Illinois American Water
The Clean Water and Drinking Water revolving funds are up for reauthorization by Congress, which gives us a chance to reform how they work. Through these loans, the federal government provides funding to states, which match the funds and then award low-interest loans to municipal water providers for projects that ensure compliance with federal water quality requirements. Lots of municipal governments rely on these loan funds to provide the necessary capital for new projects, and so the loan requirements drive a lot of decision making.
The Water Infrastructure Financing Act of 2009, sponsored by Sen. Ben Cardin (D-MD), passed out of the Senate Environment and Public Works Committee last May, but has yet to move beyond that. That means there is still chance to ensure that the funding provided by the loan funds encourages communities to develop projects and programs that meet water quality standards while also managing finite water supplies.
There are three reforms I see as critically important; the first one is currently addressed in the bill language and needs to be protected, the other two need to be inserted:
1) Provide assistance to the neediest communities: Because these programs are matching loans, many poorer communities don't bother to apply. They can neither provide the upfront match to the state/federal funding, nor pay back the loan. At the same time, these communities tend to suffer from historic underinvestment. While the bills offer loan forgiveness for "disadvantaged communities," continued reliance on federal and state subsidies provides a disincentive to solving fundamental problems such as inefficiency and artificially low rates. One option would be to require communities receiving grants or loan forgiveness to conduct a comprehensive water system audit to diagnose these core issues and develop a strategy for overcoming them.
2) Encourage solutions that match the scale of the problem: While the loans ultimately go to individual communities, water supplies tend to cross borders. In theory a community could receive a loan to improve treatment on their part of a river, while their upstream neighbor could continue to contaminate the water. This makes no sense. In Texas, regional water supply planning groups evaluate applications for the revolving loan funds, and approve projects consistent with the regional water supply plans. This approach would have clear benefits for Illinois. Our two pilot regional water supply planning groups—one in 11-county northeastern Illinois and the other in the Mahomet Aquifer region of east-central Illinois—have fiinished their initial plans, but communities are not rewarded for adopting the plans' consensus-driven strategies. The federal government should use the revolving loan fund criteria both to reward states for conducting regional water supply planning and communities for working together to protect shared supplies. See Appendix B of MPC and Openlands' recent report, Before the Wells Run Dry, for more on how Texas does this.
3) Reward and prioritize innovative infrastructure: Traditional water-related infrastructure is expensive to build and maintain. Over the past 20 years, more and more communities have looked to alternative approaches to protect water supplies, manage stormwater, and reduce strain on heavy infrastructure (and thus the need to build more of it). These strategies include everything from wetlands restoration to permeable paving, and full-cost pricing to rainwater harvesting for non-potable uses. Current bill language offers several provisions to encourage the use of these strategies—greater weight in application ranking, lower interest rates, etc.—but falls short of setting aside a specific portion of funding for them. Experience with the "Green Reserve" of the American Recovery and Reinvestment Act (20 percent of the Clean Water Revolving Loan Fund appropriation was designated for these sorts of projects) suggests that until these projects become more the norm than the exception, there must be a specific set-aside for them. If states are not obligated to pursue innovative green strategies, they very well may not. Ultimately these projects should compete for funding with more traditional infrastructure on a level playing field, but it doesn't seem like we're ready for that yet.
MPC will be working in Illinois and nationally to pursue these recommendations and others, partnering with groups like the Alliance for Water Efficiency, Chicago Metropolitan Agency for Planning, Center for Neighborhood Technology, and Openlands. If you or your organization would like to get involved, please get in touch with me. The chance to reform the revolving loans doesn't come around too often, so we shouldn't waste the opportunity.