Funding Water Infrastructure Repair through Asset Management Planning

Using land sales to fund water infrastructure repair is not a new idea. Officials from Paris to New York City have used this strategy – mostly in the 19th century when cities were growing most quickly.

It will be interesting to see whether or not funding through land sales will make a comeback now, in the 21st century, when so much infrastructure funding is needed.

A utility in Pennsylvania almost sold land to the Pennsylvania Game Commission this year, but the proposal was ultimately rejected by the utility board even though the sale would have provided cash enough for the utility to spend on improving its entire water system.

Water Online reports:

“As U.S. cities face huge costs for water infrastructure upgrades, it remains unclear where the money will come from to adequately address the problem.

“Assuming every pipe would need to be replaced, the cost over the coming decades could reach more than $1 trillion,” the American Society of Civil Engineers reported, citing the American Water Works Association (AWWA).

It’s not an easy time for utilities. Between regulatory compliance, aging infrastructure, and reduced revenue due to conservation, “you have a cesspool of financial worries,” The Kansas City Star reported, citing a research paper by the consulting firm Black & Veatch.”

This strategy is only one of many that may come into play for securing funding the repair America’s declining infrastructure over the next few decades.

Inframanage.com notes that financial projections form a key part of infrastructure asset management planning.

Expenditure projections are developed from the asset lifecycle management analysis and planning.

Revenue projections are developed from rate setting, loans, bonds, state and federal grants, and possibly other income streams such as land sales.  Other options for revenue can be a development levy’s (if permitted).

Utility revenue is a complex subject, the can be subject to considerable analysis.  Given the monopoly nature of water utilities – utility revenue setting is almost always accompanied by political processes and/or regulators.

From an infrastructure asset management perspective expenditure projections and revenue, projections must be developed together.

Simply, if there are revenue constraints, then this will impact as expenditure constraints.

This may lead to iterations of asset lifecycle management analysis, as options for different service levels, future demand scenarios, and risk management are developed and then tested for their impact on the timing of expenditure and revenue.