Handbook of Project Finance for Water and Wastewater Systems.

• Author: Wilson, Roberta M.

This book sets out to be a handbook for board members of water and wastewater systems. While it may enlighten people with nonfinancial backgrounds about present value concepts and calculations of loan payments, for the finance professional it can be a disappointing read.

The scope of the book seems a bit skewed. It is advertised as a reference book to be used by utility board members when confronted with a project that needs to be financed. It falls short of this objective in several areas. Approximately three-fourths of the book is devoted to explanations of present value comparisons of different loan payment schedules. The other one-fourth briefly discusses the various types of additional costs that can be incurred with a debt financing and mentions two federal programs that are available to help finance water and wastewater projects. Noticeably absent is any discussion of internal financing from the utility's cash, fees or charges. Also absent are discussions of other types of debt financings that are generally offered to water utilities, such as certificates of participation, refundings and capital leases. Instead, the author concentrates on tedious calculations of level payment loans versus level principal payment loans and other such detailed analyses.

If I were a newly elected board member who read this book, I would think that the most important financing decision a board member makes is selecting the appropriate payment schedule for debt financings. While this is an important aspect of utility finance, it is not the most important financing decision; board members can rely on their financial staff to make these technical comparisons. If the utility is too small to have its own staff, it should have a financial advisor working independently on its behalf to do these types of calculations. Certainly it is worthwhile for a board member to have a little knowledge about present value theory and the various types of loan maturity schedules; however, a board member might better expend his or her time learning how to select appropriate financial consultants or learning in more depth about the various sources of funds available to the utility.

On the other hand, the author skillfully explains the time value theory of money, which is a difficult concept for some to grasp. His persuasive illustrations of how prices change over time should convince even the most zealous disavowers of present value...