Planning for Sustainability
United States
Environmental Protection
Agency
  A Handbook for Water and Wastewater Utilities
February 2012
EPA-832-R-12-001

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Prepared for the U.S. Environmental Protection Agency under contract OW-08-EUM

          Prepared by Ross & Associates Environmental Consulting, Ltd.
                         1218 3rd Avenue, Suite 1207
                             Seattle, WA 98101
                              (206) 447-1805

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Table of Contents
Foreword
Introduction and Context	1
   Purpose and Intended Use of this Handbook	4
   Approach	4
   Providing a Solid Foundation for Planning through Asset Management and Community Engagement	7
   What Comes Next	9
Planning Element 1: Goal Setting—Establish Sustainability Goals that Reflect Utility and
Community Priorities	10
   Element  Description	10
   Current Planning Process	13
   Building Sustainability Considerations into Goal Setting	13
   Implementing These Steps on a Smaller Scale	18
   Key Diagnostic Questions	19
   Example  of Sustainability Planning in Practice: Portsmouth, New Hampshire Incorporates Water and
   Wastewater Decisions into Community-Wide Master Planning	20
Planning Element 2: Objectives and Strategies—Establish Objectives and Strategies for Each
Sustainability Goal	23
   Element  Description	23
   Current Planning Process	23
   Building Sustainability Considerations into Objective Setting	24
   Implementing These Steps on a Smaller Scale	30
   Key Diagnostic Questions	30
   Example  of Sustainability Planning in Practice: The Portland, Oregon Water Bureau Turns Goals from the
   Portland  Climate Action Plan into Specific Objectives	31
Planning Element 3: Alternatives Analysis—Analyze a Range of Alternatives Based on
Consistent Criteria	33
   Element  Description	33
   Current Planning Process	34
   Building Sustainability Considerations into Alternatives Analysis	34
   Implementing These Steps on a Smaller Scale	44
   Key Diagnostic Questions	44
   Example  of Sustainability Planning in Practice: Louisville, Kentucky Combined Sewer Overflow Project Selection
   Process Uses a Consistent Alternatives "Scoring" Approach	44
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Planning Element 4: Financial Strategy—Ensure that Investments are Sufficiently Funded,
Operated, Maintained, and Replaced over Time	47
   Element Description	47
   Current Planning Practice	47
   Building Sustainability Considerations into Financial Strategies	48
   Implementing These Steps on a Smaller Scale	58
   Key Diagnostic Questions	60
   Example of Sustainability Planning in Practice: Camden, New Jersey Invests in New Infrastructure and Benefits
   the Environment without Raising Rates	60
Conclusion	62
Appendix A: Useful Sustainability Planning Resources	63
Appendix B: Relationship Between Core Elements of Planning for Sustainability and
Effective Utility Management	69
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Foreword
Sustainable water infrastructure is vital to providing the American public with clean and safe water and helping to
ensure the environmental, economic, and social health of the nation's communities.  For the past several years,
the U.S. Environmental Protection Agency (EPA) has worked with states, industry,  and other stakeholders to help
water and wastewater utilities sustainably plan  and manage their water infrastructure  and adopt innovative
practices such as green infrastructure.

In  September 2010, EPA released the Clean Water and Safe Drinking Water Infrastructure Sustainability Policy
which described  EPA's overall vision and priorities for ensuring the long-term sustainability of water infrastructure
and communities throughout the nation. As the Policy was developed, stakeholders strongly emphasized the need
to  focus on the planning that takes place in the project development phase, before infrastructure solutions are
designed and implemented.

In  response, EPA is issuing Planning for Sustainability:  A Handbook for Water and Wastewater Utilities.   The
Handbook describes a number of steps  utilities can undertake to enhance their  existing  planning processes to
ensure that water infrastructure investments are cost-effective over their life-cycle, resource efficient, and support
other relevant community goals.  Developed after extensive consultation and input from utilities, states, and other
stakeholders, the Handbook is organized around a series of Core Elements, including:

    •   Setting utility sustainability goals and objectives that also support relevant  community goals;
    •   Analyzing a range of alternatives, including green infrastructure and other innovative approaches, based
        on full life-cycle costs; and
    •   Implementing a financial strategy, including adequate rate structures, to ensure the alternatives selected
        are sufficiently funded, operated, maintained, and replaced over time.

EPA believes that utilities which incorporate sustainability considerations into planning consistent with the steps in
this Handbook will realize many benefits because they will be able to better:

    •   Optimize environmental, economic, and social benefits by setting goals and selecting projects through a
        transparent and inclusive process with the community;
    •   Consistently assess a range of alternatives that address utility and community goals; and
    •   Enhance the long-term technical, financial, and managerial capacity of the utility.

Protecting our communities and our precious water resources by sustaining our Nation's  water infrastructure is a
critical  and ongoing challenge. This Handbook is designed to help address this challenge.
                                                                                        Nancy K. Stoner
                                                               Acting Assistant Administrator for Water
Planning for Sustainability

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Planning for Sustainability

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Introduction and  Context
Sustainable water infrastructure is critical to providing the American public with clean and safe water
and to help ensure the  social, environmental, and  economic sustainability of the communities that
water utilities serve.  For the past several years, the  U.S. Environmental Protection  Agency (EPA),
working with states and utilities, has been undertaking a number of programs to help ensure the long-
term sustainability of water infrastructure.  A key component of EPA's work has been to promote the
adoption of practices  by water and wastewater utilities that will help these utilities plan and  effectively
manage their infrastructure  and operations to ensure sustainability and develop and  maintain  the
necessary technical, financial, and managerial capacity to do this planning.

These efforts  act  in support of effective utility management based on  the Attributes  of  Effectively
Managed Utilities,1 and  include the Safe Drinking Water Act's  Capacity  Development Program,  and
training and technical  assistance on advanced asset management  and energy management.

In October 2010, EPA issued a Clean Water and Drinking Water Infrastructure Sustainability Policy in
accordance with directions set forth in the President's FY 2010 budget request to Congress.2 This Policy
describes  EPA's  overall vision and priorities for ensuring the  long-term sustainability of the  nation's
water infrastructure  and the communities  this infrastructure  serves.   The  policy  is  applicable to
infrastructure funded through the clean and safe drinking water State Revolving Loan Fund programs
(SRFs), traditional forms of community financing, or other appropriate financing mechanisms.

During public consultation as the Policy was being developed, stakeholders  emphasized that utility
infrastructure investments throughout the water sector could best be influenced through the planning
that takes place in the project development phase, before infrastructure solutions are selected  and
designed.  This planning  is relatively low  cost  and  can reduce  long-term infrastructure costs.  Such
planning helps ensure that funded projects are financially sustainable over the long term  and that they
support other relevant community sustainability goals.

Water utilities typically have  a long-term planning horizon and long-term  infrastructure operation  and
maintenance commitments.  The costs and potential benefits of investment decisions will be  realized
over a long  period  of time.  Accordingly,  EPA's Sustainability Policy calls on  drinking water  and
wastewater systems  to  undertake "robust and comprehensive"  planning  to  ensure that water
infrastructure investments are cost-effective over their lifecycle,  resource efficient, and consistent with
other relevant community goals.  Throughout the Policy, EPA emphasizes the  important relationship
between utility and community  sustainability. The core mission  of water sector utilities is to  provide
clean and  safe water in compliance with all applicable standards and requirements at an affordable price
in order protect public health and  enhance the economic, environmental, and social sustainability of
the communities they  serve.    Similarly,  a  community's  approach  to economic  development,
 See:
http://water.epa.gov/infrastructure/sustain/upload/2009 05 26 waterinfrastructures tools si watereum primerforeffectiveutilities.pdf
2 See: http://water.epa.gov/infrastructure/sustain/Clean-Water-and-Drinking-Water-lnfrastructure-Sustainabilitv-Policv.cfm
Planning for Sustainability                                                                        Page 1

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transportation,  housing,  and  other relevant areas  can also strongly influence the  management,
operations, and financial health of utility services—including the quality and quantity of available water,
and drinking and wastewater capacity and treatment needs.

This  handbook reflects a system-wide approach to planning that can drive a strategic shift from  a
project-by-project focus to one of utilities as systems. It can drive greater consideration of a utility's role
within the community or watershed and open up opportunities to achieve water quantity and  quality
objectives. Many water infrastructure decisions share interdependencies with housing, transportation,
and other infrastructure,  requiring collaboration  or pursuit of coordinated strategies to optimize these
investments. A system-wide approach  involves  utilities looking "beyond  the fence  line" to include
community institutions,  and the implementation of projects  outside the utility's direct span of control.
There is also an opportunity to  discuss collaborative partnerships with other municipal departments and
with neighboring utilities to share information and services, or to plan on a regional basis.

A number of utilities  are also facing challenging and sometimes  competing  infrastructure  priorities
driven by regulatory requirements. This handbook, supplemented by other more specific guidance, can
help utilities consider a range of potential solutions that enable them to efficiently address their most
pressing   public  health  and  welfare  issues.  Utilities  that  effectively   incorporate  sustainability
considerations into planning can expect to achieve a number of benefits, including:

    •  Minimizing costs by optimizing investment
        choices, operating  water  and wastewater      Reducing Costs through More Effective Water
        systems more efficiently, and pursuing cost-              Utility Energy Management
        effective  investment  and   management
                                                      Water utility planning that leads to adoption of energy
        strategies,   such   as  collaboration   and     efficient operational practices and technology can save
        partnering  with  neighboring  systems to     utilities money. Nationally, water and wastewater
        leverage resources and improve efficiency.       ener9V costs are often 3°-40% of a municipality's total
                                                      energy bill.  They are also often the largest controllable
        Maximizing   results   of   investments  to     cost for these utilities.
        ensure  a  continuing  source   of  water,
        treatment, and discharge capacity, as well as     ^he Hidden Valley Lake Community Service District in
                                                      California, for example, found that it could save
        financing capability.                            $70,000 per year in energy costs by pumping water
        Improving the ability to analyze  a range of     during off-peak times when rates were lower.
        alternatives, including (as appropriate) both
        traditional and non-traditional infrastructure
        alternatives, such as green  infrastructure and/or decentralized  systems, and selecting the
        option or mix of options that best meet the needs of the utility and the community it serves.
        Engendering greater support for the utility by recognizing community values and sustainability
        priorities.
        Ensuring that financial and revenue strategies are adequate to finance, operate, maintain, and
        replace  essential infrastructure throughout its operational life, while appropriately considering
        the needs of disadvantaged households.
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This handbook focuses on helping utilities to incorporate sustainability considerations into their existing
planning processes effectively.  It will assist them in selecting projects that ensure protection of public
health and water quality, support other relevant community goals, reflect full lifecycle costs, are based
on  a  robust  analysis  of alternatives  (including  conservation  or "green"  approaches),   and  are
implemented through an ongoing self-supporting financial strategy.  If utilities are fully undertaking the
actions described in this handbook, they will make decisions that are the most appropriate for the utility
and the community and optimize economic, environmental, and social sustainability.
                                                   Sustainability Planning and Regulatory Compliance

                                                  Compliance with regulatory requirements is a key focus of
                                                  water and wastewater utilities. By incorporating sustainability
                                                  considerations into planning, utilities can meet regulatory
                                                  requirements in ways that also contribute to utility and
                                                  community sustainability.  Examples (described further in this
                                                  handbook) include:
                                                  •   Lenexa, Kansas,  which met new Municipal Separate
                                                      Storm Sewer permit requirements by aligning stormwater
                                                      management strategy with community master planning
                                                      priorities through  a program that promotes economic
                                                      vitality, addresses environmental concerns, and meets
                                                      community needs (see page 12).
                                                  •   Louisville and Jefferson County (Kentucky) Municipal
                                                      Sewer District which evaluated and selected green
                                                      infrastructure strategies based on community input to
                                                      meet consent decree requirements for its sanitary and
                                                      combined sewer system (see page 44).
Some  utilities  and  communities  have  been
incorporating sustainability considerations into
their  planning  processes  but are  looking  for
ways  to  improve  and  refine  their current
efforts.  Others may choose to focus on how
such considerations can help to cost-effectively
meet    existing    regulatory    or    service
requirements. Regardless  of  motivation, the
steps described in this  handbook can help to
optimize    infrastructure    and    operational
investments.

Some  utilities may want to start with  small
steps toward incorporating sustainability into
their planning and operations and then pursue
larger commitments to sustainability over time.
To get started,  utility managers should create
time  to  discuss   and  seek  input  on  their
sustainability planning with their  boards,  commissions,  and other  leadership bodies.  Appendix A
includes resources for working with boards and commissions.

Utilities will want to improve their planning process continually over time by evaluating and refining
their  goals,  objectives, and  strategies.  Recognizing  that  effectively  incorporating sustainability
considerations into planning is a long-term process, utilities may also want to consider codifying a policy
that builds  sustainability considerations as outlined in this handbook into their planning processes. A
policy can provide for  long-term planning continuity and  drive continual improvement even as utility
leadership and oversight changes over time.  A policy can also convey the commitment to sustainability
in the  utility's  strategic   direction  and  day-to-day  operations  support   a  process  of  internal
communication  to board members and employees.
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Purpose and  Intended Use of this Handbook

This handbook is intended to provide information about how to enhance current planning processes by
building in sustainability considerations.  It is designed to be useful for various types and scales of
planning efforts, such as:

   •    Long-range integrated water resource planning
   •    Strategic planning
   •    Capital planning
   •    System-wide planning  to  meet  regulatory requirements (e.g., combined  sewer overflow
        upgrades and new stormwater permitting requirements)
   •    Specific infrastructure project planning (e.g., for repair, rehabilitation, or replacement of specific
        infrastructure)

A  plan's scope  and time  period  will  determine  the scale of  projects considered.  For example,
comprehensive, long-range planning will typically focus on large-scale infrastructure, watershed, and/or
aquifer  management  decisions,  while  more routine,  smaller scale  project planning may focus on
narrower investments in new or existing infrastructure components or operational changes.

In practice, the planning elements described in this handbook can enhance several planning processes at
a utility.  For example, a utility can establish goals and objectives reflecting sustainability considerations
in a strategic planning process with a 10- to 15-year time horizon, then use them to guide 5-Year Capital
Plan decisions.

Where applicable, utilities are also encouraged to engage with other municipal departments during the
planning process.  For example, there may not be enough sludge generated by the utility alone to justify
the purchase and operation of a digester,  but in combination with other organics collected by the solid
waste department, there may be enough energy generated to make the purchase.

This handbook is intended to be  used by  utilities of various sizes and levels of capability regardless of
their use of SRF or other federal  water  infrastructure funding.  EPA recognizes that some elements of
the handbook may pose challenges for  utilities delivering water and wastewater services at a smaller
scale, those that may have  limited  resources or capacity,  or those that have not adopted a formal
planning process. The handbook describes steps these utilities can undertake to enhance their planning.
It also includes examples and resources specifically for utilities implementing activities at a smaller scale.

Finally, EPA recognizes that some  period of testing and refinement of this handbook will be necessary to
improve the document over time.

Approach

Utility  planning  processes  typically involve a series  of  consistent and predictable activities  that
encompass identifying goals, setting objectives, assessing  alternatives,  and  developing  a  financial
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strategy.  In  many cases, this process is complemented  by ongoing asset management programs and
stakeholder involvement and communication.  Based on this typical planning process, this handbook
identifies four "core" elements where consistent and predictable practices can help utilities effectively
build sustainability considerations into their planning  processes.  The elements will  help  utilities set
sustainability  goals and associated  measurable objectives,    consider a  range  of  infrastructure
alternatives (including   various watershed, conservation,  or "green" alternatives), and  implement a
financial strategy to ensure  that the infrastructure alternatives selected  are  adequately financed,
maintained, and replaced overtime. The elements (along with any related measurable results) can also
be revisited on an ongoing basis to ensure continuing implementation and  improvement.

These core elements are:

1.  Goal-Setting:  Establish sustainability goals that reflect utility and community priorities.
2.  Objectives and Strategies: Establish explicit, measurable objectives for each sustainability goal and
    identify strategies for meeting the objectives.
3.  Alternatives  Analysis:  Based on sustainability  goals  and objectives, set explicit and  consistent
    evaluation criteria to analyze a range of infrastructure alternatives.
4.  Financial Strategy:   Implement a  financial strategy  including  adequate revenues  so that new
    infrastructure and operational investments—as well as the overall system—are sufficiently funded,
    operated, maintained,  and replaced  over time on  a  full lifecycle  cost basis,  with appropriate
    considerations for disadvantaged households.
These elements are intended to build on each
other as utilities go through a specific planning          Planning Terms as Used in this Handbook
process or they may be inter-related parts  of     Goa|s: Broad, qualitative statements of what the utility hopes
separate planning  processes.   Some utilities,     to achieve.
however, may  be  adequately implementing     Objectives: Specific, measurable statements of what will be
one or more of the elements and  therefore     done to achieve goals within a particular time frame.
choose to focus greater  attention  on other     Strategies: General approaches or methods for achieving
elements as  a  means  of  enhancing  their     objectives and resolving specific issues. Strategies speak to
                                                 the question How will we go about accomplishing our
Planning-                                        objectives?"
For  each element, this  handbook  describes     Alternatives: Within a strategy, specific infrastructure
                                                 investments or operational changes for achieving objectives.
specific  steps  to enhance  utilities' planning
                                 ,   ,  ,      ,     Criteria:  Measures or considerations used to
processes  to  aid  effective   and   balanced     evaluate alternatives.
consideration of  sustainability in the selection
of infrastructure projects.  The steps for each
element, along  with  brief case examples and call-out boxes, also describe suggested practices from
utilities that have incorporated  sustainability considerations  into their planning.  Each  element also
includes diagnostic questions for gauging how thoroughly each element is addressed.

Figure 1 summarizes the  elements  and  illustrates  how two sustainability goals—increasing energy
efficiency and supporting infrastructure in existing communities—could be addressed in the process.
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                                Figure 1: Core Planning Elements for Sustainability
     1. Goal-Setting
   Consider goals that
    reflect utility and
       community
      sustainability
        priorities
Energy Use Example...
   Sustainability Goal:
 Utility seeks to reduce its
  energy use consistent
  with the community's
energy efficiency program
    2. Objectives and
        Strategies
   Establish objectives
    and strategies for
   each sustainability
          goal
 Objective and Strategies:
  Utility sets objective of
  reducing energy use by
25% in 5 years; it conducts
    an energy audit to
  determine its baseline
 energy use and identifies
potential projects to meet
       its objective
     3. Alternatives
        Analysis
        Based on
      sustainability
     objectives, set
       explicit and
       consistent
  evaluation criteria to
   analyze a range of
   alternatives using.
  Alternatives Analysis:
   Utility evaluates all
 projects, in part, on their
 relative lifecycle energy
  efficiency costs (e.g.,
   installation of high
  efficiency heat pumps)
and their relative ability to
 meet the 25% energy use
   reduction objective
r
4. Financial Strategy
 Develop a financial
 strategy reflecting
 full lifecycle costs
   and adequate
 revenues to ensure
    the system is
 sufficiently funded,
  maintained, and
 replaced over time.
     Financial Strategy:
     Utility revenue and
     borrowing strategy
    ensures sustainable
 financing of new projects,
 taking advantage of lower
        energy costs
Supporting Infrastructure in
   Sustainability Goal:
  Utility aligns itself with
   community goal to
   accommodate most
   expected growth by
  revitalizing urban areas
 rather than through new
      development
Existing Communities Example...
 Objective and Strategies:      Alternatives Analysis:
  Utility sets objective to
  serve 75% of expected
 growth within its existing
   service boundary; it
   analyzes its current
 capacity to accommodate
  new growth  within its
 existing service area and
  identifies strategies for
    increasing capacity
   Utility evaluates all
 projects, in part, on the
   extent to which they
  increase the ability to
 serve growth within the
 service boundary (e.g.,
projects providing service
   near planned public
     transit services)
     Financial Strategy:
     Utility revenue and
     borrowing strategy
    ensures sustainable
 financing of new projects,
    taking advantage of
  avoided costs of service
 boundary expansion (e.g.,
   by ensuring that costs
  associated with growth
   outside of the existing
   service boundaries are
     paid by new users)
Planning for Sustainability
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Providing a Solid Foundation for Planning through Asset

Management and Community Engagement

Throughout  the  planning  process,  two  aspects  of utility  management  and  operations—asset
management and ongoing engagement with communities and customers—strengthen and reinforce the
four elements.
Asset Management

An   ongoing  asset  management  program  that
includes detailed  information  on  what assets a
utility has, how long they will last, and how much it
will  cost to replace them,  is essential to effective
utility management. An infrastructure  inventory;
condition  assessment;   risk-based  schedule   for
maintenance,    repair,    rehabilitation,     and
replacement of  infrastructure; and financial plan
are  specific parts of a utility's asset  management
strategy.        Asset    management    supports
sustainability planning in many ways, including:

    •   Providing  infrastructure   capacity   and
        condition information;
    •   Generating   options   for   the   repair,
        rehabilitation, and  replacement  of existing
        assets; and
    •   Providing information on full lifecycle costs
        of existing assets.


