Policies and Financing Solutions to Modernize U.S. Water Infrastructure

The Environmental and Energy Study Institute (EESI) and American Rivers held a briefing about America’s most pressing water infrastructure challenges, and solutions to close the gap between investment needs and reliable water services. Today, U.S. waterways—and our drinking water—are vulnerable to aging infrastructure, stormwater and sewage overflows, and extreme weather. In January 2026, Washington, D.C., saw the consequences of such aging infrastructure when a sewer line collapsed, discharging 200 million gallons of raw sewage into the Potomac River—one of the largest spills in U.S. history.

This briefing convened practitioners and policy experts who presented innovative policy and financing solutions—from smart monitoring systems to credit trading—to improve water infrastructure across the country. Panelists also highlighted key existing programs, like the U.S. Environmental Protection Agency’s Clean Water State Revolving Fund, which help states catalyze water innovation and address water affordability.

Highlights

KEY TAKEAWAYS

The Environmental Protection Agency's Clean Water State Revolving Fund (CWSRF) is the backbone of federal clean water financing, supporting the construction and upgrading of sewage treatment plants, nonpoint source pollution clean-up, septic system replacements, energy efficiency projects, water reuse work, and cybersecurity. It has funneled more than $172 billion into more than 65,000 projects nationwide.
In 2024, the annual wastewater and stormwater capital needs were $99 billion and the funding gap was $69 billion, meaning that only 30% of those infrastructure funding needs are being met.
The Infrastructure Investment and Jobs Act (IIJA) (P.L. 117-58) infused about $43.4 billion into the CWSRF and the Drinking Water State Revolving Fund, quadrupled annual SRF funding from about $2.7 billion to $11.4 billion from fiscal year (FY) 2022 to FY 2026. IIJA funding expires on September 30, 2026, leaving every state facing significant reductions in assistance.
Groups like American Rivers are working with communities across the United States to pilot solutions that increase access to funding for water infrastructure improvements like stormwater credit trading, tax incentives for nature-based infrastructure projects, and a dedicated trust fund for new wastewater technologies.
Utilities need to make water infrastructure upgrades—which are several years behind schedule—a top priority. While doing these upgrades, there are opportunities to address multiple issues at once, such as incorporating digital technologies when replacing aging pipes.

Gary Belan, Senior Director, Clean Water Supply, American Rivers

Polling by the U.S. Water Alliance shows that 80% of voters support continued funding for water infrastructure upgrades and improvements. About 83% of people polled say that reducing main breaks, sewage overflows, and basement backups is extremely or very important, and 81% say that cleaning up rivers, creeks, and streams is extremely or very important.
The American Society of Civil Engineers 2025 Infrastructure Report Card gave U.S. wastewater infrastructure a D+ rating.
In 2024, the annual wastewater and stormwater capital needs were $99 billion, whereas the funding gap was $69 billion, meaning that only 30% of those infrastructure funding needs are being met. That gap is increasing annually with population growth and land development.
The estimated wastewater infrastructure funding gap is $271 billion. The estimated stormwater infrastructure gap is $115 billion.
From 2015 to 2025, the average number of pipe failures for combined water utilities increased from two to 3.3 per 100 miles of pipe.
From 2010 to 2020, the average monthly bill for residential wastewater customers increased from $35 to $65—but locally generated funds still fall short of what is needed to maintain infrastructure.
More than 98% of water infrastructure funding is generated at the local level.
Small municipalities are struggling to access water infrastructure financing. American Rivers’ River City Initiative is working with 10 cities across the country to support access to financing.
American Rivers has partnered with the University of California-Davis researchers to pilot solutions like stormwater credit trading, tax incentives for nature-based infrastructure projects, and a dedicated trust fund (partially funded by polluters) for new wastewater technologies.
These funding solutions are meant to supplement, not replace, key federal resources like the Environmental Protection Agency’s (EPA’s) Clean Water State Revolving Fund (CWSRF) and its Water Infrastructure Finance and Innovation Act (WIFIA) programming.

Matthew McKenna, Director, Government Affairs, National Association of Clean Water Agencies (NACWA)

