussion and Management’s Discussion and Analysis for State and Local Analysis for State and Local Governments”Governments”

June 1999June 1999

Changed reporting from Optional to Changed reporting from Optional to RequiredRequired

GASB #34 Objective:GASB #34 Objective: To make government accounting more like To make government accounting more like

private sector accountingprivate sector accounting

Defined Infrastructure AssetsDefined Infrastructure Assets– roadsroads– bridgesbridges– water and sewer systemswater and sewer systems– drainage systemsdrainage systems– dams, tunnels, ...dams, tunnels, ...

Asset Valuation: GASB #34Asset Valuation: GASB #34

Requirements:Requirements: state and local agencies to include the state and local agencies to include the

value of physical assets in their financial value of physical assets in their financial statementsstatements

value based on depreciated historical cost, value based on depreciated historical cost, or historical cost without depreciation if or historical cost without depreciation if the agency can demonstrate that they:the agency can demonstrate that they:– inventory their assetsinventory their assets– assess every 3 yearsassess every 3 years– spend funds sufficient to maintain at an spend funds sufficient to maintain at an

established condition.established condition.

GASB #34GASB #34 gives 2 options gives 2 options

1) Depreciate1) Depreciate

2) Modified Approach2) Modified Approach

Modified vs. Modified vs. DepreciationDepreciation

ModifiedModified DepreciationDepreciation Expense:Expense: Maintenance & Maintenance Maintenance & Maintenance

Preservation Preservation

Capitalize: Capitalize: Additions andAdditions and Preservation costs Preservation costs Improvements Additions & Improvements Additions &

Improvements Improvements

GASB #34 GASB #34 recognizes that recognizes that factors vary among jurisdictions factors vary among jurisdictions and among infrastructure assetsand among infrastructure assets

In aIn a Nutshell Nutshell

Governments generally don’t Governments generally don’t depreciate their assets and the depreciate their assets and the

private sector does, but now the private sector does, but now the rules have changed !!rules have changed !!

Why “Worst First” is Why “Worst First” is “Worst” “Worst”

Comments on how to build Comments on how to build an effective public works an effective public works infrastructure programinfrastructure program

Worst First occurs becauseWorst First occurs because::

Easy to sell - lots of roads are in Easy to sell - lots of roads are in poor shapepoor shape

Funding / budgets tilt toward Funding / budgets tilt toward new new constructionconstruction

No Ribbon CuttingNo Ribbon Cutting

Deferred maintenanceDeferred maintenance

But “Worst First”:But “Worst First”:

Costs more - 6X moreCosts more - 6X more

Drags the whole system downDrags the whole system down

Is difficult to recover fromIs difficult to recover from

Is a difficult concept to counterIs a difficult concept to counter

MaintenanceMaintenance:: RoutineRoutine

ReactiveReactive

Preservation / PreventivePreservation / Preventive

Build:Build: Replace / Reconstruct Replace / Reconstruct

(improve structural condition)(improve structural condition)

Expand / New Facilities Expand / New Facilities (add new capacity)(add new capacity)

Pav

emen

t C

on

dit

ion

Optimal Timing

Time/Traffic

Rehabilitation Trigger

Prevention Trigger

Original Pavement

Current ConditionCurrent Condition

0

10

20

30

40

50P

erc

en

t o

f N

etw

ork

Pa

ve

me

nt

I

(0-2)

III

(8-12)

II

(3-7)

IV

(13-17)

V

(18-22)

VI

(23-27)

(years)

Pavement Remaining Life Categories

From Michigan DOT -- Galehouse

19%

10%

40%

8%6%

17%

Remaining Service Life Remaining Service Life Distribution StateDistribution State

5%1%

42%

7% 7%

20%

8%10%

0.005.00

10.0015.0020.0025.0030.0035.0040.0045.00

Pe

rce

nt

Su

rfa

ce A

rea

0 1-3 4-6 7-9 10-12 13-15 16-18 19-20

Remaining Service Life Category

State Highway Network (RSL)

RSL average 8.32

Remaining Service Life Remaining Service Life Distribution CountyDistribution CountyTooele County Remaining Service Life Distribution

5.8 4.0

50.2

9.8

25.5

3.1 1.3 0.30.00

10.00

20.00

30.00

40.00

50.00

60.00

0 1-3 4-6 7-9 10-12 13-15 16-18 19-21

RSL Category

Perc

ent A

rea

Average RSL 6.9

Ideal ConditionIdeal Condition

0

10

20

30

40

50P

erc

en

t o

f N

etw

ork

Pa

ve

me

nt

I

(0-2)

III

(8-12)

II

(3-7)

IV

(13-17)

V

(18-22)

VI

(23-27)