Beyond implementing asset management, utilities
are also encouraged to  perform an assessment of
their  operations   using  the   Effective   Utility
Management Primer  developed  by  EPA and  six
national water  sector associations.3   The  Primer
helps utilities to assess their operations based on a
series of Attributes of Effectively Managed Utilities
and  to identify specific  actions they can take to
improve their performance (see call-out box).
         Effective Utility Management

Effective planning is essential for an effectively
managed utility. In 2007, EPA and six national water
associations entered into a historic agreement to
promote effective utility management based on a series
of Attributes of Effectively Managed Utilities and Keys to
Management Success. The Attributes describe a range
of outcomes utilities should strive to achieve across all
facets of their operations—from infrastructure and
finances to building stakeholder understanding and
support. The Keys to Management Success describe a
series of frequently used management approaches that
can help utilities achieve the outcomes called for in the
Attributes.

The EUM partnering organizations have also developed
a Primer to help utilities assess their operations and
identify actions to improve their performance.  Utilities
are encouraged to learn more about the Effective Utility
Management Initiative and use the Primer to do an
assessment of their operations by going to
http://www.watereum.org/.

The planning steps described in this handbook can help
utilities manage their infrastructure and operations and
achieve the outcomes embodied in the Attributes. In
addition, two of the Keys to Management Success-
Strategic Business Planning and using a Plan-Do-
Check-Act management systems approach—are
particularly relevant to implementing this handbook.
Appendix B contains a description of the relationship
between the four elements described in this handbook
and in the Keys to Management Success and Attributes
of Effectively Managed Utilities.
 The Primer and other information about Effective Utility Management can be found at:
http://water.epa.gov/infrastructure/sustain/upload/2009 05 26 waterinfrastructures tools si watereum primerforeffectiveutilities.pdf
Planning for Sustainability
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Guidance and other resources on asset management and effective utility management are included in
Appendix A.

Community Engagement

Ongoing community engagement—including in-person involvement and outreach and  communications
with communities—is important for establishing and maintaining community understanding of the value
of utility services  and the resources needed to deliver them.   Ideally, utilities undertake  long-term
planning in the context of an ongoing relationship and active engagement with their communities and
customers.  In the specific planning context, community input about sustainability goals and values can
inform utility service levels, reliability standards, revenue strategy, and other considerations.
Communication and  transparency throughout the
planning process can lead to greater support  for       Building Customer Appreciation for Water
utility decisions by increasing public understanding        Infrastructure Value in Rural New Mexico
of the  value  of  water  infrastructure  and  utility
             ..  ., ,.                   ,           .       A small water and wastewater utility (approximately 50
services.     Building  customer  and   community     connections) serving a community |ocated near Ga||Up,
appreciation  of infrastructure investment  value is     New Mexico, used an asset management process to
likely to  require  proactive,  ongoing  stakeholder     prepare infrastructure and financial plans. The plans
             ...          ._          ,    ,           addressed infrastructure reaching the end of its useful
education and  involvement.   For example,  changes     |ife in 10years. Replacement would require rate
to utility rates and fees typically require the approval     increases. Through transparency with the public using
of a  governing  body (e.g., utility board, municipal or     information from the asset management process, the
             ,.    ,     ,,.,,.,     ,    ,         ,     utility made an effective case for infrastructure
county council) and can be difficult ,n the absence of     investment and general community support for a
reasonable customer support.  Utilities  that have     $6/month rate increase.
established  and  clearly communicated  a case  for
infrastructure  investment value and that have a
reputation for  effective management and transparency are more likely to garner support for needed
rate  and fee increases.

Ongoing community engagement can support the planning process by:

   •   Providing necessary input early in the process;
   •   Providing understanding of community goals and values (e.g., for green  space or economic
        redevelopment) to guide the utilities' strategic direction and the  identification  and  weighting
        alternatives assessment criteria;
   •   Generating  specific ideas about strategies to meet goals,  which  may be also considered as part
        of the alternatives analysis where specific projects are selected; and
   •   Building  a  base  of community understanding and  support  for  selecting  service  levels,
        establishing reliability standards, and meeting revenue needs through rate  changes or  other
        mechanisms.
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Recording and tracking issues raised by community members should be carefully undertaken and can
help utilities be transparent and responsive.  Appendix A includes several guides, tools, and case studies
with other strategies for engaging with the community.

What Comes Next

The remaining chapters focus on the four planning elements. Each chapter includes:

    •   A description of the element and how it enhances existing planning approaches;
    •   Key steps to implement the element;
    •   Approaches to implement the element on a smaller scale;
    •   Diagnostic questions for gauging how thoroughly an element has been addressed; and
    •   One or more illustrative examples
Planning for Sustainability                                                                    Page 9

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Planning Element 1:  Goal Setting—Establish
Sustainability Goals that Reflect Utility and
Community Priorities
Element Description

Utilities should consider and  set  sustainability  goals to  provide  a foundation for incorporating
sustainability considerations throughout  the  planning process.  These goals should  reflect internal
assessment of  sustainability priorities as well  as community sustainability priorities identified through
information gathering and consultation with local institutions and  stakeholders.   Utilities  are also
encouraged to engage other municipal departments, as appropriate.  For example, there  may not be
enough biosolids generated by the utility to cost-effectively operate a  digester, but in combination with
organics collected by the solid waste department, there may be enough energy generated to justify a
major equipment purchase.

Ideally, utility consultation with communities
and  customers  about  sustainability  goals
occurs as part  of ongoing engagement  about
services,  key decisions, and revenue needs.
Information  gathering  about   community
sustainability  priorities,  however,  can  take
many  forms,   from   review   of   existing
community plans  or other documents  to
direct    consultation   with    community
representatives  (e.g.,   planning   agencies,
elected officials, and stakeholder groups).
   Internal and Community-Wide Considerations for
          Developing Sustainability Goals

Sustainability goals will be strongly influenced by several factors
internal to the utility, including:
       The utility's mission and strategic direction
       Regulatory and legal requirements
       An assessment of vulnerability related to sustaining
       operations and financing
       Customer expectations about services and rates
       Other considerations related to the effective operation
       of the utility
Sustainability goals  are critical for guiding
utilities as they move through the other three
elements to set measurable objectives and
strategies, analyze alternatives, and develop a
financial   strategy   to   support   chosen
investments.
Sustainability goals should also support, where feasible, other
community sustainability priorities related to economic
development, quality of life, and environmental quality.
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                                         Potential Sustainability Goals
  This list describes a range of sustainability goals along with examples of utility approaches to address them. The examples
  are illustrative only.  More information on how to use the goals to make appropriate infrastructure and operational decisions
  is contained in the remainder of the handbook.

  Improve compliance
      •   For example, establish collaborative partnerships with neighboring utilities to increase or maintain technical,
          managerial, or financial capacity or to share information and expertise.
  Reduce energy cost
      •   For example, invest in more energy efficient equipment or explore operational changes that can enhance energy
          optimization (such as pumping at night when the rate is lower).
  Reduce overall infrastructure costs to communities
      •   For example, partner with other community agencies to coordinate infrastructure projects such as road repairs with
          lead service line replacement and installation  of rain gardens.
  Extend the projected adequacy of current water supplies
      •   For example, implement consumer water conservation programs, implement water metering, fix distribution system
          leaks, or make use of reclaimed water.
  Address wet weather impacts
      •   For example, implement a mix of non-traditional infrastructure alternatives such as green infrastructure solutions
          with integrated stormwater and combined sewer overflow control.
  Preserve critical ecological areas in the community
      •   For example, adopt management programs for septic systems to reduce nutrient loadings to lakes or employ
          "green" treatment chemicals.
  Improve the economic vitality of the existing community
      •   For example, target water infrastructure projects to support existing community infrastructure and encourage
          redevelopment.
  Enhance community livability.
      •   For example, incorporate green space or recreational opportunities into projects.
  Reduce long-term system operational costs
      •   For example, use natural treatment systems, such as functioning wetlands, to reduce the input of energy and
          chemicals for treatment or re-use water treatment solids.
  Improve operational resilience
      •   For example, understand operational, financial, and potential climate vulnerabilities and incorporate them into
          alternatives analysis as part of a broader risk  management strategy.
  Reduce vulnerability to water supply disruption or contamination
      •   For example, conduct real-time water quality monitoring,  install isolation shutoff values, or provide connections to
          alternative water supplies.
  Ensure a sustainable workforce
      •   For example, implement steps to ensure a safe workplace, knowledge retention, and incorporating new knowledge
          through training.
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         Lenexa, Kansas: Aligning Community and Utility Sustainability Goals to Ensure Compliance

  Lenexa, Kansas is a Kansas City suburb of 45,000 people. It's "Rain to Recreation" program illustrates how a utility can meet
  regulatory requirements by aligning its programs with community sustainability goals.

  In the late 1990s, to respond to rapid population growth, Lenexa undertook a citizen-led community planning process that
  resulted in a community strategic visioning report, "Vision 2020" (released in 1997).  The community's vision statement was:

           "Showing commitment to a superior quality of life and respect for the natural environment, Lenexa will
           provide an atmosphere where people desire to live,  work, and play. Our unique villages and parklands,
           residential, commercial and industrial developments will reflect a community in which the heritage of the
           past and the pride of the present are preserved for citizens of the future."

  In Vision 2020, the community showed a strong interest in stormwater management to reduce flooding, improve water
  quality, enhance recreation, and preserve open space in the community.  To address this community priority, the city
  developed an integrated Stormwater and Watershed Management Master Plan in 2001.  This plan became the foundation
  for the community's "Rain to Recreation" program.

  In 2004, Lenexa—along with many other cities of similar size around the country—faced new Municipal Separate Storm
  Sewer System (MS4) permit requirements. To comply with the permit,  the city strengthened Rain to Recreation through a
  local ordinance and design manual that favored stormwater management practices that infiltrated and reused runoff and
  facilitated evapotranspiration.

  With its origins in community visioning and in response to new regulatory requirements, Rain to Recreation now includes
  both regulatory and non-regulatory components, including:

       •    Regulatory requirements for stormwater management practices at new and redeveloped properties, such as rain
           gardens, bioswales, and other forms of green infrastructure in private development projects
       •    Major capital projects, such as new stormwater facilities and infrastructure repair funded by a 1/8 cent sales tax
           levy
       •    Land acquisition to provide flood mitigation, stream protection, water quality improvements, and recreational
           amenities

  Funding for Rain to Recreation is provided by a sales tax levy, stormwater charges based on runoff surface area on land
  parcels, one-time capital improvement fees for new developments, state and federal grants for water and transportation
  infrastructure, and permitting fees charged to developers. Overall, the program has allowed the utility and community to
  comply with regulatory requirements, protect natural resource areas in the watershed, create greenways along  streams,  and
  implement green  infrastructure practices.  Functional and aesthetically-pleasing green infrastructure projects resulting from
  the program complement neighborhood revitalization plans and generate multiple benefits for the environment and
  community.

  Additional reading:
       •    City of Lenexa's Rain to Recreation Web site at www.raintorecreation.org
       •    Map of Lenexa's green infrastructure: http://maps.lenexa.com/greeninfrastructure/greeninfrastructuretour.html
       •    EPA, Green Infrastructure Case Studies:
           http://cfpub.epa.gov/npdes/greeninfrastructure/gicasestudies specific.cfm?case id=75
       •    City of Lenexa, "Rain to Recreation:  Making the Case for a Stormwater Capital Recovery Fee": http://www.environmental-
           expert.com/Files%5C5306%5Carticles%5C11741 %5C299.pdf
       •    City of Lenexa, Vision 2020: http://lenexa.com/main/pdfsA/ision2020.pdf
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Current Planning Process

In their existing planning processes, utilities often set goals based on community planning information
that defines the amount,  type, and  location  of future demand for the utilities'  services.   Relevant
information often includes  population  growth  projections,  the location  and  nature  of  planned
development,  and  zoning changes.  This  information  typically  flows  one-way  from  community
development plans, master plans, and growth management plans to the water utility.  Water sector
utilities are then  in a position to describe how they will be able to  help address other community
priorities in the future.   However,  utilities typically have a  limited role  in helping  communities
understand the expected impacts of planned growth, such as infrastructure needs and associated costs.
For example, projections  of the lifecycle infrastructure costs of accommodating planned growth can
allow for better informed community decisions.

Building Sustainability Considerations into Goal Setting

For purposes of this handbook, setting sustainability goals at the outset of the planning process should
involve information gathering and, where  feasible, consultation with  community members  or other
planning institutions about community sustainability  priorities.  This  activity can  take  several forms
depending  on the utility's capabilities, needs, and relationship to the community.  Figure 2 illustrates a
continuum  of different types of up-front information  gathering and/or consultation between  a utility
and the community.

                Figure 2: Continuum of Utility-Community Information Gathering and Consultation
                Utility gathers
              information from
              existingdocuments
              about community
                sustainability
                  priorities
 Utility actively engages
 with community about
community sustainability
      priorities
 Utility partners with
 community to jointly
     formulate
sustainability priorities
The left side of the continuum represents the utility gathering information from existing community
planning documents or key individuals (such as the town manager or town clerk) about sustainability
priorities related to areas such as  transportation, recreation, and housing. Although this approach may
be appropriate for  some  utilities and  communities (particularly in cases where  utility  capacity or
resources are constrained), most  utilities will find significant value added from more active community
consultation.

The  center  of the  continuum  represents more  active engagement  between  the utility  and the
community to  discuss community sustainability priorities.  This  engagement can be through meetings
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with  planning  officials,  involvement  in  ongoing  community  forums  about  desired  growth  and
development, or convening stakeholders representing community organizations to better understand
their priorities.

The  right hand  side  of  the continuum  represents active  partnership between  the  utility and the
community to jointly formulate sustainability goals that both the  utility and the community can actively
pursue. Partnerships, either formal or informal, allow the utility and community not just to understand
each others'  priorities but  also to enable each others' activities.  For example, the water utility that
serves Hidden Valley Lake, California worked over time to enhance drinking water source protection. It
ultimately influenced  the nature and location of development through a role  in land use permitting
under the direction of the local planning department (see call out  box later in this section).

Any  of the approaches  along this continuum  can  be used depending on  the utility's  capacity and
resources, as well  as local conditions.  Regardless of the approach taken, the following steps can  help
utilities effectively engage in consultation at the beginning of the  planning process and set sustainability
goals.

Step 1. Identify sustainability priorities and potential opportunities for the utility

Utilities first  consider their  own sustainability priorities  by internally  assessing  infrastructure and
operations that may provide opportunities for increased sustainability and improved performance.  For
example,  utilities  may want to  assess  operations  using  the Effective Utility Management  Primer
described in the Introduction to this handbook.  Similarly, many aspects of a utility's asset  management
plan can  provide useful information for identifying sustainability  opportunities.   A  vulnerability
assessment can  pinpoint opportunities for improved system resilience.   It can also identify gaps in
technical, managerial, and financial capacity that, when address, can help utilities achieve  sustainability
goals. For many utilities,  sustainability priorities may focus almost exclusively on strategies for meeting
regulatory requirements  or approaches for sustaining existing infrastructure and operations as opposed
to new projects.

Although  Step  1  is  internally  focused,  it can  be  informed by ongoing customer and community
relationships  and their expectations about the role and operation of the utility. It can also be informed
by the range of incentives  utilities have to become more sustainable, including  cost savings, financial
benefits, and  alignment with the utilities' traditional mission or sustainability policies.
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Step 2. Identify community
sustainability priorities

As  a second step, utilities should gather
information   to   understand    broader
community    sustainability     priorities.
Utilities can utilize planning documents or
ongoing planning efforts to gather relevant
community      sustainability     priority
information, such  as transportation  plans,
climate action plans, watershed  plans, or
community "vision" documents.

As part of considering these plans, utilities
should   develop  familiarity  with   the
community-wide  priorities   these  plans
seek to address.    Furthermore, utilities
should  improve  understanding  of  the
institutions  (and  key contact  personnel)
responsible      for      planning,     and
opportunities for  involvement  in ongoing
planning   processes   (e.g.,   as   part  of
steering  committees, or  through  direct
agency-to-agency dialogue).

Step 3.  Engage the community about
its sustainability priorities

In many  cases,  utilities  will find  value  in
pursuing     active    engagement     or
partnerships with  the community.  These
utilities will need to identify  forums or
other opportunities  for  consultation with
community   planning   institutions   or
stakeholders.  (Some utilities with limited
resources  or capacity may not be able to engage the community actively but can still gather available
information as described in Step  2).   In some cases, effective engagement can also be accomplished
through discussions with key individuals, such as the town manager or clerk.

Active  community  engagement  seeks  to  identify  sustainability  priorities,  describe  how  water
infrastructure decisions affect a community's ability to achieve priorities, and provide an opportunity to
discuss how the  utility and community can align sustainability efforts. These discussions should address
what communities are willing  and  able  to afford if  new infrastructure is needed or if other costs
     Approaches for Involving Stakeholders in Planning

A variety of approaches for involving stakeholders in planning can
be used in various stages of the planning process:
    •   Using existing boards or other governing bodies to
        provide stakeholder perspectives or as a means for
        collecting information about community priorities and
        communicating about utility activities
    •   Establishing and maintaining an informal network of
        community opinion leaders periodically consulted on
        community priorities or utility sustainability objectives
    •   Ongoing communications through websites, press
        releases, and other channels to keep the broad
        community informed about the utility planning process
        and decisions
    •   Public meetings to  inform the community about key
        milestones in the planning process and solicit feedback
        on key decisions
    •   Focus groups, surveys, or related strategies for soliciting
        information about community goals, priorities, values,
        and ideas
    •   A stakeholder steering committee to advise throughout
        the process on key planning decisions, such as setting
        long-range goals and establishing project selection
        criteria and/or weighting schemes
To select an approach, assess how much stakeholder input and
support is needed to make decisions consistent with both utility
and community priorities. Consider:
    •   What are the potential rate implications, including for
        disadvantaged households?
    •   What is the potential for community disruption?
    •   What is the overall  cost and duration of the effort?
    •   Do we need consensus for a timely and effective
        implementation?

The answers will help utilities determine what stakeholders to
involve, how often, over what period of time, and what outcome is
needed.  This information will inform the time and other resources
for stakeholder engagement.
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necessitate increases of rates or fees. Such
discussions help set realistic expectations
about levels of  service and  community
costs,  and  inform   the   process   for
evaluating   alternatives   (described   in
Element 3).

Consulting  stakeholder  groups can help
build support for utility goals and specific
infrastructure  decisions.    For  example,
utilities considering watershed protection
goals may benefit from consultation with
local  land  use  agencies,   private  land
owners,   developers,  or local  watershed
groups.     Among   other   things,  these
stakeholders may see  utility vulnerabilities
not identified by internal personnel.

As part of the consultation process, utilities
may  want to  consult  with  neighboring
utilities    to    understand    how   peer
institutions are  addressing sustainability.
This  consultation  can   also  create  an
opportunity    to    explore    potential
collaboration opportunities and partnering
relationships.

Other  important   stakeholders  include
economic development, transportation, or
other agencies  that  set  local long-term
growth and  development  strategies. The forum and nature of discussions on these topics can vary
widely depending on institutional context.   For example, a utility  housed  in a  public works or other
department may have consultation with another department facilitated through the  leadership of the
mayor, city manager, or city council and  governed by city-wide policies. In contrast, an independent
enterprise utility seeking to consult with municipal  or county planners may  need  to  establish new
institutional relationships, such as a formal  or informal steering committee  made  up of the senior
management from the relevant agencies.

