Daniel Kolomeets-Darovsky is an Environmental Finance Analyst with the Environmental Finance Center.
Defining a resilient business model for water utilities is no easy task in a time of unprecedented economic conditions, scare capital, and increasingly volatile environmental conditions. Everything seems to fly in the face of it, let alone the necessary informational foundation needed to see what’s really going on behind-the-scenes. How do we even know, for instance, that residential water use is declining in a place like North Carolina? What about how well your local utility is running its business, as measured by money it takes in versus money it spends (operating revenues versus operating expenditures)?
You’d like something concise and easy to absorb like this graph about the state of utilities’ finances in our southeastern backyard. But where does this come from? Well now you’ve entered the world of data collection, research and analysis. I promise it won’t hurt…much.
Being able to access, sort, and play around with data to unlock hidden trends is the basis of any good research that’s worth its weight. Or as a former head of Hewlett-Packard once said, “The goal is to transform data into information, and information into insight”. In the case of the EFC’s Water Research Foundation Project (#4366, “Defining a Resilient Business Model for Water Utilities”), our focus is water/sewer rates and revenues of geographically diverse states nationwide. Simple enough, so far, right?
Well here is where it feels like having only one oar in the water: Very few states do gather all of that, in one place, in a useable database format that allows for more analysis and more insights. Remember the NC graph from earlier? In our backyard, we have the Local Government Commission (LGC), that allows us to create visuals that communicate water utility financial integrity, for instance. Most states do not aggregate that kind of data in an efficient manner even though they base many of their lending and grant-making decisions on the financial health of their borrowers! It’s similar to when your bank loans you money for a car — the bank does so based on what it knows about your finances and history so it can be confident that you will be able to pay them back.
The good thing is that as we’ve gone out and located what data is available for this project, we’ve heard more and more that we’re not the only ones. Hopefully, this means that such information will become more readily accessible and digestable. Water development boards, public agencies, and creditors are focusing more on this area and with greater depth. If you’re deciding who should get your state’s scarce resources, wouldn’t you also want to know more, not less? That all begins with understanding who’s financially stable and where their business models are taking them.
Simply put: Two oars in the water are better than one.