With an aging infrastructure system, new regulatory drivers demanding more spending, and sewer and water rates now nearing $1,000 annually for some households, a vital dialogue has formed around one very basic question: who will pay for all of this?
The Federal Government has substantially reduced its funding role over the years, leaving the burden almost entirely with local governments. At the same time, the Trump Administration and Congress have been unable to advance a significant new federal infrastructure funding initiative. This means the vast majority of funds invested in clean water infrastructure will continue to come from local sources.
However, NACWA is committed to ensuring a continual federal funding presence and has been very successful over the past year in helping secure additional funding in key federal programs. At the same time, the Association is supportive of other options that can provide infrastructure funding, including opportunities with the private sector to leverage private dollars and innovative financing structures. At the end of the day, there will need to be multiple “tools in the tool box” to help meet the infrastructure funding gap.
Among NACWA’s priorities in the funding arena are the following:
- Ensuring Water Infrastructure is on Par with Other Infrastructure Sectors – While NACWA is disappointed the Trump Administration and Congress have not advanced a comprehensive infrastructure package, we are gratified that policymakers in Washington, DC now view water on a co-equal footing with other infrastructure sectors. As demonstrated in both the President’s proposed infrastructure plan and the proposal issued by Senate Democrats, water is front and center and viewed with equal importance. This is the result of years of hard work by the public clean water sector, and NACWA is committed to ensuring that water continues to be a top-tier infrastructure investment priority for the White House and Congress.
- Preserving and Increasing the Clean Water State Revolving Fund (CWSRF) – The CWSRF has been the primary source of federal clean water funding since the end of the construction grants program. It has not kept up with the need, however, and has been targeted for cuts in recent years by both the Obama and Trump Administrations. However, thanks to the hard work of NACWA and others, the CWSRF has actually been increased the last two years by Congress – most recently by $300 million. NACWA will continue strong advocacy for robust CWSRF funding.
- Water Infrastructure Finance and Innovation Act (WIFIA) – NACWA believes the WIFIA program is an important new financing option that will allow clean water utilities to leverage federal financial support of needed infrastructure investments. As EPA’s first round of WIFIA funding shows, clean water projects can receive substantial support through this program. And as recent Congressional appropriations show, there is strong support for this important funding tool.
- Protecting Tax-Exempt Municipal Bonds – Tax-Exempt municipal bonds have played a key role in helping municipal clean water utilities secure financing for infrastructure investment. They support tens of billions of dollars in clean and safe water investments annually. NACWA worked tirelessly with a broad coalition of groups to preserve this tax exemption in Congress’ 2017 tax reform law and will continue defending this valuable funding source.
- Public-Private Partnerships – In an era of constrained governmental resources, public clean water agencies are more interested than ever before in looking to the private sector for financing help. NACWA is supportive of public-private partnership (P3) arrangements when they help further the mission of public clean water utilities and are prudent for public utility ratepayers.
Many local governments and their utilities are facing huge affordability challenges. Some have shrinking rate bases, but even those with growing populations have increasing segments of their rate base that are unable to afford the rising costs of clean water. In short, local infrastructure investments are disproportionately impacting the poorest segments of communities across the country.
Addressing this low-income affordability challenge is one of the most critical issues for public clean water utilities, and requires two major initiatives:
- Low-income Rate Assistance – Utilities have worked hard to establish local community assistance programs, but the extent of the assistance these programs can provide is constrained by limited local funding sources. The time has come for a national low-income rate assistance program that provides support to the poorest households in a community to help ensure that utilities can set rates that reflect the true cost of clean water services. A national low-income water rate assistance program would also help incentivize clean water utilities to raise rates to ensure the revenue necessary to meet their infrastructure requirements, while at the same time lessening the burden on the poorest households.
NACWA has worked with key congressional champions on both sides of the aisle to promote this concept and is hopeful that marker legislation will be introduced on a bipartisan basis before the end of 2018. Looking forward to a new Congress in 2019, NACWA will continue to advance legislative support for this approach by working with multiple stakeholders across the water sector.
- Updating EPA’s Affordability Guidance – EPA’s 1997 Affordability Guidance has long been the Agency’s benchmark in determining affordability. This is especially true with federal enforcement actions and consent decrees, which are often the largest drivers of clean water infrastructure that any community undertakes. But the document, which was written in the context of combined sewer overflow compliance, has never been updated and is now grossly outdated and uninformed by modern economic conditions. Most concerning, it continues to rely heavily on median household income (MHI) as the key indicator of affordability.
NACWA has long pushed for revisions to the guidance and continues to do so aggressively in both a regulatory and legislative context. A recent report from the National Association of Public Administrators—to which NACWA contributed—echoes NACWA’s suggestion about how to reform the guidance. As a result of work by NACWA and others, EPA has agreed to revise its affordability documents, including making them more holistic to account for both drinking water and clean water costs. NACWA is also partnering with the American Water Works Association (AWWA) and the Water Environment Federation (WEF) on a project to propose new criteria for affordability that will influence EPA’s process.
The challenges of infrastructure funding and affordability concerns facing clean water utilities will only grow. But the public clean water sector is well-positioned to meet these challenges with a combination of innovative solutions, local resources, and a unified national advocacy effort to ensure consistent federal investment support. NACWA is, and will continue to be, a leader in this effort to ensure that every community can pay for clean water.