MMA testifies in support of ‘water banking’ bill

The Joint Committee on Municipalities and Regional Government has collected written testimony on a bill that would expand authority for cities, towns, water districts, stormwater utilities, and authorities to collect fees on new development to help offset the costs of water, wastewater and stormwater system investments.

On May 19, the MMA submitted testimony in support of the local-option bill, which would establish a process known as water banking.

“Cities and towns need supplemental funding options in order to protect municipal water supplies, meet federal requirements, and address environmental concerns,” the MMA wrote.

With water banking, a community collects a fee from new developments — for each new unit that would increase water demand — and those funds are placed into a dedicated fund that helps offset the cost of the water system’s conservation efforts, the replacement of aging infrastructure, and environmentally friendly retrofits.

Water banking allows municipalities to maintain their water systems while taking steps to meet more ambitious goals, such as water conservation and updating infrastructure. By targeting the fees to new development, water banking avoids additional costs for existing users or having to finance water projects using other municipal sources.

Across Massachusetts, key components of municipal water infrastructure are long past their expected lifespans. Repairs, replacements and upgrades are urgent but very costly for municipalities.

In 2012, a report from the Massachusetts Water Infrastructure Finance Commission estimated that there was a $20 billion gap in funding needed for water and wastewater infrastructure over the next 20 years, in addition to an $18 billion deficit to meet proposed federal stormwater regulations. Newly available, one-time funding options — such as the American Rescue Plan Act and the Bipartisan Infrastructure Law — are not sufficient to close the funding gap. Other competitive programs, such as the State Revolving Loan Fund, require projects to meet a high threshold to obtain funding, leaving many lower-scoring projects without a path forward.

The MMA and advocates argue that giving communities the option, through water banking, to increase funding for water management, infrastructure updates, and repairs would offer an innovative financing solution to a costly problem.

The water banking bill (S. 2869) awaits further action from the Joint Committee on Municipalities and Regional Government.