Household Affordability, Why SRF Managers Should Pay Attention

Transcription

1 Household Affordability, Why SRF Managers Should Pay Attention Jeff Hughes, UNC Kim Colson, NCDEQ Sonia Brubaker, USEPA Environmental Finance Center at the University of North Carolina UNC School of Government Halloween, 2016 Austin, Texas

2 Household Affordability, Why SRF Managers Should Pay Attention Affordability Updates Local, State, and Federal Initiatives

3 What Worries Me More A. Zombies B. Vampires C. Clowns 0% 0% 0% Zombies Vampire Clowns

4 What Worries Me More A. Financial Capability of Water Systems B. Community/ System Rate Affordability C. Customer/ Household Affordability Financial Capability of a Wat.. 0% 0% 0% System Rate Affordability Household Affordability

5 Framing the Discussion System/Community Financial Capability Originated as a CSO Issue Is a system financially capable of meeting regulatory requirements? System/Community Affordability Originated as funding issue If additional subsidies and public funds are limited, which systems should get assistance? Customer/Household Affordability Originated as a local community issue What if a household can not pay their bill?

6 Do you Work for A. State SRF B. EPA C. Other 0% 0% 0% State SRF EPA Other

7 My Personal View is that Household Affordability Should be Addressed Primarily by: A. Households themselves B. Local Social Assistance Programs C. Utilities D. States E. Federal Government Households themselves Local Social Assistance Prog... 0% 0% 0% 0% 0% Utilities States Federal Goverment

8 Our SRF Programs are Effective at Addressing Household Affordability A. Strongly Agree B. Somewhat Agree C. Neutral D. Somewhat Disagree E. Strongly Disagree 0% 0% 0% 0% 0% Strongly Agree Somewhat Agree Neutral Somewhat Disagree Strongly Disagree

9 If you work with a SRF program, does your SRF provide affordability assistance based on: A. Community based: Rates/Median Household Income B. Community based: Rates/MHI and other factors C. Community based: Other factors not including Rates/MHI D. Affordability based individual user assistance E. No affordability criteria Community based: Rates/M.. Community based: Rates/M... 0% 0% 0% 0% 0% Affordability based individu.. Community based: Other fac... No affordability criteria

10 Are you familiar with water customer bill assistance programs in your state? A. Yes B. No 0% 0% Yes No

11 Which community has the greatest affordability issue A. A Rates/MHI Town B. A B (Clarkton) 4.2% Town B (Elizabethtown) 2.7% C. C Town D. C D (Pembroke) 3.5% Town D (Hickory) 2.0% E. Town E (Hillsborough) 2.6% 0% 0% 0% 0% 0% A B C D E

12 Which community has the greatest affordability issue Rates/MHI Persons in Poverty Town A (Clarkton) 4.2% 281 Town B (Elizabethtown) 2.7% 1700 Town A. C (Pembroke) B Town B. D (Hickory) C Town C. E D (Hillsborough) D. E 3.5% 2.0% 2.6% A. A 0% 0% 0% 0% 0% A B C D E

13 Which community has the greatest affordability issue Rates Persons in Poverty Town A (Clarkton) $ Town B (Elizabethtown) $ A. A Town A. C (Pembroke) B Town B. D (Hickory) C Town C. E (Hillsborough) D $49 $70 $ D. E 0% 0% 0% 0% 0% A B C D E

14 Which community has the greatest affordability issue A. A B. B C. C Town A (Clarkton) D. D Town E. B E (Elizabethtown ) Town C (Pembroke) Town D (Hickory) Town E (Hillsborough) Rate s Projected Rates for $1M Project Persons in Poverty $52 $ $47 $ $49 $ $70 $ $100 $ % 0% 0% 0% 0% A B C D E

15 Affordability and the NC SRF Water Infrastructure Master Plan Focus on viable utilities Look at organizational issues as well as infrastructure Kept System Affordability But moves toward customer/household view Focus is on higher rates

