In France, the municipalities in charge of water utilities can choose to delegate the management of the service of water or to manage it themselves. They still have the possibility of combining to ensure water management. There are three scheme of water management: ‘direct management’, ‘delegated management’ and ‘intermediate management’.
In the case of a direct management, the service of water is ensured by the municipal agents. For a delegated management, the municipality entrusts water utilities to a private operator (called the farmer) and then perceives a contractual remuneration. There are two principal types of contracts specific to a delegated management: ‘concession’ and ‘leasing’. For the leasing contract, the municipality is in charge of water equipment (network, etc). The municipality remains the owner of this equipment, but temporarily entrusts them to the farmer. The latter is responsible for the maintenance and sometimes the renewal of operating expenses of the network. The intermediate management differs from the concession and the leasing by its legal principle. In such a situation, one distinguishes: the ‘management’ and the ‘interested control’. The manager is an ‘employee’ of the municipality and for this reason, he or she is remunerated according to a price determined at the time of the contract. In the interested control, the municipality keeps the financial responsibility of water utilities, the exploitation of which is entrusted to an external person or entity receiving benefits.
The data we have collected comes from different sources. They were provided by: ‘Compagnie Générale des Eaux, Direction Régionale Est’, ‘Direction Générale des Impôts de la Moselle’ (Regional Tax Center), ‘Centre Départemental de la Météorologie de la Moselle’ (Regional Center of Meteorological Studies) and ‘Institut National de la Statistique et des Études Économiques’. In the following, we provide more details on data and the way some of the variables used in the empirical analysis are computed.
A1. Consumption of drinking water
The consumption of drinking water is measured in cubic meter per municipality. These measurements are thus aggregate observations. Some municipalities are much longer than others, mostly rural. Thus, in order to consider observations which are not too heterogeneous and to reduce the size effect, we have divided each observation of consumption by the total number of households in the municipality in 1990. The basic year 1990 was selected because it is the year of the last communal inventory available. It also constitutes the last period of the general census of the population.
The demand for drinking water is defined as the quantity of water taken from natural environment at each moment to meet specific needs, taking into account water losses.
14 Thus, the consumption statistics produced in Table 1 include the losses which have occurred on the network and those the supplier distributes on the effective consumption of domestic users. The losses at the subscriber level correspond to the leak in the network as well as the leak at the points of distributions of which 80% come from the water closet, Valiron (1994).
15
From Table 1, we observe that the average values of water consumption are stable, about 70 m3 in the first half of the year 1988, and 76 in the first half of the year 1991. Meanwhile, the average consumption in the first half of 1988 is the lowest over all periods, that is to say 69.68 m3 with a standard deviation of 27.75. The highest standard deviation is 29.26 and corresponds to the second half of 1993. In contrast, one can expect that the consumption in the first half of 1988 is one of the highest with respect to the average price of water. The statistics of 1992 suggest opposite indications. This is guided by the fact that the year 1992 is the year of the application of the accounting instrument (directive) ‘M-49’ which involved a substantial increase in prices. Indeed, if the average price of water regularly increased over the whole period of study, it is noticed however that the largest increases occur from 1992 on.
A2. Price of water
The tariff modulation used by the farmer is decided during the making of the leasing contract between this latter and the local authority. This contract is termed a ‘treaty’. We then face a ‘delegation’ mode of the public utility of drinking water distribution. The contract establishes the clauses governing the tariffs, their distribution as well as the principle of their variation over time. A ‘treaty’ can cover one or more municipalities. In this last case, the same tariff applies in all the municipalities concerned.
