Activity on the Infrastructure Funding Front

In a televised address to Congress on Sept. 8, President Barack Obama called for the passage of the American Jobs Act, which includes investment in infrastructure for roads, bridges, railroads, airports and schools. But in the 4,000-plus word transcript, there was no mention of water.

Prior to the speech, the U.S. Conference of Mayors and 54 House Democrats wrote a letter to the president to include water-related projects as part of the infrastructure investment package. The letter cited studies that show for every $1 billion invested in water infrastructure, 27,800 jobs are created. The signatories also pointed out that federal investment in water infrastructure would help bridge the funding gap, which is estimated by EPA, GAO and others to be in the range of $300 million to $500 million.

While the speech did not make specific references to water, information about the American Jobs Act released by the White House includes discussion of a National Infrastructure Bank. The proposal would set aside $10 billion for the bank, which would be used to fund infrastructure projects that would include water and wastewater. Transportation, water and energy projects eligible for funds from the National Infrastructure Bank would generally be large ? $100 million or more ? that have regional impact.

The National Infrastructure Bank would be government owned but independently operated. One of the chief advantages of the National Infrastructure Bank would be the ability to address private capital at a time when federal funding is harder to come by. ?Democrats and Republicans, business and labor, are now united to create an American infrastructure bank to leverage private investment, make America the world?s builders once again, and close the deficit in our infrastructure investments,? Sen. John Kerry (D-Mass.) was quoted by the White House as saying.

Opponents of the bank say that funding decisions should not be made by leaders in Washington, but by local government entities.? ?Unfortunately, a National Infrastructure Bank run by Washington bureaucrats requiring Washington approval and Washington red tape is moving in the wrong direction.? A better plan to improve infrastructure is to empower our states, 33 of which already have state infrastructure banks,? Rep. John Mica (R-Fla.) stated on his webpage.

The American Water Works Association (AWWA), a leading association of drinking water utilities, is calling the introduction of a Water Infrastructure Finance and Innovation Authority (WIFIA). ?The National Infrastructure Bank covers all facets of infrastructure, but our focus is solely on water,? said Tommy Holmes, Legislative Director for AWWA. ?We believe that the WIFIA approach is a more effective and allows greater investment in water and wastewater infrastructure at the lowest cost to the federal government.?

The WIFIA approach would allow low-interest loans for some larger projects that cannot currently receive money through State Revolving Funds (SRFs). Holmes believes that legislation creating the WIFIA will be introduced in the current congressional session. The WIFIA model is based on the successful Transportation Infrastructure Finance and Innovation Act (TIFIA). Additional information on WIFIA is available at www.awwa.org.

In other legislation, both the House and the Senate have introduced their versions of the Sustainable Water Infrastructure Investment Act of 2011 (HR 1802 and S 939, respectively). The act would exempt water and wastewater projects from existing volume caps on private activity bonds. Local and state governments can use the tax-exempt bonds to partner with private investors to achieve lower overall costs for infrastructure repair and construction projects, while shifting debt risk from the government entity to the private partner, according to a news release by Parkson Corp., a solutions provider for water recycling and treatment.

?This legislation is expected to infuse $50 billion in private capital for water and wastewater projects over 10 years and create more than 1.4 million jobs,? Parkson CEO Zain Mahmood wrote. ?It will offer much needed relief by encouraging the local government to work with the private sector to deliver an absolutely critical public service.

?It is now time to allow water and wastewater projects to receive the same treatment and give municipalities the ability to leverage private capital in order to help close the $500 billion investment gap they face over the next 20 years to upgrade and rebuild the aging and overburdened water and wastewater infrastructure.?

Construction Materials Prices Fall 0.6 Percent in August

With the demand for construction services waning, the cost of construction materials fell 0.6 percent in August, according to the Sept. 14 Producer Price Index (PPI) report by the Department of Labor. However, prices are 7.9 percent higher than one year ago.

Contributing to the decline, prices for asphalt, tar roofing, and siding fell 1.6 percent in August, but are still 4.5 percent higher from one year ago. Iron and steel prices slipped 0.7 percent for the month, but are 15 percent higher than the same time last year. Steel mill product prices decreased 1 percent compared to the same time last month, but prices are 14.3 percent higher year-over-year. Fabricated structural metal product prices were down 0.5 percent for the month but are 5.1 percent higher from August 2010.

In contrast, a number of construction inputs posted increases for the month, including softwood lumber, up 2.8 percent in August and 4.8 percent higher year-over-year. Nonferrous wire and cable prices were up 0.5 percent compared to the previous month, and up 15 percent from the same time last year. Prices for concrete products inched up 0.1 percent for the month and are unchanged from August 2010. Prices for plumbing fixtures and fittings were flat in August, but are up 2.8 percent over the past 12 months.

Crude energy prices fell 5.1 percent in August as crude petroleum prices slid 11.3 percent. Year-over-year, crude energy prices are 5.3 percent higher. Overall, the nation?s wholesale good prices were unchanged for the month, but are 6.5 percent higher from August 2010.

?Today?s release gives us a snapshot of the current state of the nation?s construction industry,? said Associated Builders and Contractors Chief Economist Anirban Basu. ?Demand for construction services, in general, continues to fall short of capacity. However, the decline in construction materials prices in August now makes the purchase of construction services more attractive.

?Still, the 0.6 percent decline registered last month falls short of reversing construction material price increases in earlier months,? Basu said. ?Materials prices are still nearly 8 percent higher than they were a year ago.

?Much of the overall decline in materials prices is attributable to a decline in crude petroleum prices, but prices for many other items also slipped in August,? said Basu. ?Among the key materials that experienced price declines were steel mill products, fabricated structural metal products and asphalt.?

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