16 Water Resources Development Act of 2016 (Senate Version S2848) SEC FINANCIAL CAPABILITY GUIDANCE. (a) DEFINITIONS. In this section: (1) AFFORDABILITY. The term affordability means, with respect to payment of a utility bill, a measure of whether an individual customer or household can pay the bill without undue hardship or unreasonable sacrifice in the essential lifestyle or spending patterns of the individual or household, as determined by the Administrator. (2) FINANCIAL CAPABILITY. The term financial capability means the financial capability of a community to make investments necessary to make water quality or drinking water improvements. (3) GUIDANCE. The term guidance means the guidance published by the Administrator entitled Combined Sewer Overflows Guidance for Financial Capability Assessment and Schedule Development and dated February 1997, as applicable to the combined sewer overflows and sanitary sewer overflows guidance published by the Administrator entitled Financial Capability Assessment Framework and dated November 24, (b) USE OF MEDIAN HOUSEHOLD INCOME. The Administrator shall not use median household income as the sole indicator of affordability for a residential household. (c) REVISED GUIDANCE. (1) IN GENERAL. Not later than 1 year after the date of completion of the National Academy of Public Administration study to establish a definition and framework for community affordability required by Senate Report , accompanying S (114th Congress), the Administrator shall revise the guidance described in subsection (a)(3). (2) USE OF GUIDANCE. Beginning on the date on which the revised guidance referred to in paragraph (1) is finalized, the Administrator shall use the revised guidance in lieu of the guidance described in subsection (a)(3). (d) CONSIDERATION AND CONSULTATION. (1) CONSIDERATION. In revising the guidance, the Administrator shall consider (A) the recommendations of the study referred to in subsection (c) and any other relevant study, as determined by the Administrator; (B) local economic conditions, including site-specific local conditions that should be taken into consideration in analyzing financial capability; (C) other essential community investments; (D) potential adverse impacts on distressed populations, including the percentage of low-income ratepayers within the service area of a utility and impacts in communities with disparate economic conditions throughout the entire service area of a utility; (E) the degree to which rates of low-income consumers would be affected by water infrastructure investments and the use of rate structures to address the rates of low-income consumers; (F) an evaluation of an array of factors, the relative importance of which may vary across regions and localities; and (G) the appropriate weight for economic, public health, and environmental benefits associated with improved water quality. (2) CONSULTATION. Any revised guidance issued to replace the guidance shall be developed in consultation with stakeholders. (e) PUBLICATION AND SUBMISSION. (1) IN GENERAL. On completion of the revision of the guidance, the Administrator shall publish in the Federal Register and submit to the Committee on Environment and Public Works of the Senate and the Committee on Transportation and Infrastructure of the House of Representatives the revised guidance. (2) EXPLANATION. If the Administrator makes a determination not to follow 1 or more recommendations of the study referred to in subsection (c)(1), the Administrator shall include in the publication and submission under paragraph (1) an explanation of that decision. (f) EFFECT. Nothing in this section preempts or interferes with any obligation to comply with any Federal law, including the Federal Water Pollution Control Act

17 Low Income Sewer and Water Assistance Program Act of 2016 (HR 4542) SEC LOW-INCOME SEWER AND WATER ASSISTANCE PILOT PROGRAM. (a) ESTABLISHMENT. The Administrator shall establish a pilot program to award grants to not fewer than 10 eligible entities to assist low-income households in maintaining access to sanitation services. (b) REPORT. Not later than one year after the date of enactment of this section, the Administrator shall submit to Congress a report on the results of the program established under this section. (c) DEFINITIONS. In this section: (1) ELIGIBLE ENTITY. The term eligible entity means a municipality, or a public entity that owns or operates a public water system, that is affected by a consent decree relating to compliance with this Act. (2) HOUSEHOLD. The term household means any individual or group of individuals who are living together as one economic unit. (3) LOW-INCOME HOUSEHOLD. (A) IN GENERAL. The term low-income household means a household (i) in which 1 or more individuals are receiving (I) assistance under a State program funded under part A of title IV of the Social Security Act; (II) supplemental security income payments under title XVI of the Social Security Act; (III) supplemental nutrition assistance program benefits under the Food and Nutrition Act of 2008; or (IV) payments under section 1315, 1521, 1541, or 1542 of title 38, United States Code, or under section 306 of the Veterans' and Survivors' Pension Improvement Act of 1978; or (ii) that has an income determined by the State in which the eligible entity is located to not exceed the greater of (I) an amount equal to 150 percent of the poverty level for the State; or (II) an amount equal to 60 percent of the State median income; and (B) LOWER INCOME LIMIT. For purposes of this section, a State may adopt an income limit that is lower than the limit described in subparagraph (A)(ii), except that the State may not exclude a household from eligibility in a fiscal year solely on the basis of household income if such income is less than 110 percent of the poverty level for such State.

