Low Income Household Water Assistance ProgramPotential Program Dimensions and CostsNovember 2016

Introduction

� Affordability is one of the most important issues facing water and wastewater utilities today.

� As a practical matter, the key to delivering “affordable” water and wastewater services to households and businesses across America is recovery of the full cost of all services delivered.

� This requires utilities to allocate service costs to customers in proportion to their use, but the burden of such an allocation in many jurisdictions exceeds some customers’ ability to pay.

� Without relief for low-income customers, water and wastewater utilities face real barriers to rate increases needed to recover full costs of service.

� Broad-based capital assistance programs help, but in many jurisdictions, they are not sufficient.

� Accordingly, this analysis examines the potential for, and costs of, a targeted low-income household support program modeled roughly after a similar program in the energy sector.

Toward a Low Income Household Water Assistance Program (LIHWAP):Key Issues

� How widespread is poverty in America?

� How have we addressed other assistance programs to deal with households in poverty?

� What level of funding would be needed to provide similar levels of assistance for water and wastewater services for Americans near or below the poverty line?

� How could a water/wastewater assistance program (LIHWAP) by structured?

� What are some of the key policy issues that must be addressed in the administration of a LIHWAP?

� How far would a LIHWAP program go in selected cities?

US Poverty is Widespread

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

0

500

1,000

1,500

2,000

2,500California

Texas

Florida

New

York

Ohio

Illinois

Penn

sylvania

Geo

rgia

NorthCarolina

Michigan

Tenn

essee

Arizon

aIndiana

Missouri

Virginia

New

Jersey

Alabam

aWashington

Louisian

aKe

ntucky

SouthCa

rolina

Wisconsin

Massachusetts

Oregon

Minnesota

Oklahom

aCo

lorado

Mississippi

Maryland

Arkansas

New

Mexico

Nevada

Iowa

Kansas

Conn

ecticut

WestV

irginia

Utah

Nebraska

Idaho

Maine

Mon

tana

Rhod

eIsland

Haw

aii

Districto

fColum

bia

SouthDakota

Delaw

are

New

Ham

pshire

NorthDakota

Verm

ont

Alaska

Wyoming

2015Hou

seho

ldsinPo

verty

(Tho

usands)

HouseholdsinPoverty

NumberofHousholdsinPoverty PercentofHouseholdsinPoverty

Average=15.47%

The U.S. Census Bureau determines poverty status by comparing pre-tax cash income against a threshold that is set at three times the cost of a minimum food diet in 1963, updated annually for inflation using the Consumer Price Index. In 2014, the poverty threshold for a family of four was $24,230.

Average US Water and Wastewater Bill = $791/year

Two Benchmark Programs for Assistance to Low Income Households:LIHEAP and Food Stamps (SNAP)

Program

Average Annual

Cost Per Household

Cost as Percent of Household

Income

ProgramAssistance

Levels

Annual Program Funding Funding

LIHEAP $779a 3.2% 46%$3.5-$4.5

billion

SNAP $11,028 46% 50%-100%$70-$80 billion

aWinter Heating Costs Only

Cost of a LIHWAP Program at Different Assistance Targets

Note: Figures above assume: (a) 20% of water and wastewater revenue, on average, is from non-household customers (e.g. commercial and industrial), and (b) low-income household water/wastewater bills are 60% of average bills.

$0$500

$1,000$1,500$2,000$2,500$3,000$3,500$4,000$4,500$5,000

15% 20% 25% 30% 40% 50%

Annu

alProgram

Cost

(inm

illions201

6$)

TargetSubsidytoLow-IncomeHouseholds

Wastewater DrinkingWater

LIHWAP Funding Assuming a 30% Assistance Target

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

California

Texas

Florida

New

York

Ohio

Geo

rgia

Michigan

Penn

sylvania

Illinois

Washington

NorthCarolina

Arizon

aMassachusetts

Tenn

essee

Colorado

New

Jersey

Virginia

Indiana

SouthCa

rolina

Oregon

Missouri

Alabam

aKe

ntucky

Oklahom

aWisconsin

Nevada

Maryland

Louisian

aMinnesota

Arkansas

Kansas

Iowa

Mississippi

New

Mexico

Utah

WestV

irginia

Haw

aii

Districto

fColum

bia

Conn

ecticut

Nebraska

Rhod

eIsland

Idaho

Maine

Mon

tana

SouthDakota

Delaw

are

NorthDakota

New

Ham

pshire

Alaska

Wyoming

Verm

ont

2016Program

Cost

(Tho

usands)

ProgramCostByStateAssuminga30%TargetSubsidytoLowIncomeHouseholds

Wastewater DrinkingWater

Federal LIHEAP Funding by Year in 2016 Dollars

$0

$2

$4

$6

$8

$10

$12

$14

$16

1977

1978

1979

1980

1981

1982

1983

1984

1985

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1987

1988

1989

1990

1991

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2012

2013

2014

2015

2016

ProgramFun

dingbyFiscalYear

(Millions)

LIHEAPFundingbyYear(2016Dollars)

Average=$4,122

Funding Objectives:LIHEAP vs LIHWAP

ProgramBased on Average

Funding 1981-2016

Based on LIHEAP Funding at Target Percent

Assistance

If Mimicking thisCharacteristic of

the LIHEAP Program is the

Target:

$4.5 billion(actual in 2016 dollars)

17% of energy cost of all households below the

poverty line in 2014

This Row Shows the Comparable

LIHWAP Program

Funding Level:

$4-$5 billion,which is 50%-60% of

nationwide cost of water and wastewater for all households below the

poverty line

$1.3 - $1.7 billion which is 15%-20% of

nationwide cost of water and wastewater for all households below the

poverty line

Food Stamps (SNAP) Program Funding (2016$)

$0.00

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

$140.00

$160.00

$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

$80.00

$90.00

1969

1970

1971

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1977

1978

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1980

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1983

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1988

1989

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1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Funding/Person/Month(2016D

ollars)

TotalProgram

Fun

ding(Billionsof2016$)

FoodStamps(SNAP)ProgramFundingbyFiscalYear(2016Dollars)

TotalProgramFunding($2016) FundingPerPerson/Month

Food Stamps (SNAP) Program Funding (2016$)

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

Thrifty Low-Cost Moderate Liberal

SNAPA

ssistanceLevelByPlanFamilyFoo

dPlan/M

onth($2

016)

MaximumFoodStampsPayment($649/Month)ComparedtotheAverageCostofFoodforaFamilyofFourForAlternativeFamilyFoodPlans(2016Dollars)

AverageFoodStampProgramPayment PercentofAverageFamilyFoodCost

Funding Objectives:LIHWAP vs Entitlements

Program Design Variable

SNAP’s Maximum Family Benefit of $649/month Pays50% to 85% of Family Food Costs for Families on a “Thrifty” and “Moderate” Food Plan, Respectively

($2016)

If Mimicking this Characteristic of

the SNAP Program is the

Target

50 % of Average Commodity Cost

“Thrifty” Family Food Plan

85% of Average Commodity Cost

“Moderate” Family Food Plan

This Row Shows the Annual

Funding Level of a LIHWAP

Program

$4.7 billion($94/person/year)

which is 50% of nationwide cost of water and

wastewater for all people living below the poverty line

$8.0 billion ($161/person/year)

which is 85% of nationwide cost of water

and wastewater for all people living below the

poverty line

An Alternative LIHWAP Proposal: Fund Real Growth in Rates for Those Living Below the Poverty Line

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

$4,000,000

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

ProgramFun

dingbyFiscalYear

(Millionsof$

2016)

LIHWAPFundingbyYearCovering100%of3%RealGrowthinCostsFrom2016BaseYearforallHouseholdsBelowthePovertyLine

(2016Dollars)

Wastewater Water

Key Issues in Structuring a LIHWAP Program

� Program Scope – cover both water and wastewater, given the relationship between their use, comparability of service costs, and anticipated administrative process.

� Income Targeting – LIHEAP (sectoral assistance) and SNAP (entitlement) programs set precedent somewhere around $125/person or $340/household below the poverty line, which will cover about half of the average combined water and wastewater bill nationwide. If structured to subsidize future rate increases, might consider a cap at this level, which would occur around 2032.

� Program Delivery Method – LIHEAP administered by the Department Housing and Human Services (HHS), SNAP administered by the Department of Agriculture, so intuitively since its more of a sectoral program than an entitlement, LIHWAP could be administered by HHS using block grants to states for distribution to utilities or households upon application, similar to LIHEAP.

� State Match – LIHEAP does not require states (including territories and tribes) to match federal grants, although there is a separate, intermittently funded incentive program that requires a match.

� Administration – Based on the success of LIHEAP, LIHWAP could take on similar administrative processes (see next slide)

LIHWAP Administration

Like LIHEAP:

� Federal LIHWAP rules should allow grantees to decide the mix and dollar range of benefits, choose how benefits are provided (e.g., to utilities or directly to households), and decide which agencies will administer the program.

� LIHWAP grantees should provide details to HHS about program operation via a state plan submitted each year and they are to provide a method for public participation in the state plan’s development.

� The state agency administering LIHWAP should coordinate with other relevant low-income programs, including LIHEAP.

� LIHWAP grantees should be required to establish fiscal control and accounting procedures, including monitoring assistance.

� LIHWAP grantees should be required to evaluate the effectiveness and efficiency of their programs periodically.

Assistance Levels of a $4 billion LIHWAP Program in 50 Cities

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%Mem

phis

ElPaso

Chicago

Phoe

nix

Fresno

LasVe

gas

Albuq

uerque

Miami

Denver

Wichita

Arlington

Mesa

SanAnton

ioLongBeach

Oklahom

aCity

Omaha

FortW

orth

Dallas

Tulsa

Nashville

Milw

aukee

Tucson

SanJose

Minneapolis

Sacram

ento

Charlotte

Detroit

Indianapolis

Philade

lphia

LosAngeles

Baltimore

Louisville

Raleigh

Columbu

sJacksonville

Colorado

Springs

Hou

ston

Oakland

WashingtonD.C.

Cleveland

VirginiaBeach

Austin

KansasCity

Boston

SanDiego

New

York

Portland

SanFrancisco

Seattle

Atla

ntaPe

rcen

tofC

ombine

dWater/W

astewaterBill

PercentofCombinedWaterandWastewaterCostCoveredbya$4billion/yearLIHWAPProgram($218/householdbelowthepovertyline)

NationalAverage=27%ofanaveragecombinedwaterandwastewaterbillof$927/year