We must shift from overreliance on residential ratepayers to fund water infrastructure, and ensure affordable and equitable water and sanitation rates
Janet Meissner Pritchard is FLOW’s Interim Legal Director
By Janet Meissner Pritchard
On October 1, Gov. Gretchen Whitmer announced $500 million in investments in clean water that she designed to be a significant step forward in solving Michigan’s inequitable, unsustainable water infrastructure crisis.
The new investment package will provide grants for much-needed water infrastructure projects such as replacing lead service lines, addressing failing or inadequate wastewater infrastructure that contributes to violations of water quality standards, and increasing green infrastructure to reduce risk of flooding and other wet weather impacts that can lead to water quality problems.
Three features of this investment package are particularly welcome. First, the bulk of the new investments ($417 million) will be made as grants, rather than loans, to fund water infrastructure projects, and a substantial portion of these grant funds will be directed to disadvantaged communities. This is important because the severe decline in federal and state grants for water infrastructure since the late 1970s has led to an overreliance on water ratepayers to repay bonds and loans used to finance much-needed infrastructure projects, resulting in soaring water rates that are unaffordable for households struggling to make ends meet.
Second, Gov. Whitmer’s funding package includes $7.5 million to develop affordable water rates and other affordability programs. Implementing affordable rate structures, such as income-based rates, and other affordability programs, will further relieve the burden on struggling rate payers, greatly reduce the likelihood of household water shutoffs, and ensure more reliable revenues for water utilities. Third, the package also includes $35 million to address failing septic systems, which are contaminating rivers, lakes, groundwater, and private wells in some communities across Michigan.
Status Quo Is Inequitable and Unsustainable
During the 20th century, small and large cities and towns across Michigan and the United States benefited from extensive federal investments in public water systems. Today, local taxpayers and ratepayers bear the burden of assessing, operating, maintaining, and financing water infrastructure with far fewer state and federal subsidies. This overreliance on ratepayers compounds existing inequities. The inability of vulnerable communities to pay for much-needed infrastructure maintenance and upgrades means their needs remain unmet, subjecting these already-vulnerable communities to greater risks of water insecurity and related health, social, and economic impacts.
Overreliance on ratepayers is also unsustainable, not only for households, but also for water utilities that are forced to increase water rates to pay for water infrastructure projects. Water rates might still be manageable for a majority of ratepayers today, but rates are expected to increase sharply, driven in large part by the need to maintain and upgrade neglected water infrastructure. In 2018, the American Association of Civil Engineers gave Michigan a D+ rating for the state of its water infrastructure. Michigan’s 21st Century Infrastructure Commission determined in 2016 that an additional $800 million is needed annually to make the state’s water infrastructure fit for the 21st century, and this estimate did not account for emerging threats to water quality such as PFAS.
Under a business-as-usual trajectory, in which these infrastructure costs are placed on ratepayers, water prices in Michigan and nationally are expected to skyrocket to four times current levels over the next few decades. If water rates rise at projected levels, conservative projections estimate that nationally over 35% of American households will face water bills requiring them to pay more than 4.5% of their household income for water and sanitation, the threshold beyond which water-and-sewer service becomes unaffordable, per the U.S. Environmental Protection Agency, although some analysts set that affordability limit at a much lower 2% of household income. Michigan ranks 12th in the nation for the number of census tracts at high risk for unaffordable water bills by 2023.
For many years, water affordability and justice advocates such as the People’s Water Board Coalition and We the People of Detroit have been urging utilities to adopt affordable water rates and other programs to make water bills affordable for families struggling to make ends meet. Since 2014, more than 140,000 Michigan households have had their water shut off due to inability to pay unaffordable water bills. The $7.5 million made available under Gov. Whitmer’s initiative to communities to develop sustainable water rate plans and implement pilot affordability plans within their communities are a long-overdue, initial response to these demands. To create the systemic change needed and to fully address the affordability crisis, more resources will be needed and frontline communities must be involved in the design and implementation of affordability plans.
Needs of Rural Residents Also Addressed
While 70% of Michigan’s population relies on a community system to handle wastewater from their homes, the remaining population relies on residential septic systems. As highlighted at FLOW’s 2019 Michigan Septic Summit, failing septic systems can lead to both public health and environmental risks. But the cost of replacing failing septic systems can be overwhelming for individual homeowners and small rural communities. To make these costs more manageable, Gov. Whitmer’s investment package includes $35 million to establish a low-interest revolving loan program for homeowners and communities to replace or eliminate failing septic systems that are impacting Michigan’s water resources.
While $500 million for water infrastructure is a significant sum, even more is needed to address Michigan’s mounting annual funding gap. The investments recently announced by Gov. Whitmer also indicate a welcome shift in approach to how Michigan pays for water infrastructure—providing more grant funds, addressing affordability concerns, and extending support to homeowners and rural communities to address failing septic systems. his shift, however, needs to be reinforced and furthered too.
Michigan lawmakers and water utilities need to join Gov. Whitmer and water justice advocates to relieve pressure on struggling ratepayers, especially in communities facing economic hardship. We need to rebuild our water infrastructure using revenue sources that are more substantial, more equitable, and more sustainable to ensure safe, clean, and affordable water for all in Michigan.
