The American Recovery and Reinvestment Act (ARRA), or economic stimulus as it is more commonly known, celebrated its one-year anniversary on Feb. 17. The $787 billion bill was intended to stimulate an economy experiencing its worst recession in more than 25 years. ARRA adopted a three-prong approach to grow the economy, which included $287 billion in temporary tax breaks, $224 billion for extended unemployment benefits, education and health care and $275 billion for federal contracts, loans and grants. Of that $275 billion for federal contracts, loans and grants, approximately $80 billion was set aside for infrastructure projects, including highways, broadband, electric grid transmission and water infrastructure.

Standing as President Barack Obama’s biggest legislative achievement to date, according to the nonpartisan Congressional Budget Office, the economic stimulus has created or saved 2 million jobs. However, despite the massive amounts of government spending, unemployment remains high across the country and especially in the construction industry, where the unemployment rate reached 24.7 percent in January.

Stimulus and Infrastructure Spending

As of Feb. 12, $278 billion, or 35 percent, of the money from ARRA had already been spent. Of particular interest to the utility construction industry, the economic stimulus included $6 billion for water and wastewater projects through the Environmental Protection Agency’s (EPA) Clean Water and Drinking Water State Revolving Fund (SRF) programs. While remaining funds from the economic stimulus are expected to be spent out over the next two years, 100 percent of the money for the SRF programs is now under contract according to EPA Administrator Lisa Jackson. Under the ARRA, states had until Feb. 17, 2010, to place SRF projects funded via the economic stimulus under contract or start construction.

The $4 billion for the Clean Water SRF has been obligated based on the Clean Water Act formula, with tribes receiving 1.5 percent of the funding. These awards have resulted in nearly 1,900 assistance agreements, 1,500 projects already under construction and will serve approximately 68 million people. In addition, the $2 billion for the Drinking Water SRF resulted in 1,351 assistance agreements with 1,072 having started construction. Examples of wastewater infrastructure projects funded by ARRA include $1.5 million to complete the final phase of sewer construction in Charlestown, Ind., and $6 million to construct a water treatment plant in Ocean Shores, Wash.

According to a study published last year by the Clean Water Council, a legislative coalition chaired by NUCA, it is estimated that every $1 billion provided for water and wastewater projects between 20,000 and 27,000 jobs are created and $2.87 billion to $3.46 billion are added to the economy as a result of that investment. The hope is that SRF projects funded through the economic stimulus will not only improve the environmental infrastructure in local communities but also help create scores of good-paying jobs. However, a major criticism of the economic stimulus has been that the money has not been spent as quickly as promised by federal officials. On that front, critics of ARRA have a point. For example, as of Feb. 19, all ARRA investment for SRF projects is now under contract but less than 16 percent of that funding has actually been spent. With only a small percentage of stimulus funds actually spent, it is still too early to tell the impact ARRA has had on the construction industry and the economy.

Buy American in the Economic Stimulus

Several problems have slowed down the spending of economic stimulus funds. One of the most significant challenges has been the Buy American provision, which requires that all iron, steel and manufactured products used in ARRA-funded public building and works projects be produced in the United States. Although Buy American is intended to keep jobs in the United States, it has also led to delays and increased costs associated with ARRA projects.

Concerns and confusion over the rule have led to projects running late and going over budget. For example, when a vital part for a wastewater project is made in Canada and that part has to be purchased from an American vendor, it often increases costs and delays completion of the project. Trojan Technologies Inc. of Ontario, Canada, a key supplier to U.S. companies, is North America’s leading manufacturer of ultraviolet disinfection equipment for treating sewage. Because of Buy American, Trojan had to shift production to a plant in Valencia, Calif., a move that has resulted in delays and additional costs being passed on to customers and taxpayers.

Recognizing the challenges of complying with Buy American for water and wastewater projects, on June 2, 2009, EPA issued a de minimis waiver allowing materials or components that constituted five percent or less of the total cost of materials incorporated into a water infrastructure project funded through the Clean Water and Drinking Water SRF programs.

Attempting to further reduce the challenges posed by Buy American, the U.S. and Canadian governments reached an agreement changing the provision in ARRA. The change, which took effect on Feb. 16 — one day before SRF projects had to be under contract — applies to economic stimulus money that has not yet been spent, allows access to only a limited number of U.S. procurement areas and is not retroactive. The agreement gives Canadian companies access to only seven ARRA-funded programs, but includes both SRF programs and the Department of Agriculture’s Water and Waste Disposal Programs.

Critics of the agreement have pointed out that by having it take effect one day before the vast majority of ARRA funds for water and wastewater projects had to be under contract, it is largely a symbolic gesture and will do little to speed up construction of a project. However, engineers and contractors working on water and sewer projects funded by the economic stimulus hope the agreement will make it easier to comply with Buy American, reduce product shortages and speed up the completion of projects. NUCA will continue to monitor developments to Buy American provisions in the economic stimulus, as thousands of water and wastewater projects provide work and fix the nation’s vital environmental infrastructure.

Brad Hannon is a NUCA Government Relations Intern.