welcome! board basics: capital improvement plans
TRANSCRIPT
WELCOME!
Board Basics: Capital
Improvement Plans
RCAC Online Training SeriesMay 4, 2016
Storage and Distribution Word Search
N F O Q V E U R L N E B K W S
M Z I B D T L L B O L O C D S
F E E R H B E A C I E L O E W
B B E R E W F I Z T V T L T O
A U U V R F T C R A A E B E H
L S R A L S L X G R T D X V U
T Q E I A A Y O H O E P S I L
W L N L E U V M W P D L E R F
C G P L J D K P J R C A S T S
S T A N D P I P E O N P K S T
E D W Q M A I W P C V V K N O
H Y D R A N T R R C N A U U P
A Q F Y H V Z W O I E N E T J
Y T I R U C E S A N Q V B U S
L E E T S E U M S S X S D S Y
BAFFLING BLOCK BOLTED BURIED CAST CLEARWELL
CORPORATION ELEVATED FIREFLOW HYDRANT IRON MAIN
PLASTIC PVC RIVETED SECURITY STANDPIPE STEEL STOP
THRUST VALVE
Can you spot the difference? Total of 10
WELCOME!
This training is presented by RCAC with funding provided by the California State Water
Resources Control Board Division of Drinking Water (DDW)
The Rural Community Assistance Partnership
RCAC
RCAC Programs
• Affordable housing
• Community facilities
• Water and wastewater infrastructure
financing (Loan Fund)
• Classroom and online training
• On-site technical assistance
• Median Household Income (MHI) surveys
Performance Assessment
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• 3 questions – 3 minutes maximum
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Today’s Presenter
Richard Culp
RCAC/ENVIRONMENTAL PROGRAMS
Rural Development Specialist-Civil Engineer
Shelter Cove, CA
Today’s Session
Capital Improvement Plan (CIP)
•What and why
•Development process
•Examples and resources
What is it?
� A Capital Improvement Plan (CIP) is the multi-year scheduling of public improvements and infrastructure replacement.
What a Capital Improvement Plan
Should Not Be:
� A wish list that is never completed.
� Treatment facilities never built
� Vehicles not purchased
� Leaking mains not replaced.
Reasons Why Communities Resist CIPs
� Might lock a jurisdiction into projects
� Isn’t flexible
� Commits them to a future debt
� Causing higher rates to support future replacements.
Why Communities Need a CIP
� CIP saves money, by identifying upcoming needs
� It allows a community to spend money wisely, rather than paying top dollar in crisis mode.
� By looking at long term costs, it promotes financial and rate stability.
� Reduces the monies that otherwise would be paid as interest.
� Informs leaders, so they can educate the public.
Why Communities Need a CIP
Seven Steps in Developing a CIP
� Strategic Planning
� Step 1: What are you going to do.
� Step 2: How to do it.
� Identifying Projects
� Step 3: Inventory assets
� Step 4: Prioritize projects
� Budgeting
� Step 5: Analyze financial capacity
� Financial Planning
� Step 6: Funding options
� The Comprehensive Plan
� Step 7: Draft CIP package
Seven Steps in Developing a CIP
Strategic Planning Step 1: What are we going to do?
� Appoint a coordinating committee or person.
� Distinguish between a CIP or an operating expense.
� Decide how long to plan for and timetable for the process.
� Important to include public opinion early and often.
Strategic Planning Step 2: How to do it?
Develop Policy Framework:
� Prioritize capital improvement projects.
� When to use loans or outside money.
� Set these policies early.
Develop Policy Framework:
� Should answer two questions.
� Are we doing what we planned to do?
� Are we getting the results we intended?
Strategic Planning Step 2: How to do it?
CIP Strategic Plan
� Measured by:
� Comparing budgeted CIP to actual work completed.
