Call to Action: DON’T LET $25 BILLION IN WATER INFRASTRUCTURE FUNDING SLIP AWAY!

A message from WWEMA, the Water and Wastewater Equipment Manufacturers Association, Inc.:

TODAY you have a chance to make a real difference! The U.S. House of Representatives is expected to act this week on a transportation reauthorization bill, known as the “American Energy and Infrastructure Jobs Act”. We have an opportunity to include a provision in that bill that would remove the volume caps on private activity bonds for water infrastructure projects. This could generate $25 billion in private capital being invested in our industry over the next five years, creating 700,000 jobs and adding $225 billion to the national economy. In order to accomplish this, we need to encourage the House Ways and Means Committee to include it in its mark up of the “American Energy and Infrastructure Jobs Act”, which is scheduled to be considered on Friday, February 3.

WE NEED YOUR HELP! Call your Congressman TODAY and ask to speak to his (her) tax legislative assistant about tax-exempt private activity bonds for water and wastewater projects. Request that your Congressman contact House Ways and Means Committee Chairman Dave Camp and/or his tax staff to support and include in the tax section of the jobs/highway bill a 5-year provision of the bipartisan private activity bond legislation (H.R. 1802) – known as the “Sustainable Water Infrastructure Investment Act” - to exempt water projects from state bond caps.

· Congress already exempts airports, high-speed rail and solid waste disposal facilities from the bond caps. Water, which is essential for life, should be exempt as well.

· The private activity bond measure will help cash-strapped communities address safe drinking water and wastewater infrastructure needs by encouraging private capital investment of $5 billion annually – twice the amount of water infrastructure funding requested by President Obama.

· An investment of $5 billion annually in community water and wastewater systems will create approximately 140,000 local jobs and add almost $45 billion to the national economy.

· The use of private capital instead of tax dollars means less impact on the federal budget and less risk and long-term debt for local communities.

· A five-year bill will provide $25 billion investment in water infrastructure, create 700,000 jobs and add $225 billion to the national economy, at a cost of only $50 million in lost federal tax revenue.

THIS IS THE MOST IMPORTANT CALL YOU CAN MAKE TODAY! In addition, if you have manufacturing and/or sales operations in other locations, please urge them to do the same by contacting the congressional representative in their district. Go to http://www.house.gov/ and type in your company zip code to obtain contact information for your representative.

TIME IS SHORT SO WE MUST ACT NOW given that the Committee is expected to act on this measure on Friday. Attached is a one-page overview of the private activity bond issue, talking points, and a list of House Ways and Means Committee members, for background purposes.

Exempt Facility Bonds for Water and Wastewater Infrastructure

ISSUE:

Aging and crumbling public water and wastewater systems threaten economic vitality and public health. Incentives such as tax exempt private activity bonds for water and wastewater projects encourage private capital investment, create jobs and provide more affordable financing for water and wastewater infrastructure, which in many cities is beyond or nearing the end of its useful life. However, federally imposed state volume caps for private activity bonds limit bond issuance for water projects.

BACKGROUND:

$635 Billion Funding Gap for Nation’s Aging Water and Wastewater Infrastructure

Cities, towns and communities across the nation face major challenges over the next 20 years to replace aging and worn out water and wastewater infrastructure. Capital investment for such projects will be difficult as many states and local governments face mounting budget deficits, revenue shortfalls and opposition to new taxes. Recent studies by the U.S. EPA and the GAO predict an investment-funding gap of more than $635 billion for upgrades and repairs to public water and wastewater systems many of which were constructed 50 to 100 years ago.

Exempt Facility Bonds: A Public-Private Partnership Approach to Infrastructure Investment

The single-most effective tool for financing long-term, capital-intensive infrastructure projects is the private activity bond (PAB) or exempt facility bond, a form of tax-exempt financing that encourages state and municipal governments to collaborate with sources of private capital to meet a public need. The partnership approach makes infrastructure repair and construction more affordable for municipalities and ultimately for users or customers. Exempt facility bonds utilize private capital instead of public debt and shift the risk and long-term debt from the municipality to the private partner. In addition, the tax-exempt bond provides lower cost financing, which can translate to lower costs for the customer.

Annual Volume Cap Restricts Water and Wastewater Infrastructure Investment

Congress provides to states an annual allocation of the federal tax-exempt bonds, based upon population (Section 146 of the Internal Revenue Code). In 2011, the state allocation or volume cap shall be the greater of $95 per resident or $277.82 million. Historically, most of the tax-exempt bonds have been issued to politically attractive, short-term projects such as housing and education loans. The annual volume cap hinders the use of PABs for water and wastewater infrastructure, which are generally multi-year projects and out of sight. In 2007, only 1.3% of all exempt facility bonds were issued to water and wastewater projects.

