Research Ranks U.S. Cities’ Water Infrastructure Investment

Dec. 28, 2016
Many U.S. cities face significant financial, economic hurdles

The Brookings’ Metropolitan Policy Program released new research that benchmarks U.S. cities in terms of their ability to pursue water infrastructure investment.

By creating a new framework to analyze utility finances and other related economic concerns, the research explores many of the country’s largest public drinking water utilities and the primary cities they serve to provide a more complete understanding of the context for local water infrastructure investment. It finds that many of these large utilities face relatively high levels of long-term debt and other operational and economic pressures that are spurring action in innovative planning approaches.

“Investing in water: comparing utility finances and economic concerns across U.S. cities,” by Brookings Associate Fellow Joseph Kane finds that while a handful of large drinking water utilities in cities such as Washington, Denver, and San Francisco perform well across six indicators of financial and economic health, many cities, from Detroit to Cleveland to Birmingham, Ala., are facing a longer list of difficulties by comparison.

Since utilities frequently vary in their size and geographic coverage, it can be challenging to compare water investment at a city level. However, by using a combination of Census data and 2015 survey data from the American Water Works Assn. and Raftelis Financial Consultants to investigate city-level water finances in greater depth, author Joseph Kane creates a “water investment score” (or ranking) for 97 cities nationally.

The scores are based on three different measures of utility finances—operating ratios, debt-to-asset ratios and rates—and three broad economic variables—changes in population, changes in median household income and the share of lower-income households in the primary city served. Ranging from a low of -6.20 in Detroit to a high of 9.61 in Washington, these scores attempt to show the wide variety of regional contexts that exist nationally for water infrastructure investment.

“Ultimately,” Kane notes, “utilities and their regional partners will need to consider a wide menu of options to drive future water investment. The scale and nuances of the challenge at hand demand more extensive analysis, and the concerns of individual cities and the capacity to drive innovative solutions will need to be fleshed out more fully.”

This brief begins to scratch the surface of the types of metrics and tools that cities need to deploy as they explore new approaches to their long-term water infrastructure needs. As leaders at all levels of government increasingly turn their attention to water infrastructure investment, it is important to view any potential policy options or financial tools in light of this regional variety. Future Brookings Metro work will explore additional water infrastructure concerns from this vantage point, aiming to cover all types of utilities (drinking water, wastewater, storm water) and geographies (urban, suburban, rural) to get an even clearer sense of the investment challenges and opportunities at hand. 

Source: Brookings Metropolitan Policy Program

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