Construction Funding Conditions

Water & Sewer Utility Business Plan for Served Communities

Prior to an obligation of funding for construction, the community must complete a comprehensive business plan for the project with detailed annual operating costs (including operations and maintenance, repair and short-lived replacement), annual revenues (including user fees, local subsidies, and capital contributions); and a description of the managerial structure for the utility. A business plan must be approved for each individual Village Safe Water funded project.

Business plans expire after five years. A request may be made to associate a new project number with an existing business plan. New projects must fit within the scope delineated in previously approved business plans.

The template for business plans is available for download. In addition, the evaluation checklist used for business plan review is also available. Please use the current template and the evaluation checklist to ensure all relevant information is included in the business plan.

Community Resolution Adopting the Approved Business Plan

Prior to an obligation of funding for construction, the community must issue a resolution adopting the business plan approved by VSW as well as water usage rates and other financial data indicated in the plan. Template for Community Resolution Adopting Business Plan and User Rates (9/29/2017).

Sustainability Plan for First Service Piped Water and Sewer

VSW and our federal funding partners are committed to ensuring that communities have the necessary capacity to safely and sustainably operate their utilities in the long term. To ensure the community is able to support the utilities in the long term, a Sustainability Plan (Plan) is required before CIP funding will be provided for first time piped water and sewer service projects. Utilities that do not collect sufficient revenue are unable to recruit and retain qualified managers and operators, nor are they able to proactively maintain and repair the systems to ensure that the systems meet or exceed their design life while providing safe sanitation. Additionally, when utility rates exceed that which local users can afford, many stop paying, resulting in loss of service for those users, and shifting additional burden to the remaining paying customers or causing the system to operate at a financial loss.

Each community’s Plan will be unique and specific to that community and community involvement in the development of the Plan is essential. At a minimum, the Plan must establish the anticipated annual Operations and Maintenance (O&M) costs of the utilities, including sufficient staffing for system operators and utility management to facilitate the implementation of necessary O&M, and the corresponding subsidies, revenues and user rates necessary to pay for those expenses. Additionally, the Plan must evaluate the affordability of those rates across all users.

VSW has developed a framework that considers the affordability of combined water and sewer user rates for the lowest two income quintiles within the community. This framework is one method of assessing affordability and communities are encouraged to use it in developing their Plan but other methods are available. From the perspective of the CIP funding agencies, user rates that do not exceed the upper limit of the medium burden range are considered sustainable as defined in the framework. However, user rates that fall within the low to medium burden in the VSW affordability framework are not the sole factor for achieving Plan approval. VSW affordability framework.

In some instances, communities may receive outside support to ensure sustainability. This can come in many forms, including financial contributions, technical assistance, participation in a collaborative or regional subsidy program, or other regional programs or partnerships. If the Plan relies on such partnerships, a resolution adopted by the local governing body accepting the support, as well as a written agreement signed by both parties, is required before the Plan will be approved. The agreement must define the support to be provided, as well as the timeframe during which it will be provided. In most instances, aspects of the pledged support will not be required for several years until project construction is complete. Therefore, the Plan must address how the committed resources will be managed in the interim period. Additionally, if the Plan incorporates co-management or co-operation of the utilities, the outside partner must demonstrate the technical, financial, and managerial capacity to provide the assistance defined in the agreement.

During the development of the Plan, communities are encouraged to work with the Rural Utility Business Advisor program, regional tribal health organizations, and other regional partners, such as Community Development Quota programs and local or regional businesses, to develop their Plan.

Multiple agencies are actively working to encourage development and funding of a long-term subsidy for rural sanitation operations and maintenance. If a subsidy is established, the need for sustainability plans will be reconsidered and guidance revised as appropriate.

Environmental Determination

Prior to obligation of funding for construction, a review and determination of environmental effects for the project will be completed according to policies and procedures established by the federal funding source. In addition, all pre-construction environmental requirements and stipulations will be completed prior to obligation of funding for construction. Any mitigation measures identified through the environmental review will be fully implemented.