Congress Enacts Water Resources Reform and Development Act

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By Patrick Crow

Congress has enacted the massive Water Resources Reform and Development Act (WRRDA), which included a scaled-back Water Infrastructure Finance and Innovation Authority (WIFIA). A House-Senate conference committee had been working since last October to mesh conflicting WRRDA bills. Both houses overwhelmingly approved the conference bill in May, and President Obama signed it into law on June 10.

The $12.3-billion WRRDA, the first bill of its kind since 2007, broadly authorizes Army Corps of Engineers water infrastructure projects. Appropriations committees would decide on actual funding levels later. The final WIFIA chapter authorizes the EPA and Corps of Engineers each to offer $175 million in low-interest loans over five years for water and wastewater infrastructure projects expected to cost at least $20 million (or $5 million for water systems serving 25,000 or fewer people).

Based on an expected 10-to-1 leveraging ratio, if fully funded, EPA and the Corps together could offer $3.5 billion worth of loans over the course of the five-year pilot. They will select loan recipients through a nationwide competitive process. The program would function separately from the existing state revolving fund (SRF) programs.

EPA will offer WIFIA loans for projects to carry out "repair, rehabilitation or replacement" of a community water system or treatment works, construct brackish seawater or desalination infrastructure, and enhance a water system's energy efficiency, as well as any project eligible for assistance through the SRFs.

The House-Senate conferees reduced the size of the WIFIA program and added several conditions. They denied funding if a state intends to award an equal or greater amount of SRF funding for the project in a given year. They also inserted a provision requiring 15 percent of each year's WIFIA appropriation be reserved to fund small community water system projects.

The American Water Works Association (AWWA), Water Environment Federation (WEF) and Association of Metropolitan Water Agencies (AMWA) praised WIFIA's passage, although Congress limited funding to 49 percent of project costs and prohibited tax-exempt financing for the remaining portion.

David LaFrance, AWWA's CEO, said, "WIFIA will reduce the financing costs of critical infrastructure projects, allowing communities to fix and expand water systems at a lower cost to their customers." But he added that WIFIA would be more effective if communities could fund 100 percent of project costs and finance any non-WIFIA share with tax-exempt debt.

Diane VanDe Hei, AMWA executive director, said her group would lobby Congress to remove the restrictions, which she said "will have the practical effect of deterring many communities from taking advantage of WIFIA assistance."

AMWA explained that the conference committee watered down the Senate-passed WIFIA to keep the program budget-neutral. "We understand the tax-exempt financing restriction was not conceived as a matter of policy but was necessary to achieve a clean budget score. We appreciate that conferees worked hard in their attempts to resolve this issue, so AMWA is confident that lawmakers who have consistently supported WIFIA will continue working with us to do so in the months ahead."

The conferees also made some changes in the Clean Water SRF that Rep. Tim Bishop (D-N.Y.) had proposed in his Water Quality Protection and Job Creation Act (H.R. 1877) last year. The SRF loan repayment period was extended to 30 years; Davis-Bacon prevailing wage rates and "Buy American" iron and steel product requirements were made permanent; water reuse, energy-efficiency and green infrastructure projects were made eligible for funding; and states were allowed to offer loans with principal forgiveness or negative interest rates.

Meanwhile, the National Association of Water Companies (NAWC) is pushing for another reform to facilitate the financing of water projects. That proposal would remove the volume cap on private activity bonds (PABs) used for drinking water and sewage treatment projects. Sens. Robert Menendez (D-N.J.) and Michael Crapo (R-Idaho) introduced the latest PAB legislation (S. 2345) as a companion to H.R. 4237 filed earlier by Reps. John Duncan (R-Tenn.) and Bill Pascrell (D-N.J.).

Michael Deane, NAWC executive director, said, "The infrastructure that delivers clean water to our homes, workplaces, hospitals, and schools in many communities across the county is in disrepair. A removal on bond caps for water projects will bring funding for this vital piece of the nation's infrastructure in line with airports, high-speed rail and solid waste disposal, all of which are currently exempt from existing caps."

He continued, "PABs are a critical source of financing for the public water systems serviced by regulated water utilities and serve as an important tool to leverage the value of public private partnerships (PPPs) in resolving the infrastructure gap that exists in our nation's water systems."

NAWC said that lifting the volume cap could generate up to an estimated $5 to 6 billion in private capital for water projects. No hearings have been scheduled on the bills.

About the Author: Patrick Crow covered the U.S. Congress and federal agencies for 21 years as a reporter for industry magazines. He has reported on water issues for the past 15 years. Crow is now a Houston, Texas-based freelance writer.

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