Consultation opportunities are as varied  as the communities  in which they take  place, including the
following examples:
    Hidden Valley Lake, California:  Encouraging the
    Community to Engage with Water Utilities about
                      Planning

For certain sustainability goals—such as source water protection-
utilities will need to work with other community institutions that
guide local land use and economic development. Water utility
experience in Hidden Valley Lake, California illustrates how utilities
and communities need to work together on sustainability goals—in
this case by developing community planner appreciation for what
utilities have to say about sustainable growth and development.
Hidden Valley Lake is a rural community of around 4,000 people in
northern California.  The Hidden Valley Lake Community Service
District (CSD) provides drinking water to around 1,500 lots from
three high quality domestic water supply wells. In the early 1990s,
CSD sought a greater role in commenting on development permits
issued by the county planning department. CSD sought to avoid
development that might harm groundwater resources and
potentially lead to increased treatment costs.
The county planning department was initially reluctant to increase
CSD's role in its  existing permitting process. By working with the
local County Board of Supervisors and other means, CSD
eventually obtained a role in commenting on permits on a project-
by-project basis. CSD recognized, however, that commenting on
individual projects was insufficient to protect the area's water
resources over the long term. With continued support from the
County Board of Supervisors, CSD moved from commenting on
individual permits to playing a deeper role in county planning—
both on a working level and as a "critical stakeholder" in the
county's Master  Plan development. Today, CSD maintains a
productive working relationship with county planners and has a
strong voice in how the community grows.
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                                                       Cross-sector Coordination for Sustainability at
                                                           the Federal Level: The HUD-DOT-EPA
                                                          Partnership on Sustainable Communities

                                                       At the federal level, the Departments of Housing and
                                                       Urban Development (HUD) and Transportation (DOT),
                                                       along with EPA, have joined together through the
                                                       HUD-DOT-EPA Partnership on Sustainable
                                                       Communities to help improve access to affordable
                                                       housing, more transportation options, and lower
                                                       transportation costs while protecting the environment in
                                                       communities nationwide.  Through a set of guiding
                                                       liability principles and a partnership agreement, this
                                                       partnership will coordinate federal housing,
                                                       transportation, and other infrastructure investments to
                                                       protect the environment, promote equitable
                                                       development, and help address the challenges of
                                                       climate change. One goal of the federal partnership is
                                                       to have this kind of cross-sector coordination occur at
                                                       all levels of government. More information about this
                                                       Partnership is available at
                                                       http://www.epa.gov/smartgrowth/partnership/.
Participating  in  direct  discussions  with
other planning institutions and community
bodies  early in their planning  processes.
Utilities  can  go  directly to  other  local
planning institutions to discuss sustainability
priorities.    In  some  cases,  community
institutions,  such  as county councils or city
managers,   may  need   to   support  and
encourage  the consultation, and  utilities
may  need  to   build  relationships  with
planning  agencies and  encourage support
for collaboration over time.
Getting involved  with existing community-
wide planning efforts. Where communities
are  already involved  in  community-wide
planning or "visioning,"  utilities can play an
active  and  important  role  in  helping to
define  community  goals and  the  actions
supporting them.   For example, the city of
Portsmouth, New Hampshire undertook a  master planning process  (culminating in a plan in
2004) that involved  many citizens and community institutions in discussions to define a future
vision for the city. The role of water infrastructure was an integral part of the plan, which called
out  as a  key priority "water and sewer policies and infrastructure [that] make use of best
practices  in environmental  protection and  provide  incentives for  conservation."    The
development of the community's Master Plan was influenced by utilities' existing  water and
wastewater plans. The Master Plan then drove subsequent infrastructure  decisions by the local
utilities, including  construction of a LEED-certified water treatment plant (see case study at the
end of this section for more information on the Portsmouth, New Hampshire case).
Aligning utility planning  with existing community plans.   If community plans already exist,
utilities can incorporate the plans' goals into their own  planning efforts.  This may not involve
active  utility participation in community  planning itself,  but rather a  strategic decision  to
incorporate community  goals into the utility's own  planning efforts.  For example,  the City of
Portland,  Oregon  Water Bureau  aligned with  Portland's Climate Action Plan by  setting specific
objectives in its Strategic  Plan to reduce carbon  emissions.  It then identified (and monitored)
specific carbon reduction  actions through the Water Bureau's Sustainability Action  Plan.  (See
more about the Portland case at the end of the next section.)
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Convening a stakeholder process for water planning. Absent ongoing processes, utilities may need to
take the initiative to convene and consult directly with members of the community.  For example, Quay
County, New Mexico convened a stakeholder steering committee representing the rural county's 10,000
residents to outline a vision and goals and to guide development of its 40-year water plan. Similarly, the
Envision  Utah program, a community-wide conversation about the future of the state, outlined a
"Community  Design  Workshop"  process  providing  communities  with  a water  conservation  plan
development blueprint involving "teams of citizens representing a cross-section of local interests."4

Step 4. Identify and document sustainability goals

Regardless of the up-front consultation approach, the utility should document and make available a
description of its process  and identify the sustainability goals that emerged from the consultation.
These goals will guide  development of the remaining elements, including decisions about infrastructure
investments and other potential utility operational changes. Documentation can also help communicate
sustainability goals to boards, other oversight bodies, and utility employees.

As utilities develop goals, maintaining regular communication with stakeholders and relevant regulatory
agencies will help lay the foundation  for (and engender support for) subsequent decisions about specific
strategies and investment alternatives. A transparent decision-making process will help utilities gain the
support of the community.

Implementing  These Steps on a Smaller Scale

EPA's Strategic Planning: A Handbook for Small Water Systems describes a process for small systems to
identify goals as a component of a strategic planning  process and to carry those goals  through to
implementation.5 The document describes the development of a "strategic roadmap" consisting of the
utilities'  ideals,  goals,  and  values.   Utilities  implementing on   a  smaller  scale  can  incorporate
sustainability considerations  into the development of this type of strategic roadmap and inform the
development of  sustainability goals  through  information gathering and  consultation  with  the
community.

In the goal setting process, utilities implementing on a smaller scale may not have the staff or funding
resources to  consult  actively  with  other  community institutions  or stakeholders through  a  formal
process.  These utilities should consider employing less resource-intensive approaches to identifying
community  sustainability  priorities.   These  approaches  include gathering information  through
documents, such as community comprehensive plans, or holding discussions with key  individuals in the
community with access to this information,  such as the town manager or clerk.

Depending on resources and capacity,  some utilities may only be able to pursue Steps 1 and  2. These
utilities may also find that Steps 1 and 2 are sufficient to understand community priorities.
 See: (http://www.envisionutah.org/eu qgs waterconserv.html) (call out pp. 119)
5 See: http://www.epa.gov/ogwdw/smallsystems/pdfs/guide smallsystems stratplan.pdf
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           Neighbors Helping Neighbors:  Regional Cooperation and Partnerships in New Mexico

  New Mexico covers over 121,000 square miles and has a population of slightly more than two million people. A majority of
  the population is located within the metro areas of Albuquerque, Las Cruces, and Santa Fe.  The state is served by over 600
  community water systems, of which 93% serve fewer than 10,000 people. While the smaller community water systems must
  be resourceful to meet their own needs, many simply do not have the resources and the talent pool to do everything—so
  neighbors help neighbors.

  Regionalization is an active concept in New Mexico, and there is a concerted effort by public officials to encourage physically
  connected regional systems ... but regionalization does not always mean connected systems, nor does it have to be nudged
  by governmental action in all cases.

  In the mountains east of Albuquerque, within a 600 square mile area, there are 19 community water systems (CWS)  with
  various organizational forms, including non-profit privately-owned cooperatives, private for-profit companies and
  corporations, public mutual domestic associations—and four community sewer associations. To ensure high quality and
  efficient service for their customers, these systems work together in a variety of ways pursuant to both written and unwritten
  agreements.

      •   The largest CWS provides a certified water operator (under contract) to three much smaller CWSs and certified
          wastewater expertise for two community sewer associations serving less than 100 homes each.  It frequently helps
          troubleshoot problems and provide managerial expertise and regulatory  knowledge to the smallest entities  at no
          charge.
      •   The owner of a private for-profit CWS also owns a construction company and provides construction and repair
          crews for its neighbors below its normal rates.
      •   A private for-profit CWS provides a certified wastewater operator, under contract, to a public mutual domestic
          sewer association.
      •   Some of the smaller systems share billing and work order systems, share expenses for a back hoe and operator,
          and assist one another in repairing damage.
      •   As drought reduces the availability of ground water, systems within proximity of each other have created
          interconnections to provide temporary assistance to resolve a water supply challenge of their  neighbors—and in
          many cases, that water can flow in both directions.

  Neighbors in rural communities help each other; the same is true for the CWSs and sewer associations that serve them. In
  rural New Mexico, necessity is the mother of invention.
 In most cases, utilities in smaller communities will find it beneficial to  pursue active engagement with
the community, with community planning institutions, or with stakeholders. Even smaller communities
will occasionally need to garner community support for critical decisions. Community-wide planning has
multiple benefits in this context.  For example, utility managers in the City of Live Oak,  Florida worked
with the local water management district to develop plans for wastewater reuse before any funding was
available to do so.  When state legislation established a funding source for reuse,  Live Oak was well-
positioned to receive the money, which funded a significant amount of its reuse infrastructure.6


Key Diagnostic Questions

Utility managers can use the following questions to evaluate their implementation of this element:
5 Bob Farley, 7/1/10
Planning for Sustainability                                                                              Page 19

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    •   What was the internal process your utility undertook to identify its sustainability opportunities?
       What opportunities did the utility identify?
    •   What community plans or information sources did your utility consult to identify community
       sustainability priorities?
    •   If applicable,  how did  your utility consult with  other  community members  or community
       planning organizations  about utility and community sustainability  priorities and the relationship
       between them?
    •   If applicable, how did your utility consult with neighboring utilities about potential partnership
       opportunities to share information or services?
    •   As a result of your own internal discussions and upfront information gathering and consultation
       with the community, what sustainability goals did your utility set and why?
    •   How  were your utility's sustainability goals documented and communicated  internally and
       externally?
    •   How  will the community and others consulted be kept informed of subsequent decisions and
       developments?

Example of Sustainability Planning  in Practice:  Portsmouth, New
Hampshire  Incorporates Water and  Wastewater Decisions into
Community-Wide Master Planning

Portsmouth,  New Hampshire, a community of approximately 20,000 people, provides  an example of
how utility planning informed community Master Plan development.  It also illustrates how utilities can
help implement parts of a Master Plan through ongoing water system operations.

Portsmouth produced a community-wide Master Plan in  2005.7  The Master Plan  established goals,
objectives, and strategies for the city for a ten year period. It covered land  use, housing, economic
development, transportation, natural resources, and a range of other topics—including the city's water
and wastewater utilities.

The city's residents and  public officials contributed to plan development—mainly through "Portsmouth
Listens,"  a process that convened  citizens through  small discussion groups and  included several
meetings with  City boards,  regional institutions, neighborhoods, and private interest groups.   This
process resulted  in  a  vision  reflecting citizen aspirations for the  city's future, and it informed
identification of community action priority areas. The vision read,  in part:

       Portsmouth should be a livable, walkable city that preserves its history, lives in balance
       with its natural resources, protects its waterfront and views, provides a good climate for
       entrepreneurial  opportunity, acts on its  belief in  socio-economic diversity through
       affordable housing, and connects neighborhoods through multiple  and innovative modes
       of transportation.
7 City of Portsmouth. 2005. Portsmouth Master Plan: http://www.citvofportsmouth.com/masterplan/MasterPlanFinalComplete-Aug2005.pdf


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Key  plan priorities  included maintaining a vital downtown area (including increased public transit,
mixed-use buildings, and higher density housing options), enhancing certain transportation corridors,
and  housing affordability.  Sustainable development—including environmental, economic, and  social
sustainability—was also called  out as a key priority. As a component of sustainable development, the
plan said that  "water and sewer policies  and infrastructure  should  make use of best practices in
environmental protection and provide incentives for conservation."

The  Portsmouth Master Plan incorporated, and benefited from, strategies identified in existing  water
and wastewater plans (i.e., the Water System Master Plan, the Sewerage Improvement Program,  and
the Combined Sewer Overflow Long Term Control Plan).  It also  outlined new strategies for  water
conservation, energy efficiency, "green infrastructure," and others to be implemented by the water and
wastewater systems.  Table 1,  below, provides examples of goals, objectives, and strategies related to
water and wastewater from the Master Plan.

Under the goal to "provide drinking water that meets federal  and  state regulatory requirements  and
serves the needs of  Portsmouth's residents and businesses," the Master Plan called out upgrading or
replacing the Madbury Treatment Facility to  meet future regulatory  requirements  and rectify past
violations—an action also identified in the Water System Master Plan. Driven by the sustainability goals
in the City's Master Plan, the new facility was designed according to sustainability principles, including
promoting energy efficiency, minimizing waste,  being durable over its lifecycle, reducing the  City's
carbon  footprint,  and  reusing existing structures wherever  possible.  The  design followed  LEED
(Leadership in Energy and Environmental Design) principles, including using 30 percent less energy than
conventional  designs (including technologies  such as solar hot water collectors, heat pumps,  and
"daylight harvesting"), saving costs and reducing the facility's carbon footprint.
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      Table 1: Examples of Water and Wastewater Goals, Objectives, and Strategies from the Portsmouth Master Plan
   Selected Master Plan      Selected Objectives Related to
          Goals                Water and Wastewater
 Promote new
 development and
 redevelopment that
 supports the Master Plan
 vision.
                         •  Promote new development and
                            redevelopment that...minimize
                            demands for new infrastructure
                            and services.
                                                                    Selected Strategies Related to Water
                                                                              and Wastewater
                                  • Revise site review regulations to allow for a fuller
                                    consideration of off-site and neighborhood impacts (e.g.,
                                    stormwater).
                                  • Consider fiscal impacts when reviewing proposals for
                                    zoning changes or zoning map updates.
 Provide drinking water
 that meets federal and
 state regulatory
 requirements and serves
 the needs of
 Portsmouth's residents
 and businesses.
                         •  Protect and improve the quality
                            and supply of the City's
                            groundwater and surface water
                            resources.
                         •  Maintain and upgrade water
                            distribution and treatment
                            systems to meet current and
                            future domestic, commercial, and
                            fire protection standards.
                                    Protect reservoir watershed areas and wellhead zones.
                                    Promote water conservation and increase public
                                    awareness of best practices in watershed management.
                                    Implement recommendations  made in...the Water
                                    System Master Plan (e.g., improve the distribution
                                    system efficiency, upgrade and/or replace the Madbury
                                    Treatment Facility).
 Protect the Region's
 water resources through
 effective collection and
 treatment of wastewater
 and stormwater.
                         •  Operate and maintain the City's
                            wastewater treatment facilities
                            and expand and upgrade as
                            needed to comply with regulatory
                            requirements and to
                            accommodate growth.
                         •  Minimize impacts to the City's
                            waterways from combined sewer
                            overflow.
                         •  Participate in regional
                            approaches to wastewater
                            treatment and disposal.
                                  • Continue to implement...the Sewerage Improvement
                                    Program.
                                  • Review site review regulations with respect to
                                    stormwater management and upgrade to current best
                                    practices.
                                  • Implement the Combined Sewer Overflow Long Term
                                    Control Plan.
                                  • Consider implementing a stormwater enterprise fund to
                                    provide for and fund the construction,  operation,
                                    improvement, and maintenance of stormwater facilities.
                                                            • Consider adopting the "green infrastructure" concept as
                                                              a component of open space planning and site plan
                                                               sview.
Develop an approach to
natural resource
protection and planning
that is based on
watershed boundaries,
wildlife habitat areas, and
open space corridors.
• Direct new growth to areas that
  are already developed and
  where adequate infrastructure for
  growth is in place.
                                                              review.
 Incorporate sound
 environmental practices
 into all municipal policies
 and projects.
                         •  Develop and adapt an
                            environmental policy to guide
                            City projects and operations in
                            order to achieve City-wide goals
                            of improving and sustaining
                            environmental quality.
                                  • Identify goals for reducing water
                                    consumption....improving energy efficiency, [and]
                                    implementing natural landscaping techniques.
 Maintain and improve the
 quality of wetland and
 waterfront areas.
                         •  Protect significant wetlands.
                         •  Reduce non-point source
                            pollution.
                                  • Require the design of stormwater management systems
                                    to maximize habitat value.
                                  • Minimize runoff by clustering development on the least
                                    porous soil and using infiltration devices and permeable
                                    pavements.
                                  • Limit impervious surfaces and add green spaces.
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Planning Element 2:  Objectives and Strategies—Establish
Objectives and Strategies  for Each Sustainability Goal
Element Description

Utilities should develop one or more explicit and measurable objectives for sustainability goals selected
in  Element 1. These objectives translate sustainability goals into the specific achievements the utility
will work toward.  Utilities should also assess their current performance (or "baseline") relative to each
sustainability objective and identify general strategies to meet them.
For example,  if a utility has a sustainability goal
to manage runoff effectively  in wet weather
events using green infrastructure, it might set an
objective, baseline, and strategies as follows.

    •   Objective: Reduce projected wet
       weather combined sewer collection
       system capacity needs by 10 percent
       through green infrastructure.
    •   Baseline: Current CSO capacity needs
       given  historical and anticipated
       precipitation event flows.
    •   Potential Strategies: Green
       infrastructure alternatives and
       deployment options that will meet the
       10 percent objective.
       Illustration of Objective,
       Baseline, and Strategies
High
 u
 c
 TO
 OJ
 CL
 M—
 O
 "oj
 OJ
Low
                 Objective: Desired Level of Performance
I Strategies: Move Utility
I from Currentto Desired
I Performance Level
             Baseline:
             Current
            Performance
               Level
Specific project and program alternatives based on the strategies identified at this stage of planning will
be specifically evaluated through alternatives  analysis later in  the planning process  (Element  3).
Strategy implementation should include measurement and evaluation to determine if further advances
and improvements can be made overtime.

Current Planning Process

Some utilities establish  planning objectives or, similarly, establish "levels  of service" through  asset
management  programs.8   Many utility  planning  documents,  however,  never  explicitly  identify
objectives.  Whether or not objectives are explicitly stated, utility plans typically focus on conventional
 Levels of service describe desired performance on issues that are a high priority to customers or are required by regulators. They represent a
commitment on the part of the utility to offer service that meets an expected quality standard. Utilities that establish service levels typically
also seek to collect and report performance data that assess the utility's success in meeting the established levels.
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drinking water or wastewater objectives, such  as providing adequate and reliable services, providing
high  quality  water,  protecting  water resources, and  operating cost-effectively.  When  evaluating
baselines, utilities typically  analyze current and  projected service demand,  the adequacy  of current
supply capacity, the ability to meet current and anticipated regulatory requirements, and the baseline
condition of existing infrastructure.  Strategies typically focus on infrastructure repair, rehabilitation, or
replacement.
                        Setting Objectives for Drinking Water Quality and Quantity
  The quality and quantity of available water are sometimes not given sufficient attention in long term planning.  Drinking water
  utilities should consider setting both near- and long-term water source quantity and quality objectives.  For example, it is
  possible that the community's water source might not meet its long term needs or the community may not be able to
  adequately address a source water contamination challenge—thus ultimately rendering the source unusable.  Water utilities
  should work closely with their communities to determine water supply needs and demands in conjunction with land use
  planning and zoning for development (or redevelopment) while ensuring those plans are protective of the environment and
  the drinking water source(s). Planning processes to address these issues can include consideration of the following types of
  questions:

      •   How much water is available from the water supply source(s)?
      •   What are the legal and regulatory implications for water withdrawals, while maintaining ecological flows?
      •   What are the water supply needs and demands of the community, including energy and industry, and projected
          growth?
      •   How much storage capacity is built-in to the water supply?
      •   Does the utility have back-up or alternative sources and interconnections with other water systems in case of
          extreme weather events, such as droughts and floods?
      •   Does the utility have a conservation plan in case of a water shortage?
      •   Is the water supply susceptible to saltwater intrusion from over-withdrawals of groundwater or climate change?
      •   Does the community's land use plan and zoning include provisions for determining adequate water supply
          production, and protection of drinking  water sources and environmentally sensitive areas?
      •   Does the water utility have a source water protection plan?
      •   Does the water supply have natural filters and barriers (e.g., riparian buffers, land conservation, and wellhead
          protection) in place to prevent pollution, or are there opportunities to implement them?
Building Sustainability Considerations into Objective Setting

For the purpose of this handbook, developing objectives, analyzing baselines, and identifying strategies
may involve enhancements to existing planning processes, including:

    •   Incorporating a broader range of objectives, which are aligned with sustainability goals, into the
        planning process;
    •   Analyzing  baselines for  the sustainability objectives, which may require  utilities to undertake
        new (and possibly unfamiliar) types of monitoring and analysis, such as conducting an energy or
        water audit;
    •   Identifying different types of  (and also possibly unfamiliar)  strategies for meeting  objectives,
        such as assessing green infrastructure options or opportunities to partner with other utilities.
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    •   Using the sustainability objectives and related strategies as the basis for making subsequent
        project decisions through alternatives analysis (Element 3) and developing a supporting financial
        strategy (Element 4).

