November 26, 2012

Water Policy and the 2012 Elections

On November 7, 2012, the American Water Works Association (AWWA) issued a report considering the recent U.S. elections' ramifications for the water sector. AWWA notes that the federal government continues to wrestle with the problem of maintaining the nation's water infrastructure. Similar to transportation, diminishing federal resources have contributed to the shifting of water infrastructure funding onto state and local taxpayers, as witnessed in this past election cycle by political support for local and state bond measures for water and sewer investment.

CMAP's Policy Updates blog previously described the City of Chicago's efforts to close the funding gap for needed water infrastructure. Increasingly, this issue is tied to both jobs and the economy -- last year's failed federal America Jobs Act contained a proposal to create a national infrastructure bank that would have provided low interest loans for public infrastructure projects, and the budget sequester is anticipated to reduce U.S. Environmental Protection Agency financial support for state revolving loan fund programs, according to the AWWA report.

Given the post-election climate, the AWWA predicts that a proposed Water Infrastructure Finance and Innovation Authority (WIFIA) -- patterned after the Transportation Infrastructure Finance and Innovation Act (TIFIA) -- will be the most likely vehicle for federal investment in water infrastructure. The WIFIA would lower the cost of capital by allowing use of U.S. Treasury funds for financing of water infrastructure projects at low long-term interest rates without requiring additional appropriations from the federal government.

While the WIFIA is an important strategy to make large-scale water infrastructure investment more affordable for local communities, the AWWA continues to believe that local rates and charges are the best funding sources. Regardless of where funding for capital projects originates, communities must generate revenue to pay back loans for large infrastructure investment projects as well as to cover smaller day-to-day maintenance and repairs for our aging water systems. GO TO 2040 recommends that communities adopt full-cost pricing to help address the need for investment in water infrastructure at the local level. CMAP and the Illinois-Indiana Sea Grant will release a full-cost water pricing guide for local leaders this winter.