water and wastewater infrastructure funding strategies jeff hughes unc school of government...
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Water and Wastewater Infrastructure Funding Strategies
Jeff HughesUNC School of Government
Environmental Finance Center919.843.4956
Workshop Acknowledgements
• UNC School of Government• Public Water Supply Section, Division of
Environmental Health, NC Department of Environment and Natural Resources
• US Environmental Protection Agency– Region 4– Environmental Finance Program, Office of Chief
Financial Officer
Workshop Objectives
1. Promote proactive capital funding planning and analysis
2. Improve understanding of funding sources and strategies
3. Improve understanding of the role of rates and fees in infrastructure investment
4. Provide forum for sharing capital funding perspectives, ideas, and experiences
Water and Wastewater Infrastructure
• Serving current “unserved” residents• Serving growth• Regulatory requirements• Modernization/efficiency improvements• Protecting source water• Replacement and rehabilitation
What types of projects are in your utility's current CIP? (n=172)
Rehabilitation or replacement of existing assets (e.g. replace water lines, pumps, etc.)
Meeting a regulatory requirement (e.g. changing treatment technology due to quality requirements, etc.)
Extension of water/sewer lines to currently unserved customers
Expansion of treatment or collection facilities to increase current capacity
Interconnection to another system
Watershed protection (land acquisition)
Reservoir construction
Other (please specify)
Don't know
None of the above
Largest component
59%
5%
9%
20%
3%
0%
0%
2%
2%
1%Preliminary results
Who is in the room?
1. Utility management2. General
management3. Finance Office4. Consultants/
Community Advisors
5. Others Utili
ty m
anag
emen
t
Gen
eral m
anag
emen
t
Fina
nce O
ffice
Con
sulta
nts/
Comm
unity
Adv
...
Oth
ers
40%
12%9%
23%
16%
Do you have an approved set of water/wastewater finance policies?
1. Yes2. No3. Workin’ on
it…31%
46%
23%
Yes No Workin’ on it…
Do you have an approved CIP?
1. Yes2. No3. Workin’ on
it…59%23%
18%
Yes No Workin’ on it…
46) Does your utility have a Capital Improvement Plan (CIP)?
n = 258
67%
20%
8%5%
YesNoNo, but we are creating oneDon't know
Preliminary results
53) What is included in your utility's CIP?
n = 172
A detailed estimate of your utility's future capital project costs
A list detailing what sources of revenues (rates, loans, bonds, grants, etc.) would pay for the projects
The estimated effect of your utility's future capital project costs on your utility's actual rates
Other
Don't know
None of the above
0% 20% 40% 60% 80% 100%
Preliminary results
47) Is your utility's CIP approved by your Governing Board (City Council / County Commissioners / Board of Directors)?
n = 174
84%
14%2%
YesNoDon't know
Preliminary results
32) Does your utility have a "finance policy" that sets financial targets and goals, such as reserve balance, debt service ratios,
etc.?
n = 256
42%
46%
12%
YesNoDon't know
Preliminary results
What period does your CIP cover?
1. < 3 yrs2. 3 - 5 yrs3. 6 - 10 yrs4. > 10 yrs5. Don’t know
3%
24%
7%
28%
38%
48) How many years does your utility's CIP cover?
n = 164
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 >200%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2% 1% 1% 1%
42%
2% 2% 1% 0%
23%
0% 0% 0% 0%4%
0% 0% 0% 0%
21%
1%
Years
Preliminary results
How do the majority of projects make it on to your CIP?
1. Pass rigorous business case evaluation
2. Too complicated to explain
3. I don’t know
0%
0%
0%
Pass rigorous bus... Too complicated t... I don’t know
Do you have a multi-year approved Capital Improvement Budget (CIB)
1. Yes2. No3. Workin’ on
it…
0%
0%
0%
Yes No Workin’ on it…
51) Does your CIP include a multi-year budget (i.e. your elected officials have approved a BUDGET for MORE THAN ONE YEAR)?
n = 174
16%
76%
5% 3%
YesNoDon't knowOther
Preliminary results
What period does your CIB cover?
30%
4%
41%
26%
0%0%
1. 1 yrs2. 2 yrs3. 3 yrs4. 4 yrs5. 5 years or greater6. Don’t know
Do you have a multi-year finance model that shows projected revenues and expenditures?
1. Yes2. No3. Workin’ on
it… 39%
52%
10%
Yes No Workin’ on it…
Is your CIP integrated with a finance plan and/or rate model?
1. Yes2. No3. Workin’ on
it… 40%
50%
10%
Yes No Workin’ on it…
Water and Sewer Projection Summary 8 Year Financial Plan
$ 1,739,213 $ 1,806,785 $ 1,419,245 $ 1,483,201 $ 1,233,752Total outstanding debt(2)
40%42%41%41%40% As % of op. exp. and DS
$ 110,313
$ 105,581
$ 102,346 $ 95,503 $ 90,626
Debt service/operating fund bal.
1.27 1.32 1.191.22 1.16 DS coverage - total
1.72 1.92 1.852.13 2.11 DS coverage - revenue bonds
51%48%52%50%53%DS as % of total revenue
$ 162,209 $ 142,575 $ 146,109 $ 131,560 $ 129,047 Total DS
42,45744,544 52,186 56,325 57,941 Total G.O. and other DS
$ 119,752 $ 98,031 $ 93,922 $ 75,235 $ 71,106Total revenue bond DS(1)
$ 205,891 $ 188,260 $ 173,903 $ 160,486 $ 149,851 Net income available for DS
113,976109,141 104,516 100,09195,858 Total operating expenditures
$ 319,867 $ 297,401 $ 278,419 $ 260,577 $ 245,708Total revenue
1.00%1.00%1.00%1.00%1.00%% incr. in water sales volume
6.50%6.50%6.74%6.05%6.25%% incr. in avg. residential bill
268,195 260,383 252,799 245,436 238,287 Number of water customers
$ 448,700 Revenue bond issues
$ 379,300 $ 190,400 $ 448,700 $ 215,800 $ 309,440Commercial paper balance (6/30)
$309,440
17%18%8%10%16% PAYGO as % of total
$ 229,700
$ 234,700
$ 255,700
$ 242,100
$ 181,360 Total
38,950 42,450 20,950 24,050 28,850 PAYGO
1,850 1,850 1,850 2,2505,050 Debt - equipment L/P
$ 188,900
$ 190,400
$ 232,900
$ 215,800
$ 147,460 Debt - CP/revenue bonds
Capital program 2012 20112010 2009 2008
www.efc.unc.edu/tools
How have you funded most of your W&S capital during last five years?
1. Grants2. Debt3. Pay-go (current
year receipts)4. Capital Reserves5. We’re still looking
for funds…….
Percentage of capital needs in your CIP you are confident you can fund?
1. <10%2. 10%-25%3. 25%-50%4. 50%-75%5. >75%
0% 0% 0%0%0%
44) Based on your experience, how often is your utility able to fund all of the necessary capital improvements?
n = 254
10%
35%
29%
22%
4%
All the timeMost of the timeSometimesRarelyDon't know
Preliminary results
Acquiring Funds for Capital Infrastructure (Day Covered)
1. Save and spend later 2. Spend/pay as you go Spend borrowed funds
and pay later 3. Spend grant funds and get “someone else” to
pay