The following steps will help utilities establish effective sustainability objectives, measure baselines, and
identify strategies.

Step 1. Identify sustainability objectives

Utilities should identify an  objective  or objectives for  each sustainability goal.  Any vulnerabilities in
technical,  managerial, or financial capacity of the utility that would  preclude achieving sustainability
goals should  be  targeted for specific objectives and  strategies.   Measuring performance relative  to
vulnerabilities is critical to achieving a  sustainable course of action.
In some cases, utilities may want to
express sustainability objectives in
terms   of   specific   quantitative
targets.  For example, a utility may
want     to     reduce     energy
consumption  by   10  percent  or
increase  water  efficiency by  25
percent.   In other cases, a utility
may  want to  develop  procedural
objectives,   such    as  developing
policies that  target  infrastructure
investments        to       existing
communities.  Utilities   may  also
want  to  establish  a  procedural
objective to  create a level playing
field    among   options—including
those that  are more sustainable.
For example,  a  utility could  set  an
objective    to    evaluate    non-
traditional    project   alternatives
(e.g.,   decentralized   wastewater
solutions, green infrastructure for
stormwater,   etc.)   along    with
conventional  "grey"  infrastructure
or    to    evaluate   partnership
opportunities in  any analysis  of
system expansion options.
           The City of Walla Walla, Washington Sets
                Water Conservation Objectives
Washington State requires that all utilities develop and implement a cost-
effective water conservation program in order to have Water System Plans
approved and when applying for new water rights. The State's planning
handbook outlines a conservation program planning approach that includes
setting objectives as an early step in program development.

Following the state guidance, the city of Walla Walla—a community of
58,000 people in arid Eastern Washington—set the following objectives for
its conservation program:

    •   Reduce unaccounted-for-water;
    •   Increase customer awareness of water-use habits;
    •   Reduce peak water consumption;
    •   Protect natural resources; and
    •   Comply with state guidelines.
These objectives are all aimed at achieving a measurable conservation
program goal set by the City "to reduce losses before customer meters of
an average of 0.2 percent per year until 2010, with a goal of reaching a 10
percent [unaccounted for water] level by 2024."
Walla Walla identified several strategies for achieving the objectives,
including source meters, service meters, leak detection, and conservation
pricing.
Further Reading:
    •   Washington State Department of Health. "Water System Planning
        Handbook," April 1997, Chapter 4. (On file)
    •   City of Walla Walla. "Comprehensive Water System Plan
        Update—Final Report." October 2006. See: http://www.ci.waiia-
        walla.wa.usA/ertical/Sites/l5C31B82F-5E63-4200-9CF4-
        237E5245E279)/uploads/IQ6C6AB02-467C-4C10-BDAB-9E4944C6698A).PDF
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Step 2. Ensure that objectives are SMART

The most effective objectives are SMART:

•   Specific: Utilities specify exactly what they want to achieve
•   Measurable: Utilities are able to measure whether they are meeting the objectives
•   Attainable: Utilities can realistically achieve the objective in the time period specified
•   Realistic: Utilities can achieve the objective with the capacity, funding, and other resources available
•   Time-based: Utilities set a timeframe for achieving the objective

An example of a SMART  objective, which was developed by the City of  Portland Water Bureau, is:
"Reduce the bureau's overall electrical use by 5 percent (excluding variation due to weather and
groundwater operation) by July 2012, compared to a 2005-08 baseline."

While these objectives clearly establish a target, other types of objectives can be similarly "SMART." For
example, a utility  could  establish an objective to evaluate green infrastructure alternatives for any
proposed  infrastructure investment of over $10 million and  revisit the investment threshold in five
years.

Utilities should strive to set objectives  that are "achievable"  and "realistic."  They may, however, be
operating in an environment where information on their baseline and realistic objectives is lacking. In
this case, utilities may want to set provisional objectives that can be refined later. As part of a continual
improvement process, these objectives may be refined and adapted over time as more information is
gathered and project alternatives are evaluated and selected.  For example, a utility may identify current
energy consumption and the relative costs and benefits of energy efficiency alternatives before setting a
specific target. Utilities with  "low hanging fruit" may  set an ambitious objective, while utilities with few
remaining low-cost efficiency options may set a more conservative target.

Step 3. Analyze baseline performance

Utilities should conduct and document a baseline analysis for each sustainability objective.

For some objectives, the analysis of baselines will be data-driven and quantitative.  For example, a utility
with an objective to reduce  energy use  by 10 percent over five years could conduct an energy audit to
identify baseline energy use.  The analysis can  use publicly available tools, such as EPA's Portfolio
Manager for water utilities,  and readily-accessible information such as utility bills (see Appendix  A for
links to a variety of energy audit and analysis tools).

Examples of other  useful baseline analysis information sources include:

    •    Asset inventories and  condition assessments to  establish the degree of baseline deployment,
        effectiveness, and cost;
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    •   Population and land use projections to forecast future demand inside and outside of service
        areas to understand needs and opportunities for infrastructure investments focused on existing
        communities; and
    •   Water service supply and demand data to establish a baseline for water efficiency and use (e.g.,
        for an analysis of water conservation opportunities).

Where objectives are procedural, the analysis of baselines can be qualitative.  For example, a utility may
set the following objective: "For all proposed infrastructure investments to accommodate new growth,
consider alternatives that can accommodate the same amount of growth through investment in existing
communities."  In this case, the utility would describe its current (i.e.,  baseline) capacity to analyze and
implement alternatives that focus growth in existing communities.

There are a  number of tools and resources available to support quantitative  and  qualitative baseline
analysis. They are included in Appendix A.
               Envision Utah:  A Guide to Baseline Analysis in Water Conservation Planning

  Envision Utah is a stakeholder-based statewide effort to establish a vision "to keep Utah beautiful, prosperous, and
  neighborly for future generations." Although it is a state plan rather than a utility plan, Envision Utah's toolkit on water
  conservation illustrates a step-by-step guide for conducting baseline analysis that utilities could follow.  Key steps are:
    1.   Describe the water storage and delivery system, including the size of the physical system, the number of people and
        connections, services, land use, demographics, and any unique characteristics that affect supply or demand.
    2.   Inventory the water supply system, including sources of water supply, the status of water rights, and any limits on
        system capacity.
    3.   Estimate present water demand (e.g., with information from current billing records).
    4.   Estimate future water demand based on population growth projections and other relevant information.
    5.   List and rank water problems, including high per capita use, significant losses, constraints on system capacity, and/or
        insufficient water rights.
    6.   List and analyze potential solutions, including water conservation through infrastructure investments (e.g., repairing
        leaks, replacing old lines and tanks, etc.) and/or demand reduction.

  The first five steps establish a baseline for the current system.  Step 6 describes the identification of potential strategies.
  Further Reading:
      •    Envision Utah. "Urban Planning Tools for Quality Growth," Chapter 5 (pp. 115-118)
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                              Examples of Potential Types of Baseline Analysis
          Although the specific kinds of baseline analyses utilities will undertake will be driven by their specific objectives,
          some examples are listed below.
          Through asset management, evaluation of the baseline condition of existing infrastructure and needs for repair,
          rehabilitation, and replacement to maintain target service levels, reliability, etc.
          Assessment of current revenue adequacy and needs to cover full costs of asset repair rehabilitation, or
          replacement.
          Assessment of service demand that could be addressed through green infrastructure and opportunities for
          deployment (i.e., what kind, where located, capacity, etc.).
          Energy audit and associated analysis of conservation/efficiency opportunities.
          Water audit and analysis of conservation/efficiency opportunities, including consumer-based strategies (e.g., water
          conservation programs).
          Assessment of service demand or other needed technical, financial, and managerial capacity that could be met
          through joint infrastructure development or other types of collaboration with adjoining utilities.
          Assessment of opportunities to more cost-effectively use existing collection capacity through in-fill development
          within the existing service area.
          Assessment of community land use options and the impact on water utility infrastructure operation and
          maintenance costs.

                                                         The City of Panora, Iowa, Improves Water Quality
                                                       and Saves Money by Partnering with a Neighboring
                                                                              Utility

                                                       The City of Panora, Iowa, serves a population of 1,175
                                                       people through 700 residential connections. To address
                                                       nitrate levels that were exceeding water quality standards,
                                                       Panora chose a strategy of partnering with a neighboring
                                                       utility. Through this partnership, Panora purchased low-
                                                       nitrate source water from the neighboring Panorama Lake
                                                       Association and blended it with Panora's source water to
                                                       meet the water quality standards. This partnership strategy
                                                       was more cost-effective than installing expensive new nitrate
                                                       treatment infrastructure at Panora's treatment plant.

                                                       Further Reading:
                                                           •    EPA, System Partnership Solutions to Improve
                                                                Public Health Protection:
                                                                http://www.epa.gov/ogwdw/smallsvstems/pdfs/publichealthstudv
                                                                v1 .pdf
Step 4. Identify key strategies

Baseline  analysis   can  help  utilities  identify
general strategies  for achieving sustainability
objectives   and    for  conducting   in-depth
alternatives  analysis  (described later  in  this
handbook).     In   addition   to   considering
strategies    that     would     involve     new
infrastructure,  utilities  can  consider,  where
appropriate,   collaboration   and   partnering
relationships as a  way  to meet objectives.  In
many cases, it may be useful  to undertake  a
basic "brainstorming"  approach.

As utilities begin this step, they should keep in
mind basic tips about brainstorming:

    •    Don't  judge,  challenge, evaluate, or
         criticize suggested strategies;
    •    Emphasize  the  quantity of ideas, not
         quality; and
    •    Put analysis and organization in the background.

Resources  listed  in  Appendix  A  describe  sustainability  strategies and  best  practices  related  to
sustainability.  Examples include:
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        State of Wisconsin "Water and Wastewater Energy Best Practice Guidebook";
        Water Infrastructure Finance Authority of Arizona, "Sustainable Infrastructure: A Best Practices
        Guide for Arizona Wastewater Utilities" (chapter on "sustainable design strategies");
        Water Environment Research Foundation (WERF):  "Performance and Whole-Life Costs of Best
        Management Practices and Sustainable Urban Drainage Systems";
        EPA, "Gaining Operational and Managerial Efficiencies Through Water System Partnerships";
        EPA, "Setting Small Drinking Water System Rates for a Sustainable Future"; and
        Vermont Agency of Natural  Resources,  "Growth  Center and  Growth Management Guidance
        Document."
Step 5.  Document objectives,
baselines, and strategies

Once a utility  has set objectives, it should
incorporate  them   into   utility  planning
documents  along  with information  about
baselines.   Utilities should  document  how
progress   towards   objectives   will   be
measured and  should be  willing to adapt
their strategies over  time.   Some  utilities
may choose to document objectives through
an Environmental Management System (see
call-out box about Camden County, at right).
EPA has developed a variety of tools to help
water   and   wastewater   utilities   adopt
environmental    management    systems.
These tools are listed in Appendix A.

Utilities  should  also  document  general
strategies (and related tools and  resources)
that  suggest  project alternatives  to  be
considered in alternatives analysis (Element
3).   For example, a  utility evaluating the
feasibility of  non-traditional strategies for
meeting future drinking water needs would
identify a range of strategies that  include
source water protection, reduction of non-
point sources  of  pollution,  and potential
service   interconnections   with   adjacent
utilities. The most promising strategies can
be further analyzed as  part of alternatives
analysis.
    Camden County, New Jersey Municipal Utilities
       Authority: Documenting Objectives in an
         Environmental Management System

The Camden County Municipal Utility Authority (CCMUA) serves
a population of around 500,000 people. It has codified its
specific objectives related to water quality, odor control, and cost
minimization in its Environmental Management System (EMS)
manual. All of the decisions that the utility makes have to be
consistent with these objectives, which are expressed in the
manual as:
"The CCMUA will do its utmost to:
    1.   Optimize the quality of its effluent
    2.   Minimize adverse impact from odors emanating from
        the wastewater treatment and sludge disposal
        processes.
    3.   Minimize cost impacts to ratepayers."
The EMS Manual goes on to describe the ways in which the
utility will achieve its objectives, such as:
    •    Operating the plant in a  manner which will minimize the
        potential for odors from the wastewater treatment and
        sludge thickening, dewatering and drying processes.
    •    Implementing and maintaining a comprehensive record
        keeping and reporting system that tracks water quality,
        odor minimization and cost minimization efforts.
    •    Providing regular  training opportunities to personnel
        associated with the wastewater treatment and biosolids
        management program.
Further Reading:
    •    Camden County Municipal Utilities Authority EMS Manual:
        http://www.ccmua.org/ccmuaems.pdf
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Implementing These Steps on a Smaller Scale

All utilities should set realistic sustainability objectives. When implementing this handbook at a smaller
scale, utilities may want to set qualitative rather than quantitative objectives.  For example, a utility may
choose to set an objective to "reduce energy use" and, based on further experience, consider setting a
specific quantitative objective later on, such as "reduce energy use by 10% over 5 years."

Utilities  setting qualitative objectives can  also do  a qualitative analysis of baselines.   For utilities
implementing on a  smaller scale, basic information gathering on baseline conditions may be enough to
understand strategies available to pursue  sustainability objectives (see call-out box on Arenas Valley,
below).  All utilities can take advantage of the range of tools described above (and listed in Appendix A)
that have been developed to estimate baselines and identify strategies.
       Arenas Valley, New Mexico Establishes an Asset Baseline through an Inventory and Condition
                                             Assessment

  The Arenas Valley Water District Association—which maintains around 430 connections in the small community of Arenas
  Valley, New Mexico—used an asset inventory and condition assessment to better understand baseline infrastructure
  conditions. This analysis revealed that small investments in repair of existing pipes made much more sense than large-scale
  pipe replacement—a solution that saved the community money and allowed it to invest in other system upgrades.

  Concerned about leaks from the distribution system, the AVWDA Board sought to replace significant portions of the water
  distribution system, which were old and degraded. With assistance from the New Mexico Environmental Finance Center,
  AVWDA undertook an asset inventory and condition assessment to understand the utility's baseline infrastructure condition
  and needs for upgrades. As part of this work, AVWDA also established a level of service agreement, which described the
  kind of service it sought to provide. The service levels addressed operating costs, responsiveness, reliability, regulatory
  requirements, water quantity, and customer satisfaction. This information enabled AVWDA to assess how to fill the gap
  between its current baseline and desired service levels.

  The asset inventory and condition assessment helped AVWDA realize that replacing PVC pipe was not the most cost-
  effective strategy for reducing leaks and upgrading service.  The analysis revealed that the existing PVC pipe should remain
  in good condition for 25 years.  Replacing it would not help prevent breaks related to junctions with service  lines or damage
  from construction contractors, which accounted for a large number of breaks and service disruptions.  An analysis of full
  lifecycle costs identified pipe repair (rather than replacement) as a more cost-effective strategy.
Key Diagnostic Questions

Utility managers can use the following questions to evaluate their implementation of this element:

    •   How was each of your utility's sustainability goals reflected in specific, measurable objectives?
    •   In what ways were your utility's sustainability objectives articulated consistent with the SMART
        principles?
    •   For each sustainability objective, what kind of baseline analysis did you  conduct to assess your
        current status?
    •   What types of tools and resources did you use for the baseline analysis?
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    •   Are there monitoring programs already in place to generate data for baseline analysis and to
       monitor progress toward objectives?
    •   For each sustainability objective, what traditional and non-traditional strategies did your utility
       identify?
    •   How and  where  were the sustainability  objectives  described and codified in a planning
       document?
    •   What is your plan for measuring and tracking the accomplishment of sustainability objectives
       overtime?

Example of Sustainability Planning in Practice:  The Portland,
Oregon Water Bureau Turns Goals from the Portland Climate
Action Plan  into Specific Objectives

The  Portland,   Oregon Water  Bureau  provides  drinking water  to nearly 900,000  residents in
Northwestern Oregon.  Its role in implementing the Portland Climate Action Plan illustrates how a utility
can set SMART objectives to achieve  sustainability  goals and help achieve  an important community
priority.

The City of Portland issued a City-wide Climate Action Plan in October 2009.9  The plan outlined several
actions to be accomplished by 2012. Since that time, the Portland Water Bureau has become a partner
in the City's effort to reduce greenhouse gas emissions by incorporating the community's goals into its
own strategic and sustainability planning.

The Portland Water Bureau's 2008-2011 Strategic Plan10 reflects both a general commitment to support
community goals and specific objectives and tactics related to the City's Climate Action Plan.  As an
indication of the Bureau's high level commitment to support community goals, its mission  is "to provide
the citizens and the City Council with a water system that supports their community objectives and
overall vision  for the  City  of Portland."   Accordingly, the Water  Bureau  incorporated reducing
greenhouse gas emissions into its strategic plan as a commitment to:

       "Develop and  implement a carbon  emissions  mitigation strategy.   Continue  to  make
       improvements  in  energy-efficient operation  and design  [and]  increase  both  use and
       generation of renewable energy."

The commitment was further elaborated through utility service levels described in the plan:

    •   Bureau's carbon emissions are reduced from  2007 levels.
    •   Percentage of energy generated from renewable sources increases from 2007 levels.
 Seethe City of Portland and Multnomah County Climate Action Plan at: http://www.portlandonline.com/bps/index.cfm?a=268612&c=49989
10 See the Portland Water Bureau Strategic Plan: 2008-2011 at: http://www.portlandonline.com/water/index.cfm?a=328185&c=55152.
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The Water Bureau  spelled out its specific action plan for reducing carbon  emissions  and increasing
renewable energy use in the 2009 update to its "Sustainability Action Plan." The Action Plan contained
the Bureau's goals and actions to  reduce energy use, transportation-related emissions, paper use, water
use, and toxics use and to enhance neighborhood livability.

The 2009 update included specific actions to reduce Portland's carbon footprint in its sections on energy
use and transportation.  The plan identified specific, measurable goals, which are very similar to the
concept of "SMART objectives."11  For example, under the heading of energy, the Water Bureau listed:

    •    Reduce the Bureau's overall electrical use by 5 percent (excluding variation due to weather and
       groundwater operation) by July 2012, compared to a 2005-08 baseline.
    •    Reduce electrical use by  5 percent at top 10 facilities (highest  electrical use) by July 2012, as
       compared to a 2005-2008 baseline.
    •    Install renewable energy facilities with minimum capacity of 400 kW by July 2010.
    •   Take energy efficiency and renewables generation opportunities into account when planning for
       facilities to comply with Long Term 2 Enhanced Surface Water Treatment Rule requirements.

The specificity of these objectives allowed the Bureau to identify specific actions related to each and to
develop annual status reports.  Greenhouse gas emissions are tracked through the Bureau's annual
carbon footprint report.12
 See: http://www.portlandonline.com/water/index.cfm?c=49430&a=279197.
12 See: http://www.portlandonline.com/water/index.cfm?a=246396&c=31525
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Planning  Element 3: Alternatives Analysis—Analyze a
Range of Alternatives Based on  Consistent Criteria
Element Description

Effectively integrating sustainability goals and objectives into an analysis of infrastructure alternatives is
a critical component of planning.  It allows utilities and local officials to make infrastructure decisions
consistent with sustainability goals and objectives best suited for the utility and the community.

Alternatives analysis can be conducted at many
scales,   from   an  analysis   of  system-wide
infrastructure alternatives to specific engineering
decisions about the  repair,   rehabilitation,  or
replacement of specific equipment.   The steps
and examples described below focus on project-
level alternatives analysis  linked to utility goals
and objectives  but can be translated to different
scales.
For alternatives analysis to be effective, utilities
need to establish explicit and consistent project
selection criteria for each sustainability objective.
Identifying and applying sustainability criteria  is
the critical juncture at which utilities choose the
specific economic,  environmental,  and  social
benefits  they  will weigh  in  selecting among
alternatives.    A  replicable,  consistent,   and
transparent  approach  will  ensure  that   each
alternative is considered on a level playing field.
When  done well, this  approach  will enable
utilities to choose a mix of projects  that meets
customers' service expectations,  optimizes the
sustainability   of  utility   infrastructure    and
operations,  and  supports  other   community
sustainability priorities  whenever  feasible.   The
selected  alternatives will  thus  represent  "best
value"   projects  for  the  utility  and  for  the
community as a whole.

