We know how Baltimore’s water affordability crisis harms city residents— thousands of people have lost running water in their homes over unpaid bills, renters have been evicted, and about 1,700 homeowners faced possible foreclosure after the city sold liens to their homes at sale since 2015.
Now, a new study by Roger Colton, the country's leading utility affordability expert and an independent consultant with Fisher, Sheehan & Colton, describes the dangers of this crisis for the water system’s own financial health. Colton’s pro-bono analysis — “Baltimore’s Conundrum: Charging for Water/Wastewater Services that Community Residents Cannot Afford to Pay” — provides a compelling case for why the city of Baltimore cannot afford to avoid addressing its water affordability problem.
Baltimore faces a conundrum: the cost of unavoidable improvements to the water and sewer system is coming up against households’ ability to pay for the rate increases to fund those improvements. When households cannot afford their water bills, they cannot pay their bills and the city doesn’t collect the revenue it needs. Simply, the city cannot collect money that residents do not have. The city must further raise water rates to cover this uncollected amount, further exacerbating the affordability problem for low-income residents. This downward spiral is in no one’s interest: the city spends more and more money on collection efforts that yield less and less money, while households suffer the consequences of losing water service through shutoffs or even their homes through evictions and tax sales.
Key findings from the analysis:
Water bills are rapidly increasing. Since 2010, the typical Baltimore household’s water and sewer bill has more than doubled. From 2010 to 2022, the typical bill is expected to more than triple, from $347 in FY2010 to $1,115 in FY2022.
Debt owed from water customers is growing precipitately. From 2010 to 2016, the receivables that the city doesn’t expect to collect within a year jumped by 154 percent for the water service billings and by an astonishing 1400 percent for the wastewater service billings. Over this period, total receivables for service billings increased by nearly $140 million, 92 percent of which is not expected to be subject to near-term collection. This suggests that the rate increases are already colliding with customers’ ability to pay.
The water affordability crisis is worsening across the city. The number of areas where water bills are unaffordable began to sharply increase in 2015 and 2016. By 2019, water bills will be unaffordable for the typical household in more than half the city. Low-income households are being hit the hardest. Water bills are already unaffordable for the bottom fifth of income earners in virtually every part of the city. In more than half the city, these low-income households will be paying more than 10 percent of their income on water and sewer bills by 2020.
A water affordability program will benefit the water utility financially by improving the payment patterns of low-income customers and reducing collection expenses. Customers with affordable utility bills are more likely to pay their bills, pay more of their bills, and pay more consistently and reliably into the future. At the same time, the city will find it easier to collect revenue from these households, so it will spend less money on shutoff notices, crews to shut off service, and other collection activities. A water affordability program can improve utility staff productivity and job satisfaction by reducing customer confrontations, facilitating resolution to customer concerns and decreasing workplace stress. Job satisfaction can increase employee retention and decrease the utility’s costs of recruiting and training new staff.
For years, we have seen that the city’s existing assistance programs are failing to meet the needs of low-income residents, and we have advocated for an income-based water affordability program to address the growing crisis. This new study shows that Baltimore must act now. It can’t afford not to.
Baltimore can resolve the conundrum it faces by implementing a comprehensive percentage-of-income water affordability program for low-income households. It is a matter of public health, equity, justice —and fiscal responsibility.