Public water systems in the U.S. are facing a significant challenge due to underinvestment in water infrastructure, resulting in large water leakage and potential public health crises. Being a natural monopoly, the investment decisions made by local water regulators are based on the tradeoff between profit earned from water customers and residents' satisfaction. Failure to provide high-quality water or charging high prices can directly lead to negative electoral consequences in the next term. However, the managers' preferences regarding this tradeoff can deviate their investment decision from the profit-optimal level. This paper aims to explore the reasons for underinvestment by developing a dynamic framework to specify and estimate the local manager's preference for water utility investment. I recover the intertemporal consequences of water infrastructure investment decisions, recognizing water price adjustments and changes in water quality. I find that the municipal regulator assigns less weight to consumer surplus over profit, leading to a reduction in investment in water infrastructure. My findings show that underinvestment in water treatment and distribution infrastructure, aimed at improving drinking water quality and reducing water leakage, is a result of this preference. I use the estimated model to quantify the welfare improvement resulting from the manager's preference in inducing higher investment. The counterfactual analysis results indicate that programs such as subsidizing the water utility and technological advancements on improving infrastructure quality can help improve the investment level and social welfare.