Following  and documenting a consistent set of steps for alternatives analysis can help utilities explain
the logic of decisions to utility boards, local elected officials, and  others.  These steps also provide
 Sustainability Criteria and Conventional Criteria

When analyzing alternatives, utilities should use
sustainability criteria along with conventional project
selection criteria.
Examples of potential sustainability criteria include:

    •   Ecological and economic impacts, such as the
       extent to which projects damage (or create)
       important habitat, or create green space and
       recreation opportunities.
    •   Preference for treatment or operational functions
       that rely on natural systems for lower lifecycle
       operating costs through reduced energy and
       chemical inputs.
    •   Reduced reliance on the energy grid through
       greater energy efficiency or self-generation of
       energy.
    •   The extent to which projects focus on
       sustainability of infrastructure in a utility's existing
       service area.
    •   Cost-effectiveness based on an assessment of
       full lifecycle costs.
Conventional criteria often include considerations such as:

    •   Ability to meet future demand growth.
    •   Ability to improve reliability.
    •   Ability to meet regulatory requirements.
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utilities with information  that  may be useful for guiding the work of consultants to analyze and
document a variety of traditional and non-traditional alternatives.

Current Planning Process

Utilities commonly undertake alternatives analysis as part of planning. They then document selected or
recommended alternatives in planning documents. Alternatives often involve the repair, rehabilitation,
or replacement of aging infrastructure or investment in new infrastructure to meet demand growth or
regulatory  requirements,  including  those  driven by  enforcement actions.   As typically practiced,
alternatives analysis considers criteria such as  technical performance, cost,  maintainability, and
reliability.  These  criteria screen for alternatives that deliver the highest reliable performance at the
lowest overall  cost.  Conventional alternatives analysis, however, rarely explicitly and  consistently
incorporates broader economic, social, and environmental sustainability considerations.

Building Sustainability  Considerations into Alternatives Analysis

Incorporating  sustainability considerations  into  alternatives analysis  may  involve  the  following
adjustments to current planning processes:

    •   Using a broader set of assessment
        criteria that explicitly link to  the
        utility's specific sustainability goals,
        objectives, and other community
        priorities, where applicable;
    •   Using a consistent and documented
        methodology for evaluating and
        comparing projects using the
        criteria;
    •   Including specific consideration of
        natural or "green" systems; and
    •   Potentially using other relevant
        community input to inform the
        assessment methodology (e.g., by
        weighting criteria according to
        community priorities).

The following steps will help utilities incorporate sustainability considerations into alternatives analysis.

Step 1. Identify alternatives

Utilities should list and  describe  a broad range  of project alternatives  that,  individually  or in
combination, support  the  stated objectives.  Many project alternatives will come from  the general
     Evaluating Green Infrastructure Alternatives

As part of alternatives analysis, utilities should assess what types
of non-traditional or "green" infrastructure alternatives may help
achieve objectives. Lack of familiarity or experience with these
alternatives, however, can create challenges. In particular,
utilities may face uncertain operations and maintenance costs for
green infrastructure alternatives.
In response, utilities can phase in green infrastructure
investments and then consider further deployment based on
what they learn about effectiveness and cost. In alternatives
analysis, utilities may want to examine a range of deployment
options—from pilot scale to "maximum technically achievable"—
and identify the right level of deployment given their needs and
the level of knowledge or uncertainty about green infrastructure.
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strategies identified in Element 2. For example, a facility may have identified source water protection as
a viable strategy for protecting groundwater to meet future demand.  In the alternatives analysis, the
utility would  evaluate  options  that specifically identify  candidate source water  areas,  protection
strategies, time frames,  and other specific characteristics.

Step 2. Develop sustainability
criteria
The criteria  used to  assess  and  select
projects  in  the  alternatives   analysis
should reflect  a  utility's  sustainability
objectives   identified   in   Element   2.
Utilities will  also  likely  include criteria
related   to   other   utility   objectives
(reliability,    risk  management,  etc.).
Setting and  applying  project selection
criteria is the critical  juncture at  which
utilities     choose    the     economic,
environmental,  and social  benefits they
will    weigh    in    selecting   among
alternatives  and  choosing the  mix  of
projects that optimizes the sustainability
of utility operations.

Community stakeholder views  are  also
important when evaluating alternatives.
Where feasible, utilities should  consider
using   community  input   to   identify
project   selection   criteria   and  their
relative  importance.    For  example,
Louisville     and    Jefferson    County
Metropolitan Sewer District in Kentucky
convened  community  stakeholders to
identify community values for analyzing
and   selecting   among   options  for
reducing   wet  weather  flows.    The
community  values,   which   included
"public   health  enhancement"    and
"economic  vitality" among others, were
used to calculate benefit scores for each
project alternative.   These scores were
combined  with cost  information  for a
 Orange Water and Sewer Authority Plans for Future Water
                         Demand

Orange Water and Sewer Authority (OWASA) provides drinking
water, wastewater, and reclaimed water services to the Chapel Hill-
Carrboro community in North Carolina. Its long-range planning
approach illustrates how utilities are altering their planning and
investment decisions in response to greater uncertainty about factors
such as climate change.

After experiencing the worst drought on record in 2001-2002—and the
second worst drought in 2007-2008—OWASA began to question the
reliability of its conventional planning assumptions about rainfall
patterns and the yield of its water supply sources.  In response to this
increased uncertainty, the utility began to consider potential low yield
scenarios outside of historical trends and extended its water supply
planning horizon out from 15 years to 50 years.  These scenarios
identified substantial vulnerabilities to the utility's future water supply
and pointed to the need to examine an expanded suite of water
supply and demand management strategies that could address
increased variability in future supply and demand conditions.

As a result of its new planning approach, OWASA selected several
strategies to increase the long-term reliability of its water supply.
These included immediate acquisition of an active quarry which will
provide increased water storage capacity when rock quarrying ends in
2030. OWASA also adopted a demand management program with
an emphasis on conservation rate structures and year-round water
use restrictions. Additionally, OWASA developed, in partnership with
the University of North Carolina at Chapel Hill, a reclaimed water
system (in operation since April 2009) which provides a reliable
source of non-potable water that offsets more than 10% of the
community's drinking water needs. The reclaimed water system uses
40% less energy than pumping, treating, and delivering raw drinking
water, and it provides the University and UNC Hospitals with supply
redundancy for critical water needs. OWASA has also increased
attention on the energy and greenhouse gas footprint of its operations
and now includes these factors in the analysis and selection criteria of
major capital project alternatives.

As part of its Climate Ready Water Utilities (CRWU) program, EPA
has provided a number of resources for the water sector to adapt to
climate change by promoting a clear understanding of the climate
science and adaptation options by promoting consideration of
integrated water resources management (IWRM) planning in the
water sector.  These resources can be found at
http://water.epa.gov/infrastructure/watersecurity/climate/
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benefit-cost comparison across alternatives (see the Louisville case study at the end of this section).
            Blacksburg, Virginia Selects a Decentralized Solution with Input from the Community

  The Blacksburg, Virginia Public Works Department owns and manages wastewater infrastructure serving approximately
  95,000 people. Blacksburg's approach to serving a growing community demonstrates use of a public stakeholder
  engagement approach to evaluate project alternatives. The process resulted in a money-saving decentralized solution that
  met service needs and protected the environment.
  Blacksburg established a workgroup to evaluate wastewater treatment system alternatives, including building a decentralized
  system or extending its existing centralized sewer system. The workgroup and town considered factors such as cost,
  construction-related traffic disruptions, floodplain and creek impacts due to centralized sewer main construction, collection
  system infiltration/inflow and leakage, and treatment effectiveness.
  After careful review, Blacksburg conducted a pilot project to test the feasibility of a decentralized, clustered system.
  Approximately 200 residents implemented a hybrid collection system including a Septic Tank Effluent Pump (STEP)
  pressure system combined with a Septic Tank Effluent Gravity (STEG) system.  Each house had an individual septic tank
  that required resident maintenance.
  This decentralized, clustered system saved the community more than $1 million  in construction costs. Operations and
  maintenance costs were similar to those of conventional centralized systems. This system also addressed key community
  concerns: centralized sewer collection system leakage. During heavy rains, the decentralized, clustered system avoided
  infiltration/inflow problems, showed no leakage, and maintained a stable treatment level.
Step 3.  Assess the benefits of each alternative

Each alternative  should be analyzed on an individual  basis  using Step  2 criteria.   Different  types of
analysis  may be appropriate for different plans or for utilities with different levels of capacity.  Options
include:

    •   A narrative, qualitative assessment of potential benefits and risks of each alternative  (may be
        most appropriate for utilities with  limited resources or capacity).  For example, to develop a
        capital  improvement plan, Bloomington,  Indiana's water utility qualitatively evaluated several
        alternatives according to criteria including redundancy, consequences of a failure, capital  and
        operations and maintenance costs, and flexibility for expansion.
    •   A qualitative "scoring" of potential  benefits  and risks.   For example, Louisville and Jefferson
        County Metropolitan Sewer  District used a  -5 to +5 scale to  rate alternatives'  impacts on
        ecosystems; the community then calculated an overall score across the criteria.  (See Louisville
        case study at the end of this section. The Tualatin Valley Water District also used this approach,
        as described in a call-out box in this section.)
    •   A quantitative assessment,  such as  monetizing  benefits and  risks  using economic valuation
        techniques.   For example,  Seattle Public Utilities  used  economic valuation  techniques to
        quantify benefits and costs for infrastructure investment alternatives (see the call-out box in this
        section).
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The  evaluation  of each  alternative  should  be documented using a  common template.   To aid
comparison,  utilities should  use the same methodology for all  alternatives.  Consistent tools and
templates allow for efficient analysis and documentation of a potentially large number of projects.

A "scorecard" approach is one way to analyze a range of alternatives across several  criteria.   This
approach helps  utilities organize  both qualitative and quantitative information to  make decisions.
Implementation  can range from fairly simple to complex depending on the number  of alternatives
assessed and criteria used.  Once developed, it can be reused whenever necessary.

An illustration of a scorecard approach is shown on the next page.  This scorecard demonstrates scoring
of two alternatives in a consistent manner using three criteria.  The alternatives represent two odor
control strategies at an aging wastewater treatment plant with  poor odor control  systems. Alternative 1
reduces wastewater volumes and avoids the older infrastructure most of the time by connecting to an
adjacent system.  Alternative 2 builds tanks with modern odor control systems in riparian areas adjacent
to the current plant.  The alternatives are compared using three criteria:  habitat protection, odor
control, and  non-obtrusive construction techniques (in reality, these alternatives would be compared
using additional  criteria  related to cost, effectiveness,  etc., but these criteria serve to illustrate the
scorecard approach). While the first alternative is less effective in controlling odors because  the old
tanks are used intermittently, it wouldn't  affect the riparian area; laying some additional pipe  along a
few miles of  road is the only disruption. The second alternative is highly effective in controlling odors,
but would involve significant  impacts  on the riparian area  and potentially disruptive construction
impacts (e.g., truck traffic, noise, etc.)

Because the utility is utilizing several criteria, a weighting approach can be helpful to provide an overall
score.  Utilities may choose to weight each criterion equally, or choose to weight certain criteria  more
highly.  To weight criteria  the  utility can  distribute a total  number of points among criteria.  In this
example, the utility distributes  ten points  among the three criteria. Riparian area protection and odor
control are considered equally  important—and more  important than construction-related disruptions.
The utility then gives a weight of 4 points each to riparian area protection and odor control, and 2 points
to non-obtrusive construction techniques.  (In some cases—as in the Louisville example described at the
end of this  section—utilities base their weighting approach on  community priorities, increasing the
likelihood of acceptance by the  community.)
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Illustration of a Scorecard Approach to Alternatives Analysis
Alternative 1: Connect to Adjacent System to Reduce Volume of Wastewater Treatment
Criteria
Riparian Area
Protection
Odor Control
Non-
obtrusive
Construction
Techniques
Range of Impacts and Scores
-3
Substantial
impairment
of riparian
area
Generation
of frequent
odor
Frequent
dust, noise,
truck traffic,
and/or
street
closures
-1
Moderate
impairment
of riparian
area
Generation
of occasional
odor
Occasional
dust, noise,
truck traffic,
and/or
street
closures
0
No impact
on riparian
area
No impact
on odors
No
construction
impacts
1
Moderate
enhancement
of riparian
area
Elimination
of 50% of
odor events
Not
applicable
3
Significant
enhance-
ment of
riparian
area
Elimination
of 90% of
odor
events
Not
applicable
Score for
Each
Criterion
0
1
-1
Weight
(out of 10
points)
4 points
4 points
2 points
Total Weighted Score: (0x4 points) + (1x4 points) +-1x2 points) = 2 points
Alternative 2: Build New Wastewater Treatment Tanks on Adjacent Property
Criteria
Riparian Area
Protection
Odor Control
Non-
obtrusive
Construction
Techniques
Range of Impacts and Scores
-3
Substantial
impairment
of riparian
area
Generation of
frequent odor
Frequent
dust, noise,
truck traffic
and/or street
closures
-1
Moderate
impairment
of riparian
area
Generation
of
occasional
odor
Occasional
dust, noise,
truck
traffic,
and/or
street
closures
0
No impact
on riparian
area
No impact
on odors
No
construction
impacts
1
Moderate
enhancement
of riparian
area
Elimination of
50% of odor
events
Not
applicable
3
Significant
enhance-
ment of
riparian
area
Elimination
of 90% of
odor
events
Not
applicable
Score for
Each
Criterion
-3
3
-3
Weight
(out of 10
points)
4 points
4 points
2 points
Total Weighted Score: (-3 x 4 points) + (3x4 points) +-3x2 points) = -6 points


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The  highlighted boxes of the scorecard show how
each alternative scores against the three criteria.        Steps for Using a "Scorecard" Approach to
When the individual scores are multiplied by the                  Assess Alternatives
weights  and  summed,  Alternative  1 scores two
points and Alternative 2 scores negative six points.     1-   ldentifYcriteria
...   .       ...      .         , ,  ,   ,       r     ,     2.   Establish a scale (e.g.-3 to+3) for each criterion
All else equal. Alternative 1 would  be the  preferred     „   .  .     .,.,..     ...
                                                      3.   Assign weight factor to each criterion
°Ption-                                               4.   Score each criterion
                                                      5.   Multiply each score by the criteria's weighting factor
Tualatin  Valley, Oregon used a  scorecard  approach     6   gum we|ghted scores across g|| criteria
to   evaluate   potential   projects  according  to     7   identify alternative with highest calculated score
economic, social, and  environmental criteria (see
call-out box later in this section). The utility applied
consistent criteria and a consistent methodology across all projects, increasing transparency, providing
better "apples to apples" comparisons, and, once established, reducing the  time and effort required for
alternatives analysis.

For scoring some criteria, utilities can use readily available analytical tools that show the effectiveness,
cost, and other characteristics of project  alternatives.  Examples, which are also listed in Appendix A,
include:

    •   EPA's Energy Star/Portfolio Manager for water utilities to calculate energy reductions;
    •  Center for Neighborhood Technologies (CNT) Green Values Stormwater Management Calculator
       to calculate the effectiveness and cost of certain green infrastructure; and
    •   EPA's Check Up Program for Small Systems (CUPSS) to calculate the 10 year financial projection
       based on project operating and capital requirements (i.e., cost of asset maintenance and annual
       revenue and expenditures entered into the software).
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           Tualatin Valley Water District Uses "Triple Bottom Line" Criteria for Alternatives Analysis

  The Tualatin Valley Water District (TVWD) serves 200,000 customers through 58,000 connections (http://www.tvwd.org/).
  The system covers 44 square miles of incorporated and unincorporated Washington County in northwestern Oregon. The
  District uses a triple-bottom line methodology to evaluate, score, and compare alternatives against a consistent set of
  criteria.  Once the District developed the methodology, it could then be reused whenever major infrastructure decisions were
  needed.

  The methodology has three main components:
  1.   Criteria. TVWD uses nine criteria to evaluate each alternative—three each for economy, society, and environment.
  2.   Consistent "scores." For each criteria, TVWD defines scores that range from 1  (low) to 5 (high).
  3.   Weighting. TVWD assigns 10 weighting points allocated among the three criteria within each category (i.e., economy,
      society, and environment) to reflect the relative importance.

  The approach assigns an overall  score to each alternative by multiplying the criteria score by the criteria weight and
  summing across all of the criteria. The overall scores can then be compared to select the highest value alternative.
  Representatives from TVWD say this structured approach is an efficient way to organize qualitative and quantitative
  information about each alternative.  In practice, TVWD staff has found that the discussions spurred by implementing the
  methodology have been one of its most useful characteristics. The table below shows the criteria and scoring approach
  used by TVWD.
CD
"O3
O
Economy
total weight=10
Society
total weight=10
0
I 4L
IS
o o
-1
Criteria
Supports economic growth and
development
Utilization of local employment and
manufacturing
Improves efficiency (1)
Improves effectiveness (1)
Improves reliability (1)
Reduces long-term costs (1)
Other economic benefit (1 )
Meets regulatory or contractual
requirement or recognized standards of
practice
Supportive of community esthetics and
liability
Improves public/employee safety,
including fire protection capacity;
improves drinking water quality
Construction impact on natural
environment
Project Sustainability
Supports conservation and/or demand
management goals
^:
CO
'
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Step 4:  Assess the full lifecycle costs of each alternative
                                                      Taking the Long View in Alternatives Analysis

                                                 When analyzing alternatives, utilities should look to the future to
                                                 maximize long-term benefits and reduce long-term costs.  For
                                                 example, when considering replacing underground pipes in the
                                                 existing service area that are likely to experience increasing
                                                 demand from urban infill, a utility should also consider installing
                                                 extra capacity for the future.  While this may involve additional
                                                 up-front expenses, it may reduce costs over the long term by
                                                 avoiding the need to re-excavate the lines.
Utilities should assess the full lifecycle costs
of  each   alternative  to  provide   a  full
accounting of the project's annualized cost
and revenue  impacts.   Lifecycle  costs  are
the  net  present value of all  costs  for  a
project over its lifetime, including primary
project costs,  secondary  financing   costs,
operations and maintenance and the cost of
rehabilitation, repair, and replacement.

Primary project costs include:
    •   Construction;
    •   Engineering and technical services (e.g., surveying and subsurface investigations);
    •   Pilot studies;
    •   Environmental review and permitting;
    •   Bidding and contracts;
    •   Administration and legal services;
    •   Land and right-of-way acquisition;
    •   Bond issuance;
    •   Commissioning costs;
                                                          The Cost of the "No Action" Alternative
                                                  When assessing whether to make new investments, utilities
                                                  should account for the costs of the "no action" alternative—or
                                                  maintaining the status quo.  These costs may be hidden and
                                                  substantial. They include:
                                                      •   The cost of inefficient operations and excess
                                                          maintenance for older "underperforming" capital;
                                                      •   The cost of expensive reactive emergency repairs to
                                                          aging infrastructure (vs. predictive and preventive
                                                          maintenance for newer infrastructure); and
                                                      •   Fines or other penalties (e.g., for not meeting regulatory
                                                          requirements).
                                                  The longer utilities wait to replace underperforming capital, the
                                                  more these costs are likely to increase. When utilities examine all
                                                  costs of inaction, they may find that new investments can save
                                                  money and improve sustainability over the long term.
    •   Construction management; and
    •   Decommissioning.

Indirect financing costs include the cost of
capital   (i.e.,  interest),  capital  acquisition
costs (such as financial advisory fees, rating
agency fees, closing costs,  etc.),  and costs
related  to  creating any required  reserve
funds   and/or   meeting   debt   coverage
covenants.  Utilities should be aware  that
grants  or  other  financing  incentives   can
affect indirect costs  and potentially influence
which  alternatives appear to be most cost-
effective.
New  project operating costs can include energy use, chemical  use,  operating staff, and  the project's
share of general  utility overhead expense.  Basic maintenance  costs will likely include the personnel,
equipment, and materials needed  to  keep the  project  infrastructure operating properly and  reliably.
Alternatives that  require more ongoing monitoring and maintenance  will  generally have higher lifecycle
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operations and maintenance costs. Effective asset management programs can help utilities assess these
costs, as well as costs for rehabilitation, repair, and replacement.

