Tuesday, April 8, 2003
Cities struggle to find sewer improvement funds
Damon Franz, Greenwire staff writer
Residents of Baton Rouge, La., are paying twice as much
this year in sewer bills than they were just three years ago to pay for
deferred maintenance and repairs. In Toledo, Ohio, public utilities
managers plan to raise rates annually for the next 10 years to finance
$450 million in infrastructure improvements mandated by the U.S. EPA.
And in Holyoke, Mass., city officials estimate average sewer bills will
jump from $200 per year to $833 per year to eliminate untreated
Saddled with aging sewage infrastructure and increasing pressure from
federal regulators to eliminate leaks and overflows, cities across the
country are facing massive shortfalls of funding needed to repair and
upgrade antiquated sewage systems and wastewater treatment plants.
Meanwhile, the only federal program to help municipalities meet the
challenge is facing major budget cuts, forcing municipalities to pass
along billions of dollars in maintenance and repair costs to consumers.
Reports from from numerous federal agencies and private consultants have
found substantial and growing gaps between funding to wastewater
utilities and the costs they will incur to meet EPA orders to overhaul
entire sewer and wastewater systems, expand sewer capacities, replace
old and faulty equipment and make other substantial upgrades. If not
rectified, the cost gap could easily run into the hundreds of billions
of dollars, the reports say, leading to a doubling, tripling or even
quadrupling of sewer rates in many U.S. cities.
By EPA's own estimates, between 2000 and 2019 the difference between
funding and costs for sewer and wastewater improvements in the U.S. will
be about $271 billion, according to a Gap Analysis completed by the
agency last September. Meanwhile, the Water Infrastructure Network, a
coalition of municipalities, engineering groups, sewer utilities and
others, placed the gap about about $241 billion, a figure roughly
equivalent to the gross domestic product of Austria.
New regulations, old pipes drive need for renovation
One reason for the huge capital investment required for wastewater
systems is that as sewers and treatment plants age, they deteriorate,
leading to chronic pipe ruptures, failing pumps and overextended
treatment facilities. Because of deferred maintenance and outright
neglect, some cities on the Eastern Seaboard rely on 200-year-old pipes
to carry millions of gallons of wastewater daily. According to EPA, even
the most modern sewer systems are designed to last from 15 years to over
100 years, depending upon local conditions.
In Baltimore, aging wastewater infrastructure has been blamed for leaks
and overflows that for years discharged millions of gallons of untreated
sewage into city streets and local waterways, including tributaries of
the Chesapeake Bay. To repair the problem, Baltimore plans to spend $940
million over the next 14 years to replace pipes, install parallel piping
and complete a general upgrade of the system. A 6-percent increase in
water and sewer rates implemented this year will be a first step toward
raising the necessary funds, said public works spokesman Bob Murrow. But
until the city completes a full assessment of its centuries-old system,
the costs to perform the necessary upgrades could go much higher.
Adding to the problem is the fact that most of the nation's sewers and
wastewater treatment plants were built with inadequate capacity to
handle all the wastewater they receive. Often, a city's sanitary sewer
system -- which moves human waste from homes and businesses to treatment
facilities -- is connected to stormwater collection channels in what is
called a "combined sewer system." Heavy rains and snowmelt routinely
overwhelm these systems, which are designed to route untreated sewage
directly into creeks or other waterbodies when inflow exceeds capacity.
Environmentalists have for years pointed to such "safety valve" sewer
systems as major contributors to water pollution in urban areas,
prompting EPA in the mid-1990s to begin cracking down on combined sewer
overflows (CSOs). Regulators estimate such overflows are responsible for
roughly 1.26 trillion gallons of untreated wastewater into the nation's
waters each year.
In 1994, EPA began requiring point-source pollution permits for CSOs
under the National Pollutant Discharge Elimination System (NPDES), which
requires technology-based controls on discharges to the nation's
waterways. The CSO control policy was designed to allow communities
flexibility, taking into account their financial limitations, and EPA
estimated the policy would cost municipalities approximately $44.7
billion, one-tenth of the estimated costs they face today.
Beyond performing maintenance work needed to keep aging sewers running,
managers of financially strapped wastewater utilities say its hard to
envision where the necessary money will come from. William Schatz,
general counsel for the Northeast Ohio Regional Sewer District, said in
recent congressional testimony that his district raised rates 7 percent
just to cover the $1 billion needed for sewer maintenance and permit
requirements. Another $1.35 billion will be required to meet EPA's
mandate for CSO control, he said.
Federal sewer loan fund whittled down
To help address these needs, the federal government offers assistance in
the form of the Clean Water State Revolving Loan Fund (SRF), a program
that offers below-market loans to communities seeking to make sewer
improvements. Under the program, federal contributions are matched by
state governments that distribute the loans to needy communities.
The Bush administration has made it clear, however, that funding this
program is not a priority. In its budget blueprint for FY '04, EPA
proposed spending $850 million on the Clean Water SRF, a $500 million
reduction from the FY '03 enacted level and $362 million less than the
administration's FY '03 request.
In Congress, efforts are underway to restore funding for the program.
Recently, House Transportation and Infrastructure Water Resources
Subcommittee Chairman John Duncan (R-Tenn.) introduced legislation that
would authorize a $20 billion federal contribution to the SRF over the
next five years. Competing legislation from Reps. Sue Kelly (R-N.Y.) and
Ellen Tauscher (D-Calif.) would authorize $25 billion over the same
Meanwhile, a survey from the Association of Metropolitan Sewerage
Agencies (AMSA) found that less than 20 percent of sewer districts use
the Clean Water SRF, and less than 10 percent of wastewater
infrastructure projects are funded by it. And some communities say it
makes little difference whether a municipality issues a bond, borrows
from a bank or gets an SRF loan. Although communities can sometimes
secure a better interest rate using an SRF loan, the added cost of the
paperwork and bureaucratic hurdles can negate the savings in interest,
public works officials said.
