A trillion-dollar federal infrastructure package and a chance to reform the water sector
– Warning: mixed metaphors ahead –
Observers of America’s water, sewer, and stormwater systems have known for years that the nation faces a trillion-plus-dollar bill for repairs, replacements, and upgrades. I’ve long been skeptical about the prospect of federal funding alleviating that burden in any significant way. With Congress ideologically divided and its chambers split across parties, the idea of a major infrastructure program coming out of Washington would seem unlikely on its face.
But rumblings over the past eighteen months have made me reconsider. Last spring the White House released an infrastructure plan that called for significant investments in water.*
Just before the 2018 mid-term elections, Congress passed the bipartisan America’s Water Infrastructure Act, which signaled federal priorities for the water sector but stopped short of sending tens of billions into the nation’s pipes and canals. Then last week President Trump met with House Speaker Pelosi and Senate Minority Leader Schumer and apparently agreed in principle on a $1-2 trillion federal infrastructure program.†
Little is known about the dimensions of the program, beyond the eye-popping figures. What might a huge federal infrastructure package mean for the water sector?
Back to an afterthought?
Transportation is the politician’s perennial infrastructure darling, as “roads and bridges” (Rosenbrigez) offer excellent credit-claiming opportunities for politicians who like to associate themselves with gleaming, highly visible projects. President Trump has made a career of putting his name on buildings, so we shouldn’t be surprised that he’d like to put his name on some Rosenbrigez, too. Although Pelosi and Schumer’s letter on infrastructure to the White House last week mentions “broadband, water, energy, schools, [and] housing,” transportation continues to grab the headlines: Time’s glibly declared that all $2 trillion was for Rosenbridgez.
Although water, sewer, and flood control systems are arguably more vital, much of that infrastructure is literally buried. Politicians aren’t clamoring to put their names on sewage treatment plants. Creating credit-claiming opportunities for water infrastructure is an ongoing challenge. If Washington is really going to pour hundreds of billions of dollars into infrastructure, water sector leaders will need to work hard to make sure their systems aren’t forsaken in favor of sexier transportation projects.
The promise & perils of fiscal federalism
Let’s assume for blogging’s sake that the water sector gets some major love (say, >$300 billion) in a trillion-dollar infrastructure bill. When contemplating such a massive federal capital infusion, it’s worth considering the last time Uncle Sam poured hundreds of billions into the water sector. The 1972 Clean Water Act and 1974 Safe Drinking Water Act included grants that provided as much as 90% matches for local investments in water and sewer infrastructure. The political genius behind the CWA and SDWA was that sweeping new environmental mandates came with considerable sweeteners in the form of federally-funded jobs in construction and environmental engineering. The federal funding made the new regulations politically palatable. From a policy perspective, the idea was for the federal funding to help create systems that local governments would operate, maintain, and upgrade in perpetuity.
Unfortunately, it hasn’t worked that way. One of the main reasons so much of America’s water infrastructure is in trouble is that there are strong structural disincentives for local leaders to invest adequately in water systems, as I’ve observed before. Maintaining water infrastructure doesn’t offer much of a credit-claiming opportunity, and local officials worry a great deal about being blamed for rate increases. Many of the organizations that operate water systems are ill-suited to the task; the institutions that govern and regulate water infrastructure are badly fragmented and often ineffective.
Attaching some strings
A federal water infrastructure funding package that fails to address the systemic factors that got us into this mess would be a wasted opportunity. Hundreds of billions of dollars might help shore up failing systems today, but would simply kick the problem down a generation: our children and grandchildren would face a similar infrastructure crisis in 2070, and justifiably curse their forebearers.
Rather than simply firing a money cannon at local water systems, federal leaders should use a massive funding package as leverage to reform the institutions that govern, regulate, and finance water infrastructure in America. In future posts I’ll explore some of the strings that Congress might consider attaching to their water infrastructure dollars.
*President Trump has since disowned his own plan. 🙄
†Still unclear is the small matter of how to raise a couple trillion dollars. Donald, Nancy, and Chuck are supposed to meet about that soon.
A reasonable expectation
What low-income households pay for essential service in the United States
Over the past 18 months I’ve been working to develop a valid, generalizable depiction of water and sewer affordability in the United States. There’s currently no nationally-representative dataset on water and sewer rates, so my Texas A&M research assistant Jake Metzler and I painstakingly gathered water and sewer rates data from an original, nationally-representative sample of American water utilities.* We then calculated basic single-family residential water and sewer service prices and developed affordability estimates for each utility using the double-barreled methods I published earlier this year.
All that effort is now ready to bear fruit. A forthcoming AWWA Water Science article reports the full methodology and findings in gory academic detail. If there’s interest here, I’ll share more about our findings here over the next few weeks and months – without the academic gore.
Today I’ll start by sketching the basic picture: how we measured affordability, and how affordable water and sewer services are in the US.
The sample & data
We drew our sample from the EPA’s Safe Drinking Water Information System (SDWIS), which SDWIS contains basic system information for the country’s nearly 50,000 water systems. An overwhelming majority of systems serve fewer than 3,300 people, and so a simple random selection would result in a sample of mostly small systems that collectively serve a tiny minority of the total population. So we stratified the sample—that is, we intentionally “oversampled” different kinds of utilities in order to get a wide variety of systems. Our analysis then adjusted mathematically for the sampling procedure to make sure we get truly representative results.
