Environmental Protection

House Hearings Begin on Water Trust Fund Possibility

U.S. Rep. Earl Blumenauer (D-Ore.) on July 14 introduced the Water Protection and Reinvestment Act, which would raise $100 billion annually for drinking water and wastewater systems by taxing various industries.

The American Society of Civil Engineers (ASCE) expressed strong support for the creation of a stable, long-term funding mechanism and commended Blumenauer for his support for the nation's infrastructure. The society noted that such a commitment will be essential to the renewal of these vital national resources, but that provisions--such as making the program deficit-neutral and including budgetary firewalls to prevent the diversion of monies collected--must be included to ensure long-term, sustainable success.

In the ASCE's 2009 Report Card for America's Infrastructure, ASCE assigned both wastewater and drinking water systems a barely passing grade of D-. According to "Every day we rely on seemingly invisible water and wastewater systems to support our quality of life and the nation's economy, and yet they suffer from inattention and underfunding," said ASCE President D. Wayne Klotz, P.E., D.WRE, F.ASCE. "A long-term, dedicated funding source, like the one proposed by Congressman Blumenauer, will go a long way in ensuring that these vital systems can continue to support the health and safety of the American people."

In testimony before the House Subcommittee on Water Resources and Environment, Chips Barry, a former member of the American Water Works Association's (AWWA) Water Utility Council and current manager of Denver Water, told the committee that the United States is best served by water systems that sustain themselves through consumer rates and other local financing. However, the federal government can help by providing access to low-interest loans.

“The federal water infrastructure bank would provide direct low-interest financing or loan guarantees for projects of regional or national significance, or which were simply too large for the state to accommodate,” Barry said testimony.

The complete AWWA testimony is available at www.awwa.org/InfrastructureBank.

According to an AWWA press release, the federal water infrastructure bank would be authorized to borrow money through the federal treasury system at very low rates, just as commercial banks do. In turn, the water infrastructure bank would make low-interest loans for water projects that are too big to access the State Revolving Fund (SRF) and help those states that want to leverage their SRF capitalization grants, making even more capital available for low-interest SRF loans.

A federal water infrastructure bank would require no new taxes, striking the right balance between federal assistance and local responsibility, Barry said.

“More effective tools for financing water infrastructure include enhancement of the existing state revolving loan fund (SRF) programs,” the testimony said. “It is particularly important to ensure that large water systems have guaranteed access to and meaningful participation in SRF programs. Other effective tools include removal of the annual volume caps for private activity bonds for water projects, full-cost pricing for water service, and creation of a dedicated federal water infrastructure bank.”

Barry said that a key concern with federal trust funds is that Congress typically does not spend all the funds raised for the stated purpose. Frequently, money from the funds is either lent to other programs or not appropriated for the full amount collected.

The National Association of Water Companies (NAWC) said, “The trust fund mechanism created by this bill would serve to further mask the value of water through taxes on unrelated activities and discourage responsible water use and conservation through heavy, broad utility subsidizations. Aggregate water use can only be reduced by changing the way people think about flushing their toilets, watering their lawns, and washing their dishes, and how industries think about water as an input cost. Similarly, public support for spending on environmental infrastructure can only be increased by changing the way people and businesses think about those very same activities. Neither goal can be achieved by creating opaque ways to fund water initiatives that allow users to continue thinking of water as a disposable resource.”

According to a press release, NAWC actively supports federal policies that provide utilities with the incentives to set prices that both sustain infrastructure investments and encourage conservation by household and industrial water users. State Revolving Loan Fund programs and H.R. 537, U.S. Rep. Bill Pascrell’s (D-N.J.) bill that would increase the amount of tax-exempt funding available to water and wastewater utilities, both adhere to the principals of helping utilities make affordable investments in their infrastructure while still sending accurate price signals to the public about the value of water.

“We are concerned … that by masking the true cost and value of water service, the Water Protection and Reinvestment Act would directly undermine these goals and could in the long run increase the infrastructure challenge. Congress should stay focused on encouraging long-term efficient and sustainable utility management,” said Michael Deane, executive director of NAWC.

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