Temporal Dynamics of Willingness to Pay for Alternatives That Increase the Reliability of Water and Wastewater Service

Abstract

Changes in public perceptions affect infrastructure projects, policies, and revenue streams. As such, utilities should leverage these dynamic perceptions for a variety of reasons, including identifying strategic times to increase operational revenues through rate changes or billing structure, implementing capital projects or management approaches, or integrating new policies. This study focuses on assessing the temporal variations of stated willingness to pay for improved water and wastewater service of residents in 21 shrinking US cities. This classification of cities was selected due to the fiscal constraints placed on utilities because of the reduced number of customers from that which the original system was designed to serve. Furthermore, a consequence of this decline, a high proportion of low-income residents are paying high per-capita costs. Enabling this study are survey data collected in 2013 and 2016. Random-parameter Tobit regression models are used to identify geographic and sociodemographic factors influencing this stated willingness to pay. A likelihood ratio test confirmed a statistically significant shift between the surveys in the residents’ stated willingness to pay. Model results reveal that between the timeframes of the deployed surveys, the influences of geographic (e.g., Michigan, Ohio) and sociodemographic factors (e.g., age, income) changed as well. Utilities may benefit from using the identified parameters to develop strategies (e.g., outreach programs, targeted education, media advertisements, inclusion in planning) to target specific groups. Similarly, using the geographic parameters may also present an opportunity to increase operational revenue due to higher willingness to pay by residents. In general, this study highlights that public perceptions should be periodically investigated to continually identify times of greater public support for various utility efforts under way.