Local and Financial Aspects of Urban Water Management for Six Cities at the U.S.-Mexico Border

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1 Local and Financial Aspects of Urban Water Management for Six Cities at 2009

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3 Local and Financial Aspects of Urban Water Management for Six Cities at Project Coordinator: Dr. Ismael Aguilar Benitez Participating Researchers: Dr. Socorro Arzaluz Solano Dr. María Eugenia González Ávila With the assistance of: Isabel Sánchez Rodríguez* English translation by: Katrina Kargl, Alan Hynds, and Patricia S. Cejas *We appreciate the support of Eduardo Loredo Guzmán, Carlos D. García Nieto, Mayra Coronado Ramírez and Rosalía Chávez Alvarado for transcribing interviews, inputting data and designing figures and tables.

4 Table of Contents Preface Executive Summary v vi Introduction 1 Study Objectives 4 I. General Characteristics of the Cities Studied and their Water Utilities (WU) 5 II. Evaluation of the Components for Determining Best Practices in Water Services Local Management Legal Framework Governing Water Professionalization of the Service Transparency in Information Public Participation Mechanism Financial Management of Water Services Strategic Business Planning for Water Services Financial Indicators Commercial Efficiency Financial Sustainability Management of Water Quality Infrastructure Maintenance and Improvement Compliance with Standards and Regulations Professionalization and Training 129 III. Best Management Practices Identified in the Cities Studied Best Practices in Local Management Best Practices in Financial Management Best Practices in Managing Water and Wastewater Quality 140 IV. Final Note and Recommendations Local Management Financial Management Water Quality Management 145 Bibliography 147 Annexes Annex 1. Description of Water Rates 150 Annex 2. Water Quality Standard for Wastewater and Wastewater Treatment Plants 155 Photographic Annex 157 ii

5 Index of Tables Table 1.1. Breakdown of COMAPA-Nuevo Laredo Personnel 36 Table 2.1. Some Financial Indicators: Mexican Water Utilities, Table 2.2. Some Financial Indicators: U.S. Water Utilities 81 Table 2.3. Design of Water Rates for Mexican Cities 89 Table 2.4. Design of Water Rates for U.S. Cities 97 Table 3.1. Qualitative Evaluation of the Water Treatment Plants Visited 112 Table 3.2. Qualitative Evaluation of the Wastewater Treatment Plants Visited 115 Table 3.3. Water Quality Standards for Water Treatment Plants 118 Table 3.4. Characteristics of the WTPs in the Mexican Cities 119 Table 3.5. Regulations that Apply to Drinking Water Quality in U.S. Cities 121 Table 3.6. Characteristics of the WTPs Visited in the United States 122 Table 3.7. Regulations Governing WWTPs in Mexico 124 Table 3.8. Characteristics of the WWTPs in the Mexican Cities 125 Table 3.9. Institutions and Regulations Governing WWTPs in the United States 128 Table Characteristics of the WWTPs Visited in the United States 128 Table WTP and WWTP Personnel by Education Level in the Three Mexican Cities 130 Table Level of Training Required for Del Rio, McAllen and Laredo (WTP and WWTP) 132 Table Sludge Production and Disposal at the WWTPs in the Cities Studied 139 iii

6 Index of Figures and Graphs Figure 1. Location of the Six Cities Studied 12 Figure 3.1. Location of Water Treatment Plants by U.S. Mexico Border City 109 Figure 3.2. Location of Wastewater Treatment Plants by U.S. Mexico Border City 110 Graph 1.1. General Structure of the Legal Framework for Water in Mexico 15 Graph 1.2. Scope of Local Water Management in Ciudad Acuña, Nuevo Laredo and Reynosa 22 Graph 1.3. Scope of Local Water Management in Texas 25 Graph 1.4. Scope of Local Water Management in City of Del Rio, Laredo and McAllen 29 iv

7 Preface Established in 1994, the North American Development Bank (NADB) is an international financial institution capitalized and governed equally by the United States and Mexico. Its main goal is to finance environmental infrastructure projects in the border region of the two countries, which extends 2,100 miles from the Gulf of Mexico to the Pacific Ocean, and encompasses an area about 62 miles north and about 186 miles south of the international boundary. The issue of water management for urban use is a high priority for NADB. Local, financial and water quality management in this region is handled in different ways, depending upon the institutional framework of each utility. For this reason and in keeping with its mandate, NADB commissioned the Mexican research facility, Colegio de la Frontera Norte (COLEF), to research and analyze local and financial water management for urban use in three sister cities in the U.S.-Mexico border region (Ciudad Acuña/Del Rio; Nuevo Laredo/Laredo and Reynosa/McAllen). The purpose of this study is to compare the way water services are managed locally, analyze the different ways in which investment in urban water infrastructure is handled and identify a series of best practices in water management currently used by the six cities studied. It is important to clarify that the opinions contained herein are the responsibility of the individual who expressed them and do not necessarily represent the point of view of the institutions involved. Jorge Silva Technical Assistance and Training Specialist North American Development Bank v

8 Executive Summary This work examines the different ways in which water services are managed in cities located on the border between northeast Mexico and southern Texas, in three areas: local management, financial management and water quality management. Three pairs of sister cities were included: Ciudad Acuña in Coahuila and Nuevo Laredo and Reynosa in Tamaulipas, along with their corresponding counterparts: Del Rio, Laredo and McAllen in Texas. The purpose of this study is to compare the way in which water services are managed locally, analyze different approaches to investment in urban water infrastructure and identify a number of best management practices currently used in the six cities studied. In reviewing local management, the following aspects were considered: 1) management autonomy, 2) service professionalization, 3) transparency and access to information, and 4) public participation mechanisms. The findings among the cities were dissimilar, basically because of the different legal frameworks and the political ends for which the service is used in Mexico. These differences are reflected in relatively better performances by the U.S. cities as compared with the Mexican cities. It can be asserted that water services are more financially viable in Texas than in Mexico. These services are characterized by: a business focus to the services that entails annual financial planning, low reliance on external sources of funding, and appropriate user fee adjustments and collection rates. This financial approach does not eliminate performance-related problems arising from the provision of services; however, it does vi

9 allow for the development of strategies to deal with problems in service operations. A key characteristic that U.S. cities have for financing water services is that they may sell bonds and use them as financial instruments. In contrast, Mexican cities rely heavily on federal or state appropriations. In terms of water quality management, water and wastewater treatment plants in the six cities were inspected and analyzed, including the condition of the infrastructure, regulatory compliance, and staff professionalization and training levels. Here again, different practices were identified between the two groups of cities. This study highlights clear and specific differences in the management of water services between Mexico and the United States. Even though U.S.-Mexico border cities have to share the water in the region, because of institutional differences, each group of cities (Mexican and U.S.) manages, administers and handles their water services and water quality differently, which makes it difficult to compare and exchange management experiences. Nevertheless, this document identifies a number of best practices in each group of cities and provides some recommendations for improving the management of water services in the region. vii

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11 Introduction Urban development is unfeasible without adequate water services. A distinction must be made between water as a resource and water services for urban use (OECD, 2003; World Water Council, 2003). This distinction is important in identifying possible obstacles to the financial sustainability of water services. Water as a natural resource involves its extraction and distribution among various uses. It also entails the protection of surface water bodies and underground water reserves. Water services for urban use, on the other hand, involve the investment, operation and management of infrastructure systems, the provision of drinking water and the collection of wastewater. This study deals exclusively with the management of water services for urban use. Assuring the provision of safe, reliable and affordable water services is one of the major challenges facing fast-growing urban centers, such as those along the U.S.-Mexico border. The U.S.-Mexico border region is one of the areas with the lowest quantity of water available per inhabitant in Mexico. Water availability ranges from extremely low (Water Region VI) to average (Water Region IX), in addition to tremendous pressure put on the aquifers (Mexican federal water agency, CNA, 2000). Storage volumes in the major reservoirs in the region dropped from 60% of their capacity in 1990 to 20% in 2000 (CNA, 2003). This shortage is important, as surface water is the main source of water for urban consumption in the region. Because of economies of scale and scope utilities usually have a monopoly on the services provided in urban areas. The cost of multiple systems makes competition unfeasible. In general, the complex nature of water services makes sustainable financial 1

12 management difficult. These characteristics create potential risks for public and private utilities, which become real problems when the services are not managed efficiently. Differences in legal and institutional structures between Mexico and the U.S. further complicate water management and urban water services on the border. In Mexico, there is little data on how local governments handle utility service management. However, it is important to study the different ways in which local governments have managed water services, especially since water is a resource that has to be shared with the neighboring local government, which in this case operates under a different institutional framework. For this research project, three pairs of sister cities located on the Mexico-Texas border were studied as units: Ciudad Acuña, Coahuila and Del Rio, Texas; Nuevo Laredo, Tamaulipas and Laredo, Texas; and Reynosa, Tamaulipas and McAllen, Texas. The research study encompasses two Mexican border states (Coahuila and Tamaulipas) and three municipalities: Acuña, Reynosa and Nuevo Laredo; which provide three different case studies in terms of economic development. On the U.S. side, one state (Texas) and three local governments were covered. Studying local management on the border allows for a comparison of cities sharing the same water sources, with strong economic and social ties, but completely different institutional frameworks. This analysis helped identify water management practices from different perspectives (administrative, financial and environmental) that may lead to improved water management for urban use on the border. This approach also permits the analysis of different management practices generated under very different 2

13 institutional frameworks (i.e. laws, regulations and standards) and their impact on the financial and environmental sustainability of water services. Various sources of information were used in this study: water utility databases and files, websites of local governments and utilities, newspaper archives and interviews of local officials responsible for different areas related to the provision of water services. 1 1 The authors appreciate the assistance and cooperation provided by utility officers and all the people who granted us interviews and helped us carry out the field work for this project. 3

14 Study Objectives Overall Objective: To analyze local and financial water management for urban use in three pairs of sister cities (Ciudad Acuña/Del Rio; Nuevo Laredo/Laredo, and Reynosa/McAllen) on the U.S.-Mexico border. Specific Objectives: 1) To analyze and compare local management of public water services in six cities on both sides of the U.S.-Mexico border. 2) To examine the different ways investment in water infrastructure for urban use is managed in the six cities studied. 3) To identify a number of best practices in water management (administrative, institutional and environmental) based on the different current practices used in these cities. 4

15 I. General Characteristics of the Cities Studied and their Water Utilities (WU) 2 Mexican Border Cities Acuña, Coahuila The municipality of Acuña is located in northeastern Mexico and covers an area of 11,487 km 2 (approx square miles), making it the second largest municipality in the state of Coahuila. Acuña borders the Rio Grande to the north, which marks the international boundary between the U.S. and Mexico; the municipalities of Jiménez, Zaragoza and Múzquiz to the south; the municipality of Jiménez and the Rio Grande to the east; and the municipality of Ocampo to the west. Its municipal seat, Ciudad Acuña, is located in the eastern region of the municipality. In 2005, the municipality of Acuña had a population of 126,238 inhabitants, 98% of which was concentrated in Ciudad Acuña. 3 According to projections from the Mexican national population council, Consejo Nacional de Población (CONAPO), this figure is expected to reach 295,000 inhabitants by Acuña obtains its water supply for urban use from both ground and surface water sources. Surface water is obtained from the Rio Grande River through two intakes: one located just downstream of the Amistad Dam and the other is located at a smaller dam 12.7 miles downstream from the Amistad Dam. Groundwater comes from an underground aquifer and is pumped through two deep wells. 2 In this study we will use the term Water Utility for both Mexican and U.S. cities, with the observation that in the latter case water service operations are provided in different ways: as a department of the local government, as an area of the local public service department, etc. 3 II Conteo de Población y Vivienda (II Population and Housing Count), Mexican national statistics institute, INEGI,

16 The local water utility, Sistema Municipal de Agua Potable y Saneamiento de Ciudad Acuña (SIMAS), is responsible for providing water and sewer services. In December 2007, the water registry listed 37,529 users, with 95% classified as residential users, 3.97% as commercial users, and 0.03% as industrial users. Ciudad Acuña has two water treatment plants (Cd. Acuña and La Amistad), which as of December 2007 produced a total of 3.07 million gallons. It also has a wastewater treatment plant (Cd. Acuña) with the capacity to treat 4.68 million gallons a day (mgd). Nuevo Laredo, Tamaulipas The city of Nuevo Laredo is located in the northern region of the state of Tamaulipas and borders the United States and the state of Nuevo Leon to the north; the state of Nuevo Leon and the municipality of Guerrero to the south and west; and the United States to the west. Nuevo Laredo is virtually flat, with no major elevations or depressions. According to the II Population and Housing Census taken in 2005, the municipality had a population of 355,827 inhabitants. The only source of water for urban use in Nuevo Laredo is the Rio Grande River, which also serves as the boundary between Mexico and the United States. This river has two natural spillways, the Coyote stream to the south of Alazanas, and smaller streams to the west, such as Laguito, Estero Reventado, Abandonado, Sandra, Ortillo, Carrizo, Aguas Negras, El Gobierno, Ramireño and Cedena, from which water is also pumped

17 The city s first water system was built in Currently, the decentralized entity responsible for providing water and sewer services in Nuevo Laredo is the local water utility, Comisión Municipal de Agua Potable y Alcantarillado (COMAPA-Nuevo Laredo). Established as such in 2002, it is worth noting that since that time, the utility has been headed by the same manager, Jesús Valdez Zermeño. As of September 2007, COMAPA-Nuevo Laredo provides service to a total of 107,609 users, the majority residential users (95%). Commercial users represent only 4.8%; while industrial users rank third at 0.2%. Total water consumption in 2007 was 661,877,304 gallons. COMAPA-Nuevo Laredo has two water treatment plants: the Central and Southeastern plants; as well as three wastewater treatment plants: the International Wastewater Treatment Plant (IWWTP), the ORADEL WWTP and the Land Reserve WWTP. Reynosa, Tamaulipas The municipality of Reynosa is located in the northern region of the state of Tamaulipas and borders the United States to the north, across the Rio Grande; the municipality of Méndez to the south; the municipality of Rio Bravo to the east and the municipality of Díaz Ordaz and the state of Nuevo Leon to the west. According to the II Population and Housing Census taken by INEGI in 2005, Reynosa had a population of 526,888 inhabitants. 7

18 Water in Reynosa comes from two irrigation systems: the San Juan River and the Rio Grande. The main source of water for urban use is the San Juan River, which provides water for irrigation and urban use, as well as irrigates the southern portion of the municipality. There are an infinite number of canals, the largest of which are the Rhode and Anzaldúas Canals. 5 Water is collected at the Anzaldúas Diversion Dam and then pumped to the Loma Linda and PEMEX water treatment plants. The entity responsible for providing water and sewer services in Reynosa is the local water utility, Comisión Municipal de Agua Potable y Alcantarillado (COMAPA-Reynosa). Reynosa has a plant consisting of oxidation ponds for wastewater treatment, located in the northeastern area of the municipality, between the Anzaldúas Canal and the Rio Grande, next to the highway to Matamoros along the Rio Grande. U.S. Border Cities Del Rio The city of Del Rio is located in Val Verde County in South Texas and covers an area of 15.4 square miles. Del Rio is located to the north of the Rio Grande River, which physically separates it from the city of Acuña in the state of Coahuila. Together these two cities form one of the six metropolitan areas along the U.S.-Mexico border. Del Rio had a population of 33,867 in 2000, which is estimated to have grown to 35,957 in Instituto Nacional para el Federalismo y el Desarrollo Municipal (Mexican national institute for federalism and municipal development), Enciclopedia de los Municipios de México (Encyclopedia of Mexican Municipalities). 6 Texas State Data Center. 8

19 The city s main water supply is the San Felipe Springs, which provides approximately 150 million gallons of water per day, 7 with most of the water coming from the East and West Springs. Since , the city government, through its Public Works Department, has been responsible for providing water and sewer services. 8 Del Rio currently has a water treatment plant, the San Felipe Springs Water Treatment Plant, with a production capacity of 18.2 million gallons a day. The city also has two wastewater treatment plants (Silver Lake and San Felipe). Laredo, Texas The city of Laredo is located in Webb County in the state of Texas, on the banks of the Rio Grande River, and borders the Mexican states of Tamaulipas and Nuevo Leon to the south. Laredo is the largest city in the county, covering an area of square miles. Its population in 2005 was 207, The main source of water for Laredo is the Rio Grande River, from which approximately 45 million gallons/day is pumped. Water and sewer services are currently provided by the city government through its Utilities Department. This city is the only one in the study that has previous experience with a private operator. In 2002, it entered into a five-year agreement with the company United Water; however, this arrangement only worked until mid-2005, when the services were returned to the control of the local government. 7 Del Rio Chamber of Commerce, 8 City of Del Rio, U.S. Census Bureau, 9

20 The Utilities Department of the City of Laredo has a customer base of 51,043 accounts, with 91% residential users and 9% commercial users. Laredo has two water treatment plants (Jefferson and Colombia) with a capacity of 66 million gallons/day, as well as three wastewater treatment plants (North, South Side and Zacate). McAllen, Texas The city of McAllen is located in Hidalgo County in South Texas, in an area known as the Rio Grande Valley. It is only five miles away from the Mexican border, where its closest Mexican counterpart is the city of Reynosa, Tamaulipas. According to the U.S. Census Bureau, McAllen covers an area of 46.3 miles 2 and had a population of 116,376 in 2005, with a growth rate of 1.8% between 2000 and As in Laredo, the main source of water for McAllen is the Rio Grande River. The McAllen Public Utility (MPU) is responsible for providing water and sewer services. MPU has three treatment plants: Plant 1 was constructed in 1918; however, the growing demand for water necessitated the construction of two more plants, the Southwest Water Treatment Plant, with a capacity of million gallons/day and the Northwest Water Treatment Plant, with a capacity of 8.25 million gallons/day. McAllen also has two wastewater treatment plants: the South Wastewater Treatment Plant, with a capacity of 10 million gallons/day; and the North Wastewater 10 Ibid. 10

21 Treatment Plant, which was recently expanded from 6 million gallons/day to 8 million gallons/day. Water consumption recorded by MPU in fiscal year was 7,608,685 gallons. The location of the six cities included in the study is shown in Figure 1. Source: Author s own design Figure 1. Location of the Six Cities Studied 11

22 II. Evaluation of the Components for Determining Best Practices in Water Services 2.1. Local Management This section addresses the different facets of the municipal management of public services. One aspect of this management can be defined by the manner in which governments handle the tasks for which they are legally responsible. The concept of local government used in this document refers to the municipal or provincial level of the social and political organization of a country and to the sphere of control of an institution, administration, agency or social group. The notion of local government defines political units of government of varying sizes states, municipalities, cities that are geographically and administratively delimited and socially and culturally heterogeneous. (Ramírez Kuri, 1999: 1) There are basic differences between the forms of government in the two countries of this study. Whereas in Mexico local authorities play both a political and managerial role, in the United States these two roles are kept separate. This necessarily affects the form of governing and especially the provision of utilities. In Mexico, the local government is responsible for managing all types of services from public lighting to trash collection and water disposal as set forth in Article 115 of the Constitution. The problem is that this legislation treats all services the same, even though water, by its very nature, requires special treatment. In the United States the management of services is different, as set forth in federal legislation and in specific state, municipal or local provisions. Public services are supervised differently, especially in the case of water, which is controlled by 12

23 administrative agencies with clearly defined boundaries, unlike in Mexico, where water management is eminently political. In the three American cities examined in this study Laredo, McAllen and Del Rio, sister cities of Nuevo Laredo, Reynosa and Acuña, respectively the highest authority is the mayor. Texas cities also have a city manager, whose most important duty is to oversee the operation of all the administrative agencies. In Mexico, this position does not exist. In the specific case of public services, a number of elements are considered for determining that a certain management is appropriate for the type of services and for the territory where they are provided. Of these elements, three are highlighted in the case studies: (1) professionalization of the service, (2) transparency in the information provided to users, and (3) forms of public participation in the processes. Before presenting the results of these indicators in the cities studied, we will examine the main legal provisions that currently govern water in both countries and in the respective cities, in order to have a clearer understanding of these processes which are extremely different in the two countries and how they work. 13

24 Legal Framework Governing Water The Case of Mexico Until the 1990 s, water in Mexico was managed through a centralized institutional arrangement that did not take into account its scarcity but rather was based on the idea of its abundance. (Amaya, 2007: 19) In 1983, a decentralization process began and the responsibility for managing urban services, including water, was transferred to the municipalities. At the institutional level, the definition of a new water management policy had two broad implications: 1. Establishment of a new regulatory framework that would allow the traditional stakeholders to participate in new ways, while at the same time encouraging new players to take the political stage. 2. Creation of new institutions at the federal, state and municipal level (ibid, 19). Graph 1.1 provides a general description of the legal framework governing water service in Mexico. 14

25 NATIONAL WATER LAW EXECUTIVE Mexican Constitution Art. 27 y 115 fracc. III. MEXICAN MINISTRY OF HEALTH Health General Law Art. 118 fracc. VI, Art. 119 fracc. II, Art. 121, 122 y 457 NOM SSA Mexican Ministry of Environmental and Natural Resources (SEMARNAT) SEMARNAT Internal Ordinances National Water Law National Water Law Ordinances NOM SEMARNAT FEDERAL CONGRESS State Development Plan STATE GOVERNMENT State Water and Wastesater Treatmetn Law LOCAL CONGRESS National Water Commission (CNA) Water Sector Oficial Rules CNA Internal Ordinances State Water Commission Internal Odinances CNA State Division Water and Wastesater Treatment Section BASIN ORGANIZATIONS Municipal Development Plan State Water and Wastewater Treatment Comission MUNICIPALITIES City Council: Utility Ordinances UTILITY ADVISORY COUNCIL UTILITY (COMAPA. SIMAS) Federal Attorney's Office of Consumer (PROFECO) Source: Author s own design Graph 1.1 General Structure of Legal Framework for Water in Mexico 15

