Financial Report: Addressing Water Equity in a Time of Rising Costs

By Josh Ellis & Dan Cooper

Even before COVID-19 hit our country, water affordability has been a growing concern. From 2010 to 2019, the price of water service increased by 57 percent in 30 major U.S. cities. Meanwhile, millions of Americans have their water shutoff every year due to an inability to pay their water bills. Although many communities have placed a moratorium on shutoffs during the pandemic, some have not, leaving people stuck at home without clean running water to drink or wash their hands.

Policy makers and practitioners alike are considering how to rebuild our water systems and policies to be more resilient in the face of the next shockwave. Tackling the intertwined issues of rising water rates and deferred water infrastructure maintenance is a top issue they’re facing.

This issue is even more pressing for the Chicago region: The average water rate grew by almost 80 percent between 2008 and 2018, from an average of $4.05 per 1,000 gallons to $7.21 per 1,000 gallons, after adjusting for inflation. There are several reasons for this:

Our water infrastructure, built over a century ago, has aged and urgently needs repair and replacement.

Water utilities must play catch-up with years of deferred infrastructure investment, and often this means increasing water rates, which hits low-income customers the hardest.

Other cost drivers in the water industry include resource depletion, pollution, population growth/decline, rising input costs (e.g., energy, chemicals, labor), increasing regulatory burdens, and decreasing or no longer existing subsidies and grants from federal and state governments.

Unfortunately, while water costs have continued to rise, income growth – particularly working-class wages – has remained essentially stagnant while other household costs have grown. This scenario holds true even in municipalities where incomes are above average. Three-fourths of communities in the northeastern Illinois region have experienced water bill growth rates exceeding income growth rates over the past 10 years.

A New Way to Analyze Water Affordability

A new report released in February 2020 draws attention to the issue of water affordability, and outlines solutions for tackling growing water affordability challenge in northeastern Illinois. The report was produced by the Metropolitan Planning Council, in partnership with Elevate Energy and the Illinois Indiana Sea Grant.

A key finding of the report is that some of the older approaches for analyzing water affordability challenges have masked the impact of rising water rates and stagnant incomes experienced by our most vulnerable households. These new analyses indicate just how widespread it is for low-income households to be burdened by the cost of their water. More than half of Chicago region municipalities have at least one neighborhood where water is unaffordable for low-income households. The report also highlights the relationship between water burden, segregation and income inequality. In fact, our report shows that half of the Chicago region’s municipalities have at least one census tract where the lowest income earners are water burdened.

Improving Affordability Will Take a Range of Solutions

Workable solutions begin with recognizing the effect rising water service costs have on some households, and then implementing rate structures, policies and programs that alleviate the strain on customers who are unable to pay. However, since every community is unique, a one-size-fits-all water affordability solution does not exist. What’s more, communities cannot go it alone. All levels of government (county, regional, state, federal) and non-governmental organizations also have roles to play.

Consider how we can begin to address water affordability in the midst of COVID-19. Utilities or municipalities can choose to place a moratorium on water shutoffs and reconnect service to those who have been previously shutoff. Together with nonprofit partners, they can distribute potable water to residents in need. County and state governments can begin to design more effective water rate and fee assistance programs for low-income households that cannot afford their bills. One of the chief causes of unaffordable water—deferred water maintenance—could be addressed through increased state and federal funding for water infrastructure improvements.

Because the issue of water affordability is so complex, we did not intend for our report to be exhaustive. Instead, it was designed to consider water affordability for the most vulnerable households, which exist in most municipalities across the region. It begins to analyze and explore the underlying causes of increasing water burden toward the goal of designing an equitable water rate structure and effective water affordability programs. More research is needed to understand household-level trends, for example.

However, the report, along with an accompanying package of resources available on our website, represents an important first step in quantifying the extent of the problem in northeastern Illinois, and exploring strategies for tackling the growing affordability challenge. The need is urgent. Right now, people are staying home without clean, safe water for consumption and hygiene because they couldn’t pay their bill. We must change this trajectory to protect public health and safety.

Josh Ellis is vice president of the Metropolitan Planning Council, a nonprofit dedicated to shaping a more equitable, sustainable and prosperous greater Chicago region. Ellis has been with MPC since 2006, and directs many of the organization’s urban and regional planning initiatives, including MPC’s water programs.

Dan Cooper is director of research at the Metropolitan Planning Council, a nonprofit dedicated to shaping a more equitable, sustainable and prosperous greater Chicago region. He provides data analysis and visualization, policy analysis and action-oriented research to support all of MPC’s program areas.

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