U.S. water utilities are grappling with a diverse suite of challenges. Aging water infrastructure, changing weather patterns, rising demand for clean water, higher water treatment costs, and other pressures are affecting how water utilities expand, repair, and maintain the infrastructure that carries and cleans our water. The traditional approach to addressing these problems – building more grey infrastructure1 – is not the only option. Green infrastructure may provide a cost-effective alternative that can help water utilities protect source water supplies, reduce stormwater runoff, and improve water quality.
Current municipal accounting standards, however, do not adequately account for the benefits provided by green infrastructure. For example, the Governmental Accounting Standards Board, which establishes standard accounting practices for state and local governments, requires public utilities to value land assets using the historical purchase price, rather than the current market value. This approach frequently does not capture the full value of the benefits provided by green infrastructure and so may limit utilities' ability to accurately compare the benefits and costs of green and grey infrastructure.
The lack of a formal approach for accounting for green infrastructure and its benefits may be a barrier to further utility investment in this area and may predispose utilities to favor more investment in grey infrastructure. The lack of comparable accounting methods may also limit utilities' ability to convey green infrastructure's true benefits to rate payers, municipal governments, and investors.
This project developed new accounting methods to help public water utilities more accurately assess the value provided by their green infrastructure assets. The researchers developed two model accounting frameworks that could be included in the unaudited supplementary disclosure part of a utility's comprehensive annual financial report (CAFR). We pilot tested these two frameworks at three participating utilities: The City of Raleigh (NC) Public Utilities Department, The City of Asheville (NC) Water Resources Department, and Clean Water Services (OR). We conducted surveys and semi-structured interviews to understand the utilities' experiences with the accounting frameworks and how the frameworks could be improved.
This report summarizes the results of these pilot tests, including the frameworks' strengths and weaknesses and recommendations from the piloting utilities for improving future iterations of the frameworks. Several key themes emerged from these results. Each utility faced a unique set of regulatory, political, and other policy drivers that influenced their use of green infrastructure. The extent and type of both inter- and intra-utility communication affected the utilities' access to information and their ability to fully document their green infrastructure assets. Despite the differences among utilities' drivers and communication pathways, however, all utilities noted the need for standardized approaches that allow for cross-utility comparison.
The ability to account for the benefits provided by green infrastructure is critical for further investment in green infrastructure by water utilities, municipalities, and investors. This project contributes to that effort by offering two approaches for accounting that more accurately reflect the value that green infrastructure provides for water utilities.
This title belongs to WERF Research Report Series.
ISBN: 9781780405124 (eBook)
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