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Smart Management for �Small Water Systems
www.efcnetwork.org
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Funding Options: Grants and Beyond
Funding Options for Small Water Systems
Stacey Isaac Berahzer April 24th, 2013
Rhode Island Department of Health Providence, RI
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www.efcnetwork.org
4/24/13
Outline • Introduction • How to Pay for Water/Sewer Projects • Accessing federal grants • Accessing non-federal grants • Grants.gov for federal grants • Grant writing tips • Getting funded again
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INTRODUCTION
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How the Payments are Made For Infrastructure Projects
• Save in advance and pay • Pay as you go (current receipts) • Pay afterwards (someone loans you
money) • Grants
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Where does the money come from?
• Loans • Grants • Bonds • User fees • Assessments • Impact fees • Taxes
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About Grants
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NOT a good way to find a grant!
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Grants Aren’t Completely �Free Money
• Application for the grant can be expensive – staff time and money
• Applications can take months to process
• Often lots of strings attached
• Often require a percentage match
• Lots of competition
• Difficult to sustain
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FEDERAL GRANTS
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Step 1 – Choose Grants
http://water.epa.gov/grants_funding/ à Catalog of Federal Funding Input: • Grants • Local
Government • Wastewater • Get results in
Table Format
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Step 1 – Choose Grants Results – 7 Programs Matched
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Step 1 – Choose Grants Another way to find EPA Grants
h1p://water.epa.gov/type/drink/pws/smallsystems/financialhelp.cfm
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Step 2: Find More Information on Those Grants from CFDA.gov
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NON-FEDERAL GRANTS
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Grants at the State Level - Examples
• Community Development Block Grant Program http://www.planning.ri.gov/community/development/blockgrants/index.php
• USDA Waste and Water Disposal Direct Loans and Grants http://www.rurdev.usda.gov/UWP-dispdirectloansgrants.htm
• See handout/later presentations for more
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Grants from Private/Non-Profits
• Trusts and charitable foundations offer some grants, but local governments are not the main target in most cases
• Partnering with a non-profit or community-based group may be an option
• Making the case for cultural significance of your community would be important here (e.g. historic significance)
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STEP 3: WRITING A GRANT APPLICATION
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GRANTS.GOV For federal grants
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Step 3: Apply at Grants.gov
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Grants.gov • You may need to download special
software on your computer • Sometimes this is the ONLY way to apply,
paper applications are not accepted • If you do not get an email confirmation of
receipt, call the RFP contact
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GRANT WRITING TIPS
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Grant Writing Tips • Read the RFP thoroughly to make sure
your project is appropriate for the funding
• Follow the suggested RFP outline, if there is one
• Include maps and photos as appropriate
• Include letters of support from partner agencies, not from politicians
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Grant Writing Tips • Be specific with your work plan and
timeline
• Cite measurable goals • Focus on the results from this funding
source and not the work of your program as a whole
• Don’t mention “unfunded mandates”
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Grant Writing Tips • If you are applying as a group, choose
one agency as the lead agency. Pick either the agency with the most work or the agency with the best relationship with the funder.
• Apply on time
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Grant Writing Tips • Ask the funder any questions you have
during the application process. (But, beware: your questions may be published for other applicants to see)
• Look over any sample grant applications
• If you are not funded, ask the funders why
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Grant Writing Tips – Appliction Assistance
• Community Development Consortium (Geoffrey Marchant)
• Church Community Housing Corporation
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Smart Management for Small Water Systems
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4/24/13
What are your community’s unique needs and assets?�
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Sample, Annotated Grants • http://www.efc.unc.edu/projects/wetlands/index.htm
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Good Book on Grant Writing • Grant Proposal Makeover: Transform Your
Request from No to Yes
• By Cheryl A. Clarke & �Susan Fox
• John Wiley & Sons, Inc. • ISBN: 978-0-7879-8055-9
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GETTING FUNDED AGAIN
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Don’t Burn your Bridge With a Funder
• If you are funded, report your results thoroughly and on time
• Give the funder recognition: – Include credit/logos in your reports/
publications (with permission) – Invite funder to relevant events (ribbon-
cutting)
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Grant writing Questions and Answers
Image Source: Utah DEQ
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BEYOND GRANTS
Smart Management for Small Water Systems
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Again - Where does the money come from?
