Center for American Progress

State Water Funds Should Make Better Use of Their Resources
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State Water Funds Should Make Better Use of Their Resources

State water funds are not optimally investing their assets and are not getting the kind of returns necessary to meet future needs. These funds could generate billions more without any more taxpayer funding if they invested their money better.

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We will need to invest at least $636 billion over the next two decades to keep our water systems in safe working, according to EPA estimates. That could mean Americans will pay higher water bills in the coming years. But we can curb that increase if clean water and drinking water state revolving funds—the vehicles through which most water infrastructure investment is done—make better use of their existing resources.

State water funds, which make low-interest loans to water infrastructure projects, are not optimally investing their assets and are not getting the kind of returns necessary to meet future needs. These federally backed “revolving funds” could generate billions more without any more taxpayer funding if they invested their money better, according to a recent report by the Environmental Protection Agency’s Financial Advisory Board.

That’s what New York and Connecticut revolving fund administrators have done in recent years, investing in longer-maturity, high-grade bonds that yield more than comparable Treasury securities, and thereby increasing capital available to finance water infrastructure projects. Congress and the EPA, which oversees and financially supports these funds, should encourage more states to adopt similar investment practices.

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