Local governments have an increased public health responsibility to ensure that people have access to clean water during the COVID-19 pandemic. During this time, many utilities are refraining from shutting off customers’ water, despite unpaid bills. In more than a dozen states, mandates have even been put in place to prevent utility service shut-offs for customers. While it is a common practice during the crisis, utilities lose a tool to ensure collections from customers. Furthermore, many utilities will experience significant declines in water use from non-residential customers. The reduction in revenue could put utilities in a difficult financial position.
Many utilities may not be able to generate the revenues needed to cover their expenses this year. In that case, utilities may have to rely on their reserves to cover the gap. How long will utilities be able to last during this pandemic without recovering all of their expenses through revenues? This leads us to analyze a key financial indicator that approximates unrestricted reserves: days cash on hand. To put it simply, days cash on hand is the amount of saved and unrestricted cash a system has and how long it will be able to pay for daily operations before it runs out. For additional information on days cash on hand see our previous blog post.
At this point, it is unknown how long utilities might expect to operate under current COVID-19 conditions, which dictates how much they will need to rely on their reserves. According to Washington Post’s William Wan, it was two and a half months from the time of outbreak before COVID-19 peaked in China and restrictions began to lift. Given the uncertainty, it is important to examine the financial sustainability of utilities at various lengths of time. Here we will be analyzing the impact of the virus shutdown continuing for two, three, and four months. Additionally, we will compare present regional differences between utilities in North Carolina and Arizona. Continue reading
On August 29, the EFC lead a webinar on finance and governance models for watershed management as part of the Environmental Finance Network Smart Management for Small Water Systems program. The webinar focused on source water protection as an effective way to protect public health and avoid the costs associated with contaminated drinking water. The webinar sought to answer three separate questions:
- What is watershed management?
- How do small water systems (under EPA guidelines, those serving under 10,000 people) benefit from watershed management?
- How can small systems participate in watershed management?
The answers to the first two questions are somewhat straight forward; watershed management is any strategy or set of strategies that positively influences land characteristics in a drainage area, and small systems benefit by avoiding costs; both monetary and abstract.
However, the answer to the third question is a bit more difficult. Small systems face unique challenges with respect to watershed management for the protection of drinking water; they often rely on purchased water, they have limited technical and financial resources, and they have limited ability to impact land use in the entirety of their water supply watershed. Watershed boundaries often cross jurisdictional boundaries, so the land use decision made by a neighboring government often heavily impacts the quality of the small system’s source water. This makes partnership extremely important. Small systems can partner with neighboring jurisdictions, enter into a shared source partnership, or collaborate with nonprofit conservation groups in order to have a greater impact on the quality of their source water. Continue reading
During the 2014 North Carolina Water and Wastewater Finance course, the Town of Cary and Sensus Inc. presented to the class on a panel entitled “Smart Technology and Water Finance.” During the panel, Karen Mills, Cary’s Finance Director, and Leila Goodwin, Cary’s Water Resources Manager, stated they have adopted advanced metering infrastructure (AMI), colloquially known as “smart meters,” for their drinking water system. This ambitious technological project has allowed the Town of Cary many benefits for their water system, a few of which include: earlier leak detection and repair, improved backflow prevention, and better monitoring of water usage during rationing / shortages, among many others.