MAPPING CAPITAL PLANNING: How Infrastructure Investment Decisions Are Made.

• Author: Kavanagh, Shayne

Eastern Municipal Water District (EMWD) in southern California encompasses about 800,000 people over about 555 square miles, including cities such as Temecula, Hemet, and Moreno Valley EMWD has about 146,000 accounts and more than $200 million in annual net operating revenue. Water is a potentially scarce commodity in southern California, so EMWD must maintain a strong supply and distribution infrastructure. This article will describe the process EMWD uses to direct its capital dollars to the projects that will provide the best value for its customers. We will start with a "functional deployment," or "swim lane," diagram of the process, shown in Exhibit l. The diagram shows the participants in the process along the left-hand side, while the flowchart walks through each step, from left to right. The numbers on the steps in the chart correspond to the sections of this article, which explain those particular steps. After the description of EMWD's process, we will review the lessons that can be generalized from EMWD's experiences.

Before visiting the first step in more detail, we should note that EMWD provides other services in addition to potable domestic water. It also provides wastewater services and recycled water (for industrial or agricultural uses). To make the article easier to follow, we have chosen to focus on domestic potable water.

(1) FORECAST DEMAND

As a water utility, EMWD's capital requirements (and revenues to pay for those investments) are determined mostly by the size of its customer base and customers' demand for service. Therefore, the first part of the capital planning process is to forecast that demand. This starts with EMWD's New Business Department working with local land developers to estimate the number of "equivalent dwelling units" (EDUs) they anticipate building and the timeline for development. An EDU is equal to the amount of water used by a typical home, so a development consisting of very large homes might be worth more EDUs than the actual number of homes in the development. Expressing development in EDUs provides a commonly understood and unambiguous metric within EMWD, compared to expressing growth simply in terms of actual units (since water usage can vary significantly between different types of units). EMWD's Water Supply Planning Department maintains a database of proposed development projects.

The Water Supply Planning Department forecasts demand using two methods. The first relies primarily on the developer estimates described above, where the average water use per EDU and the total number EDUs are used to project demand. EMWD supplements this with information taken from the official land use plans produced by the municipal governments within EMWD's service boundaries and, to a lesser extent, land use plans produced by the overlapping county government (Riverside County).

The second forecast method is based on population, where it is assumed that changes in population will correspond to changes in total water demand. Population estimates are made for each of the...