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According to the Environmental Protection Agency (EPA) and water utility industry groups, communities will need as much as $1 trillion during the next 20 years to repair, replace, or upgrade aging drinking water and wastewater facilities; accommodate a growing population; and meet new water quality standards. GAO found that the amount of funds obtained from user charges and other local sources of revenue was less than the full cost of providing service--including operation and maintenance, debt service, depreciation, and taxes--for more than a quarter of drinking water utilities and more than 4 out of 10 wastewater utilities in their most recent fiscal year. GAO also found that more than a quarter of utilities lacked plans recommended by utility associations for managing their existing capital assets, but nearly all had plans that identify future capital improvement needs. A privatization agreement's potential to generate profits is the key factor influencing decisions by private companies that enter into such agreements with publicly owned utilities or the governmental entities they serve, according to the companies GAO contacted.

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