� Completing projects on schedule
Step 3: Inventory Assets
� List all existing capital equipment and facilities
� Estimate the replacement cost for each item
� Determine the expected life span
� Review system growth rates
� Monitor Federal and State regulatory mandates
� Evaluate infrastructure conditions
� Use staff input in the CIP process
� Identify customer service needs
� Prepare a list of long range capital items
Step 3: Inventory Assets
� Record original cost and purchase date
� Maintain records of fixed assets and equipment
� Review accounting depreciation schedule
Step 3: Inventory Assets
Project information needed:
� Assign project ID #
� Project description and location
� Estimated start and finish dates
Step 3: Inventory Assets
Project information needed:
� Estimated project or equipment cost
� Financing method to be used
� Group and categorize similar projects
Step 3: Inventory Assets
CIP Information SpreadsheetANYTOWN
WATER DISTRICT
CAPITAL IMPROVEMENT PROJECTS
RESERVE FUND Adopted Projected Projected Projected Projected
CIP This year Year 2 Year 3 Year 4 Year 5
CAPITAL IMPROVEMENTSDESCRIPTION
Source of Supply
New Well $17,500
Clearwell storage tank $21,000
Hydrophnematic tank 15,000$
Elecrical panel upgrade 7,500$
loan for main well $2,200 2,200$ 2,200$ 2,200$ 2,200$
Distribution System0.05 MG storage tank 50,000$
8" mainline extension 15,000$
New hydrants 5,000$ 5,000$ 5,000$ 5,000$
VehiclesUtility truck $35,000 $7,278 7,278$ 7,278$ 7,278$ 7,278$
meter reader pickup $12,000
Total Capital Expenditures $59,978 $29,478 $14,478 $71,978 $29,478
Reserve Fund Calculator
� What can it do?
� Calculate monthly cost necessary for cash replacement of equipment
� Why use cash to replace equipment?
� Lessens the impact to rates
� You may not be able to borrow
� You may not want to borrow
v2.4
750$1.56
$14,085 $1,181,647
$50,058
ItemReplacement
Cost
Years to
ReplaceInflation Future Value
Account
Interest Rate
1 Pipes $302,000 51.0 2.0% $829,117 3.0%
2 Storage - replace 1 tank (2000 tank) $20,000 38.0 2.0% $42,446 3.0%
3 Valves - replacement $22,500 31.0 2.0% $41,571 3.0%
4 Hydrants - replacements $60,000 31.0 2.0% $110,855 3.0%
5 Storage - replace 2 tanks (1993 tanks) $40,000 31.0 2.0% $73,904 3.0%
6 Well pumps - 2 well pumps at $5000 ea. $10,000 10.0 2.0% $12,190 3.0%
7 Storage - rehabilitate 3 tanks $50,000 5.0 2.0% $55,204 3.0%
8 Chlorinator replacement $2,000 2.0 2.0% $2,081 3.0%
9 Chlorinator redundant unit $2,000 1.0 2.0% $2,040 3.0%
10 Pumphouse - replace controller $2,000 1.0 2.0% $2,040 3.0%
11 Well pumps - replace well 1 pump $5,000 1.0 2.0% $5,100 3.0%
12 Well pumps - replace well 2 pump $5,000 1.0 2.0% $5,100 3.0%
13
14
15
16
17
18
1920
Connections / ERUs:Monthly Payment:
Date:
INSTRUCTIONS: List items in descending order of "Years to Replace " (Longest replacement time first). Enter inflation,
capital costs to be reserved and interest rate of reserve account. (SORT password is "ok")
Annual Transfer to Budget:
Revenue Over Target:
Reserve Fund Calculator
Total Cash Outlay:
Consider rate decrease at end of year
Step 4: Prioritize Projects
� Immediate needs in the next year
� System improvements within 2-5 years
� Long range capital improvements within the next 5-10 years
Step 4: Prioritize Projects
� Solve water quality problems
� Regulatory requirements
� Eliminate maintenance problems
� Meet future growth needs
� Provide fire-flow requirements
� Improve operating efficiencies
Step 4: Prioritize ProjectsWATER DISTRICT
CIP SUMMARY
REVENUE FUNDED Adopted Projected Projected
CIP PROJECTIONS FY 02-03 FY 03-04 FY 04-05 COMMENTS
VEHICLES $18,000 $20,500 $22,000 GE-CORP loan
BUILDING IMPROVEMENTS $1,750 $2,750 $750 treatment plant
EQUIPMENT - FIELD $1,500 $11,100 $1,750 trench pumps
EQUIPMENT - ADMIN $7,400 $9,350 $6,000 electrical upgrades
TREATMENT PLANT $8,900 $14,000 $4,000 filter upgrades
DISTRIBUTION SYSTEM $1,200 $6,500 $5,000 valve repairs
MAIN UPGRADES AND HYD $5,000 $8,500 $8,500 hydrants
SOURCE OF SUPPLY $2,000 $3,000 $3,500 intake screens
ENGINEERING AND STUDIES $14,700 $10,000 $3,500 hazardous waste study
MISC. UNBUDGETED $1,000 $1,000 $1,000 misc.
