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Breaking the Cycle: A Holistic Approach to Asset Management and Capital Planning for Government Leaders

5 minutes

Most local governments are nearing the halfway mark in their fiscal year, which means it’s time to start planning for next year. When thinking about the budget needed for the upcoming year, public works professionals are likely looking at using the traditional budgeting method – tweaking last year’s budget up or down depending on the overall financial picture.    

While it’s tempting to repeat this process and look back at last year’s budget to inform planning, the world is quickly changing, and this approach will no longer work to support asset management. To be truthful, it probably hasn’t worked in a while. With numerous assets like buildings, parks, sidewalks and even utility lines, and chronic underfunding, the deferred maintenance list has been growing. Do stakeholders understand what is truly needed to protect the assets and increase their ROI?  

Add to that climate impacts, new technologies, and demographic shifts, and it becomes clearer that the budgeting process needs to adapt. In fact, the International City/County Management Association (ICMA), the Government Finance Officers Association (GFOA) and the National League of Cities (NLC) recommend that cities consider a more holistic view of the budget process 

Building on the recommendations from these organizations, an asset management plan can break the cycle of traditional planning and gives governments the opportunity to understand their existing asset portfolio and make the right asset investments to support the town’s goals. 

Building an asset management plan 

To build an asset management plan, public works professionals should evaluate four major components: an asset’s age or condition, an asset’s priority, the city’s objectives, and service level agreements.   

Before making any monetary decisions, public works professionals need to understand the true age and condition of each asset under their purview. This allows proper estimates to be made on what is needed to maintain the asset at that point in its lifecycle or if it needs to be replaced. With details about the asset, better short- and long-term operational and financial decisions can be made. 

An asset registry and asset-based computerized maintenance management system (CMMS) can help capture and store this information and use it to inform their capital investments. This allows professionals to use insights to develop the best expenditure of capital dollars across the community, which is critical as cities have hundreds to thousands of assets.  

Asset priority is also essential for the creation of an asset management plan. Not all assets are created equal; some are more important and impactful to the community than others. For example, a highly traveled main road that is critical for the city to function or an old boiler at the end of its life in a town’s only high school are both high priorities. To receive proper funding, public works departments must place these assets at the top of the priority list. The priority of an asset helps decide when the timing is right for intervention (i.e., repair, replace). An asset with a high priority might be replaced ahead of the end of its useful life, while a low priority asset might be let to run to failure before replacement occurs. 

All of the above information must tie to the city’s objectives. Cities conduct thorough and inclusive processes to determine their community’s priorities, which are generally set out as objectives in the city’s strategic plan. Some communities might aspire to be more “walkable,” making sidewalks and walking paths high priority assets. When the city prioritizes assets, it becomes clearer where to make investments. 

Finally, agreed-upon service levels outline the expectations of the government and its constituents. They can hold city officials accountable for specific services, which can guide officials on where to make investments and improve community trust. For example, if residents want all the snow cleared from their streets within two hours, the city must put more investment into the service than if the expectation was to clear snow in one day.  

It’s important to note that service levels aren’t always the same across asset classes. In this same example, the main roads and those leading to schools have a higher level of service expected than side streets or less traveled country roads.   

These four components – asset age and condition, asset priority, city objectives, and service level agreement – can ultimately make up a strong asset management plan that can be used to make good financial decisions.   

Breaking the Cycle in Action 

The city of Asheville, Noth Carolina recently went through a budget planning cycle, serving as an example of how cities and public works departments can approach fiscal year planning in a new way.  

By reviewing the city’s asset data and their previous year’s budget, the Asheville public facilities division determined that the $1 million allocated for building and asset maintenance would not be enough to preserve the current state of the city’s infrastructure. The team presented the data and findings to city officials, which resulted in the division receiving $3.5 million in the budget for preventive maintenance costs.  

By gathering and evaluating all the information at hand, the Asheville public facilities team produced the best asset plan for its community. Beyond making the case for additional funding, the city identified that only three of the city’s 13 fire departments were built in the 21st century, allowing funds to be strategically allotted to stations that needed to be fully replaced and ensure citizens have sufficient fire department services.  

The next step for public works departments is to utilize business intelligence visualization tools to show decision-makers the impacts of multiple funding scenarios, helping them understand how much risk they are taking on at each level of funding.   

A holistic approach to asset management 

When cities look holistically at their assets, it helps better inform future capital and operating budgets. Breaking the cycle of how planning has historically been done is not a light undertaking. But, similar to how the city of Asheville made the case for triple the maintenance budget compared to the previous fiscal year, cities can utilize asset management plans to secure the resources needed to manage the thousands of assets they oversee.  

As public works professionals look ahead to the next fiscal year’s budget, this will be the year to break the cycle, more accurately forecast the asset lifecycle, and generate the most fiscally and operationally responsible and efficient plans.  

Learn more about Brightly’s Asset Management for Government solution here. Or, if you’d like to read more, take a look at my recent post on 5 reasons to use asset management to drive your community’s capital plans.