How the federal government might end shutoffs & keep water flowing during the COVID-19 crisis
The COVID-19 crisis has escalated America’s water and sewer affordability challenge into a full-blown health emergency. Many low-income households struggle to pay for these essential services in the best of times, and the specter of shutoffs for non-payment now threatens to worsen the pandemic. It’s hard to wash hands, cook at home, and maintain adequate sanitation without water service.
In response to the fast-moving crisis, scores of utilities are suspending shutoffs and restoring service for the duration of the pandemic. That is a prudent move in this emergency, but suspending shutoffs and restoring service carries significant financial risks for utilities and does not fundamentally solve the affordability problem, even in the short-run. An end to shutoffs does not mean an end to high prices, late fees, or penalties. When the crisis passes, many customers will still have outstanding balances running into the thousands of dollars and once again face the threat of shut-offs. Meanwhile, in plenty of places shutoffs continue even as COVID-19 rages.
Federal water bill relief?
Last week Congress passed a monumental $2 trillion economic rescue package in response to the COVID-19 crisis sweeping the country. During the helter-skelter Capitol Hill negotiations over the COVID-19 bill, House members proposed $1.5 billion in water assistance relief for low-income households. Modeled after LIHEAP, the federal low-income energy assistance program, the proposal would have provided financial assistance to income-qualified households to help pay for water bills through existing LIHEAP administrative processes. The proposal didn’t make it into the bill that finally reached President Trump’s desk.
Although the water bill assistance would surely have helped many, it would likely have made little difference in the big picture. For starters, while $1.5 billion is a lot of money, means-tested assistance programs are costly to administer and burdensome for customers who need help. This sort of relief can help, but will take time to work its way through administrative processes and into consumers’ accounts to prevent shutoffs. Even at their best, means-tested programs help a small fraction of the eligible population—historically LIHEAP has reached only about 16% of those eligible for assistance. Complicating matters is the extreme fragmentation of the U.S. water sector, with 50,000 mostly small water systems operating across the country. Some of the poorest Americans live in small communities where utilities’ and social service organizations have limited capacity to administer assistance. The need for immediate relief in the face of a pandemic demands faster, farther-reaching action.
Bigger, bolder, faster action*
So what might work better? I’ve long argued that pricing, not assistance programs, is the best way to tackle water affordability. With the pandemic upon us and a massive, emergency need for universal in-home water and sanitation, it’s worth considering a similarly massive, emergency financial response. Here’s an outline of a scheme that could quickly end shutoffs and maximize short-term affordability relief with the lowest management cost to utilities and zero administrative burdens on customers.
The federal government should provide formulaic, conditional grants directly to water utilities. Grants would be awarded as a percentage of each utility’s budgeted 2020 annual rate revenue, with the percentage equal to the community’s poverty rate. For example, Seattle Public Utilities’ 2020 budget calls for $205 million in water revenue and about 12% of its population lives in poverty, so its grant would be $24.6 million. Detroit’s budgeted water rate revenue for 2019-2020 is $131 million and its poverty rate is 33%, so its grant would be $43.2 million.
In exchange for this cash injection, utilities would have to meet simple conditions on pricing and customer administration. Specifically, for the duration of the national COVID-19 pandemic, utilities would:
- End residential shutoffs for non-payment;
- Restore service to all occupied residences currently shut off;
- End residential foreclosures and financial penalties for non-payment or service restoration;
- Forgive all outstanding penalties, fees, and interest on residential water accounts;
- Structure prices so that 6,000 gallons of monthly residential water and sewer service costs less than $58 (eight hours of labor at federal minimum wage).
All community water systems that operate on a fee-for-service basis would qualify, including municipal, tribal, special district, and investor-owned systems. Utilities could use the money to offset revenue losses due to COVID-19 crisis, fund assistance programs, or maintain and improve capital.
Federal funds would be channeled from EPA through existing state Drinking Water Revolving Funds directly into utility coffers, requiring very little additional administrative capacity. There would be no administrative burden at all on customers. Administration for very small systems could be managed through state or county governments.
With annual water utility revenue totaling something like $70 billion and a national poverty rate of 11.8%, the program would end up costing around $8.5 billion dollars. For another $10 billion we could extend the program to cover sewer revenue, too. Until last week, those would seem like absurdly large sums, but they’re rounding errors in the $2 trillion-dollar package that Congress just approved.
