Establishing and Funding a Capital Improvement Program

1. Establishing and Funding a Capital Improvement Program WAMCAT September 9th, 2014 Kathy Weinsaft Wyoming Rural Water

2. Capital Improvement Plans (CIP) • This is your road map • It tells you where you want to go • How you are going to get there • What resources are needed • Where the resources will come from • It should cover a minimum of five years

3. Not A Shelf Document • Decision Makers should review and add to the plan every year • Input should be garnered from: • Clerk/Treasurers • Accountant • Operators • Administrative staff • Consulting Engineer Board and Council members

4. Expansion • Each expansion, upgrade and or replacement should include the rational for why it is in the plan. • This is really important so if there is a change of leadership there is continuity and projects are not caught up in an election cycle

5. Things to Consider • Requirements for other methods of financing • Regulatory requirements and changes • Potential growth or decline • Use actual numbers for revenues and expenses from the previous three to five years to obtain an average increase or decrease per year • Avoid magical thinking

6. You Need Reserves • Notice that is plural! • O & M Reserves • Capital Improvement/Asset Depreciation • Emergency Reserve • Debt Service Reserve

7. Minimum Utility Reserves • O & M Reserve • Target 1/8 of annual O & M expenses • Accumulate over 5 years = budget 1/5 of target each year

8. Minimum Utility REserves • Emergency Reserve • Target enough in reserve to pay for the replacement of the most critical piece of equipment • Accumulate over 5 years = budget 1/5 of target each year

9. Minimum Utility Reserves • Capital Improvement/Asset Depreciation Reserve • At the very least 1 % of replacement value per year

10. Minimum Utility Reserves • Debt Service Reserve • Target 1 year of payment in reserve • Accumulate over 10 years = budget for 10% of the annual loan payment per year

11. What A CPI Budget Might Look Like • You can get a copy of this at www.warws.com under downloads

12. In Reality • You have to have an operating surplus to be able to fund reserves • Set your rates so that can happen • Operating something until the wheels come off and than yelling “emergency” is no longer SOP

13. Prioritize projects - Critical • Improvements that have a direct impact on customer health • Things needed for regulatory compliance • Testing results can be a guide • Severity of potential consequences both acute and chronic

14. Other projects - Urgent • Projects that must meet a given deadline • Those that have been delayed for a long time • Potential costs that may rise dramatically in the future

15. It takes a package • There are resources available • Step One is get on the Intended Use Plan • Kevin Frank (DEQ) is the keeper of the list • (307) 473-3471

16. Currently • There are 269 Million Dollars in projects on the list for drinking water • There are 214 Million Dollars of requests on the Clean Water side • Approximately 50 million dollars are available each year • 6 million in the Governor’s Emergency Fund

17. Don’t Forget USDA RD Funding • They do have money available • You may be eligible for a grant/loan combo • Don’t let the paperwork scare you • Engineering oversight can be worth its weight in gold • Alana Cannon (307) 233-6709

18. Sustainability • A good CIP can help your system develop capacity and work towards sustainability • Sustainability Workshop • September 24th • 8:00 – 5:00 • Holiday Inn, Cody Wyoming • Pre-Conference is free of charge but please register • Full conference agenda on line and registration

19. Want to talk? • Give me a call anytime • Email works too! • Kathy Weinsaft • (307) 262-3943 • kweinsaft@wyoming.com