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Water Infrastructure Needs and Investment: Review and Analysis of Key Issues

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Policymakers are giving increased attention to issues associated with financing and investing in the nation's drinking water and wastewater treatment systems, which take in water, treat it, and distribute it to households and other customers, and later collect, treat, and discharge water after use. The renewed attention is due to a combination of factors. These include financial impacts on communities of meeting existing and anticipated regulatory requirements, the need to repair and replace existing infrastructure, and concerns about paying for security-related projects.

The federal government has a long history of involvement with wastewater and drinking water systems, with the Environmental Protection Agency (EPA) having the most significant role, both in terms of regulation and funding. The U.S. Department of Agriculture also plays an important role in rural communities through its water and wastewater loan and grant programs. These programs have been popular; however, states, local communities, and others have asserted that various program gaps and limitations may be diminishing their potential effectiveness. They also point to the emergence of new infrastructure needs and issues.

A number of interest groups and coalitions have issued reports on infrastructure funding needs and related policy issues, as have EPA and the Congressional Budget Office (CBO). They present a range of estimates and scenarios of future investment costs and gaps between current spending and future costs. EPA and CBO, in particular, caution that projections of future costs are highly uncertain, and that funding gaps are not inevitable. Increased investment, sought by many stakeholders, is one way to shrink the spending gaps, but so, too, are other strategies such as asset management, more efficient pricing, and better technology.

Congressional interest in these issues has grown for some time and is continuing in the 110th Congress, partly in response to urgings of stakeholder groups. In each of the past three Congresses, House and Senate committees acted on legislation to reauthorize and modify infrastructure financing programs in the Clean Water Act and Safe Drinking Water Act, but no bills were enacted. The Bush Administration has addressed water infrastructure in a number of general ways, but has not offered legislative proposals of its own. EPA's principal initiative has been to support strategies intended to ensure that infrastructure investment needs are met in an efficient, timely, and equitable manner.

This report identifies a number of issues that have received attention in connection with water infrastructure investment. It begins with a review of federal involvement, describes the debate about needs, and then examines key issues, including what is the nature of the problems to be solved; who will pay, and what is the federal role; and questions about mechanisms for delivering federal support, including state-by-state allotment of federal funds. Congressional and Administration activity on these issues from the 107th to the 109th Congresses also is reviewed.


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