www.efc.unc.edu financial management challenges faced by southeastern u.s. water utilities shadi...
TRANSCRIPT
![Page 1: Www.efc.unc.edu Financial management challenges faced by southeastern U.S. water utilities Shadi Eskaf Senior Project Director Environmental Finance Center](https://reader036.vdocument.in/reader036/viewer/2022062322/56649f585503460f94c7cd1d/html5/thumbnails/1.jpg)
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
![Page 2: Www.efc.unc.edu Financial management challenges faced by southeastern U.S. water utilities Shadi Eskaf Senior Project Director Environmental Finance Center](https://reader036.vdocument.in/reader036/viewer/2022062322/56649f585503460f94c7cd1d/html5/thumbnails/2.jpg)
CONTEXT
![Page 3: Www.efc.unc.edu Financial management challenges faced by southeastern U.S. water utilities Shadi Eskaf Senior Project Director Environmental Finance Center](https://reader036.vdocument.in/reader036/viewer/2022062322/56649f585503460f94c7cd1d/html5/thumbnails/3.jpg)
Southeastern United States
![Page 4: Www.efc.unc.edu Financial management challenges faced by southeastern U.S. water utilities Shadi Eskaf Senior Project Director Environmental Finance Center](https://reader036.vdocument.in/reader036/viewer/2022062322/56649f585503460f94c7cd1d/html5/thumbnails/4.jpg)
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
![Page 5: Www.efc.unc.edu Financial management challenges faced by southeastern U.S. water utilities Shadi Eskaf Senior Project Director Environmental Finance Center](https://reader036.vdocument.in/reader036/viewer/2022062322/56649f585503460f94c7cd1d/html5/thumbnails/5.jpg)
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
![Page 6: Www.efc.unc.edu Financial management challenges faced by southeastern U.S. water utilities Shadi Eskaf Senior Project Director Environmental Finance Center](https://reader036.vdocument.in/reader036/viewer/2022062322/56649f585503460f94c7cd1d/html5/thumbnails/6.jpg)
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
![Page 7: Www.efc.unc.edu Financial management challenges faced by southeastern U.S. water utilities Shadi Eskaf Senior Project Director Environmental Finance Center](https://reader036.vdocument.in/reader036/viewer/2022062322/56649f585503460f94c7cd1d/html5/thumbnails/7.jpg)
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.
![Page 8: Www.efc.unc.edu Financial management challenges faced by southeastern U.S. water utilities Shadi Eskaf Senior Project Director Environmental Finance Center](https://reader036.vdocument.in/reader036/viewer/2022062322/56649f585503460f94c7cd1d/html5/thumbnails/8.jpg)
DEMAND
![Page 9: Www.efc.unc.edu Financial management challenges faced by southeastern U.S. water utilities Shadi Eskaf Senior Project Director Environmental Finance Center](https://reader036.vdocument.in/reader036/viewer/2022062322/56649f585503460f94c7cd1d/html5/thumbnails/9.jpg)
Demand is Declining…
![Page 10: Www.efc.unc.edu Financial management challenges faced by southeastern U.S. water utilities Shadi Eskaf Senior Project Director Environmental Finance Center](https://reader036.vdocument.in/reader036/viewer/2022062322/56649f585503460f94c7cd1d/html5/thumbnails/10.jpg)
… Sometimes By a Lot
![Page 11: Www.efc.unc.edu Financial management challenges faced by southeastern U.S. water utilities Shadi Eskaf Senior Project Director Environmental Finance Center](https://reader036.vdocument.in/reader036/viewer/2022062322/56649f585503460f94c7cd1d/html5/thumbnails/11.jpg)
DEMAND AND RATE STRUCTURES
![Page 12: Www.efc.unc.edu Financial management challenges faced by southeastern U.S. water utilities Shadi Eskaf Senior Project Director Environmental Finance Center](https://reader036.vdocument.in/reader036/viewer/2022062322/56649f585503460f94c7cd1d/html5/thumbnails/12.jpg)
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.
