1. www.efc.unc.edu 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

2. CONTEXT

3. Southeastern United States

4. 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

5. 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

6. 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

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

8. DEMAND

9. Demand is Declining…

10. … Sometimes By a Lot

11. DEMAND AND RATE STRUCTURES

12. 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.

13. 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

14. COST RECOVERY

15. Cost Recovery

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

17. RATES AND INCOME

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

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

20. But Rates are Going Up, Rapidly

21. All Over the Southeast

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

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

24. Local Disparities

25. INFRASTRUCTURE CONDITION

26. Infrastructure is in Bad Shape Source: ASCE www.infrastructurereportcard.org

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

28. OUTCOMES

29. 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

30. If you do it right…

31. BENCHMARKING

32. EFC’s Water & Sewer Rates Dashboards http://efc.unc.edu/RatesDashboards/

33. www.efc.unc.edu Environmental Finance Center at the University of North Carolina School of Government, Knapp-Sanders Building CB #3330 Chapel Hill, NC 27599-3330 USA Shadi Eskaf eskaf@sog.unc.edu 919-962-2785 eskaf@sog.unc.edu