AWWA M29-2014 Water Utility Capital Financing (Fourth Edition).pdf

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1、Manual of Water Supply Practices M29 Ideal crop marks Ideal crop marks Fourth Edition M29Water Utility Capital Financing, Fourth Edition M29 W ritten for both public and investor-owned utilities, AWWA M29 Water Utility Capital Financing, Fourth edition addresses both traditional and innovative utili

2、ty financing alternatives to meet both short- and long-term capital requirements. M29 covers timely concerns such as inflation, growth-related demands, the impacts of public pressure to keep rates low, and new financing options and considerations. This manual should primarily be considered as a guid

3、e for determining capital requirements, strategic planning, and financing alternatives. It also provides general information for those utilities considering the issuance of long-term debt. M29 includes appendices on Applying Risk Assessment to Asset Management, Comparison of Capital Financing Scenar

4、ios, and Rating Agency Requirements. The manual also includes informative tables and figures, a glossary, references, and additional sources of information. M29 covers six general areas: 1. The capital and financial planning process 2. Identification of financing alternatives 3. Evaluation of financ

5、ing alternatives 4. The process of taking a debt issue to market 5. Participants roles in the debt issuance process 6. Special considerations for investor-owned utilities 1P5.5C 30029-4E (9/14) IW Water Utility Capital Financing Dedicated to the worlds most important resource, AWWA sets the standard

6、 for water knowledge, management, and informed public policy. AWWA members provide solutions to improve public health, protect the environment, strengthen the economy, and enhance our quality of life. www.awwa.orgManual of Water Supply Practices Ideal crop marks Fourth Edition Water Utility Capital

7、Financing M29Printed on recycled paper Printed in the United States of America American Water Works Association 6666 West Quincy Avenue Denver, CO 80235-3098 awwa.org hours of work by your fellow water professionals. Revenue from the sales of this AWWA material supports ongoing product development.

8、Unauthorized distribution, either electronic or photocopied, is illegal and hinders AWWAs mission to support the water community. This AWWA content is the product of thousands of Manual of Water Supply PracticesM29, Fourth Edition Water Utility Capital Financing Copyright 1988, 1998, 2008, 2014 Amer

9、ican Water Works Association All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording, or any information or retrieval system, except in the form of brief excerpts or quotations for review

10、purposes, without the written permission of the publisher. Disclaimer The authors, contributors, editors, and publisher do not assume responsibility for the validity of the document or any consequences of its use. In no event will AWWA be liable for direct, indirect, special, incidental, or conseque

11、ntial damages arising out of the use of information presented in this book. In particular, AWWA will not be responsible for any costs, including, but not limited to, those incurred as a result of lost revenue. In no event shall AWWAs liability exceed the amount paid for the purchase of this book. Sr

12、. Manager, Editorial, Development and Production: Gay Porter DeNileon Project Manager: Melissa Valentine Senior Manuals Specialist: Molly Beach Production: TIPS Technical Publishing, Inc. If you find errors in this manual, please email booksawwa.org. Possible errata will be posted at www.awwa.org/re

13、sources-tools/resource.development.groups/manuals-program.aspx. Library of Congress Cataloging-in-Publication Data Fedder, Richard.Water utility capital financing / Richard (Toby) Fedder, Eric Hofeld, John Mastracchio. - Fourth edition.pages cm - (AWWA manual ; M29)Revised edition of the Association

14、ss Fundamentals of water utility capital financing, 3rd ed., published in 2007.Includes index.ISBN 978-1-62576-016-6 1. Municipal water supply-United States-Finance-Handbooks, manuals, etc. 2. Waterworks-United States-Finance-Handbooks, manuals, etc. 3. Water utilities-Finance-United States-Handbook

15、s, manuals, etc. I. American Water Works Association. II. Fundamentals of water utility capital financing. III. Title.HD4461.F43 2014363.610681-dc232014030193 ISBN-13 978-1-62576-016-6 eISBN-13 978-1-61600-277-3Ideal crop marks iii Contents AWWA Manual M29 Figures, v Tables, vii Preface, ix Acknowle

