House Committee Releases Draft Water Funding Proposal

  • News
  • by BPC Staff
  • February 24, 2012
  • 0 Comments

Eric Sapirstein provides the following update on water infrastructure funding……..

Congressional efforts to address the water infrastructure funding gap continue with the previously reported hearings before the House Committee on Transportation & Infrastructure, Subcommittee on Water Resources and Environment scheduled for February 28 and March 21.  In preparation for the hearing, the Subcommittee Republican staff have provided CASA with a draft proposal that it hopes will provide a basis for development of a formal legislative vehicle later this session or next year.  The proposal (see attached)  is limited to loan guarantees and loans.  There is a provision to allow for unrestricted uses of private activity bonds for water infrastructure, but this is a provision that is not new having been attached to the House and Senate transportation reauthorization bills. For more info: House water finance bill 201202210001458441

Outlook

As noted, this proposal has been provided in anticipation of the upcoming hearings.  Prospects of the measure being enacted into law are questionable in light of the current inability of Congress to move legislation like the massive highway spending reauthorization bill that in many respects contains similar provisions for roads.  However, the President’s fiscal year 2013 budget request includes a $10 billion National Infrastructure Bank proposal that is very similar to this proposal.  Therefore, the relevance of this proposal may rest in the fact that both Congress and the Administration are seeking ways in which to redesign the way in which water infrastructure needs are financed within the budgetary constraints of the federal deficit.  Based on the hearing, CASA will be provide its comments to the Subcommittee.

The key provisions of the proposal include:

*       Vesting USEPA with the authority to provide for direct loans and loan guarantees for water and wastewater needs;
*       Making municipal and regional separate storm sewer systems, community water systems, or state infrastructure financing authorities eligible to apply for assistance;
*       Allowing for a public-private partnership to be eligible for assistance provided the assistance is directed to the public entity or the investor owned utility entity (not to the developer of a project);
*       Defining projects eligible for assistance:
        *       capital projects for construction, replacement, or rehabilitation;
        *       security upgrades;
        *       energy efficiency including renewable energy technologies;
        *       water efficiency to reduce water demand or need for wastewater treatment capacity;
        *       stormwater controls;
        *       water reuse ; and
        *       consolidation of two or more systems.

*       Defining project activities eligible to receive actual support (as opposed to the overall project):
        *       development phase activities including permitting;
        *       construction;
        *       property acquisition;
        *       financing costs associated with construction phases (reserve funds, issuance expenses);

*       Requiring USEPA to use criteria to select projects for assistance including significance of the project meeting infrastructure needs, project creditworthiness, need for project assistance, degree of other public and private assistance provided, cost impacts to federal government, and whether the project is nationally or regionally significant.
*       Requiring USEPA to develop a credit evaluation process prior extending project assistance;
*       Requiring that interest rates set at U.S. Treasury rates based on maturity date (higher rates allowed if project risks dictate);
*       Requiring a specific loan repayment schedule and providing that repayments must begin within 5 years of substantial completion date or using an undefined date after the loan is committed;
*       Authorizing that lenders of assistance must be a “non-federal qualified institutional buyer which includes pension funds; and
*       Allowing for appropriate administrative fees for such project assistance being extended.

In addition to the above provisions, the proposal would limit assistance to projects that exceed $20 million.  Combining projects would be permitted to achieve the threshold.  Because the bill would incur costs to the federal budget, actual authorizations for the loan and credit enhancement program are not provided to avoid scoring concerns required by the rules of the House.