Newsletter: How Do I Fund My Asset Management Plan or CIP? (July 2019)

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Community leaders in Michigan today are challenged more than ever to finance infrastructure improvements that are both fiscally sound and consistent with community goals.

Most communities have relatively new Asset Management Plans (AMPs) for their wastewater, stormwater and/or public water systems. Within those AMPs, a Capital Improvements Program (CIP) was developed outlining the plan to properly maintain and complete upgrades of their system over time.

“Paying for needs identified in the CIP can pose a financial burden,” said Tracey Connelly, Harrison’s city manager and clerk. “It has its challenges because nobody likes to raise rates or pay more.”

The question is “How do I raise sometimes millions of dollars to pay for my infrastructure needs before I have failures?” Communities have typically two choices:

  • Pay as you go. That means water/sewer rates need to be adequate to pay for the projects as they are needed.You complete individual projects from year to year. Some people think they save money because you don’t pay interest cost to borrow money. However, the projects are stretched out. Instead of one larger project, you have smaller individual projects with higher costs per project,and you have to deal with cost increases from year to year.Current customers are paying for the majority of the costs that will benefit the community for years.
  • Finance the larger components of the AMP or CIP,use grants where possible. The payments for the improvements are stretched out over the life of the bond issue and paid by future users that receive the benefit of the project. One or more larger projects is usually cheaper than many smaller projects. Many communities are eligible for grants and low interest loans.

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