This article is part of an ongoing series about financial sustainability, based on GFOA's new financial sustainability framework. You can learn more about the framework at www.gfoa.org/financialsustainability.
Funding asset maintenance is hard. Cities and other agencies rarely have sufficient funding, so they have to make choices about where to direct available funds. The classic approach is to fund asset maintenance according to a predetermined maintenance schedule. However, this falls apart when there isn't enough money to complete all scheduled work.
The most common fallback has been a "worst-first" approach, where the assets that are in the worst shape are maintained. Worst-first can be quite expensive, though, because the worst assets often require costly reconstruction. This approach also overlooks the fact that some assets are more important than others, and it's hard to predict exactly when one may fail. It may be wise to delay repairing an asset that is in poor condition, but is less consequential, when compared to an asset that is also in poor condition that is highly consequential to the health, safety, and/or welfare of the community.
An alternative approach is "risk-aware" infrastructure maintenance. This approach optimizes the use of funding across the different assets that a local government owns by comparing likelihoods and consequences of failure. This article lays out the basics of such an approach, modeled on practices used by the Bureau of Environmental Services (BES) in City of Portland, Oregon, to analyze wastewater collections system infrastructure. (1)
Exhibit 1 offers an overview of the process. It's not sequential --you can estimate the costs of current fixes while also figuring out estimated failure rates at the same time. We'll approach each section, number by number, on the following pages.
Where to Apply Risk-Aware Asset Management
This article focuses on Portland's sewer infrastructure to illustrate risk-aware asset management. Risk-aware asset management can be applied to other asset classes, but it generally works best when a rich data set is available to asses the assets and the assets are relatively uniform (e.g., all sewer pipes in a system are similar). The importance of the first point is addressed in this the article. The second may need some explanation. If the assets are highly variable, it will become more difficult to compare risk. For instance, comparing the roof of a community center playground with a neighborhood park would be more difficult than comparing two sewer pipes. These kinds of challenges are not insurmountable, but they do show that risk-aware asset management is more promising for some asset classes than others.
DETERMINE YOUR ASSETS--WHAT AND WHERE
Figuring out what assets you own is a logical first step to a more informed allocation of maintenance resources. A less obvious, but no less critical, step in a risk-aware asset strategy is to learn about local conditions that impact the cost of maintenance and the consequences of failure.
Three types of environmental conditions that could impact sewer pipes, for example, are:
* Transportation infrastructure. Pipes near rail lines are difficult to access and can wreak havoc on rail service if they fail. Different types of streets have different reconstruction costs and impacts to citizens. It's a bigger problem when sewer pipes fail near a busy avenue than a side street, for example.
* Sensitive areas. This might include areas where hazardous materials are stored, that are environmentally sensitive (e.g., a nature preserve), or that have a prevalence of low-income households, which may have fewer resources to cope with an infrastructure failure.
* Utilities. At best, the presence of other utilities complicates repairs; at worst, they could introduce safety hazards (e.g., natural gas line explosion).
Exhibit 2 shows a section of Portland's sewer pipe intersecting a sensitive environmental area. A red "X" indicates a location where pipes cross an environmental feature that will affect the cost of pipe repair and the consequence of failure. The pipe is evaluated in 10-foot segments. Many utility databases track pipes in much larger increments, such as the segment between manholes (250 to 300 feet).
The advantage of a more granular system is that serious defects could be clustered in sections between a 300-foot pipe check. A less granular tracking system would offer less precise guidance on where exactly problematic areas lay, while a more...