26 Consistent with this new framework, in April 2004 the National Water Law was amended. These reforms were aimed at the following areas: 11 Management of national waters by basin; Participation of states, municipalities and the federal government in decisions regarding the management of national waters and their inherent common good; Institutional strengthening with a new organization Since then, the stakeholders involved in managing this resource are: the national water agency, Comisión Nacional del Agua (CNA), at the federal level; the basin organizations, at the regional level; the respective governments and water agencies, at the state level; and lastly, the municipalities and utilities. At the federal level, CNA was established as a decentralized, autonomous agency of the Mexican Ministry of Environment and Natural Resources (SERMARNAT). Through CNA, the executive branch of the federal government exercises powers of authority over water-related matters. It is the highest technical, regulatory and advisory agency in the country for the comprehensive management of water and its inherent common good. 11 Some of this information is based on the talk, "Marco legal del agua en México (Legal Framework of Water in Mexico)," Binational Rio Grande Summit in Reynosa, Tamaulipas, November 2005, available at 16

27 CNA is generally responsible for the following duties: Proposing water policy; Establishing water regulations; Planning strategic projects and infrastructure for national security; Managing federal resources; Acting in inter-basin and cross-border issues. The next level in water management is the basin organizations, which are specialized legal and administrative technical units answering directly to the head of CNA, with regional jurisdiction over basins, as set forth in the law and regulations, and with a specific budget and resources as set by CNA. These basin organizations have administrative, technical and executive autonomy to exercise their functions and manage the assets and resources entrusted to them, and answer directly to the director of CNA. They are responsible for: Carrying out regional programs; Ensuring the sustainability of the basins; Managing and overseeing regional resources; Acting in inter-state issues. 17

28 The third level in the administration of water resources is responsible for duties such as developing and monitoring state programs, executing agreements, and establishing cooperative agreements when needed. For the cities included in this study, local legislation specifies certain circumstances that require comment. In Coahuila, the Law for Water and Wastewater Services in Municipalities establishes that: The provision of drinking water and the collection, treatment and disposal of wastewater will be the responsibility of the municipalities, which may provide them individually or in coordination or partnership with each other, in accordance with the law and other applicable provisions. These municipal public services may also be provided through decentralized agencies or government-run entities established in accordance with the provisions set forth in the Municipal Code for the state of Coahuila. Concessions for the provision of these services may be granted by city governments to individuals or legal entities, in accordance with the provisions set forth in the Municipal Code for the state of Coahuila. (Art. 2) Therefore, the powers and functions for providing drinking water and wastewater collection, treatment and disposal services will be exercised by: I. Decentralized agencies of the municipal public administration, to be called, Sistema de Agua y Saneamiento (Water and Wastewater System); II. Government-run entities established in accordance with the Municipal Code for the state of Coahuila; or III. Private entities that obtain a concession to provide the service in accordance with applicable provisions. (Art. 4) 18

29 In the case of Tamaulipas, the state Law of Public Service for Drinking Water and Wastewater Collection, Treatment and Disposal establishes the legal guidelines for water management in the state. Article 4 establishes that this public service is the responsibility of the municipality. Subject to a prior agreement between or among the local governments, municipalities may coordinate with each other and enter into partnerships to provide these services more effectively; to this end, they must have the approval of the state Congress pursuant to the state Municipal Code. Municipal governments may also enter into agreements with the state government, so that the latter may, directly or through the appropriate agency, temporarily assume responsibility for providing the public service set forth in this law, or provide the service in coordination with the municipality. Moreover, the law provides for the establishment of decentralized public agencies of the municipal public administration with legal capacity and their own assets, and with the administrative authority to conduct various duties related to providing these services. The last level in the management of water resources in Mexico is the municipalities, with federal regulations, state legislation and local statutes. Article 115 of the Constitution establishes the provision of municipal public services, which sets forth, inter alia, that: Municipalities will be responsible for the following public services and functions: I. Drinking water and wastewater collection, treatment and disposal. 19

30 In Coahuila, the town council, exercising its powers, published the ordinances of the local utility, Sistema Municipal de Aguas y Saneamiento del Municipio de Acuña (SIMAS-Acuña). These ordinances establish SIMAS-Acuña as a decentralized government entity of the municipal public administration of Acuña, with legal capacity and its own assets. Its purpose is to construct, rehabilitate, expand, manage, operate, conserve, and maintain the systems for drinking water, desalinization, and wastewater collection and treatment for the municipality of Acuña, as well as to set and collect user fees for the provision of these services. (Art. 3) A board of directors acts as the governing board of SIMAS-Acuña, and the ordinances establish its powers and authority, as well as those of each of its members. One of the main duties of the board is to select the utility manager from a short list of candidates. The ordinances also establish the rules governing board meetings, as well as guidelines for managing the utility s finances. In addition, they regulate issues related to labor relations with the utility s employees. In Nuevo Laredo the internal regulations of the local utility, Comisión Municipal de Agua Potable y Alcantarillado (COMAPA-Nuevo Laredo) establish that: the provision of drinking water and wastewater collection and treatment services is a public service that is the responsibility of the government-run utility called Comisión Municipal de Agua Potable y Alcantarillado del Municipio de Nuevo Laredo (COMAPA-Nuevo Laredo). 20

31 The ordinances also call for the establishment of a board of directors, composed of the mayor and representatives of the town council and advisory council, a district delegate, state and municipal officials, and a representative of the state water agency. The municipality of Reynosa has its own regulations, which establish that: The Commission, as a public entity, will collect and manage, in its capacity as a municipal fiscal authority, the fees for the services that it provides, in accordance with the State Fiscal Code, Municipal Code, Municipal Revenue Law, and other relevant municipal fiscal laws. The public service will comply with the principles of generality, continuity, regularity, uniformity, quality, efficiency, and coverage to meet the demand of different users, promoting the actions necessary to achieve financial and technical self-sufficiency. (Art. 4) This body of rules also sets forth the purpose, powers and authority, assets, and administrative structure of COMAPA-Reynosa. One section governs the professionalization of civil servants: The utility will establish an ongoing system of professionalization for its employees through efficiency and management quality plans aimed at improving their level of training, in accordance with the programs approved by the board of directors and proposed by the general manager. (Art. 68) It also includes a series of technical provisions for providing the service. Finally, with respect to public participation, two mechanisms are included: an advisory council (Art. 74) and the appointment of honorary inspectors to encourage the rational and efficient use of water in the municipality (Art ). 21

32 cities studied. Graph 1.2 provides a broad description of local management in the three Mexican Federal Government State Government City Council Advisory Council City Mayor City Mayor COMAPA/ SIMAS Utilities Department Source: Author s own design Graph Scope of Local Water Management in Acuña, Nuevo Laredo and Reynosa Water Management in Texas Water in the United States is regulated by the following main laws and agencies: At the federal level: The U.S. Constitution The U.S. Environmental Protection Agency (EPA) At this level of government there are few references to water management at other levels of government. Nonetheless, water quality and the levels suitable for human consumption 22

33 are regulated by EPA provisions. The U.S. federal government basically overseas service standards, while state and local governments are responsible for establishing other types of relevant provisions. At the state level: Texas state government Texas Constitution Texas Water Code Texas Administrative Code Texas Commission of Environmental Quality (TCEQ) Texas Water Development Board (TWDB) At the state level, the state constitution is the main legal instrument governing water in Texas; it also establishes some water service regulations. However, this issue is addressed in greater detail in the Texas Water Code and the Texas Administrative Code. Issues that fall under state jurisdiction are the quantity and quality of water, as well as the user fees charged for this service. Lastly, the local government level is basically governed by the municipal code of each city: Code of Ordinances, City of Del Rio, Texas, 2006 Code of Ordinances, City of McAllen, Texas, 2007 Code of Ordinances, City of Laredo, Texas,

34 These codes regulate practically all aspects of local life in Texas cities, including water services. The regulations cover everything from technical issues to types of penalties and user fees, as well as emergency plans. They are much more specific instruments than similar ordinances in Mexico. In the United States, local water service depends on an administrative department, not an autonomous agency; however, because the legal framework regulating it is so concrete, there is very little room for bad practices. Graph 1.3 provides a description of the legal framework governing water in the United States. 24

35 Clean Water Act US Environmental Protection Agency (EPA) State Government Surface Water Groundwater Texas Commission of Environmental Quiality (TCEQ) Texas Water Code Texas Groundwater Protection Committee (TGPC) Texas Water Development Board (TWDB) Texas State Solid and Water Conservation Board (TSSWCB) City Council City Code Special Districts City Mayor City Manager Citizen Boards Utilities Department Source: Author s own design Graph 1.3 Scope of Local Water Management in Texas 25

36 The local government in U.S. cities is defined as a council-manager form of government. The city's powers are exercised by an elected city council. 12 City councils are responsible for setting policy, approving the annual budget, setting tax rates, buying and selling property, establishing the city's administrative departments, holding public meetings, adopting city ordinances, and establishing city services. Authority is exercised by the mayor in conjunction with the Council. Mayors are elected by popular vote for four-year terms and may serve a maximum of two terms. In U.S. cities, mayors have the following powers and authority: 1) Preside over city council meetings; 2) Act as the head of the city government and officially represent the city, although they do not have any administrative duties; 3) Cast the deciding vote in the event of a tie in a Council vote; 4) Exercise their right to veto, which may be overruled by a majority vote of the city council. The city council appoints the following officials: City manager City attorney City clerk Municipal court judge(s) Fire chief 12 Hereinafter, "the Council." 26

37 Police chief Members of citizen boards One of the administrative departments is Utilities. This department generally has an area in charge of water management. Divisions that make up the Utilities Department (water): Administration Engineering Customer service Operations - water treatment Distribution Wastewater collection and treatment In these cities, by law, ordinances must be passed for the following actions: 1) Adopting or amending an administrative code or establishing, modifying or eliminating any city department, office or agency; 2) Establishing a fine or other penalty or establishing a standard or regulation the violation of which results in a fine or other penalty; 3) Collecting taxes; 4) Renewing or extending a franchise; 5) Regulating the price of public utility services; 6) Authorizing loans; 7) Leasing or authorizing the transfer or lease of land anywhere in the city; 27

38 8) Creating councils and commissions as set forth by state law; 9) Amending or repealing existing ordinances; 10) Prescribing standards for the issuance of business or other licenses; and 11) Determining the salary of all city officials and employees. Acts other than those indicated above can be carried out either by ordinance or by resolution, as prescribed by law. In response to emergency situations affecting lives, health, property or public peace, the city council may adopt one or more emergency ordinances. A general description of local management in the U.S. cities studied is provided in Graph

39 Federal Government State Government City Council City Mayor Citizen boards (1) City Manager Utilities Department (1) In Del Rio this function is performed by the Utilities Commission and in McAllen by the Board of Trustees. This board does not exist in Laredo. Source: Prepared by authors Graph 1.4 Scope of Local Water Management in Del Rio, Laredo and McAllen Bond Issues One of the main differences between the management of cities in the United States and in Mexico is that the former have the authority to issue bonds. 29

40 The law establishes that city governments have the power to borrow money by issuing general obligation bonds for the acquisition, conservation and improvement of public property or any other non-public purpose. The legislation provides that, except for the repayment of previously issued bonds, any proposed borrowing through the issuing of bonds must previously be approved by a majority vote of residents in an election in order for such debts to be authorized. The city council is responsible for collecting an annual tax sufficient to pay the interest required by law on all outstanding general obligation bonds of the city government. The Council will have the power to establish the terms and conditions of the purchase agreement, contract, mortgage, bond or other desired or required documents for the issue of revenue bonds and the acquisition and operation of this type of asset or interest. The Council is authorized to issue certificates of obligation in accordance with the laws of the State of Texas. The city government will designate a major bank to lend and deposit them, specifying the banking services. These banks are designated through a deposit or contract. With respect to the provision of public services, the law establishes that the city can offer residents water, gas, electricity and other essential services as determined by the city council, which has the power to construct or purchase the facilities needed to provide 30

41 these services, as well as to regulate and set user fees and other conditions for these types of services. City governments may contract public utilities or private companies to offer water, gas, electricity and other essential services to the city and its residents. In this case, the city council is authorized to regulate and prescribe the user fees and conditions of these services. As we can see, the main difference in the forms of management in the two countries has to do with the political handling of the utilities in Mexico and the independence of this area in the United States. The key issue is that in Mexico there is a close relationship between the mayor and the water utility administration, while in Texas the existence of a city manager 13 prevents the politicization of the services. In Mexico, the mayor is involved in the decision-making, while in Texas it is the Manager and the utility directors who set the agenda. Binational Agencies 14 As part of the water management process in border cities, we must comment on the role played by the International Boundary and Water Commission (IBWC), which is responsible for overseeing the proper use of this resource, the source of which is shared by both sides of the border (the Rio Grande). 13 Henceforth, "the Manager." 14 The sources of information for this section are an interview with the representative of the Mexican Section of the International Boundary and Water Commission (IBWC) in Nuevo Laredo, as well as the webpages of the IBWC, the Border Environment Cooperation Commission (BECC), and the North American Development Bank (NADB). 31

42 When this agency was originally established in 1898, its purpose was to delineate the boundaries between the United States and Mexico, since at the time the border between the two countries was not clear. Its powers were later expanded to include water resources, so in its current form IBWC was established in IBWC currently has regional offices in the major cities on the border; its main offices are located in El Paso, Texas. The directors of these offices meet twice a year: at the beginning of the year to formulate the annual plan and at the end of the year to evaluate what has occurred during the year. The Mexican Section of this agency answers to the Mexican Ministry of Foreign Affairs, advising it on technical issues related to water management, since each office monitors the water quality of the Rio Grande on a weekly basis. The results are published in the newsletter, Boletín Hidrométrico, which is available to the public. On the northeastern border of Mexico, this agency played an important role by arranging the construction of one of the water treatment plants in Nuevo Laredo a few years ago. Indeed, Nuevo Laredo was considered one of the most polluted areas in the border region in the 1980 s. Therefore, a binational project was generated that included several works: construction of the riparian along the Rio Grande river, fixing the sewer system in the city's downtown area, and construction of the treatment plant in The construction of this plant called for the coordination of several federal, state and municipal agencies, as well as the utility COMAPA-Nuevo Laredo, which at that time answered to the state government. 32

43 It should be noted that, to date, the IBWC representative in Nuevo Laredo continually supervises the treatment plant to oversee its operation and the maintenance of the equipment. Another task that was carried out is a study of the water utility. The purpose of the study was to detect the main obstacles to the proper operation of COMAPA-Nuevo Laredo, which led to the following conclusions: Sixty percent of the water system had leaks and the pipes were obsolete; There were no meters, so a single, flat rate was being applied; The rates were extremely low and had not been raised for political reasons; Payments were delinquent, and there was no way to pressure people to pay. A consulting firm was commissioned to perform the study, and the findings have served as a guide for the supervision of COMAPA-Nuevo Laredo. The other players involved in this binational management mechanism are BECC and NADB, as funding agencies of projects related to the improvement of water infrastructure in border cities. Basically, projects must meet the following criteria: Provide a public health benefit Be technically and financially viable Be endorsed by local residents 33

44 Project studies aimed at improving water infrastructure have been conducted in several border cities. The complete list of projects can be found on the respective webpages of the organizations. It is worth noting that, at least in the case of Nuevo Laredo, the different levels of government (federal, state and municipal) and the binational agencies responsible for water management are working together Professionalization of the Service In Mexico, the concept of professionalization in municipal government is just beginning to be discussed. Some states have enacted laws to establish civil service careers, and this obligation has been extended to the municipalities in those states (Merino, 2007: 38). Even so, it is a fact that administrative bodies in the municipalities still function based on politics. For this reason, in the case of Mexico it is difficult to establish a professional profile of the officials responsible for managing water utilities, despite the fact that most state laws establish minimum experience requirements for the position. Results in Mexican border municipalities vary, but there is no doubt that the political profile of these officials stands out more than their experience or education. Another aspect considered in this section is the structure of municipal organizational charts and the role played by water utilities within Mexican municipal governments. 34

45 In Nuevo Laredo, the person in charge of the utility is a civil engineer who has held his post for two terms. This situation is unusual in Mexican political practice and may offer advantages for the continuity of projects. There has not been any change in the governing political party in this city in recent municipal elections. As set forth by law, the highest level in the organizational chart is held by the board of directors, followed by the general manager of the utility. Several offices answer to the general manager: the comptrollership, legal department, commercial and administrative advisor, public communication department, training department (also in charge of the Water Culture Program), and a systems department. Three areas answer directly to the general manager: Commercial, Technical and Administrative-Financial Divisions. Based on its staff size and responsibilities, the most important area is the technical division. The Commercial Division is basically responsible for billing, service cut-off, contracts, metering, and customer service. It is made up of six departments that deal with these issues. In terms of number of employees, the largest is the billing department, which includes data entry operators, meter readers, and inspectors. The Technical Division comprises the departments of Water Quality, Wastewater Treatment, Pipelines and Operations, and includes two plants: Center and South-East. The Administrative and Financial Division includes the Finance, Procurement and Administration and Human Resources Departments; it is the division with the smallest number of employees. 35

46 The breakdown of employees in several categories is worth noting (see table below). Table Breakdown of COMAPA-Nuevo Laredo Personnel Type of Contract Number of Employees Non-union temporary 28.96% Non-union permanent 11.56% Union temporary 21.73% Union permanent 37.75% Source: Prepared by authors using information provided by COMAPA-Nuevo Laredo. As Table 1.1 shows, the largest number of employees is unionized, while at the other end there is a high percentage of non-union temporary employees, who are the most vulnerable to changes in government and who, in addition, do the most specialized work. In Reynosa, the utility has followed a different path: The person in charge of COMAPA-Reynosa is an engineer by profession and was recently appointed. It should be noted that a different political party recently assumed office in this municipal government, which has meant a complete reshuffling of staff in the main departments. In addition, action has been taken against the previous administration, which is accused of corruption and using the utility for political ends. At the highest level is the board of directors, followed by the general manager, who oversees the Statutory Auditor, the Water Culture Coordination Department, the Legal Department, the Public Relations Department, the ISO Coordinator, the Public 36

47 Communication Department, and the recently created Comprehensive Citizen Service Coordination unit. The Administrative Division is composed of several coordination areas: quality management, human resources and payroll, material resources, general services, systems, and security and surveillance. Because of its functions, the area of general services has the largest staff. The Commercial Division is responsible for providing service and is composed of the following coordination areas: billing, metering and inspection, contracting, high consumption, low consumption, recovery of past-due accounts, and off-site billing and collection offices, in which the service has been divided based on city characteristics. In this division, the coordination areas with the largest staff are billing, metering and inspection, and off-site billing and collection offices, which consist of several units: Two units of Mobile COMAPA and the Juárez, Periférico and Airport offices. The creation of the Recovery of Past-Due Accounts area is worth noting as a mechanism to address the problem of delinquent accounts. The Financial Division is divided into only two coordination areas: income and expenses, and accounting, which basically deals with the financial issues of the utility. The Technical Operations Division can be considered the most important based on its responsibilities and staff size. It is made up of eight coordination areas: (1) water distribution, (2) infrastructure development, (3) wastewater, (4) engineering and projects, 37

48 (5) electromechanical maintenance, (6) International Clean Water Project (PIAP), 15 (7) water quality and (8) works supervision and bidding. The utility in this city has union and non-union employees. The unions are divided into three types: COMAPA, plumbers and day laborers. The first covers 206 employees from all three divisions; the second covers 198 employees and the third, 213, most of who are assigned to the Technical Division. It s a fact that this situation makes organization and decision-making difficult, as was noted by the managers who were interviewed. Lastly, in Ciudad Acuña, the SIMAS director is a systems engineer who graduated from the Instituto Tecnológico y de Estudios Superiores de Monterrey (ITESM). He has held this post for six years and also served as interim mayor for six months in With his professional background he has been able to implement a process to modernize and automate water distribution. Given the size and characteristics of the city, SIMAS-Acuña is proportionally smaller than the utilities in Nuevo Laredo and Reynosa. As in the preceding cases, the board of directors occupies the top level in the organizational chart, followed by the general manager, who oversees the departments of finance, purchasing, systems, and systems advisor. The Personnel Department also reports to management. In this case there are only three sub-divisions: (1) the technical area, (2) the commercial area, and (3) wastewater treatment. The commercial area is responsible for 15 Spanish acronym 38

49 collections, contracts, clarifications, security, cutoffs and reconnections, meter reading, and billing; all issues related to customer service, even though there is no department by that name. The technical area is responsible for the water treatment plants. Two observations can be made based on the experience of SIMAS-Acuña. First is the importance of the automation process implemented by the current manager to supervise plant operations electronically. The system was developed by the manager himself and has helped to improve efficiencies in the use of time and human resources, which are now allocated to other activities. The second item worth noting is the concession of the treatment plant to a private company, which is responsible for carrying out an often costly process for utility management. This concession was granted several years ago and has worked without any problem. Moreover, it has not changed, even with the political comings and goings in the municipal government. This experience demonstrates one of the many options available for local water management. 16 In Acuña there is also a union in the water utility with which the manager and the members of the board of directors have negotiated different agreements. Finally, it is worth noting the manner in which the different utilities implement their Water Culture Program, which is coordinated at the state level. In Nuevo Laredo, this area answers directly to the Manager and is supervised by the head of the Training Department. In Reynosa, a coordination area was recently created to address this issue. The coordination area for the Water Culture Program reports directly to the manager of 16 During the visit to this plant we were able to verify the efficiency of plant operations with a small staff and the right facilities. 39

