The Infrastructure Investments and Job Act (IIJA) passed in late 2021 included authorizing $35 billion in water infrastructure investments over the following five years, ending in 2027.
The heart of the IIJA bill that our industry uses for our projects was the Drinking Water and Wastewater Infrastructure Act of 2021 (DWWIA 2021), which authorizes water resource development projects across the country with a focus on upgrading aging infrastructure, addressing the threat of climate change, investing in new technologies, and providing assistance to marginalized communities. Investments were made to the U.S. Environmental Protection Agency’s (EPA) grant and loan programs, including the Drinking Water and Clean Water State Revolving Loan Funds, or SRFs, and the Water Infrastructure Finance and Innovation Act (WIFIA).
However, conditions have changed significantly from November 2021 when IIJA was signed into law. The rising cost of materials and labor, as well as general inflation, has led to significantly increased prices across the board – simply put, the funding approved by Congress and the White House will not stretch as far as originally envisioned.
For our industry’s projects, this is of course a major problem by itself, but unfortunately Washington seems to be failing to uphold the goals they set forth by not providing full funding as authorized in IIJA. Even President Biden’s budget request fell short, asking key programs be underfunded from IIJA levels. And Congress has done no better – since IIJA’s passage, SRF appropriations have fallen short of expected levels, and – while Congress has supported several key water infrastructure projects directly through Community Project Fund appropriations (“earmarks”) – these funds have been diverted from already allocated water funding, rather than adding to it.
At the same time, needs are higher than ever. According to the U.S. Environmental Protection Agency, the 20-year national drinking water infrastructure need for the United States as estimated by the 7th Drinking Water Infrastructure Needs Survey and Assessment is $625 billion. This is a 32% increase over the 6th DWINSA ($472.6 billion) and an increase of $152 billion in only five years. Those numbers are just for drinking water – we are currently awaiting the new estimated Clean Watersheds Needs Survey numbers for wastewater/stormwater. The previous analysis, conducted in 2012, found needs of $271 billion.
Taken together, it is likely that there will be funding needs of over $1 trillion over the next 20 years for upgrades and repairs to public water and wastewater systems. The funding gap is estimated in the hundreds of billions of dollars.
We’re the experts, so how does NUCA propose the problem be fixed?
Increased funding for water/wastewater programs.
At a bare minimum, water infrastructure program funding levels from IIJA should be maintained at the framework authorized in the legislation, and ideally increased to match current market conditions brought on by inflation. With inflation already cutting into value of investment a spending cut is unthinkable.
Start the legislative resource phases now.
Congress should consider thinking ahead about reauthorization of the CWSRF and DWSRF, as well as other critical water programs, when the runway ends in FY2026. Our members do not want to be in position of continued uncertainty over water funding level. We cannot afford to let SRFs be uncertain as they were in past reauthorization phases.
Be realistic about the resources demanded by a nationwide program.
Congress should also appropriate additional funding towards lead pipe replacement projects on top of funding for other drinking water projects – the only way to meet the commitment of replacing every line in use. 9.2 million lead service lines remain in use in U.S. cities, with 400,000 of those found at schools or child-care facilities. The IIJA allocated $15 billion for lead pipe remediation. However, while this funding is a good start, industry experts and environmental advocates estimate the actual cost of fully replacing all lead pipes in the U.S. is at least $43 billion and could be as high as $60 billion.
Be creative about the resources demanded.
Direct federal appropriations is a key part of the solution, but it is unlikely to close the gap on its own. Congress needs to be creative and look elsewhere for resources. Today, the federal tax code allows state and local governments to use tax-exempt bonds to finance certain projects that would be considered private activities. These bonds are known as Private Activity Bonds (PABs, or Exempt Facility Bonds). Congress uses an annual state volume cap to limit the amount of tax-exempt bond financing generally and restricts the types of qualified private activities that would qualify for tax-exempt financing to selected projects defined in the tax code.
Drinking water and sewer projects are eligible for these bonds, but there is currently a limit on how much can be financed annually using these bonds. These caps and restrictions artificially reduce the amount of resources available to states and municipalities for their local infrastructure needs. Lifting the cap on PABs will infuse hundreds of millions in private capital into water and wastewater projects.
NUCA members have been essential educators and advocates for America’s water infrastructure, but there is more work to be done. Our recent 2023 Washington Summit had these issues at the top of our agenda, and our members have successfully helped shine a light on the magnitude of America’s water infrastructure needs. Now, we need to continue the push – so if you aren’t already, please, get involved in NUCA National and your local NUCA chapter’s government affairs program.
Utility contractors will be responsible for carrying out the construction projects that will build and rebuild drinking water and clean water infrastructure. We need to take responsibility for advocating for the resources our communities need to complete the job.