Water infrastructure throughout our region needs replacement and repair.
By Justin Williams, MPC Research Assistant - May 16, 2019
Update: HB2650 is on the Governor's desk. MPC has asked Gov. Pritzker to sign it without delay.
Every day, Northeast Illinois utilities lose approximately 70 million gallons of treated water per day. This is water pumped from Lake Michigan, treated, and leaked into the ground somewhere along the pipeline. Water loss is a symptom of a broader problem: our water infrastructure is aging and it needs to be repaired or replaced.
Infrastructure repair is expensive: even well-resourced communities often need help raising enough money to address large capital improvement projects. When communities need help paying for water infrastructure repair, they often turn to an important federal program administered by the State of Illinois: the State Revolving Fund.
But some low-income communities have trouble accessing this fund – it requires a lengthy application process that some communities simply don’t have the resources to complete.
MPC has worked closely with the Illinois Environmental Protection Agency to come up with a solution to this problem, HB2650. The bill, currently under consideration in the Senate, would take proactive steps to make the State Revolving Fund more accessible to those who need it the most. After significant consultation, we arrived at the amendment passed unanimously by the House on April 11. The bill is now sponsored in the Senate by Sen. Elgie R. Sims (D – Chicago).
The State Revolving Fund helps communities invest in water infrastructure
To get the money required to maintain or replace aging infrastructure, communities often apply for low-interest loans from the State Revolving Fund (SRF). Created in 1996 under amendments to the Safe Drinking Water Act, SRF is an ingenious but complicated financing mechanism that provides cash for water systems to improve their infrastructure.
When you strip it down to the basics, the SRF acts like a bank. Here’s how it works:
- Uncle Sam makes a gift to the States. The federal government gives out billions of dollars as “capitalization grants” to the States. This is the “Fund” given to “States” (we’ll get to “Revolving” in a minute).
- States put the money in an account. Because the federal government is giving out that money to help with water infrastructure, they want to make sure States aren’t using it for road repair, schools, or anything else. The federal Environmental Protection Agency sets rules on what that money can be used for.
- States make the money available as loans. States can make low-interest loans for water infrastructure repair.
- Water systems apply for loans from the fund, which they pay off over time. This is what makes it “Revolving”: money goes out to water systems, then comes back in as water systems pay back the loans.
It’s been a really successful program: it allows water systems to get upfront money to fund expensive water supply improvement projects that they may not be able to finance on their own.
Inequitable access across our region
There’s also been a downside, though: as MPC has previously argued, because of the complicated nature of the program and the multiple levels of government involved, some low-capacity water systems have struggled to take advantage of it. The SRF application requires that engineering studies and capital improvement planning be complete. Yet those studies and planning activities are expensive: low-capacity communities may not have the resources to complete the required studies and plans. And even if those studies were complete, they may lack the staffing resources and technical knowledge to apply for a low-interest loan.
Part of the problem is the way that the SRF is structured in Illinois: currently, very little money in the fund is dedicated to “technical assistance:” staffing, studies, and help with technical issues. Instead, almost all money goes to physical infrastructure projects – digging in the ground, replacing pipes and meters, that kind of thing. But low-capacity communities need technical assistance before they can access the infrastructure money.
There’s a trap here: those systems most in need of assistance are least able to apply for it. That means maintenance and improvements fall further and further behind in these communities. Illinois needs a way to deliver more of the benefits of programs like SRF to low-income households living in low-capacity communities.
HB2650 expands the State Revolving Fund
Enter HB2650 (Robert Rita, D-Blue Island), which will help low-capacity water systems get access to SRF funding. In a nutshell, the bill expands how SRF funding can be used, setting aside some money for technical assistance to low-capacity water systems.
HB2650 creates a 5 year pilot program. During the pilot, the Illinois Environmental Protection Agency must use a portion of the SRF to prioritize technical assistance to low-capacity water systems. Technical assistance can include things like:
- Water rate studies: As reported in the Chicago Tribune’s “Water Drain” series, water rates are generally on the rise, and nobody really knows why. This program makes SRF money available to study this problem. (Incidentally, MPC is also working to address this problem in a separate Senate Bill).
- Preliminary engineering: Remember those engineering studies required to apply for SRF funding? Now there’s a way to get those done.
- Staff training: With more resources available for training, staff can stay on top of best practices in water utility planning, maintenance, and engineering.
- Lead service line inventory and remediation: For the health of Illinois’ residents, we need to deal with our lead service line problem. Expanded SRF funding can ensure that the most vulnerable communities have the resources they need to stay on top of the problem.
- Studies of efficiency measures, including regional partnerships: MPC has identified one especially promising route for building utility capacity: regional partnerships. By cooperating regionally, water utilities can potentially reduce administrative overhead and take advantage of economies of scale.
A way out of the Low-Capacity Trap
By setting aside money and explicitly prioritizing low-capacity communities, HB2650 can help low-capacity communities plan for the future and take advantage of SRF.