Key Financial Indicators for Water and Wastewater Systems: Operating Ratio

In previous posts, we have discussed where to find data to help water and wastewater systems make smart financial and managerial decisions. Another vital data source for any water and wastewater system is its own financial statements, from which systems can calculate key financial indicators.

Key financial indicators are a way for a system to get a snapshot of its financial health and to determine whether it needs to make adjustments to its rates, and they should be calculated annually when financial statements are released. One important financial indicator is operating ratio, which measures the ratio of annual operating revenues to annual operating expenses. To be a true enterprise fund that is self-supporting, a system should strive to have at least as much operating revenue as it has operating expenses, if not more. Otherwise, the system would be operating at a loss.

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Green Infrastructure Programs at Local Governments– What’s in a Name?

Many local governments have been creating programs to improve water quality by addressing non-point sources of pollution. Over the years the approach itself has had different names. Terms such as “low impact development,” and “environmental site design” seem to have given way to the name “green infrastructure” (GI) lately. GI often takes the form of multiple efforts ranging from green roof installations on city hall, to encouraging rain garden installations in private front yards. Oftentimes though, there is an umbrella name for the program that covers all of these related efforts. In researching how cities and counties have financed these programs, I could not help but start a list of some of the creative names that have been devised.

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Four Myths about Water Rate Setting

Infrastructure has been in the news a lot lately. The president highlighted it in his budget speech/State of the Union address, and if you live in North Carolina, you heard the Governor highlight it in his State of the State speech a few weeks later. Both leaders identified infrastructure in general (including water and wastewater) as key problems that required new national and state initiatives. Initiates such as new types of bonds and augmented public funding programs will help, but none of these will replace the most important and somewhat magical water and wastewater finance tool – namely, locally determined customer water and sewer rates. Water rates are the tool that customers dread and elected officials rarely embrace, but rates ultimately drive the ability of communities to protect their environment and public health.

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Solar Panels

“Decouple” of Electric Utility Business Models in the Solar Age

In North Carolina, and around the country, growth in the deployment of solar photovoltaic (PV) power has accelerated dramatically in recent years. However, from the standpoint of financing the provision of electric power to customers, this growth in solar deployment presents challenges to the traditional business models of investor-owned utilities (IOUs). How will the electric power industry adapt in the coming years, especially from the standpoint of sustainable financing of clean energy?

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Image of a Violations Notice

Small Water Systems with Financial Difficulties are More Likely to Violate EPA Regulations

One hazard that water utilities with financial difficulties face is an increased risk of falling out of compliance of federal requirements and drinking water regulations. Violating regulations often triggers enforcement actions (and sometimes fines) by the state primacy agency, adding to the time and expense of running the water system. This can be extra troublesome if those utilities are already financially constrained. We analyzed national and regional data and found that unfortunately, there is statistical evidence that correlates small water systems’ financial difficulties and some types of violations.

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