by Dawn Kristof
The Environmental Protection Agency estimates that $138 billion will be needed over the next 20 years for drinking water infrastructure and treatment needs, plus another $139 billion for the wastewater industry. The American Water Works Association puts the price tag at $360 billion for drinking water distribution needs alone.
Surpassing these figures is an estimate released by the Water Infrastructure Network (WIN) in a report titled Clean and Safe Water for the 21st Century. WIN predicts that the cost of building, operating and maintaining needed drinking water and wastewater facilities over the next 20 years approaches $2 TRILLION, of which half represents capital investment in plants, water distribution systems, and wastewater collection systems.
WIN further estimates that the water and wastewater industry is spending $23 billion less than it should each year to meet these capital investment needs. Failure to bridge this funding shortfall in infrastructure spending needed to replace and upgrade aging systems and keep pace with new federal regulations could reverse the environmental, public health, and economic gains of the last three decades, asserts WIN.
The WIN coalition - comprised of industry organizations representing state officials, local governments, private operators, engineering firms, construction companies, equipment manufactures, and environmentalists - is seeking new solutions to bridge this funding gap. At the time of this writing, negotiations are underway among this diverse set of stakeholders to develop legislative proposals that would increase the federal role in funding future water and wastewater infrastructure activities.
WWEMA supports the goal of WIN to generate a renewed national commitment to meet the significant needs facing our industry. At the same time, WWEMA recognizes that federal assistance must be one of facilitation, not dependence, if our industry is ever to become self-sustaining and fiscally sound. To that end, WWEMA is espousing four main principles in its negotiations with WIN:
Value-Based Procurement
Federal procurement regulations that accompanied the EPA Wastewater Treatment Construction Grants Program of the 70's discounted quality for the sake of lowest price. Owners were forced to purchase and install equipment that fell short of desirable quality and performance standards. WWEMA recommends that any procurement regulations associated with access to new federal funds must preserve the right of the municipal owner to choose the technology most appropriate to that community's needs. The objective should be maximizing value, not minimizing merely one element in the value formula - price. Embracing innovation and life-cycle benefits of superior equipment can yield substantial savings in the long run by extending the life of a plant, reducing operating costs, or enhancing plant performance.
Affordability
Every community in the United States could benefit from federal assistance in helping to repair or replace aging infrastructure. The needs are infinite but federal subsidies are not. This reality requires judicial use of federal assistance to ensure that the most pressing threats to health and safety are met for those communities in greatest need. WWEMA recommends that determination of need be based on affordability criteria. Communities seeking federal subsidies should be able to demonstrate that their rates would be unaffordable to a substantial portion of customers if they were to provide the capital for essential infrastructure investments. WWEMA recognizes that utilities face major political obstacles when attempting to raise rates, but this is not sufficient justification for seeking a federal handout. The cost of obtaining water and sewage services in the United States remains under-priced relative to other services. Federal assistance must be targeted to those communities that are genuinely unable to afford higher rates.
Market Stability
It is only natural that communities might postpone investments in infrastructure repairs, assuming it does not threaten the health and safety of their citizenry, when there is talk of a new federal assistance program that could help underwrite their costs. For this reason, it is imperative that conditions for eligibility be made known explicitly and expeditiously. In addition, WWEMA recommends that any new sources of funding are channeled through the existing state revolving loan funds (SRFs), in lieu of creating a new federal funding mechanism that may compete with the SRF programs. This will minimize market disruptions and ensure continuity in the distribution of funds. In addition, by working through the current SRF mechanism, states will preserve the right to determine what forms of funding should be provided on a case-by-case basis, including loans, grants or variations thereof. Expanded access to loans, with grants issued only to communities unable to afford necessary rate increases, will assure that the financial corpus of the assistance program is not permanently depleted.
Self-Sustainability
Lastly, WWEMA recommends that any renewed national commitment to our Nation's water and wastewater programs incorporate the goal of self-sustainability on the part of its utilities. Consumers should expect to pay adequate rates to cover the full cost of service. To determine the adequacy of rates, utilities should adopt an asset-based management strategy which tracks the condition of capital assets and develops estimates of replacement and rehabilitation costs. A capital replacement fund should be established to meet these capital needs and a rate structure set to meet estimated current and future costs, including O&M, treatment, and infrastructure replacement or rehabilitation.
Failure to move in this direction will result in continued reliance on the federal government to subsidize water and wastewater operations, thus undermining the economic stability of the industry and endangering the welfare of those individuals and companies whose livelihood depends on a healthy marketplace.
WWEMA will continue to report on the progress of the WIN initiative. We would welcome any ideas on new solutions to the aging problem facing our Nation's water and wastewater infrastructure. Please send your comments to [email protected].
