Utility costs could put pressure on cities’ finances, S&P experts warn

Rising utility rates are creating affordability pressures that could eventually constrain municipal finances and credit quality, according to panelists on a recent S&P Global webinar.

If fewer homebuyers and businesses choose to move to cities where utility rates are high — shrinking the tax base — those cities could have less money to pay for utility infrastructure costs, said Sarah Sullivant, S&P sector lead for Americas public finance.

“We’re seeing this dynamic playing out where utility rates are high compared to household income,” she said.

While utility rates may pose a threat, affordable housing and sustainable debt for public transportation and facilities in underserved communities are bright spots, Sullivant said.

This growth has helped boost the sustainable debt market, said Alan Bonilla, S&P director of sustainable finance.