Margurite McNeill, a Black woman who is 83, lives in a brick-sided, two-story house in Northwest Baltimore that her husband bought a half century ago.

Soft spoken and composed, McNeill recalled changes in the neighborhood. Older neighbors dying, younger people moving in. In the city as a whole, more gun violence and killings. Some of the early stability seemed to be slipping away. “It’s just, everything’s just, different everything,” she said.

Except her water bill until very recently. McNeill never thought much about the utility payment, which was typically about $40 a month. She receives about $1,000 a month from Social Security, and her grandson helps out with finances when needed.

Then two years ago McNeill, for unknown reasons, did not receive a water bill. That lasted for about six months. Around the same time a pipe inside the house sprung a leak that eventually put a hole in the ceiling and rumpled the living room wall. Combined, the billing error and leak proved disastrous.

Everything got different in a hurry. The next water bill that arrived was for $4,000.

“I almost had a fit,” McNeill told Circle of Blue. “Where am I going to get $4,000 from?”

Ayana Pope, who has lived in Detroit for all of her 44 years, had a similar experience. She moved into her current place on the east side of the city in 2019. Twelve family members live in the house: her dad and her kids, plus her grandchildren.

Having so many people at home increases water use. A leak didn’t help. Pope soon found herself several hundred dollars behind on her water payments that year. The water was shut off twice since.

More than 1.5 million households in 12 major U.S. cities with publicly operated water utilities owe $1.1 billion in past-due water bills, according to a Circle of Blue investigation.

Pope received $421 from The Human Utility, a charity, to help with her debt. The water is on now after she paid off about $700 in past-due balances in June, she said. The leak is under control but the external pressures remain. “They keep raising the prices, and people with low incomes, it puts them in a bad predicament,” Pope told Circle of Blue. “I know people who went one and a half years without water. That’s crazy.”

McNeill and Pope are two of the millions of Americans who are in debt to municipal water departments. More than 1.5 million households in a dozen major U.S. cities with publicly operated water utilities owe $1.1 billion in past-due water bills, according to a Circle of Blue investigation. Businesses, industries, and other commercial operations in those cities owed another $416 million.

Most Americans give little thought to water bills, paying them on time and in full. But for a subset of homeowners and renters, water debt is constant and menacing. The burden is an extension of two notable national trends: the rising cost of water service and the general precarity of those at the bottom of the economic pecking order. A missed bill or faulty plumbing can spell financial doom.

In Margurite McNeill’s case it was a pipe leak. In other instances deepening water debt amassed gradually, as part of the monthly grind to make ends meet on poverty wages.

However it accumulated, water debt has serious and potentially long-lasting consequences. It can result in the water department shutting off water to the home. Utilities tack on fees for late payments. To make a claim on payment, some cities use tax liens on the property, a collection method that adds additional fees and can result in foreclosure or the inability to take out a loan for home repairs.

“It makes poor people poorer,” Maria Quiñones-Sánchez, a four-term member of the Philadelphia City Council, told Circle of Blue about the effect of water debt.

Water debt has become so pervasive that The Human Utility raises money to pay overdue bills for people in Baltimore and Detroit. Some utilities have bill assistance programs funded by ratepayer revenue, but others solicit private donations to fund the programs.

City councils and mayoral administrations in Baltimore, Chicago, and Philadelphia go a step further. They ordered their water departments to provide indebted, low-income residents with a path toward clearing out their arrears. The legislation in Philadelphia, which was sponsored by Quiñones-Sánchez, established a novel water-billing system for people near the poverty line. For those enrolled in the program, their water bill is set as a percentage of their income, between 2 and 4 percent. The goal is an affordable bill that prevents debt from accumulating in the first place. Baltimore will soon mimic that system on the orders of its Council.

Rosazlia Grillier, an activist in Chicago, helped spearhead a campaign in her hometown for debt relief and affordable bills. Other goals in this movement include customer service that does not look down upon people, less cumbersome paperwork in applying for assistance, and plumbing retrofits to fix leaks and reduce water use for low-income households. She said these steps are necessary to level the playing field for those at the bottom, especially as the Covid-19 pandemic threatens to undo a decade of economic gains.

