Financing Consent Decrees - Cincinnati's Approach to an Affordable Solution

In June of 2004, the Metropolitan Sewer District of Greater Cincinnati (MSD) entered into a Global Consent Decree with the U.S. Environmental Protection Agency (US EPA), U.S. Department of Justice, State of Ohio, and ORSANCO to address Wet Weather Issues including significantly reducing the number of Sanitary Sewer Overflows (SSOs), Combined Sewer Overflows (CSOs), and Water-In-Basement Issues. The consent decree mandates that MSD complete its Wet Weather Program by February of 2022 unless the capital costs are expected to exceed $1.5 billion.

The costs associated with this program will necessarily substantially increase customers’ sewer bills. MSD’s service area is regional in nature, and encompasses the City of Cincinnati and most of the remaining incorporated and unincorporated areas of Hamilton County. Median household income varies widely throughout the service area, and the need to maintain local affordability, while maintaining a sound financial condition and meeting all conditions set forth in the consent decree is a challenge that MSD is addressing early in the implementation of the resulting capital program.

MSD is one of many utilities across the United States that are under a consent decree to eliminate or significantly reduce SSOs and CSOs. These utilities are in various stages of the process of implementation, and all have addressed or should be prepared to address the financial implications of implementation of the capital and operating programs that are necessary to meet the requirements of such a consent decree. This paper will discuss the financial issues that a utility needs to address in order to successfully implement the capital program required by a consent decree, including capital financing options, alternative rate structures, affordability criteria, and the benefits of long-term planning. In addition, the paper will outline the approach that MSD is taking to ensure compliance with their consent decree while maintaining adequate capital spending on non- SSO and CSO facilities and keeping rates as stable as possible over the planning period.

MSD is currently developing its Wet Weather Program and is scheduled to submit it to the USEPA for review in June 2006. Long-term financial analyses of existing and projected funding requirements and resulting rates are being conducted as a component of the Program development.

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