Willingness to Pay for Perceived Increased Costs of Water and Wastewater Service in Shrinking US Cities: A Latent Class Approach

Abstract

Chronic population decline in cities nationwide has resulted in increased per capita costs for continued service of water and wastewater infrastructure. Due to the high fixed costs associated with water and wastewater infrastructures and this chronic population decline, the financial burden to maintain and operate the fixed-grid footprint has become a challenge for those who reside within these shrinking cities. With this in mind, the understanding of public opinion toward the provision of service provided by critical infrastructure sectors is crucial for informed decision making by both utilities and state agencies. Hence, this study seeks to present a new methodological approach to assess the willingness to pay for the provision of water and wastewater services, and to evaluate the drivers of the willingness to pay in shrinking cities. A latent class Tobit regression modeling approach is proposed to identify and understand the influential variables associated with a stated preference survey on the willingness to pay for increased rates in shrinking cities. In addition, the modeling approach can more accurately capture the unobserved heterogeneity across the nationwide shrinking cities. The results illustrated that the latent class Tobit outperformed the more basic Tobit model and accounted for unobserved heterogeneity. Moreover, characteristics determining an increased willingness to pay for improved reliability of water and wastewater service included the responsibility of paying the water bill, homeownership, and income level. Characteristics determining a decreased willingness to pay for improved reliability of water and wastewater service included gender, awareness of chronic population decline, having no income, marital status, and employment status.