From The EditorAnita HarrisPlanning and Funding SpecialistAnita.Harris@frachetti.com

Hello,

I am certain that you too have heard about the droughts and

water shortages that we are faced with on the West-Coast. Arizona, California, Nevada, New Mexico and Colorado are all running short on water supply. The Federal Government is introducing several new funds to help towns and municipalities, and to ease the burden of water and wastewater loans and grants. This issue of the Bucket Li$t introduces some fresh ideas about how to get your town’s financial health up and running, so you can qualify your local government for available low interest loans and grants.I also presented details about Budgeting, Policies, Cost Accounting, and Financial Reserves, along with a new Federal bill that was initiated by Senator Bennett. The list is long and space here is limited so if you have additional questions I can help you dive in and get the most out of your specific situation.

Best Wishes,Anita

Next Time in THE Bucket Li$t

How to identify weaknesses in your • financial portfolioWhat you need to know about • applying for a loanWhat is required to qualify for • Grants

Frachetti Engineering, Inc.5325 South Valentia Way

Greenwood Village, Colorado 80111

phone: 303.300.3464www.frachetti.com

Volume 5 Issue 1February, 2014

Volume 5 Issue 1February, 2014

New Bill Introduced to the Senate

U.S. Senators Michael Bennet (D-CO) and Roy Blunt (R-MO) introduced a bipartisan bill named Partnership to Build America Act to jump-start our nation’s capability to construct and repair roads, bridges, highways, ports, schools, and other infrastructure projects.The bill was introduced so that the federal government wouldn’t have to use any additional amount of federal dollars for re-building the nations outdated infrastructure. The bill allows U.S. corporations to repatriate some of their income from foreign sources and invest it tax free into the new bond. The bond will have a 1% interest rate, but it is not backed up by the federal government.The bill will give a competitive edge to the country to finance top priority infrastructure projects and allow the US more competition on global scale. It will give $50 billion that can be leveraged to $750 billion in funds to build new infrastructure. The fund will make guarantees or low-cost loans to state or local governments, nonprofit, private parties, and public-private partnerships to finance infrastructure projects that state and local governments prioritize.

Water Infrastructure Finance and Innovation Authority (WIFIA)

Another fund that is gaining support and popularity is the new Water Infrastruture Finance and Innovation Authority (WIFIA) fund. WIFIA was modeled after the Transportation Infrastructure Finance and Innovation Act (TIFIA) and it is a mechanism that could lower the cost of capital for water utilities, while having no long term effect on the federal budget. WIFIA was created to enable communities with larger scale water and wastewater projects to finance their developments without placing a burden on the local government and relieving the SRF funding to finance smaller scale projects. The funds Ratio would be similar to TIFIA, where $1 in subsidy appropriation supports $10 in credit assistance. Water and wastewater projects could also add up to a higher subsidy since the historical default rate is extremely low on these projects.Therefore WIFIA allows states with good credit history to leverage loans and facilitate large scale projects at a minimal risk. It is a win-win situation for municipalities and government alike.

What we need to know and how to prepare entities to qualify for grants and loans

Municipalities of Water and Wastewater facilities need to prepare a comprehensive financial plan for their accounting systems to successfully qualify for various Grants and Loans. In order to

make this process competitive, and stress-free, it is valuable to know what the rules and regulations are to qualify for Grants or Loans. The first step is to make sure that you have a solid financial strategy in place; policy planning and development; budgeting, cost accounting and reporting should all be lined up and in place.

Policies

The policies should represent the goals and directions that the governing elected officials want to • adhere to; transparency is a significant part to achieve success.In developing new policies the board of directors or elected officials needs to list operating policies that • are needed to manage the utilities.The policies and new rules need to be evaluated from time-to-time to make sure that it is relevant and • serving shareholders’ value.

Budgeting

The goal of the governing party might differ from the public demand to keep rates low, not understanding • that in order to keep the facility operational there is a need for fiscal reserve, to plan to fund upcoming maintenance costs or to build a new facility.Decisions must be made to identify what is needed for the capital reserve and for operational and • maintenance cost.

There are various types of budgeting plans available such as; line-item budgets, activities based budget, zero-based budget, capital budget and performance based budgets. We can assist you in the process to decide which budget would serve your specific needs. It is necessary to have proper tracking of the revenues and expenditures. Budgets are critical to have a successful operation and prepare to take on a loan or grant.

Volume 5 Issue 1February, 2014

Volume 5 Issue 1February, 2014

For additional information on Grants and Loans please contact me at: anita.harris@frachetti.com

Financial Reserves

Establishing financial security and maintaining financial reserves are the two most important components for a thriving operational facility. It is necessary to have a clear definition of how the funds are being allocated, and how the funds are serving the needs of the shareholders. These needs could arise from a various sources; changing regulations, natural disasters, growing population, new facility, operational expenditures, insurance losses, litigation etc.A well-managed and operated utility should consider all of the above in order to gain acceptance from an agency for a loan or grant. Municipalities should make it a consistent objective to exercise solid fiscal planning regardless of loans or grants, but the more solid their case, the more likely to have access to the shrinking bucket of federally mandated or state mandated loans and grants.

Cost accounting and financial reporting

It is essential to have a tight budget and policies in place in order to qualify for grants and loans. It is also important to have a flexible and open accounting system that can adapt to the changing needs of an organization. To qualify for a loan or grant, agencies require that you have an up-to-date budget in place and solid rules and policies.