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Tension Bubbles Up Over Water Infrastructure Bill in Senate

Workers fix a sewer main below the sidewalk in Mid City New Orleans, Wednesday, Jan. 31, 2018.

Workers fix a sewer main below the sidewalk in Mid City New Orleans, Wednesday, Jan. 31, 2018. AP Photo/Gerald Herbert

 

Connecting state and local government leaders

The prospect of making changes to federally-backed drinking water and sewer lending programs is proving to be controversial.

WASHINGTON — The waterworks financing legislation might be known as the "SRF WIN Act" for short, but a trio of groups in the water and wastewater sector are calling it a loser.

The American Water Works Association, the Association of Metropolitan Water Agencies and the Water Environment Federation came out swinging Thursday against the Securing Required Funding for Water Infrastructure Now Act, a bill that would blend elements of two federally-backed water and wastewater lending programs.

A day earlier, Sen. John Barrasso, the Wyoming Republican who chairs the Environment and Public Works Committee, left open the possibility that the bill could be included in a broader package of water infrastructure legislation that the committee hopes to pass this year.

But the water groups, in a letter to the committee's leadership, called the SRF WIN Act a "fundamentally flawed proposal." (The groups outlined similar concerns in March.)

They also threatened to withdraw support for the broader water infrastructure legislation that the committee is working on if the SRF WIN Act is included in it. This position pits the three groups against the main national organization representing rural water utilities—the National Rural Water Association.

Depending on how the debate plays out, it could affect the way millions of dollars in federal loan money for water and sewer upgrades flow to the state and local level, at a time when estimates show the nation needs about $744 billion in waterworks investment over two decades.

The SRF WIN Act is a bipartisan bill that Sens. John Boozman, an Arkansas Republican, and Cory Booker, a New Jersey Democrat, introduced in the Senate in January. An identical bill with Democratic and Republican support was also introduced then in the House.

Central to the SRF WIN Act are the clean water and drinking water state revolving funds, and the Water Infrastructure Finance and Innovation Act, or WIFIA.

The revolving funds are bedrock programs that involve the Environmental Protection Agency awarding "capitalization grants" to states. States contribute a 20 percent match, and then use the funds to provide low-cost loans and other financing assistance for water and sewer utilities to complete projects.

WIFIA was created by 2014 legislation. It involves the federal government lending directly for water projects at interest rates aligned with the typically low rates for U.S. Treasury debt. To qualify for the program, projects need to be at least $5 million in communities with 25,000 people or less and at least $20 million in larger places.

EPA just awarded its first-ever loan through the program last month, totaling $134 million, for a stormwater and wastewater facility in the Seattle area.

Critics of WIFIA say its cost thresholds leave smaller water utilities boxed out and that, compared to the revolving funds, it shifts power to the federal level from states when it comes to selecting projects. Another criticism is that the program falls short incorporating water infrastructure "need" into selection criteria for projects.

Enter the SRF WIN Act. The legislation would effectively extend WIFIA lending terms to the state revolving funds, so that states could offer revolving fund loans, with Treasury interest rates, for water and wastewater projects that they’ve determined to be priorities.

It would also authorize $200 million in funding annually for five years to support state revolving fund projects, for a total of $1 billion.

Dennis Sternberg, executive director of the Arkansas Rural Water Association, testified on behalf of the National Rural Water Association at an Environment and Public Works hearing on Wednesday. He said the SRF WIN Act would "allow the WIFIA program to be much more helpful to some of the rural communities."

"We think it'll steer the WIFIA to look at the communities with the greatest economic need, and communities that each state thinks is the priority," he added. "It'll be an excellent partnership with the SRFs."

But the groups that fired off the letter to the Environment and Public Works Committee on Thursday offered a different take.

"Supporters of this bill claim it would make WIFIA more accessible to small communities and generate additional funds for state SRF programs," they wrote. "But in reality it would undermine the purpose and ability of WIFIA to effectively leverage limited federal dollars to support major water and wastewater infrastructure investments."

They add: "Under the SRF WIN Act individual communities that wish to finance large-scale water and wastewater projects would be unable to take advantage of any of the funding made available through the new $1 billion authorization—leaving many potential large-scale projects across the country on the sidelines."

The groups level a barrage of specific criticisms against the bill.

They say it's unnecessary because WIFIA already allows state agencies that administer revolving funds to combine multiple, smaller-scale water and wastewater projects into larger, individual WIFIA loan applications. (They point to an Indiana proposal of this sort.)

Additionally, the groups say the bill would establish preferential treatment for state revolving fund agencies, over other applicants—who might include city or county governments with big projects.

For state revolving fund applicants, their letter notes, the SRF WIN Act would waive application fees and caps that dictate WIFIA financing can cover no more than 49 percent of a project's cost.

They go on to say that, while the bill seeks to provide assistance based on "need," it fails to explain what this means. ("Is it the number of water infrastructure projects awaiting funding in a state? The degree to which projects may address a state’s public health concerns?")

And they make a case that the SRF WIN Act would undermine WIFIA's ability to "leverage" federal investment because it would offer borrowers under the new framework it sets up even lower interest rates than it provides to current applicants.

"The lower the interest rate, the higher the interest rate subsidy must be provided by EPA. And the higher the subsidy, the lower the leveraging ratio of the WIFIA program. The lower the leveraging ratio, the fewer total dollars will be available through WIFIA to communities to access for water infrastructure projects," their letter says.

The broader bill the SRF WIN Act could be embedded into is known as America's Water Infrastructure Act of 2018.

It is the latest Water Resources Development Act, or WRDA, authorization measure. The legislation typically comes up every two years and sets a range of policy for the Army Corps of Engineers and other programs that involve infrastructure like dams, ports and levees.

Route Fifty asked Boozman Thursday afternoon if he expected the SRF WIN Act would be included in the WRDA package.

"I don't know," he replied. "We've got a lot of support."

During the hearing Wednesday he touted a batch of support letters for the bill from a range of organizations, including the Council of Infrastructure Financing Authorities, the National Association of Clean Water Agencies and the American Public Works Association.

The senator characterized the main hang up with merging the bill into the broader legislation as having to do with the $200 million annual authorization. "I think the biggest thing is the funding issue," he said.

"We're flexible with that," he added.

Introduced earlier this week, the WRDA legislation has so far been a relatively noncontroversial bill with bipartisan backing. Another hearing on the bill is scheduled for next Thursday.

Bill Lucia is a Senior Reporter for Government Executive's Route Fifty and is based in Washington, D.C.

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