The Clean Water Act (P.L. 95-217) established a federal grant program to build out water infrastructure across the country. The grant program invested over $60 billion into treatment plants, pump stations, and sewer systems over the course of its lifespan.
In 1987, Congress transformed the federal grant program into the loan-based CWSRF to finance the construction and upgrading of sewage treatment plants.
Through this revolving loan fund, the federal government provides state capitalization grants to all 50 states and Puerto Rico. Each state must put up a 20% match of what the federal government has provided. Repaid dollars are reinvested into future projects. The state-level approach to water financing allows for projects to be tailored to individual communities’ needs.
Today, CWSRF is the backbone of clean water financing. It has funneled more than $172 billion into more than 65,000 projects nationwide.
Since its inception, CWSRF eligibility has expanded to nonpoint source pollution projects, decentralized treatment systems (i.e., septic system replacements), energy efficiency measures for sewage treatment plants, water reuse projects, and cybersecurity projects.
The Infrastructure Investment and Jobs Act (IIJA) (P.L. 117-58) infused about $43.4 billion into state revolving funds (SRFs) (i.e., the CWSRF and the Drinking Water State Revolving Fund), and quadrupled annual funding from about $2.7 billion to $11.4 billion from fiscal year (FY) 2022 to FY 2026. IIJA funding expires on September 30, 2026, leaving every state facing significant reductions in CWSRF assistance.
The EPA’s 2022 Clean Watersheds Needs Survey estimated that at least $630 billion is needed through 2042 for clean water alone.
Water infrastructure funding must address aging infrastructure, per- and polyfluoroalkyl substances (PFAS) and other emerging contaminants, extreme weather and related flooding, and cybersecurity risks.
Beyond the CWSRF and Congressional appropriations, utilities also have access to federal tools such as:
- The WIFIA program, which provides long-term, low-cost federal loans for larger wastewater and stormwater projects.
- Direct grant programs, such as the Sewer Overflow and Stormwater Reuse Municipal Grants Program—an essential resource for small and distressed communities.
- Tax-exempt municipal bonds, which keep borrowing costs low and keep water affordable for ratepayers.
- The Low Income Household Water Assistance Program (LIHWAP), which provided $1.1 billion and helped 1.7 million households during its first authorization.

Jay Bernas, CEO and General Manager, Hampton Roads Sanitation District (HRSD)

The Hampton Roads Sanitation District (HRSD) is a regional wastewater authority in eastern Virginia, serving two million residents across 20 cities and counties and operating 14 wastewater treatment plants.
HRSD has one of the largest research and development programs in the country, with 12 active patents, four patents pending, and 32 active water research foundation projects.
HRSD is also the largest borrower of SRF loans in Virginia, recently securing $60 million in financing over 20 years at a 2.35% interest rate with a 1.5% subsidy.
Between SRF loans and WIFIA loans, HRSD saved customers $390 million—a roughly 9% reduction in utility bills.
By implementing the EPA’s integrated planning framework, the utility also saved the region over $5 billion in regulatory compliance costs, according to a January 2026 study by Old Dominion University. These savings meant that customers’ bills were 47% lower than what they would have been without integrated planning.
HRSD’s Sustainable Water Initiative for Tomorrow program is addressing critical land subsidence issues in the Chesapeake Bay by pumping purified wastewater into the aquifer. The aquifer does not naturally recharge, and groundwater levels have declined by over 200 feet in the last hundred years.
HRSD’s research and development programming focuses on lowering costs for ratepayers. Their latest research initiative, calDENSE, is in partnership with Crew Carbon and could save ratepayers more than $400 million.
HRSD also developed a new energy efficient technology called partial denitrification-anammox, or PdNA, which saves the utility $1 million annually in operating expenses.

Angela Ebiner, Director, U.S. Government and Industry Relations, Xylem

Xylem is a global water technology company that works with utilities, industries, and communities on solutions around pumping, treating, transporting, and managing water.
1.4 billion people globally live in areas of high-water vulnerability. Data centers are being built in regions already suffering from drought and water stress.
In Hot Springs, Arkansas, 143-year-old water infrastructure was leaking four million gallons of water a day. By implementing digital solutions like remote monitoring and virtual district metering areas, the city’s utility was able to identify high water loss areas and reduce leaks by 50%, saving ratepayers money on their utility bills in the process.
The Water Infrastructure Modernization Act (H.R.6075/S.2388), led by Reps. Rob Bresnahan (R-Pa.) and Kristen McDonald-Rivet (D-Mich.) and Sens. Ruben Gallego (D-Ariz.) and John Curtis (R-Utah), would authorize funding to deploy smart water technologies like remote sensing, advanced metering, and predictive tools.
Often, a lack of education and information-sharing about these technologies is the only barrier to a utility’s implementation of water infrastructure upgrades.

Q&A

Q: What are some nontraditional financing opportunities that states and utilities can or should leverage?

Belan

Normally, regulations work to incentivize developers to meet a certain stormwater retention threshold on-site. Stormwater credit trading programs allow developers to build nature-based infrastructure off-site to collect stormwater and sell those credits on the market. This program has been successfully implemented in Washington, D.C.; Grand Rapids, Michigan; and Eugene, Oregon.

McKenna

NACWA is looking at financing mechanisms such as using the wastewater treatment process to generate electricity to sell on the market, and electrifying water treatment operations to save utilities and ratepayers money

Bernas

Subsidized financing adds only 5% to total project costs but leads to 20% gross savings, meaning a net savings of 15%. But large utilities are reluctant to adopt this financing mechanism.

Ebiner

You have to consider all financing opportunities. Federal funding comprises only 5% of water infrastructure funding but does provide a level of certainty for utilities.

