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Frequent readers of our blog will know that we often discuss the gap that exists between the need for capital investment in the water/wastewater sector, and the availability of both the necessary capital as well as the ability to repay debt. Indeed, our most recent blog post, Water Rate Affordability (Dec. 26, 2011), presents a [...]
Water and wastewater utilities in the public sector are often under fire for increasing rates, but strong financial health is becoming more and more important in today’s changing credit markets. Access to credit for utilities is as vital as it is to any business, and maybe more so due to the capital intensive nature of [...]
One of the interesting debates in the water industry these days is how, when, why, and how much private equity can be brought to bear to address our growing water investment needs. As readers of our blog would note, US water systems are faced with daunting shortfalls in financing for developing new water supplies, and [...]
If you watched 60 Minutes (CBS) on Sunday 12/19 then you heard a story about how the States are in big trouble with their budget deficits that renowned Wall Street analyst Meredith Whitney says is likely to lead to a wave of municipal bond defaults. The prologue for failing municipalities looks like this: the State [...]
In the water and sewer utility, costs tend to pile up quick and they are seemingly endless if not formidable. As an industry, water and sewer utility services are among the most capital intensive anywhere. There are very few industries in the world where one has to invest so much capital to produce even the [...]
Eventually the piper must be paid. For municipal governments, balancing the budget is these days a constant concern and budget cuts are starting to hit core services as the recession plods along. In Washington, however, balanced budgets are not a concern, nor it seems is the staggering deficit that comes with massive spending programs that [...]
An important part of our financial planning toolbox is the Credit Scorecard. Embedded in our financial plan models prepared for clients, we compare your own metrics against the published median benchmarks for Fitch Ratings’ AAA, AA, and A rated credits, and to S&P’s Strong, Avg., and Low indicators. While not an official credit rating by [...]
A VP for United Water New Rochelle recently published a letter explaining the reasoning behind the company’s requested rate increase that is now being considered by the NY commission (click here to read the full letter). He brings out a couple of points in the letter that bear additional commentary. “Capital improvements are not a [...]
As the Global Water rate case in Arizona unfolds, we are starting to see “under the skirt” of the water utility that is seeking a 34% increase to its approved water rate and 130% for its sewer rate. We were pretty sure that we would see some fireworks in this case given the size of [...]
The Illinois American water company serving about 10,000 customers in the Chicago area has asked the Illinois Commerce Commission to approve a 30% increase in water rates and a 50% increase in sewer rates. What the protesters probably don’t understand, and what everyone who thinks substituting public ownership of their water/sewer utilities with private (corporate) ownership needs to know is that the private utility owner has a constitutional right to charge rates that will allow it the opportunity to earn a reasonable profit.
We’ve been following the story in Oceanside, CA for several weeks now and were not surprised to awake to today’s headline that the city council rejected the water rate increases that had been proposed by the utility managers (Council Rejects Water, Sewer Rate Increases). As this story has unfolded, we’ve learned a few things: a) [...]
The cost of equity is an often overlooked aspect of water and sewer rate setting. It isn’t always relevant to the rate setting situation, but when it is it is extremely important and most so-called experts get it wrong. This article explains the cost of equity, and some of our approach to quantifying it.