Water Infrastructure Has A New Bottleneck — And It's Not Money

By Kevin Westerling,
@KevinOnWater

Billions have been approved, but millions remain idle. The EPA's new report on earmarks sheds light on the logjam.

For an industry that spent decades lamenting chronic under-investment, the current moment should feel like a breakthrough. Congress has funneled billions into water infrastructure in recent years through a combination of major legislation and targeted community project funding — earmarks, in common parlance — and the money, at least on paper, is there.

A newly released audit from the U.S. EPA Office of Inspector General (OIG), however, suggests the reality is more complicated.

According to the report, 58% of 291 reviewed earmark grants — roughly $269 million in awarded funds — had not drawn down any money within six months of the award.

The Gap Between Appropriated And Deployed

So why the delay? The OIG audit offers a partial answer.

Earmark-funded projects are often smaller, hyper-local, and politically directed. They can involve first-time federal grant recipients, communities with limited administrative capacity, or projects that haven't yet matured from concept to construction. "Shovel-ready" is rarely as straightforward as it sounds — even when the need is urgent.

So idle funds don't necessarily mean nothing is happening. Permitting, design, procurement, and stakeholder alignment all take time. But without documentation, we can't tell the difference between a project that's responsibly pacing itself and one that's quietly stalled. That distinction matters, both for prioritizing federal support and for maintaining the credibility of these funding streams with Congress.

The Bottlenecks That Money Can't Fix

The water sector has long framed its challenges as primarily financial. Now that funding is flowing, a different set of constraints is coming into sharper focus: administrative capacity at the local level, complex grant compliance requirements, procurement and contracting timelines, workforce shortages in engineering and construction, and coordination challenges among stakeholders.

Earmarks, by design, distribute funds broadly, often to communities without the internal infrastructure to quickly absorb federal dollars. That's both the strength and the challenge of the approach: it democratizes access to capital while simultaneously increasing the likelihood of delays.

What the OIG is highlighting isn't the delays themselves — it's the absence of visibility into them.

Are projects stalled by permitting? Are cost estimates outdated in an inflationary environment? Are recipients struggling with federal reporting requirements? Are local priorities shifting? Each scenario calls for a different response. Without data, the response is guesswork.

What Needs To Happen Next

The EPA has already begun to take corrective action in response to the audit's findings, and strengthening post-award monitoring is the right first step. But the corrective actions need to go further than updated guidance — toward genuine capacity-building for smaller or first-time recipients, streamlined compliance processes, and better communication between federal agencies and project sponsors.

In other words, implementation needs to be treated with the same seriousness as appropriation.