This project, funded by the Public Water Supply Section of NC Department of Environment and Natural Resources, brings together many resources focused on capital planning for drinking water and wastewater utilities. Capital planning often leads to the creation of a Capital Improvement Plan (CIP) and/or an Asset Management Plan.
Why have a Capital Plan?
It is important for water and wastewater utilities to create, maintain and follow a plan to invest in their capital assets; whether to rehabilitate, replace or install new assets. Capital infrastructure costs account for a very large portion of utilities’ total costs. Without proper long-term planning, utilities run the risk of not being able to pay for capital costs when they need to, leading to deteriorating service and, ultimately, public health risks. There have been many studies on the capital needs of drinking water and wastewater infrastructure in the United States, and invariably these needs amount to dozens of billions of dollars. External funding (loans, grants, bonds, etc.) can only cover a portion of these capital needs. Ultimately, the customers of the systems will be covering the rest (if not all) of the capital needs of their systems. Long-term planning is required to schedule major infrastructure improvements and spread the capital costs over many years in order to avoid having to raise rates significantly in any one year to pay for a capital project that was unplanned.
A tool for utilities: “Plan to Pay: Scenarios to Fund your Capital Improvement Plan”
The EFC at UNC developed an Excel-based tool that allows water utility managers and technical assistance providers to relatively quickly create a simple CIP and assess strategies to fully fund capital projects for the next 20 years through a combination of pay-as-you-go and debt service. The user inputs cost and timeline data for all capital projects and the tool projects the utility’s fund balance (revenues, expenses, and reserves), and projects estimated rate increases for the next 20 years to fund the capital projects and O&M expenses. Data entry requirements are minimal, and the tool is intended for small- and medium-sized water and wastewater systems in any state.
Reference Guide on What to Include in Your Capital Plan
The EFC at UNC also developed an Excel-based tool in September 2015 titled “What to Include in Your Capital Plan: A Reference Guide for NC Water and Wastewater Utilities.” This reference guide lists the requirements and recommendations made by many sources that influence what utilities in North Carolina include in their capital plans. Listing all of these sources in one document provides a reference that allows a utility to quickly compare and assess what they may want to include in their capital plan. Although the guide was written specifically for NC utilities, utilities in other states may also find it useful. Please note that some references and information may no longer be valid since requirements and recommendations change over time.
Links to Capital Planning Resources for Managers and Planners
The following resources provide requirements and recommendations for water and wastewater utility capital planning. While some of these resources are North Carolina focused, many of the resources can be applied to other states, in particular the best practices guides. This list was last updated in February 2011.
Best Practices Guides
U.S. Environmental Protection Agency (EPA)
- Asset Management (webpage)
- Asset Management – A Best Practices Guide (pdf)
- Asset Management – A Handbook for Small Water Systems (pdf)
- Taking Stock of Your Water System: A Simple Asset Inventory for Very Small Drinking Water Systems (pdf)
- Asset Management for Local Officials (pdf)
- Building an Asset Management Team (pdf)
- Strategic Planning: A Handbook for Small Water Systems (pdf)
- Setting Small Drinking Water System Rates for a Sustainable Future (pdf)
- Financing for Environmental Compliance (includes resources on long-term capital planning due to compliance issues)
NC Department of Environment and Natural Resources (NC DENR) Public Water Supply Section’s Capacity Development Program
American Water Works Association (AWWA)
- M29: Fundamentals of Water Utility Capital Financing (manual)
- M28: Rehabilitation of Water Mains (manual)
UNC School of Government (SOG) and ICMA
- Capital Budgeting and Finance: A Guide for Local Governments (book, second edition)
- County and Municipal Government in NC Article 17: Capital Planning, Budgeting, and Debt Financing (article of a reference book)
Effective Utility Management
- Infrastructure Stability (webpage includes measures of asset management)
Software and Tools for Capital Planning
- CUPSS (EPA)
- Plan to Pay: Scenarios to Fund your C.I.P. (EFC at UNC)
- Dashboard for Using Capital Reserve Fund to Avoid Rate Shock (EFC at UNC)
Funding Agency Requirements in North Carolina in 2011
Applicants to loans and grants administered by funding agencies in North Carolina will find that many of the applications either require or recommend reporting certain elements that would normally appear in a capital plan. Knowing ahead of time what the application requires and incorporating these elements into your capital plan will improve your utility’s chances of receiving funds.
- Common Application Form (pdf)
- NCDENR Public Water Supply Sections’ loans and grants, including the Drinking Water State Revolving Fund (webpage. Download the pdf of the Supplemental Form here)
- NCDENR Infrastructure Finance Section’s Clean Water State Revolving Fund (webpage)
- G.S. 159G-23: capital planning requirements for state administered loans and grants (webpage)
- USDA Loans and Grants (webpage. View the Forms page )
- NC Rural Economic Development Center (webpage. View their Capital Improvement Plan Checklist)
Other Reporting Forms in North Carolina
Utilities in North Carolina are required to report to various agencies for different reasons. Some of the elements they report on would normally appear in a capital plan.
- The Drinking Water Needs Survey (website. Includes requirements for long-term planning and costing of capital needs). View this pdf for details.
- Local Water Supply Plans (website)
- NCDENR Public Water Supply Section’s Capacity Development Programs forms(webpage)