Abstract
As local governments' finances become poor, questions are being raised about the sustainability of the sewage business since Korea's sewage rates are very low. Due to the short-term characteristics of public officials and the short-term characteristics of elected officials whose desire to achieve their election-related commitments, there is a high possibility that local governments will not be able to invest a lot of resources for preemptive response and maintenance of sewage projects based on systematic and rational long-term plans. This study applies the Altman Z-Score, which can identify the signs of bankruptcy of private companies, and examines the trend of the sewage business where the deficit accumulates because of low rates and the amount of general account support is increasing. It was revealed that the realization of sewage rates to cost is important in that the increase in sewage rate revenue can significantly increase the Altman Z-Score Next, this study shows that voluntary efforts, financial support, and rate realization to cost have important influences on the Altman Z-Score. Finally, the total cost function, average cost function, and marginal cost function were estimated using the annual treatment amount and the population of the sewage treatment area as independent variables. This study insists that high-level (or provincial level) local governments should take the long-term responsibility of the sewerage business in order to allocate adequate resources for preemptive response and maintenance of sewage projects based on systematic and rational long-term plans.
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