Renewing American water infrastructure will take time, but we are on the right track
So far, 2018 has brought encouraging news in the ongoing struggle to renew the nation’s water infrastructure. However, it will take a sustained effort over many years to assure water systems remain strong and reliable.
Making the Case
A few years ago, the American Water Works Association, the world’s largest association of water professionals, released the study “Buried No Longer: Confronting America’s Water Infrastructure Challenge.” This study analyzed the history of investment in water infrastructure in the United States, the types of pipe material used, and the lifespan of those materials. It then used that data to forecast future pipe failure and the cost of replacement, concluding that the U.S. will need to invest $1 trillion in the next 25 years to maintain our current level of service and to serve a growing population. Wastewater infrastructure needs are thought to be of a similar scale.
Water infrastructure management and investment will be hot topics of conversation at AWWA’s Annual Conference and Exposition (ACE18), hosted June 11-14 in Las Vegas. An estimated 12,000 attendees will have access to professional tracks that focus on asset management, rates and financing, and affordability.
Even the U.S. EPA’s latest needs survey — which usually suggests lower investment and focuses primarily on serving the State Revolving Fund loan program — estimates that in the next 20 years, the United States will need to invest $313 billion in pipelines, $83 billion in treatment facilities, $48 billion in storage infrastructure, and $22 billion in source water facilities.
A Federal Role
Currently, the primary federal role in aiding investment in water infrastructure comes via providing tax exemptions for municipal bonds and funding for the drinking water and wastewater SRFs and the Water Infrastructure Finance and Innovation Act program.
The omnibus budget bill Congress approved in March gave the two SRF programs an additional $300 million each over the previous year’s funding levels. It also provided WIFIA with $63 million in funding, more than doubling funds from the previous year.
WIFIA leverages federal appropriations with the issuance on long-term Treasury bonds. Because water utilities have such strong credit histories, WIFIA can leverage federal dollars at a very high rate. In fact, the $30 million that Congress appropriated in FY2017 was leveraged at a ratio of 92:1, meaning that for every dollar appropriated, WIFIA was able to loan $92.
Congress created WIFIA in June 2014, but the program did not receive funding to make loans until FY2017. Therefore, it is just now showing what it is capable of. After the first notice of funding availability, EPA’s WIFIA office received 43 letters of interest from utilities and similar entities across the country about potential loans. From those, 12 were invited to proceed to the formal application process, and those 12 projects will receive $2.3 billion in loans. Because WIFIA supports no more than 49 percent of a project’s costs, that means it will spur $5.1 billion in infrastructure investment. Now consider the impact the $63 million provided in FY2018 can have.
However, authorization for WIFIA expires at the end of FY2019. It would be a huge setback to addressing the nation’s water infrastructure needs if this efficient program were to go away. Fortunately, there is bipartisan legislation in both houses of Congress now to reauthorize the program and increase its funding. That legislation is H.R. 4492 and S. 2329, the Water Finance and Innovation Reauthorization Act. Americans should thank Representatives Brian Mast of Florida, Bob Gibbs of Ohio, and Julia Brownley of California, as well as Senators Patrick Maloney of New York, John Hoeven of North Dakota and Cory Booker of New Jersey for their leadership on WIFIA reauthorization.
An even more concrete step toward continuing WIFIA took place in May, when the Senate Committee on Environment and Public Works released its America’s Water Infrastructure Act of 2018. It contained a two-year reauthorization of WIFIA with authorized funding set at $200 million over that period, to be split between EPA and the U.S. Army Corps of Engineers. The legislation creating WIFIA in 2014 set up a parallel program at the Corps, but it has never been implemented.
It’s encouraging that the public and policymakers in the United States are recognizing the need to invest more in water infrastructure. Members of the water community and local government need to continue to communicate our water infrastructure challenges to lawmakers and the public. Then we need to make the most efficient use possible of the infrastructure finance tools at our disposal — rate and fee revenues, tax-exempt bonds, SRFs, WIFIA, private activity bonds, etc. — to serve the public and the environment.
Tommy Holmes, is the Legislative Director of the American Water Works Association. Established in 1881, the American Water Works Association is the largest nonprofit, scientific and educational association dedicated to managing and treating water, the world’s most important resource. For more information, visit www.awwa.org