Week 11c - Risk-Based Prioritization and Funding Strategy

ENGR 331 Infrastructure Management I 2023-03-24
ENGR 331
Infrastructure Management I
Dr. Solomon Tesfamariam
Risk-based prioritization and funding strategy

for infrastructure management
Example 4: Budget Allocation

The City of Windsor wants to prioritize the roof maintenance of its social
housing buildings with different occupancies. The data on the ages, condition
ratings, consequences of failure, and maintenance cost for the 7 roof sections
are summarized in the table shown below. The annual maintenance budget is
limited to $270,000. Prioritize the roof using age-based, condition-based,
consequence-based, and risk-based prioritization methods.
Section Cost Consequence
Age (years) Condition
Number ($1,000) ($1,000)
1 36 1 100 50
2 30 2 75 20
3 23 3 35 10
4 40 3 75 30
5 18 2 60 10
6 32 1 90 20
7 38 2 85 20
Dr. Solomon Tesfamariam, PEng 1

Example 3…
The annual maintenance budget is limited to $270,000. Prioritize the roof
using age-based, condition-based, consequence-based, and risk-based
prioritization methods.
Consequence ($1,000)
Section Number
Cost ($1,000)
Age (years)
Condition
Rank
Rank
Rank
1 36 3 1 6 100 50 1
2 30 5 2 3 75 20 3
3 23 6 3 1 35 10 6
4 40 1 3 1 75 30 2
5 18 7 2 3 60 10 6
6 32 4 1 6 90 20 3
7 38 2 2 3 85 20 3
$260 $245 $250
The weights for condition and consequence for three decision

makers (DM) are given in the following table.
Decision Maker Condition Consequence
1 0.20 0.80
2 0.75 0.25
3 0.55 0.45
1) Which DM is risk averse, risk taker, and risk neutral?
2) Prioritize the roof using risk-based prioritization methods.

Example 3…
The annual maintenance budget is limited to $270,000. Prioritize the roof
using age-based, condition-based, consequence-based, and risk-based
prioritization methods.
Decision Maker
Consequence
Condition
Cost ($1,000)
Risk (DM1)
Risk (DM2)
Risk (DM3)
Rank
Rank
Rank
1 0.20 0.80
2 0.75 0.25
3 0.55 0.45 100 0.87 1 0.50 6 0.63 3
75 0.45 3 0.60 3 0.55 4
35 0.36 6 0.80 2 0.64 2
75 0.68 2 0.90 1 0.82 1
60 0.29 7 0.55 5 0.46 6
90 0.39 5 0.35 7 0.36 7
85 0.45 3 0.60 3 0.55 4
$250 $270 $210
Funding Strategies

Asset Classifications
 Linear (e.g. pipe) and vertical (e.g.

building)
 Surface (e.g. roads) and sub-surface

(e.g. pipes)
 Self-financing, tax supported and

quasi-commercial (or blended)
Funding strategies
Fund
Balance
Expenditure Revenue
Operational Capital DCC Service fee Tax
Administration Renewal
Inspection
Expansion
Maintenance

City of Mississagua

City of MISSISSAUGA
• Pop. 828,854, stormwater assets total replacement value of
$2.06 billion
• >2,100 km of storm sewer pipes, >51,000 CB, 250 km of
ditches, 32 creeks and 62 stormwater management
facilities
Stormwater charge

Why stormwater fee
• Dedicated funding source for stormwater

infrastructure management
• Increase funding for stormwater management
and climate change adaptation programs
• Creates awareness and incentivize property
owners to reduce paved area
– Reduce runoff rate
– Improve stormwater quality
– Reduce heat islands effect

City of Windsor

State of Infrastructures
Factors Affecting their LOS
• Strategic Goals
• Legislative and Regulatory requirements along
with City Policies
• Current state of assets
• Community Expectations
• Affordability

Current and Projected LOS
Operating Expenditure

Approved Capital Budget 2010-2013 and 2003
Funding Source

Challenge
“As a result of economic challenges experienced by

Windsor area residents in the last 5 years, Council
and Administration felt it was prudent to hold the line
on the tax levy.”
Property Tax Levy

Funding for Capital Projects
• Pay As You Go
– Pay As You Go Operating Budget
– Pay As You Go Sewer Surcharge
– Pay As You Go Debt Reduction
• Corporate Reserves
– Capital Expenditure Reserve
– Development Charges Reserves
– Other Reserves
…Capital Projects
• External Sources
– Provincial Transit Funding
– Federal Fuel Tax Funding
– Infrastructure Stimulus Funding (ISF)
– Recreation Infrastructure Funding (RInC)
– Developer Charges
– Other One-time
– Third-Party Recoveries

…Capital Projects
Capital Projects Funding Source History

City of Kelowna

City of Kelowna’s…
Public transit
City of Kelowna’s...
Fire Department

Airport
Police Services

Capital Investment by Category

2018-2027 ($Millions)
Capital Investment by Project Drivers

2018-2027 ($Millions)
Infrastructure required to Infrastructure required

accommodate growth to support enhanced
service levels
Infrastructure that replaces

or renews existing assets

Average Annual Investment

for Infrastructure Renewal
Investment Priorities 1 and 2

Challenge
“Approximately 72% of the priority 2 projects are

needed for growth or service level improvement
(new). Additional funding would be required for
these priority 2 projects to proceed.”
Priority 2 Projects

