how to use asset sustainability & long term planning to

Confidential & Proprietary

How to use Asset Sustainability &

Long Term Planning to get the funding

you need

Marc Retish, Ameresco

Rob Haneline, Ameresco Garry Stark, North Idaho College

May 9, 2018

Asset Sustainability

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Today’s Session:

• Introductions

• Common Challenges in Asset Management

• North Idaho College’s Approach

• Capital Creation Strategies

• Q&A


Facilities’ Life Cycles: 50 Year Building

Years 10-15 Years 20-25 Years 30-35 Years 40-45

Interior Painting, Kitchens,

Bathrooms

DHW Heaters

35% of Building Replacement Value

65% of Building Replacement Value

Roofing

HVAC

Plumbing BLDG

Envelope


2%-4% of Replacement Cost

Higher Ed 88 buildings, 3.5 m sq. ft.

Replacement Cost of Portfolio: $605,500,000

Annual Capital* Request:

$12,110,000/yr (2%) - $24,220,000/yr (4%)

*Capital Renewal not Capital Investment

Is this the Formula You Use for your Capital Request?

A show of hands


Common Challenges: Asset Management

Copyright 2012

Growing deferred maintenance

Operating costs increasing

Changing functional demands

Aging Infrastructure

Energy Goals

Tribal Knowledge Transfer


Deferred Maintenance: Risk

Deferred maintenance is the practice of postponing maintenance activities.

Generally, a policy of continued deferred maintenance may result in higher costs, asset failure,

and in some cases, health and safety implications. Wikipedia

Deferred Maintenance is everywhere

Deferred Maintenance is a cycle

Deferred Maintenance is a RISK to your organization

Deferred Maintenance results in premature life cycle

expiration, creating more costly repairs to address

failure, and increasing exposure to risk.

$1 deferred becomes $4 of maintenance over time* *Rick Biedenweg, former AVP of information resources at Stanford university

Yet, Deferred Maintenance is a Best Practice


- 2009 Ad

- 5% of stimulus

to higher education

infrastructure

- $40-45 Billion and a

20 year vision

- “Shovel Ready Jobs”

~10 b sq ft ~$1.7 T $221B backlog (2013); $478B (2030)

Underfunding Issues: Everywhere and Unaddressed


Are we using the right language?

• How much do we know about our aging infrastructure and the RISK it poses to our mission?

• How much deferral do we have and how

much RISK is represented?

• Where do we get the funding to manage the RISK of our aging infrastructure?

• How much funding do we need to

maintain and SUSTAIN the portfolio? • At what point in time, will the Quality of

Teaching & Learning (MISSION) be challenged in the absence of additional funding ?

The Boiler Room to the Board Room


Physical Asset Criteria

• Building Condition Needs

• Unfunded Liability

• FCI

Utilization Criteria

•Facility utilization

•Enrollment Forecasting

•Space use

•Own vs. lease

Real Estate Criteria

•Asset Valuation

•Land Valuation

Environmental

Criteria

•Carbon Footprint

•Energy Conservation

•Renewable Solutions

Financial Criteria

•Capital Costs

•Operating Costs

•Capital Creation Strategies

•Incentives

Tools

Processes

&

Policies

Own the Conversation: Decision Development Framework


North Idaho College

School Facts:

Coeur d’Alene, ID

Community College

34 Buildings

774,000 square feet

3,700 Students

# of Facilities Professionals: 40

Why did NIC ask Ameresco to put together an Asset Plan?

Previous Condition Assessment

Master Plans

Funding Mechanism

Annual Capital Budget


• By creating Life Cycle Profiles for major building components and systems; Quantify Renewal Needs

• Forecast how capital needs will grow in both the short and long term (5-year & 30-year plan) as the buildings continue to age; Multi-Year Capital Plan

• Calculate building performance using industry standard metrics to evaluate overall building risk and continued asset sustainability;

Evaluate Building Performance

• Develop Cost by Discipline, Unfunded Liability, & Facility Condition Index (FCI) profiles for the portfolio; Risk Mitigation

• Introduce Asset Sustainability targets, as a measure of FCI, to demonstrate funding required to enhance the Quality of Teaching, Learning, and Research;

Asset Sustainability

• Benchmark Capital Creation Strategies and illustrate their impact on the portfolio in terms of building performance and risk.

