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Affordability Analysis Through a Recession, How Times Have Changed

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The City of Toledo, Ohio is implementing a Combined Sewer Overflow Long-Term Control Plan (LTCP) under the terms of a 2002 consent decree. One of the negotiating items in reaching approval on the final LTCP was the financial commitment of the City to reduce the amount of combined sewage entering the Toledo area waterways. At the time of the initial submittal of the LTCP in 2005, and again in 2009 and 2010, an Affordability Analysis was performed according to the U.S. EPA's guidelines. The EPA Affordability Guidance evaluates the impact of the program on the City as a snapshot in time. The City of Toledo chose to work directly with the EPA Affordability Guidance as written, despite concerns over the appropriateness of the tool to assess community financial impacts. Working with the tool as identified in the guidance demonstrates the limitations of the tool in projecting long term impacts.

The three Affordability Analysis snapshots in 2005, 2009 and 2010 demonstrate the impact of changing financial conditions during the implementation of a long term program. This analysis also highlighted the limitations with the availability of the necessary data to provide a current perspective on the financial impact of the program.

As a result of recent Toledo economic conditions (which were experienced nationally beginning in December 2007) the City's unemployment rate increased from 8.1% to 12.1%, and median household incomes declined significantly. In addition, water consumption dropped significantly, reduced industrial activity shifted costs increasingly to residential accounts, and property tax collection rates dropped. As projects have been implemented, wastewater debt and operating expenses have increased. As a result, the “Residential Indicator” in the EPA y's affordability guidelines as a percentage of median household income increased significantly and unpredictably. The Residential Indicator increased from 1.56% in 2005 to 2.09% in 2010. This was due to a combination of higher costs and reduction in median household income. Because of these changes the affordability of the LTCP worsened from being a “medium burden” project to a “high burden” project.

In calculating affordability, the financial burden on the community will change due to changes in program cost, revenue base or economic conditions. This analysis is one case study that demonstrates the need for an adaptive management component for financial conditions to be considered in long term implementation plans. The 2005, 2009 and 2010 evaluations of the LTCP's affordability demonstrate the significance of changing economic conditions on the affordability of a project, and show the weakness of a snapshot analysis. Therefore, Affordability Analyses should be reviewed periodically, especially when there have been significant changes in a community's financial circumstances. Also, some of the data required to perform an Affordability Analysis is not updated annually and needs to be researched and, in some cases, extrapolated from previously confirmed data. For example, US Census data is updated once a decade. Therefore data based on the US Census is often extrapolated based on demographic assumptions.
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Keywords: Affordability analysis; combined sewer overflows; consent decree; long-term control plan

Document Type: Research Article

Publication date: 01 January 2011

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