Financing for Environmental Compliance
Water Case Studies
Read short case studies of how other cities and tribes financed water and wastewater infrastructure.
City of Los Angeles - 2005
This is an example of a large system using bonds and rate increases to fund sewer infrastructure.
The City of Los Angeles (City) provides wastewater service to over four million people in the City and 29 contract agencies. The system covers 600 square miles and is comprised of more than 6,500 miles of sewers and four wastewater treatment and water reclamation plants that process over 550 million gallons of flow each day.
In October 2004, the City reached a landmark 10-year settlement agreement (settlement) with the United States EPA (US EPA), the State of California, the Santa Monica Baykeeper and a number of community groups in South Los Angeles. As part of the agreement, the City committed to a systematic inspection, maintenance and upgrade of the sewer system with the goal of reducing sanitary sewer overflows. The 10-year estimated sewer system investment was estimated at $2.3 Billion with $2 Billion previously planned and budgeted.
The increase in expenditures is being financed by increases in sewer rates combined with financing and increased operational efficiencies. The settlement agreement was followed by unanimous approval of a 5-year sewer rate increase of 7% annually to help fund the sewer improvement program.
Over 75 community meetings followed the settlement in an effort to communicate the rate increase to the community. Demonstrating the need to renew the aging infrastructure and to reduce sewer overflows, the community supported the rate increase. The average monthly household sewer rate will increase from ~$21 in 2005 to ~$30 in 2009 The increased sewer rates will increase the projected annual revenue by $129 million from $399 million in 2005 to $528 million in 2009. With the manageable settlement terms and the 5-year rate increase, the City maintained its Fitch and Standard and Poor’s wastewater bond ratings of AA- and received a Moody’s upgrade from an A1 to Aa3. As a result, the City will be able to issue additional debt at a lower cost. Results are already showing where overall spills have been reduced by ~50% and grease related spills have been reduced by ~80%.
Waverly, New York
This is an example of small system using SRF loans and non-EPA grants to fund sewer infrastructure.
The city serves ~4,600 customers and needed to build a $2.7 million wastewater treatment plant and make improvements to the collection sewer system to comply with the requirements of the Clean Water Act. The city qualified for a $900,000 SRF interest-free loan and received commitments from the federal Rural Utilities Service for a $1.3 million grant and $50,000 loan, and from HUD for a $400,000 grant. With these commitments, the town obtained a short-term, interest free, $2.7 million SRF loan, which will be paid off by long-term SRF, RUS and HUD financing.