Financial Capability Assessment Revisited: Structuring Consent Decrees to Recognize Capital Financing Constraints and Market Change
Abstract:EPA's workbook approach to Financial Capability Assessment, as delineated in its 1997 guidance documenti, requires restructuring and enhancement. As highlighted by the ongoing financial crisis, and underscored in the recent Effective Utility Management Primerii, new approaches must recognize the dynamic nature of long-term program implementation and the financing constraints of local government agencies. This paper presents in conceptual outline an approach to re-structuring Consent Decree language related to the prioritization and scheduling of water quality investments that:
Is consistent with selected attributes of the existing EPA guidance document yet addresses realities of long-term program implementation not afforded through a workbook approach,
Provides practical and transparent mechanisms to assess financial capability that reflect principles advocated by the National Association of Clean Water Agencies (NACWA) and Association of Ohio Metropolitan Wastewater Agencies (AOMWA),
Fulfills requirements of the recently introduced Clean Water Affordability Act introduced into the U.S. Senate (Voinovich/Brown).
Facilitates permittees' embrace of the 10 Attributes of Effective Utility Management throughout the course of program implementation
This revised approach reflects the principle that utilities must fulfill their fiduciary responsibilities by prioritizing and scheduling water quality investments to achieve greatest returns within prevailing financial constraints. Perhaps more importantly, it advances a common-sense approach to financial capability assessment based on methods by which permittees actually implement capital programs. It involves relatively simple cash-flow analyses, consistent with demonstrations utilities use to secure capital in debt markets, and project prioritization based on anticipated benefits (broadly defined) per dollar of expenditure.
Document Type: Research Article
Publication date: 2010-01-01
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