This article by Andrew Morris first appeared on the StrongTowns.org website on December 1, 2020
The fact that we need to ‘think locally’ about funding and maintaining our public water infrastructure, should ring eerily true to any Strong Towns thinker. A recent report from the US Water Alliance frames the root of the funding shortfall problem like this:
Forty years ago, the federal government contributed 63 percent of total capital spending on water infrastructure. Today, the federal government funds nine percent of our water infrastructure spending. In comparison, federal spending on transportation infrastructure remained constant over the same period. While the US water industry is still supported, in part, by tax-exempt financing and subsidized borrowing programs like [federally supported State Revolving Fund] loans, this subsidization does not approach the levels needed for reinvestment in our aging systems. A resurgence in federal funding for water is unlikely in the foreseeable future. Therefore, revenue from water, sewer, and stormwater rates and charges will continue to be the primary source of funds.
Figure 1 puts this history of federal versus local funding into perspective.
The challenge in finding local funding is compounded by the fact that higher funding levels are required to replace pipes, pumps, and treatment plants than for initial installation. There are several factors contributing to this phenomenon. First, construction and material costs are increasing at a faster rate than inflation. Enhanced environmental permitting requirements, increased property acquisition complexity, and more crowded right of ways shared by other utilities have also all contributed to rapidly increasing infrastructure maintenance costs.
Perhaps most troubling is the fact that much of our water infrastructure is nearing the end of its useful life. For example, in metropolitan Atlanta much of our water infrastructure was installed in the 1950s, ’60s, and ’70s during a period of significant population growth and suburbanization. And this problem is often even worse for other regions with even older infrastructure because many water and sewer systems have fallen behind on the annual, incremental investments needed to keep up with the rate of obsolesce of their infrastructure.
The solutions offered in the US Water Alliance Report, like understanding the full cost of service and pursuing rate increases, are essential and necessary first steps. However, when many water and sewer systems do the math, they may find out that their customers cannot afford to pay the very large rate increases that would be needed to fully fund system maintenance costs. For our water and sewer systems, which many regard as the greatest public health achievement of the 20th century, there are limits to how much water and sewer systems can raise their rates while ensuring essential water and sewer service remains accessible to all customers.
This problem is much more difficult to address for water and sewer systems serving areas with shrinking populations, increasing poverty, or both. The story of rural population loss and poverty in many areas is a well-known problem at this point, and rural water and sewer systems are struggling. Many urban areas have also experienced significant population declines for a variety of reasons. As highlighted by the Business Insider article “10 American cities that have fallen into decline” there are places like Cleveland, Detroit, St. Louis, and Pittsburgh that have lost more than half of their population since 1950.
With the US population growth rate continuing to slow, more cities are likely to see slow, stagnant, or negative population growth. An article from Brookings titled “US population growth hits 80-year low” provides perspective on this point. As CityLab recently reported on the spatial growth of poverty, “There are more communities living in poverty across U.S. metropolitan areas than there were four decades ago — and the neighborhoods that were already poor have even less now.”
So what can public water and sewer systems do beyond the necessary steps of accounting for their costs and raising their rates?
From a Strong Towns perspective, the answer is clear: we need to consider solutions that involve building more productive places. This means we need to ask how we can increase the amount of private investment without substantially increasing our public investment. To use the words of Chuck Marohn, the Founder and President of Strong Towns, “Our challenge now is not about expanding our infrastructure networks but making better use of what we’ve already built.” Building more productive places will increase water and sewer system revenues from new customers while adding few if any new liabilities. This is the opposite approach of the suburban experiment, which merely replicates the least financially sustainable aspects of our current development patterns and kicks the can down the road.
So can we make better use of what we’ve already built? The answer is clearly “yes” because, in many places, our existing water and sewer systems have excess capacity available to add new users without further public investment. A leading reason for this is substantial improvements in water efficiency. For example, based on data and analysis performed by the Metropolitan North Georgia Water Planning District, metropolitan Atlanta withdraws 10% less water today than in 2000, despite a 1.3 million increase in population. On a per person level, water use has also been declining significantly in metro Atlanta. As shown in Figure 2, per capita water use has decreased by 30%.
Reports like the Residential End Uses of Water, Version 2 from the Water Research Foundation confirm that the trend of declining per capita water use is something that is happening nationwide as well. While the levels of efficiency vary from state to state and region to region, water efficiency frees up capacity in existing water and sewer systems to accommodate new, infill development. In areas that also have declining population, there is likely to be even more excess capacity.
At the neighborhood or block level, this mean there is excess water and sewer capacity available in many places. This existing capacity can be used more efficiently by adopting land use polices that focus on reinvestment and incremental redevelopment in these existing neighborhoods and blocks. Incrementally adding density to our existing places in this way will, in turn, improve the economic fundamentals of operating a water and sewer system.
While public water and sewer systems may be part of a local government, they traditionally have not played a role in shaping future land use policy. This is a missed opportunity because, through a water and sewer system’s efforts to fully account for its costs, it will have unique insights on what types of development patterns will help (or hinder) its efforts to maintain and replace its water infrastructure. In other words, development in areas with excess capacity is as close to free as the proverbial free lunch gets.
Water and sewer systems and local policymakers need to think more holistically about our backlog of water infrastructure maintenance needs and how our development policy choices affect our ability to reinvest in these critical assets. Specifically, water and sewer systems can become more active participants in land use policy by:
- Identifying areas where water and sewer systems may have excess capacity;
- Analyzing how future development patterns will affect a water and sewer system’s financial solvency;
- Outlining how land use policies that favor reinvestment and redevelopment in these areas increase water and sewer system revenues using existing water infrastructure;
- Sharing the above information with land use policy makers as part of local comprehensive planning and zoning map updates.
We can change water and sewer system policies to support the decisions of land use policy makers by:
- Evaluating whether impact fees, which are charged to pay for increasing water and sewer system capacity, should be reduced or waived in areas with excess capacity;
- Streamlining permitting and administrative requirements for incremental redevelopment such as accessory dwelling units, duplexes, and quadplexes; and
- Establishing charges for maintaining water infrastructure serving vacant properties to ensure speculators either pay for their share of the system’s cost or sell to someone who will reinvest and use the property.
The US Water Alliance is right to focus on full cost accounting and increasing rates to pay for much needed maintenance of our water and sewer systems. But, we need to go further because many of our places are not productive enough to support the high rates needed to pay for this maintenance. We need to apply Strong Towns thinking to ask how we can make our places more productive and better use our existing infrastructure. The best way to do this is through reinvestment and incremental redevelopment in areas with existing excess capacity. Water and sewer systems need to share this insight and the underlying information regularly with land use policy makers.