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In hard times, money for water: Funding is tougher, trickier, and leaner, but ultimately available

Posted by: Maven on March 18, 2009 at 11:05 pm

From the Water Efficiency Journal:

Just when water agencies were getting used to rainfall droughts, comes a financial one. In the wake of the housing market collapse, towns and cities have seen revenues plummet for over a year. A recent survey by the National League of Cities found that falling property and other tax revenues were impacting nearly 80% of the communities polled, and shortfalls were anticipated to continue at least two more years. Many state governments are now also running in the red or facing deficits. Departments and agencies must wrangle over what dwindling income remains. The federal deficit continues to explode beyond control.

Water agencies—which in sunnier times have enjoyed relatively easy access to funding—also are finding that times have changed. As a fact sheet from the Missouri Department of Natural Resources (MoDNR) put it to its state water agencies in mid-2008: “The days of 100% construction grants are long gone, and the reality is that all communities will have to borrow money for water and wastewater infrastructure at some point.”

Borrowing for water projects has long been routine in most places, of course, but here too, the late-2008 capital crisis applied unprecedented pressure on bond markets, adversely impacting interest rates and affordability.

Taking stock of this drastically altered funding landscape, the same MoDNR fact sheet noted that water agencies (even during a relatively easier bond market) have sometimes unwisely balked at drawing upon subsidized state-revolving funds to pay for projects, protesting the many attached strings (e.g., meeting state wage rates). Impatient with such requirements, agencies are thus tempted to explore independent financing and, in an almost eerie parallel to bad subprime mortgage deals, have sometimes been lured into debt financing, such as lease-purchase arrangements or issuing their own bonds. As the fact sheet cautioned, these have sometimes resulted in doubling, and even tripling, a project’s total cost.

Read more from the Water Efficiency Journal by clicking here.

March 18, 2009 · Filed Under Infrastructure

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