Smart Management for �Small Water Systems

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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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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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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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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”  

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 berahzer@unc.edu T: 770.509.3887     F: 770.509.9539

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