New Orleans, Sewerage and Water Board of
The Sewerage and Water Board of New Orleans (Board) has faced a unique and difficult set of financial management challenges occasioned by the unprecedented capital investment required to address the devastation from Hurricane Katrina, sewerage Consent Decree requirements, and deferred investments in business systems. To help overcome these challenges and create a plan for a financially sustainable future, the Board engaged RFC to conduct a comprehensive water, sewerage, and drainage rate study. The primary objective of the study was to develop financial plans and associated rates for each system to collectively strengthen the Board’s financial position and credit rating.
RFC worked with Board staff to determine a program of rate increases that would meet the Board’s financial needs while minimizing the impacts on customers. As a part of this effort, RFC met with a task force of citizens and business leaders to provide an overview of the project and initial findings and to receive feedback on preliminary recommendations to help ensure stakeholder buy-in. The initial financial plan called for a five-year program of annual 14% water rate increases and 15% sewerage rate increases. Working with Board staff, the task force, and Mayor Landrieu’s staff, RFC was able to modify the financial plan to instead follow a program of eight years of annual 10% water and 10% sewerage rate increases.
The eight-year program of rate increases was approved by the Board, City Council, and the Board of Liquidation, with the first increase becoming effective January 1, 2013. These rate increases will generate approximately $583 million of additional revenue that will allow the Board to increase operations to sustainable levels and to, directly and through debt, fund the capital improvements necessary for the water and sewerage system. A financial plan was also developed for drainage to identify the funding needs and identify funding sources such as a drainage fee and/or increased millages.
One of the purposes of the rate study was to financially position the Board to issue debt necessary for capital projects. RFC was engaged to prepare financial feasibility studies for a water bond issue and sewerage bond issue. The bond issues included a refunding component to fully refund all outstanding bonds, allowing the Board to develop new, more up-to-date bond documents. RFC participated in the working group that developed new General Bond Resolutions for water and sewerage. With the financial feasibility studies as part of the official statements, the Board received rating upgrades and successfully sold over $260 million of debt.
The Board’s forward-looking financial planning and rate-setting initiatives will help to ensure sufficient revenues to support the Board as they continue to provide high quality services to the citizens of New Orleans now and into the future.