![Page 13: Www.efc.unc.edu Financial management challenges faced by southeastern U.S. water utilities Shadi Eskaf Senior Project Director Environmental Finance Center](https://reader036.vdocument.in/reader036/viewer/2022062322/56649f585503460f94c7cd1d/html5/thumbnails/13.jpg)
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
![Page 14: Www.efc.unc.edu Financial management challenges faced by southeastern U.S. water utilities Shadi Eskaf Senior Project Director Environmental Finance Center](https://reader036.vdocument.in/reader036/viewer/2022062322/56649f585503460f94c7cd1d/html5/thumbnails/14.jpg)
COST RECOVERY
![Page 15: Www.efc.unc.edu Financial management challenges faced by southeastern U.S. water utilities Shadi Eskaf Senior Project Director Environmental Finance Center](https://reader036.vdocument.in/reader036/viewer/2022062322/56649f585503460f94c7cd1d/html5/thumbnails/15.jpg)
Cost Recovery
![Page 16: Www.efc.unc.edu Financial management challenges faced by southeastern U.S. water utilities Shadi Eskaf Senior Project Director Environmental Finance Center](https://reader036.vdocument.in/reader036/viewer/2022062322/56649f585503460f94c7cd1d/html5/thumbnails/16.jpg)
High Rates Alone Won’t Save a Utility
Source: EFC/NCLM 2012 Water and Wastewater Rates and Rate Structures in North Carolina
![Page 17: Www.efc.unc.edu Financial management challenges faced by southeastern U.S. water utilities Shadi Eskaf Senior Project Director Environmental Finance Center](https://reader036.vdocument.in/reader036/viewer/2022062322/56649f585503460f94c7cd1d/html5/thumbnails/17.jpg)
RATES AND INCOME
![Page 18: Www.efc.unc.edu Financial management challenges faced by southeastern U.S. water utilities Shadi Eskaf Senior Project Director Environmental Finance Center](https://reader036.vdocument.in/reader036/viewer/2022062322/56649f585503460f94c7cd1d/html5/thumbnails/18.jpg)
Household Income is Declining
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011$ 0
$ 10,000
$ 20,000
$ 30,000
$ 40,000
$ 50,000
$ 60,000
Statewide Median Household Income in Southeastern United States in 2011 Dollars, 2000-2011
AlabamaFloridaGeorgiaKentuckyMississippiNorth CarolinaSouth CarolinaTennessee United States
Source: U.S. Census Bureau, Table H-8.
![Page 19: Www.efc.unc.edu Financial management challenges faced by southeastern U.S. water utilities Shadi Eskaf Senior Project Director Environmental Finance Center](https://reader036.vdocument.in/reader036/viewer/2022062322/56649f585503460f94c7cd1d/html5/thumbnails/19.jpg)
Poverty is Rising
Source: U.S. Census Bureau Current Population Surveys.
2,000 2,001 2,002 2,003 2,004 2,005 2,006 2,007 2,008 2,009 2,010 2,011 0.0
5.0
10.0
15.0
20.0
25.0
Percent of People in Poverty in Southeastern United States by State, 2000-2011
AlabamaFloridaGeorgiaKentuckyMississippiNorth CarolinaSouth CarolinaTennessee
![Page 20: Www.efc.unc.edu Financial management challenges faced by southeastern U.S. water utilities Shadi Eskaf Senior Project Director Environmental Finance Center](https://reader036.vdocument.in/reader036/viewer/2022062322/56649f585503460f94c7cd1d/html5/thumbnails/20.jpg)
But Rates are Going Up, Rapidly
![Page 21: Www.efc.unc.edu Financial management challenges faced by southeastern U.S. water utilities Shadi Eskaf Senior Project Director Environmental Finance Center](https://reader036.vdocument.in/reader036/viewer/2022062322/56649f585503460f94c7cd1d/html5/thumbnails/21.jpg)
All Over the Southeast
![Page 22: Www.efc.unc.edu Financial management challenges faced by southeastern U.S. water utilities Shadi Eskaf Senior Project Director Environmental Finance Center](https://reader036.vdocument.in/reader036/viewer/2022062322/56649f585503460f94c7cd1d/html5/thumbnails/22.jpg)
Growing Affordability Concerns
<= 0
.25%
0.25
- 0.
5%
0.5
- 0.7
5%
0.75
- 1%
1 - 1
.25%
1.25
- 1.
5%
1.5
- 1.7
5%
1.75
- 2%
2 - 2
.25%
2.25
- 2.
5%
> 2.
5%
0%
5%
10%
15%
20%
25%
30%
35%
Water
Wastewater
Total Bills in One Year as % of MHI of Community Adjusted to 2008
Perc
ent o
f NC
Util
ities
Source: NCLM/EFC 2010 Water and Wastewater Rates Structures in North Carolina.
2010
![Page 23: Www.efc.unc.edu Financial management challenges faced by southeastern U.S. water utilities Shadi Eskaf Senior Project Director Environmental Finance Center](https://reader036.vdocument.in/reader036/viewer/2022062322/56649f585503460f94c7cd1d/html5/thumbnails/23.jpg)
Growing Affordability Concerns
<= 0
.25%
0.25
- 0.
