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Financial management challenges faced by southeastern U.S. water utilities

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.

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Financial management challenges faced by southeastern U.S. water utilities

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

  6. Financial Management at a Local Level

  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 Revenue and Expenses for Charlotte-Mecklenburg Utilities in a Given Year Depends on usage 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 Cary 91.1%* (FY2010) Charlotte 82%** (FY2008) Raleigh 75.4%* (FY2010) OWASA 75%** (FY2012) Durham 73.5%* (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 2010 Source: NCLM/EFC 2010 Water and Wastewater Rates Structures in North Carolina.

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

  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. Shadi Eskafeskaf@sog.unc.edu919-962-2785 Environmental Finance Center at the University of North Carolina School of Government, Knapp-Sanders Building CB #3330 Chapel Hill, NC 27599-3330 USA

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