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HEADLINES
Water trust fund bill not a slam-dunk winner
Editor's Note: See link below to comment on this article.  | | Chips Barry testifies on behalf of AWWA at a hearing July 15 on HR3202. |
Introduction of a bill July 14 to create a $10 billion annual federal water trust fund met with mixed reaction at a hearing in the US House of Representatives. Some industry associations support it, while AWWA and others don't support the concept at this time.
AWWA would prefer that funds raised locally be retained and spent locally, rather than being sent to Washington, D.C., first, and that communities that have adopted adequate rates not be asked to subsidize those that have not. One way of doing this is through a federal water infrastructure bank, which AWWA supports over a trust fund. The trust bill — Water Protection and Reinvestment Act (HR 3202) — would create a trust fund with a dedicated source of funding, new federal taxes that would raise $10 billion annually. The taxes proposed by the sponsor are - A 4 cent per-container fee on water-based beverages — includes anything that is more than 50 percent water, such as soda, but not juice or milk;
- A 3 percent fee on items disposed of in wastewater, such as toothpaste, shampoo, cosmetics, toilet paper, and cooking oil;
- A one-half of 1 percent excise fee on pharmaceutical products, which would support remediation research and programs to prevent drugs from entering water systems;
- A one-fifteenth of 1 percent fee on corporate profits over $4 million — similar to the tax that funded the Superfund program until the tax expired in 1995.
Citing the shortfall of funding for water infrastructure, sponsor Rep. Earl Blumenauer (PDF), D-Ore., who drew bipartisan sponsorship (1 Democrat, 3 Republicans), said, "While it's probably the case that some water agencies could and should charge more for the water services they provide, we can't expect individuals to shoulder the entire burden of upgrading our nation's seriously neglected infrastructure with their water bills. This could mean a doubling or tripling of rates…. To me it is unconscionable that in this country, something as essential to life as water could become unaffordable." Joining in support of the bill at a hearing June 15 before the Subcommittee on Water Resources and the Environment of the House Transportation and Infrastructure Committee were representatives from the American Society of Civil Engineers, the National Association of Clean Water Agencies and the Associated General Contractors of America. Representing American Society of Civil Engineers, which gave a grade of D- for both the nation's drinking water and wastewater infrastructure, Dale Jacobson (PDF) testified "Although Americans still enjoy some of the best tap water in the world, the costs of treating and delivering that water where it is needed continue to outpace the funds available to sustain the system," Jacobson said. New sources of funding must be found, he said, adding ASCE "strongly supports the creation of a trust fund to finance the national shortfall in funding." ASCE estimates the shortfall to replace aging drinking water facilities alone at least $11 billion annually. Representing AWWA, Chips Barry (PDF), manager of Denver Water, noted that over $80 billion annually is spent by local officials on water and wastewater infrastructure. The infrastructure gap represents a shortfall of about 20 percent relative to current spending, Barry said. Thomas K. Walsh, engineer, director and treasurer for a water pollution district in Millbury, Mass., spoke for NACWA, citing a recent US Conference of Mayors report that says municipalities currently pay 95–99 percent of the costs for drinking water and wastewater infrastructure. NACWA's own study showed that "the average cost of wastewater services for a single-family residence increased by about 5.3 percent in 2008, compared to the rate of inflation, which was 3.9 percent," Walsh said. He felt small, rural and low-income communities would be hardest hit. Referring to the decline in state revolving fund appropriations in recent years, "it is critical to take the issue of water infrastructure investment out of the realm of uncertain annual appropriations and into the more certain arena of a dedicated funding stream," Walsh said. "If highways merit a trust fund with $30 billion per year and airports $10 billion per year, why should we not have one for water, a resource each of us uses every single day?" Kristine L. Young, representing Associated General Contractors of America, testified that "many communities do not currently have the financial resources to make the investments that are direly needed and necessary to meet federal water quality standards and face significant practical and political challenges enacting rate structures that would raise adequate capital to make the improvements that are needed." She noted the declining appropriations that SRFs suffered until recently and said "AGC supports creation of a long-term, sustainable, off-budget source of funding for water infrastructure." Barry expressed a number of reservations about trust funds, in general, to the subcommittee, and said AWWA was "not prepared…at this time" to support HR 3202. "In practice, federal trust funds routinely collect more in revenue than they are