A review of public water infrastructure financing in the United States

Abstract

The delivery of clean drinking water and the treatment of wastewater are critical public services, and in the United States, they are provided by a complex system of federal, state, and local governments. The process of water treatment and delivery requires significant investment in infrastructure both for initial capital requirements as well as the on‐going maintenance and operating costs. The quality of drinking water in the United States is, on average, relatively high, but according to the American Water Works Association, an estimated $1 trillion is necessary to maintain and expand service to meet demands over the next 25 years. The water infrastructure needs in the United States require both immediate attention and long‐term solutions, and the dollar cost is climbing rapidly. It remains unclear, however, where these funds will come from and how they will be allocated. The goal of this paper is to review the portfolio of financing options that exist for public entities responsible for the construction and maintenance of water infrastructure in the United States, including the municipal bond market, state revolving loan funds, federal grant and loan programs, public–private partnerships, and recent financing innovations. This article is categorized under: Engineering Water > Water, Health, and Sanitation Human Water > Value of Water Human Water > Water Governance

Measuring water affordability and the financial capability of utilities

“…The federal government transitioned funding from grants to low-interest or no-interest loans, with the federal contribution steadily diminishing but not ceasing (Copeland, 2019). As the federal government decreased funding, utilities became primarily responsible for financing water service infrastructure as well as operations (Greer, 2020;Tomer et al, 2019;US Water Alliance, 2017). By 2017, state and local governments were responsible for 96% of water utility financing (CBO 2018;Copeland, 2019;Greer, 2020) with local utilities generating revenue by charging rates for services and/or establishing taxes.…”

“…As the federal government decreased funding, utilities became primarily responsible for financing water service infrastructure as well as operations (Greer, 2020;Tomer et al, 2019;US Water Alliance, 2017). By 2017, state and local governments were responsible for 96% of water utility financing (CBO 2018;Copeland, 2019;Greer, 2020) with local utilities generating revenue by charging rates for services and/or establishing taxes. This means that over time, the financial health of local water utilities has become more dependent on the financial health of the local community (Spearing et al, 2020).…”

“…Since the early 2000s, water utilities have increased rates faster than inflation to cover rising costs needed for infrastructure repair and replacement (i.e., the "infrastructure gap" [AWWA, 2001]), addressing negative externalities (e.g., climate change and emerging contaminants), and meeting regulatory requirements with the expansion of regulations to protect public health (Beecher, 2020;Greer, 2020). The costs of providing water services have increased by 5% annually in recent decades (4.7% from 1996 to 2016 [Bunch et al, 2017] and 5.1% from 2014 to 2018 [AWWA, 2019a]).…”

Disparities in drinking water compliance: Implications for incorporating equity into regulatory practices

“…Borrowing ability is determined by credit worthiness, which in turn is affected by the number of customers and their wealth. The financial capacity of a water system has become especially dependent on community wealth as federal funding has declined for drinking water infrastructure (Greer, 2020). Differences in financial capacity are likely more acute in the water sector than other utility services; given the fractured and highly localized provision of drinking water.…”

Resilience in Water Infrastructures: A Review of Challenges and Adoption Strategies

“…The U.S. government enacted the Clean Water Act in 1972 and the Safe Drinking Water Act in 1974 to provide its citizens with safe and clean water [1]. Since then, attempts have been made to protect the water infrastructure and provide safe water for the healthy functioning of society.…”