Having done more with less for so long, the water and wastewater industry finally is getting a needed injection of aid. The hundreds of billions of dollars destined for cities and counties under the American Rescue Plan Act of 2021 (ARPA) and the trillion-dollar Infrastructure Investment and Jobs Act (IIJA) offer a once-in-a-generation opportunity for state and local governments to invest in long-delayed water, wastewater and stormwater projects.
Unsurprisingly, aging infrastructure remains the chief challenge for the industry, according to Black & Veatch’s 2022 Water Report survey of more than 300 stakeholders across the water and wastewater landscape. Financial concerns also command top spots, with respondents pointing to funding and availability of capital (No. 5), justifying rate requirements (No. 6), managing capital costs (No. 7) and managing operational costs (No. 10) as major challenges.
Against this backdrop, utilities eagerly have been awaiting the new resources within the IIJA and the second tranche of ARPA money, with nearly 40 percent responding they plan to use the new state or federal funding to press ahead and accelerate capital projects, reflecting an urgency in making long-delayed upgrades to aging infrastructure. One-third were slightly less committal with their responses of “might or might not,” perhaps suggesting a slower approach to identifying goals, mapping out meaningful investments and engaging stakeholders throughout the process.
Yet, overall optimism is high, with a combined 95 percent of respondents expressing confidence that their organization would be able to make use of the new funding mechanisms. Half of them cast themselves as “extremely” or “very” confident.
Opening the Purse Strings
With increased money into the state revolving funds (SRF) and other programs through the IIJA — and ARPA money available to some cities and counties for water, wastewater and sewer projects — utilities have additional financial resources available. When polled on which sources of funding they have considered for capital projects, most utilities pointed to “other federal grant programs” as the primary option.
This is a large bucket, containing a range of government programs under the Federal Emergency Management Agency (FEMA), Food and Drug Administration (FDA) and U.S. Department of Agriculture (USDA), among others.
SRFs came in second. Established in the 1990s, this revolving fund provides loans and other assistance for eligible water infrastructure projects, with repayments and interest flowing back into the fund. Most of the new IIJA funding will come through two existing SRF channels: the Clean Water State Revolving Fund (CWSRF) and the Drinking Water State Revolving Fund (DWSRF). Each program will receive $11.7 billion over five years through the IIJA. Also of note are the new funds dedicated to lead service line replacement and PFAS, all of which will come through the drinking and clean water SRF programs, largely as grants and principal forgiveness loans.
FEMA programs were third-most noted: it’s worth pointing out that FEMA funding appears three times — under the first, third and last option (Building Resilient Infrastructure and Communities, or BRIC, which also is a FEMA program). With FEMA rating so highly, this suggests that utilities lean heavily on disaster money — from the next tornado, flood, wildfire, etc., — to fund their capital repair and replacements projects.
COVID Relief vs. the Infrastructure Bill
When it comes to which new funding sources utilities plan to pursue, COVID relief through ARPA dominated the top two spots, with ARPA’s allocated $350 billion for state and local fiscal recovery coming in at No. 1, followed by ARPA’s $10 billion for capital projects (Figure 7). This may be because as of the timing of this article, ARPA money already had been available for almost a year, whereas the new money into the SRFs will be available to states in the fall.
ARPA, also called the COVID-19 Stimulus Package, is the well-publicized $1.9 trillion economic stimulus bill passed in March 2021 to speed up the U.S. economy’s recovery from the impacts of the COVID pandemic and the ongoing recession. This was followed by two IIJA categories — $55 billion for water infrastructure and $46 billion for resiliency.
It is important to note that while all utilities have access to the new IIJA money, only certain utilities, cities, counties can access ARPA money for water and wastewater. Where states, counties and cities have had a budget shortfall due to COVID or have needed additional relief funding because of COVID, the money has gone to direct COVID relief. Only in some communities, where there is a budget surplus and/or the funding is not needed for COVID relief efforts, has the money been considered for water or wastewater projects.
The survey also found that a combined 78 percent of utilities said they plan to pursue funding from these new mechanisms, leaving 22 percent stating that they were not inclined to take advantage of the new programs. Why? Paperwork seems to the main reason; when asked about barriers, respondents blamed administrative burden, overly restrictive programs and a lack of awareness as their top three obstacles.
But most of the water industry would say that the processes required to apply for state and federal funding always have been considered administratively burdensome, requiring mandatory reporting, waivers, additional provisions and extensive paperwork.
For example, the CWSRF and DWSRF always have contained the American Iron and Steel provision that requires recipients to use iron and steel products produced in the United States. Historically there have been occasional waivers issued for water and wastewater treatment products that are not manufactured in the United States. The IIJA expands this provision to require any “manufactured goods” be sourced domestically, which is an extreme burden to place on utilities. Not only might this increase the cost of projects, it also could lead to significant delays due to supply chain challenges. Yet to be determined are what waivers and carve-outs may be available to utilities. For example, products made in the United States could be certified along with previously waivered products to expedite delivery and avoid impact to critical path delivery.
And it’s worth mentioning that the administrative burden isn’t only on the applicants; the increased volume of applications means that states may have to increase staffing levels to sufficiently address the incoming flood of paperwork. Without sufficient staff available, states may find possible delays and bottlenecks when it comes to processing, administrating and monitoring compliance.
Investing in Our Water
It’s not too bold to state that America’s water, wastewater and stormwater infrastructure needs a boost after decades of underinvestment. This new funding provides tens of billions of dollars to ensure clean, safe drinking water and critical wastewater and stormwater management service in communities across the nation. There will be challenges and utilities may have to be patient, but water is critical to health, environmental and economic development. Any investment into water infrastructure can provide the resilience needed to ensure safe, secure access to water, for all.