Pennsylvania Governor Ed Rendell is fond of repeating a story from his days as Mayor of Philadelphia. After a prolonged cold snap, temperatures quickly soared into the upper 50s causing 58 water main breaks in the city service area. The Philadelphia water managers reported back to him that some of the pipes had been installed in the 19th century and were not buried deep enough. When the rapid change in weather occurred, the ancient parts of the water service infrastructure simply failed.
Aging infrastructure is a problem for many communities and public utilities. As communities grew over the years, demands on sewage systems and water providers all increased. Within the water utility industry, building more treatment plants and other big-ticket facilities made clear economic sense when communities were expanding. More customers meant more utility revenue. New facility construction was made possible by increased sales of water and sewer services.
Aging plant and equipment eventually reach the end of their service lives however. As they approach this point, utilities that do not enjoy an expanding revenue base face serious challenges to their ability to provide service into the future. Should a significant facility or treatment plant suddenly go off-line or fail, customers would potentially face significant increases to service rates to replace it. Even when older facilities are scheduled to be removed from service, the cost of replacing the existing one could also mean major price increases to existing customers.
In a recent New York Times opinion, (February 15, 2010) columnist Bob Hebert wades into the issue of decaying facilities and the battles states and communities are facing when it comes to replacing expensive infrastructure. “Ignoring these problems imperils public safety, diminishes our economic competitiveness, is penny-wise and pound-foolish, and results in tremendous missed opportunities to create new jobs on a vast scale.” Using the ‘jobs’ rationale, Hebert implies that Washington DC can provide a funding solution and thereby deliver relief from high unemployment rates.
Utility managers are well acquainted with the need to replace treatment plants and delivery systems and they are trying to coax every last possible day of service out of existing facilities. Providing service with old equipment and facilities will only last so long. At some point, cities and water service providers will have to confront sometimes enormous replacement costs.
The best way to handle this problem according to Hebert, is to look for help from the national treasury. Budget hawks are sure to resist. With the current deficit and budget crises, resolving this conflict won’t be easy and could certainly be expensive. Communities and water utilities – like Rendell’s Philadelphia water department – will still have to come up with a way to pay for repair and replacement costs. Washington may not have the ability to help.
Water systems serving fewer than 3,300 customers constitute 85% of all water systems in the United States. Without Washington’s financial assistance, these utilities will have to handle many of these problems on their own. Smaller water delivery systems still require expensive infrastructure to serve their customers. Having to spread a multimillion dollar cost to replace a water treatment plant among only a couple thousand customers is a problem most utility operators don’t want to confront.
The Times Hebert recognizes that a failure to replace important infrastructure has far reaching negative consequences. Finding the dollars to do the job is – as it always is – the main problem. Water providers need to plan sooner rather than later for the unavoidable need to replace expensive equipment and facilities – or wait for the next set of pipes to burst and figure out how to pay for it then.
Specializing in Water Utility Consulting, author Jason Mumm is a respected economic advisor to water and wastewater utilities nationwide. His company, StepWise Water Utility Consultants, assist utility organizations improve operations, improve cash flow management as well as manage customer fees in a challenging economic environment.
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