An Economic Perspective on Fiscal Sustainability of U.S. Water Utilities: What We Know and Think We Know

Mohammad Ali, Jingjing Wang (), Heather Himmelberger () and Jennifer Thacher ()
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Mohammad Ali: Centenary College of Louisiana, 2911 Centenary Blvd, Shreveport, LA 71104, United States
Heather Himmelberger: #x2020;University of New Mexico, MSC 05 3060, Albuquerque, NM 87131-0001, United States
Jennifer Thacher: #x2020;University of New Mexico, MSC 05 3060, Albuquerque, NM 87131-0001, United States

Water Economics and Policy (WEP), 2021, vol. 07, issue 01, 1-30

Abstract: A key issue facing U.S. water utilities is that while costs are generally fixed and increasing over time, the revenue is typically variable and has generally been decreasing/dampening over time, making it harder to maintain fiscal sustainability. Based on a comprehensive review of the relevant literature, we highlight the major factors that can potentially impact the fiscal sustainability of a water utility from an economic perspective. Furthermore, using numerical examples and data from North Carolina, we critically examine which of these factors actually contribute to the fiscal unsustainability of water utilities. We conclude that decreases in demand and increases in costs are the two primary driving forces. Particularly, rate increases cannot be attributed as a determinant of fiscal unsustainability because of the inelastic nature of water demand. Finally, we also highlight strategies for U.S. water utilities to improve their fiscal sustainability.

Keywords: Fiscal sustainability; water utilities; water price elasticity; revenue stability (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1142/S2382624X21500016

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