A review of city utility spending in the pre- and post-Great Recession sheds light on what happens when national economic disruptions occur. This information might be helpful in anticipating impacts from the covid-19 recession. The Great Recession impacted utilities forcing them to tighten budgets in anticipation of high unemployment rates and reduced or lost revenues. Budgets prioritized continuity of service – a public health priority. Tough decisions about shifting resources often result in deferred capital investment unless driven by regulatory mandate.
An analysis of Census data on utility capital construction spending for the period 1993 to 2019 was conducted and can be accessed here in a summary slide deck.
Among the findings:
- The Great Recession had a dramatic and lasting impact on utility budgets in favor of public health protection through continued operations but there was a trade-off that shifted capital construction spending to a near standstill at about 1 percent annual growth for some 12-15 years.
- The unemployment rate in the Great Recession peaked at 9.8 percent during the recession years (December 2007-June 2009) and increased top 10 percent four months after the recession end.
- The covid-19 recession caused a spike in unemployment rates ranging between 11 and 14 percent in the first six months of the recession. If these high levels of unemployment persist the impact on water and sewer utility capital construction could extend another 12-15 years resulting in a lost generation of needed municipal utility investment.
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