Chapter 8: Cost Estimation and California SWS Funding

Chapter 8 Key Concepts:

Steps to estimate cost for constructing or upgrading a small water system
Sources of funding and assistances for California small water systems

To construct or upgrade a water system, the project funding and costs must be considered
and are often important factors in deciding between project options. For each option, the various
costs and funding available should be determined. Often SWSs lack the funds to make the
improvements necessary to provide reliable and safe drinking water. Funding for SWS projects
is available from state and federal loans and grants.

Cost Estimation for SWSs

When costing projects for SWSs, there are basic guidelines to follow to make a complete
cost estimation. The SWS community and funding decision makers are examples of groups that
desire and may require a comprehensive and detailed cost estimation. If a unsatisfactory cost
estimate is made, then there is greater risk of making incorrect, uninformed decisions or being
denied funding. The major steps in cost estimation are:
1. Scope
2. Rough layouts
3. List of items
4. Spreadsheet and cost data
5. Summary of costs

Step 1: Scope
Cost evaluation for SWSs should start with determining the scope of the evaluation: the
SWSs problems and the best solutions for them. If possible, certain solutions such as
consolidation or finding a new source may be simple to implement and significantly lower costs.
With other solutions, it may be less clear if they are valid options or not. Other concerns such as
environmental issues, waste generation, operational complexity, and water system access should
be considered in determining the validity of a solution. Another concern is the possibility that
the valid solution is only a band-aid or short term solution. It is strongly preferred that
solutions solve the water system problem or issue for at least the next 20 years.
Before making decisions on solutions for the water system, the evaluator should consider
as many concerns as relevant for each possible solution. In considering possible solutions, the
evaluator is held liable for any decisions that are made. Therefore, clear and comprehensible
reasons should be thought through for each decision on possible solutions.

Step 2: Rough layouts

Once all candidate solutions are determined, a layout and process diagram for each
candidate solution should be created. This helps in evaluating and organizing each solution.

Figure 1: Example a process diagram (top) and layout (bottom)

Step 3: List of items

For each candidate solution, the items required for purchasing should be determined. The
items should be as specific as possible so that the cost estimates for each item can be more
precise.
Example List of Items:
Expand the existing gallery by an estimated 20 feet.
Add 50,000 gallons of storage improvements to the existing storage for an overall
90,000 gallons of storage.
Provide a Pall AP-1 or equivalent membrane treatment system.
 Re-plumbing changes to include treatment system.
New building improvements.
Monitoring equipment (turbidimeter, chlorine residual analyzer, pH, temperature)
Provide back wash decant and percolation pond.

Step 4: Spreadsheet and cost data

The spreadsheet is a way to organize the cost information for each item. Each items
quantity, cost per unit, total cost, and cost data source should be in the spreadsheet. Table 1 is an
example of a set-up spreadsheet:
ITEM UNIT PRICE QUANTITY TOTAL SOURCE
Pipe $26/ft. $1000 ft $26000 RS Means

Table 1: Example of a cost spreadsheet

There are three types of cost data: capital cost, operations and maintenance (O&M) costs,
and additional project costs. Capital costs include materials, equipment, buildings, and other o
ne-time costs. Some capital cost items are a fixed amount such as pipe or a storage tank, while
others such as contractor profit, project contingency, and design and inspection depend on the
total amount of the fixed capital cost items. The cost of the dependent capital costs are estimated
by multiplying the fixed capital cost subtotal by a certain factor. These factors can vary slightly
and depend on the project. An example list of dependent capital costs and their factors is:
Design, Inspections 25%
Contingency 25%
Contractor Profit 10%
Mobilization and Labor Monitoring 10%
O&M costs include electricity, chemicals, cost for an operator, and other re-occurring
periodic costs. Capital and O&M costs can change frequently due to fluctuating markets, which
makes projecting costs difficult. Quotes from vendors are usually the best source for current cost
information. Table 2 contains typical O&M costs from literature:
 Table 2: Typical O&M costs from literature 25
(Technologies and Cost Document p. 4-6)

Step 5: Summary of costs

To summarize the cost items for each candidate solution, a 20 year planning period
should be used. The total capital cost is determined by adding all fixed capital costs and
dependent capital costs. The annual O&M cost is then determined, projected for 20 years, and
this 20 year O&M cost is added to total capital cost to obtain the 20 year present worth capital
and O&M cost. The 20 year present worth is the cost parameter that should be used to compare
candidate solutions. Table 3 is an example of a cost summary:
Item Estimated Cost ($)
Capital Cost

