Water Infrastructure: Approaches and Issues for Financing Drinking Water and Wastewater Infrastructure

Government Accountability Office
http://gao.gov/products/GAO-13-451T

…GAO reviewed three of the approaches proposed to pay for the nation’s drinking water and wastewater needs, each of which offers a different means to fund and finance projects. To understand these approaches as they apply to wastewater infrastructure, GAO surveyed stakeholders, including industry representatives and associations and federal, state, and local government officials. GAO’s reports identified the following issues with each approach:

  • A clean water trust fund would provide a dedicated source of funding, such as an excise or other tax, for wastewater infrastructure. Stakeholders identified three main issues that would need to be addressed in setting one up: how a trust fund should be administered and used, what type of financial assistance should be provided, and what activities should be eligible to receive funding. A majority of stakeholders said that a trust fund should be administered through EPA in partnership with the states, but they differed in their views on how a trust fund should be used.
  • A national infrastructure bank would use public and/or private funds to finance infrastructure projects through a variety of loans, loan guarantees, and other mechanisms. A majority of stakeholders supported the creation of such a bank but also identified three issues that should be considered in designing a bank: mission and administrative structure, financing authorities, and project eligibility and prioritization.
  • Public-private partnerships encourage private investment in infrastructure projects. GAO identified seven municipalities that have entered into privately financed partnerships for wastewater infrastructure. Municipal and company officials identified advantages to these partnerships, such as having access to sources of financing other than traditional sources, but also identified challenges to using partnerships. Local opposition is one challenge, as is the complexity and difficulty of contracting involved…
GAO made recommendations in past reports to strengthen utilities’ use of asset management and coordination of rural water infrastructure funding. EPA generally concurred with the recommendations, taking action on some and beginning action on others.
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