Fiscal Reality Doesn't Bite – How to Create Realistic R&R (Rehabilitation and Renewal) Forecasts that Support Long Term Financial Plans

Many utilities struggle with accurate long-term forecasting of R&R (Rehabilitation and Renewal) needs. Balancing the financial requirements for R&R projects with requirements for new growth and regulatory compliance is an ongoing challenge for many in our industry. Quite often, new growth and regulatory driven projects tend to overshadow the ongoing need to maintain the service and reliability of existing assets. BJWSA realized the need for a better way to forecast ongoing R&R expenditure and ensure that:Appropriate reserves are set aside each year to ensure a sustainable financial plan is in place that supports a long-term stable rate structure.Comprehensive information is available to staff to support utility-wide capital and financial planning efforts.A rational and defensible approach is used to more accurately calculate long-term useful lives and costs.Information is presented in a way that improves communication and discussions with stakeholders and public officials.BJWSA worked with a consultant to develop an integrated R&R funding model that allows BJWSA to more accurately analyze and forecast infrastructure R&R costs over time as part of their overall financial planning efforts. This presentation will include a discussion of how the model was utilized from an internal planning perspective and the benefits it has provided BJWSA. The model has greatly improved forecasting of current and future R&R needs for above and below ground assets including: sewers, water mains, treatment plants, pumping stations, and other major assets. The model encompasses both financial and asset management principles using industry standard guidelines for expected useful lives, historic and replacement costs, financial escalation factors, and standard unit costs for buried asset renewal. The model includes a summary dashboard with critical information needed to communicate with internal and external stakeholders including customers and public officials. The underlying asset data that drives the model will be updated periodically, and the results will become even more accurate as asset data sources and systems continue to improve over time. Information from ongoing CMMS (Computerized Maintenance Management System) and GIS (Geographic Information System) was used to populate the model, and over time improved data is expected to enhance the accuracy of financial projections.The presentation will also include a discussion of next steps and future plans for use and enhancement of the model including:Continued development of asset inventory, condition assessment, remaining useful life, and other key asset management data.Integration with ongoing CMMS implementation to ensure data continues to improve and can support financial planning effortsDevelopment of formal policies, procedures, and processes to utilize information as part of annual capital and financial planning efforts.Finally, the presentation will conclude with a discussion of how the information and model results are being used to successfully communicate with external stakeholders. One of the major drivers for this project was the ability to defend proposed rates and reserve levels with influential public stakeholders who openly questioned the need for current levels of reserve funding.