International Journal of Strategic Property Management

ISSN: 1648-715X / eISSN: 1648-9179

2018 Volume 22 Issue 2: 143–156
https://doi.org/10.3846/ijspm.2018.445

MANAGEMENT OF CAPITAL ASSETS BY LOCAL GOVERNMENTS: AN

ASSESSMENT AND BENCHMARKING SURVEY

Olga KAGANOVA1,*, Jeffrey TELGARSKY2

1 Independent Consultant, 10717 Kings Riding Way, Rockville, MD, USA
2 NORC at the University of Chicago,4350 East-West Highway, 8th floor, Bethesda, MD, USA

Received 1 November 2016; accepted 8 June 2017

Abstract. There is a growing recognition of the importance of government-owned capital assets, both conceptually and in
practice, in large part due to the 2008 global financial crisis. However, a sizeable gap remains between the academic and
professional “universe of knowledge” surrounding government asset management, and the actual asset management prac-
ticed by governments. In particular, the majority of governments around the world are wholly uninformed when it comes
to good asset management. The purpose of this paper is to reduce this gap and suggest an instrument specifically for lo-
cal governments, for the evaluation of their asset management, in order to help them to identify the weakest elements of
asset management and thus focus limited resources on improving these elements. The instrument consists of essentially a
composite image of good asset management practices for three main asset types: buildings, land, and infrastructure. The
instrument specifies each asset management practice by its key characteristics and then converts each characteristic into a
survey question. Answers are scored and a total score for each asset type is calculated. The assessment instrument can be
used by local governments, their advisers, and by researchers interested in comparative analysis of asset management in
different jurisdictions or countries.
Keywords: government-owned property, asset management, assessment, local government, land management, infrastruc-
ture management.

Introduction
Management of government capital assets (buildings, land, tion, there are international membership organizations
and infrastructure) began emerging as a distinctive area of for government entities (e.g. PuRE-Net and The Work-
public management in the late 1980s in some countries, place Network) that perform similar functions across
such as Australia, New Zealand, and the UK, as well as in borders for central government entities. Unfortunately,
selected cities in the US (Utter, 1989; Audit Commission most knowledge and data accumulated within such
(UK), 1988; Conway, 2006; Dow, Gilles, Nichols, & Po- membership organizations are for internal use only,
len, 2006). Today the field can be viewed as substantially because members are very sensitive to disclosing their
developed, mainly by ad hoc efforts of numerous govern- data (or lack thereof) and their specific issues.
ments and their advisors at all levels (central, regional, and –– Governmental audit and oversight entities in a num-
municipal). What can be called the “knowledge universe” ber of countries, in the UK and US in particular, have
in this area has been built through several, sometimes played a crucial role in highlighting the importance
overlapping channels: of managing capital assets well. Such groups have
–– In some countries, there are specialized membership not only investigated the state of affairs and identi-
organizations for government asset-managing entities, fied problems, but also have suggested potential so-
such as the National Executive Forum on Public Prop- lutions, thus serving as catalysts for further reforms
erty in Canada or Asset Management Planning Net- (Audit Commission (UK), 2000; General Account-
work (AMP) in the UK, which facilitate the exchange ability Office (US), 2003, 2012, 2015). Their work has
of experiences and ideas among members and occa- also informed specialized asset management audits in
sionally launch member-requested research. In addi- other countries (Berahim, Jaafar, & Zainudin, 2015).

*Corresponding author. E-mail: olga.kaganova@gmail.com

Copyright © 2018 The Author(s). Published by VGTU Press

This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/), which permits unre-
stricted use, distribution, and reproduction in any medium, provided the original author and source are credited.
144 O. Kaganova, J. Telgarsky. Management of capital assets by local governments: an assessment and benchmarking survey

