Michigan Faces an $85 Billion Water Infrastructure Challenge. Who Will Pay for It?

A new report released by the Great Lakes Water Authority, Public Sector Consultants, and the Citizens Research Council of Michigan is raising alarms about what could become the state’s next major challenge: aging water and wastewater systems nearing the end of their useful lives and requiring significant investment in the coming decades.

The Crisis Beneath Us: The Urgent Need to Invest in Michigan’s Water Infrastructure report argues that the state faces a growing gap between replacement costs and available funding. Recognizing that local utility rates alone are unlikely to close the gap, the report’s task force recommends a sustainable, long-term funding source paired with reforms to improve accountability and direct resources to systems with the greatest needs.

According to the report, much of Michigan’s water and sewer infrastructure was installed during the 1920s and the decades following World War II. Many of those pipes are now reaching or exceeding their intended lifespan. The report identifies five primary factors driving today’s funding gap:

• Many systems are reaching the end of their useful lives simultaneously.
• Declining federal support for water infrastructure.
• A fragmented system of roughly 1,400 community water suppliers statewide.
• Utility rate structures that were not designed to fund full system replacement.
• Political challenges associated with increasing rates and fees.

The report estimates Michigan may need as much as $85 billion for water and wastewater systems over the next 20 years, far exceeding current funding. Meanwhile, less than 1% of the state’s water mains are replaced annually, even though many systems are more than 50 years old.

Delaying action carries its own costs. Recent water main failures across Michigan show the economic consequences. In May 2026, a transmission main failure in Oakland County disrupted service for roughly 200,000 residents across multiple communities, prompting a state of emergency declaration.

Importantly for employers, researchers cited in the report found that utilities incur repair costs after major failures, but the broader community bears approximately two-thirds of the overall economic impact through business interruptions, property damage, traffic disruptions, emergency response costs, and lost activity. Reliable water service is not simply a public works concern: Extended outages can quickly ripple through local economies, affecting customers, employees, and supply chains.

Options for policymakers to consider include:

• Issuing new state general obligation or revenue bonds.
• Increasing the state sales tax, with a half-cent increase generating roughly $1 billion annually.
• Expanding the sales tax to currently untaxed services.
• Using a portion of the state’s rainy day fund to establish a water trust fund.
• Creating a water extraction fee on bottled water companies.
• Allowing regional water authorities to levy property taxes.
• Redirecting portions of existing tax revenues toward water infrastructure.
• Repealing certain tax expenditures and exemptions.
• Dedicating tobacco settlement revenues.
• Expanding Michigan’s bottle deposit system or imposing a bottled water tax.

For Michigan’s business community, the challenge is balancing two competing realities. Continued underinvestment is producing increasingly visible consequences: water main breaks, flooding, boil-water advisories, and service disruptions that create real costs for employers and communities.

At the same time, many proposed revenue options would add costs for businesses, consumers, and property owners as employers manage inflation, workforce challenges, and rising operating expenses.

The debate is unlikely to center on whether Michigan should invest in water infrastructure. Instead, policymakers, local governments, businesses, and taxpayers will need to determine how those investments should be funded and who should ultimately bear the cost.

As these discussions continue in Lansing, the Detroit Regional Chamber will remain engaged to ensure the business community has a voice in conversations about both Michigan’s infrastructure needs and the policies proposed to address them.