The tariff scheme consists of a two-part tariff: a fixed part (FC) which corresponds to the charges (or service charge, it does not vary with the consumption) and a part which is the marginal price of water (MP) per units measured in cubic meter. The service charge corresponds to investments and the fixed charges of exploitation, i.e., the maintenance of connection to the network and the maintenance of the meter. The variable part consists of the farm price, other taxes, the royalty, the VAT, etc. The variable part of the price of water is divided in the following way: 46% for the distribution of water, 33% for the collection and treatment of used, 14.5% of water agencies, 5.5% of VAT, 1% on behalf of the ‘Fonds National pour le Développement des Adductions d’Eau’, (FNDAE, National Funds for the Development of the Water Conveyance). This last royalty usually serves as development assistance for the rural networks. The part of the fixed charges in the total price proves very important. It can reach 90% of the total. From this tariff information, we compute the average price of water for each time period (AP) for each municipality as
$$ {\rm AP} = {\frac{(Q \times {\rm MP}) + {\rm FC}}{Q}} $$
where
Q indicates the domestic volume of water consumed in a given municipality. As a result, we are able to avoid the theoretical and estimation problems of more complex rate structures that qualify many other studies in the field.
During the period of study, some legislative texts came into effect and had major effects on the price of water. Most important is the law of January 3th, 1992, which lays down new rules of organization and management of the public services of water distribution. This regulation aims to reveal the truth and transparency of the water prices. Two new principles thus appeared. The first is concerned with the removal of tariffing all-in price. It stipulates that the price of water corresponding to the service of distribution of drinking water must be calculated starting from the consumed volume. It is possible however to impose a binary tariff comprising a fixed part and a variable part. This provision is that which was adopted by the water supplier. It clearly underlines the choice to make the consumer pay rather than the taxpayer. There is nevertheless an exemption from this principle.
16 The exemption is adopted by municipalities located in tourists zones where the population shows a strong seasonal variation. It should be noted that some municipalities circumvent the regulation and charge very highly for the fixed part, which in fact means they practice an all-in price tariffing.
The second principle is the accounting instruction ‘M-49’. Founded on November 10th, 1992, this accounting instrument has as main objective to clarify the accounts of water utilities (water distribution and cleansing) by aligning their operation on the chart of accounts of 1982. By doing so, it restores the truth of the prices while making it possible to better identify costs inherent in the service and to define suitable tariffs. With this intention, the accounting instruction ‘M-49’ imposes the balance of budget on the water services (distribution and cleansing), as well as their individualization in an additional budget. It is a question of applying the accounting policy according to which ‘water pays water’. The management of the service of water in an independent budget implies a balance between receipts and expenditure (including the amortizing of the investments). Thus, the municipalities cannot make any more support by their general budget, i.e. by the tax, the expenditure intended for water.
17
These various regulations in particular the accounting instruction ‘M-49’ resulted in a strong increase of prices of water and sometimes even a modification of the tariff distribution as can be observed in Fig. 2.
A3. Fiscality of municipalities: income variable
In the documents we exploited, the data are not provided for municipalities having less than ten taxpayers. Records available are the following.
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Total number of taxable households (A): taxable persons or those who are given a partial restitution of taxes.
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Total number of non taxable households (B): non taxable persons including those who are given a total restitution of taxes (this concerns roughly a tax lower than 380 FF or free tax lower than 80 FF).
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Taxable or non taxable income (C): taxable free income of taxpayers including the appreciations and the exceptional agricultural benefit taxed according to the mode with the quotient counted for the 5/5, including the appreciations taxed according to an exceptional rate. The amount of the total deficits is not deduced from the total of the incomes. It should be noted that the taxable incomes underestimate the actual household incomes by 30% on average. The underestimation is very important for non-farmer-free-workers (about 43%) and still more for the farmers (57%). This partly explains the low level of the disposable incomes especially in the rural municipalities.
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Free tax (D): free tax on the income to be paid including the tax on the proportional appreciations. The amount of the partial restitutions is not deduced from the total of the tax. The social contribution (0.4 %) is not taken into account in the statistics.
Based on this information, we compute the following quantities for each municipality:
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the total number of taxable households: NTFF: = (A) + (B),
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the disposable income RD:=(C) − (D),
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the average disposable income RMD: = RD/NTFF.
