An update on what low-income U.S. households must pay for essential service
About a year ago I also published the results of a national study of affordability using these new metrics using data from a nationally-representative sample of utilities in 2017. This year, I’ve been working with Texas A&M graduate student Robin Saywitz to update that study for 2019 with fresh data and an expanded sample of utilities. A working paper details the full methodology and results for the 2019 update; this post reports the main findings.
Water and sewer affordability remain at the forefront of discussions among utility policymakers, managers, and regulators as communities across the country face rapidly rising capital, maintenance, and replacement costs. Since good policy requires good measurement, I’ve spent a lot of time in recent years evangelizing for a new, double-barreled measurement approach published early in 2018: the Affordability Ratio and Hours at Minimum Wage. These metrics are designed to capture the sacrifices and trade-offs that low-income households face when paying for these essential services.
Sample & data
There’s no central repository for water and sewer service rates in the United States, so valid depictions of affordability requires gathering data directly from utilities. We drew our sample from the EPA’s Safe Drinking Water Information System (SDWIS), which contains basic system information for the country’s nearly 50,000 water systems. To get a representative picture of the nation’s affordability we stratified the sample and then randomly selected systems. Our analysis then adjusted mathematically for the sampling procedure to make sure we get representative results.
We collected rates data during the summer of 2019 with an active survey—that is, we gathered rates information directly from utilities rather than relying on responses to questionnaires. The final dataset included full water and sewer rates data for 399 utilities—an increase of 70 systems compared with the first study.*
Basic water & sewer share of disposable income
The first main metric is the Affordability Ratio at the 20th income percentile (AR20), which estimates basic water and sewer prices as a share of disposable income, which for present purposes is total income minus other essential living costs (including taxes, housing, food, health care, and home energy), estimated using Consumer Expenditure Survey data.
In 2017 AR20 averaged 9.7 in the United States; we found that average AR20 is up sharply since 2017, with the national average now at 12.4. In substantive terms, that means that in the average U.S. utility, basic water and sewer service prices for a four-person household consume about 12.4 percent of disposable income for a household at the 20th income percentile. Here are the distributions of AR20 for 2017 and 2019:
As the figure shows, the overall distribution has shifted markedly since 2017, especially at the high end. AR20 is less than ten for about 60% of systems, but we found a troubling growth in very high values of AR20.
Basic water & sewer in hours at minimum wage
The other way I like to measure affordability is to convert basic monthly water/sewer prices into Hours’ Labor at Minimum Wage (HM). It’s not a precise way to measure affordability, but it’s intuitively meaningful.
The overall HM distribution also shifted up overall, with an average HM of 10.1 in 2019. In other words, the average monthly price of basic water and sewer service for a four-person household in the United States requires about 10.1 hours of labor at minimum wage. Average HM was 9.5 in 2017, so we see an increase in 2019, but the change in average HM is not as dramatic as the change in AR20. Here’s affordability in the United States measured in terms of local minimum wage, again with 2017 and 2019 side-by-side:
So what’s going on with affordability?
Trying to infer trends from just two time periods is tough, but some important patterns are evident in the 2019 update. The most striking result overall is the sharp increase in AR20, which reflects increases in water and sewer prices, increases in essential expenditures, and stagnant or even declining 20th percentile incomes.
The more modest increase in average HM is consistent with nominal inflation, but in terms of minimum wage labor the increase of +36 minutes is noteworthy as minimum wages have not increased in many parts of the country.
We’re still unpacking what it all means, and I’ll have more to say about what the 2019 data show. For now, these figures offer another snapshot of water and sewer affordability in the United States to help frame discussion over improvements and structural reforms to the American water sector.
*399 might not seem like a very large sample for a country with 50,000 water systems, but the sample is much larger than most studies of water rates, it’s representative, and we’re highly confident in the validity of the data because we gathered the data ourselves. It’s also 70 more systems than we sampled in 2017.
© 2019 Manny P. Teodoro
A five-point proposal to transform the U.S. water sector
As daunting as the challenges in the U.S. water sector are, solutions are possible and within our grasp. Thanks to legions of smart, creative scientists and engineers, we know a lot about the threats to environmental quality and health, and we’re pretty good at finding ways to address them. Today the principal barriers to progress in the water sector are not environmental or technological; they are social, economic, and political.
