Asset Sustainability Index

A Beta Version Using Existing State Data

Louisiana Transportation Conference Feb. 18, 2012 Gordon Proctor

Louisiana Transportation Conference Feb. 18, 2013

Project Scope
Describe Australian sustainability indices Can we replicate them here? Impact of Asset Valuation

Louisiana Transportation Conference Feb. 18, 2013

Project Intent
Test another tool to communicate the magnitude of investment need Summarize asset management data into one financial index to be tracked over time Develop a leading indicator, as opposed to lagging indicators Illustrate the story of what happens if we continue on this path Do we leave a legacy or a liability for our children?
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Project Approach
Use existing state data Dont require any new data sets Pull data from standard agency documents, management system reports http://www.fhwa.dot.g ov/planning/processe s/statewide/practices/ asset_sustainability_i ndex/page00.cfm
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Budget/Need = Index

Louisiana Transportation Conference Feb. 18, 2013

Simple Concept Complex Practice

Need must be credible
Based on sound inventory Credibly forecast at least 10 years Relates to publicly perceived need Requires a valid long-term fiscal forecast Treatment program is comprehensive enough to lead to the lowest whole life cost for the entire network Preservation Preventive Reactive Rehabilitative Replacement
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Private Sector Parallels

Sustainability of capital is a standard reporting element for publicly traded corporations Corporations must tell their investors whether they are creating long-term future capital liability Balance sheets must reflect future investment need Forecasting level of investment adequacy is a minimum competency Transportation Louisiana
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Class I RR Capital Investment

2.5

1.5

CSX
1

NSC
0.5

CN
2001 1 1 2002 1.16 0.92 2003 1.14 0.97 2004 1.11 1.4 1 2005 1.22 1.37 1.11 2006 1.76 1.58 1.21 2007 1.91 1.8 1.3 2008 1.87 2.09 1.33 2009 1.56 1.74 1.31 2010 1.96 1.97 1.48

0 CSX NSC CN

Louisiana Transportation Conference Feb. 18, 2013

Buffets BNSF Epiphany

"

All of this adds up to a huge responsibility," he wrote

in his shareholders letter. "We are a major and essential part of the American economys circulatory system, obliged to constantly maintain and improve our 23,000 miles of track along with its ancillary bridges, tunnels, engines and cars. In carrying out this job, we must anticipate societys needs, not merely react to them. Fulfilling our societal obligation, we will regularly spend far more than our depreciation, with this excess amounting to $2 billion in 2011. Im confident we will earn appropriate returns on our huge incremental investments. Wise regulation and wise investment are two sides of the same coin.
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Can We Produce These Metrics?

Yes The reports of mature US asset management practitioners include elements to produce sustainability indices These data sometimes are explicit, sometimes only inherent

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Utah DOT Investment Backlog

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Optimal UDOT Pavement $

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Utah Pavement Forecast

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UDOT Ratio, Investment Gap

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Ohio Bridge Indices

Bridge Budget GA Sustainabilty Ratio FC Sustainability Ratio WS Sustainability Ratio Paint Sustainabilty Ratio

Bridge Budget GA Sustainabilty Ratio FC Sustainability Ratio WS Sustainability Ratio Paint Sustainabilty Ratio

1997 1998 1999 2000 2001 2002 2003 2004 2005 $175.00 $174.47 $174.40 $180.00 $185.00 $190.00 $196.00 $201.88 $141.00 0.80 0.85 0.860 0.86 0.88 0.89 0.90 0.90 0.91 0.99 0.98 0.97 0.98 0.98 0.98 0.99 0.99 1.00 1.00 1.00 1.00 0.99 0.99 0.99 1.00 0.99 1.00 0.95 0.94 0.96 0.96 0.99 1.01 1.02 1.02 1.02 2007 2008 2009 2010 2011 2012 2013 2014 2015 $170.41 $185.00 $193.00 $204.89 $211.00 $224.00 $235.00 $247.00 $259.00 0.93 0.94 0.95 0.96 0.97 0.98 0.99 1.00 1.01 1.00 1.00 1.01 1.01 1.01 1.00 1.00 0.99 0.99 1.00 1.01 1.01 1.01 1.01 1.01 1.01 1.01 1.01 1.04 1.04 1.04 1.04 1.04 1.04 1.04 1.04 1.04

2006 $141.00 0.92 1.00 1.00 1.03 2016 $272.00 1.02 0.99 1.01 1.04

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Ohio Bridges by District

DISTRICT 1997 1998 1999 2000 Ohio DOT Floor Condition 'Heat Map" 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