50 COMAPA. In Acuña, the program is carried out by one of the engineers that handles one of the water treatment plants. As you can see, each utility has a very different perception of this issue, with differential treatment in funding and in the degree of importance it is given. This could be the topic of a future research project, since it is activities related to water culture that would bring about changes in the users' perception of this resource. The cases in the United States The main difference between the water utilities in the border cities studied in Mexico and in the United States lies in the level of professionalization in the latter. In the U.S. water utilities, personnel hiring mechanisms are public and open, since existing openings are published. Thus, anyone who feels qualified may apply for the position. Promotion mechanisms are the same way and are based on employee experience, courses taken, and available openings to which they may be promoted. In these cities, there are no utilitylevel unions; there is only one union at the city level. When there is a change of administration in these cities, the only staff changes occur at the general manger level; the remaining staff remains the same. The local government has a personnel department, which is in charge of finding a candidate who meets the job description of the opening. The selection process is carried out through interviews, a medical exam of the candidate (which in some cases includes testing for illegal drugs) and a criminal background check. 40

51 In the specific case of water department employees, special certification and certain licenses to operate equipment is required. 17 Most importantly, the educational level is high, ranging from high school diplomas to postgraduate degrees. Experience is also taken into account, in terms of years and the minimum number of hours needed to qualify for a position. In Laredo, the director of the water utility is an engineer with private-sector experience in the materials and accessories necessary for water service. He heads the utility after the local government s experience with the concession of service to a private company (United Water), at the invitation of the city manager and with the support of some Council members. The director of the utility oversees the engineering manager, the business manager, 18 the utilities operation manager, and the water conservation planner. The Operations Department has several treatment plant superintendents who are responsible for distribution and construction, treatment, pollution control and wastewater collection and treatment. Beginning with this administration, superintendents have an important place in the process. In addition, there is a department that focuses exclusively on pollution control. The Laredo water utility has 244 employees, the majority with technical backgrounds. The staff of the Wastewater Treatment Division is highly qualified, since most employees have a high school diploma or some college coursework; similarly, 17 The section on water quality management outlines the requirements and type of training that water and wastewater treatment plant employees receive. 18 This position was vacant when the fieldwork was conducted between March and April

52 nearly all are certified with several types of operator's licenses, from A through D. In addition, nearly the entire staff has a class C driver's license. At the McAllen utility, the general manager of the area in charge of water management is an engineer with a technical background. The first level of the organizational chart are the residents general inhabitants of the city. Next is the Utility Board of Trustees, which is the citizen committee responsible for supervising the provision of the service. 19 This committee is made up of five people. The departments that make up this division are as follows: Water utility engineer Wastewater utility engineer Finance Water systems Wastewater systems It should be noted that, while nearly all of the managers of these departments have a professional background. In some cases promotions have been made based on experience and the certifications obtained (in water systems, for example). The process of providing and charging for water services in McAllen is divided into two types of users: residential and commercial. Each has a different rate and different cost of services. 19 The functions of this body are discussed below. 42

53 In McAllen, as in other Texas cities, services may be paid for in several ways: at the collection office, electronically, by telephone and at grocery stores. Although the collection rate is very high, a percentage of customers fail to pay for various reasons. Lastly, Del Rio has five city departments: the police, fire, finance, engineering, and human resources. At the top of the organizational chart are city residents, followed by the mayor and the city council, which oversee the city attorney, the city clerk, and the municipal court of justice. The city manager is responsible for the departments in the city, including the financial and public services areas. As in other U.S. cities, the city manager is responsible for preparing the budget and submitting it to the city council, as well as for proposing different rules for the management of the city, which are subsequently translated into ordinances. The City Engineering Department is responsible for several areas: the airport, streets, and water and wastewater services. The area responsible for water consists of the water production and distribution departments, as well as the wastewater collection and treatment departments. There is also a department responsible for repairing and replacing equipment. It should be noted that the company Innovated Operation and Maintenance Solutions (OMI) is in charge of the wastewater treatment plant, under a concession arrangement. 43

54 The process for selecting and training the employees of this department is similar to the mechanisms followed in other Texas cities, which is by public notice, with education and seniority taken into account for promotions. Regarding the handling of complaints, each area has staff to handle customer requests. There are offices and secretaries to receive calls. For every call received, a report is generated and forwarded to staff in the field for follow-up. At times, the reports originate in the office of the manager. A form is sent to the corresponding department, which is charged with correcting the problem. The form requests a detailed description of everything done to correct the problem, and finally the manner in which the problem was resolved is evaluated. 44

55 Transparency in Information Mexican Cities The issue of transparency and access to information is just beginning to be addressed in Mexico. In 2002, a Public Information Access Act was issued and a series of related provisions have been established that local governments must follow. Nonetheless, in practice, local governments have made little progress in this area. Evaluations conducted by community organizations, such as the International City/County Management Association (ICMA) or by agencies themselves such as the Mexican Ministry of the Comptrollership and Administrative Development (SECODAM), demonstrate that local governments in Mexico are just beginning to address this issue. By law, water utilities are required to post information about their services on their webpages. A review of the utilities studied SIMAS-Acuña, COMAPA-Nuevo Laredo, and COMAPA-Reynosa shows serious discrepancies in the type of information presented, as well as in the way it is presented. The information is scattered, messages are incomplete, and it is difficult for ordinary citizens to access the information. Of these three utilities, Acuña presents the least amount of information, with only a few basic sections. We grouped the contents of the webpages into several categories: messages to users, general information about the utility, contact information, water culture, and technical information. 45

56 For example, the manner in which these utilities communicate with users is worth noting. In Acuña, office hours, customer service, places where payment may be made, discounts, and fees are provided. The name, position, address, and telephone and fax number of each official are also indicated. On the webpage of COMAPA-Nuevo Laredo the telephone number of the switchboard and the extensions of each officer are available. In addition, there is an e- mail address for electronic communication. The webpage of COMAPA-Reynosa provides the names, positions, addresses and extensions of both directors and mid-level managers. The manner in which water culture is addressed also merits attention. The SIMAS-Acuña webpage barely mentions it. On the COMAPA-Reynosa webpage, the information is scattered and is included as one of the utility s immediate action strategies. COMAPA-Nuevo Laredo has a Comapín site, 20 which includes information for children and interactive games. The type of technical information provided also varies. Information on salaries is only addressed by SIMAS-Acuña; however, it provides the laws and regulations that apply to water. COMAPA-Nuevo Laredo provides technical information, including data on water quality and works constructed, as well as offers virtual tours of the plants. Moreover, it is the only page that provides information on the different classes of rates: residential, commercial, and industrial. 20 Comapin is the name of the COMAPA emblem for its water conservation program, Cultura del agua. 46

57 It is also worth highlighting that the COMAPA-Nuevo Laredo webpage contains a specific section on access to information (Public Information Access Unit) with a complaint box and contact link. For COMAPA-Reynosa, the technical section includes data on infrastructure, such as sewer lines and the wastewater collection and treatment system. There is no information on user fees, but there is an explanation on how the water meter works and the contents of the water bill. It is worth pointing out that none of the web sites of the Mexican water utilities provide information on the board of directors, which is their governing board. Other forms of communication with users are mainly located under the water culture program of each utility, which operates differently in each case. It should be noted that Reynosa holds public hearings, to which the general manager of COMAPA is invited. Moreover, a coordination area for mediation between customers and the utility, known by its acronym CIAC, has recently been set up. To date, this coordination area has reported a large number of complaints that have been addressed and solved. This is an interesting initiative not used by the other utilities; however, since it has been in operation only a short time, its impact cannot yet be evaluated. 47

58 U.S. Water Utilities The webpages of these utilities stand out for the large amount of information they make available via Internet. Using the same categories as for Mexican cities, we find the following data. With respect to general information about the utility, the webpage of the Laredo utility has information on customer service and office hours. The webpage of the McAllen utility has some technical data, an organizational chart of the board, and complete contact information for employees, including name, position, telephone, fax, and extension numbers. The Del Rio utility provides contact information with mailing addresses, addresses, telephone and fax numbers, and office hours. It is worth noting that the webpages of all three utilities offer the same type of contact information: Telephone, fax and . A section that we called "user information" contains the financial reports provided by the cities. On the webpage of the Laredo utility we found annual reports (although they were not updated to 2007), as well as budgets, consumption ranges, costs, and the code of ordinances. On the webpage of the McAllen utility, water quality reports for 2001 through 2006 are posted, as well as the code of ordinances. The Del Rio utility provides data on the water treatment plant and contact information. In the category of "customer service," Laredo offers different ways of paying for service: by mail, at the Tax Department, at pay stations, by night deposit box, by phone 48

59 with a credit or debit card, or by electronic funds transfer. The locations of the authorized pay stations are posted, as well as emergency services and account and billing methods. The webpage of the McAllen utility indicates payment methods and hours of operation, as well as service rates and fees. Some forms may be printed and past and current bills may be viewed, along with the customer's payment and consumption history. Lastly, on the webpage of the Del Rio utility, payment may be made by credit card and complaints about service failures may be sent on-line. With respect to what we called "technical information," contents varied. The Laredo water utility posts information about a water conservation program and the way it treats wastewater. The McAllen utility provides more information, including advice for conserving water and several technical projects. The Del Rio webpage explains the membrane filtration process and other forms of water treatment. This section also provides some water saving tips. It should be noted that the Laredo and McAllen webpages contain information on city council meetings and access to meeting agendas and minutes. In the case of McAllen, it is also possible to access the minutes of the Special Water Committee meetings. In the U.S. cities studied, city council meetings are broadcast on television, although there are no statistics on the number of viewers A detailed description of the contents of the webpage of each U.S. city studied is provided in Annex

60 Public Participation Mechanism Public participation has become a key issue in municipal public policy. In Mexico there is currently a series of programs that operate based on the opinion of the beneficiaries obtained through public consultation mechanisms and the use of various tools. One of most widely accepted meanings of this participation refers to ways in which citizens and citizen organizations are included in the decision-making processes representing special (not individual) interests. Some of these participation tools are: Public consultation Policy-making tools Tools for designing, implementing and monitoring public policy (ibid, p. 48). By law water utilities on both sides of the border have boards of directors or representative forms of governance that express the opinion of the residents on public policy decisions. In the U.S. cities studied, these boards operate in two ways. In the case of Laredo, these forms of participation extend to the political arena, since representatives elected by popular vote make decisions regarding public services, including water. In McAllen and Del Rio, there are boards composed of district and city representatives elected by the residents, as well as committees formed with citizen representation that play an advisory role in decisions concerning water issues. 50

61 Public Participation in Mexico The Tamaulipas state water law establishes the obligation to create a board of directors to oversee the work of the municipal water utilities (COMAPA s). These boards are composed of state and municipal officials and, until recently, members of the town council. Similarly, representatives from the private sector and the general public of these cities participate. By law, the members of this board are: 1. The mayor 2. Two representatives of the municipal advisory council 3. A district deputy, appointed by the state congress 4. A representative of the Tamaulipas Ministry of Urban Development and Environment 5. A representative of the Ministry of Health 6. A representative of the Committee for Municipal Planning and Development 7. A representative of the Tamaulipas Ministry of Social Development 8. A representative of the National Water Commission (CNA) This board of directors has a chairman (the mayor), a secretary and a treasurer; the remaining members are regular members. The board has the following powers: 1. To approve work programs, budgets, balance sheets, rate studies, and other activities for which the utility is responsible. 51

62 2. To approve and sanction acts of ownership carried out in the name and on behalf of the utility. 3. To grant power-of-attorney to the general manager for acts of ownership. 4. To approve the waiving of actions or rights under its jurisdiction for the purpose of carrying out its mission. 5. To conduct audits and reviews of the utility when deemed advisable. 6. To issue internal regulations encouraging the establishment of a system to professionalize its civil servants, that must be published in the official state gazette by the Office of the Governor. 7. To establish standards, policies and guidelines pursuant to which the water and wastewater systems under its supervision are to be operated, managed, constructed and maintained. 8. To authorize, as appropriate, extraordinary expenditures of the utility under its supervision. 9. Other powers necessary for the optimum fulfillment of the purposes of the utility. The law establishes that the decisions of the board are to be made by majority vote, and the chair has the deciding vote in the event of a tie. The law also states that for a legal quorum, half of its members plus one must be present. In addition, the board of directors shall meet at least once a month. The secretary records the minutes of the meetings in the books designated for that purpose. The 52

63 members of the board may also request special meetings, and the chair shall convene such meetings within no more than three business days. If this law is observed, the board of directors has the broadest powers in the water utilities, since they are responsible, among other actions, for complying with and executing the resolutions of the board of directors. Likewise, by law, the utilities must submit a quarterly activity report to the board. The water utilities in Reynosa and Nuevo Laredo currently have boards of directors formed with the representatives required by law. In addition, the general public is covered in Nuevo Laredo by a representative from the Council of Institutions in that city and the chairs of the Association of Architects and the Association of Civil Engineers. In Reynosa, the general public is represented by the chairpersons for the Chamber of the Construction Industry and for the Association of Engineers. In Acuña, Coahuila state law states that this board be composed of the mayor and the board members indicated in the decree creating SIMAS, which shall be no less than five and no more than fifteen. The board members shall represent the organizations of the public, private and social sectors, as set forth in the decree creating the utility. This is an honorary position. The appointment of any board member by a sector may be revoked by that same sector at any time, and a new appointment may be made. The members of the board shall have an alternate, appointed by the organization that they represent. This board is authorized to appoint the general manager (from a short list proposed by the chair); likewise, the board is authorized to dismiss the general manager. 53

64 The board shall appoint a secretary and hold at least one regular meeting a month and as many special meetings as necessary. For a quorum, half of its members plus one must be present. In the event the chair is absent, a member will be designated from among those present at the meeting. The minutes of the meeting shall be recorded in a minute book designated for that purpose. The powers and duties of the board are: 1. To establish the general directives for the proper operation of the system 2. To approve the annual system operations program 3. To review and approve the annual expense budget and the revenue estimate for the coming year 4. To review and approve the user fee proposals for the services provided by the utility 5. To grant the general manager of the utility, or other persons, general powers-ofattorney and special powers-of-attorney for litigation and collections and acts of administration 6. To impose sanctions for violations in accordance with established provisions 7. To approve and issue the Internal Regulations of the utility 8. To appoint the general manager of the municipal utility from a short list proposed by the chair 9. To submit an annual report to the town council on the activities of the municipal utility 54

65 In Ciudad Acuña, the current members of the board of directors of SIMAS are the mayor, two council women, the state and municipal officials designated by law, as well as members of the general public, such as the president of the Chamber of Tourism for the city. This position is honorary and members do not receive any salary or compensation for their participation. In all three cities, representatives of the general public were included through an invitation to the respective organizations, which proposed their candidates. All of these boards function in the same way. A notice with the agenda and the minutes of the previous session is sent to the board members. If a technical or financial issue is to be discussed, the necessary information is also sent to the board members. Meetings are held monthly and in all cases are private. Non-board members are not allowed to attend. Minutes are issued for each meeting, which are filed by the secretary of the board and are not available for public consultation. In Reynosa, the member representing the National Chamber of the Construction Industry 22 indicated that this organization has traditionally formed part of the board in other cities in the state, such as Tampico and Nuevo Laredo. This organization represents a key stakeholder in the city and, according to its director, enjoys a great deal of credibility in the city and even its relationship with the current manager of COMAPA is very close This chamber is composed of the sectors related to the construction industry: consultants, firms, legal counsels, associations, labor, unions in other words, the entire production line involved in the construction industry. The CNIC has more than 120 members in the city. 23 A training agreement is being sought between the chamber and the chair to train people involved in construction and teach courses. 55

66 The issues addressed to date include the investment for a well study and the loan made to the utility. Another issue discussed is the presentation of the recently formed CIAC and the number of complaints handled by this new coordination area. Moreover, water conservation and the actions needed to be taken in this regard have been addressed. 24 The main problems detected in the city by this utility include the scarcity of water and unfinished construction works left by the previous administration. In Nuevo Laredo, the members of the board of directors of COMAPA representing the general public are the presidents for the Association of Architects and the Association of Engineers. The Secretary 25 is currently the president of the Civic Council of Institutions. 26 The items addressed to date at the board meetings are the possibility of obtaining loans for the city and the need to be more efficient in collecting water fees. The problems detected in the city are sanitary sewers and storm sewers that have collapsed due to age. It is worth noting that the Council of Institutions formed a committee to discuss the issue of water in the city. 24 It should be noted that this board was formed in January 2008, and therefore only a few meetings have been held to date. There is information to the effect that in the previous administration this board, which is prescribed by law, did not work. 25 The current chair of the Council of Institutions was the president of District Agricultural Board No. 154 for three years. 26 This organization is formed by the city's productive agencies. It has a meeting hall where it meets once a month in public and in private. The organization is supported by contributions from its members. To date, 34 organizations of various types are affiliated with this board. Their purpose is to promote progress in the city. The Council of Institutions was formed in Nuevo Laredo more than 40 years ago. 56

67 People often approach board members to request their support, mainly with respect to water charges that they consider to be excessive. However, to date the board s stance has been to refer these people to the discount programs offered by COMAPA. Another issue is the situation of the agricultural users who have a certain volume of water to use and who need to be made aware of the most appropriate hours for irrigation. In Nuevo Laredo, an incipient network of organizations and individuals who work on water issues was detected. There is a close relationship between the Council of Institutions, COMAPA and IBWC, whose representatives meet formally and informally. Another issue that must be discussed is the Water Culture Program. Its work in the city has been notable and, according to the secretary of the board of directors of COMAPA, it needs to be disseminated. One final point requiring comment is that the NGO, Centro Internacional de Estudios del Río Bravo A.C., plays an important role in Nuevo Laredo. Founded in 1992, its main purpose is to keep the Rio Grande clean. To that end, it regularly invites schools, companies, the municipal government and others to participate in cleanup brigades along the Rio Grande. 27 In Ciudad Acuña, the members of the board of directors representing the general public include the vice-president of the city s Chamber of Commerce. The members of this organization generally believe that the purpose of the board is to verify that SIMAS- Acuña performs its job according to the established standards. 27 The head of this organization is David Negrete, the IBWC representative in Nuevo Laredo. 57

68 The topics addressed at the board meetings include the hiring of employees, salaries, plant and equipment maintenance, and the investments required for the system. One issue that should be highlighted is that this board has been involved in the general work conditions of the labor union that provides service to the utility. Unlike Reynosa and Nuevo Laredo, in Ciudad Acuña the board was formed several years ago, and some of its members have held their positions for several terms. No new members have been appointed to this board. Among the most controversial issues addressed are budget reviews and frequent complaints from those who feel that the water fees are excessive. In Acuña, being a member of the board of directors is a mark of prestige in the community. SIMAS-Acuña is considered an important entity in the city, and its members are so well-known that local residents approach them to present their problems, rather than going to the general manager. Some former officials and politicians in the municipality have sat on the board, giving them a certain degree of experience for the job. For example, a commission has been formed with representatives from the Acuña chapters of the National Chamber of Commerce (CANACO) and the National Chamber of the Manufacturing Industry (CANACINTRA), as well as from the maquiladora industry, who are conducting an analysis of the commercial area of SIMAS-Acuña in order to make it more efficient, which would translate into greater benefits and more timely collections. While these boards are made up of citizens and members of the general public in the cities, several questions need to be asked regarding the boards in Mexico. 58

69 First, there is a need to review the notice mechanisms, which are not clear in these cases. Even though there are regulations in place, there is no provision for inviting members of the general public to join this organization. Related to the foregoing matter is the level of professional background that board members should have, given that, as we have seen, important decisions requiring technical and financial know-how rest in their hands. A broader review of the relationship between these boards and the members of the town councils should be conducted, since the latter is authorized to establish regulations and has more direct contact with residents of the municipality. In all three cases, there is a need to review the way in which information about the utilities and the decisions they make is transmitted to the rest of the citizens, whether or not they are affiliated with an institution. Lastly, there is a need to reflect on the transparency of the actions taken by these boards, since the minutes and documents generated by them are not made available to the general public. City Councils and Citizen Committees in the U.S. Cities In the U.S. cities studied, the local government is run by the city councils, together with the mayor. Council members are elected to office, some as district representatives and others as citywide representatives. The law allows independent candidates with no party affiliation to run for this office. Council members are elected for four-year terms and may be reelected. 59

70 As part of the government, these politicians are responsible for approving the budget, as well as appointing the city manager. Likewise, as representatives of the people, they are called upon to deal with the various demands of the citizens. Complaints about the provision of public services, urban infrastructure, new construction, and specific demands from environmentalists are some of the issues addressed by city council members. Generally meetings are held twice a month in the afternoon, with the agenda distributed beforehand. These meetings are nearly always broadcast on local television and, in the case of McAllen, videos of the meetings can be found on the Internet. The meetings are always public and anyone who wishes may attend. In some cases attendees are allowed to express their opinion during the meeting, always being respectful of the other attendees. As in the case of Mexican town councils, U.S. town councils attract different community leaders who, after following a career outside of government, run for office. There have also been cases where a council member later runs for mayor. In Laredo, the members of the town council have handled controversial issues such as opposition from an environmental group over the establishment of a company at a storm drainage pond. Another controversial topic addressed is the new organization of the water services after a private company had assumed responsibility for this concession The council member interviewed expressed dissatisfaction with the results of this concession, which has lowered service quality as well as provoked disputes with employees who had decided to remain with the company. 60

