Last week, the Senate Environment & Public Works Committee held a hearing to examine “The Role of Environmental Policies on Access to Energy and Economic Opportunity.” The hearing focused on the federal role in keeping water and wastewater infrastructure affordable for ratepayers.
A number of Senators participated, including Chair and Sen. James Inhofe (R-Okla.) and Ranking Member, Sen. Barbara Boxer (D-Calif.), who raised important issues regarding the level of investment needed by the federal government in the nation’s water and wastewater infrastructure. Both agreed that more federal investment is necessary and pledged to address the issue in separate legislation the Committee is working on for later this session.
The National Association of Clean Water Agencies submitted a written statement for the hearing, outlining three key policy pathways to ensure water and wastewater rates remain affordable, including substantially increasing funding for the Clean Water State Revolving Fund Program, modernizing the Clean Water Act so that ratepayer dollars can be better targeted toward investments with the greatest water quality benefit, and assistance programs to ensure that lower-income ratepayers continue to have access to clean and safe water.
In conjunction with the hearing, Sen. Sherrod Brown (D-Ohio) reintroduced the Clean Water Affordability Act containing many of NACWA’s key policy recommendations for ensuring ratepayer affordability, including codifying Integrated Planning, extending NPDES permit terms, authorizing use of alternative wet weather treatment technology for sanitary sewer overflows, and reauthorization of a grant program targeted specifically for managing wet weather challenges. The Association worked closely with Senator Brown to craft many of the bill’s provisions, which track closely with provisions also contained in the House Clean Water Affordability Act introduced by Congressman Bob Latta (R-Ohio).
Arndt Testifies Before Senate Committee
Arndt
The American Water Works Association (AWWA) Water Utility Council Chair Aurel Arndt testified, urging lawmakers to expand upon existing federal efforts aimed at shoring up the nation’s aging water and wastewater infrastructure.
Testifying before the U.S. Senate Committee on Environment and Public Works, Arndt offered recommendations that could dramatically reduce risks for citizens reliant upon public water systems while creating virtually no budgetary burden on the federal government.
“We need to expand the available amount of water infrastructure capital and minimize its cost,” explained Arndt, a financial expert with more than 40 years of experience in the water sector. “Effectively, the result will be a significant acceleration of needed water infrastructure investment and making it more affordable for utilities and their customers.”
Arndt, speaking on behalf of AWWA and its approximately 50,000 members — who represent many of the nation’s public water systems — specifically called the committee’s attention to the Water Infrastructure Finance and Innovation Act program, a five-year low-interest loan pilot project approved through the Water Resources Reform and Development Act in 2014. While the program is authorized at $35 million in fiscal year 2017, Congress appropriated only $2.2 million annually in the first two years to enable the U.S. Environmental Protection Agency (EPA) to develop administrative processes for the water infrastructure loan program.
“WIFIA was enacted as a five-year pilot program,” Arndt explained. “The first two years have been lost to setting up the program. We urge Congress to at least extend the pilot test for another two years. However, given the success of TIFIA, we do feel Congress would be justified in making WIFIA a permanent program as well.”
In addition, WIFIA would leverage money provided by Congress in a manner similar to TIFIA but at a much greater rate. For instance, while TIFIA provides $10 in loans for every dollar appropriated, some on Capitol Hill have suggested that the ratio for WIFIA loans could be 1:50 due to water utilities’ exceptional creditworthiness.
As evidence of pent-up demand for infrastructure reinvestment in the water sector, Arndt highlighted a 2012 AWWA report.
that projected the nation’s water system replacement and expansion needs at more than $1 trillion over the next 25 years. That estimate is regarded as exceptionally conservative, as it reflects only buried drinking water assets and does not include above-ground facilities, wastewater and storm water systems.
Another issue raised by Arndt during his testimony related to preserving tax-exempt interest benefits for investors who purchase municipal bonds. While some members of Congress have proposed denying higher-income individuals tax exemptions on proceeds from these financial instruments, AWWA data strongly suggests that the unintended consequences of that policy decision could be devastating to water utilities, which rely heavily upon tax-exempt municipal bonds to finance new facilities and the replacement of aging water system infrastructure. An estimated 70-plus percent of U.S. water utilities rely upon tax-exempt municipal bonds, the lower interest rates of which significantly reduce costs to ratepayers.
Arndt also urged the senators to appropriately fund the State Revolving Fund loan program, which primarily benefits small-to-medium-sized water systems, and to remove annual caps on the use of private activity bonds for water infrastructure projects.
“AWWA has a long-standing policy that communities are best served by water utilities that are self-sustaining through local rates and charges,” Arndt said. “However, the current sources of funding are woefully inadequate to finance our future water infrastructure needs, leading to the difficult question of how to do that.
“The recent events in Flint, Michigan, have highlighted how vital it is to operate, maintain and reinvest in our nation’s water infrastructure. Reducing the costs of these necessary expenditures through a variety of financial mechanisms which lower the cost of debt service should be the goal of all responsible water utility administrators and elected officials.”
WEF, WateReuse Encourage Federal Role in Water/Wastewater Funding
Rudolph Chow, director of the Baltimore Department of Public Works, also testified last week on behalf of his agency, the Water Environment Federation (WEF), and the WateReuse Association at the Senate Environment and Public Works Committee hearing.
With more than 30 years of experience in the water sector, Chow is a proponent of surface and underground infrastructure renewal and has spent his career developing and implementing new and innovative programs aimed at protecting these systems while mitigating affordability issues. Testifying before Inhofe and Boxer and the other committee members, his remarks focused on three main points:
Affordability – The challenges communities are having with meeting their regulatory requirements with limited funds is a national problem;
Federal Funding of Infrastructure – Congress should provide robust support for existing and proposed federal funding and financing programs; and
Economic Benefits of the Clean Water and Drinking Water State Revolving Fund Programs (SRF) – at the Committee’s request, WEF and WateReuse recently conducted an analysis of the estimated economic impact generated by SRF spending in four example states, including taxes that return to the federal government and the employment and output from that spending. The four states—California, Maryland, Ohio, and Oklahoma—were chosen as a good cross-section of states across the nation that were representative of geographic size, population size, cost of living, rural/urban populations, and general age of infrastructure.
Although WEF and WateReuse are still finalizing the analysis that will go into the Committee’s official record, the preliminary results revealed that on average, for every one million of SRF dollars spent in those four states, there was a significant return to the national and local economies. Notable examples include: $160,000 to $695,000 in federal tax revenue; national and local job creation, including high-paying positions that bring in an estimated $60,000 in labor income per job; and an average of $2.25 million dollars in total output for the states’ economies.
“As the true value of water becomes increasingly apparent, it’s vitally important to help educate our nation’s leaders about the infrastructure challenges facing our communities and the ways the federal government can help mitigate these pressures and increase opportunities for economic growth,” said WEF Executive Director Eileen O’Neill. “Although we are still working on our final analysis, the initial findings confirm that federal investments in water and wastewater infrastructure through the SRF programs have meaningful benefits to the economy, U.S. Treasury, and households across the nation.”
“A safe, reliable and cost-effective supply of water is necessary to sustain a high standard of living and robust economy in communities large and small,” added WateReuse Executive Director Melissa Meeker. “It is clear that strong federal support for water and wastewater infrastructure reaps economic benefits at the local, state, and national levels and enhances the quality of life for everyone.”