• Grants • Loans • Bonds • User fees • Assessments • Impact fees • Taxes
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Bonds • Less applicable to smaller governments • A written promise to repay borrowed
money (on a definite schedule and usually at a fixed rate of interest for the life of the bond)
• Different types exist: – General Obligation (GO) – Revenue
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The Thing About Loans/Bonds is …
they need to be repaid!!
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User Fees • Charged regularly to all customers:
industrial, commercial and residential • Customers’ bills relate to their
consumption (usually) • Utilities can develop rates based on their
expected costs • Example – water/sewer/stormwater utility
fees
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Assessments • A recurrent charge to a sub-group of the
population • The sub-group receives benefits from an
environmental service or improvement not enjoyed by others in the area
• Close cost/benefit relationship à equity
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Impact Fees • One-time charges to new users • Typically assessed when building permits
are issued • Close cost/benefit relationship à equity
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Taxes • Charged against:
– Income (federal/state level) – Property (local level) – Sales (state level, with surcharges at the local level)
• Local Sales Tax
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Taxes – Tax Increment Financing • Less applicable to smaller governments • All “new” property taxes for an area are
reinvested into the same area • Particularly applicable to urban, blighted areas • Example: Atlantic Station, Atlanta
– On the Atlantic Steel Mill brownfield site in Midtown Atlanta
– Redeveloped 138 acres into a “live-work-play” area – 2,800 new trees planted – Detention facilities to reduce peak run off
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SETTING USER RATES
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4/24/13 What Goes Into Reviewing Rates for the Next Year?
Do these rates send the right signals to our customers, based on our objecPves?
Will it provide sufficient cost recovery?
Are we allocaPng the costs to the right customers?
What exactly does this include?
Will our customers understand these
rates?
Will our customers be able
to pay these rates?
Are we following State law?
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Basic Principles • Aim at full cost pricing • Set equitable rates • Share rate structure with customers • Rate should be easy to understand • Rates should be examined annually • Consider fixed costs vs. variable costs • Allow for reserve account(s) • Promote water conservation? • Promote economic development?
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Background Information:�How Rates and Usage Interact
Set rates based on projected water use
Raising rates lowers water use Rule of thumb: water use declines ~2-‐6% as rates increase 10%
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4/24/13 Background Information:�How Rates and Usage Interact
Public PercepPon: UPlity Reality:
Source: Faye[eville Observer 2/6/2004 Source: Orange Water & Sewer Authority
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Utilities’ costs are mostly fixed, not dependent on the amount of water sold/used by the customers. But the majority of revenues come from the amount of water sold. If customers conserve, revenues drop significantly but not costs.
Why Does this Happen? Revenue and Expenses for Charlo[e-‐Mecklenburg UPliPes in a Given Year
Source: CMU Director Doug Bean’s presentaPon to the Charlo[e City Council on December 1, 2008.
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4/24/13 Understanding Your Utility �and Served Community
• What is the make up of your served community? Have a lot of large families? What is the community’s ability to pay? Is it a seasonal community? Does demand vary greatly in the summer? Does a large fraction of your revenues come from a small number of customers?
• Do you anticipate any large capital expenses in the next few years? Check/create your C.I.P. and asset management plan.
• Do you have any debt service payment requirements?
• Do you expect to meet demands comfortably (in case there is a drought)?
• Rank your utility’s rate setting objectives
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Who Will Be Impacted by Block Rate Structures?
Will it be this household? Or this one?
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Smart Management for Small Water Systems
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Before You Begin:�Rank Your Utility’s Rate Setting Objectives
1. ________ 2. ________
3. ________ 4. ________
Full cost recovery/ revenue stability
Encouraging conservaPon
Fostering business-‐friendly pracPces
Maintaining affordability (keeping rates low
– to whom?)
