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Friday, August 24, 2012

Legislative Options for Financing Water Infrastructure

Claudia Copeland
Specialist in Resources and Environmental Policy

William J. Mallett
Specialist in Transportation Policy

Steven Maguire
Specialist in Public Finance

This report addresses several options being considered by Congress to address the financing needs of local communities for wastewater and drinking water infrastructure projects and to decrease or close the gap between available funds and projected needs. Some of the options exist and are well established, but they are under discussion for expansion or modification. Other innovative policy options have recently been proposed in connection with water infrastructure, especially to supplement or complement existing financing tools. Some are intended to provide robust, long-term revenue to support existing financing programs and mechanisms. Some are intended to encourage private participation in furnishing drinking water and wastewater services.

Six options that are reflected in current or recent legislative proposals, including budgetary implications, are discussed.

  • Increase funding for the State Revolving Fund (SRF) programs in the Clean Water Act (H.R. 3145 in the 112th Congress) and the Safe Drinking Water Act (H.R. 5320 in the 111th Congress), 
  • Create a federal water infrastructure trust fund (H.R. 6249 and H.R. 3145 in the 112th Congress), 
  • Create a “Water Infrastructure Finance and Innovation Act” Program, or WIFIA (H.R. 3145 in the 112th Congress), 
  • Create a National Infrastructure Bank (H.R. 402 and S. 652 in the 112th Congress), 
  • Lift private activity bond restrictions on water infrastructure projects (S. 939 and H.R. 1802 in the 112th Congress), and 
  • Reinstate authority for the issuance of Build America Bonds (included in the Administration’s FY2013 budget request). 
A number of these issues and options have been examined in hearings by the House Transportation and Infrastructure Subcommittee on Water Resources and Environment (on February 28 and March 21, 2012) and by the Senate Environment and Public Works Subcommittee on Water and Wildlife (December 13, 2011, and February 28, 2012).

Consensus exists among many stakeholders—state and local governments, equipment manufacturers and construction companies, and environmental advocates—on the need for more investment in water infrastructure. There is no consensus supporting a preferred option or policy, and many advocate a combination that will expand the financing “toolbox” for projects. Some of the options discussed in this report may be helpful, but there is no single method that will address needs fully or close the financing gap completely. For example, some may be helpful to projects in large urban or multi-jurisdictional areas, while others may be more beneficial in smaller communities. It is unlikely that any of the recently proposed options could be up and running quickly, meaning that, at least for the near term, communities will continue to rely on the existing SRF programs, tax-exempt governmental bonds, and tax-exempt private activity bonds to finance their water infrastructure needs.

Date of Report: August 9, 2012
Number of Pages: 23
Order Number: R42467
Price: $29.95

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