Capital Creation Strategies

Introduction

North Idaho College engaged Ameresco to conduct an Asset Management Review of

their portfolio and to produce the following key deliverables:


Practical Life Cycle Modeling Approach

Modeled

Life Cycle

“Templates”

Basic Asset

Details:

Age

Size

Number of

Floors

Building Type

Incorporation of

data sources

Interview with

site staff

Further on-site

validation

Predictive

Life Cycle

“Profiles”

Validation of

Asset Templates:

Life Cycle “Model” Life Cycle “Profile”

Unique Data Development: Best Practices

Create predictive Life Cycle forecasts in AssetPlanner™ utilizing Ameresco’s

proprietary Data Development Framework & associated modelling techniques;

Conduct interviews with Facilities Management and Site Staff (Asset Reviews)

Establish Life Cycle Profiles (major building inventory)


Facilities Assessed

Administration Classrooms Gyms Library

Maintenance Museum Residence Hall Student Union Warehouse /

Storage

Wellness


AssetPlannerTM : Decision Support Tool

Findings & Outcomes


Buildings are more expensive to maintain as they age, and the risk of failure increases as building systems near their “end of life.”

Total Size: 774 thousand ft2 (34 facilities)

Weighted Average portfolio

age is 39 years (circa

1979)

Age Profile


The Replacement Cost identifies the current dollar amount needed to replace a facility relative to its current size and function.

$142M to replace 34 buildings

Replacement Cost Profile


Capital Needs By Discipline - 30 Years

2018 Deferred Backlog: $12.4M


Asset Prioritization

Weighted score for each Building System

• Is System LIFE SAFTEY/CODE RELATED? Yes/No

• Does System have an ADVERSE EFFECT ON SECURITY? Yes/No

• If System fails, will it SHUT BUILDING DOWN? Yes/No

• If System is replaced, is there an ENERGY SAVINGS OPPORTUNITY? Yes/No


2018 Capital Needs By Discipline – Urgent & High Priority

Total Deferred Backlog of $12.4M includes over $9.1M deemed Urgent and High Priority.


including

$9.1M in Urgent and High Priority

Sample of Urgent Items:

• Fire Alarm System

• Sanitary Waste Drainage Piping

• Boilers Cabinet Unit Heaters

• Fume Hood

• Roof Drainage

Sample of High Items:

• Air Handling Units

• Drop Down Ceiling

• Exhaust Fans

• Overhead Garage Doors

• Steam and Hot Water Radiators

• Stand Alone Thermostats


Capital Needs By Discipline - 30 Years


$230K average annual funding


Total Liability - 30 Years

2018 Liability: $12.4M

(Deferred Backlog)

2047 Liability: $117M

Total

Liability


Unfunded Liability - 30 Years

Cumulative lifecycle renewal costs (top line) and the average annual capital funding

allocation (dark blue area) of $230 thousand per year.

2047 Unfunded Liability: $110.1M

Unfunded

Liability

Average Annual Funding of

$230K per year


(Deferred Backlog)


• Industry Standard Infrastructure Risk Metric Used to Track Condition Performance of Facilities / Portfolios

• The FCI provides a consistent measurement of condition for a single building, group of buildings, or a

total portfolio.