–– Professional associations and societies, such as the in different jurisdictions or countries. The paper starts
Royal Institution of Chartered Surveyors (RICS) in with a literature review, and then presents the methodol-
the UK, the American Society of Civil Engineers ogy (concept, survey, and ranking). It also discusses the
(ASCE) the Transportation Research Board of the practical issues of administering this survey and concludes
National Academies in the US, and the Federation with an illustration of its test in cities in China.
of Canadian Municipalities and National Research
Council in Canada, provide some assessment, re- 1. Literature review
search, and guidance on various issues of asset man-
agement. Their work is typically specific to particular New Public Management (NPM), which became a world-
sectoral divisions of capital assets (such as real estate wide phenomenon in the 1990’s, had an impact on gov-
or roads or waterworks (American Society of Civil ernment asset management. In particular, many gov-
Engineers, 2013)), for specific sets of instruments ernments introduced practices such as cost efficiency
(like public-private partnerships (RICS, 2013)) or measures, generating a governmental balance sheet, and
for capital investment planning (Vanier & Rahman, performance management, all as a part of their asset man-
2004). International donor organizations have also agement policies and practices (Peterson, 2006). However,
sponsored research and guidance documents on some reforms associated with NPM did not resolve the
various aspects or sectors of asset management, such underlying issues and continue to be debated. This is par-
as waterworks (Asian Development Bank, 2013) or ticularly true in regards to the introduction of accrual ac-
land management (Peterson & Thawakar, 2013). Oc- counting in governments, and in terms of the merits of
casionally, researchers at “think tanks” or universities market valuation of government assets (Christiaen, 2004;
publish papers regarding government asset manage- Wynne, 2008; Kaganova, 2012).
ment, and early studies date back to the 1990s (Gib- Government capital assets came into sharp focus,
son, 1994; Bond & Dent, 1998; Kaganova & Nayaar- both conceptually and in practice, as a result of the 2008
Stone, 2000). global financial crisis. The crisis hit many central and lo-
–– Finally, the private consulting industry increasingly cal governments hard, and forced them to re-examine
recognizes government asset management as a busi- their capital assets as part of their search for new savings
ness niche, with many companies positioning them- and revenues (Kaganova, 2010/2011). Meanwhile, econo-
selves by publishing policy and technical briefs, and mists started placing these assets into the broader macro-
sometimes more substantive research (e.g. Audier, economic and macro-finance context, which resulted in
Bard, & Robieux, 2014; Grant & Skilling, 2014; Palter a number of high-profile publications. In particular, the
& Shilson, 2014; Deloitte, 2011). However, most of authors of the IMF paper Another Look at Governments’
the research, methodologies, and recommendations Balance Sheets: The Role of Nonfinancial Assets (Bova, Dip-
by private companies remain confidential. pelsman, Rideout, & Schaechter, 2013) assembled avail-
Despite all the growth and development in the field of able data on the value of non-financial government assets
government asset management, a huge gap remains be- in 32 countries. The data became highly cited and revealed
tween the “knowledge universe”, on one hand, and practi- the magnitude of the value of non-financial government
cal asset management by governments, on the other hand. assets, including land and buildings, at a full 67% of GDP
In particular, the majority of the numerous local govern- (on average, for 30 countries). The paper also made an im-
ments around the world (save for a very few countries) portant conclusion that compatible data for cross-country
are largely unacquainted with good asset management and comparisons is often not available. This paper triggered a
have no effective fiscal incentives to improve. Any attempt number of extrapolations of the estimated value of gov-
to help such governments do better needs to start with an ernmental non-financial assets to all countries (Overlaet-
assessment of their current asset management. However, Michiels & Potoms, 2015; Detter & Folster, 2015).
there is currently no standardized (or at least conceptually The latter authors, in their book The Public Wealth of
consistent) approach to such evaluation, which would (i) Nations, also argued that better management of govern-
be based on the best current understanding of what con- ment owned capital assets requires (i) better governance,
stitutes “good asset management,” (ii) evaluate manage- (ii) asset management settings distanced from direct in-
ment of all three major groups of capital assets (buildings, fluence by politicians, and (iii) consolidation of various
land, and infrastructure) consistently, and (iii) be specific portfolios (e.g. buildings and infrastructure) under a sin-
enough to directly inform local governments on needed gle managing entity, implying assets owned by a central
asset management improvements. government. The last suggestion apparently ignores the
The purpose of this paper is to reduce this gap and sug- fact that such one-size-fits-all institutional models usu-
gest an instrument for the evaluation of asset management ally do not work well. A single managing entity could suit
at the local government level. It is based on what can be relatively small countries quite well, such as Finland or
called a composite image of good asset management and Sweden or provinces like Ontario (Canada), but would be
is very practically oriented. The instrument can be used impractical and potentially disastrous in large countries
by local governments, their advisers, and by researchers like Canada or the US. A unified policy, combined with
interested in comparative analysis of asset management incentives, and imposed on all asset managing entities, is
International Journal of Strategic Property Management, 2018, 22(2): 143–156 145

a more feasible solution, as in the case of Canada (McKel- too generic, prone to biased responses, or too complex to
lar, 2006). generate reliable and useful responses in the survey.
There is a growing body of research focusing on evalua- Based on interviews with regional officials, Hanis,
tion of asset management at all government entities within Trigunarsyah, and Susilawati (2010) considered public as-
a country (or region of a country), or even in two or more set management at local governments in Indonesia and
countries. The most detailed and in-depth study found is outlined the most typical problems. Similarly, Shardy,
by Overlaet-Michiels and Potoms (2015). They assessed Razak, and Pakir (2011) studied real estate asset manage-
real estate portfolio management in Flanders (Belgium) ment practices in the Malaysian federal government. They
through analysis of responses to their formal online sur- used detailed semi-structured interviews with qualified
vey, answered by 493 government entities, including 236 representatives of 12 ministries, with a framework for the
municipalities. The authors also used follow-up in-depth interviews built upon thorough reviews of international
interviews. The conceptual framework was based on seven literature on the subject. The results revealed both spe-
elements of asset management (explicit policy, recognition cific strength and weaknesses of asset management in the
of asset costs and value, information systems, accountabil- ministries.
ity, centralization / decentralization of asset management, Schulte and Ecke (2006) surveyed and analyzed asset
privatization, and accounting) that Conway, Kaganova, management practices and method in 116 municipali-
and McKellar (2006) drew from the practices of the cen- ties in Germany. They found that conceptual approaches,
tral governments of Australia, Canada, France, and New frameworks, and practices (including organizational set-
Zealand. For their survey, Overlaet-Michiels and Potoms tings) varied widely among municipalities. Operational
(2015) populated this framework with specific, quite de- inefficiency was found in many cases, due to fragmenta-
tailed elements and questions. They also analyzed survey tion of responsibilities and functions. At the same time,
results according to the size of asset portfolio under man- at the time of the research, the sector was in transition,
agement and found that for most of the seven elements driven by a recognized need to improve real estate op-
of the framework, the bigger the size of the portfolio, the erations and by a broader modernization of the German
better the asset management. Finally, they benchmarked public sector.
performance of government entities against five Belgian It should be noted that that all of the above assess-
REITs that responded to the survey. ments did not include infrastructure; rather, they focused
Phelps (2011) assessed property asset management in only on real estate. Furthermore, while real estate should
12 local governments in the UK and 6 in Russia. His ana- presumably include both land and buildings, the above
lytical framework included two levels, with three compo- studies apparently omit land, despite the fact that it can
nents on the top level, and each being further specified by constitute a substantial share of the national wealth: in
characteristics at the second level: (i) rationale (including fact, as of 2010, the value of government land constituted
statutory requirements, external advocacy, financial im- 20% of GDP in Australia, 22% in Japan, 38% in France,
peratives, etc.), (ii) practice (including culture, govern- 50% in Korea, and 98% in Costa Rica (Bova et al., 2013).
ance, policy, information, etc.), and (iii) outcomes (includ- Regarding municipal infrastructure, several authorita-
ing costs, conditions, value, client satisfaction, etc.). The tive reports have demonstrated that even in such devel-
author used in-depth structured interviews that allowed oped countries as Canada and the US, the sustainability
ranking of all municipalities along each characteristic. of assets and related services are at risk, due to under-
However, he encountered difficulty in measuring asset funding of the assets during their life cycle, thus indicat-
management outcomes, because they were rarely moni- ing that life cycle management is crucial for good asset
tored by local governments. In general, performance ma- management. In particular, deferring proper operations
trices were exploratory in nature and not aimed at guiding and maintenance (O&M) of fixed assets can lead to a
improvements in a particular jurisdiction. premature decline of the assets’ condition and their abil-
Gross and Źróbek (2013) assessed public real estate ity to function and deliver services. It can also result in
management systems, in terms of applied procedures, in an accelerated need for capital investment in asset repair
Poland, Lithuania, Latvia, and Ukraine. They introduced and replacement, which implies large future public li-
two groups of characteristics, with several characteristics abilities. Thus, the American Society of Civil Engineers
in each, assigned ranks to each country for each charac- (2013) estimated overall conditions of US public school
teristic, and then calculated a composite rank of a country facilities as “poor,” and that the investment needed to
within each group. However, in our opinion, their meth- modernize and maintain them is at least $270 billion or
odology has a number of substantial weaknesses. Specifi- more. Research launched by the Federation of Canadian
cally, the first group of characteristics deals with real es- Municipalities (2007) estimated the total additional in-
tate generally, not just government-owned real estate, and vestment needed to repair and prevent deterioration in
therefore has limited relevance. The second group of eight existing, municipally owned infrastructure assets (water,
characteristics, which is supposed to focus on government wastewater, transit, transportation and other public in-
property, includes two characteristics that are not relevant frastructure) at 123 billion (Canadian Dollars) in 2007.
to government asset management per se (e.g. existence of a Similarly, the first Canadian Infrastructure Report Card
cadaster). The other six characteristics appear to be either (2012) assessed the overall condition of four primary as-
146 O. Kaganova, J. Telgarsky. Management of capital assets by local governments: an assessment and benchmarking survey

