Clean Water Advocacy - Newsroom - AMSA in the News
State Water Projects Feel Congressional Budget Cuts
Bond Buyer Magazine
Posted 12/29/04
By Humberto Sanchez
State revolving loan fund advocates are going to have their work cut out for
them to get funding increased in fiscal 2006, which starts next Oct. 1, because
lawmakers and the Bush administration are expected to continue to hold down
domestic spending.
The push for added federal funds comes after the state revolving loan fund
programs were cut for fiscal 2005 and is now slated to receive only $1.932
billion from Congress through Sept. 30, $270 million less than the program
received in fiscal year 2004.
The cut is "bad news because it is the first time in a number of years where we
have seen a reduction and our primary concern will be what does this auger for
the future," said Rick Farrell, executive director of the Council of
Infrastructure Financing Authorities, which represents agencies that operate the
wastewater and drinking-water state revolving funds, or SRFs. "This is a program
that needs a lot more money, not less money."
By most accounts there is a sizeable funding gap between what is spent on
wastewater and drinking-water infrastructure and what is needed. A 2002 study by
the Environmental Protection Agency identified a $270 billion gap over 20 years
between current wastewater funding and anticipated needs, as well as a $265
billion funding gap for drinking water.
The wastewater and drinking-water SRF programs provide low-interest loans to
local governments and operators of sewer and water facilities. The programs have
become a significant source of wastewater and drinking-water infrastructure
financing and are often leveraged with tax-exempt bonds.
The $1.08 billion was part of the massive $388 billion fiscal 2005 omnibus
spending measure signed into law by President Bush Dec. 9. The measure also
provided $843 million for the drinking-water SRF program, down $7 million from
the amount it received in fiscal 2004, which ended Sept. 30.
The cut primarily hurts states that leverage their SRF programs with tax-exempt
bonds because for every federal dollar spent by the wastewater SRF, an average
of an additional $1.11 is invested between state funds and bond proceeds,
producing a dollar multiplier of $2.11, according to the Water Infrastructure
Network, a water advocacy group.
In order to lessen the pain of the funding cut, water infrastructure advocates
received assurances from Rep. James T. Walsh, R-N.Y., chairman of the
Appropriations Committee's water infrastructure subcommittee, that the cut was a
one-time only necessity, according to Farrell.
But, under House Republican rules, Walsh must step down as chairman in for the
109th Congress. Walsh has spoken with House Speaker Dennis Hastert, R-Ill.,
about remaining chairman of the subcommittee for another two years, but House
leaders will not decide the matter until January.
"He's been very supportive," Farrell said. "I think it is to our distinct
advantage for him to stay," because New York state has sizeable water
infrastructure needs.
Water infrastructure lobbyists also hope to continue their campaign to win
Congressional approval of legislation to authorize increased funding for the
wastewater and drinking-water SRFs. But it will be a challenge since most
committees with jurisdiction over the SRFs will be focused on completing highway
and transit legislation.
"I assume [the committees] are going to start next year where they left off this
year, so the question is the political will and whatever compromises that have
to be made to get this thing moving," said Farrell.
In June the Senate approved a bill that would authorize spending $20 billion for
the wastewater SRF program over five years and $15 billion over five years for
the drinking-water SRF program.
But the bill died in part because of a controversial provision that would have
changed the formula used to dole out wastewater infrastructure grants, which was
opposed by some states.
Under the measure, wastewater grants initially would be distributed according to
a transition formula, which would favor states with smaller populations, while
at least maintaining current funding levels to larger population states. Once
federal appropriations for the wastewater SRF reaches $3.15 billion a year, the
formula would be based on needs documented in a survey currently conducted by
most states every four years. States like Arizona rejected the proposed formula
change because Congress has never appropriated more than $1.35 billion a year
for the wastewater SRF.
The bill also included a Davis-Bacon Act provision requiring that prevailing
wages be paid on projects funded by the SRFs. Davis-Bacon is an often divisive
issue between Democrats, who usually insist on it, and Republicans who typically
oppose it. This issue also held up SRF legislation in the House in 2003.
CIFA also plans to continue to push for the removal of all arbitrage rebate
restrictions from tax-exempt bonds sold for wastewater and drinking water SRFs.
The group has been in discussions over the last several months with officials at
the Treasury Department concerning the possibility of resolving the matter
administratively as opposed to addressing the issue with new legislation.
"We have always argued that the Treasury Department could work it out," Farrell
said. "It's a matter of whether you really need a legislative change or whether
you can interpret current statute to" exclude SRF bonds from arbitrage
requirements.
Farrell said that the discussions with the department "have been ongoing and
productive," but would not comment further.
Next year will also see a push from the Association of Metropolitan Sewerage
Agencies to create a water infrastructure trust fund, which would provide $45
billion over five years for water infrastructure funding.
Trust fund dollars would come from a proposed five-cent tax on all bottled
beverages, excluding milk and fruit juices and concentrates. The tax is expected
to raise $35 billion, with the remaining $10 billion would come from federal SRF
funding, assuming it is funded at its historical levels.
The proposal is "a work in progress," said AMSA executive director Ken Kirk.
"This is an early draft and the numbers may change. We are still in process of
getting comments back from our members and other stakeholders."
Kirk hopes to have the proposal introduced as legislation early next year, but
currently has no champion of the plan in Congress. AMSA officials plan to meet
with bottled beverage representatives in February.
"Hopefully it [the proposal] will lead to a very important dialogue with the
bottle beverage industry and other industries on how best to proceed and insure
that communities have the dollars they need to move forward to make our rivers
and lakes and streams and oceans safe," Kirk said.
Of the $9 billion a year that would be available, $5 billion would go towards
wastewater infrastructure improvements, including $3 billion for grants and $2
billion for the wastewater SRF.
The plan calls for $3 billion to be provided for drinking water infrastructure
enhancements, including $1.5 billion for grants and $1.5 billion for the clean
water SRF.
The remaining $1 billion would be used for various other water related
improvement programs.