Crumbling Infrastructure Driving Demand for Talent: Part 2
The nation’s 54,000 drinking water systems face staggering infrastructure funding needs over the next 20 years, according to the American Society of Civil Engineers (ASCE). The group also says that although America spends billions on infrastructure each year, drinking water faces an annual shortfall of at least $11 billion to replace aging facilities that are near the end of their useful life and to comply with existing and future federal water regulations. Moreover, that shortfall does not account for any growth in the demand for drinking water over the next 20 years.
The private sector has already stepped in showing much interest in water as a source of profit. Right now, a number of firms are looking to capitalize on opportunities in infrastructure, namely public-private partnerships (PPPs). Amid the trend, executive search firm, A.E. Feldman, says infrastructure finance jobs are opening up for candidates with backgrounds in investment banking as well as experience in analyzing and executing structured financings. The most sought after candidates are those with experience in infrastructure transactions and environmental engineering.
The Problem
The world’s population tripled in the 20th century, while the use of renewable water resources has grown six-fold. Within the next fifty years, the world population is projected to increase by another 40 to 50%. This population growth, coupled with industrialization and urbanization, will result in an increasing demand for water, according to the World Water Council.
The Water Infrastructure Network (WIN) contends that over the next 20 years, America’s water and wastewater systems will have to invest $23 billion a year more than current investments to meet the national environmental and public health priorities in the Clean Water Act and Safe Drinking Water Act and to replace aging and failing infrastructure. The group says that over the next several decades, many cities will need to replace water and wastewater facilities and pipes that were installed in response to population growth and demographic shifts in the late 1800s and early 1900s. WIN also says many local utilities will face unprecedented funding hurdles as multiple generations of infrastructure wear out, more or less at the same time.
The Environmental Protection Agency (EPA) reports that our nation’s wastewater treatment facilities and systems will require as much as $390 billion in capital investment by 2025 to keep them in service.
The Congressional Budget Office (CBO) concluded in 2003 that costs to construct, operate, and maintain the nation’s water infrastructure can be expected to rise significantly in the future. The CBO estimates that the U.S. has between $132 billion and $388 billion in clean water infrastructure needs alone over the next 20 years, and the spending gap over that time will reach $70-$360 billion, according to Iowa Senator Mike Crapo.
Consumers Paying the Price
Local residents in many cities and towns are already bearing the brunt of old and outdated water systems.
Nearly 6,000 residents in western Chester County, Pennsylvania could see their monthly sewer bills skyrocket by the summer, according to the Daily Local. The report states that the Pennsylvania American Water Co. has filed a request with the Pennsylvania Public Utility Commission to increase its rates. If the change is approved, a typical sewer customer’s bill would jump from $15 to $34.36, according to the company.
The reason for the rate hike: Pennsylvania American’s president, Kathy L. Pape says the increase will help pay for $8.7 million in infrastructure improvements. The proposed rate jump will also help pay for a portion of the $50 million sewer treatment plant upgrade and expansion, which will replace the existing facility built in 1932. “We are seeking rate relief so that we can continue to provide reliable wastewater service and ensure that our operations comply with all environmental standards,” says Pape.
Water and sewer customers in Holly Hill, Florida will also face an 8% increase in their rates, according to the New Journal Online. The report states the increase is necessary to fund debt service on a loan from the State Revolving Loan Fund for expansion and refurbishment of the wastewater treatment plant.
In Glen Ellyn, Illinois water and sewer rates will increase beginning June 1st, reports the Daily Herald. Village board members agreed to increase water rates by 3.7% and hike sanitary sewer costs by 3.5%. “Really, it’s needed to keep up with increases in cost of providing services to our residents…also to continue improvements to our aging water and sewer systems, which are more than 100 years old now,” says Finance Director, Jon Batek.
Today, however, the old ways of financing and constructing public facilities through bonds and taxes are not enough to bridge the widening infrastructure gap.
“Funding” the Solution
The ASCE says new solutions are needed to what amounts to a nearly trillion dollars uncritical drinking water and wastewater investments over the next two decades. Not meeting those investment needs reversing the public health, environmental, and economic gains of the last 30 years.
The ASCE recommends that funding for water infrastructure system improvements and associated operations be provided by a comprehensive program, which includes public-private partnerships, state infrastructure banks, and other innovative financing mechanisms.
The private sector has already stepped in showing much interest in water as a source of profit. Increasingly, water privatization is becoming an issue in many parts of the country.
The National Council of Public-Private Partnerships quotes Eugene A. Schiller, Deputy Executive Director, Southwest Florida Water Management District as saying, “Municipalities need to understand that outsourcing and privatization are attractive choices for many city officials seeking economic growth and community development in the competitive world we live in. It can be a smart source of revenues to fund these improvements.”
