Presidential council advises privatization of water systems

President Joe Biden’s infrastructure advisory council is recommending privatization and long-term leases of water systems to help manage what the council warned is a looming crisis facing the nation’s aging water infrastructure.

The recommendations come in a 39-page report released Monday from the National Infrastructure Advisory Council, comprised of 30 state, local and private sector leaders who advise the president on risks to the nation’s critical infrastructure.

The council voted unanimously Monday to approve the report. Among its recommendations, the NIAC called for the creation of a federal water department or an equivalent cabinet-level agency to oversee a national strategy to shore up the nation’s aging water infrastructure. The water department would, among other things, work with public water system owners “to identify necessary infrastructure upgrades and determine funding plans that include local investments, national subsidies, and water rate increases, when necessary.”

Environmental engineers working at wastewater treatment plants.
Environmental engineers working at wastewater treatment plants.

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Climate change-driven extreme weather is pounding infrastructure that is already suffering from decades of “chronic underfunding and underinvestment.” Compromised infrastructure can exacerbate natural disasters, as seen most recently in the Maui, Hawaii, wildfire, where the local water system relied on a limited supply from surface water and groundwater.

“Water access in the U.S. is a slow-rolling crisis filled with a series of headline events but no coordinated response addressing the core or root cause issues,” the NIAC said in the report.

There are more than 150,000 public water systems in the U.S., 80% of which are publicly owned and operated by municipalities. The American Water Works Association estimates that most of the nation’s existing drinking water pipes must be repaired or replaced before 2040, ushering in a “replacement era that will dramatically increase costs to utilities and their customers,” the council said.

In 2019, total capital spending on drinking water and wastewater infrastructure at the local, state, and federal levels totaled $48 billion, according to a 2021 report from the American Society of Civil Engineers. Capital needs, meanwhile, totaled $129 billion, creating an $81 billion gap for that year alone.

The federal share of capital costs on water infrastructure fell from around 60% in 1977 to below 10% in 2020, the report said.

In light of the capital needs, the NIAC recommended the White House help to “remove barriers to new ways of funding water projects.” In particular, the President should enable “privatizations, concessions, and other nontraditional models of funding community water systems.”

The report notes that new public-private partnerships for financing and operations and maintenance are already emerging, including design-build-own-operate-and-maintain, or DBOOM, models.

“Industrial users are embracing third-party investors for [operations and maintenance] as well as direct ownership of water assets,” the report said. “The trend is also accelerating for municipal systems. By entering long-term contracts with service providers, water facility operators can reduce costs and improve efficiencies.”

Privately-owned water providers should also be able to tap Water Infrastructure Finance and Innovation Act loans and other federal grant programs, the advisors said.

The need for more money comes despite major investments from the Infrastructure Investment and Jobs Act in 2021. The IIJA allocated $15 billion to replace lead pipes, for example, but experts put the total cost of that project at around $60 billion, leaving a $45 billion gap.

Meanwhile, the Environmental Protection Agency is in the midst of crafting new rules setting limits on PFAS in drinking water, which is certain to create new unfunded mandates, the council said.

If the U.S. creates a national strategy that focuses on water conservation, recycling and energy efficiency, it could usher in a “golden age of technology,” the NIAC said.

“In implementing this plan, the nation can ensure efficient water management, alleviate stress on freshwater sources, and create a more sustainable and resilient future,” the council said.

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