Emergency & aftermath
To be clear, this isn’t a carefully considered, meticulously modeled plan—it’s an idea meant to get water flowing immediately in response to an urgent need. These are big, blunt policy instruments, but the proposal outlined here could be introduced on Monday, signed into law by Wednesday, and water service restored in communities across the country by Friday. In a pandemic every moment matters.
Lasting, sustainable solutions for the water sector will require more fundamental reforms to the way that we govern, finance, and manage these critical systems. I hope that once the COVID-19 storm fades, a renewed commitment to improving the American water sector is one of its silver linings.
*Thanks to Wendi Wilkes for prompting and helping me think this through via Twitter. She deserves a share of the credit if you like this idea, but no blame if you hate it.
to win not to lose in water utility management
Warning: strained sports metaphor coming.
It’s late January, and the National Football League season soon reaches its climax with the Super Bowl. Both of last weekend’s conference championship games saw a high-octane home team take the lead. By late in the game, the winning teams’ strategies shifted from trying to score to trying to run out the clock. That meant lots of prevent defense, a tactic familiar to any reasonably attentive American football fan.
Prevent defense is an ultra-conservative strategy, designed to use up time and avoid disastrous, long passing plays—the goal is not really to stop the opposing team, but rather to manage moderate losses. A coach who deploys a prevent defense isn’t so much trying to win as he is trying to avoid losing. That works fine when the team that’s ahead has a comfortable lead. But when the lead is tenuous, prevent defense courts disaster because it can allow a quarterback to lead a heroic comeback. Legendary NFL coach John Madden famously declared that: “All a prevent defense does is prevent you from winning.”
Naturally, all of this makes me think about water utility management.
Compliance as performance
A few years ago I took a water operator training class through Texas A&M Engineering Extension. The course covered principles of safe operations, along with the basic math, chemistry, and physics that operators need. What really stood out to me was how virtually everything about our training involved regulatory compliance. Treatment plant operations, distribution system maintenance, even safety protocols, were all framed in terms of following rules and avoiding violations.
Things don’t seem much different in utilities’ executive suites or board rooms. Although the rhetoric of excellence abounds in water management circles, real policy decisions and capital investments tend to follow regulatory requirements. Treatment plant upgrades happen when the EPA formulates a new rule. Sewer capacity expansions come when overflows become so frequent and egregious that regulators force a consent decree.
A water system’s strategic goal might be public health, environmental quality, citizen trust, and economic prosperity, but the utilities’ management tactics often boil down to regulatory compliance. The practical goal is not so much to achieve good things, but to avoid bad ones.
The main reason is money. One of the challenges of managing great water and sewer systems is that the price of a water is much more visible than quality of water. Customers—who are also voters—know for sure what they pay for it when they get the bill each month. Water systems are literally buried. Unless quality is egregiously awful, the only marker of a system’s quality is regulatory compliance. It’s hard for utilities to demonstrate their real value in terms of anything but monthly bills and disasters.
Utility leaders are thus stuck between a rate increase rock and a regulatory hard place. For many, “success” means avoiding rate increases and regulatory violations as long as possible. The folks who operate these essential systems don’t like running them to the brink of failure, but as one city utility executive told me: “It’s hard to get anything done without a regulatory boot to your backside.”
That’s a fundamentally negative way to think about performance. Is it any wonder that utility managers often run a prevent defense?
From loss avoidance to winning
There are some creative, dynamic, and courageous leaders in the water sector who have found ways to build achievement cultures in their utilities. But hoping for the serendipitous arrival of an exceptional leader isn’t really a strategy. What would it take to change the game? How can we get utility leaders to think about seeking success, rather than avoiding failure?
What’s needed is a comprehensive, independent, and visible system for monitoring and reporting water and sewer utility performance. What if there were monthly box scores for utilities? What if they received a report card and grade point average every year, with results reported publicly?
Aquam cum laude
This isn’t really a radical idea; Congress had transparency in mind when it required utilities systems to provide water quality reports, and the State of New Jersey was thinking about political accountability when it launched the Water Quality Accountability Act. Too often we forget that public information about water system performance also creates a credit-claiming opportunity. But reporting under those laws is complicated and in many ways opaque.
Anyone who has been to high school understands grades and GPAs. A simple, comprehensive report card would give a utility’s leaders a way to communicate progress. A new management team could set clear improvement targets and show how their efforts moved the system’s GPA from 2.7 to 3.5. Mayors and councilmembers could trumpet the improvements, helping to demonstrate the value of those unpleasant rate increases. Water systems that achieve and maintain consistent excellence across the board would qualify for the Dean’s List.