TOTALS $61,450 $86,700 $56,000
Step 5: Analyze Financial Capacity
� Examine past and present finances
� Compare budgets with actual expenditures
� Check key financial ratios
� Debt service >25-30% of user rate
� User rate not to exceed 1.5-2.0% of MHI per year
Step 5: Analyze Financial Capacity
� Determine current financial condition
� Identify capital financing alternatives
� Estimate annual CIP and operating expenses over the planning period
� Calculate revenue required to cover expenses
� Assess impact on customer rates
Step 5: Analyze Financial Capacity
� Set up an interest bearing reserve account to fund future improvements
� An emergency reserve account
� Large facility capital improvements usually require some additional financing
Step 6: Funding Options
� How will the needed improvements be paid for?
� Few 100% grants
� Loans
� Assessment districts
� Reserve funds
� May need to raise rates
Federal and State Programs to Finance Improvements
� Community Development Block Grants
� USDA-RUS loans
� State Drinking Water Revolving Loan Fund.
� RCAC and other Sources of funds
� Website: California Financing Coordinating Committee (www.cfcc.ca.gov)
Step 7: The Comprehensive Plan
� Draft a CIP plan for public review
� Prioritized projects and link to funding sources
� Create a timeline
� Use as a guide for budgeting
CIP Checklist
What are we doing?
Prioritize projects
Inventory system assets
Establish policies, how to do it
CIP Checklist
Analyze financial capacity
Explore funding options
Prepare long range CIP plan
Start the first project
Developing a CIP: Conclusion
� A working CIP is a living document
� Revisited each year for:
� Changing circumstances
� Growth
� New technologies
Systems that invest in theirdistribution system perform better.
For Better…
…Or Worse!
Applicability1 of TMF Criteria #12:Budget Projection/Capital Improvement Plan
New Community Water System Applications Mandatory2.
Change of Ownership Applications Mandatory2.
SRF Community Water System Applications Mandatory2.
Existing Public Water Systems Should Address4.
1. Applicability may be changed depending on size and complexity of the water system
2. Mandatory: Compliance with this element is required at the time of permit issuance
3. Necessary: Compliance with this element will be required within a specific timeframe
4. Should Address: Every water system needs accurate information about its financial situation.
Questions / Discussion
BREAK TIME
CIP TOOLS & RESOURCES
• Step Guides
• Spreadsheets
• Mapping
http://www.epa.gov/safewater/smallsys/pdfs/guide_smallsystems_stratplan.pdf
Asset Management Step Guide
http://www.epa.gov/ogwdw/smallsystems/pdfs/guide_smallsystems_asset_mgmnt.pdf
RCAC TOOLBOX FREE DOWNLOADS
http://www.rcac.org/tools/
• Simplified Capital Improvement Plan
• Asset Inventory Worksheet (Version 13)
• Financial Toolbox (Version 10.3)
RCAC’s Asset Spreadsheet
Your Utility Name 8/28/2015Number of Units
(Connections, ERUs etc.):Total
Equity:
Connection Fee:
Monthly Cost Per Unit to Reserves:
$0.00
Annual $$ to Reserves: $0
Reserve Cash Applied: Payments over 0 years:
Current Year: 2015 Calculated Replacement Life Calculated Equity Replacement Cost
Asset and Description RCAC V13
Install Date
Est. Effective Life
Condition Rating
Critical Number
Calc Remain Life
Original Cost
Book Value Original $$
Replacment Cost
Infl. Rate
Accum Loss of Value (Dep)
Debt and Grants
EquityCash Replace
?