“You can’t get blood from a turnip and there’s only so much you can take from people who already don’t have,” said Grillier, co-chair emeritus with COFI POWER-PAC Illinois, an anti-poverty group. “We really need to look at creating systems where the city is sustaining itself and not causing harm to other human beings.”

Debt Burdens

Water shutoffs in the United States gained public notoriety in 2014 after a mass disconnection operation in Detroit that stemmed from the city’s bankruptcy proceedings. City contractors turned off water to about 30,000 homes that year, prompting an outcry that reached the United Nations.

Despite being a crucial component of household financial insecurity and water access, water debt is largely unexamined by researchers and policymakers.

Less visible but no less important are the financial accounts that underpin the shutoffs. The debt that households accumulate puts them at risk of having their water turned off. Yet debt is a blind spot in the debate about water affordability. Despite being a crucial component of household financial insecurity and water access, water debt is largely unexamined by researchers and policymakers.

“We know so little about this question,” Manny Teodoro, a public policy scholar at Texas A&M University who focuses on water utilities, told Circle of Blue. Teodoro could not recall any academic assessments of customer water debt and said there are no answers for basic questions. “We should know at a minimum what the scope is.”

To better understand the depth and breadth of the problem, Circle of Blue launched the most extensive investigation of water debt and its consequences ever conducted by a news organization in the United States. We spent eight months examining financial data related to customer debt that Circle of Blue requested from water departments in 12 large U.S. cities. The selections were not a random sample. The cities — Atlanta, Chicago, Cleveland, Denver, Detroit, Houston, Los Angeles, Philadelphia, San Antonio, San Francisco, Seattle, and Washington, D.C. — were chosen because they represent a cross-section of America, a mix of geographies, demographics, population sizes, and wealth.

Those data included unpaid bills owed by residential and nonresidential customers; the number of past-due residential and nonresidential accounts; the median past-due balance per account; how long those debts have been outstanding; and debt burdens by ZIP code.

Circle of Blue’s analysis was challenging for several reasons. First, data on debt reflected a point in time, but not the same point for all utilities. Five utilities reported their data from June 30, 2019, the end of their fiscal year. The most recent figures, from Houston, were from May 1, 2020.

Second, some utilities bill for water only, others for water and sewer, and still others include charges for services like garbage collection and stormwater. The debt to the utility reflects all the services for which it bills, even though enforcement generally is the responsibility of the water department. Garbage collectors are not cutting off trash pickup.

Another complication: debt levels are always in flux as some people pay up and others fall behind. Data from Atlanta shows that the Department of Watershed Management collected 99.8 percent of billed revenue in fiscal year 2019, but just 96 percent of billed revenue in 2018. The year before, in 2017, the department pulled in 102.1 percent of billed revenue, meaning that people paid off debts that had accumulated in previous years. Collection rates nationwide are, on average, between 99.5 percent and 97 percent, according to several utility analysts.

Despite the formidable challenges Circle of Blue found striking results. Residential water debt ranged from $341 million in Chicago to only $568,427 in San Francisco. The median residential debt for the eight cities that reported that figure ranged from $79.27 in Denver, to $216.58 in Seattle, to $415.13 in Detroit, to $662.80 in Philadelphia.

“Once you get into a situation where your water bill skyrockets, it’s very hard to get out of that situation.”

Some household debts included in the totals are miniscule and unlikely to be problematic — about 7 percent of the 46,134 past-due residential accounts in Atlanta, for instance, owed $20 or less. The same lack of concern is the perspective of some utilities with low residential debt. The $3.2 million in past-due residential balances in Denver, “have not been a significant issue” and are not factored into rate setting, Todd Hartman, a Denver Water spokesperson, told Circle of Blue.

But too many poor families have debts that reach into the thousands of dollars. Such sums represent crippling financial weights, according to Margaret Henn, director of program management at Maryland Volunteer Lawyers Service, which provides pro bono legal assistance to low-income residents and is frequently involved in housing and utility disputes. Debt can be a self-reinforcing cycle, she said.

“Once you get into a situation where your water bill skyrockets, it’s very hard to get out of that situation,” Henn told Circle of Blue.

