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Large Costs Loom for Upgrades to U.S. Water Infrastructure

The U.S. water infrastructure system needs expensive upgrades in the next decade, but many states and localities have failed to set aside the funding or come up with a timeline to make them happen.

By Jim Malewitz

Buried beneath soil and cement, the thousands of miles of aging water pipes, storage tanks and distribution systems that carry water to homes and businesses most everywhere are rarely thought of — unless toilets stop flushing and taps stop flowing.

For tens of thousands of residents in Maryland’s Prince George’s County, water infrastructure was front and center this week as local water officials narrowly averted what was described as a catastrophe: a days-long water shutdown during the year’s hottest week.

Those prospects set off a mad-dash to hoard water in bathtubs and bottles and sparked worries that some people would be left with few options.

Though officials, through a last-minute plan, have kept water running while repairing a 48-year-old water main that was primed to explode, water experts say the episode highlights the crumbling— and underappreciated— state of America’s water infrastructure.

“It’s an incident that brings out-of-sight, out-of-mind issues to the surface,” Tom Curtis, deputy executive director of the American Water Works Association, said of the near-shutdown. “This problem doesn’t get any better without more investment.”

Engineers and others have been harping on the issue for years, as the U.S. continues to put aside fewer dollars into all infrastructure — including roads, bridges and energy grids — than many of its peers. But for water and other systems, key questions often go unanswered: Who is going to pay, and how?

The issues plaguing American water infrastructure are simple, as experts describe them: Systems are old and need replacing. Most pipelines were laid during the booming 1940s, 1950s and 1960s and were typically constructed of cast iron that corrodes and turns brittle over the years. A sizeable slice is even older; some of today’s failing pipes are more than a century old.

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“We can’t live much longer on our grandparent’s investments,” Curtis said.

Consider Baltimore City, Md., where more than 1,400 miles of water pipeline were installed between the 1910s and 1960s. In the next four decades, it added only 116 more miles.

But fully upgrading those systems will take plenty of cash, a bill that will fall on reluctant ratepayers and governments.

The U.S. Environmental Protection Agency estimates the nation’s 73,000-plus water delivery systems will need upgrades over the next two decades totaling about $384 billion, according to a survey made public last month (see chart for state-by-state breakdown). On a per-person basis, Arkansas, Nevada and Iowa have the costliest needs, according the data. The expected tabs are lowest in Tennessee, South Carolina and Rhode Island.

Other studies have pegged the need far higher. In a 2012 report that accounted for added demands due to population growth, the American Water Works Association estimates the need for upgrades at closer to $1 trillion, with the biggest price tags in the rapidly-growing West and South. The numbers don’t include wastewater treatment upgrades, which the group says will cost just as much.

Jim Taft, head of the Association of State Drinking Water Administrators, said both of those studies provide helpful windows into what states and localities are facing. “Whether it’s $380 billion or $1 trillion, there’s a vast difference between what’s required and what’s appropriated.”

Local Funding

The majority of water funding is local, mostly from the monthly rates users pay. But those rates, some utility officials say, have long stayed artificially low.

With that in mind, regulators in at least 11 states now allow investor-backed water utilities — about 12 percent of those in the U.S. — to tack onto bills extra fees, called cost-trackers, to pay for upgrades.

In Pennsylvania, the first state to allow cost-trackers for water companies, regulators say the move has paid off. “In 15 years, they’ve been able to modernize their system and customers haven’t been hit with rate shock,” said Robert Powelson, chairman of the state’s public utility commission.

Before trackers came on board, utilities would replace an average of eight to 10 miles of pipeline each year, Powelson said. Since then, that’s increased more than ten-fold.

But hiking rates, however, is rarely a popular move. The growing use of trackers — for aging gas and electric systems, too — has rankled consumer advocates, who say companies are shirking their basic responsibility to keep infrastructure up-to-date.

What’s more, these advocates say, letting utilities claim the money upfront — outside the traditional ratemaking process — erodes incentives to invest efficiently. Once regulators approve the trackers, it’s difficult for them to scrutinize how that money is spent.

Federal Cuts

A small slice of water funding comes from the federal government, which has been tight-fisted in recent years. Much of those federal funds are given to states through EPA revolving funds programs, which have been stagnant over the past decade, save for a one-year boost from President Barack Obama’s stimulus package. This year, the funds are subject to the 5 percent across-the-board cuts known as sequestration.

Meanwhile, water officials worry about the implications of the president’s plan — should it somehow wriggle through Congress — to target wealthy taxpayers by capping exemptions on municipal bonds, a key tool to finance upgrades.

“That would have a significant chilling effect on state and local governments,” said Curtis, adding that the wealthy “are precisely the people that are buying those types of bonds.”

Brian Peteritas is a GOVERNING contributor.
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