A Review of the American Recovery and Reinvestment Act of 2009

On

Feb. 17, 2009, less than a month after assuming office, President Obama signed into law the $787 billion American Recovery and Reinvestment Act (ARRA). The purpose of the act was to address the ailing U.S. economy and to stimulate or save jobs. The level of unemployment had reached 8.1 percent – the highest in 25 years.

As a quick recap, the ARRA package allocated $288 billion (or 37 percent of the package) for tax cuts ? of which 80 percent of these tax related initiative were directed at individuals (vs. companies). Another $144 billion (representing 18 percent of the package) was allocated for state and local government fiscal relief. About $110 billion (14 percent of the package) was allocated to education and healthcare. And Congress along with the White House must have listened closely to the words of legendary banker, Felix Rohatyn and/or Nobel Prize winning economists like Paul Krugman and Joe Stiglitz ? all of whom stressed the importance of infrastructure investment as a catalyst for job creation. More than $106 billion of the ARRA package (representing 13.5 percent) was allocated to infrastructure ? water/wastewater, transportation, broadband and energy.

The water/wastewater infrastructure sector was specifically provided with the following allocations from the ARRA package: $6.0 billion for drinking water and wastewater infrastructure projects executed through the State Revolving Fund (SRF) program, $4.6 billion for environmental restoration, flood protection, hydropower and navigational infrastructure projects executed by the U.S. Army Corps of Engineers, $1.38 billion for rural water and waste disposal projects, $340 million for watershed infrastructure projects executed by the Natural Resources Conservation Service, and $1.0 billion for drinking water projects in rural and drought-like areas via the Bureau of Reclamation.

The U.S. water and wastewater infrastructure and service sector had never experienced so much federal funding directed at it in recent years. And the sector received an additional $1.5 billion in allocated federal government funds for the SRF program just months later via the CY 2009 Omnibus Bill. The Bureau of Reclamation also received another $1.1 billion from this Omnibus Bill for dams, water treatment, conservation projects and rural water projects. Additionally, $3.7 billion of the Omnibus Bill was slated to be channeled through the Department of Agriculture for rural development and conservation programs, including the upgrading of aging flood control dams and the expansion of reuse/recycled water options.

On the heels of the ARRA package and the CY2009 Omnibus Bill, the Water Quality Investment Act of 2009 (HR 1262) was introduced. The measure would authorize another $13.8 billion of federal grants for the SRFs as well as $1.8 billion over a five-year period for CSO projects. Several months later, Rep. Earl Blumenauer (D-Ore,) sponsored a bill proposing the creation of a Water Trust Fund (HR 3202) was introduced. And, the proposed Sustainable Water Infrastructure Investment Act (HR 6194) that was sponsored by Rep. Bill Pascrell (D-N.J.) is still making its rounds on the Hill. The bill would bring private company-sponsored municipal water and wastewater projects out from under the current state volume cap on private activity bonds, thereby expanding the availability of low-cost, tax-exempt financing for these water infrastructure projects.

At the end of the day, all this anticipated or newly acquired federal government funding only serves to address a fraction of the water/wastewater infrastructure investment needs that have been identified for the next 20 years. According to the fourth and most recent U.S. EPA drinking water needs study that was issued in CY 2009, $334.8 billion of investment is now required ? an increase of 21 percent from the CY 2003 drinking water needs study. The findings from the new EPA clean water needs study have not been released yet. Nevertheless, the investment figure is expected to be noticeably greater than the last reported amount in CY 2004, which was $202.5 billion.

The big questions ? was the ARRA money appropriately allocated to each state? What has all this funding accomplished almost a year later? While it is evident that the ARRA program did not stop the unemployment rates from climbing (it is now 10.0 percent), did it energize the infrastructure project sector and specifically those water/wastewater infrastructure projects ?thirsting? for inexpensive government funding? What impact did the stimulus package actually have on the water/wastewater infrastructure sector? Which states and what kind of projects actually benefitted from the ARRA stimulus funding?

It is useful to recall that the $6 billion ARRA stimulus funding specifically directed to water and wastewater infrastructure projects was apportioned by the existing standard operating SRF capitalization grant needs formula implemented by the EPA. As a result, large populated states like New York, California, New Jersey, Pennsylvania, Texas, Illinois, Michigan and Texas all received a sizeable percentage of ARRA money. It then became the responsibility of the various state revolving funds around the country to assess and disperse the ARRA money to appropriate projects.

