The Lead and Copper Rule (the Rule) legal challenge was recently struck down in the Court of Claims. Barring a successful appeal, which has not been filed at this time, there will be no changes to the Rule. While there are many engineering and process requirements in the Rule, communities should prepare for the financial impact this rule could have on their municipal water system.
The Rule will have a financial impact on affected communities. If you haven’t discussed the Rule with your in-house or consulting engineering and financial advisor, now is the time. The materials inventory detailing all of the system’s service lines material composition is due to the Department of Environment, Great Lakes and Energy (EGLE) by Jan. 1, 2020.
In addition, water systems are required to replace at least five percent of all lead service lines (or any service line that may have been connected to lead in the past) per year starting in 2020. While many questions remain as to how the process to replace these lines will be administered, the financial impacts should be addressed now.
EGLE has said that the Drinking Water Revolving Fund program administered by the Michigan Municipal Finance Authority will be allowing communities to apply for funds to replace these lines. Municipal bond interest rates continue to hover around historic lows making this a good time to finance these necessary improvements.
Planning the best course of action to comply with the Rule, while getting the improvements completed at the lowest cost to ratepayers should be the goal. What does this mean for your utility and financial situation? Should you cash fund replacements every year, issue bonds for replacements, or plan for a mix of both? Updating or creating an asset management financial plan for the water system is the best place to start.
For more information on this topic, or to learn how Baker Tilly utility specialists can help, contact our team.