Expected Growth of US Water Infrastructure
The American Society of Civil Engineers (ASCE) recently gave the US a D grade for drinking water infrastructure and D+ for wastewater infrastructure. How can the richest nation in the world have infrastructure ranked so poorly on the world scale, and what investments are being made to improve our water networks?
Americans Want Better Infrastructure
A recent poll by The Value of Water Campaign shows that 80% of Americans feel that “rebuilding America’s infrastructure” is more important than almost any other issue facing the country, with only “strengthening the economy” being regarded as marginally more important.
| Issue | Percent of Surveyed Ranking "Very Important" or "Extremely Important" |
|---|---|
| Strengthening the economy | 81% |
| Rebuilding America’s infrastructure | 80% |
| Reforming our healthcare system | 77% |
| Increasing availability of high-quality childhood education | 72% |
| Ending the opioid crisis | 72% |
| Addressing climate change | 61% |
| Reaching a trade agreement with China | 53% |
| Reducing illegal immigration | 50% |
| Increasing funding for defense and anti-terrorism programs | 50% |
| Increasing the minimum wage to $15 per hour | 46% |
Not only do Americans support rebuilding the US infrastructure, but they are willing to pay for it. 84% of Americans support increasing federal investment to rebuild our pipes, pumps, reservoirs, treatment plants, and other facilities – to ensure safe, reliable water service for all communities.
Justifying the Investment
Americans’ desire to address infrastructure shortcomings are well-founded. According to a report by the ASCE, in 2019 the total capital spending on water infrastructure was $81 billion short of the need. If this investment shortfall is perpetuated a funding gap will remain. As capital needs grow this annual gap will grow to $136 billion by 2039. This spending gap is understandable given that the portion of infrastructure funded by the federal government has shrunk considerably in the last 50 years. In 1977 the federal government provided 31% of the capital investment in water and wastewater infrastructure, compared with just 4% in 2017. The rest has been left up to state governments and water utilities to shoulder.
The ASCE created a model to investigate the impact of continuing current investment trends for the next 20 years and found that no industry is insulated from disruptions to water networks. The most water-reliant businesses will spend a projected $250 billion in 2039 in costs related to water service disruptions. Unreliable water services have consequences that will impact the entire economy, leading to over $4.5 trillion in lost business sales, a $2.9 trillion decline in the gross domestic product (GDP) and 636,000 fewer jobs. Residential homes are not immune to this impact either. Without proper infrastructure investment, the costs to US households will be seven times higher in 20 years than they are today given the current rate of investments.
The ASCE also modeled a second scenario in which the nation meets the capital water infrastructure needs. Over 20 years, closing the water infrastructure gap would create 800,000 new jobs and generate more than $2,000 in higher wages per household. The entire economy would benefit as the US GDP grows by $4.5 trillion in 20 years. Closing the water investment gap not only brings enormous economic benefits, but it will also improve public health protection.
The Federal Response Provides Opportunities for US Water Utilities
President Joe Biden has supported a variety of clean energy and infrastructure plans. Most recently unveiled was a Senate Democrat plan to reinvigorate the U.S. economy by investing in infrastructure. This and other plans focused on the "clean energy economy" have been wide ranging. The initiatives focused specifically on water infrastructure are geared primarily toward two aspects: providing every American has clean drinking water and rehabilitating outdated water and sewer systems.
To combat potable water shortages, Biden has pledged to double federal investments in clean drinking water and water infrastructure with a particular focus on funding for low-income rural, suburban, and urban areas, especially those communities at high risk of lead or other kinds of contamination.
In addition, Biden has promised to increase federal funding for water technology research and to use the convening power of the White House to encourage private-sector innovation. New technologies present real opportunities to use existing water resources more efficiently and reduce the cost and required to generate new water supplies.
The administration also acknowledges that the vast majority of America’s drinking water and wastewater systems were built over 50 years ago, and in some cases critical water infrastructure is as much as 150 years old. For this reason, his infrastructure plan includes $110 billion to rehabilitate water and sewer systems.
Major investments have been proposed for the Clean Water State Revolving Fund, the Drinking Water State Revolving Fund, and USDA water programs to address the growing backlog of water and sewer projects. The administration has also promised to give states additional flexibility in providing communities with grants in hopes of unlocking new water and sewer infrastructure projects without burdening local ratepayers. Finally, the plan includes an increase in funding for the Water Infrastructure Finance and Innovation Act program which provides federal loans to support large-scale water infrastructure projects with national and regional significance. The administration hopes that these programs will provide the US with an additional 2.5 million new jobs.
How Lucasys Is Ready to Help
As water utilities prepare for additional government support, now is the opportunity to prepare accounting systems for the influx of capital expenditures. Lucasys has the consulting expertise to assist with a rapidly expanding rate-base and has the tools to leverage utility data once it is gathered. Our knowledgeable team of consultants has the experience to restructure and standardize tax and accounting systems to adapt to growing needs of the water utility industry. Now is the time to give concerted attention to existing systems to make sure a solid foundation exists to build upon once infrastructure construction is kicked into high gear.
For water utilities looking for insight on maintaining new types of property or those that want to validate the records they already keep, Lucasys can provide insights into the latest tax, accounting, and regulatory issues facing the water utility industry. To learn more about how Lucasys can help visit https://www.lucasys.com/solutions.