Fixing the water sector—really fixing the water sector—means more than government money for pipes. The crazy quilt of institutions that govern, regulate, and manage water in the United States hinders effective, lasting solutions. Fortunately, institutions are human creations, which means we can do something about them. There’s nothing wrong with water governance in America that can’t be solved.
Over the past few months I’ve written a series advancing five broad institutional reforms to the U.S. water sector that ought to accompany any big federal investment.* This post summarizes them. They’re a package deal: each reform complements the others, and each is unlikely to be successful without the others. It’s an ambitious plan, but it’s rooted in empirical research, and together the five parts are technically and politically feasible. Here they are (click each heading for the full post on each):
There are more than 50,000 community water systems and 15,000 sanitary sewer systems in the United States. Virtually every aspect of America’s water sector is worse because there are so many systems. Let’s reduce the number of water systems to fewer than 5,000 by 2030. Consolidation can happen by merging neighboring systems into a regional utility, creating new authorities or nonprofit organizations, or when an investor-owned firm purchases small systems. To make it happen:
- Federal funding for water, sewer, and stormwater systems must be contingent on small system consolidation.
- Laws governing utility mergers and acquisitions should remove barriers to and create incentives for consolidation. Consolidation laws should ensure that struggling systems are consolidated and guard against “cherry-picking.”
- All systems must be held to the same environmental standards. Exemptions and waivers for small systems should be eliminated and regulators should be empowered to force condemnation and consolidation for perennially failing systems.
- State and federal agencies should provide technical and legal assistance to facilitate the consolidation process.
Reducing the number of water and sewer utilities through consolidation is the single best thing we can do to improve water utilities in the United States.
Let’s follow regulatory regimes used in New Jersey and Wisconsin to change the incentives for utility leaders to invest in their systems adequately and manage them responsibly.
- Regulatory authorities should collect and publicly report performance metrics for each water and sewer system,
- Water, sewer, and stormwater systems must develop comprehensive asset management plans, and demonstrate that capital assets are adequately maintained.
- Public Utilities Commission pricing and service quality regulation should be extended to all utilities, not just investor-owned systems.
The great promise of the regulatory regimes pioneered in New Jersey and Wisconsin is that transparency and fairness can make buried infrastructure more visible, and so shift the political and economic incentives for sound management of water systems.
America’s water systems need a technological leap forward with comprehensive deployment of information technology. Let’s get our systems out of the 19th and 20th centuries and into the 21st and 22nd. Funding for water, sewer, and stormwater systems should support data collection and analytical capacity for more effective and efficient investment and operations.
The water sector needs a stronger supply of human capital, and we need to streamline the labor market. To that end, let’s:
- Invest in the next generation of water professionals with new and rejuvenated educational and training programs.
- Create national standards for operator licensing and certification.
- Build a body of rigorous, data-driven social science research on effective utility management, leadership, and organizations.
Let’s build environmental justice into water, sewer, and stormwater policy. Specifically:
- Federal and state authorities must establish standard metrics to assess racial, ethnic, and socioeconomic equity in environmental conditions and infrastructure investments.
- Utilities must collect and publicly report data on service shutoffs and restorations, and work toward an end to shutoffs.
- Regulators must demonstrate equity in inspections and enforcement actions.
- Eligibility for federal infrastructure funds must be contingent on utilities demonstrating equity or progress toward equity.
- Channel extra funding and technical assistance to communities that suffer from significant disparities due to historical or structural disadvantages.
The way forward
Just over a year from now Americans will head to the polls for a pivotal federal election. With water on the national political agenda in a way it hasn’t been since the 1970s, we are, perhaps, an election away from a major federal investment in infrastructure, and with it an opportunity to reimagine water governance. Let’s use that opportunity do more than rebuild pipes; let’s rebuild institutions. If we do it right, those institutions will keep the pipes working for generations to come, and our legacy will be a cleaner environment and healthier, more prosperous people.
*The five-part plan debuted in a talk I gave at as part of the University of Rhode Island’s Metcalf Institute public lecture series last summer. You can catch the whole talk here if you’re so inclined.
© 2019 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