Four 5-gpm Homespring UF units ($5000/unit) $ 20,000.00

UV disinfection $ 5,000.00

Instrumentation/Telemetering/Installation $ 20,000.00

New Well On-Site $ 25,000.00

Waste holding ponds $ 10,000.00

31,000 gallons water storage seismic standards $ 31,000.00

7 fire hydrants ($5000/unit) $ 35,000.00
Electricity drop $ 15,000.00

Fire pump $ 5,000.00

700 feet of 2 HDPE pipe ($50/ft) $ 35,000.00

Subtotal $ 201,000.00

Mobilization and labor monitoring @ 10% $ 20,100.00

Contractor Profit @ 10% $ 20,100.00

 Item Estimated Cost ($)
Contingency @ 25% $ 50,250.00

Design, Inspections @ 25% $ 50,250.00

Subtotal $ 160,800.00

Total Capital Cost $ 341,700.00

Annual Operating Cost

Membrane maintenance and replacement $ 1,500.00

Power for NSWS $ 1,000.00

Total Annual Operating Cost $ 2,500.00

20 year Present Worth $ 391,700.00

Table 3: Cost summary to determine 20 year present worth

SWS Funding Sources and Assistance in California

List of relevant funding sources for CA small water systems:
Proposition 84
Proposition 50
Proposition 13
Community development block grants
Agriculture rural utilities service
Native American grants
California safe drinking water state revolving fund loans/grants

Proposition 84
Passed in November 2006
Funds water, flood control, natural resources, park and conservation projects by
authorizing $5,388,000,000 in general obligation bonds. Below are points that summarize the
effect of proposition 84 on CDHS and California SWSs:
The sum of one $180,000,000 shall be available to CDHS for grants to small community
drinking water system infrastructure improvements and related actions to meet safe
drinking water standards:
o primary maximum contaminant levels
o chemical and nitrate contaminants
o community is disadvantaged or severely disadvantaged
 Eligible recipients include public agencies and incorporated mutual water companies that
serve disadvantaged communities.
The Department of Health Services may make grants for the purpose of financing
feasibility studies and to meet the eligibility requirements for a construction grant.
Construction grants shall be limited to $5,000,000 per project and not more than twenty
five percent of a grant may be awarded in advance of actual expenditures.
The Department of Health Services may expend up to $5,000,000 of the funds allocated
in this section for technical assistance to eligible communities.

Proposition 50
Passed in November 2002
Proposition 50 authorizes $3,440,000,000 general obligation bonds, to be repaid from
state's General Fund, to fund a variety of water projects including: specified CALFED Bay-Delta
Program projects including urban and agricultural water use efficiency projects; grants and loans
to reduce Colorado River water use; purchasing, protecting and restoring coastal wetlands near
urban areas; competitive grants for water management and water quality improvement projects;
development of river parkways; improved security for state, local and regional water systems;
and grants for desalination and drinking water disinfecting projects.
Refer to the DHS Prop 50 website for current information:
http://www.dhs.ca.gov/ps/ddwem/Prop50/
Questions on Prop 50 Program via e-mail:
prop50@cdph.ca.gov

Proposition 13
Passed in March 2000
This act provides for a bond issue of one billion nine hundred seventy million dollars
($1,970,000,000) to provide funds for a safe drinking water, water quality, flood protection, and
water reliability program.

Community Services and Development Block Grants

HHS Community Services Block Grant (CSBG) Program, Section 680 A 3B, Rural Infrastructure
 The HHS Community Services Block Grant program provides critical technical
assistance resources for a range of programs to build capacity in disadvantaged
communities.
HUD Community Development Block Grant (CDBG) Program
The HUD CDBG program provides funding to communities for job creation,
expansion of business opportunities, public infrastructure improvements, and
affordable housing. CDBG funding is vital for revitalization and economic
development in cities throughout the nation.

U.S. Department of Agriculture (USDA) Grants

The USDA Rural Utilities Service (RUS) grant and loan program provides loans and
grants for drinking water projects, totaling on average $750 million annually.
Assistance from the RUS program is targeted for small systems serving fewer than
10,000 people. Additionally:
o Funds may be used to construct, repair, modify, expand, or improve water supply
and distribution systems
o Pay costs such as legal and engineering fees when necessary to develop the
facilities.
Loans must be paid back within 40 years or before the end of the useful life of the
financed facilities, whichever is earlier.
For more information, see the RUS Web page at
http://www.usda.gov/rus/water

Native American Grants

Funds have been set aside for eligible projects that benefit members of Federally
Recognized Native American Tribes (Tribal Members). Applications are processed in
accordance with all eligibility and other requirements of 7 C.F.R 1777, Section 306C
Water and Waste Disposal Loans and Grants.
The use of loan funds, as well as funds from other sources, in conjunction with the grant
funds is strongly encouraged whenever feasible to maximize the investment in Indian
Country.
 Generally, applicants are expected to borrow as much as they can afford to repay, as in
the regular loan program.

