How Cash-Strapped Utilities Can Finance Infrastructure

Is there an answer for the rising cost of improving the nation’s water and wastewater infrastructure?

Patricia Buckley, director for economic policy and analysis at Deloitte, addressed the question plaguing municipalities and water companies across the country in a recent podcast released by her firm. She noted that water main breaks in the U.S. cost about $2.6 billion dollars per year, which is multiplied many times over as a total cost to the economy since businesses and households have to pay for damages.

Buckley delivered the bad news first: “There’s no simple solution.”

Nevertheless, she offered a number of options that may be helpful. Innovation in pricing structures is one useful component, she said.

“One of the solutions is going to lie in moving away from usage, which is how the majority of your billing comes to you, based on how much water you’re actually consuming, to more a fixed fee—because the fixed fees need to be [sufficient] to provide for the infrastructure,” she said.

“There are obviously many different ways of doing this, but the bottom line is more water is needed. There’s some pretty good innovation in some of the pricing structures going on,” she continued.

Buckley and her colleagues Lester Gunnion and Will Sarni noted other financial opportunities for water utilities in an analysis published by Deloitte.

“Options range from China’s policy of differential pricing for rich urban users to Australia’s approach of trading water as an economic commodity,” the analysis said.

Green bonds and public-private partnerships are two other options, according to Buckley. She noted that these bonds, “which are 100-year bonds, are another encouraging possibility for financing aging water infrastructure. In July 2014, the water authority in Washington D.C., DC Water, issued the first municipal water 100-year green bond to finance a portion of the $350 million DC Clean Rivers Project. The project is the result of a 2005 consent decree for violations of the Clean Water Act,” EfficientGov reported.

For similar stories visit Water Online’s Funding Solutions Center.