North America Environmental Services: Takeaways from water infrastructure funding expert call

Research evidence excerpt

North America Environmental Services: Takeaways from water infrastructure funding expert call

Barclays | North America Environmental Services

•• State funding remains key, though Federal policy supports stability: Federal funding

represents ~10% of total public water utility expenditures, with the balance funded via state

and local sources. While representing a relatively small portion of water-related spending,

Federal funding and policy directives play an important roll in how States enact their own

annual funding appropriations. For example, the Federal government has some degree of

influence on how State Intended Use Plans (IUPs), which detail investment priorities, are set.

•• Fragmented market for water utilities has been a bottleneck for funding: In our view, the

highly fragmented structure of the U.S. water utility market (~50k individual water utilities)

has been a key gating factor behind the slow rollout of IIJA funding. Smaller utilities appear

to face a meaningful gap in resources and technical capability, particularly in navigating the

application process to access federal funding. The potential for increased regionalization

and/or consolidation of the water utility market remains a key debate. Despite growing

recognition that the current structure is unsustainable from a financing perspective, many

municipalities remain cautious about relinquishing control of local water systems.

•• Visibility into potential IIJA extension remains limited: Mr. Kane sees potential for the

Federal government to extend funding timelines for IIJA, and thinks there is a desire at the

Federal level to preserve funding amounts at or near IIJA levels. Although Congress has made

little progress on introducing legislation to potentially extend or reauthorize components of