Financial Indicators of Sustainable and Financialised Municipal Water Infrastructure

Year 2023, , 229 - 250, 30.12.2023

Brad Bell

https://doi.org/10.30927/ijpf.1275686

Abstract

Organisations that operate utility infrastructure, such as water and electricity, within the municipal context have choices to make in terms of their preferred business model. Such choices include their business goal, implementing agent, and market structure. This study focuses on two of the possible business goals, namely to deliver a ‘sustainable service’ or a ‘financialised service’, defining these terms and exploring the general characteristics of the types of organisations involved in each, such as ownership profiles and exposure to financial market instruments. The study then goes into detail for two relevant case studies, which are Joburg Water, South Africa as a sustainable service, and Thames Water Utilities, England, as a financialised service. It takes a closer look at ten specific financial indicators calculated from the 2021/22 financial statements of Joburg Water and Thames Water Utilities. The study concludes with a tentative proposal for the financial indicators of sustainable and financialised services.

Keywords

Public finance, municipal infrastructure, sustainability, financialisation, municipal service delivery

Sürdürülebilir ve Finansallaştırılmış Belediye Su Altyapısının Mali Göstergeleri

Abstract

Su ve elektrik gibi kamu hizmeti altyapısını belediye bağlamında işleten kuruluşların tercih ettikleri iş modeli açısından yapmaları gereken seçenekler vardır. Bu tür seçenekler arasında iş hedefi, uygulayıcı aracı ve pazar yapısı yer alır. Bu çalışma, olası iş hedeflerinden ikisine, yani 'sürdürülebilir bir hizmet' veya 'finansallaştırılmış bir hizmet' sunmaya, bu terimleri tanımlamaya ve sahiplik profilleri ve maruz kalma gibi her birine dahil olan kuruluş türlerinin genel özelliklerini keşfetmeye odaklanmaktadır finansal piyasa araçları. Çalışma daha sonra, sürdürülebilir bir hizmet olarak Güney Afrika'daki Joburg Water ve finansallaştırılmış bir hizmet olarak İngiltere'deki Thames Water Utilities olmak üzere ilgili iki vaka incelemesi için ayrıntılara giriyor. Joburg Water ve Thames Water Utilities'in 2021/22 mali tablolarından hesaplanan on özel mali göstergeye daha yakından bakıyor. Çalışma, sürdürülebilir ve finansallaştırılmış hizmetlerin finansal göstergeleri için geçici bir öneri ile sona ermektedir.

Keywords

Kamu maliyesi, belediye altyapısı, sürdürülebilirlik, finansallaşma, belediye hizmet sunumu

