Asset management: remedy for addressing the fiscal challenges facing highway infrastructure

Abstract

Abstract In recent years, increasing claims have been advanced for asset management as a promising new approach to infrastructure management. If these claims are seen in the light of past management fads, such as zero-based-budgeting (ZBB), management-by-objectives (MBO), total quality management (TQM), and business process reengineering (BPR), asset management may be considered the latest in a long line of management fads being marketed by consultants to transportation agency managers. However, asset management can be an effective response to the fiscal challenges confronting the United States' highway infrastructure. This paper explores asset management in light of recent developments in the funding, condition, documentation, and management of the US highway infrastructure. The paper begins with a discussion of capital biases associated with traditional US federal highway funding programs. It then describes the advent of innovative financing approaches that have evolved in response to the inability of the Federal Highway Trust Fund to meet burgeoning highway renewal and replacement needs, caused in part by widespread deferred maintenance of the highway system. The paper suggests that public sources of funding for the highway system will not be adequate to renovate or replace current highways and build new capacity. Closing the expected shortfall in public highway funding will require sustained infusions of private sector funding. However, the financing of highways through public–private partnerships will require state and local transportation agencies to radically change the ways in which the highway infrastructure is managed. Within the context of gradual changes in highway management and financing, the paper suggests a critical role for asset management – in demonstrating prudent stewardship of highway infrastructure and facilitating private sector confidence in highway investments. The paper examines the implications for innovative highway financing resulting from recent developments in asset management: • further devolution of highway program and funding responsibilities to state and local levels of government; • developments in asset management processes and practices; and • the infrastructure reporting requirements recently developed by the Governmental Accounting Standards Board (GASB). The infrastructure reporting requirements of GASB's Statement No. 34 are intended to increase accountability for publicly owned infrastructure and promote improved management of long-lasting capital assets. GASB 34 also provides a basis for enabling public agencies to finance implementation of asset management techniques and renewal of infrastructure assets through securitization. Covenants associated with securitized highway bonds would provide the fiscal discipline needed to ensure that responsible agencies abide by the terms of the bond agreements – thereby assuring preventive asset maintenance and freeing up resources for debt service payments. Shadow tolling provides a useful mechanism for generating a positive revenue stream to support securitized highway bonds. The paper concludes that asset management is a proven and essential process for helping the US rebuild and expand its highway infrastructure.