Total Management

Asset ManagementThe following narrative is formatted to convey the process used by the Town of Spindale, N.C., in developing and implementing an Asset Management Plan (AMP) for its wastewater collection and treatment system. The paper discusses the components of the plan from its inception in 2011, as well as the strategic financial planning that ultimately put the AMP into action. Finally, the current status of the implementation is described, now that the plan has been in force for approximately three years.

Asset Management Plan Components

To understand the importance of asset management planning to the Town of Spindale, a bit of local history may help set the stage for the reader?s insight as we discuss financial impact and outcomes at the local level. While Spindale suffers the same pressures of many utilities throughout the nation who are experiencing problems associated with aging infrastructure, Spindale?s needs for maintenance and rehabilitation have grown to a point where the gap between these needs and available revenue is excessively wide. This is due to the town?s history as a textile-manufacturing community. From its incorporation in 1923 up to the late 1990s, the town enjoyed a robust economy based upon the booming textile industry of the 20th century, but starting in the 1990s this element of the economy began to decline and, today, has all but disappeared. With respect to wastewater infrastructure, it is important to realize that the textile mills used very large volumes of water and therefore created vast amounts of wastewater that must be piped through the collection system and treated at a wastewater plant.

Spindale?s infrastructure was designed around the needs of this type of community. With the mill closures of recent years, flow volume has decreased but the pressure to maintain and rehab the same infrastructure has grown. Compounding this challenge, a relatively smaller number of rate-paying customers and billable flow is available today to fund the necessary work. Interestingly, and as recently as 1995, 80 percent of the wastewater system?s funding was supported by the industrial customer base while the other 20 percent came from the town?s residents. Fast forward to the time frame that the initial asset management study was conducted in 2012 this customer ratio is almost entirely reversed, with 80 percent of funding coming through the residential customers and approximately 20 percent through industrial. While the town today still has three industrial water users on the system, the cost burden clearly falls largely on residents and small businesses.

The general decline in U.S. manufacturing took an especially hard toll on communities such as Spindale that were highly dependent upon a single industry, and it has been very difficult to recover economically from such loss. In addition to the textile mills themselves, the general economic decline greatly reduced Spindale?s tax base and general fund; this relatively small town is comprised of approximately 5.5 square miles and a population of about 4,300. For a small community, this is quite a large area that must be maintained by town services on an ever-tightening budget, including police and fire service, streets, solid waste collection and of course all the necessary wastewater collection and treatment infrastructure to serve those 5.5 geographic square miles. Potable water is provided by a water authority, and therefore the Town does not own and operate its own water treatment and distribution system. In the case of the Town?s wastewater system (i.e. enterprise fund), the revenue base to sustain those operations has significantly declined. In a very true sense, the environment can be accurately described as water-intensive industry exiting the community while leaving behind massive amounts of infrastructure designed for the industrial needs of a bygone era. As a result, the elected Town Board of Commissioners needed to figure out how to pay the bills of wastewater operation through the remaining customers. Given these significant financial pressures, how could a small town survive, much less get ahead of the curve and thrive via implementation of an aggressive and proactive approach to its infrastructure management?

While on its face these problems certainly seem daunting, the Town of Spindale has been able to successfully turn this corner. The process began in 2011 as the town submitted an application to the State of North Carolina for Clean Water State Revolving Funds (CWSRF) intended to finance a sewer line rehabilitation project. At the time, the state was offering incentive and funding through the CWSRF application and award cycle for communities to begin serious efforts in asset management. Both the town leadership and its consulting engineer, Kurt Wright of SDG Engineering, Inc., saw the benefit in doing this and, hence, with the CWSRF funding award in hand, so began the first steps of Spindale embarking on a new management paradigm for its wastewater system.

First Step

The very first step with the asset management process was for Wright to participate in the CTAM-100 course. CTAM stands for Certification of Training in Asset Management. This course was conducted online by the Buried Asset Management Institute-International (BAMI-I). Wright discovered the CTAM-100 course and decided to utilize it as a basis for embarking on the asset management process with the Town. The information gleaned from this course and subsequent involvement with BAMI-I was shared with the town manager.? Both parties learned from CTAM-100 that, in simplest terms, asset management is a means by which the town can assure its ratepayers and citizens that it is spending: 1) the right amount of money; 2) on the right item; 3) at the right time. Armed with this knowledge, Wright and the town manager together began an aggressive campaign in early 2012 to educate the town board on asset management principles. For Spindale, this educational effort paid off in big dividends.

A key benefit from this educational process was obtaining ?buy-in? to this new management philosophy from all the local officials involved in the operation of the wastewater system. It is indeed the staff who carries out the lofty goals resulting from the AMP, and it is indeed the elected officials who control the purse strings and establish the necessary rates and budgets that make the work possible in the first place. In Spindale, town management and wastewater staff were highly receptive to the expected outcomes that the asset management process would afford the town by helping to solve its infrastructure challenges. Problem recognition was a key component here; to this end, the strategic planning process included several meetings between Wright, the town?s wastewater system staff and elected officials. During this phase of planning, a process was used to identify the town?s overall viewpoint as the manager of a wastewater system by identifying and discussing the various ?core values? of importance to a water or wastewater system operator (derived from Effective Utility Management, A Primer for Water and Wastewater Utilities, U.S. EPA, 2008). ?

