The Flow of Water Funding

The Clean Water State Revolving Fund (CWSRF) and Drinking Water State Revolving Fund (DWSRF) are undoubtedly marquee federal water infrastructure programs. Despite escalating local needs, Congress has been decreasing annual appropriations for both over the past five years. Unfortunately, 2008 will bring more of the same.

As of press time, the EPA appropriations bill had not passed. Signs show that the CWSRF may get less than the $1.1 billion offered in 2007. The House agreed to that level in its version of the EPA's 2008 appropriations bill, but the Senate version settled on $887 million. A conference committee tug of war may end up with a figure somewhere in the middle. The House and Senate agreed on $842 million for the DWSRF in 2008.

The EPA requested from Congress the authority to let local communities supplement CWSRF funds by allowing states to raise money for water projects through Water Enterprise Bonds. Selling these water-specific bonds would allow states to sidestep current caps on private activity bonds.

“Some of our states are interested in that; others are not,” says Rick Farrell, executive director of the Council of Infrastructure Financing Authorities. “The primary concern with that proposal is that it not be seen as an alternative to the CWSRF loans.” He adds that because the state-offered SRF loans are available at low interest rates, they're a better deal for a local government.

One problem: Many communities can't land a loan from the CWSRF, thanks to sinking appropriations over the past decade. Congress isn't likely to authorize these bonds, anyway—they were left out of the CWSRF reauthorization bill (HR 720) the House passed in March. That Water Quality Financing Act would reauthorize the CWSRF, which was first approved by Congress in 1987 but has never been reauthorized. The bill would make some changes, such as raising the annual CWSRF authorization level to $2 billion in fiscal 2008 and to $4 billion by 2010.

There's substantial opposition to some of HR 720's administrative reform provisions. Joe Freeman, chief of the financial assistance division of the Oklahoma Water Resources Board, told the Senate committee that the Council of Infrastructure Financing Authorities opposes the House bill, as do SRF managers. He quoted from a letter sent to senators last summer: “The large number of additional program and project requirements proposed by HR 720 will result in additional work, time, and expense, making it less likely that municipalities, especially small communities, will be able to afford to seek financing through the CWSRF.”

One thing HR 720 would do: create a $20 million-a-year program for the EPA to provide technical assistance and grants for treatment facilities to carry out watershed-management pilot projects. While the program likely won't see the light of day in the context of CWSRF reauthorization, it may very well appear in another, unlikely place: the 2008 Farm Bill.

Protecting local water quality isn't the first thing most think of regarding the Farm Bill—it brings to mind support payments for soybeans, wheat, and other crops. But the U.S. Department of Agriculture, through its Natural Resources Conservation Service (NRCS), provides farmers nearly $4 billion/year in grants for programs designed to help curb erosion and runoff from farmland. The impetus is to reduce the toxic load downstream for city and county wastewater collection systems, and natural bodies of water. Programs focus on environmental quality improvement, conservation security, and watershed protection.

 

Congress is on the cusp of reauthorizing the Farm Bill for another four years. The House and Senate bills, at least in terms of the conservation programs, are remarkably similar, so a bill undoubtedly will pass in the coming months. That's good news, because both the House-passed and Senate versions include a $60 million annual authorization for a new regional watershed enhancement program.

Doug McKalip, NRCS director of legislative and public affairs, says his agency envisions the program as a way for water districts or sewer agencies to round up large numbers of farmers who agree to put waste management systems on their spreads. Up until now, NRCS grants have gone to individual farmers—the new watershed program will encourage regional cooperation, which will lighten the toxins load on rivers, groundwater, and sewers.

Moving Toward Transportation Dollars

Unlike the Corps authorization bill and the Farm Bill, where authorizations don't always lead to federal funding of a project, the Transportation Department's fiscal 2008 appropriations bill will undoubtedly lead to new funding for bridge repair in the wake of the I-35 bridge collapse in Minneapolis last summer. That DOT 2008 appropriations bill (which as of press time had not been passed) is almost certain to include a provision allowing the Federal Highway Administration (FHWA) to yank an extra $1 billion out of the Highway Trust Fund in 2008 and use it for bridge repair. Both the House and Senate have agreed on that provision.

The FHWA will also make bridge repair funds available via private activity bonds. In 2005 SAFETEA-LU gave the DOT authority to allow cities and counties to issue up to $15 billion in private activity bonds and turn over bond proceeds to private contractors for highway and bridge projects. Prior to that bill, the move had been illegal. In May 2007 the FHWA gave the Missouri DOT authority to sell $700 million in bonds for the Missouri Safe and Sound Bridge Improvement Project.

Tyler Duvall, assistant secretary for transportation policy in the office of the secretary at the DOT, says the FHWA has allocated about $3 billion of the $15 billion to date and has pending applications for another $2.5 billion. Duvall says the FHWA plans to commit another $6 billion to $7 billion over the next 18 months.

“Using private activity bonds is a cheaper way for cities and towns to finance projects than using private equity,” he says.

The FHWA is helping states build highways, too—particularly those built via public-private partnerships (PPPs). Some PPP projects, including a couple in Texas, have included controversial tolling components. This year, Congress may force the FHWA to considerably slow its approval of PPPs.

The 2008 Transportation Appropriations bill also had an amendment prohibiting only Texas from moving forward with toll roads for one year, the duration of the appropriations bill. Sen. Kay Bailey Hutchison (R-Texas), sponsor of the amendment in the Senate, is seeking a nationwide ban on toll roads in the 2008 Transportation appropriations bill, which will be considered this year. She probably will enjoy significant Democratic support. Rep. James Oberstar (D-Minn.), chairman of the House Transportation and Infrastructure Committee, has relayed his committee's concern for the FHWA's push of PPPs to speed highway construction, given shortfalls in the highway trust fund owing to lower gas tax revenues.

— Steve Barlas has served as a Washington, D.C.-based freelance writer for trade and professional magazines since 1981. In that time, he has covered nearly every federal regulatory agency, cabinet department, and congressional committee, with a special emphasis on the EPA.

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