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May 4, 2010

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Government Relations

Bipartisan Group of Senators Introduces S. 3262 to Allow More Tax-Exempt Private Activity Bond Funding for Water Projects

Senator Robert Menendez (D-N.J.) and Senator Mike Crapo (R-Idaho)

The National Association of Water Companies and 60 other organizations supported the introduction of a bipartisan Sustainable Water Infrastructure Investment Act of 2010, S. 3262, by Senator Robert Menendez (D-N.J.) and cosponsors Senator Kit Bond (R-Mo.), Senator Mike Crapo (R-Idaho), and Senator John Kerry (D-Mass.). The bill will remove state volume caps on private activity bonds (PABs) for water and wastewater projects, freeing up billions of private capital dollars for investment in the nation’s water infrastructure. A similar bill introduced in the U.S. House of Representatives last year by Congressman Bill Pascrell (D-N.J.) was passed by the House as part of the Small Business and Infrastructure Tax Act (H.R. 4849) last month.

Congressman Pascrell issued the following statement: “Our nation’s job deficit and deteriorating water systems have gotten to the point that if you randomly pick up a newspaper in any American city, there’s a good chance you find a story about a company’s job cuts or a community’s water main break — maybe both. Taxpayers cannot be expected to foot the entire bill for all of the repairs and updates that our water infrastructure needs. Our legislation will encourage public-private sector partnerships to secure needed resources. I commend Senator Menendez and Senator Crapo for showing their leadership on this very important initiative.”

Part of rebuilding our economy for the 21st Century is renovating the infrastructure that helps our communities prosper,” said Menendez. “Many of our communities in New Jersey have been challenged by aging and deteriorating water and sewer systems, which not only jeopardizes the health of our families but also puts significant strain on local budgets. With this legislation, we can help local governments afford water and sewer renovations without burdening taxpayers, and we can create thousands of jobs.”

“Many small communities need, and deserve, federal support to comply with federal water and wastewater guidelines,” Crapo said. “This bill would allow local communities to leverage private capital markets in combination with other financial mechanisms to finance water and wastewater infrastructure projects.  It makes financial sense for communities and will improve public health and water quality.”

According to the U.S. Environmental Protection Agency and the Government Accountability Office, there is an investment gap of more than $500 billion for necessary infrastructure upgrades over the next 20 years to ensure safe drinking water and wastewater treatment. This bill would create up to 57,000 jobs by converting a modest investment by the federal government into billions of dollars of necessary economic investment into our nation’s aging water and sewage infrastructure. Standard and Poor’s cites approximately $180 billion in new money available for infrastructure investment.

“The Sustainable Water Infrastructure Investment Act of 2010 provides a rare opportunity to address two major American issues at once: an ageing infrastructure and troubling unemployment numbers,” said Michael Deane, executive director of the National Association of Water Companies. “Senator Menendez and his colleagues have taken a tremendous first step to bringing our nation’s water infrastructure in line with other components of our critical infrastructure, and to meeting our current and future health and safety needs as they relate to the most critical of natural resources.”

Other major infrastructure components already exempt from existing caps include airports, high-speed rail and solid waste disposal. PAB issuance is one of the fastest forms of federal assistance when applied to water and wastewater projects, with only 90–120 days needed to complete the process, from approval to sale, to getting Americans to work. Many small and local engineering and construction businesses will benefit from project opportunities that will arise from an increased availability of resources.

Providing opportunities for public water providers to leverage private sector investment in water and wastewater infrastructure, the bill will also generate significant tax revenue for states and communities across the country. Each $1 billion invested in water infrastructure yields an increase of $82.4 million in state and local tax revenue.


Urban Land Institute Reports on Need for Better Management, More Public-Private Partnerships for Water Infrastructure

The Urban Land Institute (ULI), a nonprofit land-use organization, and Ernst & Young, a major financial services firm, released a report recommending public-private investment as a viable means of closing the water infrastructure funding gap. The report also recommended that the federal government “establish a national infrastructure bank, modeled on the European Investment Bank which could help promote more investment-grade decision making and attract more private capital into infrastructure investments.”

Authors of the report said that changing the way water infrastructure is funded is a key component of making sure those projects get completed. The current system leads to underinvestment in infrastructure. Specifically, private investment was going to be central in solving the water infrastructure problem because governmental budgets are tight, investors are eager to invest and other countries — namely, Canada and Australia — have already been pursuing private investment in water infrastructure for years.

On rates, the report states that "the likely future funding course involves raising revenues from more and higher user fees tied directly to providing necessary investment capital for infrastructure systems, rather than reliance on general taxes, which distort and hide costs from the public.” The report continued: "More public/private partnerships can help finance infrastructure development and operate systems. A national infrastructure bank could also help align government and private investor interests."

On management of the scarce resource, the report notes: "Most water districts do not charge ratepayers full outlays for constructing and maintaining systems. As a result, businesses and households tend to use water inefficiently and don't conserve, even though per-capita water demand could outstrip future availability in some parts of the country."

Please find the 120-page report here.


