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In an increasingly complex and changing environment, utility regionalization offers a way to streamline operations and potentially secure the country’s water future.
State and federal governments have long promoted regionalization and other partnerships between utilities. The development of the North Carolina Statewide Water and Wastewater Infrastructure Master Plan in 2017 directly laid out utility regionalization and mergers as a key component in North Carolina’s plan to develop and maintain viable utilities. The result has been the creation of a Merger Regionalization Feasibility grant program and, just this month, the passage of HB 1087: Water/Wastewater Public Enterprise Reform. This new legislation has, among other things, established a Viable Utility Fund.
The push for regionalization (connection and partnerships between utilities) and an emphasis on mergers (the complete consolidation of management) is a direct result of the changes in infrastructure funding availability at both the state and national level. While historically a large portion of municipal infrastructure was installed using grant programs, the availability of grant money has continued to dwindle in changing political environments. Since the grants that originally paid for infrastructure are no longer available to help replace the same infrastructure that is rapidly reaching its end of life, cities and towns are going to be faced with a crisis of affordability if they are not able to leverage the economies of scale of large utilities. Small and rural communities are already feeling this effect, with water and wastewater infrastructure issues now creating serious challenges in municipality-wide financial sustainability.
There are three things utility owners can do to address financial sustainability and prepare for regionalization or merger. The first is moving toward a more robust asset management program in order to get a handle on short- and long-term infrastructure needs. The second is evaluating the financial and rate impacts of paying for needed infrastructure in the future, primarily via debt instruments. The third is identifying potential partners to help spread the cost of needs across a larger customer base, through the potential of mergers and regionalization options.
The good news is that, for much of the planning work, there is still grant money available in the Merger Regionalization Feasibility grant program, the Asset Inventory and Assessment grant program, and in new programs being established through the Viable Utility Fund. It is important to start planning earlythis work cannot be completed overnightand it is important to have the data necessary to make informed decisions on the future of your utility before problems you have now become emergencies.
For more details on HB 1087, reach out to our Funding & Asset Management Department Head, Seth Robertson at (919) 238-0323 or srobertson@withersravenel.com