allowed to spend by congressional appropriation," Barry said. Trust funds usually must be renewed annually during the appropriation process. If a trust fund collects more funds than it is it allowed to spend through the appropriations process, those funds can be and often are spent elsewhere, Barry said. "At the present time the Treasury owes many billions of dollars to federal trust funds, not counting the vastly larger sums that are owed to the Social Security and Medicare Trust funds," Barry said. "We believe a water trust fund bill, regardless of the revenue sources it employs, should include a guaranteed or automatic appropriation of all monies collected to the EPA for the program's intended purposes," Barry said. ASCE's representative had the same thought, "The fund should contain budgetary firewalls to ensure that a reliable amount of financial aid goes to state and local governments annually." Blumenauer's testimony didn't discuss this. Barry also cited AWWA's long-standing policy: "The primary responsibility for funding water infrastructure has always been local, and should remain so. Americans are best served by water and wastewater systems that are self-supporting through rates and other local charges." He was concerned that local officials would be loath to raise rates locally if they believed a pot of money were coming from Washington. What AWWA favors, Barry said, is "a federal water infrastructure bank [that] would provide direct low-interest financing or loan guarantees for projects of regional or national significance, or which were simply too large for a state [SRF] to accommodate. With loans at the Treasury bond rate, communities would typically save 10 to 20 percent compared to their current borrowing rates and would save significantly more if the bank were authorized to provide additional subsidies." The cost to the federal government of a federal water infrastructure bank would be relatively small, Barry said. If the federal banking system were to forgive 20 percent of the principal of a 20-year $10 billion loan to the water bank, the cost to the federal government would be only $150 million a year. The bank could, in turn, provide significant cost savings and even subsidies to needy communities. The National Association of Water Companies issued a statement regarding testimony it submitted to the committee, stating, "The trust fund mechanism created by this bill would serve to further mask the value of water through taxes on unrelated activities and discourage responsible water use and conservation through heavy, broad utility subsidizations." The NAWC "supports federal policies that provide utilities with incentives to set prices that both sustain infrastructure investments and encourage conservation," the statement said. NAWC also supports using the SRFs and passing a bill to remove volume caps on private activity bonds, which increase the amount of tax-exempt funding available to utilities. Both allow affordable investments in infrastructure while "still sending accurate price signals to the public about the value of water," the release said. Barry said AWWA is glad to see that the bill would channel funds through existing state revolving fund (SRF) loan programs and also urged passage of S1005, a bill that reauthorizes the SRFs and gives greater weight to loan applicants who "can demonstrate that they are implementing asset management plans and responsible financial planning." (See Water Legislation column.) AWWA also supports efforts to remove the annual volume caps from private activity bonds used for water infrastructure projects, as HR537 would do, he said. A report recently released by the Aspen Institute — Sustainable Water Systems: Step One - Redefining the Nation’s Infrastructure Challenge (PDF) — cited by both NAWC and AWWA, makes 10 recommendations, including that the price of water should cover "the total cost of meeting service and sustainable water infrastructure requirements, subject to concerns about affordability." The Government Accountability Office also issued a report recently — Clean Water Infrastructure: A Variety Of Issues Need To Be Considered When Designing A Clean Water Trust Fund (PDF). Anu Mittal (PDF), author and a GAO natural resources and environment issues director, testified before the subcommittee about a variety of sources for funding a trust fund. Levying a federal water use tax was one source she mentioned. AWWA does not support a water tax because it would siphon away local funds and would result in communities with adequate rates subsidizing those without. However, Blumenauer did not accept the water tax recommendation from the GAO, nor did he propose putting a tax on fertilizers and pesticides, as the GAO suggested. Blumenauer also spoke for the record on the House floor the day before the hearing, emphasizing the need for improved water infrastructure financing. In addition to House Transportation and Infrastructure Committee, HR3202 has been sent for consideration to the following committees: House Energy and Commerce, House Science and Technology and House Ways and Means. Some of those committees are believed to favor the water use tax, according to Tom Curtis, AWWA deputy director for government affairs. Additional AWWA Resources
Sandy Nance, Managing Editor
Posted: 07/21/2009
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