Paying for Clean Water

Rates, Funding & Community Affordability

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?

Funding

The Federal Government has substantially reduced its funding role over the years, leaving the burden almost entirely with local governments.  At the same time, there remains uncertainty whether the Trump Administration and Congress will be able to advance a significant new federal infrastructure funding initiative.  While the vast majority of funds invested in clean water infrastructure will continue to come from local sources, NACWA is committed to ensuring a continual federal funding presence – but is also focused on exploring other options with the private sector, which can successfully leverage private dollars.

  • Advance a Federal Infrastructure Bill – While NACWA is disappointed the Trump Administration and Congress have not yet engaged in serious infrastructure discussions, we believe the time is right for substantial infrastructure legislation.  NACWA is working hard to ensure this becomes a top policy priority in Washington, DC and that any infrastructure package has the highest possible funding level for water infrastructure.

  • 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 repeatedly targeted for cuts in recent years.  NACWA continues to press for increased funding to the CWSRF, including through innovative financing programs.  NACWA has worked hard to ensure SRF funding stays stable, despite other significant cuts to EPA from the Trump Administration and Congress.

  • 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. 

  • 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’ tax reform proposals 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.

Affordability

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 believes the Federal Government is the appropriate entity to fund this type of program, similar to the federal Low-Income Home Energy Assistance Program (LIHEAP), which helps low-income households afford the rising cost of energy bills and energy-related repairs.  Currently, many households in the lowest income brackets are spending well over the 2% of median household income (MHI) figure that EPA has determined is affordable to ensure compliance with federal requirements – an unsustainable situation.  Federal support for a low-income program is appropriate since many of the clean water investments made by local communities are needed to meet federal mandates.  It would also reaffirm the Federal Government’s original commitment under the Clean Water Act to partner with local governments in producing and managing clean water.

  • 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 MHI as the 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.  Although EPA has taken positive steps in recent years to acknowledge, in other contexts, that the guidance should look beyond MHI, updating the guidance is a critical next step.  Most importantly, the guidance must be untethered from MHI and must instead evaluate long term utility financial capability, based on a range of indicators.

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 reestablish the Federal Government as a critical partner in addressing low-income affordability needs; ensuring 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.