The good news for states seeking to use ARRA money as a catalyst for financing much needed water-related projects is the ability to combine the ARRA money with other existing sources of project funding, such as the existing core SRF fund, a local bond issue, a local water trust fund, a local tax surcharge, etc. The single major requirement for a project receiving ARRA money is the capacity to track and monitor its specific use and impact, particularly in the creation or the saving of jobs.

At the end of the day, the central role of the ARRA program is to serve as a rapid job/economic stimulator. As a result, the ARRA funding being dispersed via the SRF network system must adhere to two critical mandates: all funds must be allocated to projects that are under contract by Feb. 17, 2010; and all funds allocated to projects must have an assistance agreement in place. There can be no extended delay in the awarding of these ARRA funds. Therefore, any ARRA funds that have not been allocated to specific projects with a functioning assistance agreement in place will be taken back by EPA and reallocated to another state that can more quickly to disperse the funds for projects that will create or save jobs.

As the Feb. 17 deadline approached, there was good news to report. According to the EPA, there has been significant progress made in the allocation of ARRA funds for drinking and clean water projects, specifically:

  • As of October 2009, 25-30 percent of the ARRA funds funneled through the DWSRF and CWSRF programs had been allocated to projects with assistance agreement awards in place; by late January 2010, 85-90 percent of the ARRA funds funneled through the DWSF and CWSRF programs had been allocated to projects with assistance agreement in place.
  • ?As of October 2009, 10-12 percent of the ARRA funds were committed to DWSRF and CWSRF projects under contact; by late January 2010, 70-75 percent of the funds were committed to projects under contract.

Actual financial dispersal of the EPA-allocated ARRA funds can also now be measured. However, unlike the impressive figures linked to actual percentage of projects under contract and percentage of projects with assistance agreements formally in place, the financial dispersal numbers conjure up a mixed picture. According to the published government tracker, EPA as of mid-January paid out just $840.1 million of its approximately $7.1 billion in available ARRA funds (11.8 percent). In comparison, the U.S. Department of Energy has paid out $2.0 billion of its approximately $24.0 billion total available ARRA funds (8.3 percent). The U.S. Department of Transportation has paid out $8.3 billion of its $33.4 billion total available ARRA funds (274.9 percent). The US Department of the Interior has paid out $285.8 million of its $1.24 billion total available ARRA funds (23 percent). The U.S. Army Corps of Engineers gets has spent the largest percentage of its allocation, paying out $823.0 million of its $2.9 billion total available ARRA funds (28.4 percent).

The good news. Once the states get their hands on EPA-dispersed ARRA funds, they have become quicker to turn around and channel the money to projects and initiatives. For example, California, a state hard hit by the recession, is on record for paying out 61 percent of all its available stimulus funds; New York State has paid out 53 percent of all available stimulus funds; Michigan has paid out 60 percent; Illinois has paid out 61 percent; Florida has paid out 51 percent; and Texas has paid out 45 percent of all available stimulus funds.

Despite the numerous figures listed on the recovery website indicating the number of jobs linked to a particular ARRA-supported project, it is still too early to assess the true economic impact (job creation) of the complete ARRA program in its entirety or the specific contribution of ARRA-funded water and wastewater project segment. And while President Obama?s State of Union Address emphasized the role of the ARRA program as an effective vehicle for re-energizing the American economy and job opportunities, it may never be possible to succinctly measure the exact number of jobs actually created and/or saved as a result of a specific ARRA dollar investment in the overall infrastructure project sector or the water/wastewater project sector in particular.

But the recent observations about infrastructure investment made by economist Paul Krugman and others are gaining an audience. There appears to be a growing support among academics, economists, and, to some extent, financiers for promoting the value of infrastructure investment to fuel growth in a stalled economy. In fact, a newly produced study by the Milken Institute (?Jobs for America?) recommended a far greater investment in America?s infrastructure ? not only to create jobs but to improve the country?s international competitiveness. Specifically, the study suggests that an investment of $30 billion in the U.S. water and wastewater sector over a three-year period will have a direct and indirect impact on the creation of 825,300 jobs.

Only time will tell whether the multi-billion dollar ARRA program and/or the Milken Institute study can produce the job numbers to support their thesis that promotes the nexus between infrastructure investment and job creation.

Kathy Shandling is the Executive Director of the International Private Water Association (IPWA) ? a global advocacy/non-profit organization that serves as a conduit between the public and private sector players involved in the water/wastewater infrastructure project and service arena. She is a frequent contributor to UIM.

