New Jersey - Financing Urban Water Infrastructure

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Enhancing the ability of governments and other organizations to provide environmental programs in fair, effective, and financially sustainable ways through:
•Applied Research
•Education and Outreach
•Program Design and Evaluation

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New Jersey - Financing Urban Water Infrastructure

  1. 1. efc.sog.unc.edu Financing Urban Water Infrastructure Jeff Hughes Director, Environmental Finance Center University of North Carolina at Chapel Hill jhughes@unc.edu www.efc.unc.edu 1
  2. 2. http://efc.sog.unc.edu Enhancing the ability of governments and other organizations to provide environmental programs in fair, effective, and financially sustainable ways through: • Applied Research • Education and Outreach • Program Design and Evaluation
  3. 3. Crafting a Finance Strategy • Capital providers • Revenue tools and mechanisms • Aggregation and pooling • Financial incentives
  4. 4. Capital Providers and Representative Terms • Municipal Bond Investors (4%, 30 years) • “Green” Bond Investors (?,30 years) • Subsidized Government Funding Agencies (limited grants and/or 0-3%, 20 years) • Private Investment Equity (8%,20 years) • US Treasury Investors/China (2.5%,20 years) • Property Owners • Developers
  5. 5. The Goliath of Capital Providers: Municipal Bond Investors • Green vs. Grey pricing • Extended terms • Impacts of tax exemption • Reducing risk by pooling • Alternative revenue streams – Stormwater fees – Existing SRF debt service (“leveraging”) – Statewide fees (Maryland, Delaware?) – Assessments
  6. 6. The Value of Subsidization
  7. 7. Common Revenue Tools • Water and wastewater charges • Sales tax (Atlanta) • Property tax (Chicago) • Water quality or water resource fees (Maryland, Delaware) • Stormwater fees (Philadelphia)
  8. 8. Goliath of Revenue Tools
  9. 9. Stormwater Fees • $3 to $20 per month single family residence • $500 to $10,000 per month for commercial properties • Legality • Credits • An under-utilized source for backing debt?
  10. 10. Common Financial Incentives • Reducing volume of use saves money • Reducing run-off through on-site improvements • Development/density benefits • Off-set programs
  11. 11. Pooling Mechanisms • Green Bonds/Social Impact Bonds • Stormwater utilities • Water and wastewater utilities • State/regional restoration/water funds (Bay Restoration Fund) • Green banks (Connecticut) • Pooled loan programs • Off sets and trading programs
  12. 12. TRENDS AND DEVELOPMENTS
  13. 13. 10,000 12,000 14,000 16,000 18,000 20,000 22,000 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0 8.5 9.0 CustomerAccounts WaterSales(milliongallonsperday average) Actual Water Sales Accounts Falling Sales Reclaimed Water Use Begins Conservation Pricing Changes in 2002 and 2007 Source: Orange Water and Sewer Authrority
  14. 14. Industry Revenue Growth Roller Coaster Annual change in total operating revenues among the same 485 utilities nationwide -4% -2% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 2004 to 2005 2005 to 2006 2006 to 2007 2007 to 2008 2008 to 2009 2009 to 2010 2010 to 2011 AnnualChangetotheTotalOperatingRevenues BetweenYears Interquartile range (25th to 75th percentiles) Median Data analyzed by the Environmental Finance Center at the University of North Carolina, Chapel Hill and Raftelis Financial Consultants, Inc. Data Source: Moody's Water and Sewer Municipal Financial Ratio Analysis. The cohort of 485 utilities is consistent across all years. Revenues increased Revenues decreased High revenue growth Low revenue growth
  15. 15. Revenue vs. rate adjustments (2004 to 2010) 15 Data analysis by the Environmental Finance Center at the University of North Carolina. Data sources: 2010 and 2004 RFC/AWWA Water and Wastewater Rates Survey Data for 82 Utilities 1 to 1 Line
  16. 16. Where Can You Find More? http://efc.unc.edu Or subscribe to the Environmental Finance blog! http://efc.web.unc.edu

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