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December 21, 2011
Shortfall in Water Infrastructure Investment Could Reach $84 Billion by 2020
    by Robert Kropp

The American Society of Civil Engineers warns of environmental and public health consequences of a failing water infrastructure, and maintains that private investment is crucial to reversing current investment trends.


In 2010, the cost of capital investment necessary to maintain and upgrade drinking-water and wastewater treatment systems in the US was $91 billion, according to the Environmental Protection Agency (EPA). However, only $36 billion in funding was provided to offset the social and environmental impacts of a degrading infrastructure.

According to a new report by the American Society of Civil Engineers (ASCE), potential impacts of failing drinking water infrastructures include water disruptions, impediments to emergency response, and water shortages that could result in public health issues.

As for the nation's wastewater treatment infrastructure, the report continues, aging pipes and inadequate capacity has led to "the discharge of an estimated 900 billion gallons of untreated sewage each year."

As troubling as EPA's 2010 assessment is, ASCE projects that the shortfall in funding water infrastructure is likely to get worse, if current investment trends persist. By 2020, the report points out, "the investment required will amount to $126 billion…and the anticipated capital funding gap will be $84 billion." By 2040, the funding gap will be $144 billion.

The effect of the $84 billion shortfall in investment will result in increased costs of $206 billion for businesses and households, the report states, as a result of which as many as 1.4 million jobs will be at risk. In addition, "Average annual losses in GDP are estimated to be $42 billion from 2011 to 2020 and $185 million from 2021 to 2040."

"There are multiple ways to partially offset these negative consequences," the report concludes, all of which involve costs. "These solutions will require actions on national, regional, or private levels, and will not occur automatically."

Historically, federal funding has played the central role in funding water infrastructure construction and maintenance. And even as Congress obsesses over budget deficits, spending on infrastructure "can both create short-term construction jobs and improve the foundation upon which the nation's economy rests," the report states.

But federal funding alone will be insufficient to effectively address the issues, and since the 1970s local and state governments have played an increasing role in infrastructure investment. Municipal water systems are typically funded by bond issues, and provide investors with a fixed-income opportunity to satisfy their community investment missions.

Furthermore, as the report points out, approximately 10% of the nation's public drinking water systems are privatized, allowing for another avenue for community investment.

 

 
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