Government Relations

Congressman Bill Pascrell, Jr. (D-NJ)

Congressman Bill Pascrell Introduces the Sustainable Water Infrastructure Investment Act

The National Association of Water Companies (NAWC) applauds Congressman Bill Pascrell, Jr. (D-N.J.) for introducing the Sustainable Water Infrastructure Investment Act (SWIIA), H.R. 537.

Cities, towns and utilities face a major challenge over the next several decades — replacing aging and worn-out water infrastructure. The Environmental Protection Agency (EPA), Congressional Budget Office (CBO) and others have estimated that hundreds of billions of dollars will be needed to address this challenge.

Congressman Pascrell, a member of the Ways and Means Committee, has shown true leadership by introducing this important bipartisan legislation that will allow the private sector to be an even more important and effective player in meeting municipalities’ challenges and goals by providing access to private activity bonds (PABs). SWIIA will give communities an important tool when dealing with the financial challenge of replacing aging and worn-out water infrastructure. H.R. 537 has been co-sponsored by Congressman Artur Davis (D-Ala.) and Congresswoman Betty Sutton (D-Ohio).

The bill would bring water and wastewater projects out from-under the state volume cap on PABs, and thereby significantly expand the availability of low-cost financing for water infrastructure projects. Bringing water projects out from under the PAB state volume cap will assist struggling municipalities and government entities, and the citizens they serve, by helping to control water rates due to lower cost project financing; freeing municipal partners from limitations on tax-exempt financing; spreading virtually all financial risk to the private sector; freeing up traditional tax exempt municipal bonds for other uses; and providing municipalities with the security to facilitate and fund critical multi-year water projects.

“Municipalities and other government entities today are facing more challenges than ever in light of the significant strains the current financial and credit crises impose on the ability to attract capital for investment requirements in our nation’s water and wastewater infrastructure,” said NAWC Executive Director Peter Cook. “Particularly in these uncertain economic times, this creative financing initiative is an attractive option for putting private capital to work in replacing our aging water infrastructure.”

NAWC urges Congress to consider and adopt this important bill and stands ready to work with Congressman Pascrell and congressional leaders on passage of the Sustainable Water Infrastructure Investment Act into law as soon as possible.

Economic Stimulus Legislation Moves in Congress

Congress is quickly moving on economic stimulus legislation. The goal of the Obama administration and Congress is to wrap up work by the middle of February, an aggressive goal for the estimated $825 billion package.

The package has been broken into two parts — a spending piece and a tax-cut piece — which, for now, are moving through the process separately. As of this writing, the spending piece has been considered by the House Appropriations Committee, and the tax-cut piece by the Ways and Means Committee. The full House will probably consider them this week. The respective Senate committees will also likely begin formal work this week.

The following summaries are based on the respective House committee bills; they will almost surely be refined as they move through the process.

Business Taxation Highlights (From Committee Summary)

• Exempt private activity bonds (PABs) from alternative minimum tax (AMT). The AMT can increase the costs of issuing tax-exempt private activity bonds imposed on state and local governments. Under current law, interest on tax-exempt private activity bonds is generally subject to the AMT. This limits the marketability of these bonds and, therefore, drives up their cost. Last year, Congress excluded one category of private activity bonds (i.e., tax-exempt housing bonds) from the AMT. The bill would exclude the remaining categories of PABs from the AMT if the bond is issued in 2009 or 2010.
  
  
• Recovery Zone Bonds. The bill would create a new category of tax credit bonds for investment in economic recovery zones. The bill would authorize $10 billion in recovery zone economic development bonds and $15 billion in recovery zone facility bonds. These bonds could be issued during 2009 and 2010. Each state would receive a share of the national allocation based on that state’s job losses in 2008 as a percentage of national job losses in 2008. That allocation would be sub-allocated to local municipalities. Municipalities receiving an allocation of these bonds would be permitted to use the bonds to invest in infrastructure, job training, education and economic development in areas within the boundaries of the state, city or county (as the case may be) that has significant poverty, unemployment or home foreclosures.
  
  
• Extension of bonus depreciation. Businesses are allowed to recover the cost of capital expenditures over time according to a depreciation schedule. Last year, Congress temporarily allowed businesses to recover the costs of capital expenditures made in 2008 more quickly than the ordinary depreciation schedule would allow by permitting these businesses to immediately write off 50 percent of the cost of depreciable property (e.g., equipment, tractors, wind turbines, solar panels and computers) acquired in 2008 for use in the United States. The bill would extend this temporary benefit for capital expenditures incurred in 2009.
  
