WASHINGTON — Water utility executives from 47 states stormed Capitol Hill to urge lawmakers to repeal a ban on the use of tax-exempt bonds for projects already benefiting from certain federal assistance.
The more than 130 executives, members of the American Water Works Association, met with lawmakers on Wednesday to complain that the Water Infrastructure Finance and Innovation Act is not as effective as it could be because of the ban on tax-exempt bonds.
WIFIA, enacted last year as part of the Water Resources and Reform and Development Act, is a $175 million, five-year pilot program to provide low-interest federal loans and credit enhancement for large drinking water, wastewater and water reuse projects. Under the law, no more than 49% of a project's cost could be covered by WIFIA assistance, and overall federal assistance must be limited to 80%.
However, the law prohibits tax-exempts from being used to fund any of the costs of a project using WIFIA assistance, "taking away the most cost-effective tool for communities that seek WIFIA loans," the utility leaders said in a release.
"Let's free WIFIA to reach its full potential," said AWWA chief executive officer David LaFrance. "The water and wastewater infrastructure needs in the United States will likely top two trillion [dollars] over the next 25 years, and WIFIA is an important tool to help communities manage those costs. But the prohibition on the use of tax-exempt bonds is an unnecessary barrier that impairs WIFIA's effectiveness."
"If the ban were repealed, utilities would likely use lower-cost tax-exempt debt for the non-WIFIA share of project costs, lowering the overall cost of using the WIFIA program," AWWA said. "As a result, WIFIA would be a cost-effective option for the much broader range of utilities it was intended to serve."
The group said the only reason that the ban was included in the bill was that the Joint Committee on Taxation scored WIFIA as inducing the issuance of additional debt and thus creating a small tax expenditure that needed to be offset with revenue. At JCT's suggestion, House and Senate conferees included the ban.
"There is no infrastructure policy supporting this prohibition; it was included to address a tax score when no revenue offset could be identified," AWWA said.
The group's members also urged the lawmakers to support full funding for WIFIA, as well as for drinking water and wastewater state revolving loan fund programs. They also urged members of Congress to protect tax exemption for municipal bonds.
