Financing Sustainable Water Infrastructure

By Abby Crisostomo

In July and August 2011, the Johnson Foundation, along with American Rivers and Ceres, convened a series of meetings of experts from utilities, nonprofits, consulting groups, investment banks, research organizations, professional associations, unions, and foundations, to attempt to address the problem of water infrastructure financing in the 21^st century. This meeting, called Charting New Waters, focused on finding new techniques that communities could use to pay for integrated and sustainable infrastructure approaches, as well as ways to direct private capital toward more sustainable water management projects. The Johnson Foundation released a report of their findings, Financing Sustainable Water Infrastructure, last month.

The report finds that water system financing is often inflexible, expensive and siloed. That, along with the scarce money available for repairs, is disconcerting because of the poor state of most existing water systems—the American Society of Civil Engineers gives the nation’s water infrastructure a D- grade, the lowest of any infrastructure. Methods used to fund water systems include municipal bonds (often available only for the largest cities), cash, state revolving loan funds, or other low-interest loan programs through state or federal government. The separate management of different aspects of water systems (drinking water, wastewater, stormwater, greywater, and rainwater) makes them even more difficult to adequately finance and manage. Additionally, when temporary federal subsidies help pay for infrastructure, there is major concern about the ability of rate-payers and local officials to come up with enough money to maintain systems once subsidies run out.

The report suggests several ways to progress towards more sustainable, resilient and cost-effective water systems, including:

• thinking locally, like green infrastructure and recycling, but also for financing models that can eventually be scaled up;
• giving customers choices, like access to non-potable water for other household uses
• changing the way water financing works by including methods like full-cost pricing, performance efficiency, system consolidation, and value-added services;
• pursuing innovative financing models, like including non-traditional  partners and implementing green infrastructure and low-impact development; and,
• considering alternative market-based solutions, like pricing ecosystem services, creating securities for aggregating customer-financed projects, and creating private investment opportunities.

Though the report is written at a broad scale, it does a good job of making the arguments for why water resource planning needs to be thought of in more integrated and innovative ways. It provides compelling evidence for why water utilities, local governments, potential investors, and regular citizens should be concerned about the sustainability of water infrastructure financing. It also lays out arguments for a slew of opportunities to begin to work toward sustainable systems, including, but not limited to, full-cost pricing, closed-loop water systems, consolidation of water operations within or between municipalities, ecosystem service pricing, low-impact development, securitization of green infrastructure funding, and encouraging increased partnerships. Though it does not give specifics on implementation, the report concludes with specific commitments from each of its high-level participants to continue to develop tools, engage stakeholders, and disseminate information, which may lead to more opportunities for innovation in the future.