Much of America’s drinking water infrastructure is a result of investments made in the previous century. Jardine Water Purification Plant, which began operation in 1964, is the backbone of Chicago’s drinking water system. Photo © Alex Garcia / Circle of Blue

Times Change

When the McNeills moved into their home in Baltimore in the early 1970s the city and country were in different places than today. Baltimore’s population was 45 percent larger, and it was one of the country’s 10 most populous cities. The U.S. Environmental Protection Agency, then in its infancy, rolled out a grant program that ended up providing $60 billion to modernize the country’s wastewater treatment plants. Roughly the same amount of money each year in that decade went to operating and maintaining water systems as was spent on construction. Water was relatively cheap compared to electric power, heating oil, and gasoline, which were inflated during the oil embargo. Customer water debt, by and large, was not a headline issue for utilities.

Water rates have soared in recent years as the bill for outdated infrastructure has come due.

That dynamic is changing. Water rates have soared in recent years as the bill for outdated infrastructure has come due. Maintenance of existing assets has grown more costly — now more than 2.5 times what is spent on construction.  Federal support for water infrastructure, though, has declined steadily in the last four decades as Congress replaced the construction grants programs with low-interest loans.

Industry leaders are starting to recognize water affordability and customer debt as pervasive problems. The American Water Works Association is the water sector’s largest lobby group. Each year it publishes a report on the state of the industry based on survey responses from water managers and other professionals. For the 2019 report, AWWA posed a question for the first time about customer debt.

“In your opinion, is nonpayment of bills a problem for your utility?” the AWWA survey asked. Of the 761 respondents, about 6 percent said that nonpayment was a significant problem. Half, mostly in the Northeast and Southeast, said it was a moderate problem. Risk factors include declining populations, high poverty rates, leaky sewage systems, aging water distribution pipes, infrastructure that was built for a larger city, and expensive water.

City ratepayers are the ones picking up the tab for that expensive water. In Baltimore, which is under a $1.6 billion federal consent decree to fix its sewer system, water prices more than doubled in the last decade. In Las Vegas, Tucson, and San Francisco, prices have also more than doubled. In other cities, poor management of municipal finances has intruded into water bills. Chicago, which had already raised its rates to accelerate the replacement of water distribution pipes, added a bill surcharge in 2017 that goes toward plugging holes in its pension fund. Stories like these are repeated in city after city.

Poor management of municipal finances has intruded into water bills. Chicago, which had already raised its rates to accelerate the replacement of water distribution pipes, added a bill surcharge in 2017 that goes toward plugging holes in its pension fund.

“We’ve seen more concerns expressed about trying to figure out ways to ensure that people have the service and can afford the service,” Doug Scott, a water utility analyst at Fitch Ratings, told Circle of Blue.

Utilities are caught in a bind because of an inherent tension in their operating model. They provide an essential public service — delivering water, removing waste — yet they are expected to function as a business, generating enough revenue to cover costs and invest for the future.

It’s a group effort: utilities rely on customer payments to keep the system operating. The more people who fall behind on their bills, the greater the pressure on the others. If too many people do not pay, there can be a downward spiral in service and reliability. Utilities could see their credit rating downgraded, which increases the cost of borrowing.

“Once you have a high amount of customers not paying their bills it puts a burden on the entire system,” Mohamed Balla, deputy commissioner of finance at the Atlanta Department of Watershed Management, told Circle of Blue.

Utilities are also in a bind because of a data deficiency: few water providers know the financial circumstances of the people who are in debt. Are they poor people who cannot afford the service? Are they wealthier folks who are simply forgetful or negligent? Did they move away and fail to notify the department? When Philadelphia started its income-based billing system in 2017, water department officials said it was the first time they were getting detailed financial information about their customers.

A portion of Atlanta’s debts, as in other cities, are connected to wealthier home owners. ZIP code-level data from Detroit and Houston shows debt spread across poor, middle-income, and richer areas. Researchers from the Pacific Institute found a similar relationship in a different data set. They looked at U.S. Census Bureau data and found that wealthier households received utility shutoff notices at the same rate as low-income households, suggesting that people who are behind on bills are not all poor. Some are merely forgetful or oblivious, which is why utilities argue that the threat of a shutoff is a necessary tool to compel payment.