California Mounts Lobbying Blitz for EPA Water Loans

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By David Schultz

The Golden State is making a strong lobbying push to try to win new federal loans for water infrastructure projects, according to data and documents reviewed by Bloomberg BNA.

The EPA has received applications from water systems across the country for these loans in 2017, the first year the agency will dole them out. But California is head and shoulders above its peers in trying to persuade the agency to send the loans its way.

Officials in California’s water utility industry told Bloomberg BNA that their state’s thirst for these infrastructure loans is the result of a desperate need for more efficient water delivery amid a population boom and a crippling drought. But the state may also be trying to give itself a leg up in what will likely be a highly competitive EPA approval process.

Though the agency only has funding to subsidize $1.5 billion in loans this year, water systems are asking it to back 43 different infrastructure projects that would add up to a total of $6 billion.

“It’s going to be super competitive,” Dan Child, the general manager of Silicon Valley Clean Water, told Bloomberg BNA.

Of the 43 loan applications, 19 come from California. No other state submitted more than three.

Low-Cost Loans

The loans were established by the Water Infrastructure Finance and Innovation Act, also known as WIFIA. Unlike some other federal grant programs, WIFIA doesn’t provide municipalities with all of the money they need to complete an infrastructure project. Instead, the program subsidizes the municipalities’ borrowing costs, which allows them to finance a project at much lower rates.

The EPA in fiscal year 2017 will allocate almost $25 million in subsidies, which it says will allow water systems to take out a total of $1.5 billion in low-cost loans. These loans can then be combined with other sources of funding to complete projects worth up to $3 billion, according to the agency.

Child’s organization, which runs a Bay Area sewer system, is applying for nearly $200 million in WIFIA loans to replace an 8-mile long pipe that carries untreated sewage to its treatment plant in Redwood City. Like many of his fellow Californians who applied for these loans, Child enlisted the help of lobbyists in Washington.

A Bloomberg BNA review of lobbying filings from the first quarter of 2017 found that more than a dozen municipalities in the state deployed lobbyists to the Environmental Protection Agency and to Capitol Hill to discuss the new water loan program, far more than any other state.

Drought Driven?

The firm Child’s organization employed, The Ferguson Group, also represented water systems in San Diego and Monterey.

Its CEO, Roger Gwinn, said that interest has been high from California because the state’s water systems are facing huge problems that can’t be solved by issuing more bonds or raising water rates.

As recently as April of 2016, more than half of the state was facing extreme drought conditions, according to federal drought monitoring data. Meanwhile, the state’s population has increased by more than five percent since 2010, according to Census Bureau estimates.

“They’ve got tremendous challenges,” Gwinn told Bloomberg BNA. WIFIA “saves a tremendous amount of money for the borrowers.”

He said many of the applications that have come from the state would address its water shortages by funding desalinization projects or water reuse technology.

Lawmakers Enlisted to Help

Gwinn said he reached out to numerous California lawmakers to ask them to support his clients. Ultimately, five sent letters to the EPA this spring about WIFIA applications from their districts: Sen. Dianne Feinstein (D-Calif.) and Reps. Jackie Speier (D-Calif.), Lou Correa (D-Calif.), Ed Royce (R-Calif.), and Dana Rohrabacher (R-Calif.). That’s according to documents obtained by Bloomberg BNA through an open records request.

Sen. Bill Nelson (D-Fla.) sent a letter to the EPA as well regarding a WIFIA application submitted by Osceola County in Florida.

Adam Russell, a Feinstein spokesman, said it’s common across Capitol Hill for a constituent to ask their lawmaker to weigh in on an application they have pending with a federal agency.

“Senator Feinstein takes these requests seriously and, when appropriate, weighs in with her support in order to ensure that federal dollars are spent wisely,” Russell told Bloomberg BNA.

A spokesman with Rep. Correa echoed these comments, telling Bloomberg BNA that Correa “supports improving infrastructure in his district.”

Criteria for EPA Awards

It’s unclear how effective the lobbying push can be given the way the law is written.

In the WIFIA law, there is language that spells out the criteria the agency must follow when determining which loan applications to grant, according to EPA spokeswoman Amy Graham. One of those criteria, she told Bloomberg BNA in an email, requires the agency to consider the geographic diversity of the program’s borrowers.

That means that while more than 40 percent of this year’s applications come from California, the state likely won’t receive 40 percent of the loans.

Dan Hartnett, the head of legislative affairs with the Association of Metropolitan Water Agencies, said there are enough safeguards built into WIFIA to prevent lobbying or political influence from swaying the outcome of the process.

“I’d be skeptical that [lobbying] would make any difference from the sense I’ve gotten from EPA staff,” Hartnett told Bloomberg BNA. “It seems that Congress wrote the law not to make it pork.”

Infrastructure Funding Gap

But should it be?

Timothy Quinn, head of the Association of California Water Agencies, said lawmakers should be using their clout to advocate for infrastructure projects in their districts. Weighing in on a WIFIA loan application is one way they can do that now that earmark funding has been banned in Congress.

“In the old rules, you got an earmark and that’s how you helped your district,” Quinn told Bloomberg BNA. “Now you get a low-cost loan. I don’t see anything wrong with that at all.”

And it’s not as though upgrading water infrastructure is a frivolous pursuit, he said. The EPA estimated in 2011 that the country’s drinking water systems needed more than $380 billion in upgrades, an estimate that didn’t include wastewater needs. Meanwhile, other than WIFIA’s $1.5 billion in loans, the only other significant sources of federal funding for water infrastructure comes from the EPA’s State Revolving Fund program, which the president is proposing to fund at just over $2 billion for the next fiscal year.

The gap between federal funds and infrastructure needs ultimately falls on states, cities and, in the end, water bill payers.

Quinn said that, with the needs so high and the federal funding so scarce, water systems have a right to do all they can to bring home any dollars that are available. This is especially the case in California, where demand for water is rising while its supply is falling.

“We’ve been pursuing expensive local resources to make ends meet,” Quinn said. “WIFIA fit with what we’ve been doing in California like a glove. It’s a new tool and a good tool.”

—With assistance from Rachel Leven

To contact the reporter on this story: David Schultz in Washington at dschultz@bna.com

To contact the editor responsible for this story: Rachael Daigle at rdaigle@bna.com

For More Information

A log of congressional correspondence to the EPA during March and April is available at http://src.bna.com/p8y.

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