Restoring and Reimagining Investment in Public Water

As the COVID-19 pandemic acutely highlighted, water is essential to life and health. Without affordable, clean, and safe water, the ability of people to wash their hands, bathe, wash and cook food, clean clothes, prepare infant formula, stay hydrated, and do other everyday activities that keep them healthy is severely compromised, if not impossible. However, threats of aging water infrastructure in desperate need of repair, combined with declining federal funding, have contributed to a water affordability crisis across the country, especially for low-income communities and communities of color. This policy brief examines the connections between the current state of water infrastructure, the unaffordability of water, and the harms caused by privatization, with a focus on how these issues impact vulnerable communities, especially those of color.

This brief includes case studies that examine privatization issues in Atlanta, Georgia, Baltimore, Maryland, Flint, Michigan, and Pittsburgh, Pennsylvania. It also provides policy recommendations to help restore and reimagine water as a true public good—clean, safe, affordable, equitable, publicly controlled, and for all.

Click the link below to download the full issue brief.

Smart Management for Small Water Systems Project

The Smart Management for Small Water Systems Project seeks to address major issues facing the nation’s smallest drinking water systems (those serving 10,000 or fewer people). Lead by the Environmental Finance Center at The University of North Carolina at Chapel Hill and co-managed by the Southwest Environmental Finance Center, the Smart Management for Small Water Systems project is a collaborative effort between the members of the Environmental Finance Center Network and its partners, the National Association of Development Organizations and the Government Finance Officers Association, and is made possible through a cooperative agreement with the U.S. Environmental Protection Agency.

Small water systems can take advantage of training and resources through a variety of offerings including:

In-Person Workshops
One-on-one technical assistance
Small Group sessions
Funder forums
Webinars
eLearning Modules
Water Rates Dashboards
Blog Posts

Click the link below for more information and to access the project's resources.

Stormwater Fee Structure Design

Stormwater Fee Structure Design: Is One Fee Structure More ‘Equitable?’

By: Evan Kirk, UNC Environmental Finance Center

"Stormwater, or simply runoff, is precipitation that does not soak into the ground. Stormwater management involves controlling the quantity and quality of stormwater as it eventually enters waterways via ditches, culverts, and stormwater drains. Success stormwater management ensures public health and safety. Stormwater management programs may also be responsible for regulatory compliance, public education, and other requirements. It thus will come as no surprise that managing stormwater is expensive."

Continue reading this UNC Environmental Finance Center article outlining possible stormwater fee structures, and how these structures impact ratepayers.

City of Claremont v Golden State Water

On December 9, 2016, the City of Claremont, California, brought an eminent domain case against Golden State Water Company in an effort to buy back the local water system and bring it into public ownership.

Click the link below the download the complaint.

Superior Court Dismisses City of Claremont Complaint

Superior Court Dismisses City of Claremont Complaint To Condemn Golden State Water Company System

On December 9, 2016, the Honorable Richard L. Fruin, Jr. of the Superior Court of Los Angeles County dismissed the City of Claremont’s complaint to take Golden State Water Company’s (“Golden State”) Claremont Water System by eminent domain. In dismissing the complaint, Judge Fruin held that Golden State had successfully rebutted the presumptions in favor of condemnation under California’s eminent domain law.

Click the link below to read an article summarizing the case.

Transforming the East Orange Water Commission

Presentation by Mayor Lester E. Taylor III East Orange, New Jersey, outlining the town's approach to keeping their water system publicly owned while bringing much needed updates to the system's governance and operation.

Click the link below to access the presentation.

Baltimore Water Billing Rates and Fees

Starting July 1, 2019, Baltimore City will charge water/sewer fees listed in the chart below. These charges reflect a series of 9 percent increases to the current water, wastewater and stormwater charges, and fund the enhanced customer assistance program, Baltimore H₂0 Assists. The 9 percent increases are effective July 1, 2019, July 1, 2020, and July 1, 2021. The water and wastewater rate increases apply to two components, fixed charges and volumetric charges. The monthly water charge is set by meter size and is assessed until a property is formally abandoned. Water consumption is charged in CCF (100 Cubic Feet). One CCF equals 748 Gallons.

