Map of proposed reservoir
The Madison County Corporation for Economic Development is making tentative plans for Mounds Lake Reservoir, which would cover about 2,000 acres of surface area, extending about seven miles from southeastern Delaware County to Scatterfield Road in Anderson. This map shows the reservoir’s proposed location.
ANDERSON — A key issue in the ongoing public debate about the proposed Mounds Lake Reservoir is cost.

Specifically, where would the money — nearly a half-billion dollars according to preliminary estimates — come from to finance such a large public works project?

In the short-term, $300,000 will be needed to finance a phase II study to continue honing cost estimates and evaluate environmental impacts associated with the project.

The source for those funds will likely be determined after a regional commission is created to oversee continued development of the reservoir.

But that’s small change compared to a building cost of $350 million to $400 million.

Since he unveiled the project two weeks ago, Rob Sparks, executive director of the Madison County Corporation for Economic Development, has made clear that local taxing districts — meaning Anderson, Chesterfield, Daleville, and Madison and Delaware counties — won’t be relied upon for financing.

“In the end, we don’t have the ability to fund this through the tax base. We’re already under a lot of pressure,” Sparks said. “We’re looking for creative ways to make this project as affordable as possible.”

That means finding a partner, or multiple partners, to invest in the project as well as seeking state and federal grants for parts of it, Sparks said.

Citizens Energy Group would be a logical investor, of course, because it owns Indianapolis Water and needs additional water supplies to meet the demand of a growing metropolitan population.

Through a spokeswoman, however, the utility says it’s monitoring development of the project, but has made no commitment either to help finance, or buy water from the reservoir if it’s built.

Sparks has also mentioned American Water as a possible partner, an option that might also make sense. Headquartered in New Jersey, American Water is the largest publicly traded water and wastewater utility company in the United States, and already provides water to millions of people,

International investors would also be considered, although no companies have been identified.

Sparks is also working with The Ferguson Group, a Washington, D.C., public affairs consulting firm, to identify federal grants that might be available to tap.

As it happens, the Senate Environmental and Public Works Committee last week approved a bill that would create something called the “Water Infrastructure Finance and Innovation Act of 2013,” or WIFIA, to help finance water projects like Mounds Lake, said W. Roger Gwinn, president and CEO of Ferguson.

“Normally what you would do with a project like this is municipal bond financing,” and then try and reduce the debt burden with supplemental grants from a variety of sources, Gwinn said.

In that financing scenario, the bonds are paid off from revenue generated by sale of the commodity, water in the case of Mounds Lake.

The WIFIA concept, however, is modeled on the successful and popular Transportation infrastructure Finance and Innovation ACT, (TIFIA). That program provides assistance to large-scale transportation projects, Gwinn said.

The new WIFIA program would:
  •  Provide direct loans that offer flexible repayment terms to cover construction and capital costs of a project like Mounds Lake.
  •  And provide federal loan guarantees to enable institutional investors, such as pension funds, to make loans to a project sponsor.
Repayment would not begin until five years following substantial completion of a project with a payback term of 35 years A typical repayment schedule for municipal bonds is 20 to 25 years, according to Gwinn.

Under the draft Senate proposal, credit assistance through the WIFIA program would be limited to 49 percent of the total project costs.

The new federal program is being proposed because the nation’s water infrastructure needs repair and upgrading. Federal and local lawmakers say WIFIA is one way to help local governments pay for water projects.

Like Mounds Lake itself, however, WIFIA is far from being a done deal, especially in an era of sequestration and legislative gridlock.

The Senate bill reported out of committee last week still needs to be voted on by the full Senate before crossing over to the House of Representatives for consideration.
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