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Michigan’s Water Infrastructure Investment Needs

Posted by Content Coordinator on Friday, June 3rd, 2016

MICHIGAN INFRASTRUCTURE & TRANSPORTATION ASSOCIATION (MITA)

Executive Summary

The infrastructure that provides clean water is one of the most fundamental underpinnings of urban society. Yet, the systems that provide safe drinking water and treat and manage wastewater and stormwater largely operate out of sight and out of mind, only garnering the public’s attention in times of crisis. For example, (1) the statewide power outages in 2003 that shut down major public water systems, (2) the 2014 forced shutdown of the city of Toledo’s Great Lakes water system due to toxic algal blooms, (3) the recent crisis related to lead contamination when the city of Flint switched to using the Flint River as its drinking water source, (4) the 2014 flooding that forced shutdowns of five freeways and many other roads in southeast Michigan after a severe rainfall occurred, and (5) numerous contamination issues over the last several decades related to municipal and private drinking water supplies, have all highlighted how dependent the state’s metropolitan areas are on water for drinking, cooking, manufacturing, waste transport, and fire suppression. An essential role of government, therefore, is to ensure that communities have reliable drinking water infrastructure systems that pump and convey water in significant quantities and with sufficient pressure to meet critical needs, and to maintain adequate infrastructure to safely transport and appropriately treat stormwater and wastewater. Failure to adequately plan for and sufficiently fund critical water infrastructure in Michigan can lead to major crises affecting tens of thousands, if not millions, of the state’s residents.

Currently, about 75 percent of Michigan residents get their drinking water from 1,390 community water systems, and approximately 70 percent are served by 1,080 wastewater treatment systems (MDEQ 10/31/15). Most of these systems were built between 50 and 100 years ago, while some in the state’s oldest cities date back to the 1800s. Many of these systems are fast approaching, or have already exceeded, their expected lifespan. Communities throughout Michigan, therefore, face the challenge of maintaining and updating old infrastructure that was designed and built to meet former, less strict requirements, but now must meet emerging, more stringent state and federal drinking water, wastewater, and stormwater standards.

To better understand the status of the state’s water infrastructure, the Michigan Infrastructure & Transportation Association hired Public Sector Consultants (PSC) to (1) assess the level of water infrastructure investment needed to bring systems and facilities up to current standards, and (2) determine whether current investments by communities across the state are sufficient to meet the challenge. The analysis focuses only on capital investment needs for water infrastructure; it does not include an assessment of operations and maintenance (O&M) expenses or debt services. If these expenses were included, the total costs—or necessary annual investment—would be significantly higher. Additionally, delaying needed capital improvements will likely increase emergency repair costs and further erode O&M monies needed to keep functional system components from deteriorating at faster rates.

Methods

To conduct the analysis, PSC drew on many data sources that provide information on municipal spending and borrowing, state administered loan programs, and estimates of water infrastructure investment needs. To enable better comparisons, all figures were adjusted for inflation and are reported in 2015 dollars. A summary of our approach follows.

  • To answer the question of how much is spent on drinking water and sewer infrastructure, we drew from the U.S. Census Bureau Annual Surveys of State and Local Finances, which provide revenue and expenditure data for states and municipalities. The reports include line items for capital outlays, or investments, in drinking water and sewerage infrastructure.
  • To assess water infrastructure investment needs, we reviewed information collected by the U.S. Environmental Protection Agency (EPA). Every four years the EPA conducts two surveys that estimate (1) drinking water investment needs, and (2) wastewater and stormwater investment needs. While the surveys have similar goals, they use different methodologies, and thus have different strengths and weaknesses. Industry watchers regard both surveys as providing conservative estimates.
  • To account for the conservative nature of the EPA estimates, PSC evaluated different methods other organizations have used to quantify differences between the survey results and communities’ true longterm investment needs.
  • For drinking water investment needs, we developed a range of estimates. The low end uses the results of the survey and adjusts them only for inflation. The high end of the range uses an adjustment factor developed by the EPA in 2002 that accounts for underreporting.
  • Wastewater and stormwater investment needs were only adjusted for inflation because the methods available for better estimating the full investment need all draw on outdated approaches that are no longer practical given the veracity of the most recent survey.
  • PSC then compared the estimates of water infrastructure investment needs with how much Michigan communities are currently spending to determine whether sufficient investments are being made.

Michigan’s Drinking Water Investment Gap

Between 2004 and 2013, average annual investments in drinking water infrastructure were $447 million. This compares to an estimated investment need of between $731 million and $1.01 billion on an average annual basis until 2030. According to these estimates, Michigan is underinvesting in its drinking water infrastructure by anywhere from $284 to $563 million each year.

These estimates represent the additional spending needed to continue to provide clean drinking water to Michigan residents and businesses and to meet the requirements of the Safe Drinking Water Act. These estimates draw on data that were developed before the Flint drinking water crisis and do not reflect the additional investment that will be needed to reestablish a safe drinking water supply in that area.

Michigan’s Sewer Investment Gap

Compared to drinking water estimates, stormwater and wastewater figures are much murkier. Unfortunately, there is not a comprehensive estimate that accurately reflects the total long term costs to ensure that Michigan communities are adequately managing wastewater and stormwater. EPA survey results suggest that Michigan’s estimated investment need is approximately $2.14 billion. However, because of significant under-reporting in the survey this estimate does not adequately reflect anticipated long-term costs. Furthermore, because the survey is skewed toward shorter-term needs it is not practical to generate estimates of investment need on an annual basis.

Census data show that between 2004 and 2013, communities in Michigan spent an average of $691 million each year on wastewater and stormwater infrastructure. While this investment is significant, it is unlikely that it fully addresses Michigan’s long-term needs, particularly for stormwater management. Of the investments made, many have followed consent orders to reduce or eliminate combined sewer overflows (CSOs), sanitary sewer overflows (SSOs), and wastewater treatment plant bypasses. As a result of these investments, the estimated need within this subcategory declined by 70 percent between 2004 and 2008. Unfortunately, due to the underreporting of large-scale projects in the 2012 EPA needs survey, it is impractical to estimate the percent change over this period.

Furthermore, the state’s recent initiatives to collect additional information on sewer infrastructure through the Stormwater, Asset Management, and Wastewater (SAW) Program will provide a wealth of information regarding the condition of existing systems and help communities identify their long-term needs. Preliminary results from those initiatives suggest that Michigan communities are in need of significant investment in wastewater and stormwater infrastructure. Once more information becomes available, the state and communities can better evaluate how much additional funding may be necessary to ensure that wastewater and stormwater infrastructure are adequately funded.

About the Michigan Infrastructure & Transportation Association (MITA)
www.mi-ita.com
The Michigan Infrastructure and Transportation Association (MITA) is a statewide construction trade association that consists of nearly 600 Michigan companies representing construction disciplines such as road and bridge, sewer and water, utility, railroad, excavation and specialty construction throughout the state of Michigan.

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