Civil Engineering Reference
In-Depth Information
facilities for the benefit of potential future users.
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When levied, it is usually part of
the utility's general water rate structure and is applicable from the time service is first
made available to a potential customer (or when the levy is first enacted) until the
time service goes into effect. It is essentially a charge for having utility service avail-
able but not using it.
Ad Valorem Taxes
While municipalities have taxing authority, nearly all modern-day municipal water and
wastewater utilities employ utility rates and fees as the primary basis for funding the
operations, maintenance, and capital needs of the system. In most states, the practical
use of ad valorem (i.e., ''at value'' property assessment) taxes for funding water and
wastewater utility purposes is limited to special water districts. This funding mecha-
nism is most typically used where there is a need to rely, in part, on funding from
undeveloped property benefiting from the presence of utilities. In lower-density areas
that are just developing, property taxation may be an essential part of the funding mix
to attract utility capital funds at reasonable rate of interest.
Developer Exactions / Dedications
Exactions are government requirements that developers dedicate land or other facilities
for public use or improvements, or pay a fee in lieu of dedication. Within the water
and wastewater utility business, these types of capital provisions are typically defined
in what is known as utility extension policies.
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In many states, there are requirements to provide a level of municipal services to
the newly annexed areas similar to those of other municipal areas with similar situa-
tions within a defined period of time. In these cases, any major infrastructure needed
to serve a new development will be provided at city expense, although the cost of
water distribution and wastewater collection lines ''internal'' to a new development are
usually borne by the developer or owner. For requests to provide service outside of
the municipal boundaries, the developer may be required to fund the cost of major
water and / or wastewater approach mains to the development or other facilities (such
as lift stations) that may provide unique service to the development. In some cases,
there may be extension refund policies or agreements that allow for near- or longer-
term reimbursement of these capital costs to the developer. In the instances where the
city will require oversizing of the extended facilities to ultimately serve other devel-
opment, the city may cost-participate in the construction (usually on a pro rata capacity
basis) or require the developer to initially fund the entire extension project(s) with an
agreement of subsequent reimbursement.
For-profit water corporations generally have extension policies that require the pay-
ment of a determined amount by the party requesting service. In many cases, this will
constitute a ''footage'' charge for extending current service line lengths. If the service
extension request is large or unusual, other capital charges may be applicable. When
capital is acquired in this manner, this as defined as ''contributed capital'' and is usually
not eligible for earning a rate of return.
Grants / Subsidized Low-Interest Loans
Federal and state financial assistance programs have varied over the years, evolving
from substantial grant programs to a greater emphasis on loan and revolving loan
