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By Mark Strauss A ll across America, communities are faced with massive challenges to replace critical water and wastewater infrastructure, with limited access to the capital needed to make these upgrades on an increasingly urgent timeline. When we talk about the aging infrastructure in our country, it's important to keep in mind that upgrading the vast and complex systems is not the sole responsibility of any one group, organization, or entity. With an estimated 650 water main breaks occurring every day, and 2 trillion gallons of treated water lost every year at a projected cost of $2.6 billion, aging and deteriorating public water systems threaten economic vitality and public health. The need to reverse years of underinvestment in infrastructure, despite tighter budgets at every level of government, calls for us to rethink how we pay for and manage infrastructure investment. There has been a longstanding debate over the role of investor ownership in the water utility sector, which some say — as an essential resource — should be in the hands of government entities. However, this argument is commonly grounded on misconceptions about how investor-owned utilities operate. In reality, investor-owned water and wastewater providers have a long history of financial and technical capabilities to address challenges for communities. Government-owned systems make up approximately 84 percent of our nation's water systems, and more than 97 percent of our nation's wastewater systems, but many municipalities are challenged by limited budgets, inability to raise capital, and competing priorities. In fully owning, managing, and operating a water or wastewater system or in working with municipalities via public-private partnership (PPP) agreements, investor-owned utilities can meet local needs and ensure communities receive high- quality, reliable water as well as reliable and environmentally sound wastewater service now and in the future. The Question Of Rates First, it is important to understand what drives increases in rates. Capital investment needs are the primary drivers of rate requests. This allows for the provision of reliable services — including repairs, upgrades, treatment upgrades, and new sources of supply. Rates are set by state regulators staffed with experts in utility regulation. All expenses of investor-owned utilities are disclosed to and reviewed by the economic commission staff and state ratepayer or consumer advocacy groups. The cost of providing water and sewer service is then billed to customers through their water rates only and is not partially funded by other taxes. Government-owned utilities have a limited taxpayer and revenue base that must service all the municipalities needs, not just water and wastewater services. As a result, many municipalities, particularly medium to smaller systems, find themselves with significant constraints in their ability to attract capital to maintain reliable service and comply with increasing quality requirements. A case in point: In June 2015, New Jersey American Water acquired the borough of Haddonfield's water and wastewater system, which faced significant challenges. The company worked with the borough to identify the most critical system needs to be addressed and has an aggressive plan to make upgrades. Over the next five years, New Jersey American Water will spend more than $16 million on system renewal and modernization. If the sale hadn't gone through, the borough of Haddonfield Board of Commissioners, which recently raised the rates 25 percent, announced that rates would continue to rise to pay for much-needed capital improvements and would actually exceed New Jersey American Water's rates. As part of the sale agreement, New Jersey American Water committed to leaving the water rates unchanged for three years. And, because New Jersey American Water is regulated by the New Jersey Board of Public Utilities, any 32 wateronline.com n Water Innovations Setting The Record Straight On Investor-Owned Water Utilities Facts, figures, and case studies are presented to quell concerns over water and wastewater utility privatization. In reality, investor-owned water and wastewater providers have a long history of financial and technical capabilities to address challenges for communities.