How the Pandemic is Affecting the Finances of Georgia Water Utilities

By Stacey Isaac Berahzer

The pandemic may not be affecting all water utilities evenly across Georgia. While both the unemployment rate and the virus spread remain high, a few utilities have actually seen increases in rate revenues and connection fees over the last few months. Several metro utilities say they have not seen a significant drop in non-payment yet. At the national level, Standard and Poor’s (S&P), a utility credit-rating agency, reports it only downgraded 39 of the roughly 17,000 communities that the company has utility rating relations with between March and mid-December, 2020. So, with this much job loss, which utilities are suffering?

Photo by Stacey Isaac Berahzer, 2006 Atlantic Station, Atlanta, GA

Utility Size as a Determining Factor of Financial Stress

Georgia has about 540 public water and wastewater utilities. Most of these water and wastewater utilities (about 75%) are “small,” in that they serve less than 10,000 in population. In fact, more than 30% of Georgia’s water and wastewater utilities serve less than 1,000 people. Utilities this small are generally not rated by agencies like S&P, so their financial situation is not reflected in the roughly 2% (39) entities that S&P downgraded from March, when the pandemic was declared a national emergency, to the middle of December, 2020.

One large metro utility said that while there was a higher level of customer calls in the early Spring, by summer, their ninety-day receivables were up about 47% in July 2020, compared to the same month in 2019. Another metro county did see revenues go down slightly in 2020, but staff there feel that is more a result of 2019 being an extremely high growth year for this utility, as opposed to direct impacts from this year’s pandemic.

Another large utility, not in metro Atlanta, saw its bad debt in October 2020 go to the lowest it has been in the last three to four years. This is in part due to the utility putting a program in place where it is collecting payments from locations including Walmart, Kroger and CVS. While these additional payment options were being worked on before, the pandemic sped up the process.

These examples suggest that the larger utilities may be faring better than smaller ones. Also, during a webinar by the American Water Works Association (AWWA) on "Financial and Asset Management Post Pandemic: The Changing Landscape for Water Utilities and the Sector," a speaker from the credit rating agency said that he expects that it is the smaller systems, especially those that were already losing population and experiencing stagnant economies, that are facing bigger financial problems with the pandemic. A national survey done by the Rural Community Assistance Partnership estimated that for systems providing water (or both water and wastewater) using data for 33 states and Puerto Rico, 70% of systems showed a decrease in revenue in April 2020 compared to 2019. Also, 31% of the respondents said that they “could not cover costs/sustain losses for more than 6 months.”

Regional Differences in the State

Not all small utilities have been impacted equally though. Feedback from a county in the north of the state is that their connection fees have increased and they’ve seen a twelve percent (12%) increase in rate revenues in 2020. Campgrounds have been booked solid as well. The increased purchases in the area due to these additional people also means that the utility is benefiting financially from additional Special Purpose Local Option Sales Tax (SPLOST). This might be a reflection of work and school going virtual for much of 2020. People have been able to quarantine, work and learn from their second homes in the north Georgia mountains. The higher connection fees revenues mean that new houses are being built in this part of the state. And, perhaps the Georgians who can’t afford a second home are the ones settling for the campgrounds.

Utilities in densely populated areas may have the financial effects of COVID distributed across more customers, so mitigating the effect. Rural areas of Georgia tend to have smaller utilities and often have less access to medical facilities and so the impacts of the virus may be worse.

Robust Financial Policies Determine Resilience

Utilities that have been diligent about setting up, and adhering to, policies concerning reserve funds for emergencies, healthy debt service coverage ratios, and a few months of days cash on hand will weather this financial storm better than their peers that lack these policies and practices. But even the best run utilities have a limit in terms of how long they can remain resilient under these unprecedented conditions.

Resources for these Smaller Water Systems

In terms of technical assistance, Georgia has a very active Rural Water Association that provides a suite of services to its smallest systems. The Southeast Rural Community Assistance Project also offers assistance to small Georgia communities.  

In terms of financial assistance, like other states, there are a number of public agencies that provide low interest loans and grants to small systems. Whereas larger utilities can access the bond market, as well as other forms of private financing, the smaller systems depend heavily on these financing options listed in the table on the Georgia Funders’ Forum webpage. One of these funders, the Georgia Environmental Finance Authority (GEFA), provided a payment holiday to its borrowers in 2020. This meant that there was a deferral period from July 1, 2020, to January 1, 2021. Of GEFA’s current 334 borrowers, 223 (about two thirds) took advantage of the payment holiday.

Not Based on Survey Data

At this point, there has been no comprehensive statewide survey in Georgia that measured the financial impacts of COVID-19 on water and wastewater utilities. So, these are merely anecdotal cases, educated guesses, as well as assumptions that national trends can be applied to this state. If you are aware of a state-level survey effort, or have anecdotes to share from your own water utility, feel free to reach us at info@ibenvironmental.com to share.

This is part of a blog post series funded by the Georgia Environmental Finance Authority (GEFA).

Disclaimer: The opinions of the writers should not be considered legal advice or endorsement by GEFA.