Water and wastewater utilities will need to spend an average of $71.7 to $98 billion a year through 2019 to maintain the nation's drinking water and wastewater infrastructure, according to a recent report from the Congressional Budget Office (CBO).
A large portion of the investment spending will be devoted to the replacement of pipes, which represent most of the value of both drinking water and wastewater assets, but investment will also address aging equipment at treatment plants and water quality, the report concluded.
CBO acknowledged that the amount of money needed for future investment in water infrastructure is a matter of some debate, and various estimates have been developed. The "needs surveys" of wastewater and drinking water systems conducted periodically by the Environmental Protection Agency (EPA) provide one measure of potential investment costs. Others are offered by groups such as the Water Infrastructure Network and the American Water Works Association.
The Congressional Budget Office conducted its own analysis of future costs for water infrastructure and developed high-cost and low-cost estimates of spending scenarios that span the range of what it considers to be the most likely possibilities.
CBO estimates that for the years 2000 to 2019, annual costs for investment in the nation's water systems will average between $11.6 billion and $20.1 billion for drinking water systems and between $13.0 billion and $20.9 billion for wastewater systems. This compares to CBO estimates that utilities spent $11.8 billion for drinking water and $9.8 billion for wastewater in 1999.
CBO projects that annual costs over the period for operations and maintenance (O&M), which are not eligible for aid under current federal programs, will average between $25.7 billion and $31.8 billion for drinking water and between $21.4 billion and $25.2 billion for wastewater.
CBO estimated costs for the 2000-2019 period to simplify comparisons with earlier estimates developed by the Water Infrastructure Network (WIN), a coalition of groups representing water service providers, elected officials, engineers, construction companies, and environmentalists. Data on actual spending in 2000 and 2001 are not yet available.
Estimates of annual O&M costs by WIN - $29 billion for drinking water and $24 billion for wastewater - are roughly in the middle of the ranges spanned by CBO's two cases.
The range of CBO's estimates reflects the limited information available at the national level about existing water infrastructure. For example, there is no accessible inventory of the age and condition of pipes, even for the relative handful of large systems that serve most of the country's households. That lack of adequate system-specific data compounds the uncertainty inherent in projecting costs two decades into the future. Indeed, given the limitations of the data and the uncertainty about how future technological, regulatory, and economic factors might affect water systems, CBO does not rule out the possibility that the actual level of investment required could lie outside the range it has estimated.
Under each scenario, the estimates are intended to represent the minimum amount that water systems must spend to maintain desired levels of service to customers, meet standards for water quality, and maintain and replace their assets cost-effectively.
CBO excluded certain categories of investment in developing its estimates, in part because of data limitations. Water systems are still in the early stages of developing estimates of the costs for increasing system security in the wake of the September 11th attacks; however, preliminary reports suggest that security costs will be relatively small compared with the other costs for infrastructure investment.
Also excluded from the estimates is drinking water investment to serve new or future customers. Such projects are not eligible for assistance from the federal State Revolving Loan Funds (SRFs).
CBO's estimates measure investment spending in costs-as-financed rather than in current resource costs, the yardstick that economists typically use. Costs-as-financed comprise the full capital costs of investments made out of funds on hand - that is, on a pay-as-you-go basis - during the time period being analyzed and the debt service (principal and interest) paid in those years on new and prior investments that were financed through borrowing.
To read CBO's Letter on the Future Investment in Drinking Water and Wastewater Infrastructure, look under "recently released reports" on the CBO web site at www.cbo.gov.
