Goal of the Governor’s Water Supply Program

The expressed overall goal of the Governor’s Water Supply Program (GWSP) is to “assist local governments with developing new sources of water supply adequate to meet future water demands.”

One of the goals of the Georgia Environmental Finance Authority (GEFA) and the GWSP Task Force is to “[enumerate] the key challenges to developing new water supply facilities in the state and to [identify] the most effective solutions to those challenges.”  In my experience one of the primary challenges to developing new or expanding existing water supply facilities is funding the initial cost to plan, permit and design the project. The GWSP has authority and ample opportunity to resolve this challenge.

I am providing a suggested course of action for the GWSP to review and consider.

As clearly expressed by the local government officials at the May 26^th meeting of the GWSP subcommittees, the uncertainty regarding the time and expense of navigating the federal Section 404 process is a barrier to pursing new projects.  This uncertainty with the federal permitting process creates hesitation by the very local governments who are charged with and who need to be pursuing water supply options.  This uncertainty also provides a barrier to private investment assisting local governments to pursue new water supply options.  This same barrier is present when considering any new source of water (reservoirs, ground water, aquifer storage and recovery, stream flow augmentation, etc.) or conservation measure (leak detection, rain water harvesting, etc.)

GEFA’s own policies now (since January 2011) permit it to loan money to local governments for use in planning, permitting and design of expanding existing and pursuing new water supply projects.  Currently, this is treated like the use of funds for a construction project; repayment of the interest begins immediately. In these economic times, and with the uncertainty regarding the time and cost of the planning, permitting and design stage, immediate repayment obligations are as much a barrier to initiating the process as is paying for it out-of-pocket.

Facing similar circumstances in Texas, where outright grants and construction loans did not promote the pursuit of new projects, the Texas State Water Development Board, in 2007, started its “Water Infrastructure Fund – Deferred” (WIF-D) program.  The WIF-D program loans money to local governments for planning, permitting and design services.  All repayment of the funds is deferred until the sooner of completion of construction or the project or 10 years.  At that point the obligation is amortized and repaid over 10 years.

Some of the GWSP Task Force members and staff have stressed Georgia’s program needs to be sustainable and have expressed concern that deferring repayment for 10 years would hamper that goal.  But, to achieve the goal of facilitating local governments, the repayment deferral would not need to be that long.  My proposal is to shorten the Texas Plan to a five-year deferral and five year repayment schedule.  That allows the participating local governments to pursue funding options like SPLOST, incremental rate increases, revenue bonds, and private financing to meet the repayment obligation.  At the same time, it is not so long that it interferes with making the program sustainable.

The proposal does not include the local governments providing matching funds.  If the goal is to remove the barriers preventing development of new and expanded facilities, it is counterproductive to include requirements that we already know are barriers?

The second most common concern expressed is that the program will be used to pursue projects that are unlikely to be permitted or built.  Safeguards in the system to minimize those concerns could include:

As proposed, GEFA would have multiple opportunities to reassess the viability of the project before loaning additional funds.

In summary, GEFA would make loans to local governments for the planning, permitting and design of water supply projects.  Repayment would be deferred for five years from the date of the first disbursement.  Safeguards of the program include annual review of the project and reapplication at other predetermined points.  The deferral of payments allows the planning process to begin while the local government makes its long-term plans for repayment.

There are approximately 12 water supply reservoir projects in some phase of the planning and permitting process.  Most of those are stalled due to the unavailability of local funds to pursue those projects, the uncertainty of the cost and timing of permitting the project, and/or the hesitancy of private investors to enter the process at this point.  If all of these are permitted, there will be an additional 350 million gallons a day (“mgd”) of new permitted water supply in North Georgia.

With proper and sustained political and financial support, it takes an average of three to four years to plan and permit a new water supply project.  Assuming it would cost an average of $2 million dollars per project to complete the planning and permitting, this portion of the program would use less than $25 million[1] (out of a proposed $400 million), over four years, to permit 350 mgd of new water supply capacity.

Even if this amount is dedicated to North Georgia reservoirs, its leaves the vast majority of funding available to plan and permit projects for drought relief and increasing agricultural production in South Georgia.

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