Public-private solutions to repair decaying water infrastructure

HARRISBURG, PA, Apr. 27, 2011 -- In a recent keynote address, Pennsylvania American Water President Kathy L. Pape proposed a number of public-private solutions to help tackle costly infrastructure challenges...

Apr 27th, 2011

HARRISBURG, PA, Apr. 27, 2011 -- In the keynote address to the 2011 Pennsylvania Infrastructure Summit, Pennsylvania American Water President Kathy L. Pape said today that expecting government bailouts is not a realistic, long-term solution to fix aging water and wastewater systems, which require tens of billions of dollars of capital investment. Instead, she proposed a number of public-private solutions to help tackle the costly infrastructure challenges facing many communities in the commonwealth and across the country.

In light of the massive federal debt and Pennsylvania facing a $4 billion budget deficit, Pape said adequate government funding is simply not available to replace aging pipeline, rehabilitate outdated treatment facilities or build new plants to comply with stricter water quality regulations. She noted that President Obama's proposed 2012 budget slashed approximately $1 billion from the Environmental Protection Agency's infrastructure funding.

"Looking to Washington or Harrisburg for a financial bailout is not the answer. The reality is that many communities are faced with tough decisions when it comes to investing limited dollars. Unfortunately, too many systems' capital needs have been neglected over time, unless a federal or state grant is provided," said Pape.

"We need to change this cycle of rewarding inefficiency, which leads to bad management practices," she said. "Government grants typically give higher priority to systems under consent orders for noncompliance with environmental regulations, thereby rewarding poor performance."

Appointed to the 2008 Governor's Sustainable Water Infrastructure Task Force, Pape said the panel found that Pennsylvania's water and wastewater systems need $36.5 billion for capital repairs and upgrades over the next 20 years. What's more, Pennsylvania's water and wastewater infrastructure earned a D-plus grade in the American Society of Civil Engineers 2010 report card.

Pennsylvania American Water provides water and wastewater services to approximately 2.2 million people in 36 counties across the commonwealth. To address aging infrastructure, Pape said the company invested approximately $200 million in 2010 alone for water system improvements, including the replacement of nearly 80 miles of water main. The company's capital investments between 2005 and 2010 surpassed $1 billion.

She advocated public-private partnerships to address the lack of government funds for infrastructure improvements. Although approximately 85 percent of water systems are municipally owned, the private sector has a long-standing record of bringing much-needed capital, efficiencies and innovations to municipal partnerships.

"We must open the way for new approaches, such as public-private partnerships and nontraditional funding mechanisms to leverage the power of the private sector," said Pape. "By reducing constraints on private sector investment, municipalities could access the resources they need to help their financially distressed water systems repair, upgrade and operate their facilities -- a true partnership.

"Although some people contend that this would allow private companies to 'own' water resources in the future, nothing could be further from the truth. Water is a public resource that will forever be regulated by the federal and state government," she said.

She also called for reintroduction of the federal Sustainable Water Infrastructure Investment Act, which would remove water and wastewater from limitations that have been placed on private investment through the use of private activity bonds. These bonds provide low-cost financing for water and wastewater projects. The legislation passed the U.S. House twice, but failed to reach the Senate floor for a vote in 2010. Caps placed on private activity bonds in 1986 have never been updated, and the lifting of state volume caps would enable local governments to tap into much-needed private sector capital.

The U.S. Environmental Protection Agency has reported that the nation's water utilities need $335 billion in infrastructure investments over the next 20 years to replace aging water infrastructure and comply with stricter water quality standards.

"Investing in reliable water service not only benefits the customers, but it also contributes to a community's economic well-being," said Pape. According to a study commissioned by the U.S. Conference of Mayors, every dollar invested in water and sewer infrastructure increases the Gross Domestic Product by $6.35 in the long term. For every new job in water and sewer, almost four other positions are added to the national economy to support that job, the same study shows.

Pennsylvania American Water, a wholly owned subsidiary of American Water (NYSE: AWK), is the largest water utility in the state, providing high-quality and reliable water and/or wastewater services to approximately 2.2 million people. Founded in 1886, American Water is the largest publicly traded U.S. water and wastewater utility company. With headquarters in Voorhees, N.J., the company employs more than 7,000 dedicated professionals who provide drinking water, wastewater and other related services to approximately 15 million people in more than 30 states, as well as parts of Canada. More information can be found by visiting www.amwater.com.

In 2011, American Water is celebrating its 125th anniversary with a yearlong campaign to promote water efficiency and the importance of protecting water from source to tap. To learn more, visit www.amwater125.com.

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