By Rich Anderson and Brett Rosenberg
August 25, 2008

The U.S. Conference of Mayors (USCM) released a report describing the impact of local government investment in water infrastructure on the national economy at the Mayors ’08 Action Forum on Infrastructure in New York City on August 14. The Conference of Mayors commissioned the study prepared by The Cadmus Group, Inc., an environmental and economics research and consulting organization.

Conference President Miami Mayor Manny Diaz stated during his speech at the National Press Club that “Washington has lost its values – its principles – lost its sense of purpose – engaging in endless debate and partisan bickering while people in this country continue to suffer. Plain and simple, Washington has abandoned us.”

Diaz’s points are well supported by previous research conducted by the USCM. In 2005, the Conference published results of a National City Survey that indicated the top water priority of the Nation’s major cities is rehabilitation of an aging infrastructure, and more than one-third of cities could face critical water shortages by 2025. A 2007 study published by the Conference stated that local government spends more than 95 percent – the lion’s share – of water and sewer infrastructure development, rehabilitation and operations. Local government spends roughly $82 billion a year on public water and sewerS while the states and the federal government spend less than 5 percent. State and federal contributions are flat and declining over time, even though federal mandates continue to grow.

USCM Water Council Co-Chair Albuquerque (NM) Mayor Martin J. Chávez presented the study findings at the Action Forum on Infrastructure. He stated, “Public infrastructure is the foundation for economic development – access to roads, water, sewer, communication technologies, and electricity are all essential to the economy. The expert consensus is that public infrastructure investment yields positive returns, and investment in water and sewer infrastructure has greater returns than most other types of public infrastructure.” Chávez linked the previous research to the new study findings as a way to provide a rationale for an increased federal role in helping cities boost spending for public water and sewer. He stated that the difference between the dramatically increased local spending for water and sewer compared to the flat and declining federal spending can be dubbed “the region of federal abandonment.” He said that the feds have come up over $42 billion short in aid to local government since 1990 and the state of water infrastructure shows it.

The Cadmus study examined over 310 economic studies, books, and government and non-government reports. Noting that studies of the economic impact of investment in public infrastructure has experienced critical improvement over the last few decades, it is possible to estimate what the effects of an additional dollar of investment has for the economy as a whole. Cadmus reports that: (see Exhibit A)

• One dollar of water and sewer infrastructure investment increases private output (Gross Domestic Product, GDP) in the long-term by $6.35;

• Each additional dollar of revenue to local government from providing water and sewer system operation and maintenance increases revenue (economic output) that occurs in all industries by $2.62 in that year; and

• Adding one new job in local water and sewer creates 3.68 jobs in the national economy to support that job.

The Cadmus study also reports that there are indirect benefits that accrue from local government investment in water and sewer infrastructure. For example, “protecting one hectare (10,000 square meters, or 2.471 acres) of a wetland for source water protection may yield a primary benefit of $4,177 annually in avoided treatment costs” and “…may yield an additional $10,246 annually in other ecosystem services.”

The direct and indirect benefits of increased investment in public water and sewer are significant. The findings support the notion that increased spending could stimulate the sluggish economy while at the same time providing clean water and sewer services to protect public health.