Rebuilding the Nation’s Infrastructure

With the price tag for the critical upkeep and replacement of the nation’s outdated water systems at least $1 trillion over the next 25 years, it’s high time the public and private sectors make partnership work

By Walter Lynch

Author’s Note: When we talk about the aging infrastructure in our country, it’s important to keep in mind that upgrading the vast and complex systems in need is not the sole responsibility of any one group, organization, or entity. We know that no sector, whether public or private, can solve the nation’s water challenges on its own.

With the latest results from the American Society of Civil Engineers (ASCE) Report Card for America’s Infrastructure, it’s clear the nation cannot ignore our deteriorating drinking water/wastewater infrastructure. ASCE recently gave the grades of D for water systems and D+ for wastewater systems. This remains in line with the last few reports, and heightens the sense of urgency to take actions that will turn around the condition of this often-overlooked category of infrastructure.

The price tag for the critical upkeep and replacement of the nation’s outdated water systems is at least $1 trillion over the next 25 years, per American Water Works Association estimates. While this financial challenge is significant, there are solutions, including public/private collaboration from companies like American Water. We’ve put plans into action to upgrade our systems and infrastructure, investing more than $1 billion annually to ensure continued reliability.

For example, in 2015, Missouri American Water announced the closing of the company’s acquisition of the city of Arnold’s sanitary sewer system, which added 8,800 sewer customers to Missouri American Water’s operations in St. Louis County. Like many municipalities around the country, Arnold was struggling to keep up with the infrastructure demands of an aging sewer system, especially with increasingly stringent EPA and Clean Water Act requirements coming into force. Over the next four years, Missouri American Water will invest approximately $5 million to upgrade and improve the infrastructure of the Arnold sanitary sewer system.

The residents are now benefitting from outstanding customer service, stable rates (which are overseen by the Missouri Public Service Commission), infrastructure investment, and service to the community. In addition, sewer employees, formerly employed by the city of Arnold, continue to provide system operation and field services now as Missouri American Water employees.

These are investments that prove their value every day. From projects to replace water mains, pipelines, and hydrants, to enhanced treatment capabilities improving efficiency and reliability, as well as the installation of advanced metering technology to help reduce water leaks, the investments we’ve made ensure we are well-positioned to continue to meet customer needs in the communities that rely on us.

Understanding there are many competing demands for infrastructure resources, the public sector alone cannot continue to cover the cost and absorb the risk of degrading infrastructure if we are to meet our nation’s future needs and preserve our American quality of life. While some categories of infrastructure may benefit more from direct federal investment, water and wastewater infrastructure are particularly conducive to leveraging private sector resources.

One example of this is Fairview Township, Pennsylvania. In late 2015, Fairview Township sold its wastewater system to Pennsylvania American Water for $16.8 million. This decision helped to pay off $21 million in existing sewer debt, avoided additional debt (approximated at $14 million), and allowed property taxes to be cut by 50 percent. Pennsylvania American Water is investing $13 million in capital improvements, as well as up to $1 million in reimbursement for the relocation of a sewer line. The system serves approximately 4,000 customers in Pennsylvania.

Another case in point: The Borough of Haddonfield (N.J.) decided to meet its needs with a full transfer of its water and wastewater system, an aging system facing significant challenges, to the private sector. In the first five years, New Jersey American Water will spend more than $16 million on system modernization. If the sale did not go through, the Borough of Haddonfield Board of Commissioners, which recently had raised rates by 25 percent, was expected to raise rates again for its 4,500 customer accounts to pay for the much-needed capital improvements. As part of the sale agreement, New Jersey American Water committed to leaving the water rates unchanged for a minimum of three years. Additionally, with 650,000 accounts serving 2.7 million customers in the state, New Jersey American Water has a much larger rate base over which to spread costs.

Together, the public and private sectors can work together more closely to propel America’s water and wastewater infrastructure into a more modern, technologically advanced, and integrated network that enables prosperity long into the future.

Walter Lynch is the chief operating officer for American Water and has over 20 years of experience in the water and wastewater industry. To learn more, please visit amwater.com.

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