18 GAO

19 Rates/MHI vs. Rates/20% Percentile

20 GAO Report

21 GAO Report

22 Water Infrastructure and Resiliency Finance Center The Water Finance Center is an information and assistance center, helping communities make informed decisions for drinking water, wastewater, and stormwater infrastructure to protect human health and the environment. Research Advise Innovate Network Identify financial solutions to help communities meet infrastructure needs. Provide advice, support, and technical assistance to stakeholders Provide expertise and add value to the national water conversation. Build relationships with government partners and stakeholders.

23 Environmental Finance Centers Deliver targeted technical assistance to states, tribes, local governments, and the private sector Provide innovabve solubons to help manage the costs of environmental financing and program management 10 Rural Community Assistance CorporaBon California State University at Sacramento Wichita State University University of New Mexico Michigan Technological University University of North Carolina at Chapel Hill University of Southern Maine Syracuse University University of Maryland

24 DW/WW UBlity Customer Assistance Programs (CAPs) In 2014, 46.7 million people (14.8% of the U.S. populabon) lived in poverty (U.S. Census Bureau) UBliBes owen find approximately 1% of their customers are unable to pay at any parbcular Bme (WRF 2010) Compendium available at: hap://ow.ly/4nvsyo

25 DW/WW UBlity Customer Assistance Programs (CAPs) CAPs are voluntary programs that ublibes have created for customers having difficulty paying water and sewer bills CollaboraBon with nabonal water sector associabons (NACWA, AMWA, AWWA, WEF, WRF, and NAWC) Developed a compendium to highlight CAPs offered by drinking water and wastewater ublibes to low-income customers Types of CAPs Ø Bill Discount Ø Flexible Terms Ø Lifeline Rate Ø Temporary Assistance Ø Water Efficiency Short write-ups of examples are included for each type

26 Why do State SRFs care about CAPs? CAPs help all customers receive the public health benefits of drinking water and wastewater services, while also helping ublibes meet their financial needs and obligabons. Many communibes have pockets of low-income populabons UBliBes want rates to reflect the cost of providing service to the whole community These programs help ublibes be fiscally sustainable and able to take out loans

27 Who Needs Assistance?

28 How are UBliBes Funding CAPs? Line items within their budget Rate structures Voluntary customer contribubons (e.g., Round Up programs, donabons, etc) Non-profits (e.g., SalvaBon Army, United Way) Local Social Service Agencies State SRFs

29 STATE/SRFS AND CUSTOMER ASSISTANCE PROGRAMS

30 State Low-Income Assistance Programs California Background State law provides that every Californian has the right to safe, clean, affordable, and accessible water adequate for human consumption, cooking, and sanitary purposes. The State Water Resources Control Board is developing a plan for a statewide Low- Income Rate Assistance Program, which is required by A.B. 401 (2015, Dodd) to be released no later than February 1, Public Meetings Holding public meetings in October and November across the state to seek feedback on program development and implementation. Topics for comment at the public meetings: What is a reasonable amount of assistance to low-income households? What form should this assistance take (rebate, bill cost reduction, tax credit, other)? What other entities besides households should qualify for assistance? (Schools? Day care centers? Health care centers?) How much revenue is needed for the program? How should the revenue be generated; what revenue sources are appropriate? How should the revenue be allocated across customer classes within systems? Should the program be administered at the local or state level?