5%
0.5
- 0.7
5%
0.75
- 1%
1 - 1
.25%
1.25
- 1.
5%
1.5
- 1.7
5%
1.75
- 2%
2 - 2
.25%
2.25
- 2.
5%
> 2.
5%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
Water
Wastewater
Total Bills in One Year as % of MHI of Community in 2010
Perc
ent o
f NC
Util
ities
Source: NCLM/EFC 2012 Water and Wastewater Rates Structures in North Carolina.
2012
![Page 24: Www.efc.unc.edu Financial management challenges faced by southeastern U.S. water utilities Shadi Eskaf Senior Project Director Environmental Finance Center](https://reader036.vdocument.in/reader036/viewer/2022062322/56649f585503460f94c7cd1d/html5/thumbnails/24.jpg)
Local Disparities
![Page 25: Www.efc.unc.edu Financial management challenges faced by southeastern U.S. water utilities Shadi Eskaf Senior Project Director Environmental Finance Center](https://reader036.vdocument.in/reader036/viewer/2022062322/56649f585503460f94c7cd1d/html5/thumbnails/25.jpg)
INFRASTRUCTURE CONDITION
![Page 26: Www.efc.unc.edu Financial management challenges faced by southeastern U.S. water utilities Shadi Eskaf Senior Project Director Environmental Finance Center](https://reader036.vdocument.in/reader036/viewer/2022062322/56649f585503460f94c7cd1d/html5/thumbnails/26.jpg)
Infrastructure is in Bad Shape
Source: ASCE www.infrastructurereportcard.org
![Page 27: Www.efc.unc.edu Financial management challenges faced by southeastern U.S. water utilities Shadi Eskaf Senior Project Director Environmental Finance Center](https://reader036.vdocument.in/reader036/viewer/2022062322/56649f585503460f94c7cd1d/html5/thumbnails/27.jpg)
Southeast’s $50 Billion Drinking Water Capital Needs Estimate
Source: EPA 2007, Drinking Water Infrastructure Needs Survey Assessment.
Alabam
a
Florid
a
Georg
ia
Kentuck
y
Miss
issip
pi
North C
arolin
a
South C
arolin
a
Tennessee
$ 0
$ 2,000
$ 4,000
$ 6,000
$ 8,000
$ 10,000
$ 12,000
$ 14,000
$ 0
$ 500
$ 1,000
$ 1,500
$ 2,000
$ 2,500
$ 3,000
$ 3,500
Drinking Water 20-Year Capital Needs Estimates in 2007 (billions of $)
Bill
ion
s o
f $
$ /
Se
rvic
e C
on
ne
ctio
n
![Page 28: Www.efc.unc.edu Financial management challenges faced by southeastern U.S. water utilities Shadi Eskaf Senior Project Director Environmental Finance Center](https://reader036.vdocument.in/reader036/viewer/2022062322/56649f585503460f94c7cd1d/html5/thumbnails/28.jpg)
OUTCOMES
![Page 29: Www.efc.unc.edu Financial management challenges faced by southeastern U.S. water utilities Shadi Eskaf Senior Project Director Environmental Finance Center](https://reader036.vdocument.in/reader036/viewer/2022062322/56649f585503460f94c7cd1d/html5/thumbnails/29.jpg)
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
![Page 30: Www.efc.unc.edu Financial management challenges faced by southeastern U.S. water utilities Shadi Eskaf Senior Project Director Environmental Finance Center](https://reader036.vdocument.in/reader036/viewer/2022062322/56649f585503460f94c7cd1d/html5/thumbnails/30.jpg)
If you do it right…
![Page 31: Www.efc.unc.edu Financial management challenges faced by southeastern U.S. water utilities Shadi Eskaf Senior Project Director Environmental Finance Center](https://reader036.vdocument.in/reader036/viewer/2022062322/56649f585503460f94c7cd1d/html5/thumbnails/31.jpg)
BENCHMARKING
![Page 32: Www.efc.unc.edu Financial management challenges faced by southeastern U.S. water utilities Shadi Eskaf Senior Project Director Environmental Finance Center](https://reader036.vdocument.in/reader036/viewer/2022062322/56649f585503460f94c7cd1d/html5/thumbnails/32.jpg)
EFC’s Water & Sewer Rates Dashboards
http://efc.unc.edu/RatesDashboards/
![Page 33: Www.efc.unc.edu Financial management challenges faced by southeastern U.S. water utilities Shadi Eskaf Senior Project Director Environmental Finance Center](https://reader036.vdocument.in/reader036/viewer/2022062322/56649f585503460f94c7cd1d/html5/thumbnails/33.jpg)
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 [email protected] 919-962-2785