Source of Funding ($Millions)
General Taxation Funding

City of Hamilton

Level of Service
Consequence of failure mapping for the City’s

water distribution network

Integrated Right-of-Way
Infrastructure Support System
Planned Investment by Service Focus

Water, Wastewater and Stormwater

Planned Investment by Service Focus

Roads and Bridges
Investment Strategy
Water, Wastewater and Stormwater

Investment Strategy
Roads and Bridges
Breakdown of sources of financing for water and

wastewater capital (2013-2022)

Source of Capital Financing - Waterworks
Source of Capital Financing - Wastewater

Source of Capital Financing - Stormwater
Source of Capital Financing – Road and Bridges

Risk Based Decision Making
Risk based renewal planning
• Shift from emergency response to a risk-based

management of critical assets
• Reduce the number of asset failures
• Minimize the negative impacts of failures when

they occur
• Improve performance & reliability of the system
• Optimize O&M costs

Urban Stormwater Infrastructures
Risk in Asset Management

Risk = LoF x CoF
• Likelihood of Failure (LoF) - Probability of

failure of an asset from
 Aging/deterioration
 Capacity
 Regulatory/LOS and Efficiency

• Consequence of Failure (CoF) - Direct and
indirect impacts that would result from an asset
failure

Risk in Asset Management
Likelihood of Failure (LoF)
• PACP condition grades can determine segment

scores
• Segment scores can be used to calculate
Likelihood of Failure for pipelines
• The Modified PACP Quick Rating based upon
highest grade defect observed within a particular
pipe segment

Consequence of Failure (CoF)
• Direct and indirect impacts on the vicinity and

community due to a potential asset failure
• Expressed as “Triple Bottom Line” (TBL)

o Economic Impacts
o Social Impacts
o Environmental Impacts
CoF
• CoF assigned on a qualitative scale.

e.g. Very high, high..
• CoF can also be quantified in monetary

terms.

…..CoF
• Economic impacts
• Impact on adjacent utilities (electric, gas,
telecom…)
• Impact on social activities
• Impact on business operation
• Impact on the environment
….CoF
Sustainability

Economic Impact
• Impact of Direct and Indirect economic

losses
o Direct costs
– Asset Repairs
– Legal Fees
– Fines
o Indirect costs
– Property Values
– Increased Insurance Rates
– Utility's Credibility

....
Open cut Trenchless
Pipe Rehabilitation Options
…..
Trenchless Technology
https://m2ukblog.wordpress.com/2017/10/08/trenchless-technology/

Social Impact
• Impact on Society due to asset failure

• Factors include
o Number of properties/clients affected
o Types of affected properties (hospitals, schools,
businesses, parks, “critical services”, etc.)
o Duration of Failure
o Utility’s Credibility
o Public Health and Safety
Environmental Impact
• Impact to ecological conditions occurring as a

result of asset failure
• Environmentally impact considerations can
include
o Proximity to wetlands and waterways
o Federal Emergency Management Agency (FEMA)
flood zones
o Possible contamination of potable water sources
o Sensitivity of nearby soils

CoF
• 500 mm combined trunk sewer 10 meters

downstream of a Combined Sewer Overflow
(CSO) that crosses a body of water
Lower CoF
Higher CoF Vs.
• 8 inch sanitary sewer at the upstream end of the

system that only serves one resident
CoF
• Considers factors such as:

o Network position and pipe location
o Proximity to Environmentally Sensitive Features
o Service to customer of significant importance
o Accessibility for maintenance and inspection

City of Vernon
Example GIS Data
COF Example
• CoF Descriptions and Associated Factors

examples include..
o Pipe Depth
o Relative Network Position of the Pipe
o Pipe Diameter
o Location of Pipe
o Distance between Pipe and Waterway
o Customers of High Importance
o Accessibility

Pipe Depth
Typically an economic consideration

since deeper pipe is generally more
expensive to repair/replace
Pipe Depth
• Affects Economic, Environmental and Social

costs
• Larger diameter pipes generally
– Serve more customers
– Cost more to rehabilitate

Pipe Diameter
• Pipe Diameter
o Economic – Costs more to repair, replace, and
rehabilitate
o Social – Impacts more customers
o Environmental – impacts to sensitive geographical

area
Pipe Diameter
• Affects Economic, Environmental and Social

costs
• Larger diameter pipes generally
– Serve more customers
– Cost more to rehabilitate

Location
• Pipe failure on a major road causes more

disruption to traffic compared to failure of a pipe
on a local road
• Number of affect people
Location
• The cost of managing emergency repairs
• Response time for a service crew may be

significantly higher if access is difficult
• Failure may cause significant damage to the

environment as well as private properties due to
delays in response


Location
• Distance from environmentally sensitive areas
• Impact on sensitive ecosystems