POLICY RECOMMENDATION:

Lift the Volume Cap for Tax-Exempt Bonds for Water Infrastructure

Amend the Internal Revenue Code (26 USC 146) to remove the volume cap applicable to private activity bonds for public-purpose water and wastewater projects. This modification would allow local communities to leverage private capital markets in combination with other finance mechanisms and provide an influx of low cost private capital to finance water infrastructure projects. The local users in turn repay the bond issuances over time. Exceptions from the volume cap are currently provided for other governmentally owned facilities such as airports, ports, high-speed intercity rail, and solid waste disposal sites.

COST/BENEFIT:

This policy change would infuse $50 billion in private capital investment and create/support 1,425,000 jobs at a cost of only $354 million in lost tax revenue over ten years.

Exempt Facility Bonds for Water and Wastewater Infrastructure Create Local Jobs and Ensure Clean, Safe Water

· Encourages the use of private capital to assist water utilities in meeting infrastructure replacement and compliance challenges

· Partnership approach: private partner assumes financial risk and long-term debt – not the municipality

· Every dollar invested in water and wastewater infrastructure, adds $8.97 to the national economy

· $1 billion investment in infrastructure creates or supports 28,500 jobs

The Sustainable Water Infrastructure Investment Act,

H.R. 1802, S.939

HELPING to MEET OUR NATION’S WATER CHALLENGES

Talking Points

· Much of the nation’s water and wastewater infrastructure was constructed generations ago and is nearing or at the end of its useful life.

• 650 water main breaks every day
• Two trillion gallons of treated water is lost every year at a cost of $2.6 billion.

· U.S. Mayors forecast water and wastewater investment needs of up to $4.8 trillion over the next 20 years.

· U.S. EPA and GAO estimate current water infrastructure funding gap to be $500 billion to $1 trillion.

· Confronted with budget deficits and scarce funding resources, Federal, state and local governments are hard-pressed to help cover the costs of replacing crumbling and leaking water infrastructure.

· The unprecedented challenge will inevitably fall on local water systems and their customers. Thus, local governments will need many organizational, managerial and financial tools to keep costs under control.

· Many of the tools will involve greater private sector participation through public-private partnerships. Greater access to Private Activity Bonds (PABs) will increase private sector options for municipalities

· PABs are a form of financing, which allows private capital investment in public projects – the benefits of which are interest rates lower than conventional taxable financing, a lower delivered cost of service and a readily available funding supply.

· Local governments commonly use PABs for a variety of public purposes: public housing, school loans, airports, recreation and cultural facilities, solid waste disposal sites and ports.

· In the past, PAB’s have been used to solve critical infrastructure problems including the solid waste disposal crisis in the 1980’s, where the private sector invested over $20 billion in new waste-to-energy facilities to avoid massive groundwater pollution and reduce the growing number of hazardous waste sites.

· However, under the federal rules governing PABs, there is a limited total dollar amount of PABs issued by a given state. This limitation, or “cap,” is based on the state’s population. Twenty-one different kinds of projects are subject to the same PABs cap. Thus, water projects must compete for the same limited “cap” with housing or education or electric generation projects, (etc.), for example.

· Historically “out of sight, out of mind,” water projects have “lost out” in this competition to more visible projects. In 2007, only 1.3% of all PABs were issued to water and wastewater projects.

· Unless the rules governing PABs are changed, the percent of PABs going to water projects is not expected to increase even though the need for such investment in water infrastructure projects will dramatically increase in the coming years.

· Representatives Geoff Davis (R-KY) and Bill Pascrell (D-NJ) have introduced legislation to remove water and wastewater projects from the state volume caps

· The private activity bond measure will help cash-strapped communities address safe drinking water and wastewater infrastructure needs by encouraging private capital investment of $5 billion annually – twice the amount of water infrastructure funding requested by President Obama.

· An investment of $5 billion in community water systems will create approximately 140,000 local jobs and add almost $45 billion to the national economy.

· The use of private capital instead of tax dollars means less impact on the federal budget and less risk and long-term debt for local communities.

· A five-year bill will provide $25 billion investment in water infrastructure, create 700,000 jobs and add $225 billion to the national economy at a cost of $50 million in lost federal tax revenue.

· Please support H.R.1802 and S.939