Seeking infrastructure: Money for water by Barbara Champoux

Barbara Champoux, Champoux Law Group

As the August Series article, “Seeking Infrastructure: Letting the River Flow” (https://cre.nyrej.com/seeking-infrastructure-letting-river-flow-barbara-champoux/) notes, ensuring sufficient drinking water and properly treated wastewater and stormwater is essential to modern life and the nation’s economy:  preventing disease and protecting public health; protecting the environment; and providing critical services, such as firefighting and healthcare (hospitals), as well as services to sectors such as energy, food and agriculture, manufacturing and transportation systems.

But, our aging water infrastructure nationwide is rapidly deteriorating. Frequent incidents of combined sewer overflows into rivers and streams, and water main breaks in our largest cities, are visible manifestations of this problem. Local communities, primarily responsible for providing water infrastructure services, face urgently needed costly repairs, replacements and upgrades.

Analysts have estimated that over $2 trillion is needed over the next 25 years to restore and expand drinking water and wastewater/stormwater infrastructure, resulting in a significant “infrastructure gap” between levels of actual investment, and necessary investment, estimated by some to exceed $600 billion over such period.  While these are estimates only, most analysts agree that this “infrastructure gap” is huge, having profound implications for public health, welfare, the economy, and quality of life.  Local communities must significantly increase their water infrastructure investment to continue providing adequate water infrastructure services to protect public health and safety and maintain environmental standards, but face formidable challenges to overcome this “gap.” 

A variety of approaches have been proposed and implemented to bridge this gap.

For instance, the EPA’s Clean Water and Drinking Water State Revolving Fund (SRF) programs have been the largest sources of federal assistance to states and local communities for funding water infrastructure. EPA grants capitalization funds to states, which in turn provide low- or no-interest loans to local communities or utilities to pay for water distribution pipelines, treatment plants, sewer lines and similar infrastructure.

In 2014, Congress enacted “Water Infrastructure Finance and Innovation Act” (WIFIA), creating a five-year pilot program providing low-cost, long-term federal loans for major improvements to water infrastructure and water resources projects for flood control and navigation. WIFIA can finance up to 49% of eligible projects costing $20 million or more. Interest on WIFIA loans is based on long-term U.S. Treasury rates.

Through WIFIA’s repayment terms and Treasury interest rates, the federal government can lower the overall cost of borrowing for large water infrastructure projects, making local funds stretch further and accelerating water infrastructure improvements. Because this is strictly a loan program, modeled on the existing TIFIA program for transportation infrastructure, it should be budget neutral in the long run.

As discussed in a prior series article, TIFIA enables project sponsors to finance highway and transit projects that could not move forward as expeditiously and cost-effectively without federal credit assistance. Leveraging additional sources of investment has been fundamental to TIFIA’s success: a federal investment of less than $2 billion has backed more than $19 billion in low-cost TIFIA loans and spurred $72 billion in surface transportation improvements nationwide. It is hoped WIFIA will have similar success.

Barbara Champoux is principal at Champoux Law Group, New York, N.Y.