Smart Stimulus Spending
WWD Editorial Director Neda Simeonova, spoke with Eric Meliton, research analyst, envirnonmental techno-logies, Frost & Sullivan, about the effects of the stimulus package on water and wastewater infrastructure.
Neda Simeonova: Why was it important to include funding for water infrastructure in the stimulus bill?
Eric Meliton: Water infrastructure investment is needed to address the gaps identified by the U.S. EPA Needs surveys of 2002 and 2004 for drinking water and water treatment requirements. Also, with the goal to improve economy and employment, immediate projects (shovel-ready, within 12 to 15 months) would create an influx of short and long-term jobs from construction, engineering and operation.
The ARRA included funding for water infrastructure as part of a recommendation called the “National Agenda for Drinking Water.” This document covered a variety of issues affecting the water and wastewater infrastructure industry: water security, impact of climate change, protection of source water, improvements to drinking water standards and infrastructure investment.
Simeonova: As the funding gap for continues to grow, is the stimulus expected to make notable improvements to water infrastructure in the immediate future? If not immediately, when?
Meliton: The funding gap is expected to continue over the next 20 years. Gap estimates range from $250 to $400 billion over this time period—encompassing issues such as maintenance, equipment life cycle, facility upgrades and buried infrastructure. Although states rely heavily on the Clean Water and Drinking Water State Revolving Funds, the allocation is not enough to meet the demand.
Immediate funding into the CWSRF is $4 billion and DWSRF is $2 billion. This will address short-term needs; however, the upcoming fiscal 2010 budget should provide extended relief to the funds. The Obama administration is proposing a $3.9-billion total investment into the CWSRF and DWSRF. In addition, the budget will begin an annual $5-billion investment into a National Infrastructure Bank, which will serve as a fund for major infrastructure projects (including water) that fall outside the realm of SRF allocation.
Simeonova: What type of projects would be considered “smart” stimulus spending? What should be prioritized?
Meliton: This administration is focusing on green initiatives that affect energy, climate change and government policies. Green infrastructure stipulations for project spending are safe investments at this point. Regional demands are of immediate concern as well. Buried infrastructure is a national issue, while shortages of freshwater are a major concern for industrial users in specific states. The issue of full-cost pricing of water and wastewater services must be addressed and implemented across the majority of U.S. towns and cities and can no longer be ignored. Many of the financial revenue shortcomings can be attributed to the antiquated pricing of water services.
Simeonova: Public infrastructure investments generally yield positive returns. How do water infrastructure returns compare to other types of public infrastructure, and why?
Meliton: Public infrastructure investments are being viewed as safe and conservative in comparison to other commodities that used to be more attractive. With the large influx of stimulus money, a focus on economic recovery and a large funding required, private investors are in a prime position to make major public infrastructure investments into the water sector. If firms look at opportunities from a macro or micro scale, they can identify a number of key projects that are grossly underfunded or require immediate investments to get them started.
Simeonova: What is a good place for municipalities to start?
Meliton: Opportunities arise from the various state-by-state intended use plans. The ARRA requires full transparency of project approvals and project spending benchmarks, making it public knowledge of various opportunities that are available. Investors can make use of this knowledge and companies that supply technology, engineering and procurement services can benefit from this influx of immediate-action projects. A good place to start on a municipal, state or regional assessment of opportunities is with these plans.