A Water Infrastructure Bank

A Fresh Solution
to an Aging Problem

High quality drinking water and sewer systems are essential to health, business, and quality of life. Federal, state, provincial and local governments invest heavily in projects that build and maintain water quality infrastructure. Traditionally, water quality investments are made with annual operating funds raised through user charges, municipal bond issuance, and loan and grant programs.

In 2004, U.S. municipalities made $46 billion in drinking water capital investments – an 85 percent increase from 1991. At the same time, a 2002 USEPA study concluded that the gap between the capital investment needs and current funding levels for drinking water infrastructure was $45 billion over 20 years, after accounting for normal rate increases and inflation. The magnitude of investments made and outstanding need is similar for wastewater.

U.S. policymakers and water industry professionals are concerned that investment needs are too high to be met through traditional means. They are considering alternatives that would provide low-cost financing and subsidies for local water systems while maintaining required long-term investment levels.

AWWA's Water Utility Council commissioned a study of various finance tools to assist water utilities. The result was the report, Financing Water Infrastructure: A Water Infrastructure Bank and Other Innovations (PDF file, 2M). Of all of the possibilities considered in the report, a new Federal Water Infrastructure Bank would have the most significant benefits. It is therefore considered in somewhat greater detail. This intermediary federal lending institution could lower borrowing costs for existing State Revolving Fund programs as well as other federal financing programs, such as the Agriculture Department's Rural Utilities Service.

In addition, it would be able to lend directly to large projects of regional and national importance, which may not be able to obtain low-cost financing through the SRF or other sources. This option could also be expanded from water infrastructure to other infrastructure types, such as solid waste and transportation.

This report also provides an initial analysis of how a Federal Water Infrastructure Bank could be constructed and managed. Additional review by experts in federal financing would help further refine this option and help develop an implementation plan. While there will be implementation hurdles, it is clear from the analysis that this option could potentially provide very attractive financing to project sponsors of all sizes and credit quality at a fraction of the cost of simply providing direct grants for required facilities.

For more information, contact AWWA Government Affairs or Public Affairs Staff:

Tom Curtis, Deputy Executive Director for Government Affairs
tcurtis@awwa.org or 202.628.8303

Tommy Holmes, Legislative Director
tholmes@awwa.org or 202.326.6128

Greg Kail, Director of Public Affairs
gkail@awwa.org or 303.734.3410

Deirdre Mueller, Public Affairs Manager
dmueller@awwa.org or 303.347.6140