States Scramble to Repair Water Systems

American cities — including state capitals — are responsible for their own water systems. But when cities can’t afford to make urgently needed repairs, some states are stepping beyond their traditional roles to help finance upgrades to the nation’s aging water infrastructure.
September 9, 2010

When a cold snap hit the Southeast last January, water pipes broke all over Jackson, Mississippi, including those that fed the state capitol and the governor’s mansion. Like everything else in the city of 140,000, state government ground to a halt for three days.

To prevent a repeat occurrence, Jackson’s Democratic Mayor Harvey Johnson Jr. asked the state to underwrite a no-interest bond for $6 million to upgrade the pipes that supply drinking water to state buildings. Lawmakers agreed, but Republican Governor Haley Barbour and other top officials declined to approve the proposal, saying the water system in Jackson is Jackson’s problem.

Barbour’s office suggested the city seek the needed money from a state revolving fund that loans localities money for water repairs. Over the past 12 years, Jackson has borrowed more than $14 million from the fund. This time, the mayor wanted to lighten the burden on ratepayers by seeking an interest-free loan. “Although $6 million is a drop in the bucket,” says a city aide, “it would have helped us leverage borrowing in the capital market, leaving less that future ratepayers will have to pay.”

Technically, Jackson’s problem is, in fact, Jackson’s problem. Like most other cities, Jackson owns and operates its water utility and is responsible for maintaining it. States step in only when there’s an emergency, or to help disadvantaged communities that cannot afford to pay for safe drinking water systems.

But states have a lot to lose if repairs to local water systems are delayed for too long. Businesses suffer, diseases can spread and emergency repairs can be costly. As a result, some states started taking a more active role in repairing crumbling municipal water works — at least until the recession began in December 2007.

“States have been feeling pressure from localities in terms of more demand for funding,” says Rick Farrell, executive director of the Council of Infrastructure Financing Authorities. “Unfortunately, they’re not in a position to fill the void.” Instead, some states are looking at creative ways to maximize the federal money they themselves get for water facilities.

How big is the problem?

According to the U.S. Geological Survey, water main breaks result in the loss of up to 1.7 trillion gallons of clean water each year, at a cost of $2.6 billion. That loss is an issue of increasing concern as regional water shortages become more common. In addition to breakdowns in delivery, the failure of antiquated sewerage systems results in as much as 10 billion gallons of untreated wastewater flowing into the nation’s drinking water sources each year.

Although states primarily play the role of regulator — guarding watersheds against pollution — they also are charged with deciding which cities and communities should get low-interest loans for water infrastructure repairs.

States distribute about $6 billion per year through state revolving funds, which include federal grants plus a 20 percent state match. States manage the programs by recycling principal and interest payments from the localities that borrow the money and combining them with annual federal grants and state matching funds.

Created by the Clean Water Act of 1977 and expanded by the Safe Drinking Water Act of 1996, the money is intended to help localities — which own about 84 percent of the nation’s water utilities — bridge the gap between the rates they collect for water and sewerage and the cost of maintaining safe water systems. In many cases, states supplement the fund with further borrowing and, to a lesser degree, tax revenues. Mississippi makes $2.9 million in general revenues available to localities for emergency wastewater repairs that cannot wait for a loan processed from the revolving fund.

Other states have been more aggressive in supplementing local sewerage relief. California lawmakers this year approved $11 billion in bonds for water infrastructure, because of the devastating economic effects created by water shortages in farming regions.

Similarly, Pennsylvania has invested more than $1 billion in water infrastructure through general obligation bonds. “Infrastructure surely is not the sexiest word in the English language,” Pennsylvania Governor Edward Rendell wrote in a recent article, “nor does it command the attention of the media or the average person on a daily basis. That is until a bridge collapses, the water is contaminated, a levee breaks or a school is shuttered in your own backyard.”

Neighboring Maryland has a special fund to clean up its major water resource, the Chesapeake Bay. Levying a so-called “flush tax” on users of public sewerage systems and owners of private septic systems, the state created a wastewater cleanup fund that last year came to $203 million. In addition to using it for environmental restoration of the state’s watersheds, the money went for repairs to local wastewater systems, including those in the state’s largest city, Baltimore.

A growing gap

Although the state revolving funds and supplemental funding streams are important sources of capital, they don’t come close to covering the widening gap between the cost of maintaining the nation’s aging water infrastructure and the fees charged to the business and residential customers who use the systems.

At the heart of the problem is the fact that most cities and communities do not charge their customers rates high enough to cover the true cost of providing clean drinking water and removing wastewater. Among developed countries, the United States and Canada have by far the lowest rates for clean drinking water and sewerage.Yet despite a growing awareness that most U.S. water rates do not cover the costs of maintaining the infrastructure, most mayors are loathe to support unpopular water fee increases.

Clean water is assumed to be a permanent benefit, and guaranteeing it is not at the top of the average citizen’s list of public priorities. “Out of sight, out of mind,” says Steven Brown, executive director of the Environmental Council of the States, whose members oversee the state revolving funds. “Every state has multiple pots of funds they can use to assist local governments, but those are among the first budget cuts that get made,” Brown says.

This year, however, the most sought-after source of local water maintenance funding was the federal stimulus law. States distributed $6 billion in federal stimulus money to localities in the form of grants and low-interest loans. The money — which had to be fully committed by March 2010, according to stimulus rules — was quickly soaked up by local water authorities that had a long list of critical projects waiting for funding.

More than 240,000 water pipes break every year in the United States — about one every two minutes, according to the U.S. Environmental Protection Agency. Without adequate funding to replace aging pipes, the number can be expected to grow. A patchwork of concrete, iron, steel, and even terra cotta and wood makes up the nation’s 54,000 separate water utilities. With some sections more than 200 years old, the hidden network is decaying, cracking and springing leaks beneath city streets at a rapidly increasing rate.

As it turned out, Mississippi wasn’t entirely unconcerned about the Jackson water problem hampering state government. The state Department of Transportation decided to use its own money to drill a well right outside its main office near the Capitol building in downtown Jackson. That well will prevent future city water breakdowns from paralyzing the DOT. But it won’t help solve the rest of Jackson’s water problems.

By Christine Vestal, Stateline Staff Writer


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