References

• Ajam, T., Burger, J., Quinot, G., Botha, M. & Isaacs, D. (2021). Towards a municipal financial and operational sustainability strategy for the Western Cape: A report for the Western Cape Department of Local Government. http://www.sun.ac.za/english/faculty/ economy/spl/SPL%20Library/SPL%202021%20Municipal%20Sustainability%20Report%20v2%202021-06-06%20FINAL%20SMALL.pdf (30.3.2023).
• AMO – York Region. (2018). Municipal Infrastructure Investment & Financial Sustainability. https://www.gastaxatwork.ca/sites/default/files/assets/Documents/Research/Municipal%20Infrastructure%20Investment%20and%20Financial%20Sustainability.pdf (30.3.2023).
• BenDor, T. K., Shandas, V., Miles, B., Belt, K. & Olander, L. (2018). “Ecosystem services and U.S. stormwater planning: An approach for improving urban stormwater decisions.” Environmental Science and Policy. 88(February), 92–103.
• Bisogno, M., Cuadrado-Ballesteros, B. & García-Sánchez, I. M. (2017). “Financial Sustainability in Local Governments: Definition, Measurement and Determinants.” In Bolivar, M. P. R. (Ed.) Financial Sustainability in Public Administration: Exploring the Concept of Financial Health (57 – 83). Cham, Switzerland: Palgrave Macmillan.
• Brooks, R. (2021). Financial Management: Core Concepts, 4th Edition. London: Pearson International.
• Carmeli, A. (2008). “The Fiscal Distress of Local Governments in Israel: Sources and Coping Strategies.” Administration & Society. 39, 984–1007.
• Christophers, B. (2018). “Risk capital: Urban political ecology and entanglements of financial and environmental risk in Washington, D.C.” Environment and Planning E: Nature and Space. 1(1–2), 144–164.
• Cousins, J. J. & Hill, D. T. (2021). “Green infrastructure, stormwater, and the financialization of municipal environmental governance.” Journal of Environmental Policy & Planning. DOI: 10.1080/1523908X.2021.1893164
• FINRA. (2020). Private placements, explained. https://www.finra.org/investors/insights/private-placements-explained (30.3.2023).
• Grafe, F-J. (2020). “Finance, water infrastructure, and the city: Comparing impacts of financialization in London and Mumbai.” Regional Studies, Regional Science. 7(1), 214–231.
• Gorina, E. (2013). “Financial Sustainability of Local Governments: Effects of Government Structure, Revenue Diversity, and Local Economic Base.” Doctoral Thesis. Tempe: Arizona State University.
• Groves, S. M., Godsey, W. M. & Shulman, M. A. (1981). “Financial Indicators for Local Government.” Public Budgeting & Finance. 1(2), 5–19.
• Hong, S., Kweon, I., Lee, D. & Kim, H. (2019). “Indicators and Assessment System for Sustainability of Municipalities: A Case Study of South Korea’s Assessment of Sustainability of Cities (ASC).” Sustainability. 11, 1–21.
• IPSASB (International Public Sector Accounting Standards Board). 2013. Reporting on the Long-Term Sustainability of an Entity’s Finances. New York: International Public Sector Accounting Standards Board.
• Joburg Water. 2023. Integrated Annual Report 2021/22. https://www.johannesburgwater.co.za/annual-reports/ (30.3.2023).
• Loftus, A. & March, H. (2019). “Integrating what and for whom? Financialisation and the Thames Tideway Tunnel.” Urban Studies. 56(11), 2280–2296.
• Lysiak, L., Kachula, S., Hrabchuk, O., Filipova, M. & Kushnir, A. (2020). “Assessment of financial sustainability of the local budgets: Case of Ukraine.” Public and Municipal Finance. 9(1), 48–59.
• Lucianelli, G., Citro, F., Santis, S., Tranfaglia, A. & Mazzillo, A. (2018). “How to improve the financial conditions of local governments in a period of crisis: An explanatory case study.” International Journal of Business and Management. 13(1), 53–69.
• Mbulawa, A. (2019). “Understanding the impact of financial sustainability on South African municipalities.” The Journal for Transdisciplinary Research in Southern Africa. 15(1), 656–671.
• Nutt, P.C. & Backoff, R.W. (1992). Strategic management of public and third sector organizations: A handbook for leaders. San Francisco, CA: Jossey-Bass.
• O’Neill, P. (2009). “Infrastructure investment and the management of risk.” In Clark, G., Dixon, A. & Monk, A. H. B. (Eds). Managing Financial Risks (163–188). Oxford: Oxford University Press.
• Pryke, M. & Allen, J. (2019). “Financialising urban water infrastructure: Extracting local value, distributing value globally.” Urban Studies. 56(7), 1326–1346.
• Rodríguez-Bolívar, M. P., Navarro-Galera, A., Alcaide-Muñoz, L. & López-Subirés, M. D. (2016). “Risk Factors and Drivers of Financial Sustainability in Local Government: An Empirical Study.” Local Government Studies. 42(1), 29–51.
• Thames Water Utilities. (2023). Thames Water Annual Report and Sustainability Report 2021/22. https://www.thameswater.co.uk/media-library/home/about-us/investors/our-results/current-reports/thames-water-annual-and-sustainability-report-2021-22.pdf (30.3.2023).
• Titman, S., Keown, A. J. & Martin, P. (2018). Financial Management: Principles and Applications, 13th Edition. London: Pearson International.
• UNISDR. (2015). The Human Cost of Weather-related Disasters. https://www.unisdr.org/2015/ docs/climatechange/COP21_WeatherDisastersReport_2015_FINAL.pdf (30.3.2023).
• Zafra-Gómez, J. L., López-Hernández, A. M. & Hernández-Bastida, A. (2009). “Evaluating Financial Performance in Local Government: Maximizing the Benchmarking Value.” International Review of Administrative Science. 75(1), 151–167.