Affordable Strategies to Accelerate Lead Service Line Replacement

Toxic lead pipes have negative long-term developmental effects on children; more than half of Americans under the age of 6 having some level of lead in their blood. QV and the Michigan Municipal League Foundation partnered with 2 Michigan cities to develop and test affordable strategies to replace lead-containing water service lines.

QV and the Michigan Municipal League Foundation designed and executed pilot projects with Bay City, MI, and Dearborn, MI, to identify 8 priority actions designed to lower costs and increase access to low-cost capital.

The cities are already enjoying early success, with cost per line analysis complete and unique capital stack developments currently underway.

QV and the Michigan Municipal League Foundation partnered with the cities of Dearborn, MI and Bay City, MI to develop and test affordable strategies to replace lead-containing water service lines (i.e., lead service lines), which bring drinking water to homes and businesses. The project identified the following eight priority actions designed to lower costs and increase access to low-cost capital:

  1. Create a revolving loan fund to supplement existing funding and financing sources;

  2. Partner with local philanthropic organizations to assist with communication, capacity support, and community-specific funding opportunities;

  3. Implement a renter ordinance that allows renters to authorize lead service line replacement on behalf of landlords;

  4. Engage health care providers and other “alternate payors” that will support lead service line replacement through funding or other means;

  5. Establish regional procurement of lead service line replacement contractors and materials to reduce competition among neighboring local governments, which can drive prices up;

  6. Streamline permitting and inter-agency coordination to accelerate lead service line replacements;

  7. Document replacement cost estimates in both cities to analyze financial, logistical, and regulatory challenges unique to each region;

  8. Identify community engagement strategies that inform and support households and businesses with lead service lines to reduce exposure and accelerate replacement timelines.

QV and the Michigan Municipal League Foundation partnered with the cities of Dearborn, MI and Bay City, MI to develop and test cost-effective strategies to replace lead-containing water service lines (i.e., lead service lines), which bring drinking water from water mains to homes and businesses. QV hosted a series of workshops with key stakeholders in both cities to identify priority actions designed to lower costs for replacing lead service lines and increase access to low-cost capital. Stakeholders identified over 100 actions, which were consolidated to eight unique strategies currently being implemented and tested by each community.

Problem

There is no safe blood lead level (BLL) in children. Lead exposure can lead to developmental delays, damage to the brain and nervous system, and learning and behavior problems. Unfortunately, more than half of Americans under the age of six having some level of lead in their blood, and 2.5% of those children have elevated lead levels. Lead-contaminated water is a significant source of lead exposure, contributing between 10-20% of a child’s total lead intake, and 40-60% for children fed with formula.

While there has been renewed federal funding and financing offered to eliminate this avoidable public health risk, the $15 billion made available for lead service line replacement under the Bipartisan Infrastructure law (BIL) is only a portion of the more-than $45 billion needed to address this epidemic more fully. These are costs are significant, yet the benefits are greater. According to a study by the Environmental Defense Fund, the BIL’s allocation of $15 billion will yield between $26 and $51 billion in health and societal benefits. If the U.S. made the full investment to replace all lead service lines, that benefit would rise to over $205 billion.

In 2024, after the BIL funding started to reach water utilities and municipalities, the EPA announced a change to the Lead and Copper Rule that mandated that all lead service pipes would need to be replaced by 2034. While an important step toward eliminating lead exposure, without additional budget allocations, the new rule became a mostly unfunded mandate. The $30 billion gap in federal funding would now need to be covered by states, water utilities, municipalities, and ultimately rate payers. This gap is even more challenging in Michigan due to a state law that prohibits water utilities and municipalities from requiring residents and business to pay for LSLR; all LSLR costs must be borne by utilities and local governments.

Despite new funding, the pace of lead service line removal and replacement remains slow. Municipalities struggle with inconsistent replacement costs, due to variances in labor costs across the state, and balancing competing routine municipal water infrastructure investment needs.

To support municipalities' capacity to replace lead pipes and meet future water challenges, a fresh look at potential approaches is needed. There are opportunities to draw upon strategies from other sectors for broadening the scope of investment, financing, and community-to-community partnerships.

Approach

QV and MMLF partnered with the Joyce Foundation, the Robert Wood Johnson Foundation, and Masco to launch a lead service line replacement (LSLR) pilot program to develop and test a set of replicable, community-driven approaches to facilitate quicker, less expensive lead service line replacements. The cities of Dearborn and Bay City joined the effort, and invited the team to meet with stakeholders, community groups, and city staff to analyze needs and beta test solutions. The engagement is ongoing and will conclude after two and half years; the final output will be a lead service line replacement playbook, full of tested practices and approaches developed in Bay City and Dearborn that could be replicated across Michigan.

QV and MMLF began by assembling two, cross-functional, advisory teams in each city. The first advisory team (i.e., the Design Team) utilized design thinking to co-create solutions that best match community needs. The second advisory team (i.e., the Validation Team) vetted and tested the ideas from the Design Team, to ensure that solutions are inclusive and meet identified needs, while remaining feasible and implementable, and resulting in a net benefit to the community.

