Nebraska Infrastructure Project Funding Overview and Case Study

Understanding How to Secure Funding for Projects in Nebraska

Balancing a community’s immediate needs and planning for long-term resilience is crucial when obtaining funding for municipal projects. In Nebraska, it’s essential to understand the available avenues for financing and encourage collaboration among stakeholders to ensure efficient management of water resources, resilient infrastructure, and thriving communities in the future. This examination of funding mechanisms aims to highlight the essential financial considerations that drive the success of water and wastewater initiatives in Nebraska.

Webinar Agenda

• Nebraska Funding 101 (00:17)
• Introduction to Funding (01:24)
• Various Steps to Funding (02:23)
• Ensuring Eligibility (03:59)
• Funding Program Sample (06:55)
• Applying for Funding (12:38)
• Specific Funding Requirements (16:18)
• Eagle, NE Case Study (18:15)

Nebraska Funding 101 (00:17)

Good morning. My name is Barbara Johnston, and I’m a civil engineer and project manager at Snyder and Associates. I’m here this morning to talk about project funding 101.

Snyder and Associates is a multidisciplinary firm with several different Business Units and different disciplines and we also have offices in five states but work in many more. So funding is a really important facet of all project types, and there’s different programs and sources out there for different types of funding in all of these projects. But today I’m really going to focus through the lens of municipal services.

A lot of towns, larger towns specifically, have in-house public works departments or may have a city engineer. And those that are sometimes smaller don’t have the staff or the resources or technical expertise to have those services in-house and then choose to outsource those to consultants. And Snyder and Associates offers those services to over 30 municipalities throughout the Midwest. A big part of that and a service that we offer is helping Capital Improvement Planning, budgeting, and funding for the projects and improvements that a town is looking to complete.

Introduction to Funding (01:24)

So, a kind of high-level introduction to funding. You know, it’s always a struggle. There’s never enough money to complete all the capital improvements and maintenance activities that a town is looking to do, but it’s especially true for smaller municipalities. They may not have as large of a budget to absorb some of the cost of those capital improvements. And just in general, the cost of maintaining existing and constructing new infrastructure is often higher relative to the number of tax or ratepayers in that community than in larger cities. There’s not as many people to take on that cost and so it can be more impactful on an individual resident basis.

So, our job as municipal engineers is to close that funding gap, help identify what those projects are, identify what those funding sources might be, and then help apply and procure that funding. And there are many different sources out there, and there’s lots of different projects that we might identify, but the process overall is kind of all the same. And this is sort of a 101 look at funding. So this is the high-level procedure as it is very different for each different type of funding program. But we’re going to talk today about kind of the procedure overall.

Various Steps to Funding (02:23)

So, the various steps to funding, you know, the first is to identify that need. Maybe you have a sewer that is backing up or needs repairs, and then discussing improvements to address that need. So maybe that’s a point spot repair for that sewer, maybe it’s lining rehabilitation, maybe it’s a full reconstruction or replacement, identifying what those improvements might be. Then, we look at examining the funding alternatives, see what’s out there, and then determine your eligibility based on what’s out there.

After you’ve assessed all of those choices, you gather the supporting documentation that you need, and you go ahead and apply for those funding programs. So, I think as engineers, we’ve kind of covered steps one and two many times on many different types of projects and for different clients. We often see the need, or maybe the community already knows what that is, and we help them identify improvements and alternatives to get to a project that will address that need. So, what we’re kind of going to start at is step three, which examines funding alternatives.

So here is a large group of funding options but also a very small sample compared to what’s out there. This is not in any way an exhaustive list. This is just some of the funding sources that I see used more regularly in engineering projects for smaller municipalities. I’m going to address and kind of define all of these a little bit more later, but I wanted to throw this slide up here and just kind of get you familiar with some of the acronyms and see what some of the alternatives might be.

Determining Eligibility (03:59)

So, once you’ve addressed all of those alternatives or those options, you need to look at your eligibility. And this is really important to understand because seeing what the different distinct eligibility requirements are for different funding sources is going to help you kind of focus your resources and time on those that make the most sense for your community and your project and have a higher likelihood of getting awarded.

