Cash Reserves Pt. 2: Capital Reserves, Debt Service & Rate Stabilization Reserves

By Andy McCartney

Editor’s Note: This is the second article in a two-part series on cash reserves for water utilities. As mentioned in the first article on operating reserves, cash reserves are required to meet the operational, maintenance and capital needs of the utility while providing a necessary service 24 hours a day – every day of the year. This article will specifically review capital reserves, debt service and rate stabilization reserves. It is recommended that water utilities establish either formal or informal financial policies regarding utility cash reserves.