Senate Finance Backs Proposal to Lift Cap On Bonds to Fund Infrastructure Repairs

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By Amena H. Saiyid  

The Senate Finance Committee has approved a measure that for the next six years would eliminate the annual cap on how much cites and towns may raise through private tax-exempt bonds to fund drinking water and wastewater infrastructure repairs.

Approved Feb. 7 as part of a measure to fund the surface transportation bill, the proposal offered by Sen. Robert Menendez (D-N.J.) would amend the Internal Revenue Service code by removing the cap on the amount that municipalities may raise through private-activity bonds for water and wastewater projects.

Menendez sought the amendment to make water and wastewater infrastructure project financing more affordable for communities.

“The inclusion of water and wastewater infrastructure projects in the annual volume cap on private activity bonds that can be issued per state impedes the effectiveness of private activity bonds driving financing for these critically needed projects,” he said.

Other environment-related provisions in the Senate Finance Committee bill include a proposal to transfer $3 billion from the Leaking Underground Storage Tank trust fund to the Highway Trust Fund. (See related article in this issue.)

The Finance Committee approved the financing package on a 17-7 vote. It will be added on the Senate floor to an underlying surface transportation reauthorization bill, known as the Moving Ahead for Progress in the 21st Century (MAP-21) Act (S. 1813).

A Senate Democratic leadership aide said the current plan is to have the transportation bill on the chamber floor for the remainder of the work period and to have a final vote before lawmakers leave for the Presidents' Day recess.

Private Activity Bonds Targeted

Private-activity bonds are tax-exempt bonds that allow the private sector to participate in financing public projects. The federal government limits the use of these bonds by the private sector for public projects. Each state has a cap on the amount of private activity bonds it can issue for eligible projects that include water and wastewater infrastructure projects, according to EPA.

In 2009, the state cap was equal to $90 per resident or $273.09 million, according to Menendez.

The Menendez amendment is nearly identical to the Sustainable Water Infrastructure Investment Act of 2011 (S. 939, H.R. 1802) , which he and Rep. Bill Pascrell (R-N.J.) introduced in May (42 ER 2837, 12/16/11).

However, the amendment approved by Senate Finance would lift the annual cap on private-activity bonds for six years; the bill introduced last year would have permanently removed the cap, a Menendez aide told Bloomberg BNA on Feb. 8.

Filling ‘Critical Need.'

Moreover, the cap is removed just for drinking water and wastewater infrastructure projects, Michael Deane, executive director for the National Association of Water Companies, told Bloomberg BNA Feb. 8.

Deane said he was pleased that “the Senate has recognized the critical need and helped to bring more investment into water and wastewater infrastructure repairs.”

Given the constrained finances of states and localities, this amendment will allow public-private financing for these projects, Deane said.

In December, the American Society of Civil Engineers forecast an $84 billion water infrastructure investment gap by 2020.

EPA had sought to have the borrowing limit removed permanently under its fiscal year 2008 budget request to Congress. At the time, EPA Administrator Stephen Johnson had said the removal on the annual state borrowing cap would require congressional action. The National Association of Regulatory Utility Commissioners also had backed this request in a resolution adopted in September 2007 (38 ER 1970, 9/14/07).

NARUC spokesman Robert Thornmeyer told Bloomberg BNA on Feb. 8 that the group has not withdrawn any of its resolutions and still maintains that borrowing caps for wastewater and drinking water infrastructure repair projects should be lifted on private activity bonds.

For More Information

Text of the Sustainable Water Infrastructure Investment Act of 2011 is available at