Saving Acc't Interest
Future Cost
Year Years1 to 10 1 to 5
Years Cost $ Value $ Cost $ % Loss $$ Value $ Value $ X % Value $Tab A Tab A
RCAC’s Asset Spreadsheet
A-1 Condition Assessment
Condition Rating Description Maintenance Level Condition Multiplier
1 Good/Expected ConditionNormal Preventive Maintenance (PM)
1
2 0.95
3 Minor Defects Only
Normal PM, Minor Contract Maintenance (CM)
0.8
4 0.7
5 Moderate DeteriorationNormal PM, Major CM
0.5
6 0.35
7 Significant DeteriorationMajor repair, rehabilitate
0.2
8 0.1
9 Virtually Unserviceable Rehab unlikely 0.05
10 Unserviceable Replace 0
A-2 Critical Number
Critical Number Description
1The water system would essentially shut down if this component fails. This asset has no backup and is so important that an emergency plan must be in place as well as funding to replace it. Example: Single well pump failure; single reservoir failure; anything that could cause a violation of the Safe Drinking Water Act.
2This asset would have a serious impact on the water system if it failed, however, procedures could fix the problem within a reasonable time. Example: Two wells and primary wellpump fails; Electrical compents in panels fail: backflow assembly did not pass testing; key pipe failure that could be repaired; single chlorinator failure; pressure reducing valve failure.
3The condition of this asset causes continued unnecessary operational costs to your utility. Examples: deteriorating buildings, equipment and rolling stock; leaks in piping; old and worn-out electrical equipment.
4This asset's condition or failure may cause inconvenience to customers via reduced service, outages, or minor taste or odor complaints. Examples: excessive leaks, valves frozen partway closed, hydrants not working so flushing cannot be done; poor billing program.
5These assets have been in service for a long time and their condition may not be well known. Evaluation should take place and a determination made as to what may be needed.
If you don’t own Excel:
• Use Excel online for free with a MicroSoftaccount (make one at login.live.com)
• Use Google Sheets online for free with a Google account (make one at accounts.google.com/SignUp)
• Download OpenOffice for free at www.openoffice.org/download/ (this one doesn’t require constant internet connection to use it)
LINKS FOR FREE RESOURCES
• http://www.efc.sog.unc.edu/reslib/item/water-sewer-rates-analysis-model
The Environmental Finance Center at the University of North CarolinaWater and Wastewater Rates Analysis Model
Subject: Budget, Costs, Financial Data, Rates, Reserves, Revenues
Program: Drinking Water and Wastewater Tool type: Calculator
Date: 08/04/2015 Version: 2.8.2
• http://www.rcac.org/news-publications/guidebooks/
• http://www.waterboards.ca.gov/drinking_water/certlic/drinkingwater/TMF.shtml#TMF_Assessment
Sample 5-Year Budget Projection/Capital Improvement Plan (CIP)
Sample 5-Year Budget Projection/Capital Improvement Plan (CIP) - Expense Only
Sample 5-Year Budget Projection/Capital Improvement Plan (CIP) - Large Community
Water System Mapping
With Google Earth
Google Earth
www.google.com/earth/
https://www.google.com/earth/
CIP/Mapping Examples/Demo
Questions / Discussion
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Technical Resources
• Rural Community Assistance Corporation www.rcac.org
• California Rural Water Association www.calruralwater.org
• California State University Sacramento, Office of Water Programs www.owp.csus.edu
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