Rep. Bob Gibbs has drafted legislation that would create a TIFIA-type program to lower the cost of capital for water utilities, but state and local officials testifying at a hearing on Wednesday worried that it might eventually be used to replace, rather than supplement, state revolving loan funds.
The bill drafted by Gibbs, a Republican from Ohio who chairs the House Transportation Committee’s panel on water resources and environment, would create a Water Infrastructure Finance and Innovation Act, or WIFIA, program that would provide credit assistance in the form of loans and loan guarantees for water and wastewater projects. It would be similar to the Transportation Infrastructure Finance and Innovation Act, or TIFIA, which provides similar assistance for transportation projects.
At a panel hearing on the draft, Karen Massey, president of the Council of Infrastructure Financing Authorities, said she welcomes new approaches for funding because the current funding levels of SRFs are not sufficient to meet the escalating needs for water infrastructure.
The American Water Works Association estimates the cost of repairing and expanding drinking water infrastructure will top $1 trillion in the next 25 years and $1.7 trillion over 40 years.
However, Massey, director of the Missouri Environmental Improvement and Energy Resources Authority, said she strongly recommended that when Congress considers WIFIA, it take into account the accomplishments of SRFs over the last 25 years. “We are convinced the SRF partnership between the federal and state governments should continue as the primary means for assistance to communities in addressing water quality issues,” she told lawmakers at the hearing.
Congress enacted the clean-water SRF program in 1987 and the drinking-water SRF program in 1996. Under the two programs, the Environmental Protection Agency awards each state and Puerto Rico annual capitalization grants. The states use the grants plus a 20% state match to provide loans for public water systems. Communities repay the loans into the fund and then are recycled to make projects available in other communities.
WIFIA would be administered by the EPA and limited to larger projects of $20 million or more. The program could be used for a variety of projects including land acquisition and preventing pollution of groundwater, lakes and other sources of drinking water.
The program was designed to address the looming water infrastructure crisis, spawned by a both a growing need for infrastructure development and improvements and dwindling federal and state funds. The proposal also comes as cash-strapped communities are voicing concern over costly EPA enforcement actions to regulate water and wastewater infrastructure.
Massey said from an interest rate standpoint, an SRF loan would be a better deal, arguing it would provide a lower interest rate than the assistance made available through WIFIA. She also said the impact of the WIFIA proposal would be “relatively modest” because it would primarily only provide direct loans and loan guarantees for larger scale water and wastewater projects.
Benjamin Grumbles, president of the Clean Water America Alliance, echoed Massey and emphasized the importance for Congress to maintain support for SRF programs.
“It’s critical to ensure what’s intended as a supplemental tool doesn’t become the one and only tool or in some way undermine the success of the SRFs,” he said. “That’s a concern many of us have.”
Grumbles also suggested four aspects of SRFs that Congress should embrace as it contemplates future revisions to strengthen the programs: flexibility, transferability, repayment terms and equitable allocation.
Gibbs tried to reassure the nine witnesses who testified at the hearing that SRFs would not be adversely affected with implementation of his draft, which he dubbed a jobs bill.
“WIFIA is designed to complement, and not compete with, the clean-water and drinking-water SRF programs, by being another variety of financing 'tool’ available for the infrastructure financing 'toolbox,’ ” Gibbs said. “There is plenty of room for the SRF, WIFIA, private-activity bonds and other approaches to co-exist and serve communities’ infrastructure financing needs.”
Wednesday’s hearing was the second of two focused on innovative approaches to financing community water projects.