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Now is the Time for Asset Management Planning

By Jeffrey P. Rowe, CPA, Partner, March 22, 2018

Recent studies by the EPA and American Water Works Association (AWWA) estimate the nation’s infrastructure replacement needs in the hundreds of billions of dollars. These studies reinforce Indiana’s own findings. The Indiana Finance Authority’s (IFA) 2016 study identified an immediate need for $2.3 billion just to replace outdated water infrastructure assets.  At the same time, many Indiana communities are facing implementation of wastewater long-term control plans, which for some communities is the largest infrastructure project they have ever undertaken. 

Taking a passive approach to addressing infrastructure needs is no longer a viable strategy. Indiana utilities need to develop financial plans for asset renewals in combination with long-term control growth. Doing so will enable them to plan for the timely replacement of an aging infrastructure while managing large fluctuations in utility rates.  This was recently reinforced by the Governor signing into law SEA 362 which requires the development of an asset management plan if a water or wastewater utility seeks to participate in the State Revolving Fund Loan Program (SRF) or in the event a permit is being issued or amended for the purpose of the inclusion of a newly constructed or newly acquired plant; or the expansion of an existing plant.

Options are available to utilities seeking to fund their asset renewal needs. Depending on the level of need, a properly prepared financial plan can be funded through the utility’s rate-funded capital plan, cash on hand, or included in a bond financing. In addition, the SRF is encouraging communities to begin the  process by allowing asset management planning  costs, such as engineering and financial advisory fees to be eligible for funding in conjunction with other project-related costs. 

Regardless of how communities decide to pay for infrastructure improvements, it is increasingly important to recognize that these needs will not go away on their own, and the initial step of developing a financial plan needs to start soon.

If you have questions about asset management planning or would like assistance with your funding needs, please contact us at .(JavaScript must be enabled to view this email address).

 

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.


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