Clean Water Advocacy - Newsroom - NACWA in the News
EPA Hopes to Expand Private Investment in Treatment Facilities
Lucy Kafanov, Greenwire reporter
As critics of President Bush's proposed U.S. EPA budget target its cuts to a loan program for sewage treatment facilities, the administration is promoting an initiative aimed at boosting private investment in public waterworks.
EPA's fiscal 2008 budget plan touts "innovative, market-based" initiatives through the expanded use of tax-exempt, private-activity bonds for waterworks.
The administration proposal would exempt bonds issued by state or local governments for drinking water and sewage treatment facilities from the private-activity bond unified state volume cap. The cap is a ceiling on the aggregate amount of private-activity bonds that may be issued in a state for each calendar year.
By lifting the cap -- which would require approval of Congress and cooperation of the Treasury -- the administration says it would provide greater access to cash for states and municipalities. EPA's assistant administrator for water, Ben Grumbles, said the initiative would eventually increase investment in wastewaster and drinking water state revolving loan funds by billions of dollars.
The initial cost of the initiative would be a reduction in federal receipts by $31 million from 2008 to 2012, Grumbles said. From 2008 to 2019 the government stands to lose about $184 million, he added.
"But the benefits of this are enormous," said Grumbles. "We believe, based on research, that greater use of private-activity bonds can provide up to an additional $1 billion to $2 billion in water infrastructure investment annually in the first few years, with the potential increasing up to $5 billion or $6 billion annually."
Susan Bruninga of the National Association of Clean Water Agencies said the group is reviewing EPA's proposal and generally supports a wide variety of financing tools for the water sector. But, she warned, "This alternative should not be viewed as a substitute for the real financial commitment the federal government �- not the private sector -� should make to America's waters.
"Furthermore, these bonds do not provide a meaningful way to fill the huge financial gap facing the nation's clean water agencies," added Bruninga, saying the best source of cash is through a combination of grants, loans and loan subsidies.
Bush's overall $7.2 billion EPA budget proposal seeks a reduction in the Clean Water State Revolving Loan Fund from $1.08 billion to $688 million (see related story).
At a recent House hearing on water issues, Debra Coy, an analyst with the Stanford Washington Research Group, discussed the potential of increasing private investment in the water sector. If barriers to private investment in water projects are lifted, the nation could take advantage of the "tremendous amount of money now becoming available for infrastructure investment," she said.
"The global financial markets have 'discovered' infrastructure in the past couple of years, and this is fast becoming a popular asset class that is attracting many billions of dollars," Coy said. "[But] it has become increasingly difficult to put the money to work" because of government ownership of most water utilities (E&E Daily, Jan. 22).