Every NUCA member, and hopefully every avid reader of Utility Contractor, knows that a top legislative goal of the association is to increase federal investment in America’s deteriorating environmental infrastructure. Over the years, NUCA has opposed annual budget cuts to federal programs that finance water and wastewater infrastructure projects and promoted various legislative proposals that would productively address what has become nothing short of an environmental crisis. While NUCA continues to advance legislation that would provide immediate resources to rehabilitate our water and wastewater systems, we are also part of a growing discussion about long-term solutions. There is no shortage of proposals on the table.

Dedicated Source of Revenue

NUCA continues to chair the Clean Water Council (CWC), a coalition of 33 national construction organizations that work collectively to advance legislation that would increase the federal ante to tackle a problem that will cost hundreds of billions of dollars to address. The CWC’s focus over the past several years has been to restore appropriations and reauthorize the EPA’s Clean Water and Drinking Water State Revolving Fund (SRF) programs. Despite those efforts, President Bush and like-minded Republicans in Congress have cut funding for the Clean Water SRF virtually in half at a time when wastewater needs have skyrocketed to over $202 billion.

The 2006 election not only changed America’s political dynamic, but also improved the prospects of increased infrastructure funding. There has been lots of talk over the years about the need to establish a dedicated source of funding for water and wastewater projects in the form of a water infrastructure trust fund, but until the Democratic takeover, the idea was little more than a pipe dream. America’s current and likely future political status, however, makes the possibility of significantly refurbishing the nation’s underground lifelines more likely. Nevertheless, the million dollar question remains, how would a water trust fund be financed?

At the start of the 110th Congress, Rep. Earl Blumenauer (D-Ore.) sat down with a handful of key Washington organizations (including NUCA) that advocate clean water funding to discuss potential funding options. Since the initial meeting of about five or six groups, the effort has taken off and what were once “roundtable” discussions have evolved into huge events at the Library of Congress attended by hundreds of interested participants. Rep. Blumenauer has indicated that in the coming months he will introduce legislation that would establish a Water Trust Fund to provide a deficit-neutral and “fire-walled” (protected) source of revenue to the states in order to “support the replacement, repair and rehabilitation of clean and drinking water infrastructure.”

Resources would be provided in the form of grants and loans to states through a formula that would be similar to that of the SRF programs, and recipients would have to provide a 35 percent match. Activities that would be eligible for trust fund resources would include:

• Construction of public wastewater and drinking water infrastructure improvements (including projects to reduce combined sewer and sanitary sewer overflows)
• Water conservation, quality assessments, and resource management
• Security enhancements
• Non-point sources pollution prevention
“Green” infrastructure

• Energy efficiency and renewable energy

Funding Alternatives

Now comes the hard part — identifying potential funding options. Rep. Blumenauer made it clear from the very beginning that any and all proposals would be on the table.

Funding alternatives that are currently being evaluated by interested members of Congress and industry groups include various taxes and surcharges, including those on bottled beverages, flushable products, agricultural chemicals and/or practices and certain pharmaceuticals.

One idea being evaluated is the imposition of higher penalties for industrial discharges and/or permit fees — the so-called “polluter pays” approach. Another funding vehicle being batted around is the imposition of a corporate environmental income tax that could raise tens of billions of dollars annually at a very small (approximately 0.02 percent) cost to American businesses. It is based on the principle that all American businesses benefit from clean water.

In recent years, the private sector has shown an increasing interest in the water infrastructure market, although opportunities for private investment are still very limited. The concept of public-private partnerships is controversial, although they offer potentially significant revenue. Another option would be to lift the cap on private activity bonds (PABs), which currently fund a broad range of infrastructure projects but are limited by a statutory ceiling. Eliminating the cap on PABs would significantly increase opportunities for private investment in this infrastructure.

Various advocates of a dedicated source of revenue for water commonly call for a water trust fund that would operate much like the Highway Trust Fund (HTF). NUCA has stated repeatedly that the association would support and actively lobby for any and all viable funding options, including all of the ones described above. However, NUCA maintains that if champions of clean water want to follow the HTF model, imposing a true user fee should be at least part of the solution.

The collection of federal fees on water and sewer bills could raise billions annually toward rehabilitating the systems that provide drinking water and remove wastewater. Recognizing that every American benefits from this infrastructure, NUCA believes that the fairest way to pay for its refurbishment is for all Americans to share in the cost.

Long Road Ahead

NUCA and like-minded members of the Clean Water Council believe there is plenty of work to be done before a dedicated source of revenue for water infrastructure becomes a reality. That’s why the coalition continues to push for increased SRF appropriations and for their reauthorization. This will provide short-term but immediate resources to begin to reverse the harmful trends that have developed in recent years. In the long term, a combination of several funding sources will be needed to address this crisis, and current documented needs estimates support the establishment of a self-sustaining and dedicated revenue supply.

Eben Wyman is NUCA Vice President of Government Relations.