Project Type

So, the first and the most obvious maybe is project type. Certain funding sources are going to be specific to only water projects or only transportation projects. And so this is sort of looking to answer that big question of what are you doing, what is your project type?

Project Purpose

And then, once you’ve figured out your project type, you’re looking at your project purpose, and this is more of the why are you doing it question. You know, you might be putting in a new road, but is that road serving a new residential development? Are you putting in new infrastructure to serve a different commercial area? Project purpose is important because most funding programs sort of have a high-level overarching objective or goal for that program. And this is sort of where you tie what you’re doing to the goals of that program. The program may be looking at new residential development, more affordable housing, it may be looking at different renewable energy options. And so, multiple project types could be used to accomplish a specific project purpose. One example that I’ve seen is say you’re looking to increase job creation in your community. So, utility or road projects and different infrastructure improvements may be serving a new business park, and that would create jobs, but you don’t always see that link right away. So, there’s a lot of ways to connect your project type to the project purpose of the funding program.

Project Need

Project need: this is sort of the why is it a necessary question, and this could be anything from aging infrastructure to non-compliance issues. Maybe you’ve got undersized water mains or a wastewater treatment facility that’s not meeting its effluent requirements. Project need is generally just a narrative but is also backed up with data. So, it’s kind of an opportunity to tell your story but also show a quantitative need with it.

Community Finances

And then, the next step that I think everybody is familiar with, especially if you’ve ever had to personally apply for financial aid, is showing the community finances. They’re going to want to see the financial health of the community and also any specific equipment that you may be applying for projects for specific infrastructure. They may want to see if there’s outstanding loans on that equipment or any, you know, annual O&M costs, that type of thing. And this is sort of, you know if you’ve already answered the questions, what are you doing? Why is it necessary? This is where the funding program says, you know, why can’t you pay for it yourself? And a common financial metric that you’ll see on applications a lot is LMI, that’s low and moderate income, which is a HUD-defined metric. And that just kind of speaks to the financial health of the specific residents in your community, not just the community overall.

Funding Program Sample (06:55)

So, back to that slide, with all of those acronyms, we’re going to touch through a few of these quickly. You know, there are many, many funding programs out there. This is just a sample, but this kind of gives you an idea of what different options there are.

FEMA

So, for FEMA, I think everyone’s familiar with FEMA, that’s the Federal Emergency Management Agency. They’ve got many funding programs specific for emergency response and disaster recovery, and resilience. But two that I kind of see frequently used are BRIC Grants, which is Building Resilient Infrastructure and Communities. And that is used to build more resilient communities for potential disasters of any kind. So, that could be fire, flood, tornado, earthquake, or hurricane, and that’s building up a community’s resilience at any time. The other one that we see a lot is the Hazard Mitigation Grant Program Grants, which is HMGP. And that’s used to rebuild a community after a presidentially declared disaster has already occurred. So, it may be looking at some of the same resiliency measures as a BRIC Grant, but it’s specific to after a disaster has occurred. In the City of Omaha, there are currently a few HMGP Grants happening to address damages from the 2019 floods.

USDA

USDA is the US Department of Agriculture. They have revolving funds for water and wastewater projects, and they also have the RISE Grant, which is Rural Innovation Stronger Economy. And this is grant assistance that can create or augment higher wage jobs, form new businesses, support industry, specifically in low-income rural areas. So again, this is one that you can tie to that project purpose. This could be used to pay for public improvements if they support maybe a new commercial or an industrial area and not just infrastructure for the sake of infrastructure. Tying it back to that project purpose.

SRF

SRF is a very common one that I think most of us are familiar with, that’s the State Revolving Fund. This is loans and grants from the Nebraska Department of Environment and Energy through the Clean Water SRF and also for wastewater projects and also the Drinking Water SRF for drinking water projects. There’s a lot that could be said about SRF Funding, but we’re kind keeping it general today, and that’s suffice to say that’s a very common funding for water and wastewater projects.

