Most estimates we’ve read put the price tag to overhaul the nation’s aging water infrastructure at $1 trillion over the next 25 years.
Now here’s the flipside of the issue: Water prices are expected to rise more than 40 percent in the next five years to, in part, cover the costs of replacing the piping that brings us clean water and takes away wastewater.
As a result, almost 41 million households – a third of total U.S. households – would be hard pressed to pay their water bills, according to research from Michigan State University.
The researchers used an EPA benchmark that recommends water and wastewater service not be more than 4.5 percent of a household’s income.
Using that affordability criteria, the researchers matched it with U.S. Census figures, national water rates and income data, and found evidence throughout the country of people who were either “at risk” or at a “high risk” of being unable to afford their water bills as water prices continue to rise.
The price projections are relatively conservative – based on increases to water rates that have already happened between 2010 and 2015, and coupled with the trend of flat income growth.
States with the highest proportion were Alabama, Arkansas, Kentucky, Louisiana and Mississippi. In Mississippi, nearly 74 percent of the state was either high risk or at risk. The problem is not limited to rural areas either. Researchers also found that 81 percent of the total high-risk spots were located in metropolitan areas.
In cities across the country, water affordability is becoming an increasingly critical issue. In Detroit, mass shut-offs terminated water service to 50,000 households since 2014. In Philadelphia, 4 out of 10 water accounts are past due.
The researchers add that there are plenty of caveats to their report. There are quite a few ways other than the EPA recommendation to assess the relative affordability of water. Water rates, themselves, are highly variable within metropolitan areas. Incomes within census tracts are also highly variable, too.
Then again, the researchers also referenced socioeconomic issues that add up to make the at-risk demographic even more at risk of not being able to bear extra expenses for water.
But while the research puts the spotlight on the disenfranchised, there’s plenty of other evidence showing that water bills are dramatically increasing around the U.S. for everyone.
“Unaffordable water bills also impact customers for whom water is affordable via higher water rates to recover the costs of services that go unpaid by lower income households,” says Heather A. Mack, the lead researcher of the MSU study.
The Circle of Blue, an international network of journalists and scientists that reports and presents information on water-related news, has been tracking water rates since 2010.
According to its latest figures, water rates in 30 large U.S. cities climbed on average 54 percent since 2010. In some places, such as Austin, Texas, water bills shot up more than 150 percent.
A closer look at the numbers shows how unpredictable the increases are. Between 2016 and 2017, the national average was only four percent. Then again, rates went up double-digits in Atlanta, Las Vegas and San Francisco between 2011-2014. And between 2011 and 2012, rates increased 25 percent in Chicago.
The economics of setting water rates isn’t too hard to figure out; find that sweet spot between rates low for consumers, but sufficient to recover the large fixed costs of building and maintaining infrastructure. And of course the key facet is to spread out the costs to make the whole model sustainable.
That sweet spot, however, is getting more difficult to pin down.
“The challenge for utilities today is threefold: earn enough revenue to repair broken pipes, keep water affordable for the poor and do so while selling less of their product,” writes Brett Walton for Circle of Blue. “Those challenges intersect in a utility’s rates. The adjustments that utilities – from Austin and Atlanta to Denver, Philadelphia, and San Antonio – are making are evidence that old formulas are inadequate to meet changing financial and social pressures, be they outdated infrastructure, water scarcity or affordability.”
According to Mack, a hidden pressure on urban water systems is slow or even declining population growth, which reduces the customer base over which the high fixed costs of water services are distributed, and places increasing pressure on household water bills. This is the case in Detroit where a declining population has left fewer customers to pay for water. Another critical issue is the suburbanization of people, which also leaves providers in core central city areas with fewer customers to pay for water services.
“This means that for cities across the United States, shrinking populations in particular metropolitan areas and in downtown areas, combined with other pressures on urban water systems, present a perilous future for water utilities and their customers,” Mack writes.
Much of these sentiments square with testimony an official from the American Water Works Association (AWWA) gave on May 20 before a Congressional subcommittee on updates to the Safe Drinking Water Act.
Speaking before the U.S. House Subcommittee on the Environment during Infrastructure Week, the AWWA’s Water Utility Council Chair Kurt Vause presented the association’s suggestions related to funding, utility management and regulatory compliance.
In his testimony, Vause referenced the AWWA’s 2012 report, “Buried No Longer: Confronting America’s Water Infrastructure Challenge.”
In it, the AWWA discusses a challenge that, apt to the report’s title, is out of site and out mind.
“Much of our drinking water infrastructure, the more than 1 million miles of pipes beneath our streets, is nearing the end of its useful life and approaching the age at which it needs to be replaced,” states the report’s introduction. “Moreover, our shifting population brings significant growth to some areas of the country, requiring larger pipe networks to provide water service.”
And this bit of cheery news was brought to us five years ago.
In fact, more than a decade ago, the AWWA announced in another report that the country was entering into the “replacement era.”
“In the years ahead, all of us who pay for water service will absorb the cost of this investment, primarily through higher water bills,” states this report, “The Dawn of the Replacement Era.” “The amounts will vary depending on community size and geographic region, but in some communities these infrastructure costs alone could triple the size of a typical family’s water bills.”
Other communities will need to collect significant “impact” or development fees to meet the needs of a growing population. Numerous communities will need to invest for replacement and raise funds to accommodate growth at the same time. “Investments that may be required to meet new standards for drinking water quality will add even more to the bill,” the report adds.
Vause, speaking on behalf of AWWA’s 50,000 members, spoke on the need to improve the Drinking Water State Revolving Fund (SRF) to make it easier to use to help finance projects of consolidation for efficiency of operations and regulatory compliance. He also encouraged improved tracking of SRF capitalization grants to help that program become more efficient and flexibility in repayment of SRF loans to assist particularly distressed communities.
Vause also encouraged Congress to provide fully authorized appropriations of $45 million in fiscal year 2018 for what’s called the Water Infrastructure Finance and Innovation Act (WIFIA).
Since available public funding is scarce, Congress in 2014 approved WIFA, a five-year pilot program focused on supporting large-scale projects that may be under-served by existing SRFs.
The AWWA is particularly keen on promoting WIFA to repair and replace water and wastewater infrastructure.
WIFIA lowers the cost of large water infrastructure projects by providing low-interest, long-term federal loans to communities. Congress has already appropriated $30 million total for the program but, as Vause noted, a fully authorized WIFA for the fiscal year 2018 “would support nearly $3 billion in needed infrastructure investment.”
For low-income Americans, Mack says that one solution is to restructure water rates based on income. This measure provides a certain number of gallons per month to customers for a set fee. If a customer uses more than the set amount, they pay a penalty or overage fee.
Meanwhile, public utilities provide most of us with water, but another answer to fixing nation’s water infrastructure is to privatize such services.
“From this perspective, privatization offers the option to each profits on water services, which may be used to fund other initiatives and balance city budgets,” Mack writes.
During his campaign, President Trump called for tax credits for private-sector invention into infrastructure of all types that would create $1 trillion is spending over the next decade.
But such companies tend to charge higher rates than public utilities. Take Atlanta, for example. The privatization of the city’s water service is one factor, according to Mack, behind its high rates. At $352.52 a month, Atlanta has the highest rates in the nation. Using the EPA criteria, households must make at least $86,805.
Simply put, we don’t pay the full cost of water; rich or poor, no one does.
“While studies have found that Americans are willing to pay more to maintain and ensure access to water resources,” adds Mack in her report, “this willingness to pay may conflict with their fundamental ability to pay for water.”