(years)

Pavement Remaining Life Categories

11%

18% 18%16% 17%

20%

Remaining Service Life Remaining Service Life Distribution StateDistribution State

Remaining Service Life for State Network in 2011(Multi-Phase Preservation Program)

2.6% 1.4% 1.8% 1.4% 1.0%

8.2%

24.6%

37.0%

15.9%

6.0%

0.00%5.00%

10.00%15.00%20.00%25.00%30.00%35.00%40.00%

0 1-3 4-6 7-9 10-12 13-15 16-18 19-21 22-24 25-30

RSL Categories

Per

cen

tag

e o

f N

etw

ork

Remaining Service Life Remaining Service Life Distribution-Tooele CountyDistribution-Tooele County

Distribution in the Year 2010 Using a Two PhaseFunding Program

0.00%

10.00%

20.00%

30.00%

40.00%

0 yrs 1-3 yrs 4-6 yrs 7-9 yrs 10-12 yrs 13-15 yrs 16-18 yrs 19-21 yrs

Years

% S

tree

t Net

wo

rk

Remaining Service Life Remaining Service Life Distribution-Tooele CountyDistribution-Tooele County

Distribution in the Year 2010 Using a Two PhaseFunding Program

0.00%

10.00%

20.00%

30.00%

40.00%

0 yrs 1-3 yrs 4-6 yrs 7-9 yrs 10-12 yrs 13-15 yrs 16-18 yrs 19-21 yrs

Years

% S

tree

t Net

wo

rk

Reconstruction StrategyReconstruction Strategy(25 Year Fixes)(25 Year Fixes)

0

10

20

30

40

50

60

70

80

90

100

1997 2003 2009 2015 2021 2027 2033 2039

Per

cent

of

Lan

e M

iles

poor fair good

Combined Reconstruct and Rehab StrategiesCombined Reconstruct and Rehab Strategies(15, 20 & 25 Years Design Life)(15, 20 & 25 Years Design Life)

0

10

20

30

40

50

60

70

80

90

100

1997 2003 2009 2015 2021 2027 2033 2039

Per

cent

of

Lan

e M

iles

poor fair good

Combined Reconstruct, Rehab, andCombined Reconstruct, Rehab, andPreventive Maintenance StrategiesPreventive Maintenance Strategies

0

10

20

30

40

50

60

70

80

90

100

1997 2003 2009 2015 2021 2027 2033 2039

Per

cent

of

Lan

e M

iles

poor fair good

Keys to SuccessKeys to Success (from MiDOT/GaDOT):(from MiDOT/GaDOT):

Promote Preventive Maintenance Philosophy Promote Preventive Maintenance Philosophy

Fix pavements BEFORE they are broken-select Fix pavements BEFORE they are broken-select good pavements for treatmentgood pavements for treatment

Budget & fund Preventive maintenanceBudget & fund Preventive maintenance

Shorten the time between assessment and Shorten the time between assessment and maintenancemaintenance

Build them excellent the first timeBuild them excellent the first time

““Asset Management”Asset Management”

to meeting GASB #34 using the to meeting GASB #34 using the Modified ApproachModified Approach

Asset ManagementAsset Management

What is it?What is it? Improved way of doing business Improved way of doing business Draws from economics & engineeringDraws from economics & engineering Focuses on benefit of investmentFocuses on benefit of investment Shows How, When & Why resources Shows How, When & Why resources

were committedwere committed Planning toolPlanning tool

Asset ManagementAsset Management

Inventory assetsInventory assets Condition assessmentCondition assessment Value AssetsValue Assets Performance predictionPerformance prediction Alternative / Decision analysisAlternative / Decision analysis Monitor and feedbackMonitor and feedback

Condition SurveyCondition SurveyDistress Type Low

SeverityMedium Severity

High Severity

Low Extent

Medium Extent

High Extent

Fatigue Cracking

Longitudinal crack in wheel path with no or only a few connecting cracks, no spalling or

pumping.

Interconnected crack pattern in wheel path,

slightly spalled, no pumping.

Moderately to severely spalled

pattern of interconnected

cracks in wheel path,

0-10% 10-30% >30%

Longitudinal Cracking

Unsealed cracks with mean width less than

1/4" or well sealed cracks.

Unsealed or poorly sealed cracks with width 1/4" to 3/4".

Unsealed or poorly sealed cracks with width greater than

3/4" and secondary random cracking.

<100 ft. 100-300 ft. >300 ft.

Transverse Cracking

Unsealed cracks with mean width less than

1/4" or well sealed cracks.

Unsealed or poorly sealed cracks with width 1/4" to 3/4".

Unsealed or poorly sealed cracks with width greater than

3/4" and secondary random cracking.

