The new infrastructure law provides $15 billion to replace lead service lines, money that advocates and water utilities say will be a strong start to a complicated, years-long effort that will require a mix of financing tools, including WIFIA loans and traditional municipal bonds.
But before water systems can start to replace their toxic lines, they need to first figure out where they are.
The inventory effort alone is expected to take two years, meaning most systems won’t be in a position to begin replacing lines until around mid-to-late 2024.
After they inventory their lines, the utilities then need to craft replacement plans and apply for the federal funds through the states in what is expected to be a very competitive process.
The effort is further complicated by the fact that homeowners are responsible for half of the infrastructure. Federal rules require utilities to replace the entire lines, meaning that homeowners will need to be involved and likely covering some of the costs.
“It’s going to be really complicated,” said Alan Roberson, executive director of the Association of State Drinking Water Administrators.
Association of Metropolitan Water Agencies
Lead line replacement, as opposed to corrosion treatment or other mechanisms, has gained national attention and support since Flint, Michigan’s water contamination crisis in 2014.
The Environmental Protection Agency estimates there are 6.3 to 9.3 million homes serviced by lead service lines in addition to millions of older buildings with lead solder and faucets. The price tag of replacing all of them remains unclear but the American Water Works Association puts it between $60 billion to $70 billion.
The Biden Administration has said it wants to replace all lead pipes within the next decade. The IIJA provides $15 billion to help states reach the goal. The money will be doled out annually in $3 million chunks from 2022-2026.
The White House has said that lead remediation is also an eligible use for an additional $11.7 billion of Drinking Water State Revolving Fund dollars in the IIJA, and for the American Rescue Plan Act’s $350 billion state and local funding.
Another $10 billion for lead remediation is in the stalled Build Back Better plan.
Like most aspects of lead replacement work, the cost varies with each system. The EPA puts the average line replacement cost at $4,500, though most advocates say that’s too low. Newark, New Jersey estimates its line replacement cost at $7,000. Chicago, which has nearly 400,000 lead lines, the most in the nation, has estimated $15,000 to $26,000 per line.
The $15 billion IIJA money will flow through the Drinking Water State Revolving Funds. No state match is required and at least 49% of the money has to be used in disadvantaged communities — which the states will define — in the form of grants or forgivable loans.
States are required to submit by this summer their intended plans for how they will spend their federal funds, said Roberson. He estimates that at least 70% of the first tranche will go toward inventory efforts. Only a few states, such as Michigan and New Jersey, and a handful of systems are far enough along that they can craft replacement plans, he said.
Denver, Cincinnati and Newark are among the cities that are already undertaking major projects to replace their lines.
DC Water is also in the midst of an “aggressive, equitable” plan to get all lead service lines out of the ground by 2030, said a spokesperson. The district, which is paying for the program with a mix of bonds issued for general infrastructure upgrades and PAYGO, expects to receive $140 million from the IIJA for lead replacement. The money means that ratepayers will not bear the full cost of the project, the spokesperson said.
The national program is a massive undertaking that would take years no matter how much funding is immediately available, said Tommy Holmes, legislative director for the American Water Works Association.
“This is a years-long effort,” Holmes said. “Even if the whole $70 billion would have dropped out of the sky yesterday, it’s still going to take years to get this done.”
The chief financing tools will be a mix of state revolving funds, municipal bonds, state funds and Water Infrastructure Finance and Innovation Act loans.
WIFIA loans are generally reserved for larger projects, so places like New York City or Chicago may take advantage of those, coupled with additional money, said Roberson.
“There’s going to be some need for financing because systems are going to want to do it faster and they’re not going to get enough from the federal money and there will be a lot of competition,” he said. “It will be all over the place, and very system specific and state specific.”
Private philanthropy may also play a role when it comes to financing the homeowner side, which will be a key challenge for each utility and city, advocates said.
“The drinking water community has been trying to communicate for years to Congress and anyone who would listen how much this would cost and the complicating factors like private property,” Holmes said.
A few cities, including Denver and Newark, covered homeowner costs entirely or in part, and more utilities may pursue that if the Biden Administration announces mandates or accelerated timelines, said Dan Hartnett, chief advocacy officer at the Association of Metropolitan Water Agencies.
The EPA in December 2021 released a revised Lead and Copper Rule outlining how water systems are to achieve 100% lead replacement and requiring that utilities submit their inventories and replacement plans by October 2024. More rules or revisions may be coming down the pike to advance Biden’s goals, Hartnett said.
“If the Biden administration does finalize a new rule that requires replacement of lead service lines on a particular schedule, you’re going to see a lot of utilities looking for a range of funding sources,” Hartnett said.
Homeownership complications include rules against spending public money on private property or projects that disproportionately benefit a particular homeowner.
“It’s a matter of getting the homeowner to agree to do the work and a lot of utilities have said it can be difficult because they may not want to pay for it,” Hartnett said.
As utilities wait to see if new federal rules are released, most are gearing up for the inventory work, which can be funded with the IIJA dollars. Most utilities don’t have extensive records of their lines, so the program will call for hunting down old records, digging down to pipes and other efforts.
The Pittsburg Water and Sewer Authority, for example, needed to locate 100-year-old construction records to figure out where its lead pipes were, according to a video from the American Society of Civil Engineers highlighting the authority’s program.
Under the EPA revised rule, a line with unknown composition is considered to be lead until proven otherwise, which could lead to a dramatically larger estimate of lead lines once the inventories are submitted, Hartnett said.
Most IIJA funding will likely go to inventory efforts for the first year or two as states and utilities try to wrap their arms around the size of the problem.
“Over the five years of this funding through 2026, you may start to see states get their bearings, but at this point a lot of states are still in the relatively early stages of figuring how to get the money and how to direct it,” Hartnett said.