Water Groups Seek to Preserve SRF Funding

May 15, 2015
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By Patrick Crow

Water associations are currently locked in their annual struggle to preserve federal funding for the drinking water and clean water state revolving funds (SRFs).

The Obama Administration has requested an overall $54-million reduction in SRF spending in Fiscal 2016. The proposal outlines $1.116 billion for the clean water SRF (a cut of $333 million) and $1.186 billion for the drinking water SRF (an increase of $279 million). The programs fall within an Environmental Protection Agency (EPA) budget of $8.591 billion, which would rise nearly $452 million.

In the past two fiscal years, Congress rejected administration proposals to shrink the programs and maintained spending at $1.448 billion for the clean water SRF and $906 million for the drinking water SRF.

The proposed Fiscal 2016 budget continues to require that states reserve 20 to 30 percent of their drinking water SRF funding to support loan forgiveness for disadvantaged communities. However, states would not be required to set aside a portion of drinking water SRF funds for green infrastructure projects, like they must do in the clean water SRF program.

The budget also seeks $5 million for EPA to begin laying the groundwork for the Water Infrastructure Finance and Innovation Act (WIFIA) loan program.

In a letter to key legislators, water associations supported the funding increase for the drinking water SRF and asked Congress to maintain level funding for the clean water SRF. Signing the petition were executives of the U.S. Conference of Mayors, Association of Metropolitan Water Agencies, American Public Works Association, American Water Works Association, National Association of Clean Water Agencies, Water Environment Federation, and WateReuse Association.

The groups urged full funding for WIFIA's $25-million authorization, which they said would enable "communities to begin accessing additional capital (offered by the program) as quickly as possible."

They also opposed the administration's proposal to levy new taxes on municipal bond interest earned by high-income households. They noted that change in existing law would "cost municipalities billions of dollars and prevent many projects from going forward, while significantly increasing rates for customers."

In a separate statement, AMWA Executive Director Diane VanDe Hei said the administration's request for $5 million to launch WIFIA was a positive development. "[It] should put to rest unfounded fears that new funding to support WIFIA would only come at the expense of the existing SRFs," she said. "Instead, this budget shows that both programs can work together to deliver low-cost financing for a variety of water and wastewater infrastructure projects nationwide."

She urged Congress to reject (as it has several times previously) the proposal to limit the federal tax benefits tied to municipal bond interest income. "A recent AMWA study found that fully taxing municipal bond interest nationwide in 2012 would have increased water infrastructure financing costs by $9 billion that year alone -- a cost that would essentially serve as a new tax on municipalities and ratepayers," AMWA said.

EPA Administrator Gina McCarthy elaborated on the budget requests in appearances before congressional subcommittees. "Aging systems and the increasing impacts of climate change create opportunities for innovation and new approaches for drinking water and wastewater infrastructure," she said. Further, McCarthy noted that the $2.3-billion SRF request would "promote innovative practices that advance water system and community resiliency and sustainability."

McCarthy explained that EPA thinks "the (infrastructure replacement) need in drinking water is even more severe than clean water at this point," based on recent surveys that show higher cost expectations for drinking water infrastructure.

Therefore, she said that the proposed budget "shifted funds away from wastewater into drinking water." She added that despite the proposed reduction for the clean water SRF program, the request was still $527 million higher than the administration's fiscal 2015 request (which Congress rejected).

The House and Senate budget committees have released their own budget plans, which, unlike the president's detailed budget, are broad frameworks covering general expenditures and revenues. After a series of hearings and markups, Congress will attempt to forge a dozen appropriations bills to fund the government, beginning Oct. 1, 2015.

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 an Austin, Texas-based freelance writer.

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