Stacey Isaac Berahzer is a Senior Project Director for the Environmental Finance Center at the University of North Carolina, and works from a satellite office in Georgia.
We recently facilitated the first “Peer2Peer Exchange” where utility officials from ten of our partner water utilities on a Water Research Foundation project shared stories about their financial policies. To get discussions kicked off, we asked folks which came first, the “well-managed, financially sound utility” (the chicken) or the “financial policy” (the egg).
The answers from the group included both “chicken” and “egg;” one person even responded with “a half-grown chicken!” We also spent some time discussing how a financial policy gets “incubated” at a utility in the first place. Based on the participant utilities, policies seem to be initiated most often by the staff, but rating agencies and the board were also common instigators. (When it comes to working with the board, a previous blog post on “…Strategies to Get Your Board on Track with Finance Policies,” discussed some examples of getting buy-in on financial policies. Another post covered how the Water Works Board of the City of Birmingham used their finance policy to get an upgrade from the credit rating agencies.)
Several utilities shared stories on the adoption, components, and impact of their finance policies in the Peer2Peer Exchange which we hope to summarize the project’s final report.
Financial policies represent an important element in the long-term plan of a utility because they can a help utility to achieve financial sustainability of the organization. At the very least, they create a framework for discussing financial decisions with governing boards, staff, and the public. With the “new normal” that utilities have to adapt to, these policies are expected to become more popular. So popular that if you look on YouTube for “utility financial policy” you will actually find a couple of water utility-related videos! Specifically, the Charlotte-Mecklenburg Director and Orange Water and Sewer Authority’s Director of Finance discuss their utilities’ policies. So, we confess that the EFC posted those videos as part of this project. We don’t expect to compete with the 530 million views of the “Gangnam Style” video anytime soon. But, just like that K-pop song was no fluke, but was instead the result of Korea “building up to this moment for 20 years, creating record labels, recruiting young people, turning them into superstars, sending them on tour,” it is encouraging to think about utilities also being deliberate and committed to the development and upkeep of financial policies. So, whether your role is staff at a utility, or a board, when it comes to a robust financial policy, don’t chicken out.