Barrier to Debt Financing Finally Fixed

Policy Change by Government Accounting Standards Board Allows Debt Financing

Water conservation and green infrastructure projects can finally once again be debt financed with water utility capex funds. This is a major new development that should help reduce the rate shock that has accompanied these programs, since lately they have been only financed with annual utility operating funds. Because of this, utilities have been paying for the decades-long benefit of these programs in the first two years of their construction, hardly the way to properly finance a utility asset.

The ability to debt finance has now come about because of a change in policy at the Government Accounting Standards Board (GASB), which has decreed that these expenditures can now be listed on the water utility balance sheet as “regulatory assets” to be paid off with increases in rates over time to cover the capital expenditure. For an article about the issue, click here.