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Brandon M. Scott Council President Baltimore City 100 Holliday Street, Room 400 Baltimore, MD 21202 Office: 410-396-4805 | Fax: 140-839-0647

Subject | 18 – 0307, Bill Background and Fiscal Note

Prepared by | Kimberly Rubens, Fiscal Legislative Analyst, Office of the Council President

Date | May 16, 2019

Policy Objectives

1. Establishes a water bill credit for households at or below 200% of the Federal Poverty Level

(FPL). A household must apply in order to be able to receive the credit. The bill specifies

provisions to streamline the application process, including: an online application and a waived

requirement to submit proof of income if the household is already eligible for another state-

sponsored benefit, like EBT.

Using the water credit formula, a family of 4 with an annual income of $25,000 and an annual

water bill of $980 would receive an annual credit of $480 to be amortized over 12 billing cycles;

an individual making $12,000 with the same water bill would receive a credit of $860.

2. Establishes a pathway for households to get out of water debt, by allowing each monthly

payment made through the program to also count towards their unpaid water debt.

For example, if the monthly water bill is $80 and paid in full, $80 is also credited towards the

household’s unpaid water debt.

3. Formalizes the role of customer advocates who are empowered to investigate and adjust

customer bills as appropriate. Any customer, regardless of program eligibility would be able to

request an investigation by a customer advocate.

4. Creates a hearing process to adjudicate water bill disputes. Any customer, regardless of program

eligibility would be able to request a water bill hearing.

5. Requires DPW to report semi - annually on key metrics related to participation in the water

affordability program, utilization of customer advocates, and the hearing process.

Memorandum

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Fiscal Summary

18 - 0307: “Water Accountability and Equity Act” (WAEA)

In FY2020, the estimated credit amount ranges from $228 - $865, depending on household income and

size. From FY2020 – FY2024, the Fiscal Legislative Analyst (FLA) estimates 18 – 0307 to have a

cumulative cost of approximately $44,000,000.

Table 1, WAEA 5 – Year Projections1

FY2020 FY2021 FY2022 FY2023 FY2024

Enrolled 16,588 20,736 24,883 29,030 33,177

Credit Cost $4,597,999.23 $6,336,065.12 $8,328,119.37 $10,813,119.38 $14,009,730.86

Total Cost $44,085,033.96

DPW’s Proposal: “BH2O Assists”

All customers at or below 175% of the Federal Poverty Level (FPL) are eligible. The proposed program

establishes a flat discount of 43% on water and sewer volume charges, as well as waives two monthly

fixed fees (totaling between $10 - $13), to In FY2020, the estimated credit per household is $465.65.

Monthly fixed fees totaling approximately $21 (252 annually) are not discounted. From FY2020 –

FY2024, the FLA estimates DPW’s program to have a cumulative cost of approximately $63,000,000.

Table 2, “BH2O Assists” 5 – Year Projections2

FY2020 FY2021 FY2022 FY2023 FY2024

Enrolled 15,000 18,750 22,500 26,250 30,000

Credit Cost $6,984,756.00 $9,429,750.00 $12,237,426.00 $15,420,014.19 $19,047,136.30

Total Cost $63,119,082.49

1 Table 1 Assumptions: The FLA estimates that there are approximately 85,000 eligible households, a calculation based on census tract

data for households living at or below 200% of the FPL. In FY2020, it is assumed that 20% of eligible households will enroll, with an

additional 5% enrolling every year thereafter. The credit cost for each FY is calculated using DPW’s proposed annual 9% water bill

increases.

2 Table 2 Assumptions: The FLA estimates that there are approximately 75,000 eligible households, a calculation based on census tract

data for households living at or below 175% of the FPL. In FY2020, it is assumed that 20% of eligible households will enroll, with an

additional 5% enrolling every year thereafter. The credit cost for each FY is calculated using DPW’s proposed annual 9% water bill

increases.

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Background

Bill History

The Office of the Council President has been working for two years to address year over year water rate

increases and the lack of a formal system to dispute erroneous water bills. This bill alleviates bill burden

for low and moderate income households, provides a path to pay off water debt, brings households

into compliance, and formalizes two offices to address water bill disputes.

Water Affordability in Baltimore

According to the United Nations and U.S. Environmental Protection Agency (EPA), a household’s water

bill is considered affordable if it costs no more than 2% - 3% of their annual gross income.i According to

an analysis of all 198 census tracts across the city, as of FY2016, water is not affordable for median

income households ($44,000 for a family of 4) in 64 neighborhoods across the city. For households

making between $15,000 and $30,000, water is only affordable in 5 of the 198 neighborhoods in

Baltimore.

