* Water utilities’ $330 billion in debt likely to rise
* Water shortages to become more common, even in the East
By Tiziana Barghini
LAS VEGAS, April 19 (Reuters) – The Bellagio fountains, one
of the most iconic of the Las Vegas water-based attractions, is
said to contain 22 million gallons of water. It may look like a
waste for a city in the middle of the Mojave desert, but for the
moment there is no shortage of water in Nevada.
However, the abundance of water, in Las Vegas as elsewhere
in the United States, is unlikely to last, according to a panel
of experts at a forum of National Federation of Municipal
Analysts held in the city, famous for its casinos.
Water rates will be slowly but constantly creeping up, and
water utilities across the nation are likely to issue more debt
to renew and expand their pipelines, analysts agreed.
The Southern Nevada Water Authority, which plans to issue a
$360 million bond in July to upgrade old facilities and build
new ones, is a good example.
“We already raised tariffs twice, $2 each year in 2010 and
2011 for residential customers,” said William Fox, chief
financial officer at the Las Vegas Valley Water District, adding
that he does not anticipate further rate hikes until 2014.
Other utilities, which might have not yet done so, will have
to follow suit.
“With federal and state assistance limited we believe
utility managers will likely ask more of their customers,
especially in the form of rate adjustments,” a recent special
report on water scarcity by Standard and Poor’s predicted.
In general, well-managed water utilities are expected to tap
funds in the coming months. S&P; rates 1,270 revenue bonds in the
sector and says its sector common rating is A+ with a generally
stable outlook.
According to an analyst with MMD, a unit of Thomson Reuters,
water utilities have outstanding debt of around $330 billion,
nearly 10 percent of the $3.7 trillion municipal bond market.
Issues in the sector have been around $11 billion in the first
quarter of 2012.
“Despite all the bond issuances of the past two years, we
believe the sector still has infrastucture needs to fund in 2012
and beyond,” the S&P; report said.
No immediate pressure is seen as managers have shown great
ability to control their rates, but long-term worries are
starting to emerge, said Geoffrey Buswik, an analyst with S&P;
attending the forum on Wednesday.
Water shortages could become worse in the coming years.
“The U.S. is not immune to water shortages, and not just in
the arid West,” said Betsy Otto, director of Aqueduct, a project
studying water issues.
“Parts of the Southeast and even New England have been
concerned about meeting water demand during dry periods.”
“This will only continue as populations and local economies
put more strain on existing supplies, and as climate change
brings more extreme weather patterns with the potential for more
severe droughts,” Otto said.
With public tap-water prices ranging from a low of $3.73 per
1,000 gallons in Chicago to a high of $23.42 in Atlanta, the
cost of tap water has often been subsidized, another water
expert said.
“We priced water at a highly subsidized level, because it
was what people wanted and because it was necessary to settle
the West in the first instance,” said Grady Gammage of the
Morrison Institute for Public Policy. “We still continue to
price water at highly subsidized levels”.
As much of this water goes to landscaping, its cost and
scarcity are likely to soon become a political issue, Gammage
predicted.
(Reporting By Tiziana Barghini; editing by Todd Eastham)
