Article

Finance future utility projects with system development changes

Nov. 6, 2018 · Authored by Doug Baldessari

Is your utility charging system development charges (SDCs) to new users connecting to the system? SDCs, sometimes referred to as availability fees or capacity charges, have been used by sewer and water utilities for many years to provide a source of funding for future capacity-related improvement projects. New customers pay the SDC when they connect to the utility system. The funds are then held in a separate account to reduce the amount of debt needed for upcoming improvement projects. This scenario allows “growth to pay for growth.” Many times, utilities are faced with the need to expand treatment facilities because of a growing customer base. An SDC paid by new development provides funding for the expansion with minimal impact to existing customers.

Generally, there are three different methods of calculating an SDC. The appropriate method for your utility is fact-specific and depends upon the utility’s goals and the status and timing of planning for future improvements. It takes time for SDC revenues to build up to fund future improvements, so the earlier you get them enacted the more effective. 

Utilities have lots of needs and in many cases limited revenues to pay for increasing costs to run a utility. Implementing SDCs as an additional funding use with your utility source for capital projects is one way to limit the burden on ratepayers

For more information on this topic, or to learn how Baker Tilly municipal specialists can help, contact our team.

Baker Tilly Municipal Advisors, LLC is a registered municipal advisor and controlled subsidiary of Baker Tilly Advisory Group, LP. Baker Tilly Advisory Group, LP and Baker Tilly US, LLP, trading as Baker Tilly, operate under an alternative practice structure and are members of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. Baker Tilly US, LLP is a licensed CPA firm and provides assurance services to its clients. Baker Tilly Advisory Group, LP and its subsidiary entities provide tax and consulting services to their clients and are not licensed CPA firms. ©2024 Baker Tilly Municipal Advisors, LLC