The Drum Beats for Federal $$$
 
Utilities and residents facea growing crisis

Chris Topolewski of Englewood Cliffs, N.J., grabs a container of water from a 1,000-gallon tank. A broken water main in July 1999 reduced water supply to many communities in northern New Jersey.

Image: Topolewski

By Christina Ling
REUTERS
WASHINGTON, Jan. 27 —  A glass of water. A shower. Flushing the toilet. Such basic functions of daily life in America, which likes to think of itself as the world’s only superpower, are under threat, experts say, and the federal government must do something about it urgently.
 

     IF THAT SOUNDS like the plot for a bad Hollywood movie about terrorists dropping lethal germs into U.S. drinking water supplies, think again.
       Water company officials say aging systems and lack of cash to fix them are two real problems that America, already shaken at the sight of Silicon Valley’s high-tech economic powerhouse reeling from electricity outages, needs to confront.
       “This is a huge issue that the country is going to have to address,” said Steve Allbee, author of an Environmental Protection Agency study that projects a shortfall of $23 billion a year for infrastructure needs by 2020.
       “We are clearly looking at a seriously troubling future here and we need to do something,” he added.
       An industry group called the Water Infrastructure Alliance reached similar conclusions in a separate study last year.
       Some people say the state of some California beaches, closed periodically, reportedly due to pollution and sewage overflows, offers a gruesome glimpse of that future.
       But while controversy rages about whether old or decrepit sewers are to blame, municipal officials across the nation say years of scrimping on repairs are finally catching up. Few anywhere want to put off vital repairs for much longer.
       “Systems will break down, pipes will crack, there will be overflows of sewage,” predicted Ken Kirk, head of the Association of Metropolitan Sewage Authorities.
       Some might say these issues are hardly new.
       “You hear stories all the time about water mains cracking —that’s a normal thing,” Kirk said. “But at some point you also need to take a closer look at your (sewage) system and (water) distribution system and that’s what’s happening now.”
       
OLD PIPES, LEGACY SYSTEMS

       The age and quality of water and sewage pipes varies hugely, officials say, with sturdy century-old pipes connecting to shoddier post-World War II pipes in the suburbs. Parts of St. Louis’ sewer system predate the Civil War, said Willie Horton, head of the Metropolitan St. Louis Sewer District.
       Officials are in no hurry to volunteer stories of breaches of elderly pipes but environmental groups are not so shy.
       California’s Santa Monica Baykeeper, a local branch of a national nonprofit organization, sued Los Angeles in November 1998 in the wake of alleged sewage overflows into streets, the Los Angeles river and some beaches. The federal and state governments this month followed suit.
       “In L.A. we have about 6,500 miles of sewer pipe. About half of that is about 50 years or older and over time it starts to deteriorate and crack,” the group’s Steve Fleischli said, citing similar action by Baykeepers in Atlanta and San Diego. “They need to be repaired and it’s time to do that not only in L.A. but nationwide.”
       But city officials, while acknowledging they pushed up the start of a $1.4 billion sewer construction program after the freak El Ni&#ntilde;o weather system caused the heaviest February rains on record, say storms, not crumbling sewers, were to blame.
       “Of course it’s old, some of it is more than 90 years old, but it’s not leaking. This was a unique situation,” said Judy Wilson, the director of Los Angeles’ Bureau of Sanitation.
       Whatever the eventual settlement in Los Angeles, not all regions can afford to embark so readily on the major overhauls they say their systems need. At issue are not only water and sewer pipes but water treatment plants built 20-30 years ago that are already deteriorating due to heavy wear, Allbee said.
       
SEARCH FOR MONEY
       In El Paso, Texas, the local utility is pondering where to get the money for a renovation of its sewer system even as a 60 percent rate hike over the next 10 years looms for procurement and treatment of the desert city’s water supply.
       “We’re a poor community and rate increases are not popular,” said chief operating officer David Broseman.
       Adding to the struggle are a stream of new, ever-stricter EPA rules, the fruit of recent decades of environmental awareness, which helped triple infrastructure costs over the past decade and threaten to double them again over the next.
       “In the meantime we continue to try to reduce operating costs, but we’ve wrung it out as far as we can and it’s these other needs that are driving the rates,” Broseman said. “You compound trying to find adequate water supplies with trying to replace old infrastructure and it’s a constant balancing act.”
       Broseman said richer Texas towns that for years avoided jumping through the bureaucratic hoops of federal programs were now competing with him for government dollars, while Horton in St. Louis said he was $3.5 billion short of funding immediate needs, mostly repairs and meeting regulatory requirements.
       Some utilities look back wistfully to the 1970s and early ’80s when the federal government gave grants to localities to help upgrade systems to meet new requirements. But the grants were replaced in 1987 with a State Revolving Fund created with federal money and used by states to help issue loans and tax-exempt bonds for water and sewage needs.
       “There are a lot of communities out there who simply cannot afford to do what they have to do if they’re going to have to pay the money back,” said Kirk, who also associated 1987 with a “drastic” reduction in federal assistance.
       
SRF at a glance
How the EPA's program works
Made possible by 1987 changes to the Clean Water Act, the 51 separate funds allow states (and Puerto Rico) to choose the terms of their financial obligations.
Assets total more than $20 billion. Funds for SRF programs come mostly from the federal government (87 percent), with states chipping in the rest.
Funds can be used for a wide range of public water projects -- anything from municipal sewage treatment to wetlands efforts.
The plan focuses on fiscal responsibilities by setting up loans instead of grants. That lets localities get their hands on more cash immediately -- instead of sharing upfront costs.
Loans can go to a variety of organizations, including cities, non-profit groups and citizens' organizations.
Source: EPA



       But others are more enthusiastic, noting states had used creative financing techniques to leverage $20 billion of federal involvement to date into more than $30 billion of financial assistance for water and wastewater infrastructure.
       “The SRF is one of most successful programs that Congress and the EPA have ever created,” said the head of the Council of Infrastructure Financing Authorities Michael Wolff. But both he and AMSA’s Kirk agreed with others on the need for a review of federal programs to meet coming challenges.
       Wolff said CIFA planned to lobby Congress for exemption from complex tax rules requiring localities to hand over excess profits on SRF bonds to the federal government, arguing the money would be better plowed back into the projects.
       Others noted attempts by the Clinton administration to cut back funding for the revolving fund in the 2000 budget and called for full funding at a minimum, while the EPA report called for even greater federal involvement.
       With new President George W. Bush calling for a major tax cut and other interests competing for their share of the budget surplus pie, few see a quick or easy resolution of the problem. But the longer it takes, the thornier the issue could become.
       “Is the sky falling? No, the sky is not falling today but unless people start taking this more seriously, within 10 to 15 years the cost of addressing these problems is going to be even higher,” Kirk said. “It’s not an issue you can ignore for long.”