71 These city councils are authorized to form citizens committees to serve as advisory panels on utility services. In Laredo the formation of this committee has not been deemed necessary, but in McAllen and Del Rio, in addition to the city council, there are groups devoted to analysis, especially of utilities or other government activities. In McAllen, the members of the water and school committees are elected; however, others are formed by invitation. These committees follow several rules: their meetings are closed sessions and may only be held in the place designated for that purpose; no more than two members may meet outside the office; and they are given 72- hour notice of the issues to be addressed. These are honorary positions for which no salary is paid other than a small stipend to cover the expenses involved in attending meetings. 29 However, the committee members are residents who want to be involved: community leaders, teachers and smallbusiness owners. In Del Rio, this committee is composed of the mayor, one council member, and three invited citizens, two of whose terms end in 2008 and the other in In the case of the Utilities Committee in Del Rio, the representative of the city council worked more than 30 years for IBWC. The other members are local teachers. When there is a proposal, it is first submitted to the committee members for discussion and analysis before it is discussed by the council. In the view of its members, this committee is highly useful, since it helps the council make decisions. 29 The videos and minutes of the meetings may be viewed on McAllen's webpage. 61

72 However, there have also been cases where the committee's proposals are rejected, such as when a study was requested to determine the source of the spring water that supplies the city. The study was rejected because of the high cost. These committee members are also approached by neighbors who wish to make requests or lodge complaints, such as questions about water rates or complaints about the poor service provided by the garbage company that operates under a concession. Committee meetings are normally attended by the city manager, who always keeps abreast of the discussions held and conveys committee opinions to the respective city departments. The fieldwork information shows that in the U.S. cities studied there are two levels of participation: one which is really political provided through the city council, and one that more specifically incorporates the opinions of citizens expressed through these committees. This is clearly different from the experience in Mexico and requires more detailed study to verify their scope and the effective incorporation of citizens into water utilities decision-making processes. 62

73 2.2. Financial Management of Water Services This section analyzes the administrative practices of Water Utilities (WU) for funding the operation, maintenance and administrative costs of water and wastewater services in the cities studied. Adequate financial management of water services must include mechanisms for funding renovations, infrastructure and equipment replacement, and future investments to cover projected needs for service expansion (capital increase). Sustainable financial management also entails fortifying medium- and long-term financial planning by developing five- or even 20-year plans (Lafferty and Bauer, 2005). In practice, adequate financial management includes: strategic business planning for medium- and long-term financial needs; some degree of autonomy, such as in determining the rate structure and level of indebtedness; and developing and reporting financial indicators to assess the utility s financial sustainability. This study focuses on three fundamental elements of financial sustainability for water utilities: strategic business planning; analysis of some basic financial indicators and collection efficiency of the utilities (percentage of users really paying for services). The latter is important in assessing whether the plan to cover costs with the selected rate structure is really viable. The last section summarizes the distinct characteristics of the cities studied in terms of financial feasibility. 63

74 Strategic Business Planning for Water Services Developing a financial plan is the key to improving the financial situation of water utilities, and thus their operation. In general, developing a financial plan refers to determining the appropriate balance of cash flows in order to achieve the objectives of the utility while complying with its established financial policies. Mexican Cities Mexican water utilities generally have a short-term income and expense plan (annual and monthly). The annual budget is submitted for approval during the last two months of the year and discussed by the Board of Directors. Long-range planning is limited by the term of municipal administrations (typically three years). This fact shows how heavily Mexican utilities still rely on municipal administrations, which restricts strategic business planning. Another distinct characteristic of the Mexican utilities studied is that financial decisions are still mostly made by the general manager. This centralized form of decision-making makes it difficult to define the responsibilities of the financial officers in planning sound finances. They are reduced to managing revenue from services, monthly expense planning and administering funds from federal programs. In the words of one of the officers interviewed, the financial areas function only as payment processers. In addition, both Coahuila and Tamaulipas (the states where the Mexican cities studied are located) audit the water utilities every quarter, and each utility is supervised by a comptroller, as shown in their organizational charts. 64

75 The three main sources of funding for Mexican utilities are the local, state and federal governments through their different programs. The most important federal programs are Programa de Devolución de Derechos (PRODDER) and the Programa de Agua Potable, Alcantarillado y Saneamiento en Zonas Urbanas (APAZU). In general, PRODDER consists of quarterly refunds of the water rights collected from the water utilities provided that they are applied towards projects aimed at increasing efficiency or improving infrastructure, as set forth in a plan of action. APAZU provides federal financial support to increase coverage and improve physical and commercial efficiency, and requires matching funds from the state and/or municipality. One important aspect of APAZU is that since 2008 a scoring system is applied to the water utilities in order to determine the level of priority for funding for each one. The scoring system is based on the type of actions proposed for improving physical and commercial efficiency indicators (the amount of water produced that is actually billed and collected), and points are assigned by the state officials responsible for planning. This measure forces utilities to allocate more resources to improving efficiency. The Mexican federal development bank, Banco Nacional de Obras y Servicios Públicos (BANOBRAS), provides loans to finance water infrastructure for Mexican municipalities and utilities through their sector program for water and wastewater. BANOBRAS sets a Total Borrowing Limit of 15% of total municipal revenue if the municipality has detailed and current financial information, or 10% if available information is not detailed or current. 65

76 In general, no strategic financial planning is performed by the utilities in the Mexican cities studied. They have only recently developed operating plans or needs assessments of their wastewater and/or water systems as a requirement for seeking binational funding from NADB. In Ciudad Acuña, SIMAS-Acuña s operational planning is based on a needs assessment of the city s water situation carried out in The document, which is used as a master plan, is in the process of being updated. As part of the study, population growth was projected through SIMAS-Acuña can adequately finance its operations and corrective maintenance needs. However, the financial area does not plan for the rehabilitation or replacement of infrastructure. Long-term planning lies with the manager and is approved by the Board of Directors. However, in 2007 more than two million pesos were invested in rehabilitating and installing water and sewer lines. According to SIMAS 2008 Annual Infrastructure Renovation and Maintenance Plan, more than 16 million pesos will be invested this year. SIMAS-Acuña s expenditures depend on the cash flow from the daily revenue obtained directly from service payments. Infrastructure works are financed with funding from NADB and the federal government (PRODDER). One strategy for achieving more autonomy with respect to the municipality has consisted in reducing funding from this source to a minimum. Federal funding is obtained quarterly through the PRODDER refund program. The improvement programs proposed to obtain this funding are focused on equipment and metering. SIMAS-Acuña does not receive financial support from the state government. 66

77 The debt service on the BANOBRAS loan that financed Acuña s second Treatment Plant is paid promptly from its own resources. SIMAS experience with BANOBRAS as a source of financing is not considered good, because upon evaluation its sole advantage lies in its acceptance of water infrastructure projects; however, it does not offer favorable interest rates. A key event for SIMAS-Acuña occurred in 1997 when it obtained funding for the construction of one of its treatment plants from a private company. The treated water is sold to the Mexican federal electricity commission, Comisión Federal de Electricidad (CFE). However, because of an agreement between the municipality and the state government, the revenue from the sale of the water does not go to SIMAS, but to the state government. This decision prevents SIMAS from using the revenue generated by the sale of the water. In Nuevo Laredo, COMAPA-Nuevo Laredo has an estimate of the cost to improve the system generated by needs assessments of the water and wastewater systems funded by NADB in 2001 and 2002 ( Wastewater System: Diagnosis, Modeling and Expansion Report for Nuevo Laredo, Tamaulipas, Mexico, 2001 and Water System in Nuevo Laredo, Tamaulipas: Needs Assessment, Modeling and Expansion Report, 2002). These needs assessments are used as the basis for planning and are updated every six months; however, planning is affected by urgent infrastructure problems which cause delays in the implementation of scheduled projects. The needs assessments indicate infrastructure growth from 2002 to 2020 based on city growth, although actual growth has been slightly different; for example, the city was projected to grow to the south, but instead grew more toward the northwest than expected. Nevertheless, the plan contains 67

78 specific actions such as sewer mains that need to be replaced after being in service for more than 50 years. However, there is no spending plan for rehabilitating infrastructure or expanding the system. Planning in Nuevo Laredo is triennial, in sync with the term of the municipal administration; the current term is COMAPA-Nuevo Laredo finances its infrastructure expenses (e.g. new treatment plants) with binational funding from NADB, complemented by municipal and state funds. COMAPA-Nuevo Laredo has obtained a $20 million-dollar investment and a $5.7 million-dollar loan from NADB. Another significant source of funding is the APAZU program. Its 2008 proposal was for more than $500 million pesos. Some of the largest projects are the rehabilitation of sewer mains and the installation of sewer lines. COMAPA-Nuevo Laredo pays approximately three million pesos a quarter in water rights, which is refunded by the federal government through the PRODDER program on the condition that such funds are used to fund infrastructure works. In 2005, the Nuevo Laredo water treatment plant was modernized through the PRODDER program. Both APAZU and PRODDER require that proposed investment programs be endorsed and signed by the federal and state governments. One strategy used to provide the matching funds required by programs such as APAZU is to use the investments in infrastructure made by developers which are required as part of the feasibility process to expand the system into areas without service. Unfortunately, this strategy can produce a certain amount of dependency on developers. Since 2000, COMAPA-Nuevo Laredo has also had a loan from BANOBRAS for nearly 24 million pesos with a term of 12 years. 68

79 In April 2008 COMAPA-Reynosa, according to its Board members, was undergoing a phase of financial reorganization in an attempt to control (slow) spending. Operationally the situation was not good either; as of January 2008 water supply losses were estimated at 11.4 million gallons/day which is equivalent to 25% of total installed capacity. Records also showed a considerable number of leaks and no equipment maintenance. Regarding financial planning, COMAPA-Reynosa produces an annual income and expense budget. Revenue is basically projected based on revenue data from the previous year (trying to improve the collection efficiency ratio). Reynosa has a plan developed in 1994 that defines stages in the city s growth; however, these growth projections are no longer in line with the actual growth defined by developers. While the plan projected growth on the east side of the city, it has grown more towards the west, where the construction of a water treatment plant is now being considered. There is no up-to-date master plan. COMAPA-Reynosa is planning works such as the construction of two water treatment plants and eight elevated storage tanks in different parts of the city (mostly on the west side of the city which has registered the greatest growth), as well as the drilling of wells. Specifically, there are plans to expand the capacity of the Pastor Lozano Water Treatment Plant with a new disinfection system (MIOX), which will increase capacity by 9.14 million gallons/day; complete the Rancho Grande II Water Treatment Plant to the northwest of the city with capacity for 5.7 million gallons/day; and construct a 5.7 million gallons/day module in the Benito Juarez Water Treatment Plant, which would complete the whole project. 69

80 With respect to wastewater, the two treatment plants currently under construction were reviewed. Altogether investment requirements are estimated at approximately 724 million pesos. The main sources of funding for these infrastructure projects will be the Tamaulipas state government, the federal government, NADB and, to a very small degree, the utility itself. As for maintenance, infrastructure is generally repaired or replaced only when there is an emergency, usually leaks in the lines. The management of COMAPA-Reynosa estimates that revenue from water, wastewater and special contracts comes to about $25 million pesos a month, while overhead expenses are approximately $20 million a month. One of the objectives of the current manager is to increase revenue to $30 million pesos a month. The utility s main strategy for attempting to increase revenue is to improve billing and collections of large-volume customers (usually commercial and industrial users). In addition, it is implementing a metering program for delinquent residential customers and service cut-offs to improve collections from past-due accounts. Another strategy under consideration as a source of infrastructure funding is to require infrastructure works from developers of new subdivisions. In fact, significant revenue was reported in 2007 from water availability rights and special contracts for payments pertaining to new developments. Part of the policy to increase revenue consists of offering these special contracts to developers. 70

81 U.S. Cities In Texas, the water utilities studied partially incorporate the principals of strategic planning, but only recently. Based on the comments of those interviewed, one factor that makes planning difficult is the high growth rate of the population and the significant increase in urban development that this implies, particularly in Laredo and McAllen. Another important aspect of the financial planning process of the utilities is that they are generally part of the city s Public Works Department. Paradoxically, although this arrangement would seemingly lessen the independence of the utility, in practice it facilitates financial planning since the utility has the direct financial backing of the city and, in particular, forms part of the local finance plan. In general, the annual financial plans of Texas utilities include two main categories: water and wastewater. Different accounts or funds are handled under each concept (for example, operating fund, construction fund and water availability fund). Each fund is divided into different items. The three main sources of revenue are: water services, wastewater services and water availability rights for developers. Expense projections for planned infrastructure works are made easier by the definition of financial plans which specify five-year projects and normally cover 5 to 10- year planning periods. Legislation in Texas requires that utilities have five-year capital improvement plans. However, of the three cities studied, only McAllen has a defined Improvement Plan, even though it forms part of the global plan for the city. Both Laredo and Del Rio are working on defining a five-year plan. 71

82 U.S. cities, unlike Mexican cities, have the option of obtaining financing through the bonds market as a means of raising external funds for preventive maintenance, infrastructure improvement and system expansion. Borrowing capacity is defined by rating agencies, such as Standard & Poors, which assess the borrowing capacity of the city, not just the water utility. This is an advantage for the finances of utilities. Although ideally utilities should have, at a minimum, a 10-year plan, McAllen Public Utilities (MPU) was the only utility studied to have a financial plan in 2008, even though in this case it was part of the city s financial plan (The Foresight McAllen Plan). This plan projects the future population to 2025 under different scenarios and shows the expansion needs of the water and wastewater systems. However, it is only a general plan for the urban development of the city. Nevertheless, despite having no Master Plan, MPU develops an annual preventive maintenance plan detailing monthly maintenance works. The sale of bonds is important for financing infrastructure works in McAllen. MPU receives no funding from the TWDB. Some of the main projects of MPU are: expansion of the North Wastewater Treatment Plant, from 8 to 14 million gallons per day; and redesign and expansion of the North Water Treatment Plant from 8 to 12 million gallons per day. In Laredo, Texas, the Water Utilities Department (LWUD) is developing a fiveyear plan, the Comprehensive Water and Sewer Plan. The last plan the utility had was the Wastewater Master Plan developed in LWUD plans to invest around $300 million dollars over five years, in both water and wastewater projects. Its main infrastructure 72

83 projects include: construction of a new water plant; expansion and rehabilitation of the Jefferson Water Treatment Plant; construction of two new wastewater plants and expansion of the current wastewater treatment plants. Water distribution will be automated at the Jefferson Water Treatment Plant, which is expected to reduce the number of broken pipes by 75% (up to 15 to 25 leaks are reported daily). One possible explanation for the high number of leaks in Laredo is the lack of adequate pressure control as a result of manual pump operation. Water losses in the distribution system are estimated at 28%. Additionally, efforts are being made to establish a conservation policy with an ordinance regulating outdoor watering on certain days and at certain times (night) with the County Court applying fines from $20 dollars to as high as $1,500 dollars. Laredo is planning to increase its wastewater treatment capacity by 16.5 million gallons over three years. To finance this investment the city calculates the amount of revenue that must be generated from the current rates in order to pay for the bond issue and then estimates the number of years that would be needed to pay for it from annual earnings (less operation, administrative and maintenance costs). The sale of bonds is limited to up to 10% of payment capacity or revenue (this limit usually applies to the payment capacity of the city, not the utility). Projects to be funded with bonds include various city projects, among them water infrastructure projects. Laredo received substantial financial support in the form of a $6.2 million dollar grant for infrastructure in 22 colonias. Another source of funding is EPA through TWDB. In fact, LWUD is developing a project for which it will seek $12 million in funding from EPA. 73

84 One factor that facilitates system expansion planning is the small number of urban developers demanding services and determining urban area growth. Moreover, if new areas require development, the developer must cover part of the infrastructure costs, install pipelines, etc. However, the municipal fees for new developments have not been adjusted since In contrast, the cost of municipal water rights that LWUD pays per acre-foot of water tripled from $720 to $2,250 dollars. Del Rio has a very recent plan developed in 2007 (Comprehensive Master Plan). Chapter 6 of this plan refers to infrastructure growth in the city, including infrastructure for water services. According to the plan, pipelines should be replaced in 2008 at a cost of about $100 million dollars. One serious problem in Del Rio is the level of water losses in the system, estimated at approximately 31%. Leaks in the distribution system bring it up to 37%. Fifteen to 25 leaks are reported daily. This problem is partially due to aging pipelines (60 to 70 years old), as well as to the materials used to build them (metal or galvanized pipes). These pipelines are being replaced with PVC pipes. Approximately 75% of the installed pipelines are less than 6 inches wide, and in some cases just a half an inch wide. The utility staff believes that more than 80% of the water distribution and wastewater collection infrastructure is in poor condition and must be replaced. Pipeline replacement is the most important short-term project for the city. It is estimated that approximately 150 miles of waterlines in the distribution system (70% of total) and 85% of the sewer lines need to be replaced. 74

85 According to the utility officers interviewed, some of the current problems are a result of negligence in system maintenance. A financial crisis in 1993 led to a decision not to invest in maintenance. Investment requirements for pipeline replacement entail a rate adjustment. The water and wastewater rate structure in Del Rio has not been adjusted for the past four fiscal years (the last adjustment was made in fiscal year ). To support long-term planning, the utility is considering modeling the water distribution system to detect low pressure problems and leaks Financial Indicators A growing trend in water utility assessment is to include performance indicators as a means of promoting efficiency. As water utilities do not compete with other water companies in the same city (which would not be feasible), this mechanism is intended to mimic free competition among private companies. One argument in support of comparing water utilities from different cities, and even countries, is that it would help them to improve operations by comparing the performance of specific areas and tasks. One of the difficulties of using this type of comparison (also known as benchmarking), which is becoming increasingly accepted, is that every WU operates in a different context; for example, each WU has access to different sources of water supply (surface, underground), which define water quality and treatment costs; each city has a different topography, which may allow water to be distributed by gravity or may require the use of pumps; differences in the wage scale make it difficult to compare the level of labor employed (e.g., number of workers per 1000 connections); different institutional 75

86 context, differences in population size and population density, water consumption habits, etc. However, some WU managers believe that technical indicators can be of some practical use. In this section we try to estimate a sample of the financial indicators of the utilities studied (see Tables 2.1 and 2.2 below). It is important to note that the availability of information, as well as the way in which the data is recorded in different concepts, limit its analysis. For Mexican Water Utilities In the case of Mexican water utilities, the financial balances are accumulated to such an extent that analyzing them is difficult. Expenses reported in the annual balance sheets of Mexican water utilities for 2007 are grouped into very large categories. One of the most important, given its amount and because it suggests part of the problems for the utilities, is Personnel Services. This category includes employee costs and benefits without breaking them down into administrative, operational, etc. However, it is the official format for financial information requested by the top auditor of the State of Tamaulipas. In the annual income statements several categories can be broken down further. This was true for Ciudad Acuña (the only city that posts its financial statements and audits on the Internet) and Nuevo Laredo, but not for Reynosa. 76

87 Table 2.1. Some Financial Indicators: Mexican Water Utilities, 2007 Indicator SIMAS Ciudad Acuña COMAPA Nuevo Laredo COMAPA Reynosa Total annual income (excluding external contributions) 59,800, ,488, ,623, External financing 26,182, (1) 113,364, (2) 341,000, (3) (External financing/total income)*100 44% 47% 117% (Total income /Total assets)*100 41% 36% 20% Total annual operating income/total annual operating costs (Total liabilities/total assets)*100 22% 17% 19% (Current liabilities/total income)*100 10% 20% 34% (Personnel services/total annual operating costs)*100 57% 53% 56% (Electricity costs/annual operating costs) *100 14% 13% N/A (1) Loans (liabilities) from Banobras ($6,536,044.89) and from NADB ($19,646,932.40). (2) Contributions from NADB ($ 57,432,126.51), APAZU (44,400,549.09) and PRODDER (3) Estimated amount taking into account funding from NADB for the Comprehensive Sanitation Project for 2007 and the income line item for various services that was not broken down in the income statement. Source: Developed by authors based on information provided by Mexican utilities. Of the three Mexican utilities, SIMAS-Acuña presents the most stable financial situation based on its indicators for Even though SIMAS-Acuña, like most Mexican utilities, resorts to external financing for infrastructure (equivalent to 44% of its annual revenue), it is the only one of the three utilities studied that reported those funds as liabilities, not income. This implies that SIMAS-Acuña takes into account the costs of the 77

88 debt financing that it must pay, which reduces the reliance of a utility on subsidies from external sources. In contrast, COMAPA-Reynosa is shown to rely heavily on external funding sources, since the amount received from such sources is 17% higher than its operating income. Moreover, SIMAS-Acuña presents a better ratio of total assets to total net income, compared to the other two Mexican utilities (41% vs. 36% and 20% for Nuevo Laredo and Reynosa, respectively). An even clearer indicator of SIMAS-Acuña s financial situation is the ratio of total operating income to operating costs (1.39), with operating income exceeding operating costs by 39%. These results allow it to finance its investment in infrastructure. On the other hand, COMAPA-Reynosa does not even cover all of its operating costs; in 2007 it recorded a 30% deficit. Paradoxically, when we calculate the ratio of total liabilities to total assets, SIMAS-Acuña has the highest results. This can be explained by the fact that it is the only utility paying debt service (to NADB and BANOBRAS); the other two utilities receive most of their infrastructure funding in the form of subsidies or grants. Despite this fact, the difference between the three utilities is insignificant; COMAPA-Nuevo Laredo has committed 17% of its assets to debt payment, while SIMAS-Acuña has committed 22%. As shown by the following indicator, which compares current liabilities or short-term debt to net income, SIMAS-Acuña has to use 10% of its annual income to cover its annual debt payments, whereas COMAPA-Reynosa must use 34% of its annual net income to pay its short-term debt. 78