16、dgments, xiii Chapter 1 The Capital Financial Planning Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Strategic PlanningThe First Step, 1 Evaluate Internal Factors, 3 Evaluate External Factors, 5 Set Goals and Priorities, 9 The Multiyear Capital Improvement Plan, 9 The Multiyear

17、 Financial Plan, 11 The Annual Capital Budget, 14 Business Risks to the Capital Financing Process, 15 Summary, 18 Bibliography, 18 Chapter 2 Identifying Financing Alternatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Internal Funding, 19 External Funding, 24 Summary, 30 Cha

18、pter 3 Evaluating Financing Alternatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Legal Factors, 31 Financial Factors, 33 Issuer Considerations, 34 External Factors, 37 Comparison of Common Funding Alternatives, 37 Bond Structure Variations, 43 Summary, 47 Reference, 47 C

19、hapter 4 Preparing the Utility for Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 How Third Parties Evaluate the Utility Business, 50 Management Practices of Highly Rated Utilities, 50 Summary, 65 References, 65 Chapter 5 Going to Market: The Process . . . . . . . . . .

20、 . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 Obtaining Authority, 68 Assembling the Finance Team, 68 Timeline, 69 Preparing the Official Statement, 71 Method of Sale, 72 Underwriter Considerations, 75 Sale and Closing, 75 Postsale Considerations, 76 Summary, 77iv AWWA Manual M29 Chapter

21、 6 Going to Market: The Players . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 Finance Team, 79 Legal Counsel, 81 Financial Principals, 82 Project Principals, 84 Credit Evaluation Principals, 86 Other Principals, 87 Summary, 87 Chapter 7 Special Considerations for Inves

22、tor-Owned Utilities . . . . . . . . . . . . . . . . 89 Budgeting, Planning, and Forecasting, 91 Generation of Funds, 91 Attracting Capital, 98 Other Considerations, 100 Summary, 100 Bibliography, 100 Chapter 8 Special Considerations for Canadian Utilities . . . . . . . . . . . . . . . . . . . . . 10

23、3 Financial and Capital Planning Process , 103 Fiscal Policy, 105 Other Considerations, 108 Summary, 109 References, 109 Appendix A Applying Risk Assessment to Asset Management . . . . . . . . . . . . . . . . . . 111 Appendix B Comparison of Capital Financing Scenarios . . . . . . . . . . . . . . .

24、. . . . . . . . 119 Appendix C Rating Agency Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 Glossary, 141 Index, 149v AWWA Manual M29 Ideal crop marks Figures Figure 1-1 Strategic planning steps, 2 Figure 1-2 Capital and financial plan development, 4 Figure

25、1-3 Trade-off between reliability and cost, 7 Figure 1-4 Different aspects of reliability, 8 Figure 3-1 Treasury yield curve, 33 Figure 5-1 Investor groups holdings of municipal securities, 73 Figure B-1 Outstanding debt principal over 20 years, 126 Figure B-2 Outstanding debt service payment over 2

26、0 years, 126 Figure B-3 Debt service coverage ratios, 127 Figure B-4 Annual percentage increases in water rates, 127 Figure B-5 Average water rate per 1,000 gallons, 128 Figure B-6 Annual net operating surplus, 128 Figure B-7 Operating reserve balance, 129This page intentionally blank.vii Ideal crop

27、 marks AWWA Manual M12 Tables Table 1-1 Risk assessment matrix, 5 Table 1-2 Sample CIP schedule, 10 Table 1-3 Financial planning checklist, 14 Table 3-1 Comparison of funding alternatives, 43 Table 4-1 Water and wastewater revenue bond rating agency detail, 51 Table 4-2 Some key financial ratios use

28、d by credit rating agencies, 56 Table 5-1 Sample timeline for bond issuance, 70 Table 5-2 Conditions favoring a method of sale, 74 Table 6-1 Potential finance team members, 80 Table 7-1 Determination of net revenue requirements, 90 Table 7-2 Typical investor-owned utilities capitalization example, 9

29、9 Table A-1 Likelihood of a failure based on potential for a severe weather event, earth- quake, fire, or landslide, 112 Table A-2 Consequence of failure, 114 Table B-1 Key inputs for summary outcome tables, 120 Table B-2 Summary outcomes for Strategy 1: 0% Debt Financing, 123 Table B-3 Summary outc