set categories of municipal infrastructure (drinking-water prises is quite typical (Kaganova, 2008). Basic ele-
systems, wastewater networks, storm water networks, and ments of good governance, such as transparency
municipal roads) based on data obtained through a volun- and reporting, are often lacking.
tary survey of 123 Canadian municipalities. On average, (ii) As already mentioned, threats to the sustainability
about 30% of the municipal infrastructure ranked between of municipal assets exist even in developed coun-
“fair” and “very poor,” with the replacement cost of these tries, and in developing countries they are sub-
assets alone totaling $171.8 billion. stantially higher.
How “good practices” in local infrastructure manage- (iii) A common lack of unified methodologies and ap-
ment emerge is exemplified by the City of Portland (Or- proaches to asset management, even within a sin-
egon, USA). Its specialized reports (City of Portland 2010, gle local government. As a result, the three major
2015) show that the process of asset management evolved groups of immovable capital assets – buildings,
from separate efforts of various bureaus to a unified city- land, and infrastructure – are rarely managed with
wide approach and practices based on a coherent policy, an equal measure of attention. For example, some
long-term strategic planning, and consistent performance infrastructure systems (e.g. water systems) are
measurement and management. often managed using more advanced approaches
McGraw Hill Construction (2013) identified good than general public buildings. Furthermore, land
practices, and their benefits, within the water infrastruc- is often managed even more poorly than public
ture sector in Canada and the US by conducting an on- buildings.
line survey of 451 qualified respondents employed at water (iv) Often, public accounting reforms do not lead to
companies in these countries. The survey results were sup- better management of capital assets, even when
plemented by confidential in-depth interviews and four substantial resources are allocated to asset valu-
case studies of water companies. Fourteen elements of as- ation, defying the high expectations commonly-
set management identified by survey designers were esti- held for these reforms ten to twenty years ago.
mated by respondents in terms of use, effectiveness, and Rapid urbanization in many developing countries cre-
benefits. This led to an identification of the five most effec- ates additional urgency for improving government asset
tive elements (e.g. asset condition assessment for renewal / management, because construction of new fixed assets
replacement planning, development of asset management takes place on such a large scale. Often such construction
policy, strategic asset management planning, etc.). is done without proper planning and budgeting of future
Finally, it should be noted that there are international life cycle costs of existing and new assets, thus setting the
initiatives that attempt to bring some basic discipline and stage for future problems.
good practices to the management of non-financial (i.e.
capital) assets – typically from an accounting viewpoint. 2. Methodology
For example, a group of multilateral and unilateral donors
has been supporting the Public Expenditure and Financial The concept
Accountability (PEFA) program, which is built upon the
In order for governments to understand what to improve
principles outlined in the International Monetary Fund’s
in their asset management and how, they must start by
statistics manual (PEFA, 2016). PEFA’s protocol includes
knowing exactly how they are currently performing. In
assessing elements such as the existence and completion of
public asset management, performance has two distinctly
inventory records for nonfinancial assets, as well as proce-
different components: (i) system performance (i.e. poli-
dures and rules for their transfer or disposal. Reporting on
cies and practices of asset management), and (ii) portfolio
transactions with such assets is also assessed. Similarly, the
performance (e.g. space consumption per municipal em-
Council of Europe’s Local Finance Benchmarking Tool has
ployee in government office buildings, or total annual cost
a section on non-financial assets that is similar to PEFA’s.
of O&M per square meter in public buildings). System
Often such assessments are conducted in the wake of a
performance creates the foundation for portfolio perfor-
country’s accounting and public finance reforms, which
mance, and therefore should be the first component to be
introduce new asset accounting, valuation, and reporting
addressed.
requirements.
Our proposed methodology suggests a reasonably
In general, the fundamental government asset manage-
brief yet well-rounded performance evaluation and in-
ment issues identified both in the literature and gleaned
cludes universal elements of good asset management,
from the authors’ practical experience on about 20 coun-
which makes the methodology applicable to nearly any
tries include the following:
country. It is purposefully designed to be an initial assess-
(i) Common systemic deficiencies in asset manage-
ment that requires modest time and effort; the results of
ment. Many local governments do not even real-
this concise evaluation can be used immediately to plan
ize the full extent of what assets they own or how
asset management improvements. It is presumed, how-
much these assets cost them to operate and main-
ever, that as a part of a comprehensive process of improv-
tain. Institutional fragmentation and duplication
ing asset management, this assessment should eventually
among various departments and municipal enter-
be complemented by in-depth assessment of various ele-
International Journal of Strategic Property Management, 2018, 22(2): 143–156 147

