The following is an update from Eric Sapirstein of ENS
Earlier this week, both the Senate Committee on Environment and Public Works and the House Committee on Transportation and Infrastructure’s subcommittees with jurisdiction over water and wastewater infrastructure convened hearings into the ongoing concern with inadequate funding of the nation’s water infrastructure. While the hearings played out the generally accepted belief that the nation needs to invest more in this vital infrastructure, the House hearing represented a more comprehensive review of funding alternatives. The Senate hearing appeared to provide for a restatement on the need to address the funding gap.
The House hearing heard from a diverse group of public officials, investor owned utilities, and financial analysts. Among the witnesses was CASA’s Dave Williams who testified in his capacity as NACWA President. Copies of the testimony can be found at the following two sites: http://transportation.house.gov/hearings/hearingdetail.aspx?NewsID=1531 and http://www.epw.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_id=a1ed45a6-802a-23ad-4b60-5c9fc29a8e49
In general, the House committee’s members that spoke appeared in agreement that substantial infrastructure needs exist. This need is a function of both rehabilitation of systems as well as complying with new mandates such as stormwater and nutrient controls. Because of the growing need, members cited the challenge at the federal level with calls to restrain federal spending. To this end, the committee indicated that additional financing tools will become increasingly relevant in the years ahead as a supplement to the State Revolving Loan Fund Program. Among the options under consideration are the creation of a loan program/credit enhancement program known as the Water Infrastructure Financing Innovation Act or WIFIA, legislation to increase the availability of private activity bonds that could support public private partnerships, and renewing the SRF program. Actual committee legislation has not been introduced, but staff indicate that the Chairman of the Subcommittee on Water Resources and Environment will likely move to introduce a bill in the near future. This bill would be an alternative to the measure (H.R. 3145) introduced by Ranking Democrat Tim Bishop (D-NY) earlier this year.
During the hearing, witnesses cited the growing costs of construction, echoing the point raised earlier by members that new mandates are straining local resources. In order to address the matter immediately, legislation to allow for creative financing approaches should be enacted witnesses urged. Addressing the issue of public private concepts, the issue appeared to be developing a pool of reliable resources that investors can be assured exists. For this reason, the unlimited availability of private activity bonds for water infrastructure was urged. Adding to the rationale for such an approach witnesses from the financial sector suggested that public private partnerships carried the benefit of allowing the public to shift risks of the project to the private sector partners. Turning attention to the SRF, private sector witnesses called on Congress to open up the SRF to investor-owned water utilities.
In a limited number of comments, the issue of a trust fund was mentioned as a policy that needs to be considered as a financing option. However, it was clear that support for such an approach, given the fiscal environment, was not strong.
Chairman Gibbs (R-OH) questioned the way alternative financing tools would be used. Witnesses indicated that given the magnitude of the challenge, every tool should be available. On the issue of a new loan program, WIFIA, witnesses suggested that WIFIA could support large projects ($20 million or more in costs) and the SRF program could be reserved for smaller projects’ needs. Bishop questioned how funding would be allocated under a WIFIA approach. In response to the question, it became clear that a state role in allocating assistance is a sticking point with some, suggesting that EPA would award funding to projects while others seemed to favor having the states decide which projects would be eligible for assistance.
Representative Napolitano (D-CA) questioned the use of technologies to bring down costs and improve energy efficiency. Williams responded to this question, illustrating the advances POTWs have made to capture the embedded energy contained in the wastewater treatment process. He noted that the effort to enhance energy production is not without costs and that capital assistance is vital, especially for smaller communities.
In response to questions about overall costs, municipal witnesses suggested that it is important to establish priorities to avoid the unrelenting throwing down of mandates that increase costs without recognizing the limitations of funding options. In response, committee members noted that this is a troubling matter. In an exchange on the role green infrastructure can serve to lower costs, witnesses agreed that it can support sustainability in water quality improvements. At the same time, it is important to find ways to convey the value of water to the public and the safety of water supplies in the country the witnesses stated.
During a series of final questions, Gibbs questioned the mechanism that should be used to distribute project assistance under any of the alternative funding approaches that were explored. Witnesses predictably suggested approaches that would minimize “red tape”. One theme that seemed to be shared is “locals” should be able to seek funding directly to an entity outside of the SRF program. As an example, it was cited that the SRFs often are not flexible enough to address needs and this is particularly the case with large projects or public private partnerships that do not seem to benefit as much from the SRF program.
In response to these concerns with the SRF, Bishop noted that his bill to authorize a WIFIA concept was to be administered under the SRF program. He stated this approach was relied upon because of an understanding from stakeholders that this was the preferred management approach. In response, witnesses stated that first priority should be to preserve the SRF and ensure that no harm occur as alternatives are developed. Second, a point was emphasized that the SRF would address different needs (small to medium sized projects) compared with WIFIA and thus the two approaches complement not compete with each other.
Outlook
Both the House and Senate hearings represented a continuation of hearings into water and wastewater infrastructure policy needs. Additional Senate action is unclear for the foreseeable future. In the House, a second hearing on financing alternatives is slated for March 21. According to House staff, once the hearing process is completed in March, they expect to review the pending legislative proposals and develop a proposal that could be marked-up later this session. It is clear from the hearings that despite the political gridlock that characterizes Congress, bipartisan agreement on finding ways to supplement the SRF program does exist As such it may serve to promote development of a consensus measure. However, it is unlikely that final action on a bill will be taken during this Congress.