30、omes for Strategy 2: 40% Debt Financing, 124 Table B-4 Summary outcomes for Strategy 3: 80% Debt Financing, 125 Table C-1 Fitch Investors Services rating definitions, 133 Table C-2 Moodys Investors Services rating definitions, 134 Table C-3 Standard the manual does not attempt to identify practices

31、and terminologies used in the myriad other countries with public utilities. It is likely that many countries outside the United States and Canada have financial instruments and government-sponsored programs that resemble those that are referenced in this manual. The financial management strategies p

32、resented herein are seen by AWWA as universal and thus valuable to all who make use of this document to guide their programs and decisions. The financial operations of many water utilities are continually challenged by a variety of factors, such as adverse weather conditions, inflation, changes in t

33、he economy and/or political environment, growth or decline in service demand due to new construc- tion, conservation programs, changes in environmental regulations, backlog of infra- structure repairs and improvements, staff turnover, and above all, public pressure to keep water rates low. Regardles

34、s of such challenges, water utilities remain very capital-intensive businesses. Despite the growing maintenance needs of aging water systems, many water utilities elect to postpone repairs, replacements, and rehabilitation expenditures to keep current operating costs, and corresponding service charg

35、es, as low as possible. However, deferring capital expenditures invariably results in higher operating costs in the short run and higher construction costs in the future. Strategic planning helps utility management develop the steps necessary to reach the utilitys short- and long-term goals and obje

36、ctives. A strategic financial plan helps management meet the utilitys operating and capital financing needs during a specified period. Similarly, strategic capital planning, while consistent with and supported by the strategic financial plan, addresses the utilitys smaller recurring capital needs as

37、 well as its long-term expansion, upgrade, replacement, and reliability needs. Strategic financial and capital plans also provide a platform for communicating the utilitys needs to the public, thereby gaining greater stakeholder confidence in utility man- agement. The plans inform investors of a uti

38、litys potential and support rating agencies debt ratings. Whatever a particular water utilitys capital requirements may be, knowledge PrefaceAWWA Manual M29 x of available alternatives for obtaining funding is a key element in developing success- ful financing plans. Some financing alternatives come

39、 into, or are phased out of, current practice with changes in federal tax law and market conditions. Thus, an effective capi- tal financing program should contain a variety of fundamental approaches to financing infrastructure that create a systematic means of addressing the utilitys needs over time

40、. One resource that should not be overlooked is the utilitys financial advisor, who is often able to propose current financing alternatives that may provide greater benefit to the util- ity than originally envisioned in a utilitys financing plan. PURPOSE This manual provides a comprehensive overview

41、 of best management financing practices that water utility management should evaluate when determining short- and long-term strategies for meeting capital requirements. Only by thorough analysis of a particular water utilitys long-term capital requirements and financial position will utility manage-

42、 ment be able to determine the feasibility of one or more specific financing concepts. This manual is not intended to be, nor should it be considered, a complete text on water utility capital-financing concepts. A variety of other sources are available through various industry and professional organ

43、izations. Instead, this manual should primar- ily be considered a guide for determining capital requirements, strategic planning, and financing alternatives. It also provides general information for those utilities considering the issuance of long-term debt. Each of these areas is critical to the ca

44、pital planning and financing process but must be tailored to and reflect factors applicable to a local situation. No recommendations or opinions about the relevance of alternative forms of available financing have been provided. Determining the relevance of alternative financing options is considere

45、d to be the prerogative of utility management. ORGANIZATION The material presented in this manual is intended for use by both government-owned and investor-owned water utilities. Because financing alternatives and markets may differ for these two primary types of ownership, financing alternatives fo

46、r each are discussed in separate places throughout this manual. This manual covers six general areas: 1. The capital and financial planning process 2. Identification of financing alternatives 3. Evaluation of financing alternatives 4. The process of taking a debt issue to market 5. Participants role

47、s in the debt issuance process 6. Special considerations for investor-owned utilities Information presented in this manual has certain limitations. Water utility capital require- ments continually change, as do financial sources available to the utility. At any given time, financing alternatives available to a utility depend on: Tax laws and Internal Revenue Service rules and regulations Interest rates charged for various financing alternatives