31 State Low-Income Assistance Programs Delaware Additional Subsidization Assistance Program for Low-Income Subgroups Municipalities that have existing CWSRF and DWSRF loans that were closed after August 19, 2015 are eligible to apply for additional assistance. Municipal grantees must agree to administer the Additional Financial Assistance Program (Assistance Program) for low-income residential wastewater and/or drinking water users within identified project areas. Program Highlights: Assistance Program Grants max is $200,000 for drinking water and $200,000 for wastewater services (combined total cannot exceed $400,000). Approved municipal grantees must ensure grant will last for at least 5 years, regardless of the addition or deletion of assistance accounts for eligible residential utility users. Municipality submits grant reimbursement requests no more than on a monthly basis. The program is funded in part from state grant funds (wastewater), and from the DWSRF Non-Federal Administrative Account (drinking water). What can be supported over the 5 year period? Average Number of Assistance Accounts Per Year: 200 accounts (or 400 accounts if combined drinking water and wastewater services) Amount of Annual Assistance Per Household: $200 (or $400 if combined drinking water and wastewater services)

32 How can the UBlity CAP Compendium Help? View UElity Specific InformaEon Quick Find Matrix U:lity Snapshots

33 Understanding Legal Limits to Utility Customer Assistance Programs

34 Studying State Policies that Influence Utility Funded for Customer Assistance Program Few states provide clear authority for establishing rate revenue funded programs (Exceptions include DC, State of Washington, California for Private Systems) Many states have language that could be interpreted to limit using rate revenue to fund programs Utilities often get creative to fund their programs Cell Tower Rental Revenue Leasing Payments (Detroit) Many/most programs are voluntary and modest

35 State Customer Assistance Programs?????? Funds collected and aggregated at state or regional level Similar to State Electricity Programs Utility level fees

36 IF SRFs Want to Support Customer Assistance Program (ii) does not meet the affordability criteria of the State if the recipient (I) seeks additional subsidization to benefit individual ratepayers in the residential user rate class; (II) demonstrates to the State that such ratepayers will experience a significant hardship from the increase in rates necessary to finance the project or activity for which assistance is sought; and (III) ensures, as part of an assistance agreement between the State and the recipient, that the additional subsidization provided under this paragraph is directed through a user charge rate system (or other appropriate method) to such ratepayers (WRRDA)

37 Sponsorship Model: Incentivizing Targeted Utility Spending Without altering Debt Service Payments Base Loan: CWSRF Loan $4,145,000 Loan for Wastewater Treatment Facility; 1.75%, 20 years Increase Proceeds, Reduce Interest Rate: CWSRF Loan $4,145,000 + $325,000 for Non-Point Green Infrastructure 0.9%, 20 years

38 Modified Sponsorship Model Base Loan: $4,145,000, 1.75%, 20 years Reduced interest rate to allow for modest recurring expenditures: $4,145,000, 0.9%, 20 years plus an agreement that borrower will establish and fund a CAP program for X dollars for the first 10 years of loan. Replace portion of loan with additional subsidization: $3,820, % 20 year loan plus additional subsidization of $325,000 with agreement that borrower will seed a customer assistance fund with $325,000

39 Loans could be structured in our state to incentive utilities to create and fund CAPS? A. Strongly Agree B. Somewhat Agree C. Neutral D. Somewhat Disagree E. Strongly Disagree 0% 0% 0% 0% 0% Strongly Agree Somewhat Agree Neutral Somewhat Disagree Strongly Disagree

40 Questions???

41 I Learned Something Today that Will Help Me Address Affordability Issues in the Future A. Strongly Agree B. Somewhat Agree C. Neutral D. Somewhat Disagree E. Strongly Disagree 0% 0% 0% 0% 0% Strongly Agree Somewhat Agree Neutral Somewhat Disagree Strongly Disagree

42 Sonia Brubaker Program Manager Water Infrastructure and Resiliency Finance Center U.S. EPA (202)