ments of the asset management system and an analysis of The details: good practices and their characteristics
asset portfolios and their performance. As indicated above, “good practices” are not always clearly
This assessment tool covers buildings, land and infra- agreed upon or articulated by either governments or ex-
structure that local governments own or control, directly perts within the domain of international public asset man-
or indirectly, including the assets of all their entities (such agement. There are approaches, such as life-cycle costing,
as government departments, budgetary institutions, and which are broadly recognized as good practices. However,
city-owned enterprises). Capital assets leased from other overall, systems of asset management vary a great deal,
owners are not included in this instrument. Usually, build- and often differ even within one government (for example,
ings, land, and infrastructure are managed at the local gov- between managing building portfolios and infrastructure
ernment level by separate entities and teams. Therefore, systems). Further, some advanced government asset man-
the assessment has three independent parts: 1 – Buildings agement entities use multi-dimensional performance ma-
(or parts of buildings when they are separate properties), trixes for public property or infrastructure, e.g. the “bal-
2 – Land, and 3 – Infrastructure. Accordingly, this assess- anced scorecard reporting” of the Canadian Land Com-
ment can be applied in full, to all three categories of assets, pany (McIvor, 2015). However, the approaches used by
or partially, to only one or two categories. The fact that the specific entities or at specific jurisdictions in one country
instrument covers all three major groups of assets within would not be universally applicable to assessment in the
a single methodology distinguishes it from other attempts international context, for a number of reasons. For exam-
that usually focus on just one asset type. ple, approaches developed in the UK for public property
The methodology combines four elements. First, it de- are very advanced, but clearly tailored to the specific Brit-
fines a set of current good practices based on international ish situation, both regulation-wise and in the sense that
literature, professional debate among managers of munici- their approaches are advanced well beyond what would
pal assets in a number of countries (primarily Canada and be relevant for most local governments internationally
the UK), and broad empirical knowledge of international (CIPFA Property, 2014).
experiences in asset management that the authors have One of the methodology’s central ideas is to calibrate
assembled. Then, each good practice is converted into one the depth of assessment for local governments with me-
or more “characteristics.” For example, the good practice dium capacity, such as in many cities in Eastern Europe
of knowing what the government owns translates, for or China and to the improvements that can be realistically
buildings, into such characteristics as “Level of comple- expected in the foreseeable future. At the same time, the
tion of building inventory,” and “Level of inventory com- methodology incorporates details that are critical for dis-
puterization.” tinguishing truly good practices. In addition to drawing
Secondly, each characteristic is converted into a ques- on numerous empirical works, the methodology builds
tion for local governments. Questions are formulated upon several key sources that present elements of good
according to the principles of professional surveys (e.g. practices (Kaganova & Kopanyi, 2014; McGraw Hill Con-
double-barreled questions are not permitted). Response struction, 2013; City of Portland, 2010, 2015; Peterson
options for each question are defined in the survey (e.g. & Kaganova, 2010; Federation of Canadian Municipali-
the questions are predominantly close-ended) and reflect ties, 2002). Additional important sources included David
levels of advancement for each characteristic. In sum, the Bentley (2014), Peterson and Thawakar (2013), Canadian
set of good practices and their associated characteristics Infrastructure Report Card (2012), Deloitte (2011), Olga
are transformed into a survey instrument. Kaganova (2011), Audit Commission (UK) (2009), and
Thirdly, the answers are scored, in order to convert the Federation of Canadian Municipalities and National
them into a comparable qualitative measurement of local Research Council (2006).
government’s advancement in applying the good practices. Table 1 presents the good practices and their charac-
The scoring for each characteristic is immediately inform- teristics that are included in this instrument. The good
ative, as it identifies the stronger and weaker elements of practices encompass knowing what assets a local govern-
asset management at a particular government, and thus ment owns and controls; knowing why these assets are
provides decision-makers and asset managers with infor- needed; market valuation of these assets for decision mak-
mation about which elements may need improvements ing and transactions; elements of good governance (such
first and foremost. as transparency, use of auctions for asset al.ocation to the
Forth, in order to provide an integrated measurement private sector, and how revenues from allocating assets are
of overall system performance, the methodology also in- used); existence of a unified city-wide framework; strate-
troduces a summary (composite) score for each of the gic asset management planning; training opportunities for
three groups of assets. Finally, to provide additional prac- staff; life-cycle costing and management; and capital in-
tical insights and guidance for decision-makers, the good vestment planning. Table 1 also displays the variations in
practices and related summary scores for buildings and applicability of good practices among the three asset types
infrastructure are also split in two sub-components: one (buildings, land, and infrastructure), as determined by the
summary score for “basic asset management” and one for nature of the assets in each of these groups. For example,
“advanced asset management”. land management does not include life-cycle costing and
148 O. Kaganova, J. Telgarsky. Management of capital assets by local governments: an assessment and benchmarking survey

Table 1. Good practices and their characteristics

Part 1: Part 2: Part 3:

