These  cities are largely scattered across the Midwest and Northeast regions. For example, Georgia has the Georgia Fund, which provides low-interest  loans to water and wastewater utilities for water, wastewater, and solid  waste infrastructure projects. The Clean Water Act authorizes states to provide additional  subsidization to benefit certain municipalities, including those that  meet state affordability criteria, in certain circumstances. Little research has been  done on the water and wastewater infrastructure needs of cities with  declining populations, but the needs of 10 selected midsize and large  cities we reviewed generally reflected the needs of cities nationally. According to EPA’s  wastewater needs survey, estimated costs for infrastructure  improvements to control combined sewer overflows for wastewater  utilities serving 7 of the 10 cities we reviewed ranged from $7.1 million to  $1.98 billion. Utilities in Selected Cities Have Been Raising Rates to Help Address Infrastructure Needs and Using Customer Assistance and Cost Control Strategies for Rate Affordability

Our sample of 14 utilities in the 10 cities we reviewed used the traditional  strategy of raising rates to increase revenues to address their  infrastructure needs, although representatives from half of them said that  they had concerns about rate affordability and their future ability to raise  rates. All of the Utilities in the Selected Cities Developed Customer Assistance Programs as a Strategy for Addressing Concerns about Affordability of Water and Wastewater Rates

All 14 of the utilities we reviewed had developed one or more types of  customer assistance programs as a strategy to make rates more  affordable for customers who had financial difficulty paying their bills. Most Utilities Were Using Cost Control and Efficiency Strategies to Address Their Water and Wastewater Infrastructure Needs

Most of the utilities (13 of 14) we reviewed were using or had plans to use  one or more strategies to address their water and wastewater  infrastructure needs by controlling costs or increasing the efficiency of the  physical infrastructure or overall management of the utility. However, as part of  rightsizing, representatives we interviewed for five wastewater utilities  said that they have incorporated in their plans, or were considering using,  vacant lands for green infrastructure to help control stormwater runoff that  can lead to sewer overflows. Six Federal Programs and One Policy Could Assist Midsize and Large Cities with Declining Populations in Addressing Their Water Infrastructure Needs

While not specifically designed to address the water infrastructure needs  of midsize and large cities with declining populations, six federal  programs and one policy we reviewed could provide these cities with  some assistance. Economic Development Administration Public Works program. Specifically, the  Birmingham Water Works Board received $1.7 million (out of $11.6  million) from the Drinking Water SRF program as an additional subsidy in  the form of principal forgiveness for green projects, or water infrastructure  projects that include energy and water efficiency improvements, green  infrastructure, or other environmentally innovative activities. Agency Comments

We provided a draft of this report to the Environmental Protection Agency,  the Economic Development Administration, and the Department of  Housing and Urban Development for review and comment. Appendix I: Objectives, Scope, and Methodology

Our objectives were to examine (1) what is known about the economic  characteristics of midsize and large cities with declining populations and  their drinking water and wastewater infrastructure needs; (2) strategies  that selected midsize and large cities with declining populations and their  associated utilities used to address their infrastructure needs and the  affordability of their drinking water and wastewater rates; and (3) what  existing federal programs and policies, if any, could assist midsize and  large cities with declining populations, and their associated utilities, in  addressing their water infrastructure needs. To examine what is known about the economic characteristics of midsize  and large cities with declining populations, we reviewed relevant studies  and interviewed experts about cities that have experienced population  declines and water and wastewater infrastructure needs. For this report, we used U.S. Census Bureau and National League of  Cities definitions for midsize cities—those with populations from 50,000 to  99,999—and large cities—those with populations of 100,000 and greater. We calculated rates as a share of income in  the 10 selected cities using the average residential rate information  reported by the cities’ utilities and the median household income and  income for the 20th percentile for that city reported in the American  Community Survey data (5-year estimates for 2010 through 2014). In addition to national data, we  gathered information from our 10 selected cities and from 12 of the 14  drinking water and wastewater utilities on federal, state, and other funding  they received to help address their water and wastewater infrastructure  needs from state fiscal years 2010 through 2015. Data were compiled from  data and information collected from utility officials and American  Community Survey data. The five strategies are  rightsizing to meet current demands (i.e., reducing treatment capacity or  decommissioning water lines and sewer lines in vacant areas), major  reorganization, expanding the utility’s customer base, public-private  partnerships, and asset management.
Why GAO Did This Study

