DENVER (Dec. 13, 2016) ‒ The Water Research Foundation (WRF), a leading sponsor of innovative research supporting the water community, has published a new report to help utilities assess several new and emerging capital financing alternatives.
The report indicates that while the new capital funding options may help, utilities still need sufficient and sustained revenue to pay for the financing, and that revenue will need to come from rates.
In addition to examining the new funding options, the project found that the real problem with infrastructure funding is not the lack of traditional or innovative financing alternatives, but rather the limited amount of sufficient and sustained revenue funding sources that can pay for the financing. Ultimately, utility service rates are the primary means to fund capital investments in water utilities.
“While there are many new financing options for utilities to pursue in funding aging infrastructure, none are a silver bullet.” said Rob Renner, CEO of the Water Research Foundation. “Utilities will continue to need sufficient revenue to bridge the infrastructure gap.”
The project, New and Emerging Capital Providers for Infrastructure Funding (#4617), was funded because more than $650 billion is needed for water and wastewater infrastructure upgrades and renewal over the next 20 years, according to a statement from WRF.
The extraordinary capital funding needs, and the demands and expectations of water utility stakeholders, create a challenging capital financing environment for water utilities. This has led policymakers to look for innovative ways of lowering borrowing costs and achieving other benefits, such as risk mitigation, greater public awareness and value capture. New and emerging financing alternatives may be able to help utilities obtain these benefits while helping to close the infrastructure funding gap.
The research report documents the current state of financing alternatives in the water industry, identifies new and emerging capital financing alternatives, and discusses benefits and limitations of each. The Principal Investigator for this project was John Mastracchio, CFA, Vice-President, Arcadis, U.S., Inc. The project was managed by Jonathan Cuppett, WRF Research Manager.