Private Nonprofit Cooperative or Association. A private nonprofit entity such as a cooperative or association can be formed by the system users as one alternative. Homeowner’s or landowner’s associations are one example of such an operating nonprofit entity supported by association fees paid by property owners for operation and maintenance of the facilities. Cooperatives are common and very successful in the area of power supply utilities, but are not commonly used for water and wastewater although the legal provisions generally exist. The Homeowner Association is a more common form of private non- profit asset management which often encompasses water and wastewater systems in addition to other commonly shared assets such as parks, roads, community centers, etc. The Association can also be a special purpose entity focused only on the management of the wastewater/water assets. A Cooperative or Association form of ownership separates the municipality for the financial responsibility of the facility’s operation and management but this form of ownership is less viable with smaller customer bases which may lack the ability to provide adequate management and financial discipline. Associations often have difficulty managing complex assets effectively and can experience financial problems if funding and maintenance are not adequate. Ultimately, if an association falls into financial difficulty, the municipality is the next logical entity in line to provide assistance, so even though there is no legal liability there is a practical responsibility that can implicate the municipality should problems arise. One mechanism used to strengthen the small Cooperative or Association options is to implement a long term management contract from a more secure financial entity that has stronger technical and financial capabilities. A long term performance contract can provide guaranteed maintenance and can be backed by appropriate financial guarantees, such as performance bonds. Via this approach, the risk of the facility performance remains with the private sector and the Non-profit Cooperative or Association gains better protection. Recently, non-profit wastewater entities have become eligible for low cost subsidized financing through the State’s revolving fund program which is funded by the federal Clean Water Act and traditionally was reserved strictly for governmental entities. However, this eligibility is sometimes tied to specific system characteristics with special advantage offered to green or sustainable models. I...