89 A traditional indicator of operational efficiency is the ratio of labor costs to total operating costs. Given the extent that available data is aggregated, this study shows the ratio of the expense line item for Personnel Services (including labor costs and benefits for all employees) to total operating costs. In general, personnel expenses were shown to account for more than 50% of total expenses for all three water utilities studied. A factor related to these costs which were generally considered to be high is the presence of unions inside the utilities. One sign of the cost of unions is that benefits for Mexican utility workers may be 100% higher than their wages. An operational efficiency indicator reported in several water utility studies is the cost of electricity needed for various water distribution and wastewater treatment processes. The importance of this input is reflected in the available data reported by SIMAS-Acuña and COMAPA-Nuevo Laredo, which shows that electricity alone accounts for about 14% of operating costs. An increase in electricity costs would then have a significant impact on the financial situation and operation of the water utilities. It should be noted that this calculation includes personnel expenses as an operating cost, so the actual percentage of expense for this item could be considerably higher. In interviews, the finance managers for the three Mexican utilities mentioned that electricity can amount to 30% of operating costs, when the calculation only takes into account personnel costs for operation and maintenance areas exclusively. 79

90 U.S. Cities Table 2.2 shows some indicators we were able to obtain from the 2007 annual financial reports of the U.S. water utilities. Unlike Mexican water utilities, water and wastewater services are usually included in the public works or utilities department of the city. As a result, the financial reports for these services are included within the financial statements of the city. One drawback of this reporting format is that some important operating costs, such as electricity, are aggregated to such a degree that they do not appear in the report. One financial advantage for the U.S. utilities is that financial support for necessary investments in the city s water infrastructure comes directly from city revenues. In fact, investments in water infrastructure are included in the city s financial plans. However, in the finance report on city businesses we were able to identify the financial performance of the water utilities. One of the most important categories that we included in the indicators, which does not appear on the Mexican side, is bonds. 80

91 Table 2.2. Some Financial Indicators: U.S. Water Utilities (1) Indicator Del Rio LWUD MPU Total net income in 2007 (2) 8,945,808 41,129,930 28,495,988 Sale of long-term bonds (2) 38,209,000 47,399,697 70,372,240 Long-term bonds / total assets 38% 17% 36% Net income / total assets 9% 15% 15% Total annual operating income /total annual operating costs Total liabilities / total assets 43% 22% 40% Current liabilities /total net income 5% 29% 5% (Personnel services / total annual operating costs)*100 22% 26% N/A (Electricity costs / annual operating costs)*100 5% N/A N/A (1) For fiscal year October 2006-September (2) In U.S. dollars. N/A: Not available Source: Developed by the authors based on information provided by the U.S. utilities. The first indicator showing the financial situation of the water utilities in the three cities studied is the percentage of income over operating costs. Unlike Mexican water utilities, the three U.S. cities cover all of their operating costs. In the case of McAllen, income exceeds operating costs by 73%. These financial results give the cities the opportunity to finance the replacement of infrastructure or the expansion of services 81

92 using some of their own funds. Although to a lesser degree, income also exceeds operating expenses in Del Rio (18%) and Laredo (14%). Another indicator for each utility is the ratio of debt from the sale of long-term bonds to total assets. In general, we see that long-term debt from bond issues for Del Rio and McAllen represents 38% and 36% of their total assets; while in Laredo it comes to 17%. This shows how Del Rio and McAllen rely more on the sale of bonds as a funding strategy for their infrastructure investments. These indicators are probably higher than Laredo s because of the low level of investments made in recent years (during the concession to United Water) as explained by the officers interviewed. Another possible factor affecting this ratio is the fact that Laredo is the only utility that has implemented significant rate increases and, therefore, could have used direct income to partially finance some maintenance investments. The three cities have essentially the same results for the ratio of total liabilities to total assets. These results stem from the importance of bond sales in relation to total liabilities for the water utilities in these cities. Del Rio once again has a higher percentage of total liabilities compared to total assets (43%), while Laredo reports a smaller percentage (22%). The ratio of total net income to total assets shows the relationship between the revenue generated by water services and the assets used for this activity. Laredo and McAllen have similar percentages, with water service generating the equivalent of 15% of its fixed assets as annual income. A simple interpretation of this indicator would suggest that these cities could recover the cost of their total assets in approximately seven 82

93 years. Del Rio, on the other hand, reports a lower percentage (9%) probably because of the heavy investments it made in the construction of a water treatment plant that uses microfiltration. Surprisingly, the ratio of current liabilities (or short-term debt) to total net income indicates that while Del Rio and Laredo use a relatively small percentage of their income to cover liabilities (5% for both cities), Laredo uses 29% of its total net income. This indicator suggests that in the case of Laredo, even though the debt from long-term bonds is an insignificant percentage of its total assets, its short-term liabilities represent a considerable proportion of its total revenue. With respect to operations, available information indicates that labor costs in Del Rio and Laredo represent 22% and 26% of their total operating costs, respectively. Despite the difficulty of comparing these indicators with other utilities, these figures suggest that a greater percentage of operating costs is used for materials or maintenance of the water and wastewater systems. The percentage of electricity costs to annual operating costs was only available for Del Rio and was reported at 5%. This indicator is low compared to the information provided in interviews with the financial managers who generally mentioned high electricity costs. However, it is important to consider that Del Rio utilizes only surface water. Unfortunately this indicator could not be calculated for the three cities for lack of information. 83

94 Commercial Efficiency Rates play a strategic role in financial planning. A well-designed rate structure is expected to generate sufficient revenue flows for the adequate operation of the services. A financially sustainable rate structure is not, however, the only aspect of water utility finances that requires attention. Another basic element is achieving adequate commercial efficiency or collection rates (the amount of money actually collected compared to the amount billed). A well-designed rate structure can end up being fruitless if collection is not effective. For example, the Association of Water and Sanitation Regulatory Entities of the Americas (ADERASA) reported in 2006 that during the period the water utilities in the cities sampled had an average of three months of billing pending collection at the end of the fiscal year. Payment in arrears for services represents a financial cost for water utilities. So improving collection rates becomes a necessary mechanism for ensuring the financial sustainability of the water utilities. Mexican Water Utilities In most Mexican water utilities there is no direct connection between actual operating and maintenance costs and rates (CONAGUA, 2007). In practice, the financial area of the utility is usually not involved in setting rates; proposals for rate adjustments are determined by the manager and the commercial area. Rates are still an issue of political debate for local and state administrations, rather than a matter of financial sustainability for water utilities, which suggests that the use of rate structures that include costs 84

95 generated by the increase per cubic meter of water demanded (technically known as the marginal cost) is highly unlikely in the medium term. In the Mexican cities studied proposals for rate adjustments were usually initiated by an internal analysis performed by the financial area of the utility (requested, supervised and authorized by the utilities managers). The resulting proposal is submitted to the utility s Board of Directors for approval or amendment and subsequent approval. If the Board of Directors authorizes the new rate structure, the proposal is sent to the state water agency for approval. If it is approved by the state government, it is sent to the Official state gazette for publication. As a result, determining the rate structure and amounts is still a political issue. In practice, the different political forces must be in agreement, especially the city mayor and the state governor; otherwise rate adjustments may be stalled. A sign of the resistance to rate changes can be seen in the fact that only one of the three Mexican cities, Ciudad Acuña, has adjusted its rates recently (2007). Even this adjustment was only a restructuring of consumption levels, so for all practical purposes the current rates were authorized in SIMAS-Acuña management implemented an initiative for automating the distribution system which has generated some savings and thus reduced the pressure for a rate increase. However, the estimated cost per cubic meter of water ($4) is higher than the average rate of the current fee structure. The current rate system includes 12 levels of consumption; only from the seventh level (31-50 cubic meters) on is the charge $4/m 3. This means that customers using less than 30 m 3 pay less than the current estimated cost. However, setting rates is not included among the finance 85

96 area s duties. Rates are proposed directly by the general manager and the commercial area manager and are authorized by the Board of Directors. This implies that maintenance and investment needs and long-term expenses are not included in the projections for revenue needed to support the utility. SIMAS-Acuña management believes that a rate study is needed to support a financially viable rate structure. In both Reynosa and Nuevo Laredo rates have remained unchanged since 2004, 30 which means that the revenue generated by the utilities in these cities has had to absorb the cost of inflation for the last three years. One officer interviewed suggested a possible solution to this problem would be to automatically adjust rates to inflation (indexation) and that the procedure for indexing water rates could be specified in state water legislation. However, in addition to inflation, water utilities have to absorb increases in operating costs when rates are not adjusted to cover actual costs. Electricity, for example, which represents a significant percentage of real operating costs (up to 30%), went up approximately 1% a month in 2007, resulting in a 12% annual increase. Labor is another significant operating cost. The three Mexican utilities have strong labor unions (COMAPA-Reynosa has three), which implies annual contract negotiations that usually include cost-of-living wage increases. Additionally, worker benefits may be more than 100% of their wages. COMAPA-Nuevo Laredo has had to deal with a serious financial situation the past three years because rates have not been adjusted since mid Although a 21% 30 In the case of Reynosa, a rate increase was authorized in June 2004, but was not implemented until September

97 increase in water rates was requested in 2005, the Board of Directors approved an 11% increase, which was not published in the official state gazette. A request for an 11% increase was submitted again in 2008 but was rejected by the state water agency, which asked the utility to obtain a new approval from its Board of Directors. During the same period costs have increased: more than 100% for electricity; for materials such as PVC, polyethylene, steel; and for annual wages. As a result the utility has been forced to reduce operating expenses. This situation clearly affects preventive maintenance of the system. The financial manager of COMAPA-Nuevo Laredo estimates that a rate increase of at least 20% is needed to be effective. In interviews the financial managers of COMAPA-Reynosa stated that the increase in service demand deriving from significant population growth has allowed them to continue operating despite not having rate adjustments since In other words, the failure to generate revenue from adequate rates has been compensated by an increase in demand. An inspection of the water treatment plants, however, highlights serious problems due to inadequate maintenance during the past few years. Similarly, the large amount of leaks reported by local newspapers suggests that preventive maintenance has been severely affected by the financial situation. One characteristic of the rate structures in the Mexican cities studied is their complexity. The most widely-used rate structure is based on rates per cubic meter that increase with increasing consumption, also known as increasing block rates. Only SIMAS-Acuña has a relatively simple structure that consists of 12 water consumption levels for two types of customers (residential and commercial/industrial). In contrast, the 87

98 rate structure for Reynosa and Nuevo Laredo has 43 levels of consumption and four different customer types: residential, government, commercial and industrial. In COMAPA-Reynosa, the category for residential customers includes subsidized rates for retirees, pensioners, senior citizens and the disabled. Similarly, COMAPA-Nuevo Laredo has a complicated structure also consisting of 43 levels of consumption and four types of customers: residential, commercial, industrial and government. A detailed description of rates for both Mexican and U.S. water utilities can be found in Annex 1. For the purposes of applying its rates in practice, COMAPA classifies its customers in six categories: domestic, commercial, industrial, public, COMAPA employees, residential and pensioners. The application of different rates for customer sub-groups indicates that part of the population is subsidized (employees of both COMAPA and usually public buildings do not pay for service, while pensioners are subsidized). This situation is even worse when one considers that the estimated cost per cubic meter of water produced is normally higher than the average rate per cubic meter. For example, in Nuevo Laredo utility management estimates the cost at seven pesos; this rate level applies only to residential and commercial customers that consume more than 140 m 3 a month. In contrast, industrial customers pay this rate for 20 m 3 and more. However, residential customers usually pay between $36 pesos (minimum unmetered usage) and $220 pesos (high metered usage). These payments are low compared to other services such as electricity, gas or telephone. Table 2.3 presents a general description of the current rate structures in Mexican cities. 88

99 Table 2.3 Design of Water Rates for Mexican Cities Ciudad Acuña Nuevo Laredo Reynosa Fixed rate $ Low consumption level (m 3 ) 0 to 5 0 to 5 0 to 5 Rate for low usage (1) $ 2.80 $ (2) $ 2.25 High consumption level (m 3 ) 201 a 9,999 > 2001 > 2001 Rate for high usage (1) $ $ $17.35 Rate for 30 m 3 (1) $3.752 $4.06 $3.60 Charge for wastewater collection 20% 40% 40% Charge for wastewater treatment 10% 0 0 Ratio of industrial rate / residential rate at lowest level (1) Price per cubic meter extra; average water usage for a household of four in the region studied is estimated at 30 m 3. (2) Fixed price at this usage level Source: Developed by the authors with information provided by SIMAS-Acuña and the official gazette of Tamaulipas, February 18 and July 27, In both Reynosa and Nuevo Laredo the rate structure includes a wastewater collection charge equal to 40% of the amount billed for water consumed; in the case of Ciudad Acuña the wastewater collection charge is 20% of the water used. Ciudad Acuña is the only Mexican city studied that includes a charge for wastewater treatment (10%); Reynosa and Nuevo Laredo do not charge customers for wastewater treatment. The commercial efficiency of SIMAS-Acuña has recently improved. In 2001 it recorded 62% commercial efficiency, meaning that 38% of the total amount billed was 89

100 not collected. In 2007 commercial efficiency jumped to a monthly average of 87%. This percentage is high in Mexico where utilities averaged 67.7% for 2006 in the report Situación del Subsector Agua Potable, Alcantarillado y Saneamiento (Status of the Water and Wastewater Subsector), 2007 issue. The efficiency reported by Ciudad-Acuña is closer to that reported by the U.S. cities studied and is the result of a micro-metering policy for water usage (using funding from the PRODDER program, 84% of residential customers were metered by 2008), and cutting off service to customers more than two months in arrears. Additionally, as of the third month a reconnection fee is charged even if service was not physically disconnected. Moreover, although no discount of the debt is authorized, payment agreements are signed with customers in arrears. Nevertheless, SIMAS-Acuña grants 50% subsidies to seniors over 60 (as well as pensioners and retirees, as set forth by the Income Law) living in rented housing. No complaints about the disconnection policy in Acuña have been registered, apparently because a recent rate structure approved in 2007 lowered the amount billed for customers who had been paying a fixed rate for an estimated 25 cubic meters a month. However, in 2007 the State Human Rights Commission filed a claim against SIMAS- Acuña for disconnecting a customer. The claim did not proceed because the utility showed that the unpaid bills were not due to lack of income or payment capacity (interview with the commercial area responsible). It could be argued that one reason for the low collection rate is lack of available payment points. SIMAS-Acuña includes bar codes on its bills to facilitate water service 90

101 payment through banks and grocery stores, which charge five pesos for this service. To prevent an accumulation of fictitious delinquent accounts, the utility created a new account program for updating its database of customers living in public housing that had been purchased with an unpaid water debt that the new inhabitants could not or would not pay. These debts were recorded as uncollectable. As a result, the utility could at least collect revenue from the new accounts and regularize payments from approximately 500 customers. Similarly, in cases where a home is registered as abandoned the debt is declared uncollectable. This measure prevents fictitious delinquent accounts from building up and commercial efficiency statistics that really only reflect a failure to update the customer database. A positive characteristic in Ciudad Acuña is that, unlike the other Mexican cities studied, in this city public buildings pay for water services. Another revenue-boosting measure implemented in Ciudad Acuña was the improved maintenance of meters for high usage (industrial) customers, thus obtaining actual consumption levels since many meters were no longer accurate. This information suggests that something similar could occur with residential customers, although the financial impact would be smaller. Compared to SIMAS-Acuña, the utilities in Nuevo Laredo and Reynosa reported low commercial efficiency rates. In Nuevo Laredo, approximately one out of two customers does not pay their water bill on time (51%), while in Reynosa four out of ten (36%) do not pay on time. These ratios indicate that, unlike the recent measures taken in Ciudad Acuña, disconnection has not been systematically implemented in Nuevo Laredo 91

102 and Reynosa as a policy to improve collection efficiency. In both cities records commonly show many customers who have not paid their water bills for several months, and even years. What makes matters worse is that unaccounted or unbilled water makes up a significant proportion of total water produced in these utilities. For example, COMAPA-Nuevo Laredo reports a low percentage of physical efficiency or percentage of water entering the system that is billed (51%). This factor, added to the low collection rate, means that payment is only received for about 25% of the water produced in Nuevo Laredo. For 2008, approximately 14,000 customers in Reynosa (8% of the total) had not paid their water bills for a year or more or owed more than three thousand pesos. The collection area considers these accounts delinquent and has separated them from regular customers who are only one or two months past due. To deal with this problem the new administration that took over in 2008 created a delinquent collections division, which is proposing a policy of warning notices, installment payment plans and service cut-off if no agreement is reached with delinquent customers. Based on the expectations of the finance area, only a maximum of 40% of the delinquent accounts are expected to be recovered this year. Within the utility itself some differences have arisen regarding implementation of service disconnections as a means of improving collections and financial sustainability. In COMAPA-Reynosa the disconnection policy is applied in different ways. For large customers, defined as those who consume more than 80 cubic meters of water a month (usually commercial and industrial customers), service is disconnected when accounts are two months past due. Residential customers are given 92

103 slightly more time to bring their accounts up to date. This situation may also be reflected in different levels of service quality. The reconnection fee is 150 pesos; however, it is not actually applied to all delinquent customers. Although officially there are surcharges for unpaid accounts, in practice the current policy in Reynosa is not to charge them. A measure implemented by the administration that is affecting the current financial situation of COMAPA-Reynosa is the fee charged for a period of three months to both metered and fixed-rate customers, equivalent to minimum consumption of 10 or 15 cubic meters. This policy severely affected not only the amount collected by COMAPA-Reynosa, but also the willingness to pay. There have been disputes over high usage because meter reading was suspended for several customers even though they had meters. When meter reading resumed there was a significant difference between the last recorded reading (more than three months earlier) and the current reading, because a fixed rate was paid instead of actual volume. It is estimated that this situation will affect collections for several months because of customer disputes, the large amounts billed and the adjustments the utility will have to make in billings. The problem of low collection rates partly explains why COMAPA-Reynosa has fallen behind in activities essential to its operation, such as micro-metering. A reported 30,000 meters have not been installed, representing 18% of all residential customers. The sums owed by public buildings for water use is another key reason why Reynosa is falling behind. In Nuevo Laredo the high rate of past-due accounts is being tackled by disconnecting service and charging a reconnection fee, which was not applied prior to 93

104 September About 300 customers are disconnected every week. The reconnection fee for residential customers is 250 pesos. As of September 2007 delinquent accounts totaled more than 70 million pesos, which is equivalent to more than four months of billing for water and wastewater services in COMAPA-Nuevo Laredo. Despite the fact that the Tamaulipas State Water Act specifies that no one can be exempt from paying for service, municipal and state agencies do not pay for water in Nuevo Laredo. Public buildings, such as prisons and state and municipal offices, do not pay for water. Only schools pay for part of the water they use (one annual payment). Schools make one annual payment (agreement between COMAPA and SEP 31 ), which only covers part of the cost of service. One of the main reasons for being behind is because the customer database has not been updated. The water distributed to unserved subdivisions is not paid for either. U.S. Cities The water utilities in the three U.S. cities studied (Del Rio, Laredo and McAllen, Texas) generally take a business approach to water and wastewater services, which implies that the services must be provided with good quality and must be paid for. With this approach they are able to cover operating and preventive maintenance costs, as well as a small portion of medium-term investment requirements to rehabilitate and expand the system. Viewing water services as a business begins from the moment the service contract is signed. In McAllen, for example, in addition to other requirements such as a 31 Ministry of Public Education 94

105 permit from the city planning department, a deposit must be made when service is contracted: $100 dollars for residential customers and between $250 and $1,000 dollars for commercial customers. The deposit is refunded after two years of service if the customer is in good standing (no past-due payments owed) or is used to cover any outstanding payments due. If service is cancelled with no outstanding payments due, the deposit is refunded to the customer. In Del Rio the deposit for residential customers is $50 dollars, and a contract for new housing is $500 dollars. However, none of the U.S. cities has an estimate of the actual cost to produce a volume unit of water. In general the cost of water services is not compared to other utilities either, which makes a comparison with other services such as electricity or telephone service difficult since several companies offers these services in each city. Unlike the way in which rate structures are designed in Mexican water utilities, in Texan cities rates are based on studies performed by external consultants. These studies usually include operation and maintenance costs. This financial analysis of the rates is reviewed and then submitted to the City Council for approval. Rates are ultimately defined taking into account the costs of operation, preventive maintenance and planned projects. In all three cases, at least a significant portion of new infrastructure costs to be funded with bonds is included. For example, in Laredo, the water utility (LWUD) projects income from the minimum consumption block as a source of debt financing; any volume above the minimum consumption block is used to cover operations and maintenance. The rate study model for Laredo includes 14 types of customers and projects their consumption and the financial needs of the utility. One complex aspect of 95

106 the model is that the wastewater fee is a percentage of the amount charged for water. A sustained rate increase was approved beginning in LWUD is the only water utility studied that has a long-term sustained rate increase scheduled (although only for water) over 15 years. The rate increases began with a 25% increase in May 2006, followed by a 10% increase the second year and 7% annual increases thereafter. The rate increase took into account price elasticity of between 3-5 %. Despite this, the increases in the water rate are considered adequate. However, the wastewater rate, in the opinion of one utility officer interviewed, is still lower than the actual costs. A sustained rate increase is also being considered for wastewater, which is intended to be used to finance part of the planned projects. In Del Rio regular (annual) reviews of the rates began in Prior to that, there are reports of financial problems that are currently reflected in leaks and the need to rehabilitate the distribution system. Over a seven-year period ( ) rates were adjusted three times. Even though the rates are reviewed annually, a rate increase may not be necessary. One billing problem is the charge for wastewater since it is calculated as the amount of water consumed in excess of the minimum consumption level ( gallons) based on average water consumption in winter (three months). This means that if there is a leak during that period, the charge for wastewater increases beyond the customer s normal payment. Table 2.4 provides a general overview of the rate structures used by the water utilities in the U.S. cities studied. 96

