‘How will this affect our credit rating?’: municipal debt and governing the environment

ABSTRACT

By analyzing the multiple forms of debt used by municipal water supply organizations, I present evidence to argue that the financial structures of contemporary public governance give financial interests undue influence over the management of natural resources. This study uses financial statistics and qualitative data pertaining to the largest provider of drinking water in the US, Metropolitan Water District of Southern California (MWD), an empirically significant case study. Municipal water agencies collect revenues through traditional sources including water sales and tax collections, but they also raise significant funding with a variety of debt instruments. In this study, I first observe a strong increase in revenue-backed debt, supplanting tax-backed debt, as the primary source of funding. Next, I examine how revenues have shifted since mid-century with water sales growing primary and taxation becoming peripheral. Lastly, I analyze the influence of financial gatekeepers – credit rating agencies – considering the growing reliance on private financial capital. I find that rating agencies push finance-oriented objectives on water managers that include commodifying water to maximize revenue, avoiding expenditures, and flouting climatological realities of scarcity, among others. I propose the notions of financial feedbacks and the financial pathology of institutions as conceptual tools for characterizing these processes.

KEYWORDS:

• Water policy
• financialization
• governance
• sustainability
• municipal debt
• sociology

Acknowledgements

I am grateful for the many kind and generous people around me who have read or discussed this work as it developed. I especially thank Nina Bandelj, David A Smith, Evan Schofer, Valerie Olson, David A. Snow, and Mike Antos. The Center for Organizational Research provided seed funding to help this project get off the ground and the Global Reading Group at UC Irvine offered an excellent forum for inspiration and feedback. I am also extremely appreciative to the water agency directors, general managers, and staff members who have helped me learn about the world of public water management. And, I am deeply grateful to the John Randolph Haynes Foundation for the dissertation fellowship that supported me while conducting this research.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. ‘PG&E Stock, Bonds Plunge Anew as S&P Cuts Its Credit Rating to Junk.’ Los Angeles Times. Retrieved 30 March 2020 (https://www.latimes.com/business/la-fi-pge-credit-rating-cut-20190108-story.html).

Additional information

Notes on contributors

Christopher W. Gibson

Christopher W. Gibson is an Assistant Professor at CSU Fullerton where he researches and teaches on topics related to environmental sociology and economic sociology.