Chapter 7

Long-Term Funding Strategy

7.1 Introduction

In order to manage and operate the utility at the desired level of service and at the appropriate cost to your customers, you will need to have a sustainable funding strategy. You will need to determine if you are funding the operation and maintenance, repair, rehabilitation, and replacement of assets at the appropriate level. Your utility has both internal and external sources of revenue. In both cases, you should think about the revenue as "public money" whether it comes directly from your customers or through federal or state loans or grants. It is important that utilities be responsible stewards of public money.

External funding for capital projects comes from loan and grant programs and from bonds. Most federal and state loan and grant programs fund only capital projects and the utility is responsible for the overall operations and maintenance. When your utility applies for funding from state and federal agencies for capital expenses, you are more likely to be successful if you demonstrate that your rates are sufficient to cover the cost of service and that you have incorporated additional operational costs that the new project might incur.

Internal funding for day-to-day operations comes from utility rates and fees. These rates and fees should be sufficient to recover the cost of operations. Besides customer rates, a utility may have other fees such as connection fees, stand-by fees, reconnection fees, and developer impact fees.

The rating agencies really like the idea ofAsset Management.
--Stan Allred, Albuquerque, NM