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
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www.efc.unc.edu
Financial management challenges faced by southeastern U.S. water utilities
Shadi EskafSenior 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
Alabam
a
Florid
a
Georg
ia
Kentuck
y
Miss
issip
pi
North C
arolin
a
South C
arolin
a
Tennessee
0
500
1,000
1,500
2,000
2,500
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%Large Systems Serving >10,000 People
Small Systems Serving <10,000 People
Percent of Population Served by Small Systems
Nu
mb
er
of C
imm
un
ity W
ate
r S
yste
ms
Source: EPA’s 2011 SDWIS data analyzed by the Environmental Finance Center at the University of North Carolina
Large citySmall town
Rural countyRegional government
Multi-system, private corporation
Homeowners associationMobile 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
PanelCustomers
• 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
Found did not need to adjust rates
16% Lowered rates1%
Found needed to raise rates, but Governing
Board did not approve any rate increase
7%
Found needed to raise rates, but Governing
Board only approved a partial rate increase
12%
Governing Board approved the pro-
posed rate increase fully60%
Other3%
Don't know1%n = 260
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
Depen
ds o
n
usag
e
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
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
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