Key considerations in assessing lifecycle costs are the time period analyzed and the discount rate. A long
period analyzed will tend to favor longer-lived infrastructure not requiring replacement during the time
period.  Take as an example a  utility  considering two alternatives for  managing stormwater:  1) an
underground storage basin  with  a 110-year life,  and 2) high-capacity remote treatment technology with
a 40-year life.   With a 100-year view, the  utility might favor the storage basin because the remote
treatment technology would need to be replaced twice over the  100-year period.  If that same utility
only  looked out 35  years,  the  analysis might turn economically  favorable for the remote treatment
technology.
           San Antonio Water System:  Saving Money and Protecting Habitat by Conserving Water

  The San Antonio Water System (SAWS) in South Central Texas serves 1.3 million people.  Its water comes primarily from
  the Edwards Aquifer, a fractured limestone formation spanning 8,000 square miles. With San Antonio's population growing 2
  percent per year, a finite water supply (which also sustains habitat for 14 threatened and endangered species), and limits on
  pumping during drought conditions, the system faced a need to either buy additional water rights from an adjacent aquifer or
  conserve.

  After detailed analysis, San Antonio concluded that investments in conservation technology and programs to achieve water
  use reductions would allow the system to serve its growing population and would cost less than purchasing and delivering
  additional water. Specifically, investing $4.8 million per year in conservation allowed the city to reap $7.4 million in avoided
  water purchase and infrastructure costs (a cost-benefit ratio of 1:1.5).

  For residences, conservation strategies included efficient toilets, rebates, hot water on demand, garden irrigation
  evaluations, and education.  Commercial sector strategies included whole facility retrofits, industry certification for water use,
  water audits, and rewards.  San Antonio also instituted water use regulations governing  water waste, irrigation system
  design and timing, drought restrictions, and on-site water reclamation.

  With these conservation strategies, San Antonio residents reduced their per-capita water usage 49 percent between 1982
  and 2007, while the city's water customer base increased 30 percent. With these results, San Antonio achieved its water
  use reduction goal for 2008 seven years early. The system has also kept pumping rates stable in the Edwards Aquifer and
  maintained water prices that are significantly less than the national average (i.e., $0.12/100 gallons vs. a national average of
  $0.28/100 gallons).

  Further reading:
      •   City of San Antonio, Texas. 2008. San Antonio Trends, Challenges and Opportunities (presentation)
          http://www.sanantonio.aov/planning/powerpoint/Growth Trends 092506.pps#1
      •   San Antonio Water System. 2008. Conservation, http://www.saws.org/conservation.
Step 5. Compare and select alternatives

Utilities should employ a  consistent approach for comparing projects and ranking alternatives in terms
of benefits and costs.  The approach should  allow for the comparison  of a wide range of alternatives.
Again, different types  of  analysis may be appropriate for different types of plans  or utilities.  Options
include:
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        A qualitative comparison  of each  alternative's advantages  or disadvantages,  referencing the
        evaluation criteria and cost analysis.
        Cost-benefit analysis that either uses a "scoring" approach or monetized costs and benefits to
        rank alternatives according to their cost-benefit ratio.  For example, the project alternatives in
        the example above can be compared to each other and to the scores of other  possible project
        alternatives, taking into account total direct and indirect costs.
                                                                                                           :
  Seattle Public Utilities: Triple Bottom Line Decision-Making Using a Quantitative Approach for Monetizing
                                             Costs and Benefits

  Seattle Public Utilities (SPU) in Seattle, Washington has adopted a "triple bottom line" approach for key infrastructure
  investment decisions. Although focused on asset management rather than long-range planning, this example illustrates how
  a utility can operationalize sustainability goals in the project selection process.

  SPU has a formal asset management program to assess infrastructure asset condition, understand the likelihood and
  consequence of failure, consider lifecycle costs of investment decisions, and manage a range of other asset-related issues.
  SPU sums up the purpose of their program as "meeting agreed customer and environmental service levels while minimizing
  lifecycle costs."

  An executive-level Asset Management Committee meets regularly to make decisions about what project alternatives to
  select and whether or not a project is needed.  Decisions are based on information contained in Project Development Plans
  (PDPs), which contain pertinent information about projects' financial, social, and environmental costs and benefits. To the
  extent possible—especially for larger projects—projects' economic value is calculated and compared with project costs to
  allow a quantitative cost-benefit analysis.

  For the triple bottom line analysis, SPU does not use a standard set of cost and benefits criteria for every project. Rather,
  relevant costs and benefits are identified on a project-by-project basis. In addition to assessing costs and benefits that
  accrue to  SPU customers (i.e., internal costs and benefits), SPU economists also analyze costs and benefits that accrue to
  those external to SPU and its customer base, such as the general public, other city departments, other jurisdictions, Tribes,
  and the environment (i.e., external costs and benefits). In addition, analysts generate a "risk signature" for each project that
  quantifies financial, social, or environmental risk. Projects with higher risk may warrant more thorough analysis or steps to
  mitigate risk.

  Further Reading:
      •    Seattle Public Utilities. "2007 Water System  Plan," (November 2006).
           (http://www.citvofseattle.net/util/About SPU/Water Svstem/Plans/2007WaterSvstemPlan/index.asp)
      •    Compendium of Best Practices in Water Utility Asset Management (SPU example; on file)
      •    Seattle Public Utilities. "Asset Management at Seattle Public Utilities" (undated). (On file)
Step 6. Document the alternatives analysis

Utilities should document what projects were selected through the alternatives analysis and why they
were selected—with  reference to the criteria and scoring system.  As  part of this description,  utilities
should also describe what other alternatives were considered and why they were not selected.   Utilities
should also document their criteria and methodology.
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Implementing These Steps on a Smaller Scale

Some utilities use highly sophisticated quantitative approaches for conducting alternatives analysis (see,
for example, the Louisville example at the end of this section).  Utilities implementing on a smaller scale
can use a more qualitative and descriptive approach to alternatives analysis. This kind of approach can
still be rigorous, well documented, and consistent across projects being assessed.

Key Diagnostic Questions

Utility managers can use the following questions to evaluate their implementation of this element:

    •   Did you describe, analyze, and rank all alternatives?
    •   What were the methods for analyzing alternatives and the criteria for ranking them?
    •   Were  all  planning objectives—including sustainability objectives—reflected in the specific
       ranking criteria or in the alternatives analyzed? How?
    •   How were alternatives ranked according to the criteria?  In what ways did the ranking process
       reflect specific consideration of non-traditional alternatives to integrate the use of natural or
       "green" systems?
    •   Were alternatives all assessed on a full lifecycle cost basis?
    •   Was the alternatives  analysis  transparent, and  were the  approach, rationale, and  results
       communicated to community members?
    •   To what extent  was  the community involved in, or kept  up to date on,  the alternatives
       considered and selected?

Example of Sustainability Planning in Practice:  Louisville,
Kentucky Combined Sewer Overflow Project Selection Process
Uses a Consistent Alternatives "Scoring" Approach

In  response to water quality,  public health, and regulatory  issues related to sanitary and combined
sewer overflows, Louisville and Jefferson County Metropolitan Sewer District (MSD) in Kentucky used a
range of community values to  inform project evaluation and selection criteria." Over 400 projects were
evaluated, with 23 selected. The evaluation and selection process was based on benefit-cost analysis
ratios calculated  in terms of reductions  in community threats and  enhancements to  community
amenities. Costs were calculated using a comparative cost model that incorporated (among other costs)
construction costs, administrative costs, land purchases and easements, operations and maintenance,
and salvage values.
13 Swanson, Gary, CH2M Hill, Inc. "Values-Based CSO LTCP Project Selection Process.'
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Key steps used to identify, evaluate, and select projects were:

    •   Defining a  list of  potential CSO  control  projects including  traditional  infrastructure, green
        infrastructure, and customer-based solutions;
    •   Developing project cost estimates (based on conceptual  designs) using a comparative  costs
        model;
    •   Calculating a "benefit" score for each initial solution using multiple criteria; and
    •   Ranking projects based on benefit-cost ratios.

The  "benefit" score was  based on a set of eleven stakeholder-derived  community values.   These
included both "project-specific" values for evaluating individual projects and "programmatic" values for
evaluating effects of a package of projects on a specific neighborhood, a watershed, or the entire project
area (Table 2 provides the values used  in the analysis).  Each  value was represented  by specific,
measureable criteria.  Louisville then employed a  methodology for "scoring" each alternative  using a
consistent  scale and approach.  These scores allowed the  utility to use values generated  from a
qualitative assessment for quantitative analysis. For example, projects might be scored on a scale from -
5 to +5  based  on  how they  impact aquatic  habitat.   Scores across  all project-specific values  were
summed into a total benefit score, using a weighting procedure to reflect the relative importance of
different values.  When combined  with cost information, the benefit score could  be used to develop a
cost-benefit ratio. Following initial project selection, the suite of recommended projects was assessed
using the six programmatic values.

Throughout the process, a stakeholder group was instrumental in identifying  community values and
contributing to the analytical  approach.  The group reviewed detailed information on the analysis of
specific alternatives and provided endorsement of the selection of alternatives.
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                       Table 2: Louisville Community Values Used to Analyze CSO Project Options
Values
Project-Specific Values
Environmental Enhancement
Public Health Enhancement
Regulatory Performance
Asset Protection
Eco-Friendly Solutions
Programmatic Values
Economic Vitality
Financial Stewardship
Education
Environmental Justice and Equity
Customer Satisfaction
Financial Equity
Criteria/Factors Considered

Aquatic habitat protection, surface water dissolved oxygen, aesthetics, stream flow, and
biochemical oxygen demand reduction
Peak flow measurements and characteristics of the release
Discharge frequency, discharge peak flow rates, average annual overflow volume, and
release point characteristics
Flood damage and basement backups
Energy consumption, use of natural systems, multi-use facilities, pollutant control,
construction techniques, land use, and permeable surfaces

Affordability criteria, costs for general sewer service, and drainage and flood protection
costs
Cost-effectiveness of the solution set developed (first costs, total present worth cost,
dollars per gallon of annual average overflow reduced)
Number of people contacted by various means, their knowledge of issues, and number of
pollution prevention devices installed
Distribution of resources, project impacts and benefits, consistent application of project
development criteria
Adequate and reliable sewer capacity, implementing response procedures to
unauthorized overflows, and notifying customers regarding issues of concern
Fair assignment of cost, volume and type of waste introduced into the system, and
socioeconomic status
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Planning Element 4: Financial Strategy—Ensure that
Investments are Sufficiently Funded, Operated,
Maintained, and Replaced over Time
Element Description

Once utilities have identified projects or other actions to achieve sustainability objectives, they need to
determine how best to pay for them.  This involves incorporating new investments into a successful
financial strategy  that ensures revenues cover costs over the long term.  Pricing and  rate structures
should cover all costs of constructing, operating, maintaining, and  replacing the selected infrastructure
assets.

Under Element 4, utilities should use Element 3 cost and asset management program  information to
understand how the  selected project alternatives affect costs and revenues. This understanding will
inform  a  financial strategy that ensures adequate revenues to support  the investments  over their
complete lifecycle. Ideally, this effort  builds  on an ongoing process of identifying future needs and
planning ahead to finance future investments.

The Element 3 alternatives analysis should provide a complete picture of direct capital, operations, and
maintenance costs for selected project(s).  The utility's asset management  program will provide  full
lifecycle project costs  by articulating anticipated operational and maintenance needs and timeframes for
renewal or replacement.

A maintained or improved bond rating  (if relevant) is an indicator of a successful financial strategy. A
strong rating reflects  that the utility is  meeting required or desired debt coverage ratios and required
reserves.  Healthy financial conditions  will  help  maintain  operating  budgets, avoid future deferred
infrastructure maintenance conditions, and  support  capital  planning projects and  other  capital
expenditures.

Current Planning Practice

Utilities engaged  in  long-term utility planning processes that  result in recommendations for major
capital  or operational expenditures typically  also develop  a supporting  capital and operations and
maintenance financing strategy.  Conventional  practice generally involves the following activities:

   •   Articulation of anticipated project costs (capital,  operations, and maintenance) on an annualized
       net present value basis;
   •   Selection  of  a project capitalization approach  (e.g., capital financing from current revenues,
       government grants/loans, or revenue bonds); and
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    •   Articulation  of  project-driven  revenue  requirements  (based  on  costs and capitalization
        approach) and the development of a strategy to ensure revenue adequacy.

A 2002  EPA study estimated that water utilities face a  20-year operations and maintenance funding gap
of $148 billion for clean water utilities and $161 billion for  drinking water utilities.14   A General
Accounting Office report from the same year concluded that over 25 percent of drinking water utilities
and over 40 percent of wastewater utilities did not collect enough in user fees and other local sources of
revenue to cover their full cost  of service (including operations and maintenance, debt  service,
depreciation, and taxes).15 The remainder  of this section describes financial strategies to help utilities
close or avoid such funding gaps.

Building Sustainability Considerations into Financial  Strategies

For the  purposes of this handbook, building a sustainable project financing strategy may involve altering
or emphasizing various aspects of the traditional project financing strategy, as follows:

    •   Ensuring  a complete accounting of all project-
        related capital, operations, maintenance, and        Strategies for Reducing Direct Capital
           i        t.            t ii i-t    i     t. u  •                  Costs of Projects
        replacement costs on a full hfecycle cost basis                            J
        (making sure to account for asset depreciation     ,„.,.„         ,       ,    , L  L  .   L
                                                         Utilities can employ a number of strategies to
        and full costing of predictive and preventive     reduce construction-related direct costs, including:
        maintenance);
        Undertaking a  fair and complete comparison of         *   )(alue en9ineerin9;
                                                             •   Using construction management to
        capital financing alternatives, covering interest,             minimize cost over-runs and change
        acquisition, and implementation costs; and                 orders; and
        Reviewing and adjusting, as needed, the timing,         *   Providin9 clear Pr°Ject sPecifications-
        amount, and structure of rates, fees, charges,
        and other  revenue  sources  consistent with  projections  for  new project related revenue
        requirements.

The following steps will help utilities build sustainable financial strategies for their selected project
alternatives, as well as maintain or improve the overall financial health of their organization.

Step 1: Account fully for all project capital costs

There are two types of project capital costs.  Primary project capital costs should have been built into
costs  used for alternatives analysis.  They typically include construction, engineering and technical
services, environmental review and  permitting, bidding and contracts, legal services, land and right-of-
way acquisition, commissioning costs, and construction management. These costs represent the base
14 Reported amounts are central estimates assuming no increase in revenues. EPA, "The Clean Water and Drinking Water Infrastructure Gap
Analysis," http://www.epa.gov/ogwdwOOO/gapreport.pdf.
   General  Accounting  Office,  "Water  Infrastructure:   Information  on  Financing,  Capital  Planning,  and  Privatization,"
http://www.gao.gov/new.items/d02764.pdf
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capital funding requirement associated with the selected alternatives, and it is critical to ensure their full
accounting as part of alternatives analysis.
Secondary  capital costs  are linked to  the
capital financing method.  They include the
cost  of   capital  (interest  rate),   capital
acquisition costs  (such as financial advisory
fees, rating agency fees, closing costs, etc.),
and costs related to creating any required
reserve  funds  or meeting debt coverage
covenants.  Even grants have some  costs,
such as grant application  and administration
costs.

The example  on  this  page shows  a cost
analysis from the Quay County, New Mexico
"Forty Year Water Plan." The analysis is for a
conventional treatment and pumping system
that includes an  intake structure,  pumping
station,   storage   tanks,  treatment  plant,
pipelines,  and  other pieces  of component
infrastructure.     Primary  costs   include
construction,   design   services,   funding
activities,   public  education,   and   other
items—along with 5-year projected costs for
operations    and    maintenance    and
replacement.  In addition, the cost estimate
includes the secondary capital cost of "debt
service on financed  share" for the financed
component of the project.
     Example Cost Analysis from the Quay County,
         New Mexico "Forty Year Water Plan"
FIXED COSTS
Total Construction Cost                         $216,000,000
Capital Outlay for Federal Share (80%)               $172,800,000
Capital Outlay for State Share (10%)                  $21,600,000
Capital Outlay for Local ENMRWA Member Share (10%)    $21,600,000

NON-CONSTRUCTION COST
Detailed Design Services                          $13,000,000
Funding Activities                                  $250,000
Public Education Programs                           $250,000
Environmental and Permitting                        $1,500,000
Construction Management Services                   $13,000,000

TOTAL NON-CONSTRUCTION COST                $28,000,000
Capital Outlay for ENMRWA Member Share            $2,800,000
Total Fixed Costs-All Phases Full Delivery          $244,000,000
Federal Share (80%)                            $195,200,000
State Share (10%)                               $24,400,000
ENMRWA Member Share (10%)                     $24,400,000

RECURRING COSTS
Raw Water Cost ($35 per acre foot to ISC)                $600,000
Debt Service on Financed Share (20 year period)          $1,950,600
Cost of Operation and Maintenance (5 yr period)           $9,815,000
Replacement Costs (5 year period)                     $478,000
ISC Ute Reservoir O&M Fee ($5.60 per acre foot)           $134,400
         Sub-total Annualized Costs              $12,978,000

System Average Water Rate Projection ($/gal)              $1.66
  Source: Quay County, New Mexico "Forty Year Water Plan," September 2004
It is critical that the utility account fully for all capital financing costs—using up-to-date information on
interest rates and other factors—and build them into future revenue requirements analysis.  Calculating
new projects' overall impact on average annual capital financing costs and the maximum annual future
debt  service  payment will  help utilities understand the  effects of new  projects on the utility's cost
structure.
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Step 2:  Account fully for operations and
maintenance costs

The  selected project alternatives  will likely
change overall  operations and  maintenance
costs for  the  utility (either  up  or  down).
Although these costs should have  been fully
profiled  during alternatives  analysis,  it  is
important to thoroughly review the estimates
at this point in  the  process.  This will  ensure
revenue  requirement  estimates  are  fully
reflective  of any  changes  in  O&M costs
resulting from the new project(s).

From a project financial sustainability point of
view,  asset depreciation  is  an   additional
operating cost area to consider. Establishing a
project  depreciation expense,  an area  of
potential weakness  in  many revenue  adequacy determinations,  is  critical to  estimating revenue
requirements sufficient to replace aging infrastructure.  Revenue requirements reflecting depreciation
costs can provide the means to establish and fund repair and replacement accounts.

Underfunding predictive and preventive maintenance (i.e., failing to fully estimate costs as part of the
revenue requirements determination) is  a key vulnerability of revenue adequacy  determinations.
Ongoing condition assessment costs of any new infrastructure also need to be accounted for, consistent
with the utility's asset management program requirements.  Overall, maintenance costs will be unique
to the particular assets involved, but should be  driven by the utility's asset management program, which
will  set  the type and  frequency  of  desired   maintenance.  Because underfunding  predictive  and
preventive maintenance is a common problem, thorough  consideration of project maintenance costs
with the underpinning of  the utility's  asset management program is critical  to ensuring maintenance
needs are fully represented when establishing funding adequacy.  A 2002 GAO report estimated that 29
percent of water utilities deferred maintenance due to inadequate funding.16
    Operations and Maintenance Funds in Greeley,
            Colorado and Salem,  Oregon

To ensure that operations and maintenance expenses are
adequately funded, some utilities establish separate funds for
them. For example, the City of Greeley,  Colorado (serving a
population of 93,000 people) separates its enterprise funds for
operations from several other capital improvement funds. The
operations fund is primarily funded by water and wastewater
rates and has a minimum reserve of 90 days of O&M expenses.
Transfers of funded depreciation from operating funds are used
to pay for the replacement and renewal of capital assets.
Similarly, the City of Salem, Oregon (serving a population of
177,000) has established rehabilitation and replacement funds
to cover future infrastructure rehabilitation and replacement
costs as determined by the city's capital  improvement plans.
For further reading, see EPA, "Case Studies  of Sustainable Water and
Wastewater Pricing"
  General Accounting Office, "Water Infrastructure: Information on Financing, Capital Planning, and Privatization/
http://www.gao.gov/new.items/d02764.pdf
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        Changes in the utilization and
        expense of existing
allows the utility to avoid or delay the financial costs of developing
new water supplies.  Monthly service and usage charges (using
             Increasing Resilience and Saving Money through Energy Efficiency in New Mexico

  Entranosa Water & Wastewater Association serves slightly more than 3100 residential connections in a suburban and rural
  area east of Albuquerque, New Mexico.  Its decision to pursue infrastructure investments to save money, become more
  energy efficient, and make its electrical supply more resilient illustrates how a utility can set and act on sustainability
  priorities.

