Water Infrastructure Financing

OVERVIEW OF WATER INFRASTRUCTURE NEEDS


Local governments construct, operate, and maintain the vast amount—95 to 98 percent—of the country's water infrastructure networks, which are essential for economic development and quality of life in our communities. But, cities and counties face a backlog of projects and are finding challenges in funding much needed water infrastructure improvements. Federal mandates, along with aging infrastructure, are straining local budgets. Meanwhile, federal options for grants and loans are dwindling.

According to the U.S. Environmental Protection Agency’s (EPA) most recent Clean Watershed Needs Survey, the 20-year investment needed to upgrade our nation’s wastewater and stormwater management infrastructure to meet the water quality goals set in the Clean Water Act is $298.1 billion.

Likewise, the most recent EPA Drinking Water Infrastructure Needs Survey and Assessment estimates the cost of drinking water infrastructure upgrades over a 20-year period to be $334.8 billion. The American Water Works Association (AWWA) puts that number higher; according to an AWWA report, "Buried No Longer: Confronting America’s Water Infrastructure Challenge," the true cost of replacing drinking water pipes at the end of their useful life will be more than $1 trillion dollars nationwide over two decades.

The AWWA report also notes that delaying investment only makes the problem worse, raising the overall costs and increasing the likelihood of major water breaks and other infrastructure fails.

EXISTING FINANCING MECHANISMS


A report by the Congressional Research Service, "Water Infrastructure Financing: History of EPA Appropriations," provides a review of the federal commitment to funding local water infrastructure projects. Prior to the 1987 amendments to the Clean Water Act, wastewater treatment assistance was provided in the form of grants made to municipalities. The federal share of project costs was generally 55 percent; state and local governments were responsible for the remaining 45 percent.


The 1987 amendments altered this arrangement by replacing the traditional grant program with one that provides federal grants to capitalize state clean water loan programs, or state revolving funds (SRFs). This change has meant that local communities now are responsible for 100 percent of projects costs, rather than 45 percent, because they are required to repay loans to states.

The clean water and drinking water SRFs help local governments finance upgrades to wastewater and drinking water systems.

While appropriations for the clean water and drinking water SRF programs through FY2012 have totaled over $69 billion, including $6 billion that was appropriated through the American Recovery and Reinvestment Act, federal assistance has not kept pace with the needs. In the appropriations bill for FY2013, the news is not any different; the House Appropriations Committee has approved a bill that drastically cuts the Clean Water and Drinking Water SRFs.

The Congressional Budget Office concluded in 2003 that “current funding from all levels of government and current revenues generated from ratepayers will not be sufficient to meet the nation’s future demand for water infrastructure.”

BOTTOM LINE


The bottom line is that there is not enough funding to go around. Because annual appropriations to the SRF are likely to continue to decline and the needs of our communities continue to increase, many organizations and members of Congress are seeking new ways to increase funding for water infrastructure.


NLC supports a substantial and a reliable long-term source of capital to accommodate the gap between current expenditures and anticipated need to enhance and maintain critical water infrastructure.

NLC calls on Congress to reauthorize and fully fund both the Drinking Water State Revolving Loan Fund and the Clean Water State Revolving Loan Fund to ensure adequate resources for drinking water and wastewater treatment facilities.