Current Infrastructure Investment and Bridging the Funding Gap

Every four years, the American Society of Civil Engineers (ASCE) publishes ?The Report Card for America?s Infrastructure,? which grades the current state of the nation?s infrastructure categories on a scale of A through F.?This year,?the U.S. infrastructure earned a D+ average — only a slight improvement from 2009.??The report card provides an updated look at the state of U.S. infrastructure conditions, but there is also a larger question at stake: How does a D for infrastructure affect America?s economic future?

A recent?Failure to Act? report, answers the key question of how the conditions of U.S. infrastructure systems affect the nation?s economic performance. The Failure to Act report provides this economic analysis by addressing nine of ASCE?s 16 infrastructure categories that are addressed in the 2013 Report Card. Today, perhaps more than ever, economic performance is critical to the nation?s future.

The purpose of the Failure to Act report series is to provide an analysis of the economic implications for the United States of continuing its current investment trends in infrastructure. The Failure to Act series analyzes two types of infrastructure needs:

  • Building new infrastructure to service increasing populations and expanded economic activity;
  • Maintaining or rebuilding existing infrastructure that needs repair or replacement.

Analyzing the Gap

Infrastructure is the physical framework upon which the U.S. economy operates and the nation?s standard of living depends. Everything depends on this framework, including transporting goods, powering factories, heating and cooling office buildings and enjoying a glass of clean water.

The preceding four Failure to Act reports compared current and projected needs for infrastructure investment against the current funding trends in surface transportation; water and wastewater; electricity; and airports, inland waterways and marine ports. ASCE projections included both the cost of building new infrastructure to service increasing populations and the cost of expanded economic activity; and for maintaining or rebuilding existing infrastructure that needs repair or replacement. The total documented cumulative gap between projected needs and likely investment in these critical systems will be $1.1 trillion by 2020. The subsequent analyses focused on the long-term effects associated with infrastructure investments and did not consider the immediate benefits associated with the construction process. The results show that deteriorating infrastructure, long known to be a public safety issue, has a cascading impact on the nation?s economy, negatively affecting business productivity, gross domestic product (GDP), employment, personal income and international competitiveness.

The categories of infrastructure systems analyzed in the preceding Failure to Act reports were reviewed in isolation by each study. However, it is clear that there is an interactive effect between different infrastructure sectors and a cumulative impact of an ongoing investment gap in multiple infrastructure systems. For example, regardless of how quickly goods can be offloaded at the nation?s ports, if highway and rail infrastructure needed to transport these goods to market is congested, traffic will slow and costs to business will rise, creating a drag on the U.S. economy that is ultimately reflected in a lower GDP.

This fifth and final report analyzes the interactive effect between investment gaps in the infrastructure sectors addressed in each of the preceding studies. It presents an overall picture of the national economic opportunity associated with infrastructure investment and the consequences of failing to fill the investment gap.

Water and Wastewater

Of all the infrastructure types, water is the most fundamental to life, and is irreplaceable for drinking, cooking and bathing. Farms in many regions cannot grow crops without irrigation. Government offices, hospitals, restaurants, hotels, and other commercial establishments cannot operate without clean water. Moreover, many industries ? for example, food and chemical manufacturing and power plants ? could not operate without the clean water that is a component of finished products or that is used for industrial processes or cooling. Drinking water systems collect source water from rivers and lakes, remove pollutants, and distribute safe water. Wastewater systems collect used water and sewage, remove contaminants, and discharge clean water back into the nation?s rivers and lakes for future use. Wet weather investments, such as sanitary sewer overflows, prevent various types of pollutants like sewage, heavy metals and fertilizer from lawns from ever reaching the waterways.

Delivery of water and wastewater services in the United States is decentralized and strained. Approximately 54,000 drinking water systems collectively serve more than 264 million people (more than half the nation?s public drinking water systems serve fewer than 500 people). In addition, almost 15,000 wastewater treatment facilities and 20,000 wastewater pipe systems are spread across the United States as of 2008.

Although access to centralized treatment systems is widespread, the condition of many of these systems is also poor, with aging pipes and inadequate capacity leading to the discharge of an estimated 900 billion gallons of untreated sewage each year. As the U.S. population has increased, the percentage served by public water systems has also increased. Each year new water lines are constructed to connect more distant dwellers to centralized systems, continuing to add users to aging systems.

Although new pipes are being added to expand service areas, drinking water systems degrade over time, with the useful life of component parts ranging from 15 to 95 years. Failures in drinking water infrastructure can result in water disruptions, impediments to emergency response, and damage to other types of essential infrastructure. In extreme situations caused by failing infrastructure or drought, water shortages may result in unsanitary conditions, increasing the likelihood of public health issues.

The U.S. Environmental Protection Agency estimated the cost of the capital investment that is required to maintain and upgrade drinking water and wastewater treatment systems across the U.S. in 2010 as $91 billion. However, only $36 billion of this $91 billion was funded, leaving a capital funding gap of nearly $55 billion. Water-related infrastructure in the United States is clearly aging, and investment is not able to keep up with the need. If current trends continue, the investment required will amount to $126 billion by 2020, and the anticipated capital funding gap will be $84 billion. Moreover, by 2040, the needs for capital investment will amount to $195 billion and the funding gap will have escalated to $144 billion, unless strategies to address the gap are implemented in the intervening years to alter these needs.

By 2020, the predicted deficit for sustaining water delivery and wastewater treatment infrastructure will be $84 billion. This may lead to $206 billion in increased costs for businesses and households between now and 2020. In a worst case scenario, the U.S. will lose nearly 700,000 jobs by 2020. Unless the infrastructure deficit is addressed by 2040, 1.4 million jobs will be at risk in addition to what is otherwise anticipated for that year.

The impacts on jobs are a result of costs to businesses and households managing unreliable water delivery and wastewater treatment services, and will be spread throughout the economy. Moreover, the situation is expected to worsen as the gap between needs and investment continues to grow over time. In 2020, almost 700,000 jobs will be threatened, which will grow to 1.4 million jobs by 2040. By 2020, the nation will have lost over $400 billion in GDP, while the cumulative impact through 2040 is expected to be almost $4 trillion.

This information is an excerpt from the report ?Failure to Act: The Impact of Current Infrastructure Investment on America?s Economic Future,? recently released by the American Society of Civil Engineers. To view the full report, visit www.asce.org/failuretoact.

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