Water Supply Governance Examples

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Water Supply Financing
Presentation to Metropolitan Area Water Supply
Advisory Committee
Scott Harder, Environmental Financial Group
September 28, 2006
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Todays Presentation Objectives

• Current funding practices
• Current cost recovery practices
• Funding powers
• Cost sharing
• Regional benefits
• Need for future study

Water Supply Financing
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Financing Considerations

• How do you raise capital to build water projects?
• How do you recover the cost of financing,
  operating and maintaining water systems?
• How do you establish the ability to raise capital
  and recover costs?
• How do you share the costs of projects offering
  regional benefits?
• What further work is needed?

Water Supply Financing
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Capital Financing Options

• Borrow money by issuing bonds
• Take out a loan
• Get a grant
• Issue stock or otherwise sell equity
• Lease it

Water Supply Financing
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MN Capital Financing Options

• Bonding authority
• Below-market loans through State
• Homeland Security grants
• Private equity

Water Supply Financing
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Capital Financing Options
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Recover Costs

• Charge for water upon delivery
• Charge for water system capacity
• Charge for the future ability to use water
  system capacity (area charges, hookup fees)
• Levy taxes

Water Supply Financing
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Recover Costs
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Establish Powers

• Utilize existing statutory powers
• Seek unique statutory powers
• Create a separate entity authorized by existing
  statutes
• Create a partnership with a private corporation
• Enter into a legal agreement with another
  existing entity
• Exercise powers as a stand-alone entity

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Establish Powers
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How have tools been combined?
Slide 1 of 2
User Contributions
Institutional Models
Capital Financing
Water Supply Financing
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How have tools been combined?
Slide 2 of 2
User Contributions
Capital Financing
Institutional Models
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Share Costs

• Cost of service concept
• Water use
• Water system capacity
• Accommodating growth
• Providing for renewal and replacement

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Regional Benefits

• Direct / quantifiable
• Indirect / quantifiable
• Avoided costs
• Direct intangible benefits
• Indirect intangible benefits

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Regional Benefits - An Example

• 3 cities currently use groundwater from Prairie
  du Chien/Jordan,
• They decide to draw water from the Mississippi
  River, and
• Develop an aquifer storage and recovery system.

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Recommended Phase II Tasks

• Regional water project evaluation
  prioritization criteria
• Metropolitan water supply funding assistance
• Interconnection grant program
• Water supply system cost profile
• Identify source to support ongoing planning