assessing the affordability of water and wastewater ...need to consider drinking water mandates, and...
TRANSCRIPT
STRATUS CONSULTING STRATUS CONSULTING
Prepared for:
RMSAWWA JITAC Lunch
Prepared by:
Bob Raucher and Janet Clements
Stratus Consulting
Boulder, CO
February 20, 2014
Assessing the Affordability of
Water and Wastewater-Related
Services
STRATUS CONSULTING
Overview
What does “Affordability” mean?
Why is affordability important to you
and the water sector?
How is affordability measured?
What can you and your utility do to
help?
What does Affordability Mean?
• Affordability
– Ability of individual customers to pay
without undue hardship
• Financial capability
– Ability of utility to finance capital
infrastructure investments
.
STRATUS CONSULTING
Why is affordability important?
Social responsibility
– Desire to provide an essential service to
all members of the community
Political acceptability
– Elected officials’ desire to “not raise taxes”
Fiscal prudence
– Minimize arrearages, generate predicable
revenue stream
STRATUS CONSULTING
How is Affordability applied in
the water sector?
Relief from regulatory obligations
– Delay or adjust compliance mandates
– Enable spending on other priorities, obligations
Open the gateway to rate increases
– Facilitate valuable utility investments (e.g.,
infrastructure renewal, water resources)
Guide payment assistance programs
STRATUS CONSULTING
EPA Affordability Criteria
To relieve undue economic stress
from federal wastewater-related
mandates
Indicates when EPA might provide flexibility
– Compliance standards (1995)
– Schedule (1997)
No official utility-oriented affordability metrics
for drinking water-related mandates
STRATUS CONSULTING
EPA Affordability Guidance
Two-tiered economic “test”
1. Preliminary screening analysis
– “Residential indicator” based on city-
wide median household income (MHI)
2. Secondary screening analysis
– “Financial capability indicator” based on
a suite of fiscal metrics
STRATUS CONSULTING
1. Municipal Preliminary Screener
(Residential Indicator – RI)
The 2% Rule
%
income householdMedian
householdpercostpollutionwatertotalAverageX
Communities with a mid-range to large impact must
conduct a secondary screening analysis . . .
Low economic impact: < 1% of MHI
Mid-range economic impact:
between 1% and 2% of MHI
Large economic impact: > 2% of MHI
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2. Secondary Screening Analysis:
Utility Financial Capability Indicator (FCI)
EPA 1997 Affordability Guidance
NACWA. 2013. The Evolving Landscape for Financial Capability Assessment: Clean Water Act Negotiations and the
Opportunities of Integrated Planning.
STRATUS CONSULTING
Limitations of EPA Guidance for
Residential Affordability
MHI is a poor indicator of economic
distress or community well-being
Does not capture impacts across
highly diverse communities
Snapshot approach
Does not capture impacts to
landlords and/or public housing
authority
10%
12%
14%
16%
18%
20%
22%
24%
26%
$45,000 $46,000 $47,000 $48,000 $49,000 $50,000 $51,000 $52,000
% o
f P
eo
ple
in
Po
ve
rty
Median household income
Nationwide
NYC
MHI is a Poor Indicator
of Poverty and Affordability
13
US and NYC Income Distributions
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Limitations of EPA Guidance
for “Utility Financial Capability”
Fiscal realities for municipalities much more
challenging today than in mid 1990s
– Access to and cost of borrowing
– Unfunded liabilities (e.g., pensions)
Property tax levels overlooks burden
of other local taxes and fees
Comparing local unemployment rate to national
level does not reflect local economic hardship
STRATUS CONSULTING
What’s a Utility To Do?
Use WEF-AWWA-USCM Guidance!!
STRATUS CONSULTING
EPA May Consider Additional
Analyses
EPA’s 2001 Guidance states:
“ . . .States may also use alternative
analyses and criteria to support this
determination, provided they explain the
basis for these alternative analyses and/or
criteria”
Jointly sponsored by AWWA, WEF,
and U.S. Conference of Mayors
Assessing the Affordability of Federal
Water Mandates: Issue Brief
Affordability Assessment Tool
for Federal Water Mandates
New Affordability Assessment
Resources
http://www.awwa.org/resources-tools/water-
utility-management/affordability-assessment.aspx
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What’s Included in the Tool?
Background on affordability issues
Limitations of EPA’s approaches
for assessing affordability
Presentation of alternative metrics
Relevant data sources
Spreadsheets and templates
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Better Measures of Economic Need
Impact on low- and fixed-income households
Identify at-risk households by
– Income distribution
– Poverty rates
– Unemployment
– Neighborhood
– Household type
Housing burden and other nondiscretionary
spending
Residential Affordability of
Wastewater Services: NYC Example
If bills were to increase by
50%, 36% of households are
estimated to have sewer bills
2% of MHI.
Rate increases that elevate bill to
2% of median Census tract MHI
Average bill as % of MHI by income bracket
Income bracket % of NYC
households*
Median
income
within
income
bracket**
Average sewer bill as
% of bracket MHI
2012 50% real
rate
increase***
All incomes $ 48,743 0.94% 1.4%
Less than $20,000 23% $ 9,100 5.03% 7.54%
$20,000 to $39,999 20% $ 29,200 1.57% 2.35%
$40,000 to $74,999 24% $ 55,000 0.83% 1.25%
$75,000 to $99,999 10% $ 85,000 0.54% 0.81%
$100,000 to $199,999 17% $ 128,970 0.35% 0.53%
$200,000 or more 6% $ 290,000 0.16% 0.24%
*2010 ACS Data
**2009 iPUMS data used for median incomes within brackets
**Since 2009, rates have increased more than 50%. Since 2008, rates have increased more than 74%.
Residential Affordability of
Wastewater Services: NYC Example
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Socioeconomic Indicators:
Income Distribution (Atlanta)
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Pe
rce
nta
ge o
f h
ou
seh
old
s
Household income
US Atlanta
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Income Distribution for
Elderly Households (Atlanta)
0%
5%
10%
15%
20%
25%
Perc
enta
ge o
f h
ou
seh
old
s
Household income
Elderly households All households
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Summary: WEF-AWWA-USCM
Guidance
Helps utilities consider which metrics apply to
their community
Provides specific data sources and instructions
for accessing those data
Provides spreadsheets/templates for data entry
and outputs
Highlights where environmental justice issues
can be raised
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Federal Policy Issues Raised in
the Guidance
Need to consider drinking water mandates, and
other water supply spending needs
– Jointly with wastewater and stormwater costs
Need to enable localities to prioritize across all
their water-related investments
– In concert with EPA’s new Integrated Planning
and Permitting Program (IPPP)
STRATUS CONSULTING
What Can You Do to Assist
Customers in Need?
Shrink bills for low- income households
– Lifeline and other rate design options
– Conservation and leak detection programs
– Discounts
Facilitate bill payment (and avoid arrearages)
– Billing practices (e.g., monthly vs. quarterly)
– Income assistance
– Link/referrals to other social services
STRATUS CONSULTING
Thank you!
Bob Raucher [email protected]
Janet Clements [email protected]
AWWA-WEF-USCM Brief and Toolkit:
http://www.awwa.org/resources-tools/water-utility-
management/affordability-assessment.aspx