by Ayodeji George
A trend that arose in conversations with water professionals and leaders of small and rural water systems is the heavy significance of water operations in the budgets of their broader municipalities and districts. This study leveraged the Texas Water System Prioritization Tool developed by the Environmental Policy Innovation Center (EPIC) to explore the role of water/ wastewater in the municipal finances of Texas communities.
The prevalence of interfund transfers to and from the water system were a particular area of focus for this study, alongside metrics of proactive investment such as the debt to asset ratio, and measures of system performance such as health-based violations. The project also took into consideration community financial metrics such as Taxable Property Value (TPV) and Median Household Income (MHI).
Financial data for this project was drawn from the financial audits of a randomly selected subset of the systems in the Texas Water System Prioritization dataset. The random sample was constructed to represent an even proportion of systems from the 16 Texas Water Development Board (TWDB) planning districts. Financial audits were readily available for 330 of the 465 systems, and analysis included data visualization and simple linear regression.
This project finds that the smaller the population of a municipality or district, the larger the influence of water operations on the systems overall budget. Additionally, the financial capacity of the community to absorb higher water rates is a better predictor of sustainable system investment than simply population size. These observations both contribute to reinforcing the hypothesis that system underinvestment is felt more acutely by smaller and poorer communities. Accounting for the capacity of a system to invest in necessary water improvements is an essential component for regulators interested in improving the quality of water provision in small and rural communities.