Fundamental Change Needed for Infrastructure Management: Report

Fundamental Change Needed for Infrastructure Management: Report
May 6, 2013

Doug Kellogg

Doug Kellogg is communications director for the National Taxpayer Union. (read full bio)

If taxpayers and ratepayers want to avoid unaffordable utility bills and huge liabilities in the not-too-distant future, they must insist now on more competition, oversight, and innovation in the way public officials manage the nation’s water and sewer systems.

That’s the conclusion of a comprehensive study by the 362,000-member National Taxpayers Union (NTU). The analysis projects hundreds of billions of dollars in future government expenditures could be saved by adopting techniques such as open, competitive procurement for pipe materials and better asset management.

“Every time they experience the inconvenience of water main breaks or the frustration of skyrocketing utility bills, Americans sense that the water infrastructure they depend on is in serious need of reform,” said study author Gregory Baird, a renowned water finance expert. “However, simply throwing new funding into more holes in the ground, without making fundamental changes in the way infrastructure is procured and managed, won’t restore the public’s trust.”

Fiscal, Political Impediments

Baird is president of the Water Finance Research Foundation (WFRF). He examined the challenges of decaying water and wastewater systems in the United States, and determined impediments to change are more fiscal and political in nature than technical. For example, although corrosion is the main factor in deteriorating metallic pipes such as cast and ductile iron—boosting long-term replacement costs to $1 trillion or more—use of other types of material could, with proper evaluation for local needs and conditions, reduce or control that problem.

The WFRF drew upon established industry standards and research from prestigious institutions to develop a methodology incorporating pipe diameters, water main breakage/decay tests, pressure specifications, and other variables to provide an estimate of potential savings by allowing materials such as PVC pipes to be considered in the water delivery process. Among the study’s findings:

  • A nationwide switch from cast iron and ductile iron pipes to PVC, given open procurement and cost justification analysis, could benefit water ratepayers and taxpayers in the average total amount of $371 billion, or 17.4 percent of the total replacement value of U.S. underground water pipe infrastructure. About one-fourth of these savings would occur over roughly 25 years, with the rest in subsequent decades.
  • Population growth will drive the need for new underground infrastructure, not just replacement. If these pipes were also subjected to rigorous open procurement and cost justification analysis across the country, a total of $139.6 billion in savings could be realized through the year 2050.
  • Individual states and cities, many of which do not allow open procurement, could reap large benefits from such reforms. The author conducted PVC-based cost-cutting estimates for places such as Chicago ($33.6 million in savings) and Detroit ($8.5-$11.9 million in savings).

Rational Debate

Baird noted various industries and utilities are likely to argue over the estimates, but they would be missing the point of the NTU-commissioned study: Reforms such as open procurement practices and life-cycle costing methods allow debate to occur in a rational way.

“The issue at hand is not really the selection of one pipe over another, but the ability for a utility to take advantage of all materials, processes, technologies, and products that create the most cost-effective solution while meeting sustainable performance levels,” he wrote.

Many other stakeholders, including most recently the Mayors Water Council of the U.S. Conference of Mayors, have spoken out for competitive procurement of underground infrastructure, improving the prospects for overhauling current, flawed practices. Baird says utility managers and elected officials must embrace regular public reviews and financial analyses of their operations, including multiyear condition assessments, to reduce risks to ratepayers and earn their confidence.

“Taxpayers and ratepayers deserve better stewardship, oversight, and allocation of the resources they entrust to government, and all of it starts underground,” said NTU Executive Vice President Pete Sepp. “We’re excited to work with the Water Finance Research Foundation in providing some alarming findings, but also some encouraging solutions, to the debate over an issue that literally must be brought to light.”

Doug Kellogg (dkellogg@ntu.org) is communications director for the National Taxpayer Union.

 

Internet Info

 

“Reforming Our Nation’s Approach to the Infrastructure Crisis,” Gregory Baird, National Taxpayers Union: http://www.ntu.org/news-and-issues/i13-04-30-water-infrastructure-paper.html

Doug Kellogg

Doug Kellogg is communications director for the National Taxpayer Union. (read full bio)