Within the next few years, the state will run out of matching funds to obtain hundreds of millions in federal dollars for crucial clean water projects, according to projections by the Office of Legislative Services and state Department of Environmental Protection.
By fiscal year 2027, the need for water infrastructure improvements is expected to outpace available funding for clean water projects, according to theto OLS staff on the former agency’s fiscal year 2019-2020 budget. For the state’s drinking water infrastructure, the situation is even more urgent given that needs will surpass funding by this fiscal year, the DEP said.
The projected deficit is hardly a surprise; state and federal environmental officials have long projected that infrastructure improvements for an aging system of drinking water and wastewater treatment plants in New Jersey will cost as much as $25 billion.
The OLS asked the department whether the Legislature should consider a more permanent source of revenue for clean water and drinking water infrastructure projects, as it has for the Green Acres program. In that instance, they decided to dedicate a portion of the state’s corporate business taxes to fund open space, farmland, and historic preservation projects.
The DEP’s simple answer to that question was “yes.”
“While the DEP is considering several steps to address the shortfalls, for example by moving funding from the clean water program to the drinking water program, these are not permanent solutions. Additional state funding is needed. We look forward to working with the Legislature to find a solution,’’ according to the agency’s response.
That is no surprise to David Pringle, a consultant to New Jersey’s branch of Clean Water Action, and a former member of the state’s Drinking Water Quality Institute. “We’ve needed a new funding source for 30 years,’’ he said. “There’s a total lack of urgency.’’
The irony is the state’s financing mechanism for funding clean water and drinking water projects is widely viewed as one of New Jersey’s most successful programs. In the past 32 years, the(formerly the Environmental Trust) leveraged available state and federal funding to issue tax-exempt bonds for more than $6.8 billion in low-interest loans to communities for clean water projects, saving ratepayers up to $2.5 billion in interest costs and by forgiving principal on loans.
But to obtain the federal dollars, states need to provide a 20 percent match. The DEP generally needs between $3 million and $4 million per year to match drinking water funds and $13.5 million for clean water projects, according to the agency.
Historically, the state has provided this match through general obligations bonds, but the last bond issue was in 2003 and lawmakers have been wary of increasing New Jersey’s debt load in recent years, although a $500 million bond issue was approved last November. That included $100 million to help school districts deal with lead in drinking water.
The fiscal challenges awaiting the Infrastructure Bank occur at a time when New Jersey is also dealing with a wider array of pollution problems for the state’s drinking water supplies, lead probably being the most notable. Last week, the DEP projected the cost of replacing lead service lines to homes — believed to be the source of lead in residential tap water — at $2.3 billion.
Other problems persist.
For instance, earlier this month, the DEP proposed new drinking water standards for PFOAs and PFOS, pollutants that are cropping up in water supplies across the nation, but in greater frequency in New Jersey. The pollutants have been linked to various health problems in humans.
The approval of constitutionally dedicated corporate business taxes to open space preservation also led to a significant reduction in public funds going to clean up of contaminated sites (in cases where no polluters have been assigned to fund cleanups).
While additional funding ($10.5 million) for such cleanup has been provided in the FY2020 budget, the department said it is “going to fall short of our basic need: The costs associated with responding to contaminants of emerging concern (primarily PFOAs and 1,4 dioxane) are expected to overwhelm the existing funds available for responding to just the drinking water exceedances associated with these compounds. This does not even account for ground water cleanup costs.’’
“Between lead and the unregulated contaminants, we are just rearranging deck chairs on the Titanic,’’ Pringle said.