Click the link below to explore further at the City of Baltimore's Public Works page.

Inside Baltimore’s Fight Over Water Privatization

Inside Baltimore's Fight Over Water Privatization

By: Sarah Holder

"Privatizing a city's water system tends to produce a dual outcome: Pipes, once rusty, get sleek; rates get steep. When water went private in Bayonne, New Jersey, local ratepayers started paying an extra 28 percent for water; and in Middletown, Pennsylvania, privatization meant an 11.5 percent surcharge (and officials are suing the utility to stop it).

This November, amid fears that their city will meet the same fate, voters in Baltimore will decide on a charter amendment that would ban water privatization preemptively. They'd be the first major city to do it."

Click the link below to read the full article.

Baltimore To Vote On Water Privatization Ban

By: Sara Jerome

In this Water Online article, the author recounts the build up to Baltimore's vote on amending its charter to prevent privatization of its water system.

Click the link below to read the full article.

Fair Market Value: Egg Harbor City, NJ

"Fair Market Value": An Example from Egg Harbor City

Fourteen states have passed laws permitting “fair market value” in the sale of water systems. These laws allow a utility purchase price to be higher than book-value, i.e., original cost less depreciation and amortization. Private utilities that purchase a water system at this higher price can then finance the purchase with subsequent rate increases. Thus, “fair market” valuations are paradoxical. Both the seller and the buyer prefer a higher price. In the end, utility customers are left paying the higher cost.

New Jersey is among the 14 states with fair market value (FMV) laws -- the Water Infrastructure Protection Act or WIPA. Prior to adoption, the Division of the Rate Counsel, an independent New Jersey state agency that acts as a consumer advocate for utility ratepayers, cautioned that WIPA would make transactions less transparent, limit the public’s role given the elimination of a public referendum requirement, inflate selling prices, and burden ratepayers. Nonetheless, the WIPA went into effect in 2015, and the first transaction under the new rule took place in 2021 in Egg Harbor City when New Jersey American Water, a subsidiary of American Water Works Company, Inc., bought Egg Harbor City, New Jersey’s water and sewer systems, which serves about 3,000 people, for $21.8 million.

As required by the WIPA, Egg Harbor City and New Jersey American Water submitted financial and technical reports to the New Jersey Board of Public Utilities, which reviews and, if appropriate, approves, FMV transactions. While the Board initially approved the Egg Harbor City FMV sale, input from the State Comptroller (provided through a separate review process) prompted the Board to reconsider for two reasons. First, the Comptroller found that the technical analysis the parties submitted to demonstrate that the FMV sale meet the statutory conditions were based on unsupported assumptions about the state of the water system that painted a much more negative picture than prior analyses showed. Second, the Comptroller found that the financial analysis submitted was not conducted by an independent, qualified party, as the analysis submitted was done by the same engineering firm that completed the technical analysis. As of February 2022, the Egg Harbor City sale is awaiting final approval from the New Jersey Board of Public Utilities.

This transaction provides at least two helpful insights:

The WIPA rules that require parties to a sale to demonstrate certain "emerging conditions" exist before an FMV transaction will be approved by the NJ Department of Environment can be helpful backstops to inappropriate FMV sales; and
Interested stakeholders should carefully review FMV submissions to ensure the technical and financial analyses are done by qualified, independent parties and are based on reasonable assumptions.

With approval pending it does, however, remain to be seen how the costs of the purchase will be applied to the rate base. In particular, the question is: will the purchase price, including all transaction costs, be applied to Egg Harbor City customers only or will the costs be imposed on all New Jersey American customers? The answer to this question is relevant to individual ratepayers and wholesale water customers who buy water from the Egg Harbor City system alike.

Source: Why Ratepayers Protections are Needed in the U. S. Water Utility Privatization Push

Restoring and Reimagining Investment in Public Water