28 



A Commionent to Alaskans 



Urban Strategy 



Objective 3 Promote an equitable solution to capital project 

 financing. 



Addressing the water, sewerage, and solid waste needs of the State's urban communities 

 is estimated to cost in excess of $1 billion over the next 20 years. Unfortunately, local 

 governments and the State have limited financial resources. So the question arises ... how 

 will the planning, design and construction of these projects be financed? 



The State can notdo it alone. Revenues are declining and demands on budgets are already 

 burdensome. Neither can conmiunities afford to finance multi-million dollar projects. 

 There are few revenue streams which local governments can dedicate to sanitation 

 facility construction. Residential user fees are already steep in most communities and are 

 earmarked for system operation, maintenance, and replacement costs. 



The Department recommends an equitable division of financial responsibility between 

 the State and local governments. The graph below compares the costs to communities 

 and the State to construct $1 billion in projects over the next twenty years under five 

 financing mechanisms: State Direct Grants, State Construction Loans; Municipal Bonds; 

 Municipal Grants combined with State Construction Loans; and a 50/50 Municipal 

 Grant/community bond combination. 



Comparison of cost to communities and the State to Construct 1 Biilion 

 in projects over the next 20 years under 5 financing alternatives. 



CofttoSuie 

 Cost lo CotnmunKy 



As shown above, the most equitable division of financial responsibility between the 

 State and local governments would be provided by combining Municipal Grants and 

 State Construction Loans. The grant/loan ratio could be changed based upon a 

 community's financial capabilities. This approach is used in many States throughout 

 the U.S. where grant/loan blends for water and sewer projects are based upon what is 

 called an ability to pay index. 



10. 



