Abstract
Local governments in the US routinely provide water services drinking water delivery and wastewater treatment. After the Great Depression, the federal government shared the financial responsibility for water services. However, over the last 3 decades, federal support has declined, exposing local governments to greater financial risk. We analyzed the US municipal bond market and the bond offerings of 25 Pennsylvania water utilities over a 30-year period to understand how financial conditions and risk have evolved for local government water utilities. The financial health of water utilities in the US is affected by monetary policy, federal tax policy, the broader financial (bond) market, regional corporate/industrial activity, and increased pressure to maintain credit quality. Utilities in our case study are persisting with a delicate balance of low interest rates for municipal bond issuances, moderate credit downgrades, and raising water rates to maintain credit quality. If one or more of these forces slips to a greater extent (e.g., higher interest rates, larger credit downgrades, or rising affordability crises), utilities could be left with few options to sustain the fiscal solvency needed to ensure safe and reliable water services. Water managers and engineers can use these findings to understand better how federal funding and policy, central bank decisions, and market sentiment affect municipal utilities and the population that they serve.
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Data Availability Statement
Some or all data, models, or code used during the study were provided by a third party (Wharton Research Data Services). Direct request for these materials may be made to the provider as indicated in the Acknowledgments.
Some or all data, models, or code generated or used during the study are available in a repository or online in accordance with funder data retention policies:
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IPUMS National Historic Geographic Information System (IPUMS NHGIS): https://doi.org/10.18128/D050.V15.0
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Congressional Budget Office (Congressional Budget Office 2018): https://www.cbo.gov/publication/54539
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Congressional Research Office (Tiemann 2018): https://fas.org/sgp/crs/misc/R45304.pdf
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Electronic Municipal Market Access/Municipal Securities Rulemaking Board: https://emma.msrb.org/Home/Index
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Pennsylvania Infrastructure Investment Authority: https://www.pennvest.pa.gov/Information/Pages/Approved-Projects.aspx
Acknowledgments
This work was supported by Spring Point Partners via their Delta Water Innovators program. Wharton Research Data Services was used in preparing municipal bond market data and treasury rates from 1980 to 2020 via the Federal Reserve Bank and the Municipal Securities Rulemaking Board datasets. This service and the data available thereon constitute valuable intellectual property and trade secrets of WRDS and/or its third-party suppliers. Access to WRDS was granted through Duke University’s Fuqua School of Business.
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Information & Authors
Information
Published In
Journal of Water Resources Planning and Management
Volume 148 • Issue 2 • February 2022
Copyright
© 2021 American Society of Civil Engineers.
History
Received: Jan 4, 2021
Accepted: Oct 9, 2021
Published online: Dec 14, 2021
Published in print: Feb 1, 2022
Discussion open until: May 14, 2022
ASCE Technical Topics:
- Business management
- Environmental engineering
- Federal government
- Financial management
- Government
- Infrastructure
- Lifeline systems
- Municipal wastewater
- Municipal water
- Organizations
- Practice and Profession
- Urban and regional development
- Urban areas
- Utilities
- Wastewater management
- Water (by type)
- Water and water resources
- Water management
- Water treatment
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