– Level of pollution
– Degree of sensitivity

Location
• Hospitals, schools, manufacturing facilities,

emergency services, etc., as determined by
utility
• Providing uninterrupted service to these facilities
may be a priority for the utility

Location
GIS maps can be used to determine the relative

location/distance of pipes from
– street network,
– buildings,
– waterways and other EMA etc..
Other factors….
Example GIS Data
No Factors No Factors
1 Proximity to Electric Facility 22 Proximity to Conservation zone
2 Proximity to Transformer 23 Sensitivity of Conservation zone
3 Proximity to Electric Primary Cable 24 Impact on Conservation zone
4 Proximity to Electric Secondary Cable 25 Proximity to Ground Water
5 Proximity to Electric Transmission Cable 26 Proximity to Surface Water
6 Proximity to Duct Bank 27 Proximity to Trees
7 Proximity to Electric Cable
8 No. of Electric Facility [1m R] 28 Proximity to Telecom Facility
9 Length of Electric Cable [1m R] 29 Proximity to Telecom Cable
10 Impact on Electric Utility 30 No. of Telecom Facility [1m R]
31 Length of Telecom Cable [1m R]
11 Proximity to Gas Distribution Facility 32 Impact on Telecom Utility
12 Proximity to Gas Transmission Facility
13 Proximity to Gas Distribution Pipe 33 Road Condition Rating
14 Proximity to Gas Transmission Pipe 34 Type of Road
15 Proximity to Gas Facility 35 Impact on Road Infrastructure
16 Proximity to Gas Pipe
17 No. of Gas Facility [1m R] 36 Environmental Impact
18 Length of Gas Pipe [1m R] 37 Social Impact
19 Impact To Gas Utility 38 Economic Impact
39 Renewal Complexity
20 Traffic
21 Land use

City of Vernon
Example GIS Data
City of Vernon
Example GIS Data

Managing Asset Risk
• Risk matrix provides a basis for a maintenance

and rehabilitation program
• Overall risk a function of LoF and CoF
Managing Asset Risk

Managing Asset Risk
5.1, 4.4
2.4, 4.0
2.1, 3.0 4.1, 2.8
2.1, 2.5
4.4, 2.1
City of Vernon
Example GIS Data

“Decision-making is not a problem of mathematics rather is a

problem of judgment!”
Halpern and Fagin (1992)

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ENGR 331 Infrastructure Management I 2023-03-24

Dr. Solomon Tesfamariam

Risk-based prioritization and funding strategy

Example 4: Budget Allocation

Dr. Solomon Tesfamariam, PEng 1

The weights for condition and consequence for three decision

Decision Maker Condition Consequence

1) Which DM is risk averse, risk taker, and risk neutral?

2) Prioritize the roof using risk-based prioritization methods.

Dr. Solomon Tesfamariam, PEng 2

Dr. Solomon Tesfamariam, PEng 3

 Linear (e.g. pipe) and vertical (e.g.

 Surface (e.g. roads) and sub-surface

 Self-financing, tax supported and

Operational Capital DCC Service fee Tax

Dr. Solomon Tesfamariam, PEng 4

Dr. Solomon Tesfamariam, PEng 5

Dr. Solomon Tesfamariam, PEng 6

Why stormwater fee

• Dedicated funding source for stormwater

Dr. Solomon Tesfamariam, PEng 7

Dr. Solomon Tesfamariam, PEng 8

Factors Affecting their LOS

Dr. Solomon Tesfamariam, PEng 9

Current and Projected LOS

Dr. Solomon Tesfamariam, PEng 10

Approved Capital Budget 2010-2013 and 2003

Dr. Solomon Tesfamariam, PEng 11

“As a result of economic challenges experienced by

Property Tax Levy

Dr. Solomon Tesfamariam, PEng 12

Funding for Capital Projects

Dr. Solomon Tesfamariam, PEng 13

Capital Projects Funding Source History

Dr. Solomon Tesfamariam, PEng 14

Dr. Solomon Tesfamariam, PEng 15

Dr. Solomon Tesfamariam, PEng 16

Dr. Solomon Tesfamariam, PEng 17

Capital Investment by Category

Capital Investment by Project Drivers

Infrastructure required to Infrastructure required

Infrastructure that replaces

Dr. Solomon Tesfamariam, PEng 18

Average Annual Investment

Investment Priorities 1 and 2

Dr. Solomon Tesfamariam, PEng 19

“Approximately 72% of the priority 2 projects are

Dr. Solomon Tesfamariam, PEng 20

Source of Funding ($Millions)

General Taxation Funding

Dr. Solomon Tesfamariam, PEng 21

Dr. Solomon Tesfamariam, PEng 22

Consequence of failure mapping for the City’s

Dr. Solomon Tesfamariam, PEng 23

Planned Investment by Service Focus

Dr. Solomon Tesfamariam, PEng 24

Planned Investment by Service Focus

Dr. Solomon Tesfamariam, PEng 25

Breakdown of sources of financing for water and