Solving the Woes of Water Infrastructure

March 30th, 2006 by Leave a Comment

By Benita M. Dodd

One week after more than 600 people from around the nation participated in an Atlanta conference on how to fund sustainable water infrastructure, the federal Environmental Protection Agency announced its annual assistance to states and municipalities for water infrastructure topped $5 billion in 2006.

That brings to more than $57 billion the total funds distributed and more than 18,000 loans since the Clean Water State Revolving Fund began 20 years ago. The program, the largest federal funding program for wastewater infrastructure projects (such as treatment plants and collection systems), requires a 20 percent state match, and the states make low interest loans to utilities.

The problem, however, is that the nation’s water infrastructure is not just aging, it is failing, according to the American Water Works Association. The Catch 22 for utilities is conservation: Successful conservation measures reduce water use, but frugal consumers provide less revenue for utilities to repay loans or expand and upgrade service. The association identified the top two barriers to rate increases as politics (and politicians) and “the lack of public acceptance and understanding of the cost of water service.”

“By 2030, the average drinking water utility will pay three to 3-1/2 times as much on replacing pipes as repairs,” strategist John Luthy of the Futures Corporation told participants at the Atlanta conference, “Paying for Sustainable Water Infrastructure: Innovations for the 21st Century.”

Federal grant programs have created a “subsidized entitlement culture,” with local government rarely increasing tax revenues in anticipation of facility replacement, Luthy said.  The result is that consumers don’t appreciate the value of the service provided by government

At the same time, “We’re all pandering to the latest buzzword in seeking grants – watershed management, climate change,” admitted panelist Duane Smith, executive director of the Oklahoma Water Resources Board.

At a conference focusing on innovations for the 21st Century, there was a decided lack of innovative proposals as participants discussed the utility of the future. Panelists tackled the challenges for utilities – an aging infrastructure; increasing regulations; resistance to rate increases; a loss of institutional knowledge as the workforce ages and a fear of privatization, among others.

The solutions that panelists proposed as utilities move forward included better management based on a private sector model; expanding utility services to get funds from outside rate revenue; anticipation of retiring baby boomers bringing retiree fund investors into the risk-adverse industry and adding reservoirs; regionalization of utilities and outsourcing by smaller utilities.

It would seem a given that the best management practices based on a private sector model would come from the private sector, but little discussion focused on that option for the utility of the future. As was noted, utilities fear privatization. Andrew Kricun, depute executive director of the Camden County (N.J.) Municipal Utilities Authority, noted that the private sector goal is to maximize profits, while “we want to minimize costs in the public sector and improve environmental performance.”

Correcting inefficiencies, improving water quality, managing assets and reducing costs in the midst of an aging utility workforce and modern technology are a perfect fit for a profit-motivated private sector. Oversight and watertight protections by local government on behalf of ratepayers relieve the financial burden on government (a k a taxpayers), reduce the size of government and ensure compliance with environmental regulations

Today’s utility must focus on homeland security as well. Here, too, the private sector can step forward. Fire hydrants, for example have been identified by the federal Government Accountability Office as a vulnerability as part of the drinking water system. For that, homegrown solutions are available. Windsor Technologies of Peachtree City markets and installs an anti-terrorism valve for fire hydrants that was invented by Tom Davidson of Sunnyside, Ga., and has been installed throughout Atlanta to prevent injection of biological or chemical agents into drinking water through fire hydrants.

But, as Luthy told the Atlanta conference participants, “The reality is there’s not enough money to pay for all the things this country needs to do and wants.”

The role of the private sector in utilities in water services is growing as vital as its role in transportation. Public-private partnerships have proven successful and need a place at the table if consumers are to accept efficient, effective, improved service at reality-based prices without burdensome rate hikes and higher taxes.

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Benita M. Dodd is vice president of the Georgia Public Policy Foundation, an independent think tank that proposes practical, market-oriented approaches to public policy to improve the lives of Georgians. Nothing written here is to be construed as necessarily reflecting the views of the Georgia Public Policy Foundation or as an attempt to aid or hinder the passage of any bill before the U.S. Congress or the Georgia Legislature.

© Georgia Public Policy Foundation (March 30, 2006). Permission to reprint in whole or in part is hereby granted, provided the author and her affiliations are cited.

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