Skip to content

Business

Water scarcity could damage municipal bond ratings

by Michael Clark 16 Jun 2011
Water scarcity could damage municipal bond ratings

Water scarcity may not only impact public health and the environment, but the local economy as well. Recently, Fitch Ratings, a credit rating firm, issued a report stating it may downgrade Atlanta's and surrounding cities' credit rating should Georgia lose its court battle to continue using Lake Lanier as its primary water source. This could have wide ranging impacts, including delayed capital upgrades and increased taxes and utility rates to account for the higher cost of borrowing money, which could hurt an already struggling local economy.

This isn't the first time Atlanta water bonds have been downgraded. In 2003, Moody's downgraded the city's water and sewer bonds largely due to what the firm viewed as insufficient rate increases to cover costs. The uniqueness of the current situation is that the credit downgrade may be the result of potentially insufficient long term water supply.

Ceres, a sustainability and environmental research group, has been writing about the need to incorporate water risk in the municipal bonds market. The group designed a model to assess municipal water risk and determined that Los Angeles and Atlanta had the highest water risk ratings of major US cities.

Los Angeles is heavily reliant on imported Colorado River water, a risky proposition at best, and Atlanta's water supply has been significantly reduced by a court ordered withdrawal reduction from Lake Lanier, the source of a tri-state (Georgia, Alabama, and Tennessee) water war.

Ceres recommends water utilities improve water risk report, improve demand management and leak prevention programs, and invest in diversification of local water supply. Should utilities fail to heed these recommendations, water scarcity will only become more widespread and, along with it, damaged municipal credit ratings. Many western cities that are highly dependent on Colorado River water are at particular risk.

Western suppliers that are developing alternative local water supplies are actually seeing a rise in their credit ratings. The Orange County Water District, due in large part to its recently completed groundwater replenishment system, has maintained top credit scores. Other cities would be smart to follow suit.

The issue of water scarcity will likely only become more widespread. Ceres published a report listing the top 10 largest US cities facing the prospect of an insufficient long term water supply; it included Los Angeles, Houston, Orlando, Atlanta, Phoenix, and San Francisco, major economic and cultural centers. New York City may be a future addition to this list, should hydrofracking be permitted within its watershed, potentially putting the city's primary water supply at risk.

The implications of credit downgrades related to water risk in these cities are widespread; infrastructure upgrades may be delayed, and the local economy may suffer. Future water supply planning will require that water utilities consider these implications in cost-benefit analyses. This, in turn, may make currently prohibitively expensive water supply augmentation alternatives, such as desalination, look more attractive. Water utilities should be waiting with baited breath for the outcome of the court battle over Lake Lanier and its impacts on Atlanta's credit.

Top Image Credit: © gsteve


Trending Eco-Friendly Clothing

Love My Planet Women's Relaxed Fit Hoodie
Earth
Quick Add
Close
Notify me
Notify me
Love My Planet Women's Relaxed Fit Hoodie
Love My Planet women's eco-friendly relaxed fit hoodieSize Guide Centimeters 8 10 12 14 16 18 Bust 84 88 92 97 103 108 Waist 66 70 75 80 85 91 Hips 91 95 99 104 109 116 Bust: Measure around the fullest part of...
£38.00
£38.00
Close
Notify me
Notify me
Penguins Hate Push-Ups Men's Pullover Hoodie
Earth
Quick Add
Close
Notify me
Notify me
Penguins Hate Push-Ups Men's Pullover Hoodie
Penguins Hate Push-Ups men's eco-friendly pullover HoodieSize Guide Centimeters XS S M L XL XXL Height 171 175 179 183 189 195 Chest 86 93 99 104 116 129 Waist 71 76 81 89 99 112 Chest: Measure all round your chest just below...
£38.00
£38.00
Close
Notify me
Notify me
Lightning Bolt Kids Long Sleeve T-Shirt
Earth
Quick Add
Close
Notify me
Notify me
Notify me
Lightning Bolt Kids Long Sleeve T-Shirt
Lightning Bolt kids eco-friendly long sleeve t-shirtSize Guide Centimeters 3-4yrs 5-6yrs 7-8yrs 9-10yrs 11-12yrs Height 98 112 125 136 147 Chest 60 66 70 75 84 Chest: Measure all around your chest just below your armpits. Height: Your natural height If you fall between...
£18.00
£18.00
Close
Notify me
Notify me
Notify me
Union Jack Tote Bag
Earth
Quick Add
Close
Notify me
Notify me
Union Jack Tote Bag
Union Jack eco-friendly colour tote bagProduct Specification Organic Cotton Tote Bag. Twill Weave (170gsm). 37 x 42 cm (7cm gusset.) Made in India / Designed on the Isle of Wight. Wash Cool, Hang Dry.
£16.00
£16.00
Close
Notify me
Notify me
Prev Post
Next Post

Eco-Friendly Shop

Women's Clothing

Eco-Friendly Clothing for Women Our online shop offers a wide range of sustainable women’s clothing products, including t-shirts, hoodies, vests, sweaters, shorts, and...
Shop Now

Men's Clothing

Eco-Friendly Clothing for Men Our online shop offers a wide range of sustainable men’s clothing products, including t-shirts, hoodies, vests, sweaters, shorts, and...
Shop Now

Kids Clothing

Eco-Friendly Clothes for Kids Our online shop offers a wide range of sustainable kids clothing products, including t-shirts, hoodies and jumpers. Our garments...
Shop Now
Someone recently bought a
[time] ago, from [location]

Thanks for subscribing!

This email has been registered!

Shop the look

Choose Options

Earth Times
Sign up for exclusive updates, new arrivals & insider only discounts

Recently Viewed

Edit Option
Back In Stock Notification
this is just a warning
Login
Shopping Cart
0 items

Before you leave...

Take 20% off your first order

20% off

Enter the code below at checkout to get 20% off your first order

CODESALE20

Continue Shopping