A “surge of network upgrades” in capital expenditures for municipal water and wastewater utilities in the United States is being predicted for between 2016 and 2025, according to a newly issued forecast from Bluefield Research. The report predicts a 28 percent increase – or more than $532 billion – over capital expenditure spending during the last 10 years. That translates into an abundance of contracting opportunities for private-sector firms. It also will likely open the door for increased use of public-private partnerships (P3s/PPPs).
A Bluefield press release notes that P3s will “begin to take on greater significance” in this industry “that does not lack technology options, but rather capital.”
This new spending by water utilities comes at a good time, as federal funding for those utilities has dropped off considerably in recent years – from $16 billion in 1976 to just $4.3 billion in 2014. That has resulted in a backlog of state and municipal utilities’ necessary infrastructure upgrades. And, in the end, it has been the ratepayer who has shouldered that burden. Sewer bills alone have increased 20 percent annually since 2000. However, even with those increases, the funding realized from these increases still falls short of what is needed.
Using proposed utility budgets as a basis for much of the forecast, Bluefield also drew information from government agencies and company assessments. Much of the increased water infrastructure spending is expected for projects including pipes, pumps and plants. The forecast shows that water infrastructure spending suffered a drop of about 15 percent during the nation’s economic decline for the five-year period from 2009 to 2014. However, the rebound in the American economy has resulted in a rebound in spending on many water infrastructure projects that had been pushed to the back burner.
The forecast predicts increasing network upgrades that will concentrate on deteriorating infrastructure and more demand as populations increase and environmental regulations are tightened. The forecast notes that new technology related to water infrastructure as well as ways to finance these projects will also be sought and “opportunities for private capital in the municipal water sector are also expected to proliferate.” An absence of available local funding has P3s rising to the top among alternative financing options for many such large, expensive projects. Private capital is readily available and private-sector firms are eager to invest in public projects.
Bluefield predicts that 61 percent of the increased water infrastructure spending expected through 2025 will go toward projects related to the 1.6 million miles of underground water and wastewater pipes. The forecast notes that money spent on pipe networks over the 10-year period will likely double.