Beverly Ingram Testimony
Association of Metropolitan Water Agencies
1717 K Street, Suite 801 • Washington, D.C. 20036 •
Testimony on Drinking Water Infrastructure Needs
Subcommittee on Environment and Hazardous Materials
Committee on Energy and Commerce
U.S. House of Representatives
Detroit Water and Sewer Department
March 28, 2001
Good afternoon, Chairman Gillmor, Congressman Pallone, members of the
subcommittee. My name is Beverly Ingram, and I am the Assistant Director
for Administration of the Detroit Water and Sewer Department.
This testimony was prepared on behalf of the Association of Metropolitan
Water Agencies, which is comprised of the nation's largest drinking
water agencies. All AMWA member-agencies are publicly owned. Represented
by city water commissioners and utility chief executives, AMWA's
member-agencies collectively serve more than 110 million Americans with
clean, safe drinking water.
Thank you for holding this hearing to learn more about the
infrastructure needs of local water utilities. Our goal is to provide
you with information to help you understand the enormous challenges we
are facing over the next 20 years.
Overall Need and the Gap
Last fall, the Water Infrastructure Network (WIN) released Clean & Safe
Water for the 21st Century, which summarized infrastructure needs and
the funding shortfall facing drinking water and wastewater systems. AMWA
is a member of WIN. The report estimates that drinking water utilities
across the nation collectively need to spend about $24 billion per year
for the next 20 years, for a total of $480 billion. WIN's analysis also
concluded that water systems currently spend $13 billion per year on
drinking water infrastructure, leaving an $11 billion annual gap between
current spending and overall need.
A separate needs estimate was released in February by the U.S.
Environmental Protection Agency (EPA), based on a survey of public water
systems. The survey results suggest water systems will need $150 billion
during the next twenty years. But according to EPA, their survey
underestimates the true need. The survey is intended to be used as the
basis for the Drinking Water SRF distribution formula. Because the
Drinking Water SRF is primarily concerned with projects that will help
systems comply with drinking water quality regulations, so is the
survey. Therefore, EPA's estimate excludes many needs, such as the
replacement of treatment facilities and distribution systems due to age.
This is the largest infrastructure expense facing the nation's water
suppliers. The survey also excludes capital projects related to raw
water storage, and EPA's estimate for medium and large systems is
substantially under-evaluated because the agency relied on five-year
capital improvement plans (CIPs) and included them in the 20-year
picture. Utilities may estimate their needs for many years into the
future, but most CIPs cover five-year periods, leaving the remaining
out-years undocumented, and thus excluded by the survey.
In contrast, WIN's $24 billion per year estimate is more comprehensive.
It relies on historical system construction data, population figures
from the Census Bureau, actual cost data from the drinking water
community, data on infrastructure spending from the Department of
Commerce, as well as needs estimates by EPA and AWWA.
Like the nation's other 55,000 water utilities, the Detroit Water and
Sewer Department is responsible for providing safe, clean drinking water
to protect public heath and comply with drinking water regulations. In
addition, our customers -- both families and businesses -- expect
reliable service. Detroit’s 4.2 million customers expect and deserve
safe water to come out of their taps each morning.
To meet our responsibilities, old pipes and out-of-date treatment
facilities must be replaced, repaired and refurbished. Distribution
pipes in some of our cities were laid in the late 1800s, when municipal
water systems were first built. These cast iron pipes are said to last
as long as 120 years. Pipes laid in the 1920s, during a second wave of
water system construction, are made of different materials that are said
to last as many as 100 years. And experts say that pipes laid during a
boom in construction after World War II could last 75 years.
Similarly, treatment plants built in the 1950s have outlived their
maximum life spans. Even treatment facilities built soon after passage
of the Safe Drinking Water Act, in 1970s, are 25 to 30 years old, and
must be replaced with advanced treatment technology.
Considering the average life span of this infrastructure, it becomes
clear that the time for refurbishment and replacement is upon us.
Operations and maintenance costs must be taken into account, as well.
AWWA estimates that water utilities will spend an additional $27 billion
per year to operate and maintain their facilities. We note this because
electricity costs comprise between 20 to 80 percent of a water utility's
total operating budget. The inevitable rise in energy costs will
increase the O&M expenses of utilities, leaving fewer dollars for
drinking water infrastructure.
Similarly, the cost to finance infrastructure can affect the
availability of funds and whether a community can afford to build a
needed water project. AWWA and EPA estimate drinking water and
wastewater systems will each spend $5 billion per year to finance their
WIN estimates that household water bills must double or triple in most
communities, on average, if utilities are forced to absorb the entire
infrastructure bill. This scenario is complicated by rate inelasticity.
A household's water bill often covers drinking water supply, sewer and
storm-water control. Raising rates to cover one, diminishes the ability
to pay for the other two. Unfortunately, all three sectors are facing
massive infrastructure challenges.
Further compounding this issue is demographics and its impact on large
urban centers, such as Detroit. When people move to the suburbs, the
pipe and the liability for repair and replacement remain behind,
creating a financial burden on the remaining, often less affluent,
customers. Nevertheless, these cities cannot forgo infrastructure
To better understand these infrastructure needs, here are some local
Kansas City, Missouri. Kansas City raised rates by 100 percent over the
last 10 years, and the utility plans water rate increases of four
percent each year and sewer rate increases of six percent each year. The
water department anticipates spending $85 million per year for the next
six years just to resolve its infrastructure backlog, but these rate
increases and new efficiencies will net the utility only $55 million per
year, leaving an annual shortfall of $30 million.
Cleveland, Ohio. Cleveland has been investing an average of $60 million
per year over the last 10 years for drinking water infrastructure. Over
the next eight years, Cleveland must invest $500 million to rehabilitate
and modernize three of its four water plants. To finance this, Cleveland
has adopted an 18 percent annual rate increases over the next five
years. This is after 10 consecutive years of increases totaling 80
percent. Yet this does not even address Cleveland's distribution system
needs in any substantial way.
Portland, Oregon. In Portland, a $1 billion mandated combined sewer
overflow program will result in double digit rate increases for about 15
years. At the same time, the need for infrastructure funding for
drinking water is $400-800 million in the next 10 years. The likelihood
that water rates can be raised to cover these costs is doubtful, given
that the increase in sewer bills has virtually used up the elasticity
that existed to raise rates.
Knoxville, Tennessee. The Knoxville Utility Board (KUB) has spent $40
million in capital improvements over the last five years for the
drinking water system, and the utility is anticipating another $64
million in water system improvements during the next five years. KUB is
also a wastewater utility which has its own infrastructure needs,
including $63 million in sewer system improvements over the next five
years in addition to the $80 million KUB spent over the previous 14
How we close the $11 billion drinking water infrastructure gap between
historical spending and overall need is the next question. To help
reduce this gap, water utilities, especially large metropolitan systems,
are raising rates and have made great strides in efficiencies, with some
utilities achieving a 20 percent savings in operations and maintenance.
Utilities will continue to reduce costs, seek cost-effective financing
and employ innovative management strategies. Regardless, there will
remain a gap between the available funds and the significant level of
investment required. AMWA does not expect the federal government to
completely fill the gap, but some help is needed.
AMWA pledges to work with Congress to develop a fair solution to this
problem. Thank you, again, for holding this important hearing.