Buildings Land Infrastructure
Good practice Characteristics of the good practice
Basic asset management
Know what you have Inventory of assets, level of completion X X (4) X (5)
Level of inventory computerization X X (4) X (5)
Breadth of inventory information X
Know why you need these Existence of specialized asset management classification X X (4)
assets
Market valuation of assets Existence of regulations requiring market valuation of X X
for decision making and buildings and/or land before transactions are conducted
transactions Use of market valuation in practice, for decision-making X (1) X (1)
Use of market value (or market rent) in practice, in X X
transactions
Good governance: Transparency of documents and procedures related to this X (2) X (2)
transparency asset type
Transparency of transactions with assets of this type X (3) X (3)
Periodic reporting to decision-makers on this group of X X X
assets
Periodic reporting to the public on this group of assets X X
Good governance: use of Use of auctions for allocating assets of this type to the X X
auctions for allocating private sector
assets to the private sector
Good governance: how Regulation on using revenues from the transfers of assets X X
revenues from allocating for capital investment or debt repayment
assets are used Practice of using revenues from the transfers of assets for X
capital investment or debt repayment X
Advanced asset management
Unified city-wide Established responsibility for a common city-wide X X X
framework framework and approaches to management of assets of
this type
Strategic asset Existence of strategic asset management plan (SAMP) or X X X
management planning a similar specialized strategic document covering an asset
type
Training opportunities for Training and professional development opportunities for X X X
staff staff managing assets of this type
Life-cycle costing and Use of proactive maintenance / preventive repair plans and X X (5)
management schedules for assets
Use of condition records about assets for repair and X X (5)
replacement planning
Updating condition records X X (5)
Monitoring and recording annual operating and X X (5)
maintenance (O&M) costs for each building /part of
buildings or major components of infrastructure systems
Capital investment Use of norms and standards for service provision and X X
planning service levels for planning building and/or infrastructure
needs
Projecting long-term investment needs for main building X X (5)
groups and/or infrastructure
Existence of government-wide multi-year capital X X
investment plan (as a part of the budgeting system) that
covers buildings and/or infrastructure
Considering future life-cycle costs while planning X X
technical solutions for capital investment in particular
buildings and/or infrastructure
International Journal of Strategic Property Management, 2018, 22(2): 143–156 149

End of Table 1.

Part 1: Part 2: Part 3:

Buildings Land Infrastructure
Good practice Characteristics of the good practice
Assessing impact of future operation and maintenance X X
(O&M) costs resulting from planned capital investment on
the future operating budget
Existence of special protected funds or accounts for X X
accumulating funding for buildings’ and/or infrastructure
capital repairs and replacement
Notes: Numbers in parentheses indicate that a related question has further details as summarized below:
(1) Applied to allocation of buildings or land to four types of users: the private sector, social users, government users, and contribution to municipal
enterprises or PPPs.
(2) (a) Applied to three types of users (private sector, NGO, and municipal enterprise) and (b) identifies four potential ways (public website, local
newspapers, TV, etc.) of publicizing the information for each type of user.
(3) (a) Applied to three types of users (private sector, NGO, and municipal enterprise) and (b) identifies five elements of transaction information to
be published (e.g. name of buyer, characteristics of the asset, etc.)
(4) Applied to four types of land: parcelized land held by a local government and its budgetary entities; non-parcelized land held by a local govern-
ment and its budgetary entities; parcelized land held by city-owned companies; and non-parcelized land held by city-owned companies.
(5) Applied to each infrastructure system under municipal ownership/control.

management, because the latter is applicable only to im- Then, each answer is scored on a scale from 0 (the low-
provements such as buildings and infrastructure. est advancement) to 1 (the highest advancement): in the
It should be noted that Part 3 (Infrastructure) requires above example, “Almost never” will generate a “0” score,
answering some questions for each infrastructure system while “almost always” will generate a score of “1.” For ques-
separately, and the list of systems included in the survey tions that apply to more than one asset holder/user or to
is as follows: sub-portfolios, or have other details (i.e. the questions for
Water systems; wastewater systems; storm drainage the characteristics marked in Table 1 by note numbers), a
systems; solid waste collection and disposal facilities; score is calculated on the same scale (0 to 1), as a simple av-
parks & public spaces; cemeteries; streets and roads, pow- erage of the scores for individual answers to these questions.
er generation and distribution systems; and others (if such For example, if a city owns only two infrastructure systems,
exist, they should be specified). water and roads, and for the question about the level of in-
ventory computerization the water system scored 0.67 and
The details: the scoring system roads scored 0.33, the overall score for this question will
As mentioned, each characteristic associated with each be their average, 0.5. There is one exception to this equal-
good practice shown in Table 1 is converted into a survey weight rule: for the characteristic “Use of market valuation
question for local governments to answer. For example, in practice, for decision-making,” the overall score is calcu-
the characteristic “Use of condition records about assets lated as a weighted average, with the following weights: 0.5
for repair and replacement planning” becomes, for Part to allocation of assets to the private sector, 0.25 to social
3 (Infrastructure), the question “Do you have records of uses, and 0.25 to municipal enterprises.
the conditions of the components of your infrastructure Finally, scores for all answers are summed in sub-
systems (for repair and replacement planning)?” This totals and totals for Parts 1, 2, and 3 and presented as a
question must be answered for each infrastructure system scorecard, as shown in the Appendix (for the combined
under local government’s ownership and/or control. scorecards of two cities in China where the survey was
Each question has a finite list of potential answers. For tested). When the sub-total and total scores are calculated,
example, the characteristic “Use of auctions for allocat- all individual scores are summed with equal weights of 1,
ing buildings and/or land to the private sector” translates, because at the current stage of asset management intro-
for Part 2 (Land), into the question “How often do you duction of a weighted index would be premature and not
use auctions as a form of allocating municipal land to the based on any strong evidence or reasoning.
private sector?” which is answered by choosing one of fol- The scoring algorithm stipulates a possibility of some
lowing response options: questions not being answered. Such an event leads to (i)
–– Almost always (more than 95% of the times). assigning zero as a score for such a question (i.e. the low-
–– Majority of cases (50–95% cases). est achievement), and (ii) counting and reporting on the
–– Minority of cases (5–50%). scorecard the number of questions that were not answered
–– Almost never (less than 5% of the times). (see the last row in the illustrative scorecard in Appendix).
150 O. Kaganova, J. Telgarsky. Management of capital assets by local governments: an assessment and benchmarking survey