FCI =

Renewal and Repair Costs

Replacement Cost

GOOD Range: FCI (0% - 5%)

FAIR Range: FCI (5% - 10%)

POOR Range: FCI (10%-30%)

CRITICAL Range: FCI (> 30%)

Sustainability Target Sustainability Target

Facility Condition Index (FCI)


Facility Condition Index - 30 Years (Unfunded)

The portfolio has a 2018 FCI of approximately 8.7%, which places the facilities in the

“Fair” range. Without funding, the FCI would migrate to the “Critical” range by 2027

2027 FCI: 32.2% (Critical)

FCI without funding

2018 FCI: 8.7% (Fair)


Facility Condition Index - 30 Years (with Funding)

Overlaying the average annual capital funding of $230 thousand has minimal impact to

FCI; it does not change the year that FCI migrates to the “Critical” range (i.e. 2028)

FCI without funding

FCI with $230K

Average Annual Funding


2018 FCI: 8.5% (Fair)


FCI GRID


Boswell Hall

31.4% FCI (Critical) 21.1% FCI (Poor)

• 64,547 Sq Ft • Built 1979 • Replacement Cost:

$13.2M • Current FCI: 21.1% Poor • Current Deferral: $2.8M


Meyer Health Science Building


$12.4M • Current FCI: 4.0% Good • Current Deferral:

$495.5K

4.0% FCI (Good) 40.8% FCI (Critical)


Lee-Kildow Hall


$9.2M • Current FCI: 25.4% Poor • Current Deferral:

$2.34M

25.4% FCI (Poor) 39.2% FCI (Critical)

Asset Sustainability Target


By establishing an Asset Sustainability Target of 10% FCI (Fair), the assets will be

continually “sustained” at an acceptable level of risk. To achieve this, it will require $3.5M per

year of funding over the next 30 years – an extra $3.2M per year.

Sustainability Target - 30 Years

$3.2M per year

additional

funding

required to

achieve target

Sustainability

Target

FCI without funding

FCI with $230K

Average Annual Funding


2018 FCI: 8.5% (Fair)

Capital Creation StrategiesTM


Maintenance Optimization

Energy Conservation

Deep Retrofits

Renewable Solutions (PPA)

Real Estate Strategies:

Disposition

Consolidation

Redevelopment

Leveraged and Bundled Capital Creation StrategiesTM:

Real Estate

Strategies

Redevelopment

Strategies

Renewable

Solutions

Energy

Conservation

Maintenance

Optimization

Optimized

Capital

Creation

Strategies™

Capital Creation Strategies™ (CCS)


Capital Needs with Energy Opportunities


2018 MEP

Backlog = $5.5M

2018 Mechanical Backlog: $5.1M

2018 Electrical Backlog: $0.4M


2018 Capital Needs By Discipline – Urgent & High Priority

Total Deferred Backlog of $12.4M includes over $9.1M deemed Urgent and High Priority.


$9.1M Urgent and High Priority

$2.8M in Urgent and High MEP projects


Impact of Capital Creation StrategiesTM

By leveraging Capital Creation StrategiesTM, the Unfunded Liability gap is reduced to

$106.5 million.


2047 Unfunded Liability: $106.5M

Unfunded

Liability

Reduction

Sustainability Target

CCS (ESPC): $3.6M

Confidential & Proprietary Copyright 2011

Sustainability Target (10% FCI)


2018 FCI: 8.7% (Fair)

Useful Life Extension

The FCI maintains its position in the “Fair” range in 2018 until 2022. Additional funds

generated through this Capital Creation Strategy delays the migration to the “Critical” range

until 2030. This provides a 3-year extension to useful life for the entire portfolio directly

improving the Quality of Teaching and Learning.

Impact of Capital Creation StrategiesTM

Recommended Next Steps


1. Establish a portfolio FCI Target of 10% to enhance the

Quality of Teaching and Learning;

2. Apply an adequate annual funding level to maintain the

Asset Sustainability Target of 10% FCI (~$3.4M per

year);

3. Proactively Position Capital Creation Strategies™ to

address funding shortfalls:

• Maintenance & Process optimization strategies – life extension

• Energy Conservation Measures

• Renewable Solutions – solar, PPA

• Real Estate Strategies – consolidation, disposition, redevelopment

Recommendations


Recommendations (Continued)

Utilize Executive Level Dashboards as found in AssetPlannerTM


Q&A

Your Trusted Sustainability Partner.

THANK YOU!

Marc Retish Rob Haneline Business Manager Account Executive

Direct: (612) 747-6188 Direct: (208) 818-8137

[email protected] [email protected]

mailto:[email protected]

mailto:[email protected]

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