What is the financial structure of the service authority?
Although service authorities can levy taxes in Virginia as a revenue source, this is seldom used once an authority is well established financially. Most authorities’ largest revenue source is the monthly or bimonthly charges for services provided to customers.
For the King George Service Authority, general funds were utilized to purchase initial water and wastewater systems in the 1990s and have rarely been used since. Once the authority had management over these systems, rates quickly became the primary revenue source, shifting service authority financial operations to an enterprise fund.
An enterprise fund utilizes revenue collected from bills for water and wastewater services solely as a reinvestment into service authority operations. As part of an enterprise fund, customer rates are designed to recover operational costs.
If the service authority needs to spend monies not available in the enterprise fund, then the service authority will leverage its credit to apply for the issuance of a bond. The service authority has very strong credit in conjunction with the county.
Bonds are typically sought as a solution to fund large projects like infrastructure improvements, such as replacing depreciating assets like treatment plants, wells, and water and sewer lines.
The service authority borrows monies utilizing bonds, then plans repayment of the principal and interest over time through the collection of rates and fees by its customers as users directly benefit from the improvements; this process maintains the service authority’s enterprise fund financial structure.