AWWA INF52167

The funding of capital projects for water utilities is becoming more difficult as the need to provide infrastructure to support growth, to meet increasingly stringent environmental regulations, and to replacing aging facilities competes with the pressure to minimize rate increases. Municipal water utilities that are unable to meet the capital infrastructure needs without substantial rate increases are often under pressure to significantly reduce costs or to consider privatization. An effective method to minimize the rate impact of a capital improvement program is to develop an integrated capital and financial planning process. This process should include financial models to assist in determining the optimal funding plans that minimize rate increases while maintaining a financially viable water system. A financial planning model, when used in an integrated capital and financial planning process, can be a valuable tool to determine the financial impact of future regulatory requirements or deferring, accelerating or changing the size of a capital project. However, this type of sensitivity analysis requires the development of considerable amounts of information on current and projected revenues and expenses. Some examples of the data requirements are future capital needs, projections of operation and maintenance costs, current and future debt service requirements, and forecasts of the different sources of revenue available. This paper will describe the benefits of a financial model to water infrastructure planning when used within an integrated capital and financial planning process. Finally, the results of using this process over the last five years to meet the infrastructure needs for the City of Phoenix, Arizona, water system will be discussed. Includes tables, figure.