I read an interesting report released in late January that examined ways to leverage public funding and private financing to drive innovation and move the municipal water industry toward more sustainable and integrated management of water resources in the United States.
Among other suggestions, the report's authors said water systems must work toward full-cost accounting of water services; consider charging for "value-added" services; improve the capture and dissemination of performance data to drive efficiency; and consider consolidation of certain systems to enhance efficiency.
The report was the result of a meeting convened by the Johnson Foundation, in collaboration with American Rivers and Ceres. The meeting brought together a diverse mix of public and private water utility managers, investment managers, investors, municipal bond raters and underwriters, non-governmental organizations, foundations and other stakeholders.
Attendees agreed that transforming our water systems will require new financing tools. Participants identified several areas for focusing attention. Here are some examples from the report:
Expanding the pool of water service funding In many places, water utilities are partnering with other city agencies to coordinate infrastructure plans. As an example, permeable roadways and alleys laid by departments of transportation can benefit water infrastructure by reducing stormwater runoff and helping stormwater agencies comply with water quality standards.
Industrial customers can also be partners in financing system improvements. For example, Chevron Energy and multiple California utilities, including East Bay Municipal Utility District, supported the financing of wastewater treatment system upgrades and developed innovative water re-use systems to reduce the load on the local wastewater service providers.
For many systems, water treatment and delivery is their sole source of revenue. Yet water and wastewater carry embedded energy and nutrients that can be captured and offer the possibility of new sources of revenue for water utilities.
Ecosystems provide clean drinking water, often at a fraction of the cost of built infrastructure. Yet today those ecosystem benefits are not valued on utility balance sheets or reflected on income statements. The accurate valuation of the services those systems provide was recognized by participants as a "game-changer."
On-site stormwater management through green infrastructure and low-impact development is growing rapidly in the United States. Cities now realize that it's cheaper to capture and manage water where it falls. Some developers are also integrating non-potable rainwater and on-site treated wastewater for building cooling, toilet-flushing, and irrigation. This represents a significant shift from centralized, publicly-controlled water management and offers both challenges and opportunities for financing.
Similar private investments could also be developed for water efficiency retrofits and installation of closed loop water systems at the building and even neighborhood scale. Utilities have traditionally seen these as a threat to revenues, but these strategies can also be a tool for sustainable system management.
While all of these are interesting concepts, I know most water utilities work within tight funding guidelines that make thinking outside the box difficult if not impossible. But unless the economy improves for the better – and water suddenly earns a much higher profile when it comes to funding, perhaps it's time to break out of that box and look for alternatives.
If you want a more detailed look at the report and its suggestions, you can download a full copy here: www.ceres.org/resources/reports
James Laughlin, Editor
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