107 Table 2.4 Design of Water Rates for U.S. Cities (1) Del Rio Laredo McAllen Fixed rate Maximum consumption in lowest block (gal.) 3,000 2,000 1,000 Minimum block rate $8.90 $7.50 $1.30 Rate for every 1,000 gal. extra consumed $2.77 (2) $1.38 (3) $1.30 (4) Wastewater service rate for minimum consumption $8.19 $8.50 $10.30 Wastewater rate for every 1,000 gal. of water consumed in excess of minimum consumption $2.49 $1.03 $1.30 Notes: Where 1,000 gallons equal 3.78 m 3 (1) In U.S. dollars (2) The rate is constant for all amounts consumed in excess of minimum consumption. (3) Applies to consumption over 2,000 gal but less than 4,000 gal. For higher consumption, the rate increases every 10,000 gal. For a more detailed description see Annex 1. (4) This rate is charged for the first 20,000 gal.; for consumption in excess of this amount the charge is $1.60. Source: Developed by authors from data obtained from Del Rio Code of Ordinance ; Laredo Code 31; and McAllen Code With respect to collection efficiency, in general the U.S. cities report adequate collection rates for water service. The highest collection rate was reported in McAllen, with 98% of the population paying its water bills in less than two months. In Laredo the collection rate is approximately 85%, while in Del Rio about 80% of customers pay on time. In all three Texas cities a reconnection fee is charged ($35 dollars during the week and up to $75 dollars on weekends in Laredo; $15 dollars in McAllen and $10 in Del Rio). Laredo and Del Rio also charge fees for late payment. All three cities systematically cut off service to delinquent customers. Another factor that probably helps keep delinquent payments down is that water service fees are included in the same bill as other utilities such as gas or garbage collection. So if the bill goes unpaid more than one service is suspended. Another factor that may influence the commercial efficiency of the Texas water utilities is that their billing and collection process is generally more efficient than that of 97

108 Mexican utilities. In McAllen the billing process, from meter reading to bill preparation, takes seven days and bills are sent out 10 days after meter reading. The customer has 20 days to make payment, after which a notice is sent out. Ten days after the notice is issued, utility personnel are sent to disconnect service. So, service disconnection occurs one month after the meter reading date. In the case of the Mexican water utilities, it usually takes at least three months for service to be cut off. Although no fee is charged for late payment, customers are charged a $15-dollar reconnection fee. Uncollectable payments at the end of the year for McAllen are 1.2%, which means that 98.8% of the amount billed is collected. Customers pay for their services within a month of the payment date or they are disconnected. To prevent an accumulation of fictitious debts, accounts that have not been paid in more than two months are automatically cancelled in McAllen and included on the disconnected list. For customers who fail to pay on time and demonstrate an inability to pay, the utility may grant an extension for a few days or a week or a payment plan may be arranged. Payment plans are used but are short-term. By the end of the year most pastdue payments have been collected. In 2008 in McAllen water services can be paid by mail (60% prefer this method), by automatic bank draft, on-line, at grocery stores, etc. The bill contains information about the meter reading date, previous and current readings, rates and a customer service number for complaints. The bill is currently being redesigned to improve its presentation. Bills are processed internally by MPU personnel. Despite recent sustained rate increases, LWUD in Laredo reports a collection rate of between 80% and 90%. Past-due payments are usually collected within 60 days. This 98

109 means that within 60 days collection is effectively complete. A strategy recently implemented to curb rising delinquency rates is a late penalty fee equal to 5% of the amount billed or $5 dollars, whichever is higher. Rates in McAllen are comparable to those in Laredo. Both are among the lowest in the state of Texas. Unlike LWUD, McAllen is not planning any systematic rate increases in the medium-term, although rates are reviewed annually. Despite this, the rates are sufficient to recover operating and maintenance costs. According to the head of finance, the explanation for this is that the utility is run efficiently. In Del Rio, billing and collections is organized in four sections, and is performed one section per week. To prevent reading errors the data is reviewed and corrected. The customer is warned when the reading is unusually high, which does not happen often. This reduces complaints about billing errors, which are very common in other cities. Water and gas readings are taken simultaneously within a five-day period per section. Customers have 15 days following the date of issuance to pay their bill, with a grace period of 7 to 10 days. As of that date a $10 dollar penalty fee per service (water and gas) and a $10 dollar reconnection fee per service (a total of $40 dollars) is charged and a disconnection warning notice is sent. Service is disconnected approximately one month after the reading. To reinforce service payment, between 80 and 120 households a day are disconnected. The only support that Del Rio provides customers who cannot pay on time and report an inability to do so a problem preventing payment such as an illness or those who are retired or 99

110 pensioners, is not to charge them the penalty fee. Even with these measures, Del Rio reports an average of 20% of its accounts as delinquent. Certain characteristics of Del Rio may help explain some of the possible reasons for this delinquency. Customers living in the northern area of the city may have difficulty making payment because of the great distance to the city offices. Customers have relatively few payment options: they can pay at the city offices, in cash or by check, but not by credit card; at the city bank for a $1 dollar fee (since December 2007); or on line by credit card (implemented in December 2007). These recently implemented options (Bank and on-line) are expected to improve collection rates. Another option under consideration to facilitate payment is to accept credit cards at the city offices. Water bills in Del Rio do not include information about consumption or rates. Basically only the amount owed is sent in the form of a postcard. The same bill includes the charge for garbage collection. The commercial area has limited staff. The person in charge of the billing area also handles customer complaints Financial Sustainability The financial sustainability of water services can only be achieved with sufficient revenue to allow the water utilities to continue operating under adequate conditions of quality and reliability. At the same time service quality and reliability depend on maintenance and a coverage rate that keeps pace with city growth. In financial terms, a key element for the short-term sustainability of water utilities is their ability to recover operating and maintenance costs. For long-term financial 100

111 sustainability, external subsidies for operations and capital investments must be eliminated. Direct revenue from service charges and rates must become the main source of funding to cover operating and maintenance expenses and at least part of the investments in infrastructure. One possible strategy is to gain financial independence from the government and other external sources through the creditworthiness of the water utility itself (Baietti and Curiel, 2005; quoted in Baietti et al 2006: 26). However, until the water utilities take a business approach in their operation, they will continue to rely heavily on other sources. This approach can be implemented gradually, taking into account the affordability of rates, the payment capacity of customers and fairness. As described in Section of this chapter, Mexican water utilities rely heavily on external sources for infrastructure financing. They generally resort to grants or transfers and, to a lesser extent, to loans from some development banks, such as BANOBRAS or NADB. The first step to achieving financial sustainability consists of ensuring that the water utility can cover its operating and maintenance costs. As shown in the indicators in Table 2.1, SIMAS-Acuña is the only Mexican utility that covers its operating costs and can even have a maintenance plan. Moreover, it is the only Mexican utility studied that depends largely on loans and pays actual debt service costs. Despite this, its current liabilities can be met by its annual income. This utility shows how a commercial and business outlook has gradually been incorporated into its management. One possible explanation for this result is that the general manager comes from the private sector. 101

112 In comparison, COMAPA-Nuevo Laredo and COMAPA-Reynosa exhibit financial indicators that will not help ensure their long-term financial sustainability. Both utilities rely heavily on grants and subsidies to finance infrastructure and even, in the case of Reynosa, to operate and maintain its systems. As shown in Table 2.1, COMAPA- Reynosa requires subsidies to cover 30% of its operating and maintenance costs. Due to a large amount of uncollectable delinquent accounts and liabilities totaling 200 million pesos generated by the previous administration whose term ended in December 2007, COMAPA-Reynosa relies heavily on external sources for investments in maintenance, infrastructure rehabilitation and system expansion. Additionally, COMAPA-Reynosa is behind on its payment to CNA for water rights totaling 20 million pesos. Under these conditions, the water utility cannot finance any infrastructure work, even though works costing an estimated 40 million pesos are considered necessary. This situation is even more critical when one considers the high number of leaks reported in both Reynosa and Nuevo Laredo (with water losses of about 50%) and the need to replace part of the distribution system given the large number of pipelines built more than 50 years ago or with inadequate materials. This indicates inadequate maintenance, which implies that even when operating costs are seemingly covered (as is the case in Nuevo Laredo), maintenance costs are lower than the amount required. The greatest risk factor to financial sustainability for all three Mexican water utilities is their low collection rates. In the case of Reynosa and Nuevo Laredo, the high percentage of customers who do not pay for water services and, even worse, the low 102

113 likelihood of recovering delinquent accounts, calls their financial sustainability into question. A factor that could become an obstacle to the financial sustainability of Mexican water utilities is inadequate rate adjustments. With the exception of SIMAS-Acuña, which made a rate adjustment in 2007 (although the last real increase was in 2006), the Mexican water utilities keep the same rate structure for several years, except for adjustments for inflation. The centralized approval system is also an obstacle to timely rate adjustments. Heavy reliance on the mayor s decisions, as chairman of the Board of Directors, limits the real possibility of rate adjustments. There would be a better chance of making rate adjustments if the boards of directors were less dependent on mayors. The decision would then be based primarily on financial criteria. The general manager of the utility is the one who decides the appropriateness of a rate adjustment, almost always taking into account political ramifications, as well as or before financial considerations. The financial area of each utility, responsible for internal finances, could play an important informative role with respect to the real need for adjustments and their required timing. Another important factor that could become an obstacle to the financial sustainability of Mexican water utilities is a high percentage of personnel expenses (included under Personnel Services). Although available information does not permit analysis of the distribution of personnel in different areas (operation, maintenance, administration), in general more than 50% of all operating expenses go to personnel services. The existence of unions with strong bargaining power was detected in all three 103

114 water utilities. For example, SIMAS-Acuña has 129 employees (in spite of a recent reduction, there were 139 workers in 2007). Although labor costs are considered high, and despite the implementation of automated processes, the number of personnel cannot be reduced because of the collective bargaining agreement. The managers interviewed also admitted that working conditions are very good and benefits can come to more than 100% of wages. It was suggested that unions do not favor changes that would improve utility efficiency. This was also reflected in operation and maintenance conditions. Although maintaining good wage conditions for workers is advisable for the adequate operation of water services, a more efficient use of manpower would be a strategy for supporting financial sustainability. One operational factor that implies a high cost for water services is electricity. The inadequate maintenance or operation of infrastructure is reflected in high energy costs. With the exception of Ciudad-Acuña where an automated distribution process was implemented that reduced electricity costs, the other two Mexican utilities have not made any effort to conserve energy. A factor that could compromise the financial sustainability of the Mexican utilities and also affect urban development of the cities is a strong dependence on commercial and industrial customers (up to 50% of revenue) in the Reynosa and Nuevo Laredo utilities. While large water consumers (usually industrial and commercial customers) are apparently a sure source of revenue that enables the utilities to continue running, they could also severely affect the financial sustainability of the utilities, if for instance the companies leave the city or there s a decline in commercial activity and thus 104

115 in business. Moreover, this strong dependence could become an obstacle to making rate adjustments, for instance, if industry or business is represented on the Board of Directors. In general U.S. utilities seem to have better prospects for financial sustainability than Mexican utilities. The main source of internal funding for all three cities studied (McAllen, Laredo and Del Rio) is service fees and the water service feasibility fees that developers are charged. The strong business approach applied to water services in Texas means rate adjustments are seen primarily as a financial decision that must be made regularly (annually) based on independent financial studies. Moreover, the rate structure includes operating, maintenance and infrastructure financing costs. This commercial view of water services from both the city administration and residents ensures adequate collection rates (none of the three have less than 80%). It is important to note that even under this commercial and financial approach maintenance costs can be kept lower than actual needs, as occurred in the cases of Laredo and Del Rio which reported significant problems with leaks, low pressure and water losses. Therefore, it should be stressed that adequate maintenance costs must come from a long-term maintenance plan. While Del Rio and Laredo apparently recover their operating costs, it is clear that they only have a limited margin for financing their long-term needs. This information suggests that both cities are in need of a rate adjustment. Paradoxically, despite the fact that the water services in all three cities studied in Texas are managed by the respective city, they enjoy relative financial autonomy. One important factor in understanding the greater autonomy in designing and approving rates 105

116 is that meetings of the city council and utilities boards in Texas are public and open, which facilitates providing customers with information on possible rate increases and receiving customer feedback before their approval. Unlike Mexican cities, only projects in low-income areas (known as colonias and usually inhabited by low-income Mexican immigrants) are financed with grants (from TWDB and NADB). This funding policy may be considered the best option, since the rates required to finance system expansions with internal funds could be too high for many low-income families. This policy allows subsidies to be directed towards certain areas of the city where the cost of service expansion could not be covered by service fees. This option would allow service coverage to be extended to the poorest customers, while still preserving the efficiency and financial sustainability of water utility operations. One factor limiting the use of state funding sources in Texas cities is that there are only two programs: Drinking Water Account and Sewer Water Revolving Account, which have very limited grants; approximately $10 million dollars to be used in poor cities that can demonstrate insufficient revenue. The case of LWUD illustrates an important factor that may contribute to the sustainability of water utilities in the U.S.: organizational changes. LWUD is currently undergoing an intense organizational change (initiated at the end of 2007), that consists of giving superintendents greater organizational responsibilities, as well as more responsibility in project and budget planning. This reorganization stems from a need to survive after a utility crisis following its failed experience with private participation 106

117 (when the agreement with United Water was broken) and its subsequent operational problems (because of low maintenance) and significant administrative changes. 107

118 2.3. Management of Water Quality In this article the management of quality from a technical standpoint encompasses all technical actions needed to maintain, preserve and protect the physicochemical and biological characteristics of water for human consumption and the conservation of natural ecosystems. Some of the criteria used to evaluate practices related to the quality of the water provided to people and discharged into the environment are: the condition of the general infrastructure in water treatment plants (WTPs) and wastewater treatment plants (WWTPs); the level of professionalization and staff training; the physicochemical and biological parameters evaluated; and compliance with current standards. In summary, the appropriate management of water quality that a water utility is required to meet includes: 1. Maintaining and protecting water quality in accordance with current health and environmental standards; 2. Maintaining, protecting and conserving water in the environment; 3. Ensuring that water treatment processes are suitable for the purposes of recreation and human consumption. Figures 3.1 and 3.2 show the location of the WTPs and WWTPs in Mexico and the United States that were visited. 108

119 Figure Location of Water Treatment Plants by U.S.-Mexico Border City Source: Developed by authors. 109

120 Figure Location of Wastewater Treatment Plants by U.S.-Mexico Border City Source: Developed by authors. 110

121 Infrastructure Maintenance and Improvement Mexican and U.S. Water Treatment Plants For this analysis we obtained information from operations manuals as well as about physicochemical and biological parameters that the water utilities must meet in accordance with the standards established in each country. In addition, site visits and face-to-face interviews with personnel of the WTPs and WWTPs in the Mexican cities (Acuña, Nuevo Laredo, and Reynosa), as well as in the U.S. cities (Del Rio, Laredo, and McAllen) made it possible to evaluate working conditions and the functions carried out in the treatment plants. As a result we were able to implement a qualitative evaluation of the condition of the infrastructure, conditions in the work area, trained personnel and the availability of an operations manual, etc. (Table 3.1). It should be noted that this evaluation was conducted on the Mexican and U.S. treatment plants covered by this study, we assigned values to each aspect assessed on a scale of 0-4 where the highest value was 4 and the lowest value was

122 Table 3.1. Qualitative Evaluation of the Water Treatment Plants Visited Country Mexico United States State Tamaulipas Coahuila Texas Criteria/Cities Reynosa Nuevo Laredo Acuña McAllen Laredo Del Rio General condition of the water treatment plant Condition of WTP infrastructure Maintenance and repairs Condition of water analysis laboratories Physical condition of the areas or departments Personnel by work area Workplace safety conditions Operator training Information sharing among WTP departments Has an operations manual (regulatory, technical aspects; workplace safety; operator profile, etc.) 2 N/A N/A 4 N/A 3 Computerized monitoring of the processes N/A N/A Condition of the main system Where 1 = Poor; 2 = Minimum; 3 = Good; 4 = Excellent and N/A = Not available Source: Developed by authors. Mexican Water Treatment Plants The qualitative evaluation summarized in Table 3.1 allowed us to determine that the Acuña (SIMAS) WTP has the best conditions in terms of infrastructure, personnel, and technical aspects, which allows it to provide good quality water to the population. This is due, among other things, to the fact that the Acuña WTP was recently built and has received regular maintenance. In addition, the utility manager took it upon himself to develop and adapt his own computerized system to control flows and processes in the plant. 112

123 With respect to the COMAPA-Nuevo Laredo and COMAPA-Reynosa WTPs, in general the infrastructure has greatly deteriorated due to a lack of preventive measures and regular maintenance. Even though the personnel has made a great effort both from a technical (laboratories) and operational (workers) standpoint to keep these plants running, the lack of financial resources for maintenance has caused serious infrastructure problems. U.S. Water Treatment Plants In the case of the U.S. cities studied and evaluated qualitatively, the McAllen WTP and the Del Rio WTP have the best conditions for treating the water that they supply to their population. In general, it can be noted that all the WTPs in the U.S. cities have made great efforts in terms of preventive and corrective maintenance and renovations. These actions are partly the result of the legal provisions established by the Texas Commission on Environmental Quality (TCEQ), which would impose fines on the utilities otherwise. Moreover, we can see that these utilities are committed to providing good quality services to residents, which is reflected in the working conditions and water quality standards that the WTPs must meet. 113

124 Wastewater Treatment Plants (WWTPs) Mexican Cities Similarly, a qualitative evaluation was conducted on the WWTPs in both the Mexican and the U.S. cities studied (Table 3.2). Of the Mexican plants, the WWTPs in COMAPA- Nuevo Laredo and SIMAS-Acuña are in very good condition. In the case of the Nuevo Laredo WWTP, this is largely due to the constant supervision of the IBWC representative, since the plant is binational and its waste discharges must not cause environmental damage to the Rio Grande. As for the Acuña WWTP, although information on the physicochemical and biological parameters was not available, in a visit to the plant we were able to verify the good working condition of the infrastructure and work areas in general terms (the WWTP is a concession operated by the company SISSA, S.A., which made obtaining information difficult). The purpose of this plant is to provide good quality treated water to a power plant owned by the Mexican Federal Electricity Commission, Comisión Federal de Electricidad (CFE), for use in its cooling system. This process requires water with specific characteristics, such as residual chlorine ( ppm); ph (6-8); suspended solids (SS) (10-20 ppm); chemical oxygen demand (COD) (30-60 ppm); biochemical oxygen demand (BOD) (2-10 ppm); and alkalinity (211 ppm). The remainder of the water treated by the Acuña WWTP is discharged into the Rio Grande. The infrastructure conditions of the WWTPs are shown in the photographic annex. 114

125 In contrast, the COMAPA-Reynosa WWTP presents serious deficiencies in both infrastructure and operations. In general, there was a lack of long-term planning and little interest from previous administrations in investing in preventive and corrective maintenance and system renovations. Table 3.2. Qualitative Evaluation of the Wastewater Treatment Plants Visited Country Mexico United States State Tamaulipas Coahuila Texas Cities Reynosa Nuevo Laredo Acuña McAllen Laredo Del Rio General condition of the wastewater treatment plant Condition of infrastructure Maintenance of infrastructure Conditions of water analysis laboratories Physical condition of the areas or departments Personnel by work area Operator training 2 3 N/A Information sharing among WWTP departments N/A Has an operations manual (regulatory, technical aspects; workplace safety; operator N/A N/A N/A profile, etc.) Monitoring of processes N/A N/A Has a parameter reporting form Workplace safety conditions Where 1 = Poor; 2 = Average; 3 = Good; 4 = Very good; and N/A = Not available Source: Prepared by the authors. WWTPs in the United States The WWTPs visited in the three U.S. cities had obviously made an effort to maintain and modernize their facilities (Table 3.2). A clear example is the McAllen WWTP, where 115

126 through medium- and long-term planning plant monitoring has become more technical and personnel has been trained to detect system failures. The Del Rio WWTP is operated by a private company, OMI, which is responsible for maintenance, repairs and adjustments to the plant. This WWTP is in good working order, despite its age (photographic annex). In the case of the Laredo WWTP (Zacate Creek), continuous repairs and maintenance have made it possible to provide uninterrupted service for more than 20 years, with the infrastructure, personnel, and technical aspects all in good working order. In addition, the plant was undergoing maintenance and repair. Because of time constraints we could not physically visit the remaining WWTPs in Laredo (Southside, Laredo Colombia, and Laredo) and only had their operating manuals and photographs for review; so, we were unable to evaluate the condition of the infrastructure, operations, and personnel, etc Compliance with Standards and Regulations In Mexico Official Mexican Standards applicable to drinking water are issued by two government agencies. The first is the Ministry of Health (SSA), which, in coordination with the Mexican National Water Commission (CNA), regulates the water supply for human consumption and use with an adequate level of quality to prevent the transmission of gastrointestinal illnesses and other water-borne diseases. Secondly, CNA, through the 116