CDBG

CDBG is a Community Development Block Grant from the Housing and Urban Development (HUD. They have a number of grant opportunities. It could be anything from disaster recovery to mitigation. They also have an entitlement program, but their overall purpose is to develop viable urban communities for low and moderate-income persons. So this is, again, a big grant. You will see LMI as a big factor of eligibility. They want to focus specifically on low and moderate-income communities.

RAISE

The next few are specific to transportation. So there’s Raise Grants, that is formerly the TIGER Grant or the BUILD Grant. That name changes with each administration, but currently, they’re called RAISE Grants, which is Rebuilding American Infrastructure with Sustainability and Equity. This is a grant program for investments in surface transportation projects specifically that will have a significant local or regional impact. So, this could be a highway, public transit rail, could be a planning project, intermodal or airport, anything that’s going to have a significant regional impact.

TAP

TAP projects are the NDOT Statewide Transportation Alternatives Program. This funds specifically not roadway projects. So, safe routes to school or recreational trails and transportation projects that are not traditional roads.

HSIP

HSIP is the Highway Safety Improvement Program. So, this is funds dedicated to transportation safety issues. These could be projects like turn lanes, alignment modifications, pavement widening, signalization lighting, that type of thing.

ARPA

ARPA is kind of unique. That’s why I’ve got it in its own color here on the slide. ARPA is the American Rescue Plan Act. This is specifically Covid Recovery Funds that’s issued through the Nebraska Department of Economic Development. I think a lot of us have seen communities or clients use these funds already. They’ve either been received or spent, and they can be used for a wide variety of things: housing, business development, infrastructure, investments like water and sewer, or broadband. There’s a huge range of things that these can be used for, and they likely won’t be around forever since they’re specific to Covid. But they’re out there and they’re frequently used by smaller communities.

The last three are not typical funding programs, they’re just other financing mechanisms that we’ve seen communities’ use. I just wanted to touch on them and define them, although they aren’t necessarily considered, you know, grants or funding assistance in the same way.

TIFF

TIFF is Tax Increment Financing. This is when municipalities divert future property tax revenue increases from a defined area, usually a blighted area, and put that money toward economic development or public improvements in that area. So, in Omaha, we’ve seen a lot of this lately. These are the big projects like crossroads redevelopment, the streetcar project, and the Mutual of Omaha building things that are more significant to the community in terms of redevelopment.

GO & Revenue Bonds

Projects can also be funded with bonds. So there’s two here up on the slide. GO Bonds and Revenue Bonds. These are two different types of Municipal Bonds. So General Obligation Bonds are used to pay for a project that will generate revenue. Revenue Bonds are also used to pay for income-generating projects. But the main difference here is that GEO Bonds are backed by the municipality’s general credit and taxing power. Whereas Revenue Bonds are backed by specific revenue sources such as the toll road, which is then held as collateral for that bond.

Applying for Funding (12:38)

So, at this point in the process, you’ve identified your projects, you’ve evaluated what the options are, and you’ve evaluated the eligibility for each one. Now it’s time to apply. And applications, you know, obviously, there’s more to it than just the application form. There’s often supporting documentation that needs to be submitted alongside. Planning studies that financial data that we’ve talked about, also preliminary engineering reports, is a common one. So, that’s going to be submitted for any funding through NDEE. That’s where you would look at a community’s demographics the project need. You would go over environmental resources and evaluate some alternatives for the project need, maybe look at the costs and impacts of each of those alternatives and come up with a proposed project, and then look a bit closer at that project. Some design ideas as well as schedule, budget, permitting, that type of thing.

A BCA is also a common one that I’ll see specifically on federal funding sources. That’s a benefit-cost analysis, and this is a tricky one for some municipalities to do on their own. So this is a common thing that we provide assistance with. Benefits can kind of be hard to quantify, especially if the project is repair or rehabilitation. Something that, you know, the success of the project is sort of maintaining that status quo. It’s preventing a failure. So, it’s often helpful to think about benefits in that case as the opportunity cost of a no-action alternative. You know, what are you preventing from fixing it? What would go wrong if you didn’t?

