Addressing Financial Sustainability of Drinking Water Systems with Declining Populations: Lessons from Pennsylvania

Abstract

Many cities across the United States have declined in population over recent decades, creating numerous challenges to providing safe drinking water to their residents. Such “shrinking cities” are particularly prevalent in the Northeast and upper Midwest, (i.e., the “Rust Belt”) where globalization of the economy, particularly manufacturing, has shifted employment opportunities away from these once vital centers of the American economy. Drinking water systems serving cities with declining populations face the challenge of maintaining adequate service on smaller revenues. Fewer, poorer residents are left to pay for repairing and rebuilding infrastructure that was designed to support larger populations and commercial industries. As this infrastructure ages, increases in water rates to finance the necessary maintenance of these outsized systems may become unaffordable for many customers. Proper upkeep of a city’s water infrastructure is critical to public health yet requires considerable funding that can be difficult to secure. The compounding nature of these challenges can lead to unsustainable and unaffordable water systems. This report focuses on the challenges facing water utilities in areas where population has declined in the Commonwealth of Pennsylvania. A total of 16 water systems were broadly analyzed, with in-depth analyses of four municipal water systems in the cities of Altoona, Chester, Johnstown, and Reading. These four cases highlight some of the overall trends and complications faced by shrinking cities. Challenges to the utilities are explored and each system is quantified based on a set of financial indicators, credit rating assessments, rates and affordability metrics, borrowing behavior, and drinking water violations to fully capture current performance. An analysis of the incentives and impediments of current policies and agencies in place to assist water utilities in the financing of their endeavors is also included, as well as recommended policy modifications to better address water system challenges.