Last week, AWWA released a report on its State of the Water Industry (SOTWI) 2025 survey. A couple of sections provide some context on the recent cuts (and non-cuts) proposed by the Trump Administration
First, we can see what’s currently on the minds of water sector executives — they see infrastructure renewal and replacement as a top priority, but consider the necessary precursor to addressing that issue, capital financing, to be an even more important issue:
From page 4 of AWWA SOTWI 2025 Survey
Next, we can see where those executives are thinking about regarding the sources of that financing. For us, the focus is on the federally subsidized sources of financing — the Grant category in the table likely includes direct federal grants, which is a source of funding. As you’d expect, three types of federally subsidized finance show up: Municipal bonds (presumably almost always tax-exempt, per IRS Code), SRF loans (which are subsidized via federal grants to the SRFs) and WIFIA loans (subsidized with credit subsidy federal appropriations):
From page 14 of AWWA SOTWI 2025 Survey
I don’t think the table is intended to be indicative of the amount of financing sourced from each category. I’m sure that muni bonds are usually the biggest source of financing for water agencies in most years (maybe $40 billion or so), with SRFs coming in second depending on availability in a particular state (maybe $20 billion or so), and WIFIA providing a minor share, depending on the nature and eligibility of the project (maybe $5-6 billion per year).
Instead, what’s interesting is that the executives would appear to consider all three as established sources that most or many of them will regularly consider in their planning, and that to some extent the sources are interchangeable. In that context, imagine what would happen if the federal subsidy for some financing categories (say, SRFs and WIFIA) were reduced while others were left untouched (say, muni bonds). The executives will still check whether there’s availability at their local SRF or if WIFIA still has enough credit subsidy for their eligible project, but inevitably the final plan will reflect a higher proportion of the source that has maintained prior levels of federal subsidy.
In effect, the cuts proposed by the Trump Administration of SRF and WIFIA funding will almost certainly not reduce the water sector’s reliance on subsidized federal finance, given that tax-exempt muni bonds will remain available and that that market is functioning smoothly. Instead, the lost capacity in SRFs and WIFIA will be shifted to bond issuance. There might be some impact on the quality of the financing with respect to the project and the agencies’ financial situation (super-low SRF rates and very long and flexible WIFIA loan terms will be replaced by standard muni market terms), but I think probably not enough to change capital plans.
For the federal budget, I’m not sure that the cuts will result in any real cost savings, though the budget treatment for the three categories is so different that that might not matter — for now. The biggest unknown is how a $2.5 billion cut in SRF funding would impact available annual capacity and resulting increased muni issuance. That’s going to require some analysis — for the moment, here’s an overview of where things stand in June 2025:
