Water and Sewer Needs and Capital Finance Strategies in Appalachia


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The Appalachian region of the United States runs through thirteen states, from Alabama to New York. It has long been heralded for its uniqueness. What is rarely recognized are the connections between Appalachia and the rest of the country. The waters of Appalachia demonstrate this connectedness quite tangibly. Appalachia is the headwaters for the entire east coast and the eastern side of the Midwestern United States. Appalachian waters are ultimately the source of surface drinking water for a huge percentage of Americans that drink from surface systems. And Appalachian communities present a range of demands and issues for water use that span the gamut of problems faced by communities across the country: rural areas that are under served by water and wastewater, older urban areas whose infrastructure is in dire need of repair and replacement, and areas where the pace of growth is outstripping the capacity of present day water and wastewater systems.

The Appalachian Regional Commission contracted with the UNC Environmental Finance Center (EFC) to carry out a water and wastewater infrastructure needs and gap assessment in the 410-county Appalachian Region. The main purpose of the project was to provide policy makers and local officials with detailed information on future water and sewer investment requirements and financial strategies to meet those needs given the fiscal capacity of individual communities.

The research goal is to understand the adequacy of funding for water and wastewater needs in Appalachia. In part, this was a test to see whether the predictions of infrastructure funding gaps at the national level hold up when examined at a community level. In other respects, it was a policy analysis that has shed light on a much larger issue: whether the headwaters of the eastern half of the United States are making the investments in water and wastewater that are needed to meet the needs of its population.

 In particular, the project sought out to answer questions such as:

    • "Will there be a significant gap between funding needs and spending levels for water and wastewater infrastructure in Appalachia over the periods from 2000 to 2019?
    • "If so, what is the size and character of the needs and available resources relative to that predicted at the national level?
    • "Given existing data, what can be said confidently at regional, county, and community levels in Appalachia regarding infrastructure needs?
    • "How useful are policy prescriptions made at the national level, in conjunction with the published gap analyses, for state and local policy makers in Appalachia?
    • "Are the financing strategies and approaches that are being introduced in other parts of the country relevant or likely to be successful in Appalachia?
    • "Will an analysis of the problems and attributes of communities in Appalachia suggest a set of unique policies and financing strategies?

The major components of the project included:

    • Creation of a baseline financial needs database for the region. The EFC used existing national, state, and local needs assessments to create a database of baseline information that was used to quantify and characterize the needs of the region and its communities particularly counties which due to the socioeconomic status are characterized as distressed.
    • Assessment of existing (internal and external) financial resources available for water and sewer infrastructure. The EFC carried out a comprehensive assessment of the available financial resources ARC communities have available for meeting their water and wastewater capital needs. The EFC created a funding database that tracked all of the major sources of public and private capital used in the region for water and wastewater infrastructure. As part of this task, the EFC also collected detailed information on the fiscal capacity of local communities to access commercial and subsidized capital markets and to generate funds for direct infrastructure expenditures. The fiscal capacity analysis part of this task took into consideration socioeconomic data such as income levels, unemployment as well as data on existing water and sewer expenditures and outstanding debt.
    • Water and wastewater finance consultations. The EFC also facilitated a series of informal consultations, round tables, structured interviews to identify what public officials, funding agencies (private and public), and communities saw as the major infrastructure finance challenges in the ARC region. The EFC worked with these groups to develop an inventory of current infrastructure finance practices, policies, and strategies used in all or select parts of the region. The consultations were designed to facilitate the exchange of ideas regarding the effectiveness and efficiency of existing policies and practices and the identification of new or expanded strategies. Special attention was given to policies and practices that were implemented in a particular part of the region that might have applicability in other areas of the region.
    • Preparation of infrastructure finance case studies. The EFC prepared a series of infrastructure finance case studies that demonstrated the range of issues and strategies within communities throughout the ARC region. The EFC worked with the ARC and other organizations involved with infrastructure finance to identify individual communities in the region whose situation and circumstances illustrated specific financing challenges and strategies.