Water sector coalition supports lead replacement funding using tax-exempt bonds

According to the Association of Metropolitan Water Agencies (AMWA), Sen. Michal Bennet’s (D-Colo.) anticipated legislation would make it easier for water systems to finance full lead service line replacements with tax-exempt bonds.

Bennet’s Financing Lead Out of Water (FLOW Act) is almost identical to a version passed by the House in March and has similar support from prominent industry organizations including the American Water Works Association and AMWA.

In fact, a letter recently sent by eight organizations with a vested interest in water utility regulation explained how the task of fully replacing a lead service line is often complicated by the fact that ownership is split between the utility and individual homeowners.

For instance, when Denver Water attempted to fully replace public and privately owned lead service lines, and pay for the project with tax exempt bonds, it had to navigate IRS rules that required documentation of how many private businesses operated out of homes where a private lead service line was to be replaced.

In response, the FLOW Act would specify that “qualified lead service line replacement” projects are not subject to these IRS rules, thereby allowing water systems to pay for them more easily and efficiently with tax-exempt bonds. The bill would ease administrative burdens on water systems that elect to do so instead of requiring the water system to cover the cost of replacing a privately-owned lead service line.

Senator Bennet is expected to introduce the bill in the Senate as early as this week. While passage of the measure, as well as its House companion, is not certain before the end of the year, AMWA plans to enlist its members to help build support for the proposal on Capitol Hill and position it for inclusion in a future package of tax legislation.

Information contained in this news update was first reported by the Association of Metropolitan Water Agencies.

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