  
• Extension of enhanced small-business expensing. In order to help small businesses quickly recover the cost of certain capital expenses, small-business taxpayers may elect to writeoff the cost of these expenses in the year of acquisition in lieu of recovering these costs over time through depreciation. Until the end of 2010, small business taxpayers are allowed to write off up to $125,000 (indexed for inflation) of capital expenditures subject to a phase-out once capital expenditures exceed $500,000 (indexed for inflation). Last year, Congress temporarily increased the amount that small businesses could write off for capital expenditures incurred in 2008 to $250,000 and increased the phaseout threshold for 2008 to $800,000. The bill would extend these temporary increases for capital expenditures incurred in 2009.
  
  
• 5-year carryback of net operating losses. Under current law, net operating losses may be carried back to the two years before the year that the loss arises (the “carryback period”) and carried forward to each of the succeeding 20 years after the year that the loss arises (the “carryforward period”). Losses that are carried back may generally only be used to offset 90 percent of a taxpayer’s alternative minimum tax liability. For 2008 and 2009 losses, the bill would extend the maximum carryback period for net operating losses from two years to five years and would allow net operating loss carrybacks to be used to offset 100 percent of the taxpayer’s alternative minimum tax liability. The 2008 and 2009 losses eligible for this carryback provision will be, at the election of the taxpayer, for either (1) losses incurred in taxable years ending in 2008 and 2009 or (2) losses incurred in taxable years beginning in 2008 and 2009. The net operating losses of companies electing this carryback provision will be reduced by 10 percent. This benefit would be denied to companies that received money from the Temporary Asset Relief Program, Fannie Mae and Freddie Mac. This proposal is estimated to cost $15.041 billion over 10 years.

Government Spending Highlights

The House appropriations bill that passed out of committee has $6 billion for the Clean Water State Revolving Fund (CW-SRF) and $2 billion for the Drinking Water State Revolving Fund (DW-SRF). It is not clear why the committee has chosen to fund the SRFs at two different levels, especially considering the needs are roughly equal. However, NAWC and allied drinking water associations are working together to equalize the amounts.

Also, the committee bill would revise the SRF programs, ostensibly to ease financial requirements on localities and cut red tape. Specifically, for both the Clean Water and Drinking Water SRF, 50 percent of the capitalization grant that each state receives would be used to provide assistance in the form of additional subsidization, including forgiveness of principal, negative interest loans and grants to municipalities. However, in what NAWC has been told is a drafting error, private utilities would not be eligible for this 50 percent set-aside (though private utilities would be eligible for 50 percent of the Drinking Water SRF funds that are allocated through the existing formula). NAWC is working with the appropriate officials and staff to correct this error.

AWWA and ASME Join to Develop an All-Hazards Security/Resilience National Standard for Water and Wastewater Utilities

The American Water Works Association (AWWA) and ASME Innovative Technologies Institute, LLC (ASME-ITI) have announced the formation of a partnership to develop a national voluntary consensus standard encompassing an all-hazards risk management process for use by water and wastewater utilities.

The standard will be based on RAMCAP^SM, the acronym for Risk Analysis and Management of Critical Asset Protection. With assistance from the U.S. Department of Homeland Security, the Environmental Protection Agency and the Water Sector Coordinating Council, ASME-ITI tailored the general version of RAMCAP^SM to apply to water and wastewater utilities and adapt two pre-existing tools to be RAMCAP^SM consistent. The standard will build on that effort and include protection (avoiding hazardous events or their consequences), and resilience (rapid return to full function after those events that occur).

By using common definitions, threats, metrics and methods to directly compare risk, resilience and risk management benefits, the RAMCAP^SM standard will help guide the allocation of limited funds among diverse assets within a utility, across utilities in different communities and among assets in sectors of critical infrastructure.

This standard will be developed by a committee of volunteers representing water and wastewater utilities, practitioners, academics and the interested public. ASME-ITI will serve as Secretariat and the effort will proceed according to ASME-ITI’s procedures for standards development.

The American National Standards Institute (ANSI) will review the standard. Approval by ANSI is required for a standard to be issued as an American National Standard.

Supreme Court Declines to Weigh In On Southeast Water Battle

On January 12, 2009, the U.S. Supreme Court declined the State of Georgia’s request that it review a lower court decision, which had thrown out an agreement reached between Georgia and the U.S. Army Corps of Engineers regarding water rights to Lake Sidney Lanier. In February 2008, the U.S. Court of Appeals for the District of Columbia Circuit ruled in favor of Alabama and Florida, concluding that the agreement, which would have guaranteed a growing water supply for metro Atlanta, effected a major operational change at a federal reservoir and, therefore, required congressional approval. The case now returns to a federal district court in Jacksonville.