Www.efc.unc.edu Financial management challenges faced by southeastern U.S. water utilities Shadi Eskaf Senior Project Director Environmental Finance Center.

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Presentation transcript:

Financial management challenges faced by southeastern U.S. water utilities Shadi Eskaf Senior Project Director Environmental Finance Center at the University of North Carolina, Chapel Hill UNC Water and Health Conference: Science, Policy and Innovation October 30, 2012 Chapel Hill, NC

CONTEXT

Southeastern United States

Southeast’s 8,700 Community Water Systems Serving 58.5 Million People Source: EPA’s 2011 SDWIS data analyzed by the Environmental Finance Center at the University of North Carolina

Large city Small town Rural county Regional government Multi-system, private corporation Homeowners association Mobile home park Church School Not-for-profit association Contracted out operations Who’s in Charge? Independent private owner

Financial Management at a Local Level Utility Manager / Finance Director Governing Body Regulators Finance Committee / Customer Advisory Panel Customers Residential Commercial Industrial The Big-Wig Low-Income Jane Atyour Door The Mayor Outside town limits Media Legal Creditors Ratings Agency Finance Staff / Consultants

Sometimes Difficult to Raise Rates Source: NCLM/EFC 2010 Results of the 2010 North Carolina Water and Wastewater Financial Practices and Policies Survey.

DEMAND

Demand is Declining…

… Sometimes By a Lot

DEMAND AND RATE STRUCTURES

Broken: Fixed vs. Variable Depends on usage Revenue and Expenses for Charlotte-Mecklenburg Utilities in a Given Year Source: CMU Director Doug Bean’s presentation to the Charlotte City Council on December 1, 2008.

The Variable Charge Portions of All Customers’ Bills in FY2010 Cary91.1%* (FY2010) Charlotte82%** (FY2008) Raleigh75.4%* (FY2010) OWASA75%** (FY2012) Durham73.5%* (FY2010) Cape Fear 59%** (FY2012) Sources: * Billing records from utilities analyzed by the Environmental Finance Center at the University of North Carolina, ** reported by utility

COST RECOVERY

Cost Recovery

High Rates Alone Won’t Save a Utility Source: EFC/NCLM 2012 Water and Wastewater Rates and Rate Structures in North Carolina

RATES AND INCOME

Household Income is Declining Source: U.S. Census Bureau, Table H-8.

Poverty is Rising Source: U.S. Census Bureau Current Population Surveys.

But Rates are Going Up, Rapidly

All Over the Southeast

Growing Affordability Concerns Source: NCLM/EFC 2010 Water and Wastewater Rates Structures in North Carolina. 2010

Growing Affordability Concerns Source: NCLM/EFC 2012 Water and Wastewater Rates Structures in North Carolina. 2012

Local Disparities

INFRASTRUCTURE CONDITION

Infrastructure is in Bad Shape Source: ASCE

Southeast’s $50 Billion Drinking Water Capital Needs Estimate Source: EPA 2007, Drinking Water Infrastructure Needs Survey Assessment.

OUTCOMES

If you do it wrong… Jefferson County, AL, home to Birmingham Largest U.S. local government bankruptcy to date $4.2 billion in debt for sewer project –>$16,000/household –>36% of annual income for half of all county households

If you do it right…

BENCHMARKING

EFC’s Water & Sewer Rates Dashboards

Environmental Finance Center at the University of North Carolina School of Government, Knapp-Sanders Building CB #3330 Chapel Hill, NC USA Shadi Eskaf