Q: How can new businesses without institutional knowledge, capital, and technical expertise build the capacity to implement some of the water infrastructure solutions discussed today?

Belan

More water innovation hubs—like the one in Milwaukee, Wisconsin—are needed. These hubs are incubators for small businesses looking to solve emerging water challenges. Many of the concepts we discussed today are still fairly new, while others are very old problems that lack new solutions. Innovation hubs can help attract the small businesses that can generate these solutions.

Bernas

Utilities are notoriously conservative and can be reluctant to invest in startups, but those very partnerships will be key to innovation.

Ebiner

Building out a space to educate all stakeholders on emerging challenges, solutions, and resources is essential.

Q: To what degree are you thinking of challenges like aging infrastructure and PFAS proliferation as competing priorities? To what degree are there synergies across different issues? How can Congress support the problem-solvers, whether through funding, guidance, or other solutions

Belan

Utilities are very behind on upgrading dated water infrastructure—that needs to be the top priority. But there are opportunities to address multiple issues at once. For example, incorporating digital technologies when replacing aging pipes.
A few years ago, Camden, New Jersey, realized that meeting regulatory compliance did not necessarily mean that they were operating at maximum efficiency. They invested in new technologies to address river pollution, and ended up lowering utility rates for households in the process.
Solutions that address whole-of-river health can also address whole-of-infrastructure health.

McKenna

Some of the innovative technologies discussed today will help utilities meet regulatory compliance under the Clean Water Act and Clean Drinking Water Act.

Bernas

This is a question of affordability. Reinstating LIHWAP or creating a similar financing mechanism will make it more feasible for utilities to raise water rates to pay for infrastructure upgrades—without disproportionately impacting lower-income families.

Ebiner

Smart technologies can address problems associated with aging infrastructure in a more cost-efficient way.

Q: What future information needs do you anticipate having—whether from federal, state, or local sources—to power some of the smart technologies discussed today?

Belan

National water quality data is not standardized. The Internet of Water is working to synthesize this data.
Moving forward, the United States needs to rethink how it collects and organizes water quality data, and make it publicly available.

McKenna

The Water Environment Federation has created the Water-Artificial Intelligence (AI) Nexus, which initiates conversations with industry, water associations, and other stakeholders to facilitate knowledge sharing. These conversations are especially essential in an age when both emerging challenges (e.g., cybersecurity threats) and emerging solutions are developing quickly.

Bernas

HRSD is developing a flow prediction model that will help water treatment plants prepare for large influxes of water. One of the development hurdles the utility is looking to overcome is how to protect this remote data collection technology from cyber attacks.

Q: How are you incorporating cybersecurity, infrastructure, and water quality security into your short- and long-term planning and designs?

McKenna

NACWA facilitates information-sharing between water utilities and state regulators to ensure awareness about available federal resources.
NACWA also connects utilities to Water Information Sharing and Analysis Centers, which deal with cybersecurity.

Bernas

HRSD prioritizes cybersecurity training for all staff to prevent phishing attacks.

Q: How are you incorporating nature-based solutions in your planning and designs?

Belan

Nature-based solutions are now seen as a standard engineering practice, and can be impactful and cost-effective.

McKenna

EPA geographic programs provide essential grants to implement nature-based solutions
The CWSRF’s Green Project Reserve incentivizes utilities to implement nature based solutions.

Q: How can stakeholders across the water sector better advocate for sustained, affordable, and accessible water resources?

Belan

American Rivers has been striving to educate the public about the impact clean water has on their livelihoods.
Utilities need to be seen as vital community pillars.

Bernas

Water utilities do not invest in branding or communications, leaving the public in the dark about how they operate. In a survey, 60% of HRSD customers thought that the utility managed trash. The public cannot advocate for water infrastructure if they do not know where their water goes.

Ebiner

Xylem’s joint report with Global Water Intelligence, Watering the New Economy, highlights a startling proportion of future water demand dedicated to powering the AI economy. Data centers are a topic du jour that is drawing attention to water resources.

Q: As funding under the IIJA ends, who is tracking and reporting on how much of the law’s funding has been accessed, used, or allocated?

Belan

The American Society of Civil Engineers 2025 Infrastructure Report Card outlines how IIJA funding filled water infrastructure financing gaps

McKenna

The EPA’s Office of Inspector General and Real Water Technical Assistance program have worked on reporting and on helping communities access that funding.

Q: What is one message that you want audience members to take away from this briefing?

Belan

A healthy river means a healthy community and cheaper water bills.

McKenna

There is bipartisan momentum on water infrastructure solutions in Congress. Reps. Emilia Sykes (D-Ohio) and Rob Bresnahan (R-Pa.) recently led a letter calling for robust funding levels for the CWSRF in FY 2027 appropriations. Eight Republicans and more than 30 Democrats signed the letter.

Bernas