  Entranosa's ground water supply is fed from seven deep wells (ranging from 605 to 1080 feet of depth).  The water is
  delivered to two booster/disinfection stations, from which it is lifted to an array of tank storage at varying  elevations.
  Entranosa uses a lot of electrical energy to fulfill its mission.  The electrical supply is provided by a rural electric cooperative,
  and it is subject to  outage from snow storms, occasional hurricane-force winds, and cattle knocking down power poles.

  To address these challenges, Entranosa took some common sense, relatively low-cost steps to reduce its operational costs
  and meet the needs of its customers.  The Association changed energy from electric to natural gas on one highly productive
  well helping to cut  operational cost (depending on the cost of gas) and providing an emergency source of power to provide
  baseline flows to meet the needs of its membership. It also installed variable speed pumps that operate with greater energy
  efficiency at low flow rates. Taken together, these changes reduced the Association's annual operational costs by
  approximately $7,000.


Step 3:  Account for the impacts new projects may have on overall utility system costs and
revenues

In  addition to  affecting  direct capital,
operations, and  maintenance expenses,                Water Conservation and Financing in
selected  project alternatives may also                      Marin County, California
affect overall cost and revenue structure.
                                  .An example of how projects can explicitly (and intentionally) affect
lo    ensure   revenue    requirements      utilization and revenues comes from the Marin Municipal Water
associated  with  the new  projects  are      District in California, which serves 190,000 people.  The Marin
correctly   established,   the   following      Municipal Water District operates under a comprehensive integrated
                       '                        resource management plan that includes a demand-management
potential impacts should be examined:        progrgm fo reduce wgter use  Through conservation and water
                                                recycling, the utility has kept demand at 1980 levels in spite of a
    •   Changes  in the cost of service to       rising population.
        different classes of customers;
                                                While water conservation reduces the revenues for the utility, it also
        infrastructure by the addition of       increasing block rates) cover the full operating costs of the utility, and
                                                connection fees cover past and future capital costs.
        new infrastructure (e.g., bigger
        new pipes that bring larger
        volume flows to an existing treatment facility);
        Changes  in the type and utilization rates of personnel;
        Changes  in the need to provide emergency services; and
        Changes  in the resiliency of existing infrastructure and facilities (with potential implications for
        emergency preparedness and insurance costs).
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                                                               Cash vs. Debt Financing
As indicated above, new project(s) may also affect revenues available to the utility.  The utility should
therefore examine if the project(s) will affect any of the assumptions used in  its revenue projections.
Key areas for consideration are any change to the size of the customer base or to customer utilization
rates.  For example, conservation pricing has the potential to decrease utilization rates as  customers
conserve water, which may reduce revenues and potentially make them less predictable.17 Similarly, an
economic downturn can reduce the number of utility customers or their ability to pay. This decreased
rate-paying base can place substantial financial pressure on the utility.

Step 4:  Develop a capital financing strategy

An effective capital financing strategy is critical
to the financial sustainability of the selected
project alternatives and the utility system as a
whole.  A utility should  seek a capital financing
strategy  that keeps capital  acquisition  and
interest  costs as low as possible  and  keeps the
repayment  schedule  (principal  and  interest)
consistent  with revenue  capacity (cash  flow).
The mix  of financing options used by the utility
and how debt is structured  will  affect financial
sustainability.   There  are two   basic  building
blocks of an effective capital financing strategy:
1) identifying and  comparing the full range of
project  financing  options  available,  and  2)
managing   capital  commitments   and   debt
structure on  an ongoing  basis consistent with
utility revenue capacity and borrowing conditions.

Examining the Options
It is critically important to look at all funding options and carefully consider the differences in financing
costs they represent. Four basic options exist for capitalization of proposed project(s):  rates and other
utility  direct revenue sources, federal or state loan or subsidy programs, revenue bonds, and  state
grants.   The mix  of capitalization  approaches used can substantially  affect  borrowing  costs  and
repayment schedules.

In general, utilities have two choices when funding new capital investments—using revenues to "pay as
you go"  for new investments, or using long-term debt financing.  Under a "pay as  you go" approach,
capitalization through utility rates and other revenues does not  carry debt financing costs,  but it is
typically  reserved  for  routine   replacement  of  existing facilities,  system  extensions,  and  basic
improvements that can fit comfortably into annual utility revenue capacity. Major capital replacements
                                                   When considering financial strategies for new projects,
                                                   utilities should consider the pros and cons of cash vs. debt
                                                   financing. Key considerations include:
                                                       •   The opportunity cost of using cash that could be
                                                          deployed elsewhere or kept as a liquid asset;
                                                       •   The need to manage and protect asset
                                                          replacement funds over time;
                                                       •   The cost of capital (i.e., don't use cash for
                                                          something you can inexpensively finance);
                                                       •   Whether or not benefits will accrue to future
                                                          customers, which favors spreading out the
                                                          repayment terms through debt financing; and
                                                       •   The useful life of an investment (i.e., don't borrow
                                                          for 30 years if the useful life is 10 years).
 EPA, Water and Wastewater Pricing: An Informational Overview,"
http://www.epa.gov/owm/waterinfrastructure/pricing/pdfs/waterpricing final2.pdf
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and improvements, on the other hand, are typically financed  using long-term debt.  The use of long-
term debt allows for capital costs to be distributed over a number of years and better matches customer
charges with the long-term benefits provided by the new projects. The primary options for addressing
major capital financing needs are federal and state loan programs and the private bond market.  Each
will subject the utility to different interest, acquisition, and implementation costs.

EPA's "Financing  Alternatives Comparison  Tool" (FACT) provides  an illustration  of  how different
financing affects borrowing costs. 1S  FACT compares alternative financing strategies taking into account
interest rates, financing periods, amortization methods, and other financing factors.  The table below
shows key input assumptions and results for an illustrative example for the "Town of Clean Water."  It
compares two financing  approaches—SRF Direct  Loan and  Revenue Bond—to illustrate how different
capitalization approaches can substantially  influence borrowing rates and the associated long-term
costs.   Because the interest rate for the SRF  option is substantially lower than the  revenue  bond
alternative (along  with  no reserve requirements), total net present value financial costs  for the SRF
alternative are substantially lower for  the utility.  (Note that there may be other considerations  in
weighing  different financing approaches; for example SRF-funding is subject  to Davis-Bacon  wage
requirements while a revenue bond approach does not have these requirements.)

                        Table 3: FACT: Illustrative Example for "Town of Clean Water"
Key Financial Assumptions and Results SRF Loan Revenue Bond
Project Cost to be Financed
Construction Period Interest Rate (24 months)
Repayment Period Interest Rate (20 years)
Reserve Interest Rate (20 years)
Other selected costs specific to financing
method
615,000
2%
2%
(no reserve)
Reporting
615,000
5.5%
5.5%
5.5% (interest rate on a reserve fund that equals 10%
of the loan principal)
Bond counsel, underwriter, rating agency fee, bond
insurance, SEC disclosure
Results
Total Financed
Total Costs
Net Present Value (NPV) of Total Costs (5.5%
discount rate)
Average cost per year
$616,230
$800,260
$428,81019
$36,375
$699,744
$1,114,407
$617,945
$50,655
Source; EPA, FACT Overview presentation (on file)
As illustrated  above,  government loan programs, such as the Clean Water and Drinking Water State
Revolving Loan funds, will often  carry lower interest rates than private bond  issues.  (In practice, the
comparison of rates will depend on factors such as a state's or community's bond rating.)  Depending on
18 See: http://water.epa.gov/grants funding/cwsrf/fact.cfm
19 Readers will note that the NPV under the SRF financing as calculated by FACT is lower than the financed amount.  This results from the
difference between the interest rate charged on the principle (2%) and the discount rate used for calculating NPV in the tool (5.5%).
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community eligibility,  government loan programs may also provide interest and principal forgiveness
options.  These features can reduce debt financing costs  substantially.  These  subsidies provide an
incentive for  utilities  to make  sound  investments (including investments in sustainability)  that they
would not otherwise  be able to  make using commercial debt.  SRF  eligibility, review,  and selection
processes are intended to ensure that utilities are making the best possible use of the subsidy.

Capital  acquisition costs will be different for  SRF funding  and private capital.  Government loan
programs will have loan application and ongoing reporting-related administrative  costs. Private capital
acquisition costs typically  include financial advisory services, bond  counsel, underwriting fees, rating
agency fees, closing costs and fees, and bond insurance, and will have a mix of recurring costs including
those for reporting, accounting, and general administration.  Further major project capitalization costs
include  contributions to specified reserves (e.g., reserve account needs related  to annual  principal and
interest  payments, for  emergency  repairs,  and for  replacements) or  meeting coverage covenants
imposed by the indenture.  There are no specific federal  SRF requirements for  reserves or coverage
covenants, although many state SRF programs require one or the other.  Through coverage covenants,
state SRFs can require that, after operating and maintenance expenses are met, net annual revenues
must equal some increment above 100 percent (e.g., 120 percent) of the  annual debt service  payments
for principal and interest.
Although more favorable borrowing terms-
including  incentives  in  some  states  for
"green" project investments—are a principal
reason  utilities seek SRF financing,  not all
utilities are  eligible.   For those  that  are
eligible, there  are other considerations to
take into account.   For example,  a utility
with many capital projects may choose to
seek SRF funding  only for those most likely
to be approved or that would have the most
difficulty getting favorable terms in  private
markets.    SRF  funding  can  also  help
accelerate  project implementation  because
utilities with  SRF  loans can  often  obtain
accelerated consideration  of  environmental
and  other  permits.   SRF funding, however,
covers only a  small portion of the funding
needed for water and  wastewater capital
needs  and cannot be  used for operations
and maintenance.
 Camden County Municipal Utilities Authority and the
             Benefits of SRF Financing

The Camden County (New Jersey) Municipal Utilities Authority
(CCMUA) financing approach for a new sludge drying facility at
its 80 million gallon per day wastewater treatment plant provides
an example of the benefits of SRF financing. The capital cost of
the project is approximately $27.5 million.  CCMUA considered
financing through the low interest New Jersey SRF and also
through normal government revenue bonds. According to the
Deputy Executive Director at CCMUA, "the difference in total
cost and annual cost was startling."
Specifically, CCMUA was able to obtain 75 percent interest-free
funding through the New Jersey SRF.  As a result, the annual
cost to CCMUA with SRF financing is approximately $1.65
million per year for 20 years.  This compares very favorably to
the $3 million per year that the CCMUA would have paid had it
utilized commercial funding. Paying $1.35 million per year less
in annual debt service  enabled the CCMUA to implement this
important plant improvement without having to raise rates. Over
the 20-year life of the loan, CCMUA will save approximately $27
million for its ratepayers by financing this project through the
SRF program.

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Structuring Capital Commitments and Debt
Debt structure is the second critical aspect of a financing strategy.  It is linked to prevailing borrowing
conditions and the phasing of capital project implementation. A utility, when structuring debt, should
consider prevailing and anticipated future bond market conditions (to the extent that revenue bonds are
an important element of the capital financing approach). Key variables a utility can manage, depending
on conditions, are the timing of borrowing, the amount of each increment of borrowing, and the mix of
interest and principal paid on an annual basis over the life of the repayment schedule.  Maintaining
ongoing awareness of bond market conditions can provide refinancing opportunities throughout the life
of the project, particularly in cases  where a utility has strategically deferred  principal payments as a
result of financing during an unfavorable interest rate  climate.   Regardless of the public or private
financing option(s) selected, a utility can adjust project  phasing, and therefore the associated annual
capital principal and interest cost requirements.  Project phasing can smooth revenue requirements
over a several year period and help strike an effective balance with utility revenue capacity over the
debt financing period.

Step 5: Determine current revenue adequacy and develop future revenue strategy

Steps 1 through 4 will provide the utility with a full accounting  of the annualized costs and revenue
impacts of the new projects.   This information  can be overlaid  on the utility's current revenue
projections to determine revenue adequacy.  In some cases, cost savings from new capital projects (e.g.,
from reduced maintenance costs or more efficient operations) and current revenue generation will be
sufficient to cover new debt payments. In other cases, major capital projects may shift cost structures in
a manner that requires increasing revenues, unless rates, in particular, have been previously structured
with future capital project financing needs in mind.
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       Assessing Revenues Using the Financial Dashboard from the Environmental Finance Center at
                                          Boise State University

  The Financial Dashboard, developed by the Environmental Finance Center at Boise State University in Idaho, provides
  drinking water, wastewater, and stormwater utilities with a concise way to track, view, and evaluate the adequacy of
  revenues and other elements of their financial sustainability.  To use the dashboard, utilities enter information on expenses,
  rates, other revenue sources, and service demand. The dashboard quickly shows how total revenues compare to total
  expenses, and provides several indicators of financial sustainability, such as:

      •   Affordability—the percent of annual median income to pay for water service;
      •   Operating ratio—the ratio of ongoing operating revenues to operating costs;
      •   System reinvestment—a measure of funds for replacement compared to annual depreciation; and
      •   Revenues vs. expenses—the difference between annual revenue and annual expenses.

  The dashboard can be used to  assess the utilitiy's current structure of revenues and expenses and evaluate alternative
  approaches.
  The financial dashboard can be found at: http://efc.boisestate.edu/Tools/Dashboard/tabid/154/Default.aspx
                                    ~                                                 	

Once the level of adequate revenues has been established—and if a utility determines that increased
revenues are required—the utility will need to decide how to generate the necessary revenues through
customer rates and fees. Several considerations will need to be balanced:

    •   The timing, amount, and structure of any needed rate increases (e.g., phasing in increases over
        time);
    •   Alterations of the rate structure to reflect changes in the full cost of service to different classes
        of customers (e.g., industrial, commercial, and residential)  or explicit  acknowledgement of any
        transfer of revenues generated from one class to investments that serve another class;
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    •   Deviations from full cost of service pricing to accommodate special community conditions, such
        as low income customers (typically, states have their own guidelines regarding identification and
        accommodation of disadvantaged households);
    •   The structure and amount of system development fees (placed on, for example, developers) to
        help offset the capital cost of providing service to new customers; and
    •   The structure and amount of direct customer service connection fees.


                       Newport, New Hampshire:  Setting the Stage for Raising Rates

  Newport, New Hampshire is a small town of approximately 6,500 residents in West Central New Hampshire. Its city water
  system provides drinking water from a protected watershed and a single groundwater well to approximately 5,000 people,
  commercial customers, municipal agencies, and a single large industrial user. Newport is an example of a system that had
  to re-evaluate its revenues in light of a changing revenue and cost structure and adjust rates to put the system on a
  sustainable (and equitable) foundation.

  Newport invested in an expensive new treatment plant for its surface water supply in the early 1990s.  To cover debt service
  and part of the capital project costs Newport raised its water rates at that time.

  By 2002, however, a study by the city showed that rates were not adequate to cover ongoing operating costs and anticipated
  infrastructure upgrades. Costs included administration, treatment, distribution services, and debt service. Rates would also
  have to cover part of future infrastructure upgrades, because the city anticipated that the costs would not be fully covered by
  capital reserve funds, Drinking Water State Resolving Fund loans, and Community Development Block grant funds. With
  expenses increasing and capital investments on the horizon—at the same time that rates were static and usage was
  declining—the revenue adequacy study predicted that cash and working capital balances would decline to critical levels by
  2004-2005.

  Based on a 10-year planning horizon, the city chose to raise rates 10 percent over four years. For residential customers, the
  new rates were a straight usage charge based on metering. To soften the impact on lower income ratepayers and shift more
  of the cost burden to larger users, the city also reduced the minimum usage charge from 5,000 gallons per month to 3,000
  gallons. The utility estimated that it will not have to raise rates again until 2013.

  As the city was considering the need to raise rates, it informed the town selectmen and residents about the need for the
  increase and was ultimately successful in getting rates approved.

  Further Reading:
      •   EPA, "Case Studies of Sustainable Water and Wastewater Pricing:
          http://www.epa.gov/safewater/smallsvstems/pdfs/guide smallsvstems fullcost  pricing case studies.pdf


Resources that can help utilities calculate revenue requirements and set rates are included  in Appendix
A. They include:

    •   EPA, Setting Small Drinking Water Rates for  a Sustainable Future—a step-by-step  rate setting
        guide for small utilities to assessing annual costs, revenue needs,  and reserve  requirements and
        setting appropriate  rates; and
    •   American Water Works Association (AWWA), Principles of Water Rates, Fees, and Charges—a
        comprehensive guide for assessing costs and revenue requirements and setting rates.
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Implementing These Steps on a Smaller Scale

Utilities implementing at a smaller scale may face several financing challenges, including lack of credit,
lack of asset management programs, or pressure not to increase rates. These utilities need to be aware
of and utilize  resources that are available to help them obtain favorable financing rates and receive
technical assistance.  Resources include various Federal  and  State resources for building technical,
financial, and managerial capacity, such as EPA's resources for small public water systems and capacity
development,  including  the rate-setting  guide "Setting  Small Drinking  Water System  Rates  for  a
Sustainable Future."20

A  number of  utility associations also provide  resources for  utilities.   While EPA does not formally
endorse the resources, they include:

    •   The  Rural  Community Assistance  Partnership, which works with small, rural communities to
       build sustainable water systems.21
    •   The  National Rural Water Association, which has state affiliate "circuit riders" that can provide
       assistance to smaller utilities, including assistance in applying for SRF loans.22
    •   The  American Water Works Association's  Capacity Assistance  Program, which assists smaller
       utilities with "business planning."23

Utilities implementing at a  smaller scale may  have a more limited range of  options for generating
revenues or obtaining financing than larger systems—or at least they may not realize what options are
open to them.  For example, the small community of Hidden Valley Lake, California achieved significant
cost savings by merging a public  and private utility.  The merger opened up new opportunities for
financing drinking water infrastructure (see call-out box below).
20 See: http://water.epa.gov/tvpe/drink/pws/smallsystems/index.cfm
21 See http://www.rcap.org/
22 See: http://www.nrwa.org/
23 See: http://www.awwa.org/files/Resources/SmallSvstems/CAPSelfAssessmentChecklist.pdf
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                               Hidden Valley Lake Community Services District:
                   Changing Ownership and Operation for a Sustainable Financial Strategy

  The example of Hidden Valley Lake Community Services district demonstrates how a small utility can change its ownership
  and operations structure to put itself on a sustainable financial footing. Hidden Valley Lake is a community of 2,400
  residential lots and 34 commercial lots within a 1,400 acre service boundary.

  Prior to 1993, Stonehouse Mutual Water Company (established in 1968) supplied water to the Hidden Valley Lake
  subdivision and sewer to 200 lots around Hidden Valley Lake. As the community grew, the financial future of the company
  became increasingly uncertain. As a private company, it had no access to low interest loans or grants for infrastructure
  projects that the community would inevitably need.

  Stonehouse Mutual Water Company's financial problems led to discussions of a merger with Hidden Valley Lake Community
  Services District, a public utility that provided sewer service to most of the community. A merger into one utility company
  could provide large benefits, including:

      •    $300,000 savings per year in administrative and operational costs;
      •    Additional protection to the community through state oversight with full transparency; and
      •    Access to low cost loans and grants.

  The two utilities merged in 1993.  State law transitioned full ownership of water rights to the Community Services District and
  exempted the transfer of funds from Stonehouse Mutual Water to the Community Services District from taxation.  For the
  merger to occur, a vote from the Hidden Valley Lake property owners was required—1,544 votes were in favor with only 46
  opposed.

  The shift from a private to a public agency gave the utility the ability to access low interest loans and grants that were greatly
  needed for water and sewer infrastructure improvements and expansion for the rapidly growing Hidden Valley Lake
  community. In addition, the $300,000 annual savings from the merger was used to offset new infrastructure investment.  For
  example, the savings allowed the Community Services District to issue four sewer bonds and receive a state loan to  pay for
  a Water Reclamation Plant project while keeping rates stable.

