Financial Planning Process for Environmental Compliance
Financing environmental capital assets can be daunting. How can a government raise millions of dollars of revenue necessary to purchase capital equipment? What is the best financing method to pay for environmental capital assets? Do current management methods optimize capital costs? The following steps can help guide city representatives through the process of developing a financial plan to maintain compliance with current and future EPA regulatory requirements.
The following steps can be completed in the order presented or finished in an alternate order that better addresses a community ’s specific needs and goals. At a minimum, EPA recommends that steps 1-3 be completed first as they create the foundation for the subsequent steps.
Determine which municipal employees should be involved in the capital asset financing process. To be effective the team should include technical, financial political representatives and a community liaison.
Develop an inventory of current system costs and forecast future capital asset needs and associated costs. This step will create a financial needs baseline.
Set clear goals and objectives for the project.
Analyze various technical options and construct the best solution.
Conduct a rate analysis to learn whether current rates cover current costs. Determine whether the current rate structure will cover future costs.
See how the financial resources necessary to improve environmental capital assets can mesh with community-wide projects and financial commitments. Assess existing (internal and external) financial resources available for environmental capital asset acquisition.
The four main funding options are municipal revenue-generating authority, grants, loans and bonds. It is a good idea to review all four options since most municipal financing is a combination of at least two of the three options.
Once the above steps have been completed, the information can be summarized and used to communicate the goals, costs and deadlines of the project.