It is the Board's perspective that every utility should contribute annually to renewal and replacement of its system. The State does not consider a system "viable" or a project "financially feasible" if it is financially unable or unwilling to support the project. Therefore the Board requires that utilities receiving grant funds budget for system renewal. The Board imposes a condition on grants to ensure that capital funds raised as a component of water rates are used for the benefit of the existing customers and specifically for the replacement of existing capital facilities. The Board requires a utility to contribute an amount each year to a reserve account created for facility replacement. The amount to be contributed annually to the account is the present value of an ordinary annuity with a factor of one percent (1%) inflation. The interest rate for calculating the annuity is five percent (5%). The schedule of payments may be submitted by the grantee at the completion of the project, or a schedule can be prepared by the Division on request. Click the policy below to read the text of the Board's policy.

Depreciation - Capital Replacement Funds

The Board's staff uses the spreadsheet below to calculate the approximate annual capital replacement contribution to a restricted account. This annual amount is based on the grant percentage of the total eligible project cost. The spreadsheet was originally developed by the Rural Community Assistance Corporation (RCAC) out of Washington State.

Spreadsheet for estimation of capital replacement contribution

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