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Nation's Cities Weekly
Copyright 2002 Gale Group Inc. All rights reserved. COPYRIGHT 2002 National
League of Cities

Monday, May 27, 2002

ISSN: 0164-5935; Volume 25; Issue 21

Senate committee passes water infrastructure bill.(Water Investment Act of
2002)(Brief Article)
Carol Kocheisen

On a 13-6 vote, the Senate Environment and Public Works Committee (Jim
Jeffords, I-Vt., chair.) completed action on S. 1961, the Water
Investment Act of 2002.

The measure authorizes $35 billion in loans to municipalities over the
next five years for municipal infrastructure needs in drinking water
($15 billion) and wastewater ($20 billion) through the existing state
revolving loan funds (SRF).

In addition, the committee agreed to a new provision, requested by the
Water Infrastructure Network, reauthorizing funding of $250 million a
year for urban wet weather initiatives to remediate combined and
sanitary sewer overflows.

Also included in the measure is a five-year, $5 billion authorization
for assistance to small drinking water systems in meeting new federal
arsenic standards.

Controversial issues involved in the contentious, and unusually
partisan, mark-up included amendments imposing Davis-Bacon requirements
mandating payment of prevailing wages in perpetuity with funds borrowed
from either SRF, and the imposition of new mandates on local governments
requiring water and sewer rates to reflect the true cost of service and
implementation of asset management plans by systems seeking loans.

The latter two requirements must be "documented and demonstrated" to
the permitting authority (either the state or EPA) and can be challenged
in court. Efforts to soften these mandates--including a Voinovich
amendment to limit the applicability of Davis-Bacon to the first use of
the funds--were resoundingly defeated.

As a consequence, Republican Sens. Christopher Bond (Mo.), Mike Crapo
(Idaho), James Inhofe (Okla.), Smith (N.H.), George Voinovich (Ohio),
and John Warner (Va.) opposed reporting the measure to the full Senate.

For municipalities, the most troubling provision in the bill says
that, except for planning, design or security purposes, no funds may be
borrowed from the Clean Water SRF by any system in "significant
noncompliance" (undefined) with the Clean Water Act, unless the system
has entered into an enforceable administrative or judicial order and the
use of the funds will result in compliance.

Since some of the requirements of the Clean Water Act--e.g., zero
sanitary sewer overflows--are technically impossible, these funds would
clearly be unavailable to such systems which, in all probability, are
most in need of assistance.

In response to the request of local government witnesses at the March
hearings, the committee amended S. 1961 to extend repayment terms for
loans from both the clean water and drinking water SRFs from the current
20 years to 30 years for all systems and to provide a 40-year repayment
schedule for disadvantaged communities (defined by the state), so long
as the repayment period is not longer than the life of the project being
funded.

For disadvantaged communities, the measure also provides for, what in
effect are, grants in the form of negative interest loans and principal
forgiveness for up to 30 percent of each state's allotment.

Communities not defined by the state as disadvantaged are also
eligible for this type of grant assistance so long as they can
demonstrate that the financial benefit would be directed to
disadvantaged residents.

The Safe Drinking Water Act Amendments of 1996 authorized the transfer
of funds from the drinking water SRF to the clean water SRF and vice
versa.

S. 1961 makes this authority permanent and allows the transfer of up
to 33 percent of funds from one SRF to the other.

The 1996 amendments also made privately owned and/or operated drinking
water systems eligible for loans from the SRF.

S. 1961 extends access to the clean water SRF to privately
owned/operated wastewater systems.

States are authorized to use up to two percent of SRF funds as grants to systems serving fewer than 10,000 people for financial management assistance, user fee analysis, budgeting and repair scheduling.

Senate floor action on the bill has not yet been scheduled and remains uncertain.

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