Many midsize and large cities throughout the United States, including the Midwest and Northeast, have lost a substantial percentage of their population. These cities face the challenge of a corresponding decline in utility revenues from a loss of ratepayers, which makes it difficult to address their water infrastructure needs. Overall, water and wastewater utilities across the United States face substantial costs to maintain, upgrade, or replace aging and deteriorating infrastructure—approximately $655 billion for water and wastewater utilities over the next 20 years according to EPA's most recent estimates.
GAO was asked to review the water and wastewater infrastructure needs in midsize and large cities with declining populations. This report examines (1) the economic characteristics of such cities and their water and wastewater infrastructure needs; (2) strategies that selected cities and utilities have used to address their infrastructure needs and the affordability of their water and wastewater rates; and (3) what existing federal programs and policies, if any, could assist such cities in addressing their needs. GAO analyzed decennial census and American Community Survey data, relevant studies, and utility financial statements for 10 cities with the largest population declines from 1980 through 2010 and 14 water and wastewater utilities in those cities. GAO also reviewed laws, regulations, policies, and guidance for six federal programs; analyzed program and city and utility funding data; and interviewed agency and city officials and representatives from 12 of the 14 utilities.

What GAO Found

Midsize cities (with populations from 50,000 to 99,999) and large cities (with populations of 100,000 and greater) that have experienced a population decline are generally more economically distressed than growing cities. Specifically, GAO's review of American Community Survey data for 674 midsize and large cities showed that the 99 cities with declining population had higher poverty and unemployment rates and lower median income than cities with growing populations. Little research has been done about these cities' overall water and wastewater infrastructure needs, but the needs of the 10 midsize and large cities that GAO reviewed generally reflected the needs of cities nationally, as identified in needs assessments conducted by the Environmental Protection Agency (EPA). Water and wastewater utility representatives whom GAO interviewed described major infrastructure needs, including pipeline repair and replacement and wastewater improvements to control combined sewer overflows (i.e., wastewater discharges to streams and other water bodies during storms).
Utilities for the 10 cities GAO reviewed used the strategy of raising rates to increase revenues to address water and wastewater infrastructure needs and used other strategies to address concerns about rate affordability for low-income customers. Most of the 14 utilities GAO reviewed raised rates annually to cover declines in revenues related, in part, to decreasing water use from declining populations, or to pay for rising operating and capital expenses. To help address rate affordability concerns, all of the utilities reviewed had developed customer assistance programs, a strategy to make rates more affordable, for example, by developing a payment plan agreeable to the customer and the utility. In addition, most utilities were using or had plans to use one or more cost-control strategies to address needs, such as rightsizing system infrastructure to fit current demands (i.e., reducing treatment capacity or decommissioning water or sewer lines in vacant areas). For example, as part of rightsizing, representatives GAO interviewed for 5 wastewater utilities said that they planned or were considering using vacant areas for green infrastructure (vegetated areas that enhance on-site infiltration) to help control stormwater that can lead to sewer overflows.
As of June 2016, six federal programs and one policy could assist midsize and large cities with declining populations in addressing their water and wastewater infrastructure needs. Cities with declining populations may receive funding from the six programs, managed by EPA, the Economic Development Administration, the Department of Housing and Urban Development (HUD), and the Federal Emergency Management Agency, for such projects. For example, states can use a portion of EPA's Clean Water and Drinking Water State Revolving Funds to provide additional subsidies in the form of principal forgiveness or negative interest loans to cities that meet state affordability criteria, such as median household income. The Birmingham Water Works Board, one of the 14 utilities GAO reviewed, received $11.6 million from the Drinking Water State Revolving Fund in fiscal years 2010 through 2015, including $1.7 million with principal forgiveness to pay for green projects, such as water efficiency projects.
GAO provided a draft of this report to EPA, the Economic Development Administration, and HUD for comment. The agencies provided technical comments that were incorporated, as appropriate.