New Post has been published on http://www.earthandwatergroup.com/epa/gao-issues-new-report-on-drinking-water-srfs/

GAO Issues New Report on Drinking Water SRFs

Here is a link to the new report.  CRS DWSRF Report 5-3-2017.

Summary

The Safe Drinking Water Act (SDWA) is the federal authority for regulating contaminants in public water supplies. It includes the Drinking Water State Revolving Fund (DWSRF) program, established in 1996 to help public water systems finance infrastructure projects needed to comply with federal drinking water regulations and to meet the SDWA’s health objectives. Under this program, states receive annual capitalization grants to provide financial assistance (primarily subsidized loans) to public water systems for drinking water projects and other specified activities. Between FY1997 and FY2015, Congress had appropriated approximately $20 billion, and more than 12,400 projects had received assistance through the program.

The latest Environmental Protection Agency (EPA) survey of capital improvement needs indicates that public water systems need to invest $384.2 billion on infrastructure improvements over 20 years to ensure the provision of safe drinking water. EPA reports that, although all of the projects identified in the survey would promote the public health objectives of the SDWA, just $42.0 billion (10.9%) of reported needs are attributable to SDWA compliance. A study by the American Water Works Association estimates that restoring aging infrastructure and expanding water systems to keep up with population growth would require a nationwide investment of at least $1 trillion through 2035.

Key program issues include (1) the gap between estimated needs and funding, (2) the growing cost of complying with SDWA standards (particularly for small communities), (3) the ability of small or disadvantaged communities to afford DWSRF financing, and (4) the broader need for cities to maintain, upgrade, and expand infrastructure unrelated to SDWA compliance. Several overarching policy questions are under debate, including “What is the appropriate federal role in providing financial assistance for local water infrastructure projects?” and “What other funding mechanisms could supplement or replace a program reliant on annual appropriations?”

Enacted in 2014, the Water Infrastructure Finance and Innovation Act (WIFIA; P.L. 113-121, Title V, Subtitle C) authorized a five-year pilot loan guarantee program to promote increased development of, and private investment in, large water infrastructure projects. Congress noted that the pilot program is intended to complement, not replace, the drinking water SRF program and the similar Clean Water Act SRF program for wastewater infrastructure. For FY2017, President Obama requested $20.0 million for EPA to begin providing loan guarantees for water infrastructure projects under WIFIA. Congress provided this amount in P.L. 114-254, the Continuing and Security Assistance Appropriations Act of 2017.

For FY2016, the President requested $1.19 billion for the DWSRF program, and Congress provided $863.2 million. For FY2017, President Obama requested $1.02 billion. The program has been funded under continuing resolutions at roughly FY2016 levels. The Consolidated Appropriations Act, 2017 (Senate Amdt. 1 to H.R. 244, Division G, Title II), includes $863.23 million for DWSRF capitalization grants for FY2017 and an additional $10 million for WIFIA.

In the 114th Congress, the Water Infrastructure Improvements for the Nation Act (WIIN Act; P.L. 114-322) made several revisions to the DWSRF program and authorized $100 million in DWSRF appropriations to Michigan to assist the city of Flint in repairing its drinking water infrastructure. In P.L. 114-254, Congress appropriated the funding authorized in the WIIN Act to assist Flint.

New Post has been published on http://www.earthandwatergroup.com/drinking-water/congress-should-incentivize-clean-water-reward-the-innovators/

Congress Should Incentivize Clean Water - Reward the Innovators

Folks its high time we stopping talking and start doing.  Michael Curley, lawyer and author of ‘Finance Policy for Renewable Energy and a Sustainable Environment’, makes a compelling case for Congress to incentivize clean water.  Here is Mike’s proposition, reposted from Huffington Post.

Congress got a report from EPA last week that they can use to create whole series of new incentives for the States to clean up our country’s water.

The Water Resources Reform and Development Act of 2014 gave indications that Congress was not happy with the way the Clean Water State Revolving Fund (CWSRF) was dealing with our 21st Century water quality problems. First, they added eight new eligibilities to the three that had been there for 27 years. Second, they asked EPA to “review” the allocation formula for the federal capitalization grants that fuel the program and report back to Congress. Apparently Congress was thinking they could use money to induce the States to be more proactive on water quality.

