We Can’t Afford What?

A report shows that utility leaders worry about future funding for water and wastewater systems. On this issue, our society needs to grow up and get with it.

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Reports on aging infrastructure come out every so often, a few of them each year it seems, from different entities.

The latest Report Card on Infrastructure from the American Society of Civil Engineers bore a measure of good news — it assigned the nation’s water and wastewater systems a grade of D, after several years of D-minus. D still means “poor,” but at least it’s a step in the right direction.

Another report issued last year, from the Black & Veatch consulting firm, is perhaps less encouraging. It is notable for its perspective — instead of reporting the condition of the broader infrastructure, it explores the condition of water and wastewater systems and, more specifically, how utility leaders feel about it.

The Strategic Directions in the U.S. Water Utility Industry Report identifies top challenges facing the drinking water and wastewater sectors, and it cites capital costs and funding as the industry leaders’ top concerns.

This statement from Cindy Wallis-Lage, president of the Black & Veatch global water business, speaks volumes: “Utility leaders are continuously challenged to make the most of limited budgets — a situation truer today than just five years ago. As a result, the vast majority of survey respondents doubt the sufficiency of their future funding to manage and maintain their systems.”

Frightening thought

Think about what she said. The vast majority of people in leadership roles at water and wastewater utilities are not sure they can afford to run and keep up their systems of piping and treatment plants. If that doesn’t terrify people in the water business, it certainly should.

The consequences of letting our water-related systems go to seed are too dire even to imagine. If we assume, correctly, that clean water is life, then these facilities are more important than any other public infrastructure. And yet it appears to the industry’s leadership that the public is unwilling to pay what it costs to sustain them.

Look, this isn’t a choice. If we’re going to drink clean water and protect our lakes and streams from pollution, then we have to take care of the infrastructure, and whatever that costs, we have to pay. Efficiency initiatives are fine. If we can get more done with the same or less money, that’s a plus. But cost savings only go so far. Sooner or later we have to pony up, or face service issues, permit violations, pipe breaks, sinkholes in the streets, sewage overflows and worse.

Between the lines

Let’s look at some of the basic findings listed in the Black & Veatch report.

For one, more than 75 percent of respondents said they had taken steps to cut energy usage. More than half said they were taking on asset management improvement programs. Fine. If tight budgets promote greater efficiency, that’s not a bad thing.

But then: “85 percent of respondents said average water consumers have little or no understanding of the gap between rates paid and the cost of providing water and wastewater services.” This in itself is an unsettling thought. And furthermore, why is there a gap in the first place? Shouldn’t it be axiomatic that sewer and water rates cover the true costs of the services?

And then this: “Nearly half of utility leaders believe customers will probably be willing to pay the higher rates needed to fund capital improvements [emphasis added].” Which on the flip side means more than half doubt it!

Paying the piper

It’s time for that doubt to go away. One thing I have learned from working in business and observing business is that being bashful about pricing is a form of slow suicide. If you run a business, you need to charge what your product or service is worth, including enough to earn a fair profit. If you can’t do that — if your customers literally won’t pay it — then you shouldn’t be in the business.

Things aren’t much different for a wastewater or water utility. Public servants of all stripes seem to labor under the assumption that their services have to be cheap. That isn’t true. The services have to be efficient — not the same thing as cheap. The price of the service has to reflect the true cost of providing it, and that includes enough for upkeep and future investment. There’s just no getting around it.

As a society, we’ve persuaded ourselves that we “can’t afford” the rising costs to support excellent services, whether that be schools, parks, transit, or utilities. With allowance to people who genuinely are struggling in a time of recession, the reality is that most of us can well afford it — we simply prefer not to pay it. That isn’t a responsible attitude, and it needs to change.

In the words of John Chevrette, president of the Black & Veatch management consulting division, “Overcoming today’s challenges requires a significant change in how utilities develop and implement strategic and capital plans. “At the same time, consumers must better understand that water and wastewater services are not free or low-cost. Rather, these are services that must be paid for in an equitable and responsible manner.” May it be so. You can read the full Black & Veatch report at www.bv.com/survey.


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