Written by: Glenn Barnes Glenn Barnes is a Senior Project Director with the Environmental Finance Center at the University of North Carolina. In previous posts, we outlined how to use the financial statements of a water or wastewater system to calculate the key financial indicators of operating ratio (a measure of self-sufficiency), debt service coverage ratio(a measure of a system’s ability to pay …
Four Trends in Government Spending on Water and Wastewater Utilities Since 1956
Written by: Shadi Eskaf Shadi Eskaf is a Senior Project Director with the Environmental Finance Center at the University of North Carolina. According to data collected and published by the Congressional Budget Office (CBO), federal, state and local governments in the United States spent more than $2.2 trillion in the last 59 years on operations, maintenance and capital infrastructure of …
The Revenue Ups and Downs of the Water Business
Written by: Rachel Baum Rachel Baum is a graduate student at the University of North Carolina studying environmental financial risk management. The Upside: The water business sells one of the most important, if not the most important, products on earth. It is a product that can be used for thousands of purposes and one that has limited competitive pressures compared to other …
Five Dangerous Financial Myths for Small Water Systems
Written by: Jeffrey Hughes Jeffrey Hughes is the Director of the Environmental Finance Center at the University of North Carolina. Small water systems serving 10,000 people or less comprise more than 94% of our nation’s public water systems. They are a large and diverse group, and are managed by a wide variety actors – from local and tribal governments, to …
Key Financial Indicators for Water and Wastewater Systems: Days of Cash on Hand
Written by: Glenn Barnes Glenn Barnes is a Senior Project Director with the Environmental Finance Center at the University of North Carolina. In previous posts, we outlined how to use the financial statements of a water or wastewater system to calculate the key financial indicators of operating ratio (a measure of self-sufficiency) and debt service coverage ratio (a measure of a system’s ability …
Key Financial Indicators for Water and Wastewater Systems: Operating Ratio
Key financial indicators are a way for a system to get a snapshot of its financial health and to determine whether it needs to make adjustments to its rates, and they should be calculated annually when financial statements are released. One important financial indicator is operating ratio, which measures the ratio of annual operating revenues to annual operating expenses. To be a true enterprise fund that is self-supporting, a system should strive to have at least as much operating revenue as it has operating expenses, if not more. Otherwise, the system would be operating at a loss.
What Does Santa Claus Charge for Water and Wastewater Service?
The call came in on a December morning several years ago. When I saw the caller ID said “Santa Claus” I decided not to answer the phone. My thought was “seriously, what will these telemarketers think of next?!?” Later that morning, I noticed that caller had left voicemail. To my surprise, there was a message about water rates from the Mayor of Santa Claus, Georgia.
New Video Series on Financial Topics for Water Utilities, their Boards, and Funders
Water utility governing boards serve a critical role in ensuring the provision of clean, safe drinking water. Governing boards are tasked with making important and complex decisions in line with the utility’s mission, and they ultimately serve to keep water utilities accountable to the public. One of the most important roles of a governing board is to protect the utility’s long-term financial health and sustainability. Yet water utility governing board members don’t always have a background in finance or a strong understanding of key financial issues that impact the utility.
A new series of educational videos produced by the Environmental Finance Center at UNC Chapel Hill, with support from the Water Research Foundation, offers an engaging, accessible, and easily shareable resource on financial management topics designed specifically for water utility governing boards. The Water₡lips© Video Series describes challenges faced by water utilities across the country using eye catching visualizations and easy to understand explanations of concepts that can otherwise be daunting.
New Tool Helps Utilities Assess the Affordability of Water and Wastewater Service
When the five small water systems in Hampton County, South Carolina decided to band together to create the Lowcountry Regional Water System (LRWS), they, like many other small water systems across the country, faced a number of managerial and financial obstacles. Among these challenges were a flat growth rate, degraded and inadequate infrastructure, artificially low rates, and an economically disadvantaged population. Each of the five communities in this rural county had not only a different rate level, but also a different rate structure, with monthly rates for 5,000 gallons of water and sewer service ranging from as low as $36.50 to as high as $62.67. Whether the rates of the new, regionalized water system were “affordable” for all customers became a top concern for the LRWS.
Webinar: Water & Sewer Rates Analysis Tool
Does your system charge your customers the correct amount for water? This webinar will help systems answer this question by demonstrating the Water & Sewer Rates Analysis Model, an Excel tool developed by the Environmental Finance Center at The University of North Carolina. This free, basic cash-flow modeling tool allows water systems to input their current rate structure, estimates on number of customers and water use, and the expected costs for the system. The tool then automatically projects the end-of-year fund balance for the next several years, indicating whether revenues will be high enough to cover expected expenses. Users can then enter in another rate structure and compare the end-of-year fund balance side-by-side to the one projected using current rates. This allows users to try out scenarios of adjusting their rates to meet their financial goals in the next few years, and can help users determine whether they need to adjust rates, and by how much, in order to achieve financial sufficiency. The tool can be used by systems that set volumetric charges for water as well as systems that only charge flat monthly fees.