Rates
The beauty — and the beast — of a public water system is that there are no outside entities involved. Our rates have no “profit” built into them to pay shareholders. That also means we do not have capital coming from outside shareholders to pay for these improvements, so capital investment funds come from revenue generated through our customers’ rates.
Impact Fees from Builders & Developers
When new developments require new facilities, the builders or developers are expected to provide all on-site infrastructure and pay a fee for the use of the existing pumping and storage systems. This money is used for the construction or replacement of infrastructure.
Grants & Low-Interest Loans
Occasionally, when there is an emergency declaration or a health issue, there are grants available to help with the construction costs. Grants are the least-cost and best funding option because the money is a gift and does not need to be repaid. In some circumstances, we qualify for a “Drinking Water Loan”. In this case, the interest rate is low, and we can finance the project well below the market rates.
Municipal (tax-Free) Bonds
In most cases, we finance major construction projects with the sale of municipal “tax-free” bonds. Municipal bonds are available to public systems like ours and typically have interest rates that are excellent when compared to commercial loans. Bond sales allow us to spread the cost of the project out over a portion of the project’s life spans.
Of course, no matter how a construction project is financed, the costs end up in our rates. At the same time, we work to balance the impact of this by managing expenses, timing projects, and building rate structures in a way that avoids unpredictable rate swings every time there is a new project.
To do this, the 2020 rate adjustment includes funding for both current and future projects through a combination of bond sales and current revenues.