Drink what you can pay for: Financing infrastructure in a fragmented water system

Abstract

The article investigates the relationship between environmental violations and water utility infrastructure investment in the Houston metropolitan area through a lens of institutional fragmentation. Special purpose water districts are highly capital-intensive service jurisdictions, which makes them extremely dependent on local fiscal capacity. Fiscal capacity is also important for a water district’s ability to respond to performance failures, particularly regulatory violations. Resource base, however, is unevenly distributed between special purpose water districts in the highly fragmented Houston metro area. Therefore, while capital investments may significantly covary with fiscal capacity, not all water districts are expected to be capable of making needed infrastructure investment when problems arise. There are two major policy-relevant findings that we offer in the article. Institutional fragmentation in relatively more affluent areas does not impede the ability to invest in capital infrastructure related to both service pressures and regulatory violations. However, such ability is limited in relatively less affluent areas, where the fiscal capacity to respond to service delivery problems is limited.