Our Work: Policy
We identify policy or legal barriers to sustainable water options and develop smart and effective strategies to address them using the collective voice of local water leaders.
Financing Sustainable Water Innovation
Learn more: “Debt Funding for Water Conservation Programs” by Ed Harrington & Cynthia Koehler, Government Finance Review, October, 2016
Public water utilities generally capitalize their long-term infrastructure projects, paying for them with revenue raised through the issuance of municipal bonds. These projects provide benefits for many years and their costs are similarly amortized over time.
By contrast, most public water utilities do not capitalize their conservation and efficiency programs, even when these programs provide long-term benefits similar to other capital projects. This disparate treatment is often the result of certain accounting conventions that require public entities to be able to exert control over its assets in some way. This is straightforward for a treatment facility or pipeline on utility property or right of way. It’s more complicated when a public utility is interested in providing financial incentives to consumers on the other side of the meter or investing in property it does not own.
As a result, spending for decentralized water solutions on the consumer side of the meter is generally limited to cash, straining utility operating budgets. This tends to limit public investments in these options, even when they provide cost-effective and sustainable benefits to the local community.
WaterNow Alliance aims to create greater financing flexibility for utilities to make long-term investments in distributed and localized water solutions by identifying legal and accounting mechanisms that satisfy Generally Accepted Accounting Principles also allowing public utilities to debt finance non-traditional water supply and water quality options.
Local utilities will always need to spend on pipes, tanks, treatment and other forms of conventional water infrastructure. If they are better empowered to make choices about where and when and how to use debt financing to deploy innovative water technologies and strategies, these public water providers will be better positioned to invest in these options and build resilience and water security for their communities.
WaterNow Alliance has convened a team of legal and financial experts to develop a full menu of options for public water providers around debt financing different types of conservation, efficiency and other distributed water solutions mechanisms in compliance with accounting rules and conventions.
WaterNow Alliance’s principal partners for this initiative include:
We’re grateful for the pro-bono legal support being provided by:
Given the disproportionately large role of local public utility spending on water infrastructure decision making, the primary opportunities to expand adoption and deployment of sustainable water technology and innovation will be at the local level. If successful, the proposed policy guidance could benefit public water providers nationwide. Increased availability of municipal bond financing will not only accelerate implementation of water efficiency technology, but could also encompass consumer behavior software, reuse systems, groundwater management, and technology-based watershed restoration and protection measures.
Links to Additional Information
Our “Flexible Financing” initiative works to provide substantially greater flexibility for public utilities to pay for sustainable solutions by using capital budgets rather than being limited to operating cash. In January 2015, this policy project was selected as a finalist for the Imagine H2O California Water Policy Challenge
Taxing Water Rebates Deters Efficiency & Conservation
As water rebates for conservation and efficiency have increased across the nation, the IRS has indicated that it views them as taxable income, requiring water utilities to issue 1099s to all participating consumers. From “cash for grass” to low-flow toilet rebates to support for graywater and low water irrigation systems, financial subsidy programs have helped local water utilities save millions of gallons of water across the West. Taxing water rebates as income is a clear disincentive to sustainable water solutions. You can read our policy brief on this issue here.
With our partners at the National League of Cities, we’ve put together a letter to the White House from water leaders across the nation regarding the IRS’s treatment of water rebates as taxable income.