Report: Facing $1T In Water Infrastructure Costs, States Aren't Leveraging Federal Dollars To Weather Coming Storms

With water infrastructure costs expected to exceed $1T, a new report shows that only a few states are adequately leveraging federal dollars to shrink the infrastructure funding gap. The new report released today by the Natural Resources Defense Council (NRDC), “Going Back to the Well” highlights cutting-edge financing strategies for states to better fund the water infrastructure serving millions of Americans.

“Despite the looming funding gap, states aren’t thinking about how to meet that future need and are essentially funding water infrastructure the way you or I would manage our checking account,” said Rob Moore, Director of NRDC’s Water & Climate Team. “Each year, they just add up how much EPA gives them, plus a small state match, and that’s the amount of assistance they plan provide to help communities fix their drinking water and sewer systems. That’s not going to cut it.”

“Using more creative financial tools, like issuing bonds and using their SRFs to issue loan guarantees could greatly expand infrastructure funding. Those increased funds could determine which states are prepared to weather the coming storms,” said Moore.

States have accepted tens of billions of dollars in federal assistance to set up what are known as Clean Water and Drinking Water State Revolving Funds (SRFs). But most states are doing very little to grow the amount of financial assistance they can provide. NRDC’s new report shows how states could maximize their State Revolving Funds and provide more financial assistance to support communities’ water infrastructure needs.

EPA estimates that $745B is needed just to meet and maintain existing public health and environmental standards. Another $448 to $944B will be required to adapt water systems to deal with flooding, sea level rise, droughts, and other impacts of climate change. For example, 2012’s Hurricane Sandy caused more than $5B in damage to wastewater infrastructure in New York and New Jersey.

In addition to taking federal dollars, states are allowed to issue bonds to increase their SRFs’ financial capacity, as well as issue loan guarantees to provide credit assistance for water infrastructure projects, making it easier for communities to secure private financing.

However, the vast majority of states do little to expand the financial capacity of their SRF programs. Only New York, Massachusetts, Ohio and Indiana have regularly leveraged their SRFs through the sale of bonds and steadily increased the capacity of their programs. Twenty-eight states have not issued any bonds to expand their SRF financing. Most states have done relatively little. Through 2015, even states like Wisconsin and Pennsylvania, which have relatively large SRF programs, had done little to grow their SRFs using their own resources, instead relying on the incremental growth afforded by annual federal assistance.

NRDC has identified four actions federal and state governments can take to help close the funding gap to improve the nation’s water infrastructure

• Congress should triple appropriations for the Clean Water and Drinking Water State Revolving Funds (SRF) from the current level of $2B to $6B annually.
• States should make loan guarantees available to more easily and cheaply finance drinking water, wastewater and stormwater projects.
• States should leverage additional funding for their SRF programs by issuing bonds.
• Congress should allow states that increase the funding of their SRFs to provide additional subsidized assistance in order to meet the needs of low-income communities and catalyze investments in projects that are currently underrepresented in SRF portfolios.

Additional Resources

• States Need to Go Back to the Well and Leverage SRF Dollars (NRDC, 2018).
• Using State Revolving Funds to Build Climate-Resilient Communities (NRDC, 2014).
• New York’s Plan for Post-Sandy Wastewater Infrastructure Projects Doesn’t Go Far Enough to Promote Resilience (NRDC, 2013).
• The Need for Flood Protection Standards (NRDC, 2015).

About The Natural Resources Defense Council (NRDC)
The Natural Resources Defense Council (NRDC) is an international nonprofit environmental organization with more than 3 million members and online activists. Since 1970, our lawyers, scientists, and other environmental specialists have worked to protect the world's natural resources, public health, and the environment. NRDC has offices in New York City, Washington, D.C., Los Angeles, San Francisco, Chicago, Bozeman, MT, and Beijing. For more information, visit www.nrdc.org.