I’m a big believer in the power of measurement and incentives. If we keep score correctly, our utility leaders can do more than avoid disaster—they can play to win health, environmental quality, and economic prosperity for our communities.
© 2020 Manny P. Teodoro
Water Sector Reform #5: Environmental Justice
With a major federal investment in water infrastructure possibly on the horizon, the United States has a once-in-a-generation opportunity to leverage that money into a structural transformation of America’s water sector. This is the last in a series of posts outlining broad proposals to reform the management, governance, and regulation of U.S. drinking water, sewer, and stormwater systems. The first proposed reform was consolidation of water utilities; the second was an overhaul of financial regulation; the third was investment in information technology; the fourth was investment in water sector human capital.
My fifth proposal is to build environmental justice into federal water regulations.
Drinking water & environmental justice
It’s difficult to overstate just how much the Flint Water Crisis changed the national conversation on drinking water. As I’ve observed before, Flint’s water contamination wasn’t the first, or worst, or largest drinking water crisis in America in recent years, but for it’s the one that put a spotlight on water infrastructure. Last month a similar lead contamination in Newark grabbed headlines across the country again.
The lead contamination crises in Flint, Newark, and elsewhere turned the spotlight on an uncomfortable reality: America’s water systems problems are not just about infrastructure management, they’re also about institutional politics, race, ethnicity, and poverty. There’s a growing recognition that water infrastructure is an environmental justice issue. That’s expanded the political coalition interested in water infrastructure and raised the stakes in the politics of drinking water.
The color of drinking water
Anecdotes and case studies about drinking water and environmental justice abound. Looking for more rigorous evidence, David Switzer and I conducted the first nation-wide analysis of the relationships between race, ethnicity, socioeconomic status, and Safe Drinking Water Act (SDWA) compliance. Here’s what we found:
The red areas of the graph show high likelihood of drinking water violations, the blue areas show low likelihood. These results provide strong evidence of a systemic injustice in utilities serving low-income communities of color across the United States. In communities with higher populations of black and Hispanic individuals, SDWA health violations are more common. What’s more, race and ethnicity seem to matter most in determining drinking water quality in the poorest of communities. My analysis of public experiences with drinking water service also reveals important disparities by race and income. The racial disparities are far, far worse in Indian Country. My study with Mellie Haider and David Switzer found that Clean Water Act violations are 23% higher and SDWA violations are 59% higher on tribal facilities compared with non-tribal facilities.*
The reasons for these racial, ethnic, and socioeconomic disparities in water quality and utility service are varied and complex. In some cases it’s a familiar tale of urban de-industrialization and white flight; in others it’s a legacy of racial discrimination in housing or infrastructure development programs. Environmental injustices in drinking water aren’t just urban phenomena, either: majority-black and majority-Hispanic communities suffer from poor water quality across vast swaths of rural America—to say nothing of Indian Country.†
Unfortunately, the regulatory response to ongoing water quality problems in poor, minority communities is to loosen regulations or look past violations. Outsiders to the water sector are sometimes surprised to learn that there are no federal laws requiring racial, ethnic, or socioeconomic equity in water quality.
If we are going to pour hundreds of billions of federal dollars into water infrastructure, that money must bring us closer to environmental justice. My final water sector reform proposal, then, is to build environmental justice into federal water regulations. That means, at a minimum:
- Establishing standard metrics to assess racial, ethnic, and socioeconomic equity in environmental conditions and infrastructure investments. I’m working on some new environmental equity metrics that I hope to put into practice soon.
- Utilities must collect and publicly report data on service shutoffs and restorations.
- Regulators must demonstrate racial, ethnic, and socioeconomic equity in inspections and enforcement actions.
Eligibility for all federal infrastructure funding must be contingent on utilities demonstrating equity in conditions, investment, and administration, or adequate progress toward that goal. Extra funding and technical assistance should be targeted at communities that suffer from significant disparities due to historical or structural disadvantages—most obviously tribal systems.
Together with the other systemic reforms I’ve proposed, this commitment to environmental justice can rebuild trust in America’s water systems and build a broad political coalition in support of investment in the nation’s most essential infrastructure.
*We’ve got more research on tribal water issues in the, er, pipeline.
†Environmental injustice in rural America often come as a surprise to big city folks, who often seem to think that “rural” means “white.” Racial/ethnic disparities in water quality don’t surprise anyone who’s spent time in South Texas, Northern Arizona, or Alabama’s Black Belt.
© 2019 Manny P. Teodoro