Finally, on the scorecard, the scores for each charac- sons and benchmarking can catalyze focused exchange of
teristic are not only quantified on the zero-to-one scale, practices/experiences, whereby local governments that are
but also color-coded with a traffic-light theme: the best more advanced on some particular characteristics of as-
possible score of 1 is indicated by bright green, the worst set management share their experiences with others that
score of 0 by bright red, the middle score of 0.5 by yellow, are less advanced. For example, as the Appendix indicates,
and the rest are in respective shades of light green, pink, City 1 could learn from City 2 about forms of periodic
and orange. reporting to decision makers and to the public on land.
Likewise, City 2 could learn from City 1 how they project
3. Lessons from testing the survey and ways to use it long-term needs for such infrastructure systems as storm
drainage, solid waste collection and disposal, and streets
The instrument was initially envisioned as a survey that and roads.
local governments could self-administer, given that each Finally, this instrument can also be used by outside
question is accompanied by instruction. A completed ques- entities assisting local governments, such as donor agen-
tionnaire would be processed at NORC where a scorecard cies, providers of technical assistance, and consultants, in
would be produced. However, when the test was self-ad- order to assess local practices within a unified framework.
ministered in three cities in China, two problems emerged: In particular, this instrument provides invaluable oppor-
(i) staff assigned to complete the questionnaire misunder- tunities for diagnosing and analyzing asset management in
stood or misinterpreted some questions, and (ii) without at different countries within a unified framework that gener-
least some verification of answers by independent experts, ates comparable data. For example, the fact that land in
responses about current asset management practices can the test cities in China was revealed to be managed better
present them as being less or more advanced than they than buildings and infrastructure appears to be very unu-
actually are. Government asset management experts in sual internationally, given anecdotal evidence from other
Denmark and Kyrgyzstan who reviewed the instrument countries where land often is the most neglected asset
expressed similar concerns. Therefore, it is suggested that type. However, this should come as no surprise, given that
this instrument be administered, as a rule, as an adviser-fa- urbanization in China has been funded quite substantially
cilitated self-assessment, and that instructions be extended by revenues from land sales (Ye & Wu, 2014).
to include a glossary of notions and terms.
This instrument can be used by local governments Conclusion, limitations, and what can be next
and their advisors in two independent but complimentary
ways. First, it can be used by any given local government The suggested instrument can serve as a powerful asset
independently from other local governments in a given management assessment tool for both in-country and
country or region. The scores for each characteristic al- cross-country studies, and serve as a guide for practical
low the local government to see how close each charac- improvements of asset management by local governments
teristic is to a possible maximum (in other words, to full in many countries. Use of this instrument would facilitate
implementation of the feature within good practice) and asset management reforms, in particular in developing
on which characteristics it lags behind. For example, in the countries and those experiencing rapid urbanization.
test cities (see Appendix) the leadership of City 1 can see This instrument has certain limitations. First, it does
that elements of good practices that fall short include: pe- not have a section regarding the use of land or buildings
riodic reporting on buildings and infrastructure; strategic that governments may rent from the private sector. This
planning for buildings, land, and infrastructure; life-cycle case is excluded because the use of rental property is not
tools for buildings; etc. In addition, the total score assesses typical for governments in developing countries, and is
the overall state of local asset management. Thus, in City rare for post-transitional countries as well. Secondly, in
1, the total score for buildings reached 12.01 out of the some countries local governments may not yet possess
maximum of 26 points, or 46% of a good practice level. the authority assumed by some of the indicators in the
Further, if the assessment is conducted for more than “advanced asset management” section (e.g., the ability
one type of asset, local governments can compare relative to create multi-year capital investment plans). To make
performance of asset management systems by asset types. cross-country comparisons in such cases, one would need
This can inform decisions on priority investments to im- to exclude the indicators that are not applicable to some
prove asset management. Thus, City 2 has 44% of the good countries from the scorecards of all countries in a sample.
practice level for buildings, 69% for land, and 31% for in- What should come next? The suggested instrument
frastructure, which indicates that improving infrastructure covers performance of asset management systems, but not
asset management may be given the highest priority. performance of the assets themselves. This raises the ques-
Second, if several local governments conduct this as- tion of whether performance indicators for asset portfolios
sessment in the same country, results can be used for com- should be introduced. While Key Performance Indicators,
parisons and benchmarking. The latter would be especially including indicators on portfolio performance (e.g., an-
beneficial, given that benchmarking is becoming a part nual operations and maintenance costs per square meter
of mainstream good asset management (Bentley, 2014; of office space) are the subject of active interest among
Towers, 2013). In particular, cross-government compari- government asset managers in developed countries, the
International Journal of Strategic Property Management, 2018, 22(2): 143–156 151

authors of this paper believe that more exploratory work mhca.mb.ca/canadian-infrastructure-report-card-volume-