In 2002, Baltimore entered into a consent decree with the EPA. According to the City’s 2016

Comprehensive Annual Financial Report, the City has committed the residents of Baltimore to pay at

least $1.7 billion dollars in revenue bond debt for the next 29 years to make federally mandated

infrastructure upgrades.

Table 3, Average Residential Water Billsii

Fiscal Year Average Bill Amount

2010 $378.54

2011 $412.62

2012 $449.76

2013 $517.26

2014 $574.20

2015 $637.44

2016 $720.48

2017 $787.58

2018 $860.96

2019 $938.45

2020 $1,022.91

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Table 4, Water Affordability Over Timeiii

This chart tracks the number of census tracts where water bills are affordable at 150% of the Federal

Poverty Level.

198 193 190177

121

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5 1 1 0 0

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

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Fiscal Analysis

These projections are based on data from DPW, the U.S. Census, and a financial model built by a public

finance economist.

Table 5, Collection Projections with the WAEA3

FY20 FY21 FY22 FY23 FY24

Participants $ 5,660,870.07 $ 7,226,592.17 $ 8,854,735.07 $ 10,547,494.00 $ 12,054,278.85

Nonparticipants $ 41,035,477.21 $ 40,687,971.88 $ 40,093,327.02 $ 39,669,710.55 $ 38,967,910.39

Total Collected $ 46,696,347.28 $ 47,914,564.05 $ 48,948,062.09 $ 50,217,204.55 $ 51,022,189.24

Table 6, Household Enrollment Projections4

FY20 FY21 FY22 FY23 FY24

Total Participating Households 16588 20736 24883 29030 33177

0 - 49% FPL 4364 5455 6545 7636 8727

50 - 99% FPL 4406 5507 6609 7710 8812

100 - 149% FPL 4100 5125 6150 7175 8200

150 - 199% FPL 3719 4649 5579 6508 7438

3 Table 5 Assumptions: As the chart demonstrates, the city can expect to collect more revenue from participants as the number of

participating households increases. These collection projections assume that in FY2020, 20% of eligible households will enroll, with a

5% increase in household participation until FY2024, when the program is expected enroll a maximum of 40% of eligible households.

These bill collection rates are determined based on a statewide study of bill payment patterns of low-income families enrolled in a

utility bill affordability program in New Jersey. In 2006, the New Jersey implemented a similar utility affordability program, and studied

the effects of collection rates for tens of thousands of low-income participant households and non-participant households. Princeton

researchers determined that when a household can afford their water bill, they will pay 88% of their bill, compared to 44% of their bill

when bill burdens are too high. There is no reason to believe that the bill paying behavior of low-income customers in NJ will be

significantly different from low-income customers in Baltimore. 4 Table 6 Assumptions: In FY2020, 20% of eligible households will enroll in the program. In each subsequent FY, an additional 5% of

eligible households will enroll.

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Table 7, Average Water Credit5

FY20 FY21 FY22 FY23 FY24

0 - 49% FPL $865.31 $948.45 $1,039.18 $1,138.18 $1,247.92

50 - 99% FPL $655.80 $734.53 $820.77 $915.19 $1,024.92

100 - 149% FPL $228.02 $297.21 $374.07 $459.06 $568.80

150 - 199% FPL $0.00 $5.28 $76.20 $154.98 $264.72

Staffing Model

As of November 2018, DPW has 492 vacant positions department-wide, totaling at least $25 million in

budgeted positions. Of these vacant positions, at least 90 are budgeted under water and wastewater

services. DPW also already has at least 20 water bill customer representatives to assist with water bill

issues. Between DPW’s vacant positions and existing staff who could be re-trained, it is reasonable to

assume that DPW has the existing human capital to staff both offices proposed in this legislation.

Program Implementation

There are program implementation costs not considered in this analysis: onboarding new staff to DPW,

retraining existing staff, and obtaining and implementing the right software to administer the program.

These program implementation costs are not neutral. However, it is reasonable to assume that these

costs are not driving the overall cost of the WAEA.

5 Table 7 Assumptions: The average water credit increases year over year assuming water bills continue to increase at a rate of 9%. In

FY2020, water bills are still affordable for families between 150-200% of the FPL. By FY2024, water bills become unaffordable for

households in this FPL range.

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Endnotes

i “Water Rates: Water Affordability” https://pacinst.org/wp-content/uploads/2013/01/water-rates-affordability.pdf ii The data in this chart was compiled and released by Roger Colton, the report is available online. (12)

https://www.foodandwaterwatch.org/sites/default/files/baltimore_water_study-final_report-2017.pdf iii Ibid (22)