1 2 3 4 5 6 7 8 9 10 11 12 Statewide

98.5% 98.9% 96.6% 86.7% 95.8% 99.5% 97.3% 98.7% 98.2% 99.5% 97.9% 85.1% 95.1%

98.6% 98.6% 96.5% 82.3% 96.0% 99.4% 97.1% 98.4% 98.2% 98.5% 97.2% 84.4% 94.3%

99.0% 97.5% 95.7% 81.0% 98.1% 99.3% 96.6% 97.3% 98.2% 96.3% 97.0% 83.9% 93.7%

98.5% 97.4% 96.0% 78.2% 98.6% 99.2% 96.9% 97.6% 98.1% 97.6% 96.4% 90.7% 94.2%

98.6% 97.2% 96.1% 79.6% 98.4% 99.4% 97.2% 97.4% 98.2% 97.4% 96.6% 92.0% 94.5%

99.2% 96.4% 96.1% 80.4% 98.5% 99.5% 97.3% 97.6% 98.4% 98.4% 96.5% 91.6% 94.7%

99.4% 96.4% 96.2% 82.0% 98.8% 99.6% 97.3% 96.6% 98.4% 97.9% 98.2% 93.4% 95.1%

99.4% 96.2% 96.4% 82.5% 99.0% 99.7% 97.1% 96.7% 98.4% 98.4% 97.7% 93.9% 95.3%

99.8% 96.4% 96.4% 89.7% 98.9% 99.7% 97.0% 97.0% 97.9% 97.6% 97.7% 94.4% 96.3%

99.8% 96.9% 96.5% 90.7% 99.0% 99.6% 97.2% 96.8% 97.1% 97.7% 97.5% 94.6% 96.5%

99.8% 96.9% 96.3% 92.3% 98.5% 98.9% 97.3% 97.4% 97.0% 98.3% 97.3% 94.9% 96.7%

99.8% 96.6% 96.7% 92.5% 98.4% 99.0% 96.7% 97.8% 97.8% 99.1% 97.2% 96.0% 96.9%

99.1% 96.8% 97.4% 93.6% 98.6% 98.6% 97.1% 98.1% 97.6% 99.2% 97.3% 96.3% 97.2%

99.8% 95.6% 97.9% 94.9% 97.1% 98.3% 97.8% 98.7% 97.6% 99.3% 96.0% 96.4% 97.3%

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Ohio Tradeoffs Over Time

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NCDOT Index Granularity

Bridge Conditions
Element
Substructure Superstructure Bridge Deck
Concrete Timber Steel Planks Open Grid Steel Concrete Steel P/S Concrete Timber Timber Concrete Pile Steel Pile Concrete Piers NBIS Culverts Non-NBIS Culverts Overhead Sign Structures Conditon Rating >=6 Condition Rating = Good Condition Rating = Good Performance Measures % of decks rated greater than or equal to 6 Interstate State 2010 Average Target Score Primary State 2010 Average Target Score Secondary State 2010 Average Target Score

Statewide Average 82 88 84 47 62 82 94 68 42 77 82 82 87 71 92

% of superstructure rated greater than or equal to 6

85 85 85 85 90 90 90 90 90 90 90 90 85 80 95

85 NA NA NA
81 89 96 NA NA 80 91 91

80 80 80 80 85 85 85 85 85 85 85 85 85 80 95

79 86 71 50 60 82 95 43 40 75 84 81 86 74 93

75 75 75 75 80 80 80 80 80 80 80 80 85 80 95

84 88 84 33 65 81 94
69

42 81
81

% of substructure rated greater than or equal to 6

86 84 95

82 89 56 88

Other

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ASI by Program

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Sustainability Elements Exist

The message: We can do this We can add to the public discourse credible forecasts of the consequence of current investments We can illustrate the size, the impact of our investment deficits We can illustrate the liability we are leaving
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Additional Insight: Asset Valuation

GASB 34, a missed opportunity Not used much GASB looks backward, not forward British, Australians tracking asset value more closely Like an investment fund manager they consider whether they are growing investor equity or losing investor equity Do we leave inter-generation legacy or liability? Louisiana Transportation
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Assigning Value to Assets

The British guidance notes that the mere assigning of monetary value to highway components casts them as an important public asset worthy of preservation. Highway assets are not just part of the landscape, they are a valuable public commodity worthy of preservation
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Rising Asset Valuation

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Declining Asset Values

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Conclusions
Data exist to produce financial sustainability metrics They can add to the public discourse of intergenerational equity and legacy They can illustrate the future consequences of current actions

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