is needed before reasonably universal and actionable in- 1-2012-municipal-roads-and-water-systems/
dicators could be suggested for government portfolios. Christiaens, J. (2004). Capital assets in governmental account-
Meanwhile, a hypothesis and hope is that by improving ing reforms: comparing Flemish technical issues with interna-
tional standards. European Accounting Review, 13(4), 743-770.
asset management systems, governments will set the stage
https://doi.org/10.1080/0963818042000237133
for better portfolio performance – and even improve their City of Portland. (2010). Citywide assets report. Retrieved from
performance to some extent. https://www.portlandoregon.gov/bps/article/352969
Finally, an entity – in each country or regionally or City of Portland. (2015). Citywide assets report. Retrieved from
internationally – needs to “own” this instrument and help https://www.portlandoregon.gov/cbo/article/567961
local governments to apply it. Conway, F. (2006). Federal asset management in Australia. In O.
Kaganova, J. McKellar (Eds.), Managing Government Property
Assets: International Experiences. Washington, D.C.: The Ur-
Acknowledgement ban Institute Press.
NORC at the University of Chicago sponsored devel- Conway, F., Kaganova, O., & McKellar, J. (2006). A “Composite
Image” of central government asset management. In O. Ka-
opment of the survey (and copyrighted it). The authors
ganova, J. McKellar (Eds.), Managing Government Property
are thankful to their colleagues at NORC Kareem Kysia, Assets: International Experiences. Washington, D.C.: The Ur-
Aparna Ramakrishnan, and Benjamin Zimmermann for ban Institute Press.
their contribution in shaping the survey instrument and to Deloitte. (2011). Comparing public real estate management in
the World Bank team comprising Alessandra Campanaro, European cities. Retrieved from http://www.mondaq.com/
Joanna Masic, Hazem Abdelfattah, Dr Eddie Hum, and uk/x/156662/Market+Commentaries/Comparing+Public+R
Hongye Fan for pilot testing in China. The authors thank eal+Estate+Management+In+European+Cities
three unanimous reviewers for very helpful suggestions. Detter, D., & Folster, S. (2015). The public wealth of nations: how
management of public assets can boost or bust economic growth.
Palgrave Macmillan. https://doi.org/10.1057/9781137519863
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International Journal of Strategic Property Management, 2018, 22(2): 143–156 153

APPENDIX. Combined scorecards for two cities in China

Asset Management Scorecard
Part 1: Buildings (or Parts of Buildings if Separate Properties)
Maximum
Question No. Characteristics of Good Practices City 1 City 2 Score
Possible
Basic Asset Management
Q2 Inventory of buildings and parts of buildings, level of completion 1.00 1.00 1
Q3 Level of inventory computerization 1.00 1.00 1
Q4 Breadth of inventory information 0.44 0.56 1
Existence of specialized asset management classification of buildings and
Q5 1.00 0.00 1
parts of buildings
Existence of regulations requiring market valuation of buildings and parts of
Q6 1.00 1.00 1
buildings before transactions with them
Use of market valuation of buildings and parts of buildings in practice, for
Q7A 0.50 0.00 1
decision making
Use of market value (or market rent) of buildings and parts of buildings in
Q7B 1.00 0.00 1
practice, in transactions
Transparency of documents and procedures related to buildings and parts of
Q8 0.50 0.70 1
buildings
Q9 Transparency of transactions with buildings and parts of buildings 0.92 0.96 1
Q10 Periodic reporting to decision makers on building assets 0.00 0.00 1
Q11 Periodic reporting to the public on building assets 0.00 0.00 1
Use of auctions for allocating municipal buildings / parts of buildings to the
Q12 1.00 0.00 1
private sector
Regulation on using revenues from the transfer of buildings / parts of
Q13 0.00 1.00 1
buildings for capital investment or debt repayment
Practice of using revenues from the transfer of buildings / parts of buildings
Q14 0.00 0.00 1
for capital investment or debt repayment
Basic Asset Management, Subtotal Score (Q2 - Q14) 8.35 6.22 13
Advanced Asset Management
Established responsibility for a common city-wide framework for and
Q15 1.00 1.00 1
approaches to management of buildings (parts of buildings)
Existence of Strategic Asset Management Plan (SAMP) or a similar
Q16 0.00 0.00 1
specialized strategic document covering buildings
Training and professional development opportunities for staff working on
Q17 0.50 0.00 1
asset management of buildings (parts of buildings)
Use of proactive maintenance / preventive repair plans and schedules for
Q18 0.00 0.33 1
buildings (parts of buildings)
Use of condition records about buildings (parts of buildings) for repair and
Q19 0.00 0.33 1
replacement planning
Q20 Updating the condition records 0.33 0.67 1
Monitoring and recording annual operating and maintenance (O&M) costs
Q21 0.00 1.00 1
for each building (part of buildings)
Use of norms and standards for service provision and service levels for
Q22 1.00 1.00 1
planning building needs
Q23 Projecting long-term investment needs for main building groups 0.50 0.00 1
Existence of government-wide multi-year capital investment plan (as a part
Q24 0.00 0.00 1
of the budgeting system) that covers buildings or parts of buildings
Considering future life-cycle costs while planning technical solutions for
Q25 0.00 0.50 1
capital investment in particular buildings
Assessing impact of future operation and maintenance (O&M) costs
Q26 0.00 0.50 1
resulting from planned capital investment on the future operating budget
Existence of special protected funds or accounts for accumulating funding
Q27 0.33 0.00 1
for buildings’ capital repair and replacement
Advanced Asset Management, Subtotal Score (Q15 - Q27) 3.66 5.33 13
Total Score 12.01 11.55 26
Questions Without Responses 2
154 O. Kaganova, J. Telgarsky. Management of capital assets by local governments: an assessment and benchmarking survey

Part 2: Land City 1 City 2

Score (for quantitative

Question indicators the score Maximum
Characteristics of Good Practices
No. approximates estimated Score Possible
actual levels)

Q2 Inventory of land, level of completion 1.00 0.50 1

Q3 Level of inventory computerization 1.00 0.50 1
Q4 Existence of specialized asset management classification of land 1.00 0.00 1
Existence of regulations requiring market valuation of land before
Q5 1.00 1.00 1
transactions with it
Q6A Use of market valuation of land in practice, for decision making 0.50 0.92 1
Q6B Use of market value (or market rent) of land in practice, in transactions 1.00 0.00 1
Q7 Transparency of documents and procedures related to land 0.77 0.50 1
Q8 Transparency of transactions with land 0.83 0.92 1
Q9 Periodic reporting to decision makers on land 0.00 1.00 1
Q10 Periodic reporting to the public on land 0.00 1.00 1
Q11 Use of auctions for allocating land to the private sector 1.00 1.00 1
Regulation on using revenues from the transfer of land for capital in-
Q12 0.00 1.00 1
vestment or debt repayment
Practice of using revenues from the transfer of land for capital invest-
Q13 0.00 0.00 1
ment or debt repayment
Responsibility for establishing a common city-wide framework for and
Q14 1.00 1.00 1
approaches to management of land
Existence of Strategic Asset Management Plan (SAMP) or a similar
Q15 0.00 0.00 1
specialized strategic document covering land
Training and professional development opportunities for staff working
Q16 0.50 1.00 1
on asset management of land
Total Score 9.60 10.33 15
Questions Without Responses 2