Senate Budget Resolution Offers EPA Water Programs Slight Increase in FY2011

The Senate's budget resolution as introduced would open the door to a $400 million increase in the EPA's budget in fiscal year 2011 over the $10 billion requested by the Obama administration, including modest increases to clean water and drinking water state revolving funds (SRFs).

The resolution provides a blueprint for total federal revenues and spending. While non-binding, it generally provides an indication of how lawmakers intend appropriators to allocate EPA and other agencies' discretionary spending.

According to the summary document, Democrats assume EPA will receive $10.4 billion, a slight increase over its FY10 enacted funding level of $10.3 billion and a boost over the president's requested $10 billion for EPA in FY11.

The resolution includes $3.5 billion for EPA's clean water and drinking water SRFs. EPA’s water funds face proposed cuts under the president’s FY11 outline, with the budget request seeking $2 billion for the clean water SRF in FY11, a drop from the FY10 level of $2.1 billion. The drinking water SRF would be cut from $1.39 billion in FY10 to $1.29 billion in FY11. Combined, the president is seeking roughly $3.29 billion for the two water funds in FY11, so the budget resolution represents a modest increase.


Senate Climate Bill Hits a Political Snag

After months of negotiations, Sen. Lindsey Graham (R-S.C.) withdrew his support for a bill being assembled along with Sens. John Kerry (D-Mass.) and Joseph Lieberman (I-Conn.). Graham’s support wavered in light of a parallel Senate push for Immigration reform. Graham is quoted saying: "Do you think I'd sit on the sidelines and see immigration brought up like this and not object? I care about immigration."

For the time being, the bill will not be introduced as planned. The three Senators agreed to send it to the EPA for an economic analysis that is expected to take six to eight weeks. Some preliminary details of the bill are listed below:

  • The proposed provisions would take effect in 2013. They are intended to reduce greenhouse gas emissions 17 percent by 2020 (compared with 2005 levels) and 80 percent by 2050.
  • Energy-intensive and trade-sensitive industries would get an additional four years before they would be subject to greenhouse gas emissions limits.
  • Two-thirds of the revenue generated by auctioning pollution allowances to utilities would be returned to utility consumers.
  • Instead of addressing transportation sector emissions with a fee on motor fuels at the pump, as had been considered, oil companies would be issued “pollution allowances.” To blunt accusations that the provision constitutes a gas tax increase, the Congressional Budget Office would issue a document stating the allowances do not constitute a tax. All revenue from the sale of diesel oil fuel allowances would be dedicated to the Highway Trust Fund. While details of this allowance or permit system are unclear, apparently these particular allowances would not be traded on any open market.
  • The bill would pre-empt the ability of state governments and the EPA to regulate greenhouse gases under the Clean Air Act (PL 101-549), as long as emitters comply with the standards outlined in the measure. The EPA would monitor and enforce compliance
  • Loan guarantees and liability protections would be authorized for the construction of up to 12 nuclear power plants.
  • The measure would provide at least $10 billion for carbon capture and sequestration of emissions from coal-fired power plants, as well as an accelerated bonus for early deployment of this technology.
  • Financial incentives would be offered for natural gas and electric vehicles.
  • The proposal would set a hard price “collar,” with both a ceiling and a floor on the cost of carbon emissions allowances.
  • The measure would incorporate the energy bill (S. 1462) approved last year by the Energy and Natural Resources Committee, which would mandate an increase in renewable electricity production and include some new offshore drilling.
  • Agriculture would be exempt from the cap on carbon emissions.


Bill to Clarify Clean Water Act Jurisdiction is Introduced, H.R. 5088

House Transportation and Infrastructure Committee Chairman James Oberstar (D-Minn.) last week restarted the debate on the proper scope of the Clean Water Act (CWA) with the introduction of a new bill that would apply federal protections to the “waters of the United States.” Currently, the federal CWA only applies to the nation’s “navigable waters.” NAWC remains neutral on this bill.

H.R. 5088, commonly known as the Clean Water Restoration Act, has been offered in response to two Supreme Court decisions that confused and narrowed the Army Corps of Engineers and EPA jurisdiction over the Clean Water Act. Proponents of Oberstar’s bill argue that codifying jurisdiction will expedite the NPDES permitting process and reduce litigation arising from jurisdictional confusion. Additionally, the bill would ensure that creeks, small streams and seasonal wetlands are protected.

Earlier proposals were met with criticism that they would expand federal CWA authority far beyond its original scope. H.R. 5088 clarifies that existing wastewater treatment systems, including treatment ponds and lagoons designed to conform to the CWA, do not qualify as “waters of the United States” and therefore would not be subject to new regulation.

Further, the bill’s findings specify that new regulations are not intended to apply to groundwater. The bill also drops earlier proposed language that would have required a CWA permit to conduct “activities” affecting waters of the U.S. As a result, supporters say that the bill would not expand CWA regulation to actions beyond discharges into covered waters.

Chairman Oberstar hopes to have H.R. 5088 on the House floor by September, but it is still uncertain whether the changes will be enough to satisfy critics.