127 National Advisory Committee on Standardization of the Water Sector, issues official federal standards to ensure the proper use and protection of national water resources. These standards set forth the provisions, specifications and testing methods that help guarantee that the products and services offered by water and wastewater utilities meet the objective of using and managing water properly and efficiently and preserving the quantity and quality of water (CNA 2008). Regulations and Standards Applied to Water Quality in Mexican WTPs The water treatment plants are regulated by SSA standards concerning the supply and use of water in order to ensure and conserve its quality in the systems until its delivery to the consumer. These standards include the permissible limits for the microbiological, physical, organoleptic, chemical, and radioactive characteristics of water. CNA establishes the official federal standards (CNA NOM) concerning the infrastructure and technical aspects of providing water services, as well as the conservation of water in nature. Table 3.3 shows the main water- and health-related SSA NOMs, as well as the CNA NOMs that govern the technical and service-related requirements that apply to water utilities. 117

128 Institution Ministry of Health (SSA) National Water Commission (CNA) Table 3.3 Water Quality Standards for Water Treatment Plants Drinking Water Quality Standards, WTPs NOM-127-SSA (Amended) Environmental health, water for human use and consumption. Permissible quality limits and required treatment for water to be drinkable. NOM-179-SSA Quality control monitoring and evaluation of water for human use and consumption distributed by public supply systems. NOM-012-SSA Sanitary health requirements for systems supplying water for human use and consumption, both public and private. NOM-013-SSA Sanitary health requirements for water tanks on trucks used to transport and distribute water for human consumption and use. NOM-014-SSA Sanitary health procedures for sampling water for human use and consumption in public and private supply systems. NOM-230-SSA Environmental health. Water for human use and consumption. Sanitary health requirements for handling water that must be met by public and private supply systems. Sanitary health procedures for sampling. NOM-007-CNA Safety requirements for the construction and operation of water tanks. NOM-002-CNA Residential hookups to the water supply system. Specifications and testing methods. NOM-004-CNA-1996, Requirements for the protection of aquifers during the maintenance and rehabilitation of water supply wells and for the closing of wells in general. NOM-013-CNA Water distribution systems, specifications for hermitic sealing and testing methods. Source: Prepared by authors based on SSA and CNA NOMs. The Mexican WTPs (Acuña, Nuevo Laredo and Reynosa) operate using a process known as conventional clarification or complete clarification, which consists of removing specific pollutants, such as iron, manganese and arsenic, among others. The particles are forced to settle or flocculate through the application of chemicals or physical processes, thus facilitating the elimination of pathogenic microorganisms and particles (Table 3.4). 118

129 Table 3.4 Characteristics of the WTPs in the Mexican Cities State Municipality Name of WTP Type of Treatment Process Installed Capacity (l/s) Coahuila Acuña Cd. Acuña Conventional clarification 350 La Amistad Conventional clarification 500 Nuevo Central Conventional clarification 2,000 Laredo Southeast Conventional clarification 400 Loma Linda, Plant #1 Conventional clarification 1,500 Tamaulipas Plant #3 Conventional clarification 750 Reynosa PEMEX Direct filtration 150 Rancho Grande Patented clarification 40 Source: Prepared by authors based on information provided by the utilities. l/s = liters per second It should be noted that the Mexican utilities only provided data for some of the parameters set forth in NOM 127 SSA (ph, temperature, turbidity, residual chlorine, total alkalinity, total hardness, total dissolved solids, calcium and magnesium). Using this information, an effort was made to assess the compliance of the three Mexican cities with both influent and effluent standards. In general, both the Reynosa (Loma Linda) and Nuevo Laredo (Central) WTPs are within the limits established under NOM-127-SSA1 for ph, turbidity, chloride (Cl 3 ), calcium (Ca), magnesium (Mg) and residual chlorine (Cl). The Acuña WTP (La Amistad) meets the standards for such parameters as ph, total dissolved solids, turbidity, and total hardness. As for the remaining parameters, we cannot state that the plant does not comply with them, because we do not have the information to make that determination. However, one positive factor that should be noted is that its source of supply or influent is the Amistad reservoir. Holding the water in the reservoir allows particles to settle. Therefore, when the water reaches the Acuña 119

130 WTP, its level of turbidity has decreased significantly, facilitating the water treatment process. Regulations and Standards Applied to U.S. WTPs In the United States, the main legal instrument for protecting water quality including rivers and lakes, as well as the coasts is the federal Clean Water Act (CWA). This law is intended to prevent the discharge of pollutants, as well as to achieve standard levels of water quality that permit such activities as fishing, swimming and direct consumption. The U.S. Environmental Protection Agency (EPA) is another key figure that establishes federal water quality standards and is empowered to delegate authority to the states to regulate the discharge of pollutants. Such is the case in Texas, where by state law the Texas Commission on Environmental Quality (TCEQ) is responsible for granting discharge permits and licenses to utilities that provide water services and operate wastewater treatment systems. One of the functions of TCEQ is to regularly monitor and evaluate the water supplied to residents (drinking water) by local utilities, as well as to supervise the quality of surface water and groundwater (treated water) (TCEQ, 2004a and 2004b). Specifically with respect to surface water, the utilities in the three U.S. cities visited (McAllen, Del Rio and Laredo) are mainly required to comply with the regulations established by EPA and TCEQ. The following table summarizes the laws applied to the quality of drinking water in the U.S. cities covered by this study. 120

131 Table 3.5 Regulations that Apply to Drinking Water Quality in U.S. Cities Institution Regulations TCEQ Texas Commission on Environmental Quality Title 30, Part I Chapter Water Quality Certification Chapter 290 Subchapter D. Rules and Regulations for Public Water Systems Subchapter F. Drinking Water Standards Governing Drinking Water Quality and Reporting Requirements for Public Water Supply Systems Chapter 303 Operation of the Rio Grande Source: Prepared by authors based on TCEQ Rules. The type of treatment plants and their capacities (Del Rio, McAllen and Laredo) are detailed in Table 3.6. These cities must comply with the provisions of Chapter 290 (TCEQ). However, because of differences in the technologies used by the WTPs in McAllen and Del Rio, it was difficult to compare the information provided concerning physicochemical and biological parameters. Del Rio (San Felipe WTP) has a state-of-theart water treatment system with ultrafiltration membranes consisting of a series of fibers that eliminate a large quantity of particles as small as 0.1 micrometer, as well as other organic particles and salts, in addition to pollen, algae, bacteria, viruses, germs, etc., that might be present in water. Moreover, to ensure proper management of the ultrafiltration plant, the personnel operating the system had to undergo about one year of training, and the company that installed the system continues to provide regular supervision in order to maintain the plant in optimal working order. 121

132 Table 3.6. Characteristics of the WTPs Visited in the United States State City Name of WTP Texas Del Rio Laredo McAllen San Felipe Spring Type of Treatment Installed Process Capacity (l/s) Ultrafiltration with membranes Jefferson N/A N/A Colombia N/A N/A Plant No. 1 Conventional clarification Plant No 2 Conventional clarification Source: Prepared by the authors based on information provided by the utilities. l/s = liters per second In contrast, the McAllen WTP (North) uses a conventional clarification system. The plant was built in the 1960 s, but is no less efficient for its age. Steps have been taken to maintain and upgrade the different operational areas of the plant, allowing it to comply with TCEQ regulations for drinking water. For its part, the Laredo utility, like that of McAllen, has striven to comply with TCEQ regulations by performing maintenance on its WTPs, even in the face of adverse circumstances such as changing management and restructuring the system at both the management and operational level which has limited its development. A new plant is currently being built in Laredo, as required by TCEQ regulations that state when a WTP reaches an operational level of 70%, steps must be taken and investments must be made to design and construct a new plant. In general terms, it can be concluded that based on the information provided by both the Mexican and U.S. utilities, their WTPs comply, to a greater or lesser extent, with the regulations established in each country. However, there are significant differences in 122

133 the physicochemical and biological parameters that each country uses to determine drinking water quality (See annex 2). Regulations and Standards Applied to Mexican WWTPs In Mexico, WWTPs must comply with the wastewater quality regulations established by the Mexican Ministry of Environment and Natural Resources (SEMARNAT), which set the permissible limits for waste discharges in national waters and on national land, as well as discharges into wastewater collection systems (Table 3.7). In addition, they provide the permissible limits for wastewater reuse and the disposal of sludge and biosolids generated by WWTPs. CNA, in turn, is responsible for establishing testing methods and analyses for the wastewater discharged (SEMARNAT 2008 and CNA 2008). 123

134 Institution Ministry of Environment and Natural Resources (SEMARNAT) National Water Commission (CNA) Table 3.7. Regulations Governing WWTPs in Mexico Regulation NOM-001 SEMARNAT Establishes the maximum permissible limits of pollutants in wastewater discharges in national waters and on national land. NOM-002-SEMARNAT Establishes the maximum permissible limits of pollutants in wastewater discharges into sewer systems. NOM-003-SEMARNAT Establishes the maximum permissible limits of pollutants for reuse of treated wastewater in public services. NOM-004 SEMARNAT Environmental protection. Sludge and biosolids. Specifications and maximum permissible limits of pollutants for their use and final disposal. NMX-AA Wastewater - sampling. NMX-AA-113-SCFI Water analysis - detection of helminth eggs. Testing method. NMX-AA-004-SCFI Water analysis - detection of settleable solids in raw water, wastewater, and treated wastewater. Testing method. NMX-AA-005-SCFI Water testing - detection of recoverable grease and oil in raw water, wastewater, and treated wastewater. Testing method. NMX-AA-006-SCFI Water analysis - detection of floating matter in raw water, wastewater, and treated wastewater. Testing method. (Continues with other NMX regulations) Source: Prepared by authors based on the SSA NOMs and CNA NMXs. The information on quality parameters for the WWTPs visited for this study is presented in the Table 3.7. The type of process and capacity of each WWTP are shown in Table 3.8. This information indicates that the Acuña WWTP and Nuevo Laredo IWWTP are activated sludge-based (secondary treatment) plants. This process is used after simple sedimentation based on a biological contact process in which living aerobic organisms and organic solids in sewage are mixed, promoting the aerobic decomposition of the solids. The efficiency of this process depends on maintaining an appropriate level of dissolved oxygen throughout the entire process (DSENY 2006). In general, its effectiveness for eliminating organic matter and pathogenic microorganisms is relatively high (Tebbutt 2006). 124

135 Table 3.8. Characteristics of the WWTPs in the Mexican Cities State Municipality Name of WWTP Type of Treatment Process Installed Capacity (l/s) Coahuila Acuña Cd. Acuña Activated sludge 205 Tamaulipas Source: Prepared by authors l/s = liters per second Nuevo International Wastewater Activated sludge 1,360 Laredo Treatment Plant Reynosa Loma Linda Stabilization ponds 750 The Reynosa WWTP, for its part, has an oxidation-based process using shallow ponds that normally receive raw wastewater and treat it through a natural stabilization process under appropriate conditions. This type of treatment is especially well suited for regions with warm climates, such as Reynosa (ibid.). This process is an inexpensive and very simple way of treating wastewater and is also effective in removing organic matter and pathogenic microorganisms. The visit to the Nuevo Laredo IWWTP and the Acuña WWTP allowed us to observe that the wastewater infrastructure was in good condition and that the wastewater management and treatment processes were operating well. In the case of the Nuevo Laredo IWWTP, this is partly attributed to the fact that the plant must comply with the agreements contained in IBWC Minute 279, a binational treaty signed in The purpose of this treaty is to prevent contamination of the Rio Grande. To that end, the plant must meet the effluent discharge standards recommended and approved by the Mexican and United States governments. The only plant to provide information on the physicochemical and biological parameters of its influent and effluent was the Nuevo Laredo IWWTP. In general, the 125

136 IWWTP complies with the environmental standards established in the SEMARNAT NOMs, since the only effluent parameter exceeded in Minute 279 is the permissible limits for BOD 5 (biochemical oxygen demand). Nonetheless, the plant does comply with the limits established in NOM-001-SEMARNAT In the case of the effluent parameter for chemical oxygen demand (COD), the values exceed NOM-001. Since this parameter indicates the presence of degradable and non-degradable substances, tests should be run at the end of the IWWTP process. With respect to the parameters for total suspended solids (TSS), ph (a measure of the acidity or basicity of a solution) and dissolved oxygen (DO), the reported values are within federal limits and those established in Minute 279. As for the management and disposal of biosolids and sludge at the Nuevo Laredo IWWTP, we can only say that the biosolids generated are characterized as Type A sludge (urban use with direct public contact during application). For this study, we did not have access to specific data on this sludge. The Nuevo Laredo IWWTP is storing this waste on site. It is important to note that the improper management and disposal of biosolids can cause contamination problems if nutrients seep into the subsoil and groundwater. The Acuña WWTP is operated under a concession by the private company SISSA Coahuila, S.A. of C.V. Although we did not have access to data, we were able to obtain information through interviews and a visit to the WWTP. Based on direct observations, we determined that the plant is in very good condition in terms of infrastructure and biosolid management. The biosolids are compacted and disposed of in the municipal dump. The quality of the effluent must be good, since part of it is sent to the CFE's power 126

137 plant for use in its cooling processes. The rest of the treated water is discharged directly into the Rio Grande. With respect to the Reynosa WWTP, we were able to observe that it does not have trained and knowledgeable personnel who know how the plant operates. Moreover, the infrastructure is in poor condition, mainly due to a lack of investment in the maintenance and repair of the plant. Regulations and Standards Applied to U.S. WWTPs The State of Texas and the National Pollutant Discharge Elimination System (NPDES) set pollutant discharge limits for WWTPs. The state government and the NPDES issue regulations that govern the type, nature, volume, and frequency of discharges specific to each city. Hence, the federal government, through EPA and state agencies, ensures that the utilities comply with the water quality standards for a WWTP (Table 3.9). Chapter 309 of TCEQ regulations establishes the limits and location of domestic wastewater discharges, while Chapter 321 refers to the requirements for disposal of the sludge generated by WWTPs. Utilities are required to report any failure in the water treatment process to the Texas Department of Water Resources (TDWR), EPA, and TCEQ. In addition, they must take the steps needed to correct the problem, and are fined if they fail to do so. Similarly, plant managers are required to send a report to EPA within five days after the problem is detected. The report must describe both the problem and the solution. 127

138 Table 3.9. Institutions and Regulations Governing WWTPs in the United States Institution TCEQ Regulations Texas Commission on Environmental Quality Title 30, Part I Chapter 279. Water Quality Certification Chapter 303. Operation of the Rio Grande Chapter 307. Texas Surface Water Quality Standards Chapter 309. Domestic Wastewater Effluent Limitation and Plant Siting Chapter 312. Use, disposal and transportation of sludge generated by domestic wastewater treatment plants. Source: Prepared by the authors based on information from TCEQ. The foregoing is considered in the operations manuals of most of the WWTPs visited, the characteristics of which are shown in Table 3.10 below. Table 3.10 Characteristics of the WWTPs Visited in the United States State City/County Name of WWTP Texas Del Rio Laredo McAllen Type of Treatment Process Installed Capacity (l/s) Silver Lake Activated sludge 51.6 San Felipe Activated sludge North Laredo Activated sludge Southside Activated sludge N/A Zacate Activated sludge South Plant Activated sludge 37,850,000 North Plant Activated sludge 30,280,000 Source: Prepared by the authors based on information provided by the utilities. l/s = liters per second In terms of compliance with the environmental regulations established by TCEQ, the Del Rio and Laredo WWTPs are within the limits established for ph, total suspended solids, and residual chlorine. However, the Del Rio WWTP does not meet the standard for oxygen demand (OD). This fact suggests that a high concentration of dissolved oxygen is going into the Rio Grande. 128

139 Professionalization and Training Mexico In the three Mexican cities covered by this study, the internal regulations for each utility generally establish the education requirements (some engineering) of the general manager. For the remaining employees, no education requirements are specified. Instead, only work experience or in some cases the training needed for employees to change positions or to be transferred to another work area are indicated (Table 3.11). In particular, the educational background (in systems engineering) of the general manager in Ciudad Acuña has influenced the performance of the utility. His background and private-sector experience helped him to develop a software application to support the automation of the water distribution process. 129

140 Table 3.11 WTP and WWTP Personnel by Education Level in the Three Mexican Cities State City Type of Plant Position Education Level General manager University (Engineering) WTP and WWTP Assistant manager, technical area University (Civil Engineering) Coahuila *Acuña WTP Assistant manager, wastewater treatment area University (Metallurgical Engineering) WTP Operator A High school WTP Operator B N/A WWTP Assistant manager, water treatment N/A General manager University (Engineering) WTP and WWTP Manager, technical area University (Engineering) WTP Head of Water Quality University (Chemistry/Pharmacy/Biology) WTP Head of potable water laboratory University (Chemistry/Pharmacy/Biology) **Nuevo WWTP Head of wastewater laboratory University (Chemistry/Pharmacy/Biology) Laredo WTP and WWTP Head of regulations High School (Technical) WTP Head of drinking water plant operations University (Engineering) Tamaulipas WWTP Head of the treatment plant University (Engineering) WTP and WWTP Operators N/A General manager University (Engineering) WTP and WWTP Technical and operations manager University (Architecture) WWTP Wastewater coordinator University (Engineering) ***Reynosa WTP Water treatment and storage coordinator University (Chemical Engineering) WTP and WWTP Operators D Secondary and high school WTP and WWTP Operator C Secondary school WTP and WWTP Pump operator Primary school Source: Prepared by authors with *information provided by SIMAS; ** information from the COMAPA-Nuevo Laredo website; and information from COMAPA-Reynosa personnel and website. 130

141 United States The level of training required for operators is established by TCEQ in Subchapter K (Sections , , , , , , and ), which indicates the category type and educational level or experience that public water system operators must have. These professional qualifications resulted in greater efficiency in the management and operation of the processes in the treatment plants in the three U.S. cities studied. Licenses are issued and certified by the state and must be renewed annually. If applicable, the operator is required to pass a test to be promoted to a higher category (Table 3.12). It should be noted that the highest categories (e.g., A) are associated with higher salaries. 131

142 Table 3.12 Level of Training Required for Del Rio, McAllen and Laredo (WTP and WWTP) City Type of Plant Operator License Education Level Experience (years) Minimum Hours of Work 1 B (surface water) University High school Del Rio WTP 1 B (groundwater) University High school C (surface water) High school or equivalent D (groundwater) High school 0 20 Equivalent 0 40 Laredo WTP N/A N/A N/A N/A D High school 0 20 Equivalent 0 40 C High school or equivalent 0 20 McAllen B University WTP High school A Master's University High school D High school C High school or equivalent 0 20 Del Rio WWTP 2 B University A Master's University High school 160 D High school 0 20 Laredo WWTP Equivalent 0 40 C High school or equivalent D High school C High school or equivalent 0 20 McAllen WWTP 2 B University A Master's University High school 160 Source: Prepared by authors with information provided by the U.S. utilities. 132

143 WWTP Sludge Management For the U.S. cities, sludge management is established in the TCEQ regulations, Chapter 312 (Use, disposal and transportation of sludge generated by domestic wastewater treatment plants), which stipulates the type of regulations to be followed by each city based on use or disposal required. McAllen is the only city that has taken financial and technical steps to dispose of its sludge as an agricultural fertilizer. To that end, the city classifies its sludge and pays a company to handle its disposal. The company treats the sludge and sells it for agricultural purposes. Del Rio and Laredo dispose of their sludge in municipal dumps in compliance with the law (Table 3.13). Table 3.13 Sludge Production and Disposal at the WWTPs in the Cities Studied City Plants Type of Disposal Dry Tons per Year Laredo Zacate Creek Municipal dump 3, , , ,173 N/A Del Rio San Felipe Municipal dump N/A N/A N/A McAllen South Agricultural use 1, ,750 2, , , ,905 North Agricultural use 1, , , , , Source: Prepared by the authors For the Mexican cities, information on the management, disposal and even the generation of sludge is unclear. Only in Nuevo Laredo did we find sludge being disposed of on-site behind the WWTP, since the utility does not have sufficient resources or interest in putting this waste to better use. 133

144 III. Best Management Practices Identified in the Cities Studied 3.1. Best Practices in Local Management In reviewing the six cases in question, we grouped the practices identified as successful based on the variables used to describe and analyze them, namely: (1) the possibilities of local autonomy, (2) professionalization of the service, (3) transparency in information, and (4) mechanisms for public participation. With respect to the first point, two aspects should be noted: the degree of autonomy in water management enjoyed by utilities in U.S. cities, and the regulations generated in the case of Mexican cities. In the U.S. cities, even though utilities appear to depend on the central government in the organizational chart, with the city manager as an intermediary, in practice they are really autonomous. What stands out in the case of Mexico is that, in all of the cities studied, public water services are regulated, which is a step forward, given the scant attention normally paid by local governments to this issue. In terms of good practices in professionalizing the service, we can point to the high level of training that employees have in the U.S. cities, as well as the hiring and promotion mechanisms that local governments follow. Even though these practices depend on another department, they directly affect the results of the departments responsible for providing water services. Despite the political variables that come into play in the case of the Mexican utilities, we can point out that employees at the highest level have a university-level 134

145 education, and managers have engineering degrees. Even though management has had to learn to negotiate with unions, the top positions are held by university graduates. In COMAPA-Nuevo Laredo it is also worth noting that the training coordination unit reports directly to the manager. This area identifies courses that could be useful for the utility's employees and sets priorities based on the available budget. Given the need for ongoing training in these areas, this is a good practice that could be replicated in other utilities. The issue of transparency in information and customer communications is addressed in different ways by the utilities in question. Among the U.S. cities, McAllen stands out with respect to the information presented via Internet, because of the ways in which it communicates with customers and handles meetings of the Board and the Water Services Committee. In this respect, SIMAS-Acuña stands out among the Mexican cities, since it publishes the salaries of its employees and the audits that have been performed. Of the three cases, it is the only one that makes this information available. Nuevo Laredo, however, provides information on user fees. Other noteworthy forms of communication are the water culture programs implemented by the municipal governments. Among them, we can highlight the case of Nuevo Laredo, which has the most well-established program. It has generated a considerable amount of materials, including a series of data and games for children that can even be accessed on the Internet. 135

