PENNVEST FINANCING CLEAN WATER PROJECTS FOR PENSYLVANIA

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1 PENNVEST FINANCING CLEAN WATER PROJECTS FOR PENSYLVANIA National Association of Water Companies Drinking Water Symposium Orlando, Florida October 12, 2009

2 PENNVEST Objectives Eliminate health and safety risks to citizens of the Commonwealth of Pennsylvania Improve water quality by replacing outmoded, inadequate and deteriorating water and sewerage systems Promote economic development that may otherwise be inhibited by lack of clean water and adequate sewerage systems Promote sound land use

3 What PENNVEST Provides Funding for Infrastructure Projects Drinking Water Public/Private Wastewater Public/Private Storm Water - Public Non Point Source Acid Mine Public/Private Brownfield Public/Private On-lot systems Principal Residence

4 Key Benefits Low interest rate loans Financing is geared to a community s ability to repay Regional PENNVEST representatives to assist project sponsors Coordination with regulatory agencies Coordination with other available funding sources

5 Project Review/Priority Dept. of Environmental Protection: Public Health, Safety, Environment, Compliance, Adequacy & Efficiency Dept. of Community and Econ. Dev. Economic Development, Community Action Team PENNVEST Land Use, Infill, Financial Capability, Funding Offer and Collateral

6 Typical Annual Funding $280 million in Loan Funding annually Water/Sewer/Storm Water/ Non-Point Source Supplemental Grants PENNVEST Growing Greener participation - approximately $10 - $12 million

7 Sources of Funding Total Capitalization: $3.6 Billion: State General Obligation Bonds State Appropriations Clean Water State Revolving Fund Drinking Water State Revolving Fund Also use loan repayments and revenue bonds for on-going project funding, along with grant funds from Pennsylvania s Growing Greener program (landfill tipping fees)

8 Sources of PENNVEST Funding (millions of dollars) Investment Earnings Revenue Bonds Act Capital Budget General Fund Referendum Referendum Referendum Growing Greener Grants Referendum 400 ARRA Federal Revolving Funds -1,111.3

9 PENNVEST Project Approvals at a Glance Approvals as of July 21, ,395 projects 899 Drinking Water 1,334 Sewer 107 Storm Water 38 Non-point Source 3 Acid Mine Drainage 14 Brownfield Total Funding Approved: $5.8 Billion

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12 Investor Owned Approvals Counting just the two largest (Aqua America and Pennsylvania American) 76 projects $215 million in funding, of which: Loans: $208 million Grants: $7 million

13 Grant Incentive to Eliminate Non-viable Systems Our funding terms, including grants, are based on the impact we will have on rates that users pay (our affordability criterion) Typically, for any large system, such as investor owned utilities, the impact of a grant is so low that we do not offer it, only low interest loans But, we do offer grants in white knight situations. That accounts for the $7 million in grants shown previously

14 Stimulus Funding both Federal and State Approved in April and July, 2009 Funds received under ARRA - $220 million: DWSRF: $65 million CWSRF: $155 million Stimulus funds added by the Commonwealth - $664 million: Drinking water: $283 million Wastewater: $381 million Total Stimulus funding provided in April and July - $884 million: Drinking Water: $348 million Wastewater: $536 million

15 Stimulus Project Applications vs. Approvals in April and July, 2009 Application vs. Approval April 2009 (millions of dollars) Applications vs. Approval in July 2009 millions of dollars) $1,400 $1,200 $1,136 $1,200 $1,174 $1,000 $1,000 $800 $800 $600 $600 $530 $400 $354 $400 $200 $200 $0 Applications Approvals $0 Applications Approvals

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18 Drinking Water Stimulus (federal and state) funding Total: 56 projects $283 million: Loans: $244 million Grants: $39 million ARRA Green Infrastructure: $18 million Investor owned: 5 projects $19 million (all loan)

19 Observations Regarding Federal Stimulus Reporting Requirements very substantial and time consuming. So far, we have incurred almost 900 hours of overtime related to ARRA, much due to reporting. The 50% additional subsidization (principal forgiveness) requirement was difficult to reach for drinking water, but not wastewater. The 20% green infrastructure requirement was difficult to reach for drinking water, but not wastewater.

20 Automation of PENNVEST Work Processes That Made it Possible to Handle Increased Stimulus Workload Settlement process: all done on-line, very few paper documents, standard language and selfgenerating documents save considerable time for Legal staff. Funds disbursement process: also done largely electronically, line item information contained in the system facilitates tracking of information and generation of reports needed on jobs, project progress, disbursements, etc.

21 Future Direction for Infrastructure Funding in Pennsylvania Focus on Sustainability and Green Infrastructure Efficient Operation Regionalization Asset Management Full Cost Pricing Maximize Non-Structural Solutions

22 Drivers Behind These Initiatives Governor Rendell s Sustainable Water Infrastructure Task Force Issued a report in November 2008 analyzing issues related to cost-effective and sustainable investment in drinking water and wastewater infrastructure Stimulus funding emphasis on Green Infrastructure and principal forgiveness likely to be continued

23 Implications for Investor Owned (and other) Drinking Water Systems Legislation being drafted that could require all systems in Pennsylvania to implement asset management and full cost pricing. This effectively makes all systems do what investor owned systems already do.

24 Implications for Investor Owned (and other) Drinking Water Systems (cont.) There will be more emphasis on finding more costeffective, non-structural solutions. For example, drinking water systems should be looking to prevent source water contamination by using non-structural storm water control, rather than focusing simply on treatment. Message to Congress if we they want to encourage these activities, they should make our funding source water projection projects eligible under the DWSRF. As it stands now, I cannot offer a loan to an investor owned system for this purpose.

25 Follow-up Questions or Comments Paul K. Marchetti or