U.S. Senators have introduced a bipartisan bill that would help public water utilities more easily finance the replacement of private lead service lines.
The Financing Lead Out of Water (FLOW) Act would allow bonds issued by public water utilities to finance the replacement of private lead service lines to bypass the U.S. Internal Revenue Service’s (IRS’s) “private business use test.”
Streamlining this process in the tax code would help more communities access low-cost financing for lead service line replacement. This becomes more important as laws regulating lead in drinking water are being updated around the country.
“What happened to my hometown of Flint should be a wake-up call for communities across America. We need to get serious about removing lead from our drinking water,” said Congressman Dan Kildee (MI-08). “My new bipartisan legislation cuts through federal red tape to make it easier for communities to support water infrastructure projects, remove lead pipes and ensure their residents have access to clean drinking water.”
Removing lead service lines can be financed by issuing tax-exempt bonds. However, under current law, if a water utility issues bonds to finance the replacement of lead service lines buried on private property, the utility must prove the bond proceeds won’t mainly benefit private businesses. Providing this documentation to the IRS requires a long and costly analysis. The FLOW Act would remove this barrier.
The office of Dan Kildee says that the FLOW Act is supported by the Saginaw Department of Water and Wastewater Treatment Services, Public Services Area Administrator for the city of Ann Arbor, Association of Metropolitan Water Agencies, American Water Works Association, Government Finance Officers Association, U.S. Water Alliance, Children's Environmental Health Network, National Rural Water Association, National League of Cities, National Association of Counties and the Natural Resources Defense Council.
“There are many barriers utilities face in replacing lead and galvanized services for customers. The ability to fund these replacements in a way that is affordable for customers is one of those barriers,” said Paul Reinsch, director of the Saginaw Department of Water and Wastewater Treatment Services. “The passing of the FLOW Act, as we understand it, would greatly reduce the complexity and cost of issuing bonds for lead service line replacements.”
“Tax-exempt bonds offer the lowest interest rates when communities are financing water infrastructure projects, but red tape from the IRS can slow down the process when a water system is attempting to use the funds to fully replace lead service lines,” said Tom Dobbins, CEO of the Association of Metropolitan Water Agencies. “The FLOW Act would solve this problem, and we commend Congressman Kildee for his commitment to this issue. We look forward to passage of this important legislation.”