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A Review of the American Recovery and Reinvestment Act of 2009

On Feb. 17, 2009, less than a month after assuming office, President Barack Obama signed into law the $787 billion American Recovery and Reinvestment Act (ARRA). The purpose of the act was to address the ailing U.S. economy and to stimulate or save jobs. The level of unemployment had reached 8.1 percent ? the highest in 25 years.

As a quick recap, the ARRA package allocated $288 billion (or 37 percent of the package) for tax cuts ? of which 80 percent of these tax related initiatives were directed at individuals (vs. companies). Another $144 billion (representing 18 percent of the package) was allocated for state and local government fiscal relief.? About $110 billion (14 percent of the package) was allocated to education and health care. And Congress along with the White House must have listened closely to the words of legendary banker Felix Rohatyn and/or Nobel Prize winning economists like Paul Krugman and Joe Stiglitz ? all of whom stressed the importance of infrastructure investment as a catalyst for job creation. More than $106 billion of the ARRA package (13.5 percent) was allocated to infrastructure ? water/wastewater, transportation, broadband and energy.

The water/wastewater infrastructure sector was specifically provided with the following allocations from the ARRA package: $6 billion for drinking water and wastewater infrastructure projects executed through the State Revolving Fund (SRF) program, $4.6 billion for environmental restoration, flood protection, hydropower and navigational infrastructure projects executed by the U.S. Army Corps of Engineers, $1.38 billion for rural water and waste disposal projects, $340 million for watershed infrastructure projects executed by the Natural Resources Conservation Service, and $1 billion for drinking water projects in rural and drought-like areas via the Bureau of Reclamation.

The U.S. water and wastewater infrastructure and service sector had never experienced so much federal funding directed at it in recent years. And the sector received an additional $1.5 billion in allocated federal government funds for the SRF program just months later via the CY 2009 Omnibus Bill. The Bureau of Reclamation also received another $1.1 billion from this Omnibus Bill for dams, water treatment, conservation projects and rural water projects. Additionally, $3.7 billion of the Omnibus Bill was slated to be channeled through the Department of Agriculture for rural development and conservation programs, including the upgrading of aging flood control dams and the expansion of reuse/recycled water options.

On the heels of the ARRA package and the CY 2009 Omnibus Bill, the Water Quality Investment Act of 2009 (HR 1262) was introduced. The measure would authorize another $13.8 billion of federal grants for the SRFs as well as $1.8 billion over a five-year period for CSO projects. Several months later, Rep. Earl Blumenauer (D-Ore.) sponsored a bill proposing the creation of a Water Trust Fund (HR 3202). And, the proposed Sustainable Water Infrastructure Investment Act (HR 6194) that was sponsored by Rep. Bill Pascrell (D-N.J.) is still making its rounds on the Hill. The bill would bring private company-sponsored municipal water and wastewater projects out from under the current state volume cap on private activity bonds, thereby expanding the availability of low-cost, tax-exempt financing for these water infrastructure projects.

All this anticipated or newly acquired federal government funding only serves to address a fraction of the water/wastewater infrastructure investment needs that have been identified for the next 20 years. According to the fourth and most recent U.S. EPA drinking water needs study that was issued in 2009, $334.8 billion of investment is now required ? an increase of 21 percent from the 2003 drinking water needs study. The findings from the new EPA clean water needs study have not been released yet. Nevertheless, the investment figure is expected to be noticeably greater than the last reported amount in 2004, which was $202.5 billion.

The big questions: Was the ARRA money appropriately allocated to each state? What has all this funding accomplished almost a year later? While it is evident that the ARRA program did not stop the unemployment rates from climbing (it is now 10 percent), did it energize the infrastructure project sector and specifically those water/wastewater infrastructure projects thirsty for inexpensive government funding? What impact did the stimulus package actually have on the water/wastewater infrastructure sector? Which states and what kind of projects actually benefitted from the ARRA stimulus funding?

It is useful to recall that the $6 billion ARRA stimulus funding specifically directed to water and wastewater infrastructure projects was apportioned by the existing standard operating SRF capitalization grant needs formula implemented by the EPA. As a result, large populated states like New York, California, New Jersey, Pennsylvania, Texas, Illinois, Michigan and Texas all received a sizeable percentage of ARRA money. It then became the responsibility of the various state revolving funds around the country to assess and disperse the ARRA money to appropriate projects.

