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The Business Roundtable releases a new report this week titled “Back in Business: A Blueprint for Renewing America’s Infrastructure.”  Here is what the report has to say about rebuilding our nation’s water infrastructure:

DRINKING AND WASTEWATER INFRASTRUCTURE

Well-maintained drinking and wastewater infrastructure systems are necessary for creating healthy and economically vibrant communities. They provide families with clean drinking water; reduce pollution in rivers, lakes and oceans; and prevent sewage overflows that would harm public health and wildlife. Despite its critical importance to the most basic activities of everyday life, drinking and wastewater infrastructure across the country is aging, fragmented and strained. Many of these systems were built in the early to mid-20th century, and their assets are approaching the ends of their useful lives. Roughly 240,000 water mains break in the United States each year, leaking billions of gallons of treated drinking water worth approximately $2.6 billion.

More than 56 million new individuals are expected to be added to wastewater treatment systems within the next two decades.

A renewed commitment is needed to rebuild old systems and build new capacity to support growing demand, mitigate future risks and strengthen local water markets. More than 56 million new individuals are expected to be added to wastewater treatment systems within the next two decades, and accommodating this additional demand will require an estimated $271 billion in additional funding. Climate change — including more severe droughts and more frequent extreme weather events — will place additional strains on infrastructure installations and require systems to expand and adapt.

Despite these urgent needs, current funding is extremely constrained, and alternative financing sources must be explored. Less than 5 percent of federal infrastructure spending supports drinking and wastewater systems, and the vast majority of U.S. water systems are owned and operated by municipalities, which lack the resources necessary to make capital-intensive investments in maintaining, replacing and upgrading assets. In fact, there are roughly 56,000 community water systems, 19,000 wastewater pipe systems and 14,000 wastewater treatment facilities across the United States. Within this context, policy changes should prioritize improving the stewardship and management of existing resources, incentivizing market efficiencies, and removing barriers to outside sources of financing.

Policy Recommendations

  • Incentivize utility consolidation. Consolidating the thousands of fragmented water management systems across the country would significantly improve system efficiency and performance and should be incentivized according to the following:
    • Expand state revolving fund (SRF) eligibility to include prefeasibility studies. Currently, entities that wish to explore consolidation are ineligible for SRF funds. Providing a financial incentive could prompt more utilities to undertake the data collection and exploration processes necessary to make an informed decision regarding consolidation.
    • Set aside a portion of SRF money to exclusively fund consolidation. Currently, utilities interested in consolidating are forced to compete with every other type of project for funding.
    • Give entities that are out of compliance with environmental laws and regulations the option of choosing to consolidate instead of facing enforcement action.
  • Accelerate the adoption of innovative technologies. Local municipalities are understandably risk averse when it comes to adopting new technologies, despite their potential to improve the effectiveness and efficiency of water treatment and management processes. The federal government should incentivize the adoption of these technologies by establishing a “technology test-bed” program to evaluate, demonstrate and approve new approaches. Such a program could be funded by the private sector under federal regulatory oversight, funded by the federal government with participation from the private sector or run as a P3.
  • Require risk-based asset management. The government should require risk-based asset management plans from all water and wastewater systems that receive federal funding. The current regulatory approach is built around an overly simplistic age-based approach to replacement timelines. By contrast, a risk-based approach would evaluate which assets are most likely to fail regardless of age. This approach would ensure that limited resources are used more efficiently and strategically and would reward innovation in system design, delivery and maintenance.
  • Increase funding for Water Infrastructure Finance and Innovation Act (WIFIA) programs. Because of the extremely low default rate for water infrastructure projects, WIFIA is estimated to leverage funding at a ratio of at least 50 to 1. Consistent and sufficient funding for such an efficient program will accelerate investments in our nation’s water infrastructure by providing attractive low- interest loans for regionally and nationally significant projects — in the same way that the highly successful Transportation Infrastructure Finance and Innovation Act (TIFIA) program has increased access to financing for transportation projects. Finally, the Administration should expand the use of WIFIA to agencies beyond the U.S. Environmental Protection Agency — such as the Bureau of Reclamation — and initiate the program at the U.S. Army Corps of Engineers as Congress intended.
  • Increase access to innovative financing sources for water infrastructure projects. The government should lift restrictions on Private Activity Bonds (PABs) for water projects and make drinking water, wastewater and drainage projects eligible under any potential national infrastructure bank proposal. Existing state infrastructure banks should likewise expand eligibility for water projects.