Recent research has found that race doesn’t significantly impact water rates when investigators also account for infrastructure. This provides useful context for existing evidence, which suggests certain groups (including majority-black communities) pay more for water.
When studying northeastern Illinois, the researchers discovered that municipalities with higher proportions of black and Hispanic residents were associated with higher drinking water rates. However, this correlation disappeared when they considered infrastructure quality. There was also no statistically significant correlation between median household income and water rates.
These results might sound reassuring at first, but they highlight the complexity of the relationship between socioeconomic factors and water rates.
It is crucial to ensure that all communities can access high-quality water and infrastructure, regardless of demographics. By understanding the drivers behind water pricing, policymakers can improve community health.
The Enigma Of Water Rates
Few resources are more critical than water, as recent events like the Palisades fire remind us. Manuel Teodoro, a Professor of Public Affairs at the University of Wisconsin-Madison (who was not involved in the study) points out: “Water is the most basic of basic services. No government can maintain the trust of its citizens without providing for basic needs. Safe, reliable, resilient, and sustainable water for everyone, everywhere has to be a top priority for any policymaker.”
Yet despite its importance, understanding the determination of water rates is no simple matter, especially in the United States.
Municipalities control their partnerships for purchasing water and their rate structures, which has resulted in vast differences between regions. As of the end of 2023, there were nearly 50,000 community water systems (which supply water to a population) in the US. Plus, even regions that derive water from the same source may have different rates.
Partly due to this diversity, there is no universal data source for drinking water, making research difficult. However, there are some general principles to keep in mind.
Drinking water systems in the US are funded by customers, so municipalities must figure out how much to charge to maintain their infrastructure (by accounting for operational, compliance, and fixed costs). Yet this can lead to a conflict between affordability and quality.
The Environmental Protection Agency also sets the affordability threshold for water bills at 2.5% of the national median household income, based on socioeconomic characteristics. This means it’s harder to keep water affordable in areas with more low-income households.
As a result, the relationship between equity and water rates is complex. Rates could be higher in low-income or nonwhite communities due to their lower fiscal capacity, but it’s also plausible that officials would decide to address affordability concerns instead.
So far, there has been limited understanding of which factors drive variations in water pricing, and whether officials consider demographic or socioeconomic characteristics.
Making Sense Of Racial Equity
Although information on the specific drivers of water pricing is limited, previous research has found that zip codes with higher non-white populations pay more for water. Racial and income disparities in drinking water access, quality, and affordability have also been identified.
Deborah A. Carroll, a Professor in the Department of Public Administration at the University of Illinois-Chicago, was one of the five researchers involved in the recent study. She explains: “Our research was partly motivated by a three-part investigative series published by the Chicago Tribune in 2017 that noted rates varied across northeastern Illinois, and it raised questions of affordability and equity to the customer.”
The researchers expected the full picture regarding affordability and equity to be more complex than the 2017 findings.
Although they found that variance in water rates is somewhat related to socioeconomic factors, there was no statistically significant correlations between water rates and median household income or race when infrastructure was considered. This reveals racial equity in water pricing within communities, putting rate differentials down to the state of infrastructure in the supply network instead.
Teodoro believes these results are in line with the current evidence. “I’ve been studying rates and affordability for more than a decade and have never found a significant correlation between water prices/affordability and race/ethnicity in the U.S.—and believe me, I’ve looked. Rates are also not often correlated with income or poverty, but measures of poverty often are,” he explains. He also points out that some claims about race and ethnicity and water affordability have been poorly researched in the past, pointing to the “Water/Color” study as an example.
However, Teodoro does believe that race and ethnicity are correlated with drinking water quality: “There surely are racial, ethnic, and socioeconomic disparities in drinking water and sewer service, but it’s far more about quality than price.”
Another finding was that a cooperative purchasing strategy was associated with slightly lower water rates than an individualistic approach to purchasing, suggesting members can share capital costs for supply infrastructure.
The Difficulty of Setting Policy
While there is racial equity in water rates, this result can’t be passed off as a happy ending. There is significant complexity and nuance in the drivers of differences in water provision, and these latest findings are a stark reminder of deep-seated inequalities in access to essential services.
Policy is needed, but rate setting is a complex process that involves a balancing act between affordability and viability.
When asked about possible solutions, Carroll said: “As part of a broader study conducted for the Illinois General Assembly, we proposed a number of policy solutions.” These included strategic municipal investment in disadvantaged communities, which could fund technical maintenance, and state-level programs to target aging infrastructure.
By prioritizing infrastructure improvements, policymakers can help ensure all communities have access to this essential resource.
The research appeared in Volume 44 (2) of Public Budgeting and Finance.
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