Be Careful What You Ask For! Federal Funds Have Strings

What a difference a year makes.

By Dawn Kristof Champney, WWEMA President

What a difference a year makes. This time last year we were lamenting over President Bush’s fiscal 2009 budget request for the Clean Water State Revolving (SRF) program, due to be slashed another 20% from the modest $689 million given it in fiscal 2008 to a mere $555 million budgeted for fiscal 2009. Fortunately, Congress failed to act upon the President’s fiscal 2009 budget request and passed a continuing resolution funding the program at the fiscal 2008 level of $689 million. Funding for the Drinking Water SRF program also remained at the prior year’s level of $829 million.

Fast forward to February 2009 and President Obama’s fiscal 2010 budget request to Congress. It calls for the U.S. Environmental Protection Agency to receive $10.5 billion - $3 billion more than it received in fiscal 2008 - representing the largest budget request in the U.S. Environmental Protection Agency’s 39-year history. It includes a hefty $2.4 billion for the Clean Water SRF and $1.5 billion for the Drinking Water SRF. These two programs, combined, received only $1.5 billion in fiscal 2008.

Congress must still act upon the President’s budget request for fiscal 2010, but by all indications, it will be readily embraced by the committees with jurisdiction over the nation’s environmental protection programs.

Looking ahead, indications are that Congress will continue to support this upward trend in federal support of the SRF programs as evidenced by the House Transportation and Infrastructure Committee having just passed H.R. 1261 – the Water Quality Investment Act of 2009 – containing $18.7 billion over five years for wastewater infrastructure investments and other water quality efforts. The bill authorizes $13.8 billion over five years for the Clean Water SRF program; $1.8 billion over the same period for sewer overflow control grants; $250 million for alternative water sources projects; and $750 million for the Great Lakes Legacy Act, designed to eliminate toxic hot spots by removing contaminated sediment from the lakes.

The House passed a similar bill during the last session of Congress, as did the Senate Committee on Environment and Public Works, but time ran out before the Senate could act upon the measure. Prospects are brighter for quick passage of this bill during this session of Congress. Keep in mind, though, that this is only an ‘authorization’ bill. Funding for these programs will still have to go through the annual appropriations process, though they are likely to receive greater support having been official authorized by Congress as worthy investments.

With this potential for a significant increase in the federal investment toward drinking water and wastewater infrastructure projects, one should take some degree of comfort knowing help is on the way. But as the saying goes - Be careful what you ask for - for with the federal funds comes federal strings.

Federal Procurement Rules

Generating the most attention is the Davis-Bacon prevailing wage requirements that will now be imposed upon projects receiving SRF assistance under the stimulus bill, as well as all future SRF-funded projects if H.R. 1261 is enacted. Opponents of this mandate argue that it will drive project costs up, limit the number of projects that will receive assistance, and ultimately increase customer user fees.

Receiving less attention, but potentially of even graver consequence to the water and wastewater industry, is the “Buy American” provision contained in both the stimulus bill and H.R. 1261. It requires that all the iron, steel, and manufactured goods used in projects receiving SRF assistance must be produced in the United States.

This is a bad policy, which could lead to protectionism and come back to haunt U.S. manufacturers hoping to compete in the global marketplace. It is also a costly policy as fewer companies will be able to sell to SRF-funded projects. It will lead to less price competition, more expensive public works projects, and thus fewer of them to be financed through the SRF programs.

In today’s complex world of global sourcing, many components or sub-components of large systems are no longer manufactured in the U.S., especially electronics. In some cases, products and/or components that are imported have a functionality that cannot be currently matched by any American-based company. Most fiscally responsible companies today will have some degree of offshore sourcing in keeping with providing its customers with the best products that improve performance and reduce life-cycle costs. Our nation’s water and wastewater utilities have been the beneficiary of these efforts.WW

About the Author:
Dawn Kristof Champney is president of the Water and Wastewater Equipment Manufacturers Association., a 101-year old national trade organization which represents the interests of companies that manufacture and provide technologies used in municipal and industrial water supply and wastewater treatment applications.

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