Both advisory teams were comprised of leadership from the mayor’s office, the water utility, the city finance office, community groups, philanthropy, and agencies like the Michigan Department of Environment, Great Lakes, and Energy (EGLE), and the Chicago Federal Reserve.

Impact

The Design teams were determined to understand the full range of needs and challenges to LSLR before beginning to ideate solutions. With the right stakeholders in the room, they identified three key issues that they needed to solve for:

Insufficient funding to pay for all lead line replacements. Each city faced replacement costs in the tens of millions, which were unbudgeted. They were surprised to discover, however, that replacement costs were significantly different across the cities. In Bay City, the average cost to replace a line is approximately $5,600, while in Dearborn, it is around $8,500. The national average for line replacement is $8,000. QV and MMLF discovered that Bay City was able to keep their costs lower because they used previous federal funding through the American Rescue Plan Act (ARPA) to hire in-house staff to implement most line replacements. Dearborn hired outside contractors for most of their replacements, which were also in high demand in neighboring cities like Detroit. Unfortunately, Bay City’s ARPA dollars are set to expire in December 2026. In FY 2025, both Bay City and Dearborn applied for DWSRF funding when EGLE opened the program for LSLR-specific activities. Bay City was awarded funding and principal forgiveness, while Dearborn did not receive any funding. This outcome reflects Michigan’s current DWSRF ranking and rating criteria, under which Dearborn did not score high enough to qualify. As a result, Dearborn is responsible for fully funding all remaining LSL replacements across the City.

Challenges communicating the need for LSLR to their communities. Both cities have a larger than average number of Asset Limited, Income Constrained, Employed (ALICE) households: 53% of households in Bay City and 31% of households in Wayne County (where Dearborn is located). The state average is 27%. A larger percentage ALICE households are in older residential buildings that were developed when lead service lines were more commonly installed. This creates an environmental justice issue, where lower income households are more likely to suffer from lead exposure. In addition, each city has a diversity of residents that speak various languages and represent various cultures. In Dearborn, for example, there is a large Muslim community. If one or more men representing the city knock on the door of a Muslim household, it was unlikely that women at home without the presence of their husbands would speak to the representative due to their faith.

Insufficient capacity to develop and manage lead service line replacement programs. Given the above two challenges, Bay City and Dearborn lacked internal capacity to develop an inclusive, equitable, and comprehensive lead service line replacement program. More staff capacity is needed.

With the above needs in mind, the Design team generated over 100 potential solutions. The Validation team then consolidated the Design team’s strategies to 8 priority actions identified below:

Create a Fund: Express support for MML’s development of a Local Revolving Fund to support LSLR activities in low-income communities across the city.

Collaborate with Local Philanthropy: Build partnerships with community foundations and local family foundations to assist with communication, capacity support, and community-funding.

Renter Ordinance: Explore the establishment of a renter’s ordinance that would allow renters access to LSLR work on behalf of the landlords.

Alternate Payors: Examine Health Care and Health Providers supporting LSLR activities in an effort to identify specific local stakeholders for potential engagement.

Regional Procurement: Explore opportunities for municipalities and utilities within a specific geographical area to collaborate on joint projects for LSLR. By coordinating regional participation, the cities aim to achieve economies of scale, reduce costs, and ensure a consistent supply of necessary equipment and resources.

Streamlined Permitting and Inter-Agency Coordination: Implement expedited permitting procedures to improve coordination between local government agencies involved with LSLR projects. Establishing dedicated teams or liaisons for LSLR will help reduce administrative delays and improve project timelines through more efficient communication and approval pathways.

Cost per Line Analysis: Accelerate LSLR by analyzing the cost per line in specific communities. The analysis will provide insights into the financial, logistical, and regulatory challenges unique to a specific area. By understanding the breakdown of costs – such as labor, materials, excavation, permitting, and restoration – the cities can identify inefficiencies and areas for potential savings. Additionally, the cost analysis will assist in forecasting total project expenses, securing appropriate funding, and optimizing strategies to lower costs and improve the speed of replacements.

Community Liaison: Funding support for a community liaison will assist with cross-cultural communications and LSLR community education.

The cities are already enjoying early success, with cost per line analysis complete and unique capital stack developments currently underway. QV and MMLF have made significant progress establishing a state-wide charitable revolving loan fund geared toward essential workforce development activities. The fund would be designed to complement SRF and other funding, attracting philanthropic dollars from large foundations as well as individual donors. Ideally, the loan fund would offer below-market rates and make loans directly to municipalities and water utilities for a range of financing needs related to LSLR.

In addition to pursuing a charitable revolving fund, the cities are actively seeking advocacy through appropriate channels to reform the current DWSRF ranking and rating criteria to qualify for future funding. The cities hope to access low-interest state loans within the next nine years. They are also implementing efficiencies, including a dig-once policy for line replacements, which will help reduce costs and close funding gaps.

Despite these efficiencies, it’s clear that the DWSRF program remains the most effective funding source for LSLR activities, especially for smaller, underserved communities that need access to affordable capital. Policy advocates continue to push for state-level programmatic changes and a greater allocation of funding to state programs to continue to assist these communities with this unfunded mandate.