Author: Glenn Barnes (Page 3 of 7)

SOG Environmental Finance Ctr

Key Financial Indicators for Water and Wastewater Systems: Days of Cash on Hand

In previous posts, we outlined how to use the financial statements of a water or wastewater system to calculate the key financial indicators of operating ratio (a measure of self-sufficiency) and debt service coverage ratio (a measure of a system’s ability to pay its long-term debts). Another key financial indicator is days of cash on hand.

Days of cash on hand is a measure of a system’s financial security. In essence, this is how much cash a system has saved up that isn’t earmarked for anything else (unrestricted cash) and estimates the number of days the system can pay its daily operation and maintenances costs before running out of this cash. This is obviously a worst-case scenario—it estimates how long a system can run if it receives no additional revenue, but it is a helpful measure of how long a system can operate if it has a sudden and dramatic reduction in operating income, perhaps from a large customer leaving or from mandatory restrictions due to drought conditions.

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Key Financial Indicators for Water and Wastewater Systems: Operating Ratio

In previous posts, we have discussed where to find data to help water and wastewater systems make smart financial and managerial decisions. Another vital data source for any water and wastewater system is its own financial statements, from which systems can calculate key financial indicators.

Key financial indicators are a way for a system to get a snapshot of its financial health and to determine whether it needs to make adjustments to its rates, and they should be calculated annually when financial statements are released. One important financial indicator is operating ratio, which measures the ratio of annual operating revenues to annual operating expenses. To be a true enterprise fund that is self-supporting, a system should strive to have at least as much operating revenue as it has operating expenses, if not more. Otherwise, the system would be operating at a loss.

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Where to Find Data for Smart Managerial and Financial Decisions

Ever need to know how many single-family wood-framed houses were sold in the Midwest last year? Or the latitude and longitude of every farmers market in Wisconsin that sells herbs, flowers, and soap? What about the number of planes that sat on the tarmac more than three hours this past June? Or the annual sales volume of book stores in the United States for the past 20 years?

These might sound like crazy questions, but all of the above information is available through the federal government’s data portal houses more than 130,000 data sets that are freely available for download (and, no, that’s not a typo—more than one hundred thirty thousand data sets). These data can be invaluable resources for making smart managerial and financial decisions for our water and wastewater systems. Continue reading

New Tool Helps Local Governments Understand How to Finance Wetland and Water Quality Projects

wetlandLocal governments can be important partners for state and tribal wetland programs.  As noted in a previous post, while states and tribes often manage wetland programs, local governments regularly make land use, zoning, and development decisions that have a direct impact on wetlands.  Local governments are also involved more broadly in water quality issues, from watershed enhancements to stormwater programs to protecting their drinking water sources.  But local governments need access to funding for wetland and water quality projects in order to be effective partners for states and tribes. Continue reading

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