The Sewerage and Water Board of New Orleans (SWBNO) has some of the most resilient leaders in the water industry. You’d have to be bold and strategic to lead the utility through 2021’s Hurricane Ida, a Category 4 storm that proved SWBNO has made great strides in its emergency preparedness. Residents had safe drinking water during the storm and in the aftermath as temperatures climbed and threatened public health. The storm happened in the midst of SWBNO’s work on its five-year strategic plan and was a solid reminder that despite the city’s nickname—The Big Easy—charting a course to transform SWBNO is never easy. It requires innovation, teamwork, and pride.
SWBNO partnered with Raftelis recently to change its trajectory from operating in a sometimes reactive manner to putting in place a forward-thinking, strategic approach to overcoming legacy underinvestment in infrastructure, technology, and its workforce. The utility’s 2022-2027 Strategic Plan prioritizes improving the customer experience from upgrading to smart water meters to incorporating green stormwater infrastructure to mitigate flooding problems. Enhancing the resiliency of SWBNO’s operations and especially its unique electrical generation systems is also a key focus area. The five-year strategic plan lays out the future direction of SWBNO while also recognizing that the utility is an integral part of the foundation that the city relies on to help it thrive. Engagement was a significant element in the development of the plan, which used interviews and discussions with key stakeholders including employee focus groups to help shape the strategic framework.View Strategic Plan
SWBNO has faced a unique and difficult set of financial management challenges due to the unprecedented capital investment required to address the devastation from Hurricane Katrina, sewerage Consent Decree requirements, and deferred investments in business systems and infrastructure. To help overcome these challenges and create a plan for a financially sustainable future, SWBNO engaged Raftelis 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 SWBNO’s financial position and credit rating.
Raftelis worked with SWBNO staff to determine a program of rate increases that would meet SWBNO’s financial needs while minimizing the impacts on customers. As a part of this effort, Raftelis 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 SWBNO staff, the task force, and Mayor Landrieu’s staff, Raftelis 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 SWBNO, City Council, and the Board of Liquidation, with the first increase becoming effective January 1, 2013. These rate increases are estimated to generate approximately $583 million of additional revenue that will allow SWBNO 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.
As part of this engagement, Raftelis also oversaw the completion of a water audit and the identification of opportunities for improving water loss, reducing water production costs, and increasing revenues.
One of the purposes of the rate study was to financially position SWBNO to issue debt necessary for capital projects. Raftelis 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 SWBNO to develop new, more up-to-date bond documents. Raftelis 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, SWBNO received rating upgrades and successfully sold over $260 million of debt.
Raftelis updated the financial plan on an annual basis for three years following the approval of the and performing bond feasibility studies for SWBNO when SWBNO has decided to go to the bond market to secure additional financing for the CIP.
SWBNO’s forward-looking financial planning and rate-setting initiatives will help to ensure sufficient revenues to support SWBNO as they continue to provide high quality services to the citizens of New Orleans now and into the future.View the Budget Book
Raftelis was also retained by SWBNO to perform a drainage fee feasibility analysis. We completed a financial plan and rate study in 2012 for SWBNO in which Raftelis forecasted cost increases for the drainage operation, maintenance, and capital needs. In that report, Raftelis advised that significant new costs and impending rising costs for the operation and maintenance of the existing drainage system will force SWBNO to find additional funding. In addition, in an effort to manage the drainage system in a more holistic manner, establishing a funding strategy for the minor drainage system, which is operated by the City of New Orleans’ (City) Department of Public Works, would be of critical importance.
The City of New Orleans currently spends about $33 million per year on drainage operations and maintenance, plus an additional $15 million per year in pay-as-you-go drainage capital projects and debt service. Of this approximately $48 million in annual drainage revenues, more than 95% of it is collected by SWBNO through dedicated tax millages, and is spent on the largest drainage infrastructure in the City – those drainage system components like canals, box culverts, and large pumps, collectively known as the major drainage system. This effort will remain necessary in perpetuity.
The current annual millage revenue will fall short of meeting existing needs by about $1 million in the near-term. In addition to this $1 million funding need, the City faces funding needs to meet steeply mounting drainage system costs driven by several new efforts. Including new efforts, the City will experience a shortfall compared with current funding levels of between $35 and $49 million per year going forward. To fund these new costs with millages like the existing costs are funded would require that the millage rates approximately double.
The project team analyzed a number of alternatives to increasing millages, including the following potential rate metrics: impervious area, gross area, and property elevation. Raftelis also analyzed single-family residential properties to develop a recommendation on tiered rates for this customer class. As a result of this work, Raftelis recommended steps and a timetable for implementation efforts, including additional finance and rate modeling, a significant amount of public outreach and education, and a number of data, systems, and process changes to append a drainage fee to the Board’s recently implemented Cogsdale utility billing system.