"We applied for SRF, but its not that much better than the rate we can
get ourselves -- especially not with all the paperwork we need to fill
out," said Kent Mudd, special projects engineer for East Baton Rouge
Parish in Louisiana. Baton Rouge anticipates spending $618 million to
meet the terms of an EPA settlement requiring the district to eliminate
overflows from its sanitary sewer system caused by inadequate capacity,
equipment malfunctions, aging pipes, heavy rains and other factors.
To pay for the improvements, the city has raised sewer rates 33 percent
for each of the last three years and plans to use that revenue to
leverage more money by issuing bonds, Mudd said. In an upcoming meeting,
public works officials will explore ways to "cut through the red tape"
involved in accessing SRF funds, he said.
Costs burden some towns more than others
While some cities face hundreds of million of dollars in sewer
infrastructure needs, the economic impact of paying for the improvements
depends largely on the cost of sewer service prior to the improvements
and the willingness of consumers to accept the rate increases. Some
managers said that once consumers understand the reasons behind the
additional charges, they become more amenable to the fee hikes.
In a settlement with EPA over untreated sewer overflows, Toledo, Ohio,
recently agreed to spend $450 million over the next 14 years to double
sewage treatment capacity, build a basin to hold excess sewage and
improve the sewage collection and treatment system. To fund the project,
residents will pay rate increases averaging 5 percent per year for the
length of the 14-year settlement, although there will be steeper
increases early on, according to Department of Public Utilities Director
But Stevenson said residents have complained little about the rate
increases, partly because they voted in favor of the hikes. In a special
referendum held last summer, 78 percent of Toledo's residents voted in
favor of settling the suit with EPA. Furthermore, Stevenson said, the
city's sewer rates were pretty low to begin with. "In the past, the
rates have been fairly modest," he said. "Even with the increases,
compared with the rest of the country, we'd probably still be in the
middle -- not high and not low."
Even in Baton Rouge, where ratepayers just swallowed a 100-percent
increase in sewer rates, there has been little complaining, according to
Mudd, the projects engineers. As in Toledo, sewer rates in Baton Rouge
were low to begin with -- about $11.50 per month before the increases --
and the public works department was aggressive in educating residents
about the need for the increase.
"We made sure they were informed that we were in negotiations with EPA,"
he said. "We did presentations in every council district and informed
them of the improvements we were proposing."
But Schatz said that in northern Ohio, even with full explanation for
the rate increases, many residents remain adamantly opposed. "We try to
make sure everyone understands what a good job we do and what we're
trying to do with the improvements, but there still tends to be some
backlash," he said.
Trust fund debated
Schatz said he is confident Congress will pass legislation creating a
long-term federal funding source for sewer system improvements, similar
to the highway trust fund but of a lesser magnitude. "We envision it as
a way to fund the gap rather than it being the majority funding source,"
If such a fund is not created, the only way to make the needed
improvements will be to hit up the ratepayers, which, Schatz said, will
have an dire impact on a region of the country that is already suffering
economically. "If we don't get the funding from Congress, we don't have
an option now, aside from going back and raising the rates," he said.
"With the states having budget crunches and municipalities suffering,
the funding gap has put pressure on the rate payer to come up with an
immediate solution to the infrastructure problem."
Schatz, who represents AMSA, said the group is hoping to work with
members of Congress to draft legislation that would create an
infrastructure trust fund. But the group will not draft a legislative
proposal until a it has discerned a good funding source. "We want to
come up with feasible solutions and raise the debate at that point," he
But W. Malcolm Steeves, Director of the Mobile Area Water and Sewer
System, said that although his agency is an AMSA member, he disagrees
with the group about the idea of a wastewater trust fund, saying it
would not make sense to dole out federal money to ever sewer district
neeindg to make improvements. "Our industry is pushing hard for a trust
fund," he said. "But the problem is so spread out that the communities
should be able to do it themselves."
Steeves' attitude is echoed by some in Congress who do not see increased
federal assistance as the solution. To make the needed improvements,
communities will just have to bite the bullet and put up the money, just
as they did when the systems were first installed, said Rep. Vernon
"We need to make certain we reauthorize the Clean Water SRFs and fund
them adequately," said Rep. Vernon Ehlers (R-Mich.). "But it would be a
mistake for people to look exclusively to the federal government to
solve their problems." Ehlers said he remembers when the first sewer
system was installed in his town. "The cost-to-income ratio for sewer
infrastructure was much greater then than it is today," he said. "The
public needs to appreciate the need for sewerage infrastructure and be
willing to pay the bill."
Another option, according to Mayor Michael Sullivan of Holyoke, Mass.,
is a federal program that would provide grants to cities that need to
make wastewater infrastructure improvements but are strapped for cash,
or in instances where the town is threatened with severe environmental
problems. Testifying before a House Transportation and Infrastructure
Committee hearing on the issue last month, Sullivan told the panel that
residents of his town face a four-fold increase in sewer rates because
of EPA sewer overflow mandates -- a massive burden in a town where 26
percent of residents live below the poverty line, he said.
Currently, cash-strapped communities can access federal grant money, but
only if the town's congressional representative is able to secure the
money in an annual spending bill. The city of Toledo was able to get
about $2 million in federal grants to help meet its $450 million in
needed improvements, because the city's congresswoman, Marcy Kaptur
(D-Ohio) worked to have the money included in last year's