WASHINGTON Feb 15 Repairing U.S. water
infrastructure is becoming increasingly expensive and options
for funding upgrades to sewers, storm drains and drinking water
systems are under threat, the National League of Cities told a
congressional hearing on Friday.
Costs for the repairs run into the hundreds of billions of
dollars, with federal estimates of needed drinking water system
upgrades at $334.8 billion and updating wastewater and
stormwater management infrastructure at $298.1 billion over 20
years, said Michael Sesma, a city council member of
Gaithersburg, Maryland, speaking on behalf of the cities' group.
"In our estimation, these investment levels are actually an
underestimate given the advancing age of our infrastructure, the
burden of unfunded federal regulatory mandates, and factors not
yet known as a result of our changing climate," he said.
Cities and counties operate and finance almost all of the
country's water infrastructure, with help from the federal and
But the federal government sets most of the environmental
standards these systems must meet. That can leave some places
scrambling to find funds to bring their systems up to code.
Alabama's Jefferson County borrowed heavily when it was told its
sewers were in breach of environmental regulations. The debt
load, along with interest rate swaps and other risky measures,
led the county to file for municipal bankruptcy in 2011.
As its budget fight intensifies, the U.S. Congress is
considering limiting financing mechanisms that many places use
to cover infrastructure costs, including capping the tax
exemption for interest paid by municipal bonds. Issuers say this
will drive up their financing costs, as they will have to offer
the higher interest rates comparable to taxable bonds.
Tax-exempt bonds financed more than $23 billion worth of
water and wastewater infrastructure projects in the first half
of 2012, and three-quarters of capital works in the United
States were built by state and local governments using the debt,
Sesma said. They save "an average of 25 to 30 percent on
interest costs with tax-exempt municipal bonds as compared to
"If the federal income tax exemption is eliminated or
limited, states and local governments will pay more to finance
projects, leading to less infrastructure investment, fewer jobs,
and greater burdens on citizens who will have to pay higher
taxes and fees," he added.
Sesma also said Congress should not cut water revolving loan
funds as it seeks to reduce its spending, and should consider
"mechanisms that lower the cost of borrowing. He also suggested
the federal government "offer direct loans and loan guarantees
... or remove the federal volume cap on tax-exempt bonds for
water and wastewater infrastructure projects."