A National Problem with Solutions

Public-private partnerships can help get more infrastructure needs met when given the tools to do the job
By Michael Deane

Last July marked the day a 93-year-old water main in Los Angeles, installed during the administration of President Warren G. Harding, burst and flooded the UCLA campus with 10 million gallons of precious drinking water.

Since that day we have seen water main breaks in St. Louis, Missouri; Manchester, Tennessee; Cleveland, Ohio; and Bakersfield, California force schools to close early or shut down for more than a day. On one day in October we saw breaks in Manhattan and Boston that shut down businesses, caused major traffic disruptions and left residents without water. Denver also had two water main breaks in one week, causing businesses to close and even the cancellation of a Major League Baseball game.

Concerns over water quality on Mercer Island in Seattle, Washington, recently made the news as well. The island is a 6-square-mile city of about 24,000 and is one of Seattle’s wealthiest suburbs with residents like billionaire Microsoft co-founder Paul Allen. It is also home to over 60 restaurants and 6 schools. Due to concerns about compromised infrastructure and an outbreak of E.coli, a boil-water advisory stood in place for six days and forced a closure of all schools for one day and all restaurants for the duration of the advisory. Those businesses lost thousands of dollars daily and not all are sure they will recover.

While the list goes on you can see how our deteriorating water infrastructure affects everyone, regardless of where they live, how much they earn, or where they work. This negative impact on commerce, education, health, and entertainment is tremendous.

According to the U.S. Environmental Protection Agency, there are more than 240,000 water main failures each year, and it has projected a $500 billion gap in funding that will be needed to maintain water infrastructure into 2020. These repairs cost over $3 billion annually, not including the cost of equipment, traffic disruptions, and lost work time.

While water main breaks are the events that typically get media attention, those of us who are involved in infrastructure know that the problems are much greater. Underground pipes that leak due to cracks and corrosion are costing the U.S. dearly. Every day, 7 billion gallons of treated water never reaches the tap due to leaks. That comes to $2.6 billion in losses that could be avoided.
Putting into perspective how much one community is losing due to leaking water infrastructure, the city of Houston found that during the 2012 fiscal year, their pipelines gushed 22.4 billion gallons of water in 11,343 leaks. That’s about 15.2 percent of the city’s total water supply down the drain in one year.

No one entity can fix the nation’s water challenges on its own, but we can take steps together to solve the problems created by infrastructure breakdowns.

Today, 98 percent of investment in water infrastructure made at the local level can be expanded through incentives made possible through federal policy. Congress and the Administration can help communities make the infrastructure investments they need by encouraging public and private water utilities to partner to solve problems. It’s time to remove the barriers and unleash a wave of private capital funding to water infrastructure improvement projects.

They can do this by taking bold measures, like modifying Internal Revenue Code that takes tax-exempt municipal bond status away from municipal governments if a private-sector business acquires a long-term interest in their water projects. Local governments are not being allowed to explore options that could benefit their community because of confusing and contradictory IRS code. That can and should be fixed.

Another way Congress and the Administration could act quickly is by removing the volume cap for Private Activity Bonds (PAB) on water and wastewater projects. The use of PABs spurs capital investment in public projects and investors prefer PABs because interest accrues tax-free. Removal of the volume cap would also support up to 142,500 jobs with $400-$500 million in increased state and local tax revenue.

Across our nation, more than 2,000 communities have benefitted from water-related public-private partnerships. With policy assistance from Congress, we can speed up the repair and replacement of aging water infrastructure that has served us well for so long.

Let’s give our public and private water utilities the financial tools to do their job.

Michael Deane is the Executive Director of the National Association of Water Companies (NAWC), located in Washington, D.C. He may be reached at michael@nawc.com.

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