146 The other noteworthy form of communication, because of the attention given to customers, is the coordination unit CIAC in Reynosa, which provides a degree of mediation between the different utility departments and local citizens. Although it is not yet possible to evaluate CIAC's impact, it provides support for regular customers by helping them direct their complaints to the right party when they do not know who to contact. With respect to public participation, the U.S. cities are noteworthy, especially McAllen and Del Rio, with their respective citizen committees to support the water utilities. This group of residents is invited to take part in the decision-making process. Their meetings are open to the public and, in the case of McAllen, the minutes from these meetings can be consulted on its webpage. In this case there is both transparency in information and public participation in the decision-making process. 136

147 3.2. Best Practices in Financial Management This section identifies the best financial practices based, not on the values estimated and reported in Section 2.2, but on the potential for improvement gleaned from the financial sustainability of the utilities studied. These are not the practices identified as ideal in the literature on this topic, but rather those that we actually found to have been implemented in the utilities on Mexico's northeast border with the United States. With respect to strategic business planning, which we consider a key element of proper financial management, we identified the following practices: - Systematically implementing annual plans for preventive maintenance and capital improvements. Although ideally utilities should have a master plan that reflects the operational planning of water service for periods of five to twenty years, in practice the utilities with the best maintenance and operational results implement annual preventive maintenance plans (MPU in McAllen, SIMAS in Acuña). - Including debt service costs in annual financial planning and separating external contributions from net income. This practice allows SIMAS-Acuña to be realistic when evaluating its annual financial situation and to maintain a stable financial position. This practice is common in the U.S. utilities since bonds serve as their main source of infrastructure financing. - Linking the planning of water infrastructure needs with plans for urban development. This practice was found mainly in McAllen and Del Rio. Linking the annual financial planning of the utility and the city helps reduce the need for 137

148 improvisation that may result when infrastructure growth follows behind urban sprawl. - Linking technical planning with a capital improvement plan. This practice has allowed the McAllen MPU and SIMAS-Acuña to adjust their finances to infrastructure needs, even without an updated master plan. Traditionally, financial indicators have been used for benchmarking among utilities. This study suggests that, in addition to being used for comparative purposes, these indicators can also help improve the financial sustainability of the utility: - Developing an analysis of financial indicators exclusively for water services allows the utility (and city management) to evaluate the real status of the water services. The McAllen MPU was the only utility that had a specific financial analysis of the financial operation of water services, in addition to balance sheets and income statements. - Publishing balance sheets, itemized income statements and audits on the Internet with current data was one of the best practices that we found at SIMAS-Acuña. Public access to detailed financial information helps customers understand the utility's situation and can promote trust and improve their willingness to pay for the service. 138

149 Commercial efficiency is considered a key factor in the financial sustainability of utilities. Both the rate structure and the collection rate reflect specific activities in the commercial department. This study identifies the following as best practices: - The business approach to water services in the United States allows utilities to require a deposit from new customers when they contract the services, which helps ensure that they will be able to recover past-due payments (MPU and LWUD). - The effective collection of disconnection and late payment fees has helped reduce uncollectable past-due payments and maintain high collection rates in the McAllen and Del Rio utilities, and, to a lesser degree, in SIMAS-Acuña. - Rate adjustments with sustained increases based on an external study that includes future investment needs has enabled Laredo LWUD to implement a much needed reorganization process after a negative experience with private participation. - Updating the customer database helped SIMAS Acuña reduce the number of delinquent accounts to a manageable level. - Simplifying the rate structure and the effective collection of payment for water services, without exception (including public buildings and officials), has made it possible for SIMAS-Acuña to increase its revenue from services. 139

150 3.3. Best Practices in Managing Water and Wastewater Quality Some of the practices identified for improving water quality followed by both Mexican and U.S. utilities are: - At the Nuevo Laredo and Reynosa utilities, despite significant limitations and deficiencies in infrastructure, the personnel has drafted proposals to modify, upgrade and even adapt working conditions in order to improve the quality of the water and the services provided by the utilities. - At SIMAS-Acuña, there have been initiatives to upgrade, adapt, and develop a computerized water distribution system. - In Del Rio we can highlight the decision of the city and the Water Utility Department to make a major investment in an ultrafiltration water treatment system. This technology has also required a major effort from the WTP operational personnel who had to obtain technical training to operate the system for example, in repairs or contingencies that might arise with this type of ultrafiltration system. - The McAllen utility provides ongoing training to plant operators (even diversifying their duties) so that they may become familiar with most of the plant processes and procedures. - Upgrading and improving the computerized systems in the McAllen utility allowed it to monitor its water treatment processes. 140

151 IV. Final Note and Recommendations This study is an initial attempt to analyze the management of water services on both sides of the U.S.-Mexico border. Although there are substantial differences in the legal, institutional, regulatory, social and political frameworks of the two countries that make comparisons difficult, the objectives of the study have been met. In spite of the importance of border cities, little is known about the performance of local administrations in this region. In the case of water, the task is complex since we are dealing with the same supply source, which could potentially lead to forms of coordination or cooperation on specific aspects of water management for urban use. The different approaches to managing water services on the two sides of the border allow us to learn from those experiences, especially in the area of water services. For example, one possibility identified is sharing experiences on the ways in which collections are managed. With respect to water quality, this type of work is important because the border region urgently needs to establish not only quality standards but also ways of recording and sharing information in a timely manner, so that cities on both sides of the border know the status of their shared water. This section outlines some recommendations that are considered important elements of the different components analyzed and which are necessary to improve the management and performance of water services. 141

152 4.1. Local Management Among the recommendations that may be made for more efficient management in the areas indicated, we found: - With respect to professionalization, create mechanisms to identify the needs of the utilities and existing training options. In the case of Mexico, an effort should be made to establish a professional profile for middle and top management and to apply them effectively. With respect to the transparency and accessibility of information: - In the case of Mexico, consistency in the content of the webpages would be desirable, for although the utilities allocate part of their budget for this purpose, the results have varied. An effort could be made to post appropriate information, taking into account the types of customers that each utility has. - In Mexico, the water utilities could evaluate the results of their water conservation programs using specific indicators to determine if the activities undertaken are adequate. Water conservation programs have strong development potential, if sufficient attention and resources are devoted to them. - CIAC has also proven to be a novel way for the water utility to communicate with customers. This unit could establish more specific evaluation indicators and share this information with other utilities. - In addition, we recommend seeking other means of communication with customers, such as newspapers, brochures, moving advertisements (on vehicles), 142

153 as well as expanding the water conservation program to target other sectors, such as senior citizens, housewives, and companies, since it is currently only aimed at children. Several issues need to be addressed regarding participation in Mexico: - The Boards of Directors need to make the information that they generate more transparent. For example, one item that can be difficult to access is the directory of the members of these boards, which in theory are the highest decision-making bodies of the water utilities. However, regular customers do not know who sits on these boards, nor the types of decisions that they make. - Another recommendation concerning the boards is to evaluate the mechanisms for calling for the election of the public members of the Boards. A broader invitation would be desirable, as well as incorporating other members of the community, such as the academic sector. - Moreover, the information generated by these Boards needs to be more transparent, since it involves agreements and resolutions that should be made public. To date no utility has a provision allowing public access to this kind of information. - Lastly, the performance of these committees and other public participation bodies in public services and water utilities needs to be evaluated to determine if they are really functioning as such or if they are just straw figures created to give the appearance of participation. 143

154 4.2. Financial Management Some general recommendations that can be made regarding financial management as a result of observations in the cities covered by this study are: - Long-term planning (for example, 20 years) is not necessarily the most feasible type of planning for places such as the border with its dynamic population growth and varying scenarios of urban growth rates and trends. In practice, medium-term financial planning (three to five years) that includes preventive maintenance costs may be more effective. - Encourage greater involvement of the financial areas in the management of the utilities (above all in Mexican cities), especially in the medium-term planning of financial needs (e.g., developing a cost plan for rehabilitating infrastructure, systems, etc.) - Increase autonomy in the financial management of utilities (e.g. rate proposals justified on technical grounds, determining the real cost of water production, etc.) - More detail in the balance sheets and income statements of the utilities is needed in order to analyze their real financial situation. A mechanism for realistic analyses could be to require the publication of annexes in which the different financial categories are broken down or, better yet, an independent analysis (external auditor) of those indicators. The financial analysis should be carried out with ongoing annual indicators within a company and not by comparing them to those of other utilities or to benchmarks. 144

155 - Look into the possibility of financing wastewater treatment plants through private participation, and consider financial sustainability based on the reuse or sale of the treated water. - To prevent dependencies that might have a perverse affect on urban development or the environment, we suggest avoiding cross-subsidies and reducing the financial dependence on one type of user or urban developers Water Quality Management - Establish a training and certification system for treatment plant operators in Mexican cities, in keeping with a prior evaluation of their abilities. - Have the utilities develop a report with a uniform and simplified format to facilitate information sharing, as well as publish the reports regularly on the Internet so that the general public can find out the quality of the water they are receiving. - Coordinate regular meetings of WTP personnel to discuss operational problems and their possible solutions. - Encourage fluid and ongoing communication among the water and wastewater treatment plant departments in order to increase the efficiency and effectiveness of treatment of both drinking water and wastewater. - Provide information to plant operators and workers concerning the regulations and standards that each type of plant must meet. 145

156 - Create departments with personnel trained in developing, implementing and regularly evaluating the water conservation programs provided for residents (in the case of Mexican cities). - Encourage efficient ways of handling customer complaints and monitor the results of these efforts, as well as responses to customers. - Have a WTP operations manual, or develop one if it doesn t exist, that contains infrastructure requirements, processes, standards, minimum required personnel, equipment, safety measures, etc. - Develop guidelines for operators for each type of treatment plant. These guides should be included with the documentation provided to new employees or when there is a change in management. - Adopt a waste-to-energy (biogas) process for sludge that will allow the utility to become self-sufficient in energy; in other words, consider the biogas generated by the anaerobic digestion of sludge as a source of energy. - Provide for the comprehensive management of bio-solids and sludge in accordance with NOM-004 SEMARNAT Establish a certification committee that will not only certify treatment plant operators and personnel, but will also offer training courses to prepare for exams that cover specific positions within the utility. - Develop position descriptions for each job in the treatment plants, for which appropriate aptitude tests will be required based on the position in question. 146

157 Bibliography ADERASA, Base de Datos e Indicadores de Gestión para Agua Potable y Alcantarillado. Ejercicio Anual de benchmarking 2006 [Database and Management Indicators for Water and Wastewater Collection Fiscal Year Benchmarking.] Amaya Ventura, Ma. De Lourdes, Importancia de las instituciones en la gestión del agua [Importance of Institutions in Water Management], in: Gaceta Ide@as CONACYT EG, Year 2, No. 28, November 16, 2007, electronic magazine. Baietti, Aldo; Kingdom, William; van Ginneken, Meike. Characteristics of Wellperforming Public Water Utilities, World Bank Group, May Mexican national water commission, Comisión Nacional del Agua (CNA). Disponibilidad agua superficial (2000) [Availability of Surface Water (2000)], Consulted at; in March 2007., Estadísticas del Agua en México [Water Statistics in Mexico]. Edition 2003., Situación del Subsector Agua Potable, Alcantarillado y Saneamiento [Status of the Water, and Wastewater Subsector], Edition Consulted at: Accessed in January 2008., Normas Oficiales Mexicanas del sector agua. [Official Mexican Standards for water] consulted at: -b540-45b7-b9f0-24e708a0eab5%7c%20%20%20%20normas%20oficiales%20mexicanas%7c0 %7C0%7C16%7C0%7C0, Accessed in March New York State Department of Health, Wastewater Treatment Manual, Ed. LIMUSA, pp. 41, 42, 83,84, ; Mexican statistical agency, INEGI, II Conteo de Población y Vivienda [Population and Housing Count II],

158 Lafferty, Angela and Lauer, William C. Benchmarking Performance Indicators for Water and Wastewater Utilities: Survey Data and Analysis Report. American Water Works Association, Merino, Mauricio, La profesionalización municipal en México [Municipal Professionalization in Mexico], in Merino, Mauricio (editor), La gestión profesional de los municipios en México, México [Professional Management of Municipalities in Mexico City, Mexico], CIDE Organization for Economic Cooperation and Development (2003). OECD Environmental Performance Review. Paris, OECD: 241. Ramírez Kuri, Patricia, (1999). Gobierno local [Local Government], in Baca, Laura, et al, Léxico de la política [Lexicon of Politics], FLACSO-Conacyt-Fundación H.Boll, Mexico Mexican Ministry of Health, NOM-SSA, Consulted in: prompt l--11-es about utfZz-8. Accessed in March Mexican Ministry of Enviornment and Natural Resources (SEMARNAT), Normas Oficiales Mexicanas Vigentes [Current Official Mexican Standards]. Descargas de agua residuales [Wastewater Discharges]. Consulted in: ntes.aspx, Tebbut T. H. Y., Principals of Water Quality Control, Ed. LIMUSA. pp , Texas Commission on Environmental Quality (TCEQ), Rules and Regulation for Public Water Systems, 20 TAC Chapter 290, Subchapter D, Water Supply Division, pp. 1-78, b., Drinking Water Standards Governing Drinking Water Quality and Reporting Requirements for Public Water Systems, 30 TAC, Chapter 290, Subchapter F, pp. 1-86, World Water Council (2003). Report of the World Panel on Financing Water Infrastructure: Financing Water for All, World Water Council-3rd World Water Forum-Global Water Partnerships:

159 Annexes Annex 1. Description of Water Charges by City SIMAS-Acuña Usage amounts (gal) Water rate (pesos) 0 1, ,321 2, ,643 3, ,694 5, ,020 5, ,284 7, ,926 13, ,209 19, ,813 26, ,418 39, ,626 52, ,835 2,641, Amounts 0 to 1,320 gal have an additional charge of 30 pesos Retirees pay 30 pesos (minimum) 20% Sewer base rate 0 % Taxes ( water service ) 0 % Taxes ( Sewer) 10% Wastewater treatment fee Source: SIMAS-Acuña 149

160 Usage amounts (gal) COMAPA-Nuevo Laredo Water charge (pesos) Usage amounts (gal) Water charge (pesos) 0-1, , , ,321-2, , , ,642-5, , , ,284-7, , , ,926-10, , , ,568-13, , , ,209-15, , , ,851-18, , , ,493-21, , , ,134-23, , , ,756-26, , , ,418-31, , , ,701-36, , , ,985-42, , , ,268-47, , , ,552-52, , , ,835-66, , , ,044-79, , , ,252-92, , , , , , , , , , , , % Sewer Source: COMAPA-Nuevo Laredo 150

161 Usage amounts (gal) Water charge Water and sewer charge (pesos) COMAPA-Reynosa Usage amounts (gal) Water charge (pesos) Water and sewer charge

162 Source: COMAPA-Reynosa City of Del Rio Water service Sewer Usage amounts Charge (USD) Usage amounts Charge (USD) Up to 3,000 gals $8.90 Up to 3,000 gals $8.19 More than 3,000 gals $2.77 per 1,000 gals More than 3,000 gals $ 2.49 per 1,000 gals Source: Prepared by the authors using information provided by the City of Del Rio, Ordinance Code

163 Laredo Department of Water Water Usage amounts Per extra thousand gallon (Dls.) 2,000 $ 7.50* 2,001 to 4,000 $ ,001 to 10,000 $ ,001 to 20,000 $ ,001 to 30,000 $ ,001 to 40,000 $ ,001 to 50,000 $ ,000 $ 3.38 Sewer 4,000 $ 8.50* 4,001 to 10,000 $ ,001 to 20,000 $ ,001 to 30,000 $ ,000 $36.89** * Usage charge per 1,000 gallons **The maximum charge will be up to 30,000 gallons and the equivalent of per month. Source: Prepared by the authors using information provided by the City of Laredo, Ordinance Code 31. McAllen Public Utility Water Sewer Water base rate $4.00 Sewer base rate $ ,000 gals $ 1.30 per 1,000 gals Residential $ 1.30 per 1,000 gals 20,001 gals $ 1.60 per 1,000 gals Commercial $ 1.30 per 1,000 gals Source: Prepared by the authors using information provided by the City of McAllen, Ordinance Code

164 Annex 2. Water Quality Standards for Water and Wastewater Treatment Plants Type Pollutant México, NOM (Permissible Limit mg/l) United States, TCEQ (Permissible Limit mg/l) or permissible units OC Acrylamide N/A N/A OC Alacor N/A R Gross alpha particle activity N/A 15 pci/l IC Antimony N/A IC Arsenic IC Asbestos N/A 7 MFL OC Atrazine N/A IC Barium OC Benzene N/A OC Benzo(a)pyrene N/A IC Beryllium N/A R Emissions of beta and photons particles N/A 4 mrem/year SD Bromate N/A 0.01 IC Cadmium OC Carbofuran N/A 0.04 OC Carbon tetrachloride N/A D Chloramines (como Cl2) N/A 4 OC Chlordane D Chlorine (Cl2) D Chlorine dioxide (ClO2) N/A 8 SD Chlorite N/A 1 OC Chlorinated Benzene N/A 0.1 IC Chromium (total) IC Copper 2 AL=1.3 M Cryptosporidium N/A 1 CCR units M Fecal coliform and E. Coli 0 CCR units M Total Coliforms 2 0 MCLG IC Cyanide (free cyanide) OC 2,4-D OC Dalapon N/A 0.2 OC 1,2 Dibromo-chloro-propane N/A OC o-dichlorobenzene N/A 0.6 OC p- Dichlorobenzene N/A OC 1,2-Dichloroethane N/A OC 1-1-Dichloroethylene N/A OC cis-1,2- Dichloroethylene N/A 0.07 OC trans-1.2- Dichloroethylene N/A 0.1 OC Dichloromethane N/A OC 1-2-Dichloropropane N/A OC Adipate di-2 (2-ethyl hexyl) N/A 0.4 OC Phthalate di (2-ethyl hexyl) N/A OC Dinoseb N/A OC Dioxin (2,3,7,8-TCDD) N/A OC Diquat N/A 0.02 OC Endotal N/A 0.1 OC Endrin N/A OC Epichlorohydrin N/A N/A OC Ethylbenzene N/A 0.7 OC Ethylene dibromide N/A IC Fluoride M Giardia lamblia N/A OC Glyphosate N/A 0.7 SD Haloacetic Acids N/A

165 OC Heptachlor OC Heptachlor epoxide M Heterotrophic bacteria plate counting N/A N/A OC Hexachlorobenzene OC Hexachlorocycloethane N/A 0.05 IC Lead M Legionella N/A Lindane N/A IC Mercury OC Methoxychlor N/A 0.04 IC Nitrate IC Nitrite OC Oxamyl N/A 0.2 OC Pentachlorophenol N/A OC Picloram N/A 0.5 OC Polychlorinated biphenyls N/A R Radium 226 and Radium 228 (combined) N/A 5 pci/l IC Selenium N/A 0.05 OC Simazine N/A OC Styrene N/A 0.1 OC Tetrachlorethylene N/A IC Thallium N/A OC Toluene N/A 1 SD Total Trihalomethanes OC Toxaphene N/A OC 2,4,5-TP (Silvex) N/A 0.05 OC 1,2,4-Thrichlorobenzene N/A 0.07 OC 1,1,1-Trichloroethane N/A 0.2 OC 1,1,2-Trichloroethane N/A OC Trichloroethylene N/A OC Turbidity N/A N/A R Uranium N/A 30 ug/l OC Vinyl Chloride N/A M Viruses (enteric) N/A OC Xylenes N/A 10 IC Cuprum 0.2 N/A OC Total hardness (CACO3) 500 N/A OC Phenols N/A IC Iron 0.3 N/A OC Manganese 0.15 N/A OC Ammoniac nitrogen 0.5 N/A OC Pesticides in microorganisms /l: Aldrin y dieldrin 0.03 N/A DDT 1 N/A R Alpha/photons emitted N/A 15 pci/l OC Gamma-HCH (lindane) 2 N/A OC Sodium 200 N/A OC Total dissolved solids (TDS) 1000 N/A OC Sulfates 400 N/A OC SAAM 0.5 N/A OC Zinc 5 N/A Nomenclature and units OC Organic chemical MFL= millions of fibers per litre IC Inorganic chemical pci/l=picocuries per litre M Microorganisms MCL= Maxim level of pollutant R Radioactive MCLG= Maxim level permissible of pollutant SD Subproduct of disinfection ug/l= nanograms per litre Source: Jiménez C LA CONTAMINACION EN MEXICO [ Pollution in Mexico] 155

166 Photographic Annex a) Nuevo Laredo, Tamaulipas Nuevo Laredo Water Treatment Plant Nuevo Laredo Wastewater Treatment Plant 156

167 b) Reynosa, Tamaulipas Reynosa Water Treatment Plant Reynosa sewage treatment lagoon 157

168 c) Ciudad Acuña, Coahuila La Amistad Dam Ciudad Acuña Wastewater Treatment Plant 158

169 d) Laredo, Texas Laredo Water Treatment Plant Laredo Wastewater Treatment Plant 159

170 e) McAllen, Texas McAllen Southwest Water Treatment Plant McAllen sewage treatment lagoon 160

171 f) Del Rio, Texas Del Rio Water Treatment Plant Del Rio Wastewater Treatment Plant 161