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Kiplinger Business Forecasts
(c) 2002 The Kiplinger Washington Editors Inc. All rights reserved.

Monday, March 18, 2002

Volume 2002; Number Week Ending 0322

Hurdles Ahead for Bills To Upgrade Water Systems
Andrew C. Schneider

CONGRESS IS TALKING UP A MULTIBILLION-DOLLAR EFFORT TO FIX THE
COUNTRY'S ROTTING WATER INFRASTRUCTURE.

The House and Senate are both beginning to move legislation that would help modernize the nation's decrepit water infrastructure. But the recent burst of activity is unlikely to translate into final passage this year.

The leading bill under consideration (S. 1961) would authorize $35
billion over five years for revolving loan funds that states tap to
construct and upgrade wastewater and drinking water systems. The bill
also would promote cleaning up nonpoint source pollution, such as storm
water and agricultural runoff, and encourage public-private partnerships
as a way of trimming local communities' operating and maintenance costs.
Two similar bills are pending in the House, although they focus
exclusively on wastewater cleanup.

What's prompting the legislation? Much of the nation's water
infrastructure is well over a century old and rapidly falling apart. The
most conservative estimate for repairing or replacing the system is $280
billion over the next 20 years. The Water Infrastructure Network (WIN),
a broad coalition of water utilities, local governments, unions and
industry and environmental groups, is seeking $57 billion in federal
assistance over the next five years. Without it, local communities and
utilities would have to bear the full cost of the upgrades costs that
would certainly be passed on to residential and commercial ratepayers.

But the legislation faces major stumbling blocks, including a
politically thorny dispute over whether contractors on water
infrastructure projects should have to pay union-scale wages. The debate
over whether to apply the so-called Davis-Bacon wage determinations
nearly scuttled a bill to clean up brownfields last year. That's likely
to be less of a problem for the water bills, though, since most of the
companies large enough to apply for water infrastructure contracts
already rely on union labor.

A bigger problem for bill sponsors is the legislative calendar.
Congress has much on its plate and aims to finish work for the year in
October. Although the Senate Environment and Public Works Committee
plans to consider the bill in the next few weeks, the House has yet to
schedule a committee vote, and congressional leaders don't consider it a
priority.

Advocates of the legislation worry that if Congress doesn't approve
the bill this year, it will be a lost cause until at least 2004. That's
because the infrastructure committees will put it aside in favor of
writing a new highway bill next year. "You can name highways after
people, but senators aren't too anxious to have sewer lines named after
them," says Lee Garrigan, administrator of WIN.

The most daunting obstacle is opposition from the White House, which
sees the water infrastructure plan as a $35-billion distraction from the
war on terrorism. At a Senate hearing, Environmental Protection Agency
Deputy Administrator Benjamin Grumbles spelled out the administration's
position in no uncertain terms: "The president clearly defined his
priorities in the State of the Union as defense and homeland security.
As the increased spending called for in this bill is not consistent with
those priorities, the administration does not support [it.]"

Faced with an uphill climb, supporters of the water infrastructure
bills will try to gain momentum by adding money for rural water systems
that need upgrades to meet a tough new federal standard for arsenic in
drinking water. A whopping 85% of the nation's public water systems
serve fewer than 3300 people. Adopting provisions to aid in arsenic
cleanup would lure the votes of rural lawmakers who so far have little
reason to back the legislation, given that the biggest beneficiaries
would be large cities and suburbs. Such a move would also make a
significant ally out of Sen. Harry Reid (D-NV), the second-ranking
Senate leader and primary sponsor of one of the arsenic bills (S. 503).

Also, supporters will try to sell the new funding as a way to
protect the nation's water supply from terrorists. That could help
deflect White House opposition and draw in support from House Republican leaders.

"I see security issues popping in with almost any infrastructure bill now, particularly water," says Casey Dinges, senior managing director of the American Society of Civil Engineering's Washington, D.C., office. "We don't want to be spending a lot of money on security if we're just going to let these systems fall apart and degrade. That makes no sense. We need investment and security, not security in lieu of investment."

Researcher-Reporter: Gerry Moore

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