Philadelphia Water Department (PWD) is one of the few in the country that is self-sufficient financially. The department’s tariff is split into three sections including drinking water, waste water and stormwater which is the first of its kind in the nation.
Philadelphia is the fifth largest city in the nation and the sixth largest metropolitan statistical area. The city is the fourth largest retail sales market in the US with many diverse business suppliers and complementary industries. Within the city of 134 square miles, there are 1.5 million customers of PWD. The city’s medium household income is below that of similar cities and the number of college graduates who resides in the city is also quite low. Philadelphia has ~25% of its population in poverty based on US data and Philadelphia has higher unemployment rate than that of the national average. With all these and other factors, water consumption in the city has drop drastically. Loss of large industry along with increase in low income residential areas all contribute to this occurrence.Financially, PWD receives most of its money from tariff; tariff in drinking water, wastewater treatment, as well as stormwater service. PWD is currently battling a problem regarding water consumption. On one hand, the department is encouraging its users to reduce water consumption but on the other hand, tariff received from drinking water has also decreased leading to necessary increase in water rates.
PWD has a capital budget of about $10 billion by 2025. Since Tariff cannot support this expense, PWD counters the spending with revenue bonds. PWD has tried to maintain its water rate but had to slowly increase its water rates, especially in the last 20 years. The increase in water rate tend to be double of the annual inflation rate. Joseph hinted at the rates to be around $200.00 a month by 2040 based on national inflation rates. He mentioned that one of his main job function is to go around the city to talk to stakeholders about why a raise in water rate is necessary. One aspect of PWD’s water tariff that is unique is the stormwater rate. Philadelphia is a leader in stormwater management and PWD is running its Green City Clean Water Program and thus a separate charge in stormwater is added to the tariff.
Although an increase in water tariff is necessary, PWD and the city is facing a problem in that the average water and wastewater rate annually is growing at a faster rate than the average medium income. Currently, PWD collects 60% of the bill on time and eventually collect up to 90% eventually. To help counter the increase in water tariff and provide services to the populations in the city, PWD has an extended assistant program. Various assistant programs such as: 25% discount for charitable and universities, senior citizen discount, water revenue assistance program, utility emergency services fund, homeowners emergency loan program, conservation assistance program, and cross connection abatement program. PWD also offers incentives in technologies by offering reduce fee assistances especially in stormwater management.
With all this said, Joseph believes that PWD is in great shape and its tariff and increase in tariff is justifiable while its assistance programs are design to help those who are unable keep up with the increase. The city of Philadelphia prides itself with great infrastructure as the amount of water lose in the distribution line has steadily drop year after year. The number of water leaks are also well below the national average. PWD is continuing to look for ways to support its spending while justifiably increase its tariff while still providing water, wastewater and stormwater services for all individuals in the city.
Joseph Clare is the Deputy Commissioner-Finance & Administration at Philadelphia Water Department. For more information or contact please refer to his LinkedIn profile.