California Safe Drinking Water State Revolving Fund (SDWSRF)

The U.S. EPAs drinking water state revolving fund (DWSRF) provides states with a
financing mechanism to ensure that the public has safe drinking water. This revolving fund
provides federal funds to states to make loans to upgrade and replace drinking water system
infrastructure. The loans are especially targeted to small and underserved communities. Below
are details describing the SDWSRF developed by California:
Funding for Drinking Water Projects
Federal legislation: Safe Drinking Water Act of 1996
California: Safe Drinking Water Law of 1997;
o First project funded in 1999
Priority funding for projects that
o Address most serious risk to human health
Ensure compliance with the Safe Drinking Water Act
Assist systems most in need on per household basis
Program funding to date: $780 million (combined fed and state)
Annual loan/grant funding: ~~$85 million
Refer to the SDWSRF website for current information:
http://www.dhs.ca.gov/ps/ddwem/srf/srf_index.htm
Questions on the SDWSRF Program via e-mail:
sdwsrf@cdph.ca.gov

American Recovery and Reinvestment Act of 2009

On February 17, 2009, President Obama signed the American Recovery and
Reinvestment Act (ARRA) of 2009. The ARRA is designed to boost the economy through a
$787 billion package of spending and tax measures. The ARRA contains provisions that will
benefit California and Californians, including measures aimed at helping states balance their
budgets. The table below describes the water system related provisions in the ARRA.
 Estimated Impact in
Program Area Purpose
California
Provides $1.0 billion for local communities to help
Community Services alleviate poverty by providing a range of services that
$89.2 million
Block Grant address employment, education, housing, nutrition,
and other issues.
Community
Provides $1.0 billion to provide affordable housing and
Development Block $123.3 million
promote community development.
Grant
Provides $255.0 million for new construction,
Native American acquisition, rehabilitation, and infrastructure
$15.0 million
Housing Block Grants development activities. Native American tribes or
tribally designated housing entities may apply.
Clean Water State
$4.0 billion to upgrade wastewater treatment systems. $282.5 million
Revolving Fund
Drinking Water State
$2.0 billion to upgrade drinking water systems. $159.0 million
Revolving Fund
Water system related provisions in the ARRA of 2009 and how they affect California
 References

56. Proposition 84 Program Home. December 2008. California Department of Water

Resources: Bay-Delta. 15 June 2009 <http://baydeltaoffice.water.ca.gov/sdb/prop84/
index_prop84.cfm#Background>.

57. Proposition 50 Funding for Public Water Systems. May 2009. California Department of
Public Health. 13 June 2009 <http://www.cdph.ca.gov/services/funding/Pages/
Prop50.aspx>.

58. Financial Assistance Programs Grants and Loans: Proposition 13. January 2007.
California Environmental Protection Agency: State Water Resources Control Board. 15
June 2009 < http://www.swrcb.ca.gov/water_issues/programs/grants_loans/
propositions/prop13.shtml>.

59. The Community Development Block Grant Program. 2009. California Department of
Housing and Community Development. 15 June 2009 <http://www.hcd.ca.gov/fa/cdbg/
about.html>.

60. Community Services Block Grant (CSBG). 2007. California Department of Community
Services and Development. 15 June 2009. <http://www.csd.ca.gov/Programs/
Community%20Services%20Block%20Grant%20(CSBG).aspx>.

61. Water and Environmental Programs Homepage. 2009. U.S. Department of Agriculture:
Rural Development. 13 June 2009 <http://www.usda.gov/rus/water>.

62. Water and Environmental Programs: Program Priorities. 2009. U.S. Department of
Agriculture: Rural Development. 16 June 2009 <http://www.usda.gov/rus/water/
wwforms.htm>.

63. Safe Drinking Water State Revolving Fund. June 2009. California Department of Public
Health. 16 June 2009 <http://www.cdph.ca.gov/services/funding/Pages/SRF.aspx>.

64. What Does the American Recovery and Reinvestment Act of 2009 mean for California?.
March 2009. California Budget Project. 16 June 2009 <http://www.cbp.org/pdfs/2009/
090309_ARRA.pdf>.