The Clean Water and Drinking Water Infrastructure
Gap Analysis
With the aging of the nation's infrastructure, the
clean water and drinking water industries face
a significant challenge to sustain and advance their
achievements in protecting public health and the
environment. To gain a better understanding of
the future challenges facing these industries, the
U.S. Environmental Protection Agency (EPA) has
conducted a study, The Clean Water and Drinking
Water Infrastructure Gap Analysis, to identify whether
a funding gap will develop between projected
investment needs and projected spending. The
study provides an important empirical basis for
discussions addressing the critical needs of our
water infrastructure.
What Does the Study Cover?
The Gap Analysis covers a 20-year period from
2000 to 2019 and includes estimates of the funding
gap for both capital and operations and
maintenance (O&M). The report discusses the
methods for calculating the capital and O&M gaps,
but does not address the policy implications of the
results.
For clean water, the estimates of investment needs
and spending used to calculate the gaps cover all of
the approximately 16,000 publicly owned treatment
works (POTWs). The drinking water analysis covers
the approximately 54,000 community water systems
and the 21,400 not-for-profit noncommunity water
systems in the 50 states, U.S. Territories, and Tribal
areas.
How was the Study Conducted?
EPA conducts surveys of the nation's clean water
and drinking water infrastructure needs every four
years. These surveys formed the starting point for
calculating the capital and O&M investment needs.
EPA adjusted the surveys' estimates to account for
the under-reporting of needs, particularly for
capital replacement. The Gap Analysis used several
alternative assumptions to generate a number of
scenarios for estimating the capital and O&M gaps.
The estimates represent the average of these
scenarios.
What Are the Findings?
The Gap Analysis presents the projected funding
gap over the 20-year period in two ways: a "no
revenue growth" scenario that compares the
projected need to current spending levels; and a
"revenue growth" scenario that assumes spending
will increase by 3 percent per year. This annual
increase represents a real rate of growth of 3
No Revenue
Growth Scenario:
2000 - 2019
Capital:
O&M:
Total:
Total Payment Gap (20 years)
(Average in Billions of Dollars)
Clean Water
$122
$148
$271
Drinking Water
$102
$161
$263
Revenue
Growth Scenario:
2000 - 2019
Capital:
O&M:
Total:
Total Payment Gap (20 years)
(Average in Millions of Dollars)
Clean Water
$21
$10
$31
Drinking Water
$45
$0
$45
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percent over and above the rate of inflation—a
projection which is consistent with long-term
growth estimates of the economy.
The "no revenue growth" scenario is useful for
understanding the extent to which spending might
need to increase relative to the status quo. This
analysis estimates a total capital payments gap of
$122 billion, or about $6 billion per year, for clean
water and $102 billion, or about $5 billion per year,
for drinking water. The O&M gap is estimated at
$148 billion, or $7 billion per year, for clean water
and $161 billion, or $8 billion per year, for drinking
water.
Under the "revenue growth" scenario, the capital
gap is $21 billion, or about $1 billion per year for
clean water and $45 billion, or about $2 billion per
year, for drinking water. The O&M gap is
estimated at $10 billion, or $0.5 billion per year, for
clean water, while no O&M funding gap would
occur for drinking water.
Each of these numbers represents an average
within a range of estimates. Under the
assumptions used to calculate the funding gaps,
some of the models predict that total spending will
exceed the total need over the next 20 years.
Therefore, this range of estimates may include
negative numbers. The full report provides a
detailed explanation of the methods and the gap
estimates.
How Credible Are the Findings?
A diverse panel of external peer reviewers drawn
from academia, think tanks, consulting firms, and
industry commented on the methods and data used
in this study. Overall, the reviewers commended
the report as a reasonable effort to quantify the
gap, particularly given the limitations of the
available data. EPA revised projections and
approaches to incorporate the comments of the
peer reviewers.
Is a Funding Gap Inevitable?
No. It is important to recognize that the funding
gaps would occur only if capital and O&M
spending do not increase from present levels. This
assumption understates future spending and
ignores other measures that can be taken. These
can include, but are not limited to, asset
management to reduce capital and O&M costs and
rate structures that better reflect the cost of
service. In reality, increasing needs will likely
prompt increased spending and thus a smaller
funding gap, as is captured by the "revenue
growth" scenario. However, the analysis presents
an indication of the funding gap that will result if
we ignore the challenges posed by an aging
infrastructure network—a significant portion of
which is beginning to reach the end of its useful
design life.
Where Can I Obtain More Information?
Copies of the Gap Analysis and the Needs Surveys
are available from the Safe Drinking Water Hotline
at 1(800) 426-4791, the Office of Water Resource
Center at 1(800) 832-7828, and on the Internet at
www.epa.gov/ow
Office of Water
September 2002
EPA816-F-02-017
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