A systematic set of questions were posed to both staff and elected officials regarding what they felt were the most important issues facing the wastewater system, combined with a rating of how well they perceived the town to be performing in those areas. These elements were developed into a system health matrix which reduced the scoring to a numerical basis, thereby providing insight as to the items most in need of attention at the present time. Perhaps not surprisingly, the top categories of concern were ?infrastructure stability,? ?financial viability,? and ?operational optimization.?? The takeaway here was that the common theme running through each of these matters ? finances.? Each of these issues was predominantly concerned with financial impact, and from this exercise the town realized and currently believes strongly that it must pay attention to the financial condition of its enterprise fund.

Following this strategic planning phase which set the stage of initial buy-in from all involved parties, the technical nuts and bolts of the AMP were performed and catalogued. This effort essentially involved answering the ?8 Questions of Asset Management? as set forth previously in the CTAM-100 course material:

1. What do we have?
2. Where is it located?
3. What is its condition?
4. What is it worth?
5. What action is required?
6. When is action required?
7. How much will it cost?
8. Where will the funding come from?

Spindale began this quest by conducting a full survey of all the system?s physical components. The end result was a highly accurate GIS database and map depicting a full inventory of the wastewater system broken down as follows: a) number of manholes and the attributes of each; b) length of sanitary sewer pipe, along with pipe material and diameter; c) the number of lift stations and their operational capacity; d) length of sewer force mains and their discharge points; and e) the components of the wastewater treatment plant. ?

Following this inventory, Wright performed a condition assessment and criticality rating on the various components. With this information in hand, a capital improvement plan was developed, which scheduled work based on the identified priorities. In sum, this process provided an objective critique of the system?s assets and a careful analysis of the order in which work should occur. With the CIP schedule, the town now enjoyed a view of the long-term, cumulative costs of operating its wastewater system. The presence of these facts obtained over the course of many months and through considerable efforts of field inventory and analysis helped give the town the necessary tools with which to engage in an informed discussion about finances.

Financial Planning

It was at this stage in spring 2012 that the town sat down to its annual budget preparations. The AMP had targeted one significant, immediate capital need over the next few years ? a wholesale rehabilitation of the 40-year-old wastewater treatment plant?s aeration basin. At the time, this one large capital project was a driving force behind financial considerations. With this objective in mind, the town carefully analyzed its financials, most notably the enterprise fund revenue trends and retained earnings balance, and established a realistic budget backed up by a sufficient user-rate structure intended to achieve the necessary revenue to service the debt on this major project. The importance of this process cannot be overstated here; Wright and town staff provided graphical analysis of the retained earnings trend in the enterprise fund, and visual depictions of these trends were presented and explained to the town board. Emphasis was placed on retained earnings due to this accounting concept?s role as a key measure of the enterprise fund?s overall fiscal health and its degree of sustainability. Through this study, information quickly came to light that the current rate structure was insufficient (i.e., unsustainable) to continue meeting the financial requirements of the enterprise fund. In the end, this analysis resulted in a four-year rate increase plan that, although surely less than popular in a political sense, was fully supported by the elected Board of Commissioners and put into practice due to its obvious necessity. A multi-year, phased-in approach was preferred due to the impact on the customer; in total, the four-year span results in an approximately 50 percent increase to the user-rate per 1,000 gallons.


As of the Fiscal Year 2014-15, the Town of Spindale is in its third year of the four-year rate increase plan. The plans for the wastewater plant rehabilitation are moving forward as projected with assistance from the North Carolina Clean Water State Revolving Fund program. The $6.9 million project qualified for a combination interest-free loan (20 years) and $1 million in principal forgiveness. The town?s rate schedule is designed to accommodate the required debt service on the principal amount owed for the 20-year term. It is worth noting that since the inception of the four-year rate adjustment plan, there has been turnover on the Board of Commissioners due to regular elections and member resignations. Despite this change in leadership, the AMP has remained in force and effect, and the schedules have not deviated due to political preferences otherwise. Spindale?s experience has shown that an objective, fact-based mission to identify and assess one?s physical assets and related financial trends can lead an entity to beneficial, informed discussions and well-reasoned logic behind its management decisions over those assets. With a significant evolution in service demand plus the decreasing revenue base, Spindale knew that the contemporary need for strategic management of local infrastructure was of utmost importance. The town welcomed the opportunity to engage in professional asset management, and today it is more prepared to meet future challenges in keeping up with its obligations. ?

In conclusion, the principles of asset management enabled the town to gain a comprehensive long-term perspective on the condition of its wastewater system, as well as a fresh ability and logic to effectively analyze when and how to make needed repairs and upgrades. With regard to finances, a natural outcome of this base knowledge is a decision-maker?s understanding of the full cost of service and the related financial requirements. Again, Spindale learned that asset management is essentially a means by which it can assure its ratepayers and citizens that it is spending: 1) the right amount of money; 2) on the right item; 3) at the right time. Assurance and awareness of these factors is key to maintaining the buy-in necessary from local elected officials who ultimately make the goals within the AMP a reality.

Cameron McHargue is an associate with SDG Engineering, based in Bostic, N.C., and a former town manager for the Town of Spindale, N.C.

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