Single-family residential rates data were collected in the summer of 2017. To call the process laborious is an understatement (I’ll probably blog about that some other time!). For most large and medium-sized utilities, rates data were readily available on websites. When rates were unavailable online—especially common among smaller utilities—we inquired by telephone, repeating calls as necessary. Efforts to collect rates data were abandoned after multiple refusals or non-responses. The final dataset included full water and sewer rates data for 329 utilities. That might not seem like much, but it’s a larger sample than most, it’s representative, and we’re highly confident in the validity of the data.
Basic water & sewer as share of disposable income
We measured affordability in two ways; the first is with the Affordability Ratio (AR).
AR estimates basic water and sewer costs as a share of disposable income, which for present purposes is total income minus essential living costs (taxes, housing, food, health care, and home energy), estimated using Consumer Expenditure Survey data. To focus on low-income households, we measure AR at the 20th-income percentile (AR20). The 20th percentile household typically identifies the lower boundary of the middle class. These working poor households have very limited financial resources, but may not qualify for much public assistance.
Here’s what we found:
AR20 averaged 9.7. In substantive terms, that means that in the average utility, a household at the 20th income percentile must spend about 9.7 percent of its disposable income on basic water and sewer service. But AR20 varies widely, from a low of 0.6 to a high of 35.5. As the figure above indicates, AR20 is less than ten for about two-thirds of systems. A handful are very high—but these values reflect very low 20th percentile incomes as much as they do water/sewer costs.
Basic water & sewer in hours at minimum wage
My other way of measuring affordability is to express basic water/sewer costs in terms of Hours’ Labor at Minimum Wage (HM). This approach may not express affordability quite as accurately, but it’s precise and wonderfully intuitive: it represents the cost of water/sewer service in terms of labor. For those of us who have worked at minimum wage at some point in our lives, it is a powerful way to understand the cost of something.
Here’s affordability in the United States measured as HM:
As you’d expect, the distribution is very similar to AR20, ranging from 1.1 to 25.6. The overall average is 9.5, meaning that in the average utility, paying for basic water and sewer service requires about 9.5 hours of labor at minimum wage.
So is water affordable in America?
When confronting affordability, utility leaders are really asking: how much is it reasonable to expect households of limited means to pay? What economic sacrifices are reasonable?
These are ultimately questions about community values. There is no scientific answer to philosophical questions. No metric can define what is “affordable,” but good measurement can help us think about our values.
In the past I’ve suggested AR20 less than 10% and HM less than 8.0 as rules-of-thumb or point of departure to guide discussion. By these guidelines, 51 percent of the sampled utilities are affordable as measured by AR20 and just 39 percent are affordable according to HM.
We’re now in the process of analyzing the policy, organizational, economic, and demographic correlates of affordability. I’ll be publishing and blogging about what we find over the next several months. For now, I hope these figures provide some food for thought and help frame an agenda for tackling a tough issue.
*Collecting rates data is surprisingly difficult labor-intensive. Jake and I wrote a fun article on that topic–look for it next month.
Gender predicts concern for water utility issues
Do men and women think differently about their water utilities? In a recent post I wrote about some findings from a Texas A&M Institute for Science, Technology & Public Policy (ISTPP) public opinion survey that included questions taken directly from the American Water Works Association (AWWA) State of the Water Industry survey. The ISTPP survey’s sample of nearly 2,000 individuals was carefully crafted to be representative of the US population, and so is a goldmine of public perceptions about water. I’m blogging about interesting findings here as time allows; today I’m looking at gender.
Water & gender
I’ve always been a bit skeptical about the idea that water is a “gendered” issue in the United States. From a purely biological perspective, there’s no reason to expect that men and women think differently about water utility issues. People of all genders need water to drink, cook, and clean; sanitary sewers and stormwater systems protect everyone. There’s a huge body of academic research on gender related to water and sanitation in the developing world, which make sense—in much of the world, women and girls bear the greatest (literal) burden of securing drinking water, and are most vulnerable to poor sanitary conditions. My Texas A&M colleague Kathleen O’Reilly has worked extensively on this issue.
But in most of the US, men and women experience water utilities in more or less the same way. For the most part, American girls aren’t trudging long distances on foot to fetch water, and American women don’t have to use open pit toilets in urban areas.
What women want (from their water utilities)
So it was surprising (to me, at least) to discover a subtle but consistent gender disparity in attitudes toward water issues in our dataset. As noted in my last post, the ISTPP survey asked eleven questions taken directly from the SOTWI. All eleven attitudinal questions are based on a five-point scale: unimportant (1), slightly important (2), important (3), very important (4), and critically important (5).
Here are the results from the national survey, broken down by gender:
Women reported greater average concern than men across all eleven categories. The greatest disparities were in concern for water loss, climate change, affordability, and conservation. The differences aren’t huge in absolute terms—about a third of a standard deviation in general—but the consistency is striking. The gender effect is in the same direction across-the-board, and the difference is statistically significant in nine of the eleven categories. The gender differences persist in regression analyses that control for partisanship, region, and age.
Unfortunately, the 2015 SOTWI doesn’t include gender data, so we can’t say much about whether a similar gender gap exists within the water sector.
The Aquatic Gender Gap
I don’t know enough social psychology to know exactly what’s behind the gender gap in American water utility attitudes. But these results offer a potentially powerful clue for politically savvy utility leaders: building support for water systems in American communities probably starts with women.