OPERATIONS & MAINTENANCE EXPENSE:

WE NEED TO KNOW!!

By David A. Miller
P.E., USDA Rural Development, Rural Utilities Service Program Director

It has become very clear that operation and maintenance costs for rural water and wastewater systems have increased, sometimes dramatically, over the past few years. At USDA Rural Development (Rural Utilities Service) actual costs that your system experiences are critical to the loan/grant calculations made to benefit your improvements. To date, we have spot checked our estimates of operation and maintenance cost, however, given the differences in electric and other costs throughout specific regions in the state today, a more intensive investigation is now required. To this end, I have requested that your New York Rural Water Association's Circuit Riders (Technical Assistance providers) gather specific information from your systems to create a database for our internal use. I know you're thinking, "How will this information be used and how will it benefit my system?" Let me give you a little background on how we "magically" determine those loan/grant ratios. We base cost, which includes proposed new debt, and operation and maintenance expenses (including the cost of water) on an Equivalent Dwelling Unit (EDU) basis. One typical residential user is equated to 1.0 EDU. Vacant lots are partials and excessive users are multiples. In New York State (and others) a "Similar System" cost basis is used to determine affordability. "Similar System" costs are indexed to the proposed service area's median household income as well as the cost of previously financed water/wastewater systems by this agency in the region. From this established "similar system" cost, we deduct existing debt service (if any) and estimated operation and maintenance cost. The remaining amount is the debt service available for payment to the proposed project. The difference between the estimated project cost, the loan amount based upon debt service and other co-funding (if any) is the USDA Rural Development (RUS) grant amount. From this, you will agree that knowing actual up-to-date operation and maintenance costs are critical to successful projects. Your cooperation will be appreciated as it helps us to do a better job serving your needs. My thanks to the New York Rural Water Association for attending to this request.

For questions or additional information, please contact me at 315-477-6427 or e-mail me at david.miller@ny.usda.gov