Siphon Project Example

So, one example that I had on a project was a large sanitary sewer siphon that, over time, had become exposed in a creek channel. And while the cost to reconstruct the siphon is obviously substantial, the benefit of preventing its failure is even more so. So, a failure event would’ve resulted in tens of thousands of residents and businesses without sewer service and untreated sewage contaminating the water body. When a project is a repair or rehabilitation of an asset, it’s not always obvious because the intent is more or less to sort of maintain the status quo. So in these cases, it can be helpful to think about the project benefit kind of reversely as the opportunity cost of a no-action alternative, sort of what happens if you don’t do the project. And once real numbers are put to these events, the project need really becomes apparent.

Application Timing & Deadlines

Another important consideration is timing. Every program has a different timeline. Some have like rolling application periods, some have set windows, so it’s important to pay attention to what those are. And then similarly deadlines, you know, typically, they give you a few years, but if you’re working with a community that has been maybe on a list for a while or wasn’t prepared necessarily to for the project to go very quickly, it’s important to understand what these are so they can be ready to get started as soon as they’re awarded funds.

Project Prioritization & Waitlists

And then project prioritization and waitlist. I just want to touch on SRF funds or USDA funds from the NDEE, which typically come out on an IUP, which is the Intended Use Plan. And this is when they receive all of their applications, they assign those priority points and they come out with a ranked list. Funding for projects that is distributed to those projects in that order until the money runs out. And so, in the following year, any projects that weren’t funded would move up on that list. But also, new applications in that time have been received with their own priority points and may usurp the projects that were rolled over. So, it’s sort of a living rolling list all the time. And so it’s important to explain to communities or to understand how often and when their project may become awarded if they don’t get money the first year, which is pretty typical.

Specific Funding Program Requirements (16:18)

A few other specific requirements you may see from a funding program. Again, these vary a lot from source to source. So, there’s no general rule here, but things to consider. Applicable design standards. Is the funding source going to require that you do your designs to local, state, or federal specifications? Eligible versus ineligible costs is an important one. So, some funding sources are going to be specific to the project type. If you’ve got a funding source that only pays for water infrastructure, but you’re putting in an entire road with new utilities, make sure that you track only water and water-associated unit costs and quantities that are going to be eligible for that grant or loan. Whereas ineligible costs would be everything else. And you may have multiple funding sources with different requirements and tracking what’s eligible for each one.

Bid structure and procurement is also important to keep in mind. Procurement requirements are going to happen very early on in the process, so it’s important to get off on the right foot there. They may require the community to go out for RFQ or do a certain number of interviews, or hire a firm in a certain way and that is maybe not always how they’ve hired firms in the past. So, it’s important to procure the design professional in the right way, right away.

And then bid structure similarly, you know, there may be requirements on how often or in what ways you publish a bid for construction costs. So, if it needs to go in the local newspaper, maybe it’s a couple of times that’s important to understand.

Reporting as well, project progress and financial reports are often due to the funding agency on a monthly or quarterly basis. They want to track your project progress and how all the money is being spent throughout and also construction inspection and testing. They may have requirements on what needs to be tested in the frequency that is different than the way that often your projects are being done. And so, it’s important to make sure you know that going in and track that very well throughout the project.

Village of Eagle, NE Case Study (18:15)

So, I think we’ve kind of gone through this high-level process for funding. And now, I just want to look at a case study of one Nebraska community that we’ve worked in and their journey to identifying capital improvement projects and what their struggles and successes were in trying to get funding for those projects.

So, a little bit of background: the Village of Eagle, Nebraska, has a little bit more than 1,100 people, and about half of those are rate-paying water and sewer users. They are located 10 miles east of Lincoln. So they’re really advantageous for growth in terms of being a bedroom community. They are just small enough to give you that very small-town rural feel but close enough to a larger community that they have, you know, more resources and job opportunities nearby. And they have a median household income of 59,000.

Anticipated Growth for Bedroom Community

So, because of their positioning and their kind of rural feel or small-town feel, they’re looking at a lot of perspective development. They’ve been contacted by three different developers to put in residential subdivisions on the outskirts of their community. Some with as many as 200 homes. So, for a town of Eagle’s size, about 1100 people, they’re looking at potentially, if all of these projects were to move forward and be built doubling their population in 10 or 20 years, which is very significant, their infrastructure is not built for that and their community is not laid out in a way to grow that quickly.

