The intent of the legislation is to fill large gaps in the national water infrastructure, including developing a first-time national levee safety program as well as levee certifications by the Corps; expanding the reach of the federal dam safety program to non-federal dams; and ensuring that revenues collected by the Harbor Maintenance Trust Fund are actually used to improve harbors, including channel dredging to ensure that harbors can accommodate the larger vessels expected with the expansion of the Panama Canal. The draft also seeks to provide funding to projects undertaken by federal, state, and private entities either independently or through collaboration with one another.
The bill has a controversial history. The 2007 version was so loaded with what many considered wasteful earmarks that it was vetoed by President G.W. Bush and a congressional override was needed for enactment. Senator Barbara Boxer (D-CA), who chairs the Senate Environment and Public Works Committee (EPW), is taking the lead in the reauthorization and has introduced a “discussion draft” in which earmarks would be theoretically replaced by standards that prospective projects would need to meet before being funded. The reauthorization effort has received the support of Senator David Vitter (R-LA), who in January will replace Senator James Inhofe (R-OK) as ranking member of the EPW.
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Innovative Financing
The draft attempts to resolve funding shortfalls that have delayed many needed projects. According to Boxer, the top “innovative financing mechanism” is the Water Infrastructure Finance and Innovation Act (WFIA), Title X in the draft. This provision would allow the Secretary of the Army and the EPA Administrator to provide loans and loan guarantees for flood control, water supply, and wastewater infrastructure projects. The draft would initiate a 5-year pilot program covering no more than 10 projects with specified objectives, including reduced flood risk; natural resource protection; levee, dam, tunnel, aqueduct, and reservoir restoration; enhanced energy efficiency in the operation of a public water system; accelerated repair and replacement of an aging water distribution facility; water desalination; and acquisition of real property for storage of reclaimed or recycled water or wastewater.
Prospects for the WFIA look good because it is largely based on the successful Transportation Infrastructure Finance and Innovation Act (TIFA), which established a Federal credit program for eligible surface transportation projects of regional or national significance. The TIFA allowed the U.S. Department of Transportation to provide three forms of credit assistance—secured (direct) loans, loan guarantees, and standby lines of credit—all avenues that are contemplated in the WFIA discussion draft. The TIFA has provided $7.9 billion in credit assistance for 22 projects since 1999. These projects represent $29.4 billion in infrastructure investment.
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Under the draft, criteria that would be considered in selecting projects for WFIA consideration include:
- The extent to which the project is nationally or regionally significant, with respect to the generation of economic benefits;
- The extent to which assistance would foster innovative public-private partnerships and attract private debt or equity investment;
- The likelihood that assistance would enable the project to proceed at an earlier date than the date on which the project would otherwise proceed;
- The extent to which the project uses new or innovative approaches;
- The amount of budget authority required to fund the federal credit instrument;
- The extent to which the project helps maintain or protect the environment; and
- The extent to which assistance reduces the contribution of federal grant assistance to the project.
The draft would appropriate $50 million each to the Secretary and the EPA Administrator to carry out the pilot projects from 2013 through 2017. According to the American Society of Civil Engineers, that $50 million could be leveraged for perhaps $1 billion annually and would allow for major improvements to the nation’s water infrastructure. In addition to the protection and restoration it will provide, the WFIA is viewed as a significant job creator.
See tomorrow’s Advisor for more on the discussion draft of the reauthorization effort.