  In 2004, the Community Services District obtained a low interest $3 million loan as a public agency and launched the Water
  Infrastructure Improvement  Project (WIIP) to add capacity for an additional million gallons of stored water, implement
  SCADA system improvements, replace water  regulator valves throughout the water system, and establish new pump
  stations.  Community Services District was also able to operate its pumps during off peak hours, accessing the lowest
  energy costs.  These savings helped sustain the water rate structure.

  Moving from the private sector to the public sector gave customers a say in decision making. Full transparency under a
  public agency created more confidence from the public at large.

  Currently, drinking water revenues are generated through:

      •    Water rates, which pay for the cost of operating and maintaining the water system (including improvements to
           increase system reliability and sustainability); and
      •    Water service hook-up fees, which reimburse the District for the incremental costs of capital investment and
           funding for improvements necessary to provide the capacity for growth.
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Key Diagnostic Questions

Utility managers can use the following questions to evaluate their implementation of this element:

    •   Was a full range of capital financing options considered and were their interest, acquisition, and
       implementation costs fully identified and thoroughly compared?
    •   Does the capital financing strategy keep capital acquisition and interest costs as low as possible
       and keep the repayment schedule  (principal  and interest)  consistent with utility revenue
       capacity (cash flow)?
    •   What was considered in determining whether to use cash versus debt financing?
    •   Are rates, fees, and charges sustainable and do they generate sufficient revenue to fully cover
       long-term, full lifecycle costs of the selected project alternatives?
    •   Are costs allocated fairly/appropriately (e.g., reliability costs to current customers, cost recovery
       for industrial wastewater permitting and treatment, growth costs to new development, rates for
       disadvantaged households)?
    •   Does the rate structure create appropriate customer incentives consistent with your utility's
       objectives (e.g., conservation pricing)?
    •   Does the financial strategy maintain or improve the bond rating, debt coverage ratio, or capital
       financing reserves where relevant?

Example of Sustainability Planning in Practice:  Camden, New
Jersey Invests in New Infrastructure and  Benefits the
Environment without Raising Rates

The Camden  County  Municipal Utilities  Authority  (CCMUA) operates an 80 million gallon per day
wastewater treatment plant in  Camden, New Jersey (population approximately 500,000).  The sewage
treatment plant was completed in 1987 and, as a result, many of its key process units were due for
replacement  during the  period 2007-2012.  As these process units aged,  CCMUA noted  steadily
increasing maintenance costs; overtime costs also increased due  to  the  increased incidence  of
unplanned repairs.  In addition, the CCMUA was aware that newer technology was available that could
reduce energy  and  operating costs.   Camden  provides an  example  of using an environmental
management  system  (EMS) and  associated asset  management  program  to support infrastructure
upgrades and reduce environmental impact while maintaining current rates.

As part of its EMS, CCMUA embarked on a five-year plan to replace its five main treatment process units,
which included sedimentation  tanks, pure oxygen aeration tanks, sludge thickening  facilities, sludge
dewatering facilities, and sludge drying facilities.  These capital improvements resulted in significantly
reduced maintenance and overtime costs, when compared to maintaining aging equipment. Moreover,
the pure oxygen system  upgrade utilized new technology that resulted  in reduced  electricity costs.
Similarly, the  new sludge thickening,  dewatering, and drying facilities produced drier sludge cakes,
resulting in significant reductions in sludge disposal costs.
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In all cases, CCMUA utilized the New Jersey State Revolving Fund which offered 75 percent interest free
loans. The much lower interest rate corresponded to much lower annual debt service costs. The annual
operations and maintenance cost savings associated with the plant upgrades exceeded the annual debt
service costs. As a  result, CCMUA was able to replace or upgrade all of its main treatment process units
without raising user rates. Furthermore, public support for these plant improvements was quite easy to
obtain.

In addition  to the economic benefits  realized through this EMS and its associated  asset management
plan, CCMUA also improved  its environmental performance. The new sludge thickening and dewatering
facilities increased  the treatment plant's capability  to capture more sludge through  the treatment
process.  Effluent quality improved by about 70 percent.  Reducing the weight and volume of biosolids
also reduced disposal needs  and odor potential.

Overall, CCMUA's asset  management program, as part of its overall EMS, identified replacement of
underperforming, high maintenance capital with new, more efficient equipment as a key  opportunity.
These changes, coupled with the use  of low interest  New Jersey State Revolving Loan Fund financing,
enabled 1)  replacing the  main treatment  plant  process  units,  2)  reducing  annual  operating and
maintenance costs, and 3) improving environmental performance without raising  rates.
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Conclusion
Incorporating  sustainability  considerations into  water and wastewater utility  planning can  produce
substantial benefits.  It can help utilities:

    •   Reduce  lifecycle costs  by operating more  efficiently,  pursuing cost-effective  investment
        strategies and optimizing investment choices.
    •   Optimize social, environmental,  and economic  benefits  by selecting  projects through a
        systematic process of setting sustainability goals and objectives that  also support community
        priorities.
    •   Increase community support through upfront dialogue with community members and active
        consideration of other community priorities as alternatives are considered.
    •   Balance  assessment of a range of traditional  and non-traditional infrastructure alternatives
        using consistent criteria.
    •   Increase fiscal sustainability by analyzing the full lifecycle costs of investments, developing low
        cost financing strategies, and ensuring that  revenue needs are accurately assessed to support
        maintenance, renewal,  and  replacement  of  infrastructure  while  meeting  all  regulatory
        requirements.
    •   Provide  sustainability benefits  information for  making replicable,  consistent, and transparent
        decisions and for explaining decisions to  board members, local elected officials, the public, and
        others.
    •   Increase customer support through clear rate expectations (and  avoided  "rate  shocks"),
        increased system reliability, and increased responsiveness when disruptions occur.
    •   Enhance the technical, financial, and managerial capacity of the utility.

The case studies in this  handbook provide examples of how to undertake certain aspects of planning.
The guidance and tools  referenced in the handbook and Appendix A provide further helpful resources.
Utilities applying this guidance  and these  tools should utilize the identified processes on an  iterative
basis, refining them  over time.  This  will help  support the sustainability and  responsiveness of the
planning process.

As the  practice of planning for sustainability  evolves, more effective practices  will  emerge.   EPA
envisions this handbook as a resource that can be updated to provide water  utilities with the  most
current advice and resources.  These  resources can help utilities more effectively use this planning
approach over time and  further  optimize their infrastructure and operational decisions.
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Appendix A:   Useful Sustainability Planning Resources
Asset Management

   •   EPA, "Asset Management: A Best Practices Guide":
       http://epa.gov/safewater/smallsystems/pdfs/guide  smallsystems assetmanagement  bestpract
       ices.pdf
   •   EPA, "Asset Management: A Handbook for Small Water Systems":
       http://epa.gov/safewater/smallsystems/pdfs/guide  smallsystems asset  mgmnt.pdf
   •   Association of Metropolitan Water Agencies, NACWA, and the Water Environment Federation,
       "Implementing Asset Management: A Practical Guide": https://www.e-
       wef.org/Home/ProductDetails/tabid/192/Default.aspx?Productld=4130
   •   EPA Office of Wastewater Management Asset Management resources:
       http://www.epa.gov/owm/assetmanage/index.htm
   •   New Mexico Environmental Finance Center Asset Management resources:
       http://nmefc.nmt.edu/AssetManagement.php
   •   EPA, Check Up Program for Small Systems (CUPSS)—tool for inventorying assets, maintenance,
       and associated costs and short and long term budgeting: http://epa.gov/safewater/cupss/

Collaboration and Partnerships

   •   EPA, "Gaining Operational and Managerial Efficiencies Through Water System Partnerships":
       http://www.epa.gov/ogwdwOOO/smallsystems/pdfs/casestudies smallsystems gainingoperatio
       nal.pdf

Community Engagement

Guides and Tools

   •   EPA, Public Involvement Tools website—compendium of public involvement manuals, tools, and
       techniques for public involvement in environmental decisions:
       http://www.epa.gov/publicinvolvement/involvework.htm
   •   Envision Utah Community Planning Process—describes a participatory planning process that
       involves a stakeholder steering committee, community "values analysis," and a community
       information and education campaign: http://www.envisionutah.org/eu  about euprocess.html
   •   American Water Works Association Public Communications Toolkit—members-only resources
       for public relations and public communications for water utilities:
       http://www.awwa.org/Government/Content.cfm?ltemNumber=3851&&navltemNumber=3852
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    •   Water Environment Federation, "Survival Guide: Public Communications for Water
       Professionals"—public communications guidance and best practices for water managers:
       http://www.wef. org/WorkArea/DownloadAsset.aspx?id=7120
    •   International Association of Public Participation (IAP2) website—compendium of public
       involvement tools and resources: http://www.iap2.org/

Case Studies

    •   University of Arizona Water Resources Research Center, "Best Practices for Stakeholder
       Engagement in Water Resources Planning"—summary of poster sessions for 2009 conference
       that briefly describe case studies of various efforts to involve stakeholders in water planning:
       http://cals.arizona.edu/AZWATER/programs/conf2009/posters.pdf
    •   peopleandparticipation.net case studies—international collection of public participation case
       studies: http://www.epa.gov/publicinvolvement/involvework.htm

Effective Utility Management

    •   Effective Utility Management Collaboration Effort: www.watereum.org

Energy Efficiency

    •   EPA, Energy Efficiency for Water and Wastewater Utilities—provides links to several guides and
       tools for tracking and understanding water utility energy use:
       http://water.epa.gov/infrastructure/sustain/energyefficiencv.cfm
    •   EPA, "Ensuring a Sustainable Future: An Energy Management Guidebook for Wastewater and
       Water Utilities"
       http://www.epa.gov/owm/waterinfrastructure/pdfs/guidebook  si  energymanagement.pdf
    •   EPA, "Report on  Evaluation of Energy Conservation Measures for Wastewater Treatment
       Facilities": http://water.epa.gov/scitech/wastetech/upload/Evaluation-of-Energy-Conservation-
       Measures-for-Wastewater-Treatment-Facilities.pdf
    •   Energy Star/Portfolio Manager for water utilities—tool for plant managers to assess and track
       energy use, energy costs, and associated carbon emissions and benchmark performance against
       other similar facilities:
       http://www.energystar.gov/index.cfm?c=water.wastewater drinking  water
    •   EPRI. "Energy Audit Manual for Water/Wastewater Facilities"—guide for assessing energy use at
       the process level: http://www.ceel.org/ind/mot-sys/ww/epri-audit.pdf
    •   New York State Energy Research and Development Authority (NYSERDA), "FlexTech Program"—
       technique for energy assessments for facilities that will receive CWSRF funding:
       http://nvserda.nv.gov/en/Page-Sections/Commercial-and-lndustrial/Programs/FlexTech-
       Program.aspx?sc database=web
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   •   State of Wisconsin "Water and Wastewater Energy Best Practice Guidebook":
       http://www.werf.org/AM/Template.cfm?Section=Home&CONTENTID=10245&TEMPLATE=/CM/
       ContentDisplay.cfm
   •   Alliance to Save Energy. "Watergy: Taking Advantage of Untapped Energy and Water Efficiency
       Opportunities in Municipal Water Systems" http://www.munee.org/files/watergysummarv.pdf
   •   Rural Community Assistance Corporation, "Sustainable Infrastructure for Small System Public
       Services: A Planning and Resources Guide": www.rcac.org/assets/green infra/gig.pdf

Environmental Management Systems

   •   Resources on Environmental Management Systems for Water and Wastewater Utilities:
       http://www.peercenter.net/sas/water.cfm

Green Infrastructure

   •   Center for Neighborhood Technologies (CNT) Green Values Stormwater Management
       Calculator—assesses hydrological impacts and cost-effectiveness of green infrastructure
       options: http://logan.cnt.org/calculator/calculator.php
   •   EPA, Green Infrastructure website—provides background and resources on green infrastructure
       strategies: http://water.epa.gov/infrastructure/greeninfrastructure/index.cfm
   •   Water Environment Research Foundation (WERF): "Performance and Whole-Life Costs of Best
       Management Practices and Sustainable Urban Drainage Systems":
       http://www.werf.org/AM/CustomSource/Downloads/uGetExecutiveSummary.cfm?FILE=ES-01-
       CTS-21Ta.pdf&ContentFilelD=10452 (Executive Summary)
   •   Water Infrastructure Finance Authority of Arizona, "Sustainable Infrastructure: A Best Practices
       Guide for Arizona Wastewater Utilities" (chapter on "sustainable design strategies"):
       www.azwifa.gov/publications/BestPracticesGuideForWastewaterUtilities.pdf

Support for Existing Communities

   •   Vermont Agency of Natural Resources, "Growth Center and Growth Management Guidance
       Document"—guidance on strategies to support existing communities for wastewater utilities:
       http://www.anr.state.vt.us/dec/fed/financial/docs/GROWTH%20CENTER%20AND%20GROWTH
       %20MANAGEMENT%20GUIDEANCE%20November%202010.pdf

Sustainable Financial Strategy

   •   Financial strategy: EPA, Financing Alternatives Comparison Tool (FACT)- financial analysis tool
       that calculates and compares the costs of various financing options for water quality projects:
       http://www.epa.gov/owm/cwfinance/cwsrf/fact.htm
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    •   EPA, "Setting Small Drinking Water Rates for a Sustainable Future"—a step-by-step rate setting
       guide for small utilities for assessing annual costs, revenue needs, and reserve requirements and
       setting appropriate rates:
       http://www.epa.gov/owm/waterinfrastructure/pdfs/final ratesetting guide.pdf
    •   American Water Works Association (AWWA), "Principles of Water Rates, Fees, and Charges"—a
       comprehensive guide for assessing costs and revenue requirements and setting rates:
       http://apps.awwa. org/ebusmain/OnlineStore/ProductDetail/tabid/55/Default.aspx?ProductlD=
       6695
    •   American Water Works Association, CAP: Capacity Assistance Program Self Assessment
       Workbook Checklist—a series of self-assessment questions to help utilities "operate like a
       business":
       https://www. awwa.org/files/Resources/SmallSystems/CAPSelf AssessmentChecklist.pdf
    •   Government Finance Officers Association, guidance manuals and reports on financing topics:
       http://www.gfoa.org/index.php?option=com  content&task=view&id=332.  Key publications
       include:
           o  Debt Issuance and Management: A Guide for Smaller Government—introduces the
              essential concepts of tax-exempt debt financing and compares and contrasts options.
           o  Benchmarking and Measuring Debt Capacity: GFOA  Budgeting Series Volume 1 (Putting
              Recommended Budget Practices into Action)—provides a useful analytic approach to
              implementing budget practices.
           o  Capital Project Planning and Evaluation—discusses considerations associated with most
              capital project types  (e.g., public participation, cost estimation and budgeting, and
              project oversight) and a short description of twelve  important capital project types.
    •   Rowan Miranda, Ronald Pincur, and Doug Straley, "Elements of a Comprehensive Local
       Government Debt  Policy," Government Finance Review (October 1997):
       http://www.gfoa.org/downloads/GFREIementsofDebtPolicy.pdf
    •   Margaret C. H. Kelly and Matthew Zieper, "Strategies for Passing a Bond Referendum,"
       Government Finance Review (June, 2001):
       http://www.gfoa.org/downloads/GFRPassingBondReferendum.pdf
    •   California Debt and Investment Advisory Commission, "Bond Insurance as a  Form of Credit
       Enhancement in California's Municipal Bond Market":
       http://www.gfoa.org/downloads/CDIACCreditEnhancementReport.pdf

Water System Vulnerability Resources and Assessment Tools

    •   EPA, Water Security Website—provides a wide range of resources on water security,
       vulnerability, and resilience:  http://water.epa.gov/infrastructure/watersecurity/
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    •   American Water Works Association (AWWA), "J100 RAMCAP Standard for Risk and Resilience
       Management of Water and Wastewater Systems"—voluntary consensus standard encompassing
       an all-hazards risk and resilience management process for use specifically by water and
       wastewater utilities:
       http://www.awwa. org/Resources/standards.cfm?ltemNumber=54453&navltemNumber=55050
    •   EPA, Vulnerability Self-Assessment Tool (VSAT)—risk assessment software tool that assists
       drinking water and wastewater utilities in assessing security threats and natural hazards and
       updating utility Emergency Response Plans; appropriate for any water system size or type:
       http://water.epa.gov/infrastructure/watersecurity/techtools/vsat.cfm
    •   National Rural Water Association, Security and Emergency Management System (SEMS)—
       software to assist small water systems in completing a vulnerability self-assessment:
       http://semstechnologies.com/RAMCAP.asp
    •   Sandia National Laboratories, Risk Assessment Methodology (RAM-W)—a vulnerability self-
       assessment tool appropriate for small, medium, or large systems:
       http://www.sandia.gov/ram/RAMW.htm
    •   EPA, Community-Based Water Resiliency Website and Tool—resiliency resources for
       communities and water utilities, including a tool to help communities conduct a self-assessment
       of resiliency to service disruptions and identify actions to enhance resiliency:
       http://water.epa.gov/infrastructure/watersecurity/communities/index.cfm
    •   EPA, Climate Resilience Evaluation and Awareness Tool (GREAT)—a software tool to assist
       drinking water and wastewater utilities in understanding potential climate change threats and in
       assessing the related risks at their individual utilities:
       http://water.epa.gov/infrastructure/watersecurity/climate/creat.cfm  (Related resources for
       increasing water system resilience to climate change are available at: EPA, Climate Ready Water
       Utilities: http://water.epa.gov/infrastructure/watersecurity/climate/index.cfm

Water Quality

    •   EPA, "Small Systems Guide to Safe Drinking Water Act Regulations"—resource for
       understanding current and anticipated drinking water regulations with which utilities need to
       comply: http://epa.gov/safewater/smallsystems/pdfs/guide smallsystems  sdwa.pdf

Water Utility Sustainability and Climate Change Adaptation

    •   Cheryl Welch, The Green Utility: A Practical Guide to Sustainability, American Water Works
       Association (2010)—includes ideas, plans, and tools to reduce environmental impacts, positively
       impact communities, and deliver high quality service:
       http://www.normas.com/AWWA/pages/20706.html
    •   The Institute for Sustainable Infrastructure—developed and provides a civil engineering
       infrastructure Sustainability rating system: http://sustainableinfrastructure.org/
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    •   EPA, "Climate Change Indicators in the United States"—presents 24 indicators, each describing
       trends related to the causes and effects of climate change:
       http://www.epa.gov/climatechange/indicators.html
    •   EPA, "Climate Change Vulnerability Assessments: Four Case Studies of Water Utility Practices"—
       presents a series of case studies describing the approaches currently being taken by four water
       utilities to assess their vulnerability to climate change:
       http://cfpub.epa. gov/ncea/global/recordisplay.cfm?deid=233808

Water Utility Strategic Planning

    •   EPA, "Strategic Planning: A Handbook for Small Water Systems, Simple Tools for Environmental
       Protection (STEP) Guide"—a strategic planning guide and workbook for small water systems:
       http://www.epa.gov/ogwdw/smallsystems/pdfs/guide smallsystems stratplan.pdf
    •   Honolulu Board of Water Supply, "Development of a Strategic Planning Process: Tailored
       Collaboration Project," American Water Works Association Research Foundation

Working with Boards and Commissions

    •   EPA, "Talking To Your Decision Makers: A Best Practices Guide"—describes the role of board and
       commissions and  provides  information about effective engagement and communication:
       http://www.epa.gov/ogwdw/smallsystems/pdfs/guide smallsvs decision makers 08-25-06.pdf
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Appendix B:  Relationship Between Core Elements of
Planning for Sustainability and Effective Utility
Management
 Core Elements of Planning
    for Sustainability
Element 1: Goal Setting
                      Effective Utility Management
                          Keys to Management Success
   Strategic Business Planning
   Continual Improvement Management
                                Attributes of Effectively Managed Utilities
•  Customer Satisfaction
•  Community Sustainability
•  Stakeholder Understanding & Support
•  Water Resource Adequacy
Element 2: Objectives and
Strategies
•  Strategic Business Planning
•  Measurement
Elements: Alternatives
Analysis
   Strategic Business Planning
•  Customer Satisfaction
•  Infrastructure Stability
•  Product Quality
Element 4: Financial Strategy
                                  Financial Viability
For more information on Effective Utility Management, please see: www.watereum.org.
Planning for Sustainability
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