Alaska Clean & Drinking Water Funds Financial Capacity Assessment Mike Lewis Program Manager

1. Asset Management; Grants and Loans Sustained Compliance for Public Water Systems – Chapter 2 September 29 – 30, 2011 Anchorage, Alaska Alaska Clean & Drinking Water Funds Financial Capacity Assessment Mike Lewis Program Manager Municipal Grants & Loans Alaska Department of Environmental Conservation

2. Alaska Clean & Drinking Water Funds Financial Capacity Assessment Topics of Discussion • Matching Grants & Loans Services • Alaska Clean Water & Drinking Water Programs • Loan Program Eligible Project Types • Loan Program Funding Timeline Process • Financial Capacity Process – Input & Output • Financial Capacity Analysis Report • Presentation Review

3. Municipal Grants & Loans Serves (MG&L)... • 1st Class • 2nd Class • Home Rule Cities • Organized Boroughs • Eligible Private Utilities

4. Potential MG&L Projects • Drinking Water • Wastewater • Solid Waste • Water Quality Enhancement • Non-Point Source Pollution

5. ProgramsMunicipal Matching GrantsAlaska Clean Water FundAlaska Drinking Water Fund

6. Loan Programs - Financing • No Up Front Fees • Interest Only on Used Funds • Low-interest • 1.5% for 5 - 20 year term • 1% for under 5 year term

7. Alaska Clean Water Fund Loan Projects Point Source • wastewater – studies, design, collection, treatment and discharge Non-Point Source • solid waste - closures, leachate collection & treatment • water quality enhancement

8. Alaska Drinking Water Fund Loan Projects • drinking water – studies, design, source, treatment, distribution and storage • some private water systems are eligible to receive funding. These systems must be economically regulated by the Regulatory Commission of Alaska

9. MG&L Loan Timeline January MG&L mails or begins accepting electronic questionnaires February questionnaires are due and scored March-April each loan programs’ Intended Use Plan (IUP) is public noticed May-June upon completion of the public notice, each IUP is finalized and priority listed projects are then eligible to receive a loan

10. Loan Questionnaire Criteria • Submit eligible projects, check with MG&L • Fund advance planning / design • ACWF key criteria (PS) – public health, water quality, local initiative, and funding coordination • ACWF key criteria (NPS) – prevention, restoration, stewardship, local initiative, NPS strategy • ADWF key criteria – public health, compliance, affordability, and other considerations

11. Financial Assessment Overview • Financial Assessment of a potential borrower begins with a loan application. • A preliminary assessment by MGL is done to decide if adequate financial capacity exists or a more thorough evaluation is needed. • MGL will initially look at last financial capacity assessment completed, ratio’s from past and current financial statements, single audit report for any findings and total debt of the community. • For a thorough or comprehensive evaluation , MGL has an agreement with the Division of Community & Regional Affairs (DCRA) to do these type of assessments. • If upon completing an assessment, if DCRA finds questionable items with the borrowers finances that could impact loan repayment, MGL may seek additional advice through contracted financial expert. • The financial expert is an individual with many years of experience in doing these type of reviews and can offer recommendations for special loan conditions to ensure adequate loan security.

12. Comprehensive Financial Assessment - Input • Upon MGL direction to DCRA to perform a comprehensive assessment, DCRA will contact the borrower and request the following (but not limited to) information: • Community Information – population, residential customers, medium household income, poverty rate, and unemployment rate. • Financial Management Information – audited financials statements, annual & capital budgets, capital improvement plan, bond rating, billing cycle, user charges, and rate setting. • Loan Information – description of project, loan amount, loan term, and interest rate. • Other Items – current and proposed user rates, user rate ordinance.

13. Comprehensive Financial Assessment - Output • Once all data is collected to do the comprehensive assessment, the data is put in to a computer model titled “State of Alaska Water/Wastewater Revolving Fund Financial Capacity Analysis.” The output of this model is broken down into five main areas: • Current financial condition and affordability • Financial trends and future affordability • Financial management criteria • Economic factors • Project overview • From the output of the model, DCRA will put together a draft report to the borrower and MGL for review and comment. Once all comments are collected a final report will be issued. • Based on findings and recommendations made in the report, MGL will either draft a loan offer agreement or follow up with the financial expert to offer further guidance.

14. Example Financial Analysis Report

15. Example Financial Analysis Report (Cont’d)

16. Example Financial Analysis Report (Cont’d)

17. Example Financial Analysis Report (Cont’d)

18. Example Financial Analysis Report (Cont’d)

19. Example Financial Analysis Report (Cont’d)

20. Example Financial Analysis Report (Cont’d)

21. Example Financial Analysis Report (Cont’d)

22. Example Financial Analysis Report (Cont’d)

23. Example Financial Analysis Report (Cont’d)

24. Example Financial Analysis Report (Cont’d)

25. Example Financial Analysis Report (Cont’d)

26. Alaska Clean & Drinking Water Funds Financial Capacity Assessment Presentation Review: • MGL provides three funding programs: Municipal Matching Grant, and the Alaska Clean & Drinking Water Fund loan programs. • MGL loan fund programs provide an inexpensive alternative for project financing. • Financial capacity assessments are key for consideration of MGL making a loan offer to a potential borrower. • Financial capacity assessments are also a good tool for a borrower to address weak areas in how it utilizes it’s financial operations.

27. CONTACT US MG&L Web Page Links: • Municipal Loan Program: http://www.dec.state.ak.us/water/muniloan/index.htm • Municipal Grants Program: http://www.dec.state.ak.us/water/munigrant/index.htm

28. Susan Start Project Engineer, MGL Anchorage, Alaska 907-269-7437 susan.start@alaska.gov Mike Lewis Program Manager, MGL Anchorage, Alaska 907-269-7616 mike.lewis@alaska.gov Beth Verrelli Project Engineer, MGL Anchorage, Alaska 907-269-7603 beth.verrelli@alaska.gov Frank Toth Project Engineer, MGL Juneau, Alaska 907-465-5302 Frank.toth@alaska.gov