The good news for states seeking to use ARRA money as a catalyst for financing much needed water-related projects is the ability to combine the ARRA money with other existing sources of project funding, such as the existing core SRF fund, a local bond issue, a local water trust fund, a local tax surcharge, etc. The single major requirement for a project receiving ARRA money is the capacity to track and monitor its specific use and impact, particularly in the creation or the saving of jobs.

At the end of the day, the central role of the ARRA program is to serve as a rapid job/economic stimulator. As a result, the ARRA funding being dispersed via the SRF network system must adhere to two critical mandates: All funds must be allocated to projects that are under contract by Feb. 17, 2010; and all funds allocated to projects must have an assistance agreement in place. There can be no extended delay in the awarding of these ARRA funds. Therefore, any ARRA funds that have not been allocated to specific projects with a functioning assistance agreement in place will be taken back by EPA and reallocated to another state that can more quickly disperse the funds for projects that will create or save jobs.

As the Feb. 17 deadline approached, there was good news to report. According to the EPA, there has been significant progress made in the allocation of ARRA funds for drinking and clean water projects, specifically:

As of October 2009, 25 to 30 percent of the ARRA funds funneled through the DWSRF and CWSRF programs had been allocated to projects with assistance agreement awards in place; by late January 2010, 85 to 90 percent of the ARRA funds funneled through the DWSRF and CWSRF programs had been allocated to projects with assistance agreement in place.

As of October 2009, 10 to 12 percent of the ARRA funds were committed to DWSRF and CWSRF projects under contact; by late January 2010, 70 to 75 percent of the funds were committed to projects under contract.

Actual financial dispersal of the EPA-allocated ARRA funds can also now be measured. However, unlike the impressive figures linked to actual percentage of projects under contract and percentage of projects with assistance agreements formally in place, the financial dispersal numbers conjure up a mixed picture.? According to the published government tracker, EPA as of mid-January paid out just $840.1 million of its approximately $7.1 billion in available ARRA funds (11.8 percent). In comparison, the U.S. Department of? Energy has paid out $2 billion of its approximately $24 billion total available ARRA funds (8.3 percent). The U.S. Department of Transportation has paid out $8.3 billion of its $33.4 billion total available ARRA funds (24.9 percent). The U.S. Department of the Interior has paid out $285.8 million of its $1.24 billion total available ARRA funds (23 percent). The U.S. Army Corps of Engineers has spent the largest percentage of its allocation, paying out $823 million of its $2.9 billion total available ARRA funds (28.4 percent).

The good news. Once the states get their hands on EPA-dispersed ARRA funds, they have become quicker to turn around and channel the money to projects and initiatives.

For example, California, a state hard hit by the recession, is on record for paying out 61 percent of its available stimulus funds; New York has paid out 53 percent of all available stimulus funds; Michigan has paid out 60 percent; Illinois has paid out 61 percent; Florida has paid out 51 percent; and Texas has paid out 45 percent of all available stimulus funds.

Despite the numerous figures listed on the recovery website indicating the number of jobs linked to a particular ARRA-supported project, it is still too early to assess the true economic impact (job creation) of the complete ARRA program in its entirety or the specific contribution of ARRA-funded water and wastewater project segment. And while President Obama?s State of Union Address emphasized the role of the ARRA program as an effective vehicle for re-energizing the American economy and job opportunities, it may never be possible to succinctly measure the exact number of jobs actually created and/or saved as a result of a specific ARRA dollar investment in the overall infrastructure project sector or the water/wastewater project sector in particular.

But the recent observations about infrastructure investment made by economist Krugman and others are gaining an audience. There appears to be growing support among academics, economists and, to some extent, financiers for promoting the value of infrastructure investment to fuel growth in a stalled economy. In fact, a newly produced study by the Milken Institute (?Jobs for America?) recommended a far greater investment in America?s infrastructure ? not only to create jobs but to improve the country?s international competitiveness. Specifically, the study suggests that an investment of $30 billion in the U.S. water and wastewater sector over a three-year period will have a direct and indirect impact on the creation of 825,300 jobs.

Only time will tell whether the multi-billion dollar ARRA program and/or the Milken Institute study can produce the job numbers to support their thesis that promotes the nexus between infrastructure investment and job creation.

Kathy Shandling is the Executive Director of the International Private Water Association (IPWA) ? a global advocacy/non-profit organization that serves as a conduit between the public and private sector players involved in the water/wastewater infrastructure project and service arena. She is a frequent contributor to UIM.

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