The CWSRF is the most successful environmental finance program in history. Since 1987 it has provided over $110 billion of financial assistance to over 36,000 projects. That’s about $3 million per project. About 96% of this money went to sewage treatment plants.

Making $3 million loans to sewage treatment plants isn’t going to do it in the 21st Century. Back in 1972, when the Clean Water Act was first passed, municipal sewage was the #1 cause of water pollution. Not any more. Now agricultural runoff and stormwater are the two largest sources of water pollution. Congress is looking for innovative strategies to deal with these two water quality threats. It’s not going to be easy.

As far as agricultural runoff is concerned let’s take the example of a farmer who could drastically reduce the polluting nutrients running off his cropland if he would just take one or two percent of his acreage out of production and build a “constructed wetland” that would trap the nutrients. This would be great; but how are we going to get the farmer to do this? Give him a CWSRF loan? Sure, but CWSRFs are good at making $3 million loans for sewer projects and not practically well suited to making – hundreds – of $50,000 loans to individual farmers. And the more important point is: Who is going to repay the loan? The farmer? Out of the goodness of his heart? We don’t think so.

Ag runoff is non-point source (NPS) water pollution. There is no authority in the Clean Water Act to compel the farmer to do this. Furthermore, bearing in mind the almost spiritual role that agriculture plays in modern culture, it will be a cold day in Hell before any State Governments start ordering farmers to take on projects like this.

In short, we need to create clever subsidy programs that give farmers financial incentives to undertake projects like these.

Now, for a stormwater example.

Much like ag runoff, many stormwater problems arise on private property. Let’s take the example of a church with a two-acre parking lot of impermeable pavement. The local government, which is under great pressure from the State to deal with its stormwater devils, wants the Pastor of the church to replace impermeable pavement with 2 acres of permeable asphalt. At around $1 per square foot, that’s about $90,000. Where’s the money going to come from? Again, the CWSRF. But, again, where are the repayments going to come from? The Pastor’s congregation? We think that Hell would have to totally freeze over before any local government would order the Pastor’s church to come up with the money for the project.

Again, what is needed is a clever subsidy program to give the Pastor a financial incentive to take on the permeable pavement project.

This – the creation of innovative programs to deal with the water quality problems of the 21st Century – should be the #1 criterion for a new CWSRF capitalization grant allocation formula.

The #2 criterion should be “money management”.  Ask yourself, where did the subsidies come from in the ag runoff and the stormwater examples above? The CWSRFs, of course, all do subsidies. But here’s an example of a bad way to manage subsidies.

In 2013, the Virginia CWSRF made a $7.3 million loan to Loudoun County at a subsidized rate of 1%. Loudoun County is the richest county in America! The Median Household Income in Loudoun County was $119,134 in 2011! Why would anyone subsidize the richest county in America? If Virginia had made a 3% loan instead of a 1% loan, they would have saved $86,143 a year in their subsidy fund. Over 20 years, discounted at 3%, this amounts to almost $1.3 million. Looking at it a different way, this $86,143 could have been used to pay off bonds of almost $1.6 million for additional clean water projects – like our ag runoff project and our church parking lot stormwater project above.

This is what we mean by money management. That is why it is so important.

Last week’s EPA report to Congress cited three principal criteria for changing the capitalization grant allocation formula: 1) population, 2) need (water impairment), and 3) leverage.

Population, sure. Everyone has to get something. Let’s say 30%.

Need? Not so sure. What if the States with the biggest needs are the most lax in cleaning up their impaired water? No good. Rather than just needs alone, we need to give bonuses to those states that create brilliant new subsidy programs to deal with the water quality problems of today. Another 30% for innovation!

EPA hit it on the head with their third criterion: leverage. Leverage just means that the States should issue bonds to increase the amount of funds that they put into projects. Bravo!

But you must combine leverage with money management. As rich as the CWSRFs are, they could theoretically go broke – yes, broke! – if they issued hundreds of billions of dollars of bonds at, say, 4% and then turned around and loaned these funds out at 2%. So, leverage and money management together. Another 30%.

What about the final 10%? It should be divided among the states who innovate best, and who leverage and manage their money best.