Municipal Infrastructure Funding: Capital Improvements Without Rate Increases

Municipal Infrastructure Funding: Capital Improvements Without Rate Increases

Communities everywhere are struggling with municipal infrastructure funding but still need to make much-needed capital improvements to critical infrastructure. The fact that funding these projects often requires utility rate increases makes it that much more difficult. Despite the odds, two communities in New England have successfully funded major capital improvements to water infrastructure without rate increases by focusing on cost-saving and revenue-generating projects.

The City of Lowell MA, birthplace of the American Industrial Revolution, and the City of Lawrence, MA, the first planned industrial city, have shared much throughout their histories and were once the textile hubs of America. Today, both cities share something else: the rewards of millions in water system improvements without increasing the burden on ratepayers. Working with Woodard & Curran, the cities funded the projects through a combination of State Revolving Fund (SRF) loans, cost savings, and new revenue. The loans totaled $39.6 million and $33.3 million for Lawrence and Lowell respectively. Many of the loans received principle forgiveness, and the savings and revenue from improvements cover or significantly offset the cost.

Creating revenue through energy efficiency

By replacing aging water meters with new, high accuracy meters that have the ability to transmit usage data electronically, both cities have significantly increased their revenue stream. For Lowell, the added revenue from the new commercial, industrial and institutional meters totals approximately $500,000 annually, while Lawrence expects to see an additional $1.3 million. The new water meters provide a higher degree of accuracy, more reliable and consistent readings, and have enhanced features like helping detect leaks and providing better security, which improves the efficiency and reliability of each city’s water system.

“The amount saved through operational efficiencies and the increased revenue the City is seeing by replacing water meters is remarkable,” said John Isensee, Public Works Director in Lawrence. “The support that the City received from Woodard & Curran was a critical factor in this accomplishment.”

Another opportunity for increased efficiency lies within a community’s primary water pumping systems, which in many cases use significantly more energy than necessary. By replacing just two inefficient water pumps in Lawrence, the city stands to save approximately $90,000 annually in energy costs. Similarly, Lowell’s replacement of eight water pumps resulted in over $250,000 in electrical savings per year. The new pumps are equipped with high efficiency motors and variable frequency drives and, for Lowell, the savings are more than enough to cover the payment on the SRF loan obtained to construct the project.

“Funding has been pivotal to successfully implementing our capital upgrades,” explains Daniel Lahiff, Executive Director of the Lowell Regional Water Utility. “The funding allowed us to move forward with projects that are now bringing in revenue and paying for the loans used to construct them. All of this results in better infrastructure for our city and unchanged rates for our residents.”

Solar power delivers savings and revenue

Taking efficiency and new revenue to an innovative level, both cities also installed solar photovoltaic (PV) panels on the roof and grounds of their respective water treatment facilities. The energy generated from the solar PV installations offsets energy use at the plants and will generate additional revenue for the cities through the sale of Solar Renewable Energy Credits (SRECs).The net result is anticipated to be over $120,000 per year in annual electricity savings and SREC revenues for Lawrence and $150,000 for Lowell.

Collectively, the improvements will save each of the cities over $1 million annually, which, in combination with the SRF loans with principal forgiveness and constantly improving operational efficiencies, allowed them to fund the projects without a rate increase. Although a capital improvement plan is a large undertaking and significant investment, choosing the right projects can make it a financial boon rather than a burden to a community and its residents. Capital improvements and rate increases don’t have to go hand-in-hand; Lawrence and Lowell are proof of that.

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