Combining Maintenance, Operational and Capital Planning

While there are folks who relish number crunching, my suspicion is that most of us view budgeting as a necessary evil that we would prefer not to do. Budgets take many forms. Some do a simple one-year operating budget, some have a one-year capital budget, and some combine the two. Others have running budgets covering two to five years or longer depending on their operations and goals. Many times those preparing the budgets are more numbers oriented than operationally oriented. I am reminded of a cartoon I was sent that showed a person standing on a plank over a swamp with alligators chomping at that person’s behind, and the caption read, “When you’re up to your ass in alligators it is hard to remember the goal was to drain the swamp!”

Budgeting is most fruitful only when one truly understands the goals of the operation, both on a short and long-term basis, as well as understanding customer perceptions about needed improvements, which could translate to increased revenue streams. In many ways it can be easier for the hands-on management at a smaller facility to appreciate its vision and all of the facility’s needs. All too often in larger facilities, budgets are left to those who are not all that familiar with life beyond their office walls.

The trick to meaningful budgeting is understanding not only the company’s vision, desires and opportunities, but also the problems it is facing, such as the various regulatory requirements. The budget also needs to understand capital needs for replacement, expansion and new projects and the game plan for implementation.

Overlapping Budgets
What many lose sight of is that the three typical budgetary categories of maintenance, operations and capital ALL OVERLAP – and the trick is to anticipate the needs, as well as seize various opportunities. A clear example that most everyone has witnessed is when a municipality repaves a heavily traveled street (because it needed it), and a short time later a utility company is digging it back up. Sometimes the left hand is not totally communicating with the right hand!

Rather than budgeting being a tedious job of number crunching, it can be a dynamic approach for both short and longer term planning strategies for the future of the business, including how to make improvements that allow revenue to rise. I was told in business school that there were two ways to look at budgeting – focus on the expense side or the revenue side. When I left business school I was told the focus should be on the revenue side. After some time in the field, I truly believe that one needs to focus on the planning side. It should not include just one year to the next, but create five-year rolling budgets that combine the annual maintenance, operations and capital needs, while implementing the planning opportunities, and, most importantly, providing the flexibility to be able to react to inadvertent problems and opportunities. At the same time one should never forget the gorilla in the room – regulatory requirements.

A good case was a facility that was under regulatory pressure to implement a stormwater pollution prevention program. The yard was on a hill sloping toward the water, and there were concerns of hull maintenance materials running into the water. A large portion of the bulkhead was also failing, yet boats, cars and trucks were being parked directly adjacent to it. Management had in mind “fixing” the bulkhead “at some future point in time.” Unfortunately – or perhaps fortunately – the bulkhead failed as we were undertaking recommendations for the stormwater improvements. We got a call from the owner telling us that they were going to replace the bulkhead and associated paving so not to worry, it would not interfere with our plans. We suggested that would be a mistake. It would make more sense to combine the two separate items into one. We explained that in order to replace the bulkhead, the tieback system had to be replaced, necessitating the removal of a considerable amount of the asphalt. Why not replace the bulkhead and tieback system and incorporate vegetated and crushed stone buffers along the immediate waterfront? That would provide for stormwater filtration and eliminate the additional upland pressure on the bulkhead by shifting the parking and boat storage slightly landward. The costs for all would be less than the replacement costs for the bulkhead tieback system and repaving of the entire area alone, and the look and feel of the facility would be upgraded dramatically, which, along with other improvements, would allow rates to be increased.

Mother Nature
There are times when Mother Nature throws you a curve ball. Hurricanes are a good example. They can wreak havoc on your marina facilities, destroying, among other things, entrances and the docking facilities. Regardless of insurance coverage, it is a mess and a nightmare to have to deal with. In the heat of the moment, most of us immediately respond along the lines of “OK, now we need to replace what we had ASAP.” With rolling budget planning one can take a deep breath and say, “OK, how can we take advantage of this nightmare to improve our facility – are there things that we want to do?”

An example that comes to mind involves a facility that had improved accessibility for those with mobility impairments to everything except the entrance to the docking facilities. A hurricane ripped the entrance apart leaving two steel girders intact that led to a now compromised concrete filled landing, from which a short, steep gangway provided access to the floats. The immediate thought was to simply get prices to replace things just as they had been before the storm. We suggested that this would be an excellent opportunity to provide the appropriate accessibility to the facility. Rather than replacing everything as it was, why not put in a new landing by shore and an 80-foot long gangway to a slightly repositioned existing landing float? The cost would be equal to or less expensive than the needed repairs, and the facility’s accessibility would be improved. The insurance company confirmed that their policy (like most policies) had a provision allowing payment for upgrades for regulatory compliance. In short, it was a great win-win approach.

In another case, storms had destroyed the gangway entrances to two mains and associated fingers. The facility had a capital budget program for replacing those facilities in a couple of years to make them compliant with the ADA accessibility rules and to accommodate larger boats through a reconfiguration, which was allowed due to prior planning and regulatory approvals allowing for such work. So rather than just continuing with the ‘just rebuild what was there’ mentality – they took the steps needed to improve their facility which significantly increased revenue.

Future Planning
In another facility, staff had been suggesting changing the light bulbs and fixtures to be more energy efficient and longer lasting, but the idea was quickly dismissed as too expensive. Fortunately, the idea resurfaced during the budgetary process, and when they ran the numbers it turned out that the savings would be significant on a long-term basis, and they would get better looking fixtures and lighting at the same time. Simple, easy, but very meaningful.

So remember, meaningful budgeting is not just number crunching, it is PLANNING. It is taking the time and thought to really look at things, and to find synergy wherever possible. One of the best ways of achieving this is to involve all of the staff and have them help identify specific needs, desires, what ifs, sleeping problems and opportunities, as well as how to achieve them. In this way, more often than not, you can find ways to tie needed, required and desired facility improvements together, killing three birds with one stone, and increasing functionality, aesthetics and cash flow in the process!.

Dan Natchez is president of DANIEL S. NATCHEZ and ASSOCIATES Inc., a leading international environmental waterfront design consulting company specializing in the design of marinas and marina resorts throughout the world. He invites your comments and inquiries by phone at 914/698-5678, by fax at 914/698-7321, by email at dan.n@dsnainc.com.