Written by: Jeffrey Hughes, Director, Environmental Finance Center at the University of North Carolina at Chapel Hill

Affordability challenge

Interested in the challenge of protecting public and environmental health without losing sight of the burden those goals may place on some segments of our society? The affordability challenge sits at the intersection of efforts to assure adequate investment in critical public health infrastructure with social and equity concerns and three recent pieces that came across my virtual desk over the last few weeks illustrate different perspectives related to the same challenge.

I’m sure there were many other things going on related to affordability—if you know of them, share them in the comment section.

In the Why does this keep getting more expensive? department: the Congressional Budget Office (CBO) updated their study of water infrastructure spending trends in Public Spending on Transportation and Water Infrastructure, 1956 to 2017

This update continues the CBO’s important work providing a data-driven assessment of the relative federal versus local contribution towards water and wastewater expenses, particularly those of capital. Spoiler alert—the federal share percentage has been flat or decreasing for a long time as overall costs increase.

After reading this, it’s hard to see any future in the short term where the burden on rate payers doesn’t increase if we continue to advance public health and environmental protection. To see our take on some of the past data, visit this previous post. We will be updating our analysis with the new data and will share it in the future.

In the Is affordability enough of a problem that water lenders should worry about getting paid back? arena: S&P Global just released a fascinating analysis of expenditures for water across the country from over 1,000 utilities in Affordable For Now: Water And Sewer Rates At U.S. Municipal Utilities.

The title of the report not so subtlety hints at S&P’s conclusion. This report is interesting for a number of reasons; it taps into S&P’s war chest of utility water finance data that is second to none (except maybe ours…..) and provides a robust analysis looking at household expenditures in a number of ways. The analysis is tilted to larger, more credit-worthy utilities. One of the tipping points cited for getting to a binary “yes or no” is based on regulatory relief affordability thresholds that the U.S. Environmental Protection Agency developed years ago, which have been questioned as being too narrow, but the report acknowledges that and includes a number of other analyses. For a similar analysis that includes many smaller utilities, check out this previous post.

On the household side of affordability: Food and Water Watch suggests a national shutoff survey reveals a water affordability emergency in America’s Secret Water Crisis.

Food and Water Watch, an environmental advocacy organization with a history of deep skepticism and animosity towards certain management models and established practices, often interprets their research in ways aggressively promoting their stated advocacy missions (which is probably no different than most advocacy groups). This particular study presents data on shuts offs that illustrate the human side of collection policies and the rising cost of services. I would love to know more about the details of the data they analyzed — terminology and reasons for shut offs vary widely among utilities and while we’ve done some of these analyses, we’ve found the data to be quite difficult to compare between utilities. Also, the report never mentions the importance of revenue collection in maintaining financially healthy utilities and seems to categorically dismiss cut offs altogether as a collection technique which seems impractical. Utilities that we work with have been increasingly concerned about customer affordability and do not seek any joy in shutting off people’s water, but are concerned about collecting enough revenue to protect public health. Fortunately, many utilities have started looking at alternative programs to assist customers in need that hopefully will minimize disconnections without sacrificing financial health. A group of water associations hired us to study the legal framework for establishing some of these programs. In a comprehensive state-by-state analysis, our findings revealed some of the obstacles faced by utilities wanting to do more.

Still have time for more affordability reading?

Given all the issues related to affordability, it’s no surprise that the American Water Works Association recently issued a policy guidance to their members on the topic this month. The statement urges utilities to work closely with local, state, provincial, and national governments to ensure pertinent laws and policies do not obstruct utility efforts to address affordability challenges.

Addressing the ability of distressed household’s ability to pay for water service is only going to get more important as costs increase. This issue is going to require as much skill, hard work, and creativity as addressing some of the more technical emerging water concerns (like PFAS). It’s an area our center has worked on in the past and will continue to forge ahead in for the future.

What are your ideas and concerns about this issue? Leave your comments below to take part in this increasingly important conversation.