So they have all of this perspective development. They’ve also got a small town budget, so they’re left with a lot of needed infrastructure improvements and huge funding gaps. So that’s kind of where we stepped in, tried to help them identify what those infrastructure needs are and figure out how to pay for it.

Village of Eagle Full System Evaluations

The first thing we did was full system evaluations for water and wastewater. They kind of wanted us to answer the questions, you know, what do we have? How is it working? If this growth occurs, what else do we need to do? What are we missing? What needs to be approved? And it’s important to note here that because we were assuming or planning for all three of those subdivisions to move forward, this is a pretty aggressive growth projection. But we were sort of planning for the worst-case scenario. So they are big improvement projects for a town of Eagle’s size, but if they grow in the way that they think they may, all of these things will be required eventually. So, we came out with those system evaluations with recommendations for both the water and the sewer system.

For water, we identified that they would need to construct a new water tower, they would need to drill a new well to serve that water tower, and they would also need to construct some new water mains and upsize some existing water mains. They had some areas that weren’t looped, they had some pressure issues, some fire flow issues. So, they had a lot of water mains that needed to be addressed as well.

And then, for the wastewater system, they were looking to increase the size of some trunk sewers, and also, the wastewater treatment facility would run out of capacity eventually. So, there were some upgrades that needed to be made to that facility as well.

So, all of these projects are very significant, especially again for a town of Eagle’s size that came out to a total price tag of $22 million. So, of course, the next question is, how the heck are we going to pay for it? The first step was to submit facility plans to NDEE. The wastewater facility plan is still under review. So, I will be focusing the rest of this tale on the water projects. But we had to kind of pare down what we were asking for to only look at what was going to be eligible for NDEE funding. And NDEE Drinking Water Program will not pay for projects based on perspective growth or an anticipated need. They will only pay for an existing need. So all of those projects based on that anticipated growth, the new water tower, the new well, were not eligible for funding.

So, what we ended up applying for was only funding to upsize the existing four-inch water mains, which are considered undersized. And that left us with an anticipated project cost of $3.4 million. One thing I want to note here before we get into the funding specifically is the current average monthly water bill for a rate-paying Eagle resident is $15 per user. This is relatively low, particularly compared to larger cities like Omaha. But this is what residents in Eagle are paying now, are used to paying, and expect to continue paying.

 USDA Funding Offer and Consideration

So, they did receive a financing offer from USDA here, the terms of that loan. So, they received a $3.4 million loan over a 40-year term with a 3.75% interest rate. It’s worth noting that this is from about six months ago. So, the interest rates kind of evolve as the economy does with respect to some funding loan offers. It isn’t necessarily increasing as aggressively as you know, a mortgage rate, for example. But they are increasing slowly, and in order to pay off all of that loan, it would look at raising the water bill per user by $52.70 per month per residence. So, you know, for communities where people are used to paying $15, that is a very significant increase, and the community weighed this funding offer. They looked at their comfortability with taking on that much debt and making that kind of an increase on a per-residence basis, and they ultimately decided to decline the offer. They will remain on the list of prospective projects for four years. If anything changes in their project need or their project scope, we can make those updates to NDEE. That may change their priority. Their funding offer was what it was because they were a lower-priority project. You know, there wasn’t a public health concern necessarily. And also, their LMI dictated whether or not they were getting a grant or a loan offer. So, in that way, it was not as advantageous for Eagle to take that on.

They will fund future improvements as growth occurs. Ultimately, that project need will develop as there are more people living in Eagle and more demand on their infrastructure. And they do have a little bit of a happy ending. One of those developments is moving forward, and they have worked out a cost-share agreement with the developer to extend some water main and put in a booster station. So they are working on some of those improvements at a cost share with the developer, which is sort of the best-case scenario for most municipalities but certainly not one that we can rely on moving forward all the time.

And that’s all I have for you today. Thank you.