AWWA ACE65220

This presentation argues that the investment by a municipality in a water utility is at risk due to the hazards associated with owning and operating a water system, and that a return on the investment is appropriate to justify placing the investment at risk. The presentation reviews why municipalities own water utilities, explains the justification for earning a return, and describes the process for setting an appropriate return. These arguments are based on three key assumptions that include: the water utility is entirely owned by the municipality; the municipality is at risk due to the hazards associated with owning and operating a water utility; and, the municipality owns the water utility by choice and could sell the utility if certain conditions were met, including the defeasance of outstanding debt and ensuring the ongoing provision of water service to the community. The presentation goes on to answer questions that include: Why Does a Municipality Own the Water Utility; Why Should the Utility Earn a Return; By What Authority Does the Municipality Decide What is an Appropriate Return; When is the Return Established, Earned and Measured; What Should the Municipality Consider in Authorizing the Return Contained in the Budget and Water Rates; What Are the Criteria for Considering a Method for Establishing a Return; What Are the Risk- Based Return Methods; How Much of the Return to Transfer to the Municipality; What are the Barriers; and, Added Reasons For a Municipality Owning the Water Utility.