For each municipality and per year, the average disposable income by taxed household is divided by two to obtain biannual observations, assuming that the income is stable over time. It is this variable (a proxy variable of the average of disposable income of municipalities by household) measured in thousands of French Francs which is used in the empirical estimation.
A4. Weather variables
The data of the Departmental Center of the Meteorology of the ‘Moselle’ provides indications on the environmental factors. Contrary to the preceding data, those were not raised by the 115 municipalities, but starting from ‘meteorological stations’. A station is a point of observation which covers several municipalities. The rough data are monthly observations which are aggregated to form biannual values. At the beginning we have monthly rainfall at 12 stations, monthly averages of minimum and maximum temperatures at 7 stations, monthly sunstroke in Metz (1 station), monthly averages of minimal and maximum moisture in Metz (1 station).
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For the 115 municipalities considered, we then determine the thermometric and pluviometric station of reference. Rainfall is measured at 6.00 am, universal time (UT). A height of water of 1 mm is equivalent to 1 l per square meter or 10 m3 by hectare.
19 The temperatures indicated are taken with the shelter of 1.50 m ground-level above. Rainfall is measured in 100 mm, of the temperatures maximum minima expressed of 10°C.
A5. Characteristic variables
The data describing the characteristics of the municipalities are provided by INSEE. They come from the communal inventory and the general census of the population. The general census of the population was carried out in Metropolitan France and in the overseas departments in March 1990. The listed population is the whole population resident in France, whatever their nationality.
From these documents, we compute some variables gathering four types of information per municipality: the demographic structure of the population by age, the density of population, the proportion of employees and the index of equipment. Certain components were aggregated to obtain a more adequate representation. The demographic structure of the population gathers the proportion of people of age ranging between 00 and 19 years. They are calculated as (NTH + NTF)/PT, where NTH indicates the total number of men of age ranging between 00 and 19 years, NTF the total number of women of age ranging between 00 and 19 years, PT the total population. The age indicated is the age in completed years at December, 31st of the year of census. The density of the population of the households (DENSM) per municipality is calculated as DENSM = (NTM)/(SURF), where NTM is the total number of households and SURF denotes the surface of the municipality measured in hectares.
A household is defined as occupants of the same house or flat, whatever the bonds between them. A household can be only one person. It also includes the people who have their personal residence in the house but who remain at the time of the census in certain establishments known as ‘population counted separately’ (boarders of educational establishments and national service) which are thus ‘reinstated’ in the population of the households of the municipality where they have their personal residence.
Information regarding employment take into account the percentage of employees (TXS) and the percentage of the unemployed (TXCHM). These two variables are calculated as TXS = (NTS/PT) × 100, with NTS being the total number of employees, and TXCHM = (NTC/PTA) × 100, with NTC indicating the total number of unemployed and PTA the active total population. The ‘unemployed’ are defined as declared people ‘unemployed’ or without ‘employment’ except if they explicitly stated they are not seeking a job. The mothers and ‘housewives’ who explicitly stated to seek a job are also classified in this heading. The working population includes people having an employment and the unemployed. They are at least 15 years old. The working population having an employment are people who have a profession and pursue it at the time of the census. They are classified in this heading as people who help a member of their family in their work (for instance on a farm, a trade, liberal profession, etc.) provided that the helped person is not paid for. The apprentices, except if they are pupils of a technical school, the people under contract of adaptation or qualification, temporary worker, the remunerated trainees which work in a company or in a center of formation, young employees in community work, ‘Travaux d’Utilité Publique’ (TUC) and people who, while continuing their studies, carry on a professional activity, form also part of the working population having an employment.
To compute the index of equipment, we sum the numbers of various health facilities and divide it by the total population to obtain an index of the level of health facilities as TXES = (NTW + NTB + NTD) × 100/PT, where NTW indicates the total number of toilets, NTB the total number of bath-tubs and NTD the total number of showers.