Refer to this list and focus on the highest ranked objecPves when
following the guidelines for selecPng the appropriate rate structure design.
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Guidelines: �Elements of Rate Structure Designs
1. Customer classes/distinction 2. Billing period 3. Base charge 4. Consumption allowance included with base
charge 5. Volumetric rate structure 6. (If applicable) Number of blocks, block sizes
and rate differentials 7. (Optional) Temporal adjustments 8. Frequency of rate changes
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4/24/13 Scenario: Rural Water Utility With Naturally High Costs and Excess Capacity, Wants to Maintain Affordability
1. Customer class: possibly create separate residenPal class 2. Billing period: use monthly 3. Base charge: if majority of customers use li[le water, charge
fair base charge and include allowance. Otherwise, low base charge, and shie high rates to high volume users
4. ConsumpPon allowance: if including, set at a lifeline amount (~2,000 gallons/month)
5. Volumetric rate structure: probably use uniform 6. (If applicable) Block design: if using, first block at least 4,000
GPM, depending on your customers’ consumpPon 7. (OpPonal) Temporal adjustments: none 8. Frequency of rate changes: annual
Note: Set up a customer assistance program: efc.unc.edu/tools.htm#customer_assistance.
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4/24/13 Pricing Out Your Rate Structure (References)
Use any of several reference documents with step by step instructions on calculating projected costs, revenues and rates:
• AWWA (2000). Principles of Water Rates, Fees, and Charges: Manual of Water Supply Practices, M1
• U.S. Environmental Protection Agency (2006). Setting Small Drinking Water System Rates for a Sustainable Future: One of the Simple Tools for Effective Performance (STEP) Guide Series. EPA 816-R-05-006. Office of Water, Washington DC. 62 pages http://www.epa.gov/waterinfrastructure/pdfs/final_ratesetting_guide.pdf
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GA Water and Sewer Rates Dashboard
h[p://efc.unc.edu/ga/rates.html
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A free interac@ve online tool
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CAPITAL IMPROVEMENT PLANNING &�
ASSET MANAGEMENT 55
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First, a note on “Depreciation”
• Loss of use & value; or • “The systematic & rational allocation of
the cost of tangible noncurrent operating assets over the period benefited by the use of the asset”
Source: Government and Not-for-Profit Accounting: Concepts and Practices, By Michael H. Granof, Saleha B. Khumawalas
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Uh oh! How Do You Pay for This?
Emergency repair
vs.
PreventaPve rehab./
replacement (capital planning)
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What is Asset Management? According to the EPA: “Asset management is maintaining a desired level of service for what you want your assets to provide at the lowest life-cycle cost. Lowest life-cycle cost refers to the best appropriate cost for rehabilitating, repairing or replacing an asset.”
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Source: h[p://water.epa.gov/infrastructure/sustain/asset_management.cfm#1
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Why Asset Management?
Source: Steve Allbee, USEPA
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Asset Management (EPA) - Steps
1. Taking an inventory 2. Prioritizing your assets 3. Developing an asset management
plan 4. Implementing your asset
management plan 5. Reviewing and revising your asset
management plan Source: EPA’s “Asset Management: A Handbook for Small Systems”
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Create an Asset Inventory
Source: EPA’s “Asset Management: A Handbook for Small Systems”
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h[p://www.epa.gov/safewater/smallsystems/pdfs/final_asset_inventory_for_small_systems.pdf
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Capital Improvement Program - Timelines
• Use Asset Management Plan to plan for capital expenses in the long term (~20 years)
• Create a Capital Improvement Plan with a narrower timeline (~5 years) in more detail Specify the projects and accurate estimates of cost. Plan where money will come from
• Create a Capital Improvement Budget with an even narrower timeline (1 – 2 years) committing funds for the planned capital projects. Get it approved/adopted
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The lack of prior maintenance =
higher operaPng budgets and/or
unplanned capital items
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Contact Stacey Isaac Berahzer Senior Project Director Environmental Finance Center PO Box 671346 Marietta, GA 30066 [email protected] T: 770.509.3887 F: 770.509.9539
Smart Management for Small Water Systems