Asset Management Scorecard

Part 3: Infrastructure
Question Maximum
Characteristics of Good Practices City 1 City 2
No. Score Possible
Basic Asset Management
Number of infrastructure systems under local government ownership
Q2 5.00 7.00 -
and control (non-scoring characteristic)
Q3 Inventory of infrastructure, level of completion 0.74 0.33 1
S1 Water 0.33 1
S2 Wastewater 0.67 0.67 1
S3 Storm dranage 0.67 0.33 1
S4 Solid waste collection & disposal 0.67 0.33 1
S5 Parks & public spaces 0.67 0.00 1
S6 Cemetaries 0.00
S7 Streets and roads 1.00 0.67 1
S8 Power generation and distribution
S9 Othe (specify)
Q4 Level of inventory computerization 0.30 0.43 1
S1 Water 0.50 1
S2 Wastewater 0.50 0.50 1
S3 Storm dranage 0.00 0.50 1
S4 Solid waste collection & disposal 0.00 0.50 1
S5 Parks & public spaces 0.00 0.00 1
S6 Cemetaries 0.00
S7 Streets and roads 1.00 1.00 1
International Journal of Strategic Property Management, 2018, 22(2): 143–156 155

Asset Management Scorecard

Part 3: Infrastructure
Question Maximum
Characteristics of Good Practices City 1 City 2
No. Score Possible
S8 Power generation and distribution
S9 Othe (specify)
Q5 Periodic reporting to decision makers on infrastructure 0.00 0.00 1
Q6 Periodic reporting to the public on infrastructure 0.00 0.00 1
Basic Asset Management, Subtotal Score (Q3- Q6) 1.04 0.76 4
Advanced Asset Management
Established responsibility for a common city-wide framework for and
Q7 0.33 0.00 1
approaches to management of infrastructure
Existence of Strategic Asset Management Plan (SAMP) or a similar
Q8 0.00 0.00 1
specialized strategic document covering infrastructure
Training and professional development opportunities for staff working
Q9 0.50 0.50 1
on asset management of infrastructure
Use of proactive maintenance / preventive repair plans and schedules
Q10 0.53 0.67 1
for infrastructure
S1 Water 1.00 1
S2 Wastewater 0.67 1.00 1
S3 Storm dranage 0.33 0.33 1
S4 Solid waste collection & disposal 0.00 1.00 1
S5 Parks & public spaces 1.00 1.00 1
S6 Cemetaries 0.00
S7 Streets and roads 0.67 0.33 1
S8 Power generation and distribution
S9 Othe (specify)
Use of condition records about infrastructure for repair and replace-
Q11 0.80 0.48 1
ment planning
S1 Water 1.00 1
S2 Wastewater 0.67 1.00 1
S3 Storm dranage 0.67 0.33 1
S4 Solid waste collection & disposal 1.00 0.67 1
S5 Parks & public spaces 0.67 0.00 1
S6 Cemetaries 0.00
S7 Streets and roads 1.00 0.33 1
S8 Power generation and distribution
S9 Othe (specify)
Q12 Updating the condition records 0.60 0.38 1
S1 Water 0.67 1
S2 Wastewater 0.67 0.67 1
S3 Storm dranage 0.67 0.33 1
S4 Solid waste collection & disposal 1.00 0.33 1
S5 Parks & public spaces 0.33 0.33 1
S6 Cemetaries 0.00
S7 Streets and roads 0.33 0.33 1
S8 Power generation and distribution
S9 Othe (specify)
Monitoring and recording annual operating and maintenance (O&M)
Q13 0.80 0.33 1
costs for infrastructure
S1 Water 0.00 1
S2 Wastewater 0.67 1.00 1
S3 Storm dranage 0.67 0.33 1
S4 Solid waste collection & disposal 1.00 0.33 1
S5 Parks & public spaces 0.67 0.00 1
S6 Cemetaries 0.00
156 O. Kaganova, J. Telgarsky. Management of capital assets by local governments: an assessment and benchmarking survey

Asset Management Scorecard

Part 3: Infrastructure
Question Maximum
Characteristics of Good Practices City 1 City 2
No. Score Possible
S7 Streets and roads 1.00 0.67 1
S8 Power generation and distribution
S9 Othe (specify)
Use of norms and standards for service provision and service levels for
Q14 1.00 1.00 1
planning infrastructure needs
Q15 Projecting long-term investment needs for infrastructure 0.70 0.07 1
S1 Water 0.00 1
S2 Wastewater 0.50 0.00 1
S3 Storm dranage 1.00 0.00 1
S4 Solid waste collection & disposal 1.00 0.00 1
S5 Parks & public spaces 0.00 0.50 1
S6 Cemetaries 0.00
S7 Streets and roads 1.00 0.00 1
S8 Power generation and distribution
S9 Othe (specify)
Existence of government-wide multi-year capital investment plan (as a
Q16 0.00 0.00 1
part of the budgeting system) that covers infrastructure
Considering future life-cycle costs while planning technical solutions
Q17 0.50 0.50 1
for capital investment in infrastructure
Assessing impact of future operation and maintenance (O&M) costs
Q18 resulting from planned capital investment on the future operating 0.00 0.50 1
budget
Existence of special protected funds or accounts for accumulating
Q19 0.67 0.00 1
funding for infrastructure capital repair and replacement
Advanced Asset Management, Subtotal Score (Q7 - Q19) 6.44 4.43 13
Total Score 7.47 5.19 17
Questions Without Responses 2.29
TOTAL SCORE FOR PART 1 - PART 3 29.09 27.07 58
Total number of questions without responses 6.29
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