By Maureen Lorenzetti
A recent Congressional Budget Office (CBO) report predicts that for the years 2000 to 2019, between $11.6 billion and $20.1 billion will be needed annually for drinking water system infrastructure "investment" costs. For wastewater systems, the numbers are equally as daunting: a range of $13.0 to $20.9 billion annually.
CBO estimated future infrastructure investment needs by using two different scenarios - a low-cost case and a high-cost case. A number of private and public sector reports have attempted to estimate municipal water and wastewater infrastructure needs over the next 20 years. Estimates have varied from a view hundred billion to more than $1 trillion. CBO noted that the wide range of estimates reflects the limited information available at the national level about the condition of existing infrastructure. In other words, no one really knows the scope or extent of the problem.
"There is no accessible inventory of the age and condition of pipes, even for the relatively few large systems that serve most of the country's households," the report said. "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 system, CBO does not rule out the possibility that the actual level of investment required could lie outside of the range it has estimated."
CBO said its estimates represent the minimum amount that water systems must spend to maintain desired levels of service to customers, meet standards for water quality, and efficiently maintain and replace assets.
However, the calculations do not include security-related investments that will likely be needed to meet homeland security concerns. Also excluded from the estimate is investment by drinking water systems to serve new or future customers.
Congressional options
The CBO report offered lawmakers policy options on repairing and maintaining local water utilities, but gave no specific recommendations.
The report noted that giving private systems access to federal funds on equal footing with public systems may not fix the problem.
"On the one hand, balanced treatment could result in some cost savings if private ownership can reduce a system's costs in some cases and local decision makers can correctly identify those cases. On the other hand, increasing federal aid tends to increase investment costs," CBO said.
To help balance the federal government's role, Congress could modify the Clean Water Act to make private systems eligible for loans from the state revolving funds. There are also various tax incentives that could be considered based on the Environmental Protection Agency's Environmental Financial Advisory Board. These include: exempting bonds issued for water systems from the federal limits on the amount of private activity bonds (PABs) issued in each state; exempting interest earned on those PABs from the individual alternative minimum tax and partially exempt it from the corporate AMT; increasing opportunities for PAB issuers to benefit from arbitrage profits (those earned by investing PAB proceeds at a rate above the bond's own yield) by allowing issuers a full two years to spend their bond proceeds; and allowing on-time refinancing of PABs up to 90 days before redemption of the original debt.
Congressional outlook
What the new Republican-controlled Congress will be inclined to do on the issue remains an unanswered question. There is speculation that the White House's recent decision to name a new economic team may help to build congressional momentum for a more ambitious tax cut plan, including reforms to the AMT that could benefit private water systems.
Regarding infrastructure funding, congressional sources say it's too soon to speculate on whether the issue will result in legislation in the 108th Congress. Key committee chairmen in both the House and Senate are awaiting instructions from party leaders on how to proceed with the issue. Politically speaking, the most important change is in the Senate, which is now back in Republican control.
What is fairly certain is that last year's water funding bills will have to be dramatically retooled to win passage, particularly on labor issues which helped kill major water funding proposals in the House and Senate. Republican leaders say they remain adamant they will not accept legislation that includes prevailing wage requirements.
UN Declares Water a Human Right
The United Nations Committee on Economic, Cultural and Social Rights has agreed to designate water as a human right, the US State Department reported in late November.
UN officials said that the committee's decision means 145 signatory countries will now be obliged to progressively ensure their own populations have unfettered access to safe and secure drinking and sanitation.
"The human right to water is indispensable for leading a healthy life in human dignity. It is a pre-requisite to the realization of all other human rights," the committee said.
According to the World Health Organization about 1.1 billion people worldwide do not have access to clean drinking water; and an estimated 2.4 billion do not have access to sanitation.
WHO officials said inadequate water and sanitation are largely behind diseases such as malaria, cholera, dysentery, schistosomiasis, infectious hepatitis and diarrhea which are associated with 3.4 million deaths annually. Inadequate water and sanitation is also a major cause of poverty and the growing disparity between rich and poor, the group said.
"Countries will be required to 'respect, protect and fulfill' individuals' rights to safe drinking water and sanitation. This is a major boost in efforts to achieve the Millennium Development Goals of halving the number of people without access to water and sanitation by 2015 — two pre-requisites for health," said WHO Director-General Dr. Gro Harlem Brundtland.
