Revenues. Glenn Barnes Environmental Finance Center Network

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1 Revenues Glenn Barnes Environmental Finance Center Network

2 Session Objectives Understand how to pay for the costs of running your water system Learn about the debt market Identify government programs that can help

3 How much money do you need?

4 Not This

5 Full Cost Pricing Operations & maintenance expenditures Taxes and accounting costs Contingencies for emergencies Principal and interest on long-term debt Reserves for capital improvement Source water protection Value ( opportunity costs ) of the water

6 Determining Financial Need Start with your current budgets. How have they changed over time? What is the cost per customer? Then include any known future expenses Remember inflation, changes in customer levels, etc.

7 Things to Watch Out For Do you have good detail on your O&M costs? Is your capital planning complete? Realistic? What is your goal for your utility think back to the four squares from earlier

8 Ways To Pay Pay as you go (current receipts) Save in advance and pay Pay later (someone loans you money) Grants (let someone else pay)

9 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 10

10 Quick Thought on Grants This presentation is about sustainable program finance Grants are not sustainable finance

11 I Say This A Lot Grants are not sustainable finance

12 Really, I Say This A Lot Grants are not sustainable finance, said Glenn Barnes

13 The Main Source: Your Revenue Pay as you go (current receipts) Save in advance and pay Pay later (someone loans you money) Grants (let someone else pay)

14 Rates & Monthly Charges What type of rates and monthly charges to you levy? Charges based on metered usage? Flat monthly charges? Something else? Nothing?

15 What Goes Into Reviewing Revenues for the Next Year? Are we following State law? Are we allocaing the costs to the right customers? Will it provide sufficient cost recovery? What exactly does this include? Do these rates send the right signals to our customers, based on our objecives? Will our customers understand these rates? Will our customers be able to pay these rates?

16 The Process of Setting Rates Learn essenial background informaion about rates Determine criical characterisics of your uility and community Design the most appropriate rate structure Price our rates using projected costs and revenues Re- evaluate/adjust rate structure to fit primary objecives

17 Before You Begin: Rank Your Utility s Rate Setting Objectives Full cost recovery/ revenue stability Fostering business- friendly pracices Encouraging conservaion Maintaining affordability (keeping rates low to whom?) Refer to this list and focus on the highest ranked objecives when following the guidelines for selecing the appropriate rate structure design.

18 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

19 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 21

20 Impact Fees One-time charges to new users Typically assessed when building permits are issued Close cost/benefit relationship à equity 22

21 Periodic Charges Deposits on new accounts Penalties for late payment

22 Innovative Funding Sources For example, rent out your water tower for cellphone receivers

23 When You Need Cash Now: The Debt Market Lenders will look at your creditworthiness, your ability to repay the debt, in determining whether to loan to you and your interest rate

24 The Debt Market Two types Loans and Bonds Loans are universally available Bonds are typically only available to large systems with significant revenues and managerial capacity

25 Loans Typically from a bank Can be from a government-sponsored program such as the Drinking Water State Revolving Fund 27

26 Bonds 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 Source: be\ermondays.com 28

27 A Quick Aside On Debt... The only way the bonds pay for anything is if one of these people lives in your community... Source: commons.wikimedia.org/wiki/file: _barr... Source: picasaweb.google.com/.../flqy4iwz7znrmadwzg13ia

28 Loan & Grant Programs

31 %20Grids/Funding%20Sources%20&%20Eligible %20Applicants% pdf

32 Ohio EPA Drinking Water Assistance Fund (DWAF) Water Supply Revolving Loan Account (WSRLA) Drinking Water Emergency Loan Fund (DWELF)

33 Ohio Water Development Authority (OWDA) Revolving Loan Fund Security Assistance Fund for Emergency Preparedness

34 USDA- Rural Development (USDA-RD) Water and Waste Disposal Program

35 Ohio Public Works Commission Grants and loans (OPWC)

36 Appalachian Regional Commission (ARC) Area Development Program Distressed Counties Program

37 Ohio Development Services Agency (ODSA) CDBG Residential Public Infrastructure Grant Program CDBG Community Development Program CDBG Economic Development Loan/ Public Infrastructure Grant Program CDBG Economic Development Revolving Loan Fund

38 U.S. Army Corps of Engineers Ohio Environnemental Infrastructure Program Section 594

39 WSOS/RCAP Rural Community Loan Fund

40 Economic Development Administration (EDA) Public Works Program

41 Center for Local Government Ohio Capital Asset Financing Program (OhioCAF)

43 Did we miss any?

44 A Favor & A Reminder Please fill out an eval form for us before you leave Contact us anytime for direct technical assistance on any finance and management topic of our project

45 Thank you! Glenn Barnes Environmental Finance Center Network

Water System Revenues. Glenn Barnes Environmental Finance Center The University of North Carolina at Chapel Hill

Water System Revenues. Glenn Barnes Environmental Finance Center The University of North Carolina at Chapel Hill Water System Revenues Glenn Barnes Environmental Finance Center The University of North Carolina at Chapel Hill 919-962-2789 glennbarnes@sog.unc.edu Session Objectives Understand how to pay for the costs