>100 ft. 100-25 ft. < 25 ft.

BleedingAsphalt cement

beginning to flush to surface.

70% of aggregate texture lost in wheel

paths.

Excess asphalt cement in wheel path, little or no

aggregate texture.

<500 ft. 500-1500 ft. >1500 ft.

Patching & Utility Cuts

Smooth Patch.Uneven patch that

traps surface water.

Patch deteriorated, uneven, traps surface

water.0-10% 10-30% >30%

Oxidation & Raveling

Asphalt oxidized & some loss of fine

aggregate.

Loss of fine aggregate and some

loss of coarse aggregate, road surface pitted.

Surface very rough and substantial loss of aggregate in wheel

paths.

<500 ft. 500-1500 ft. >1500 ft.

Edge Drop-offEdge drop-off of less

than 1".Edge drop-off of

between 1" to 3".Edge drop-off of greater than 3". 0-10% 10-30% >30%

Condition AssessmentCondition Assessment

0 Low Med High

RSL (20)0-10% 10-30% >30%

Low 1 2 3

Longitudinal crack in wheel path with no or only a few connecting cracks, no

spalling or pumping RSL (10) RSL (8) RSL (6)Med 4 5 6

Interconnected crack pattern in wheel path, slightly spalled, no pumping

RSL (8) RSL (6) RSL (4)High 7 8 9

Moderately to severely spalled pattern of interconnected cracks in wheel path,

pumping may be noticeable RSL (6) RSL (2) RSL (0)

Extent (Percent of Wheel Path)

Se

ve

rity

Reference: SHRP Distress Manual pages 8-9

Flexible PavementLow Volume Asphalt Fatigue Cracking

..

RSL of 0

RSL of 8

RSL of 20

Pavement Performance CurvePavement Performance Curve

Pavement Performance Curve

0

20

40

60

80

100

20 18 16 14 12 10 8 6 4 2 0

Remaining Service Life

PCI

0

20

RSL

10

*Terminal Serviceability

Lowest Annual Resurfacing Cost(Rehabilitation Treatments)

PreventativeTreatments

Network Performance Network Performance ObjectivesObjectives

(Recommendations)(Recommendations)

State Network

Interstate

+12 Years 5% or less

+15 Years 3% or less

Percent Requiring Reconstruction

Average RSL

Arterials/Major Collectors(NHS and High Volume Roads)Major Collectors (Low Volume)

and Minor Collectors + 10 Years 5% or less

No more than 5%10 Year(min.)Local Roads and Streets

Needs AssessmentNeeds AssessmentCounty and City NetworksCounty and City Networks

AgencyCenterline Miles

Surface

Area (yd2)Estimated Funding Needs

Tooele County 244 3,605,282 2.1 million/yearHeber City 30 641,713 220,000/year

Routine (reactive) MaintenanceRoutine (reactive) Maintenance

Routine Maintenance

Type of repair Cost per Unit Area Added Service LifeWhen used RSL 13-18

Crack Seal $0.05 2Digout and Cold Patch $0.30 0Digout and Hot Patch $0.30 0High Perf. Cold Patch $0.30 0Fog Coat $0.30 2

Preventative MaintenancePreventative Maintenance

Preventive Maintenance

Type of Repair Cost per Unit Area Added Service LifeWhen used RSL 10-12

Sand Seal $0.54 2Scrub Seal $0.90 5Single Chip Seal $0.90 5Double Chip Seal $1.35 7Slurry Seal $0.90 5Microsurfacing $1.44 7

RehabilitationRehabilitation

Rehabilitation

Type of Repair Cost per Unit Area Added Service LifeWhen used RSL 7-9

HMA (leveling) & Overlay (<2 in.) $4.14 8Thin Hot Mix Overlay (<2 in) $3.60 7Hot Surface Recycling $4.95 8Rotomill & Overlay (<2 in) $4.95 8Plant Mix Seal $2.70 7

ReconstructionReconstruction

Reconstruction

Type of Repair Cost per Unit Area Added Service LifeWhen used RSL 0

Thick Overlay (3 in.) $5.00 12Base repair and pavement Replacement $7.50 14Base Replacement and Pavement Replacement $10.00 20Cold Recycling &Overlay (3 in.) $9.90 14Rotomill & Thick Overlay (3 in.) $6.00 12

Predicted 10 Year RSLPredicted 10 Year RSL Average- Heber City Average- Heber City

Average Remaining Service Life Two Phase Strategy

12.1

12.5

12.7

13.1

11.60

11.80

12.00

12.20

12.40

12.60

12.80

13.00

13.20

2003 2006 2008 2010

Year

RS

L

Thank YouThank YouCharlie NemmersCharlie Nemmers