AWWA's Aurel Arndt Urges Congress to Expand Water Infrastructure Efforts

April 8, 2016
Arndt asked Congress to expand the Water Infrastructure Finance and Innovation Act program

The American Water Works Assn. (AWWA) Water Utility Council Chair Aurel Arndt has urged members of Congress to expand upon existing federal efforts aimed at shoring up the nation’s aging water and wastewater infrastructure.

Testifying before the U.S. Senate Committee on Environment and Public Works, Arndt offered recommendations that could dramatically reduce risks for citizens reliant upon public water systems while creating virtually no budgetary burden on the federal government.

“We need to expand the available amount of water infrastructure capital and minimize its cost,” explained Arndt, a financial expert with more than 40 years of experience in the water sector. “Effectively, the result will be a significant acceleration of needed water infrastructure investment and making it more affordable for utilities and their customers.”

Arndt, speaking on behalf of AWWA and its approximately 50,000 members, who represent many of the nation’s public water systems, specifically called the committee’s attention to the Water Infrastructure Finance and Innovation Act program, a five-year low-interest loan pilot project approved through the Water Resources Reform and Development Act in 2014. While the program is authorized at $35 million in fiscal year 2017, Congress appropriated only $2.2 million annually in the first two years to enable the U.S. Environmental Protection Agency (EPA) to develop administrative processes for the water infrastructure loan program.

“WIFIA was enacted as a five-year pilot program,” Arndt explained. “The first two years have been lost to setting up the program. We urge Congress to at least extend the pilot test for another two years. However, given the success of TIFIA, we do feel Congress would be justified in making WIFIA a permanent program as well.”

In addition, WIFIA would leverage money provided by Congress in a manner similar to TIFIA but at a much greater rate. For instance, while TIFIA provides $10 in loans for every dollar appropriated, some on Capitol Hill have suggested that the ratio for WIFIA loans could be 1:50 due to water utilities’ exceptional creditworthiness.

As evidence of pent-up demand for infrastructure reinvestment in the water sector, Arndt highlighted a 2012 AWWA report that projected the nation’s water system replacement and expansion needs at more than $1 trillion over the next 25 years. That estimate is regarded as exceptionally conservative, as it reflects only buried drinking water assets and does not include above-ground facilities, wastewater and storm water systems.

Another issue raised by Arndt during his testimony related to preserving tax-exempt interest benefits for investors who purchase municipal bonds. While some members of Congress have proposed denying higher-income individuals tax exemptions on proceeds from these financial instruments, AWWA data strongly suggest that the unintended consequences of that policy decision could be devastating to water utilities, which rely heavily upon tax-exempt municipal bonds to finance new facilities and the replacement of aging water system infrastructure. An estimated 70+% of U.S. water utilities rely upon tax-exempt municipal bonds, the lower interest rates of which significantly reduce costs to ratepayers.

Arndt also urged the senators to appropriately fund the State Revolving Fund loan program, which primarily benefits small-to-medium-sized water systems, and to remove annual caps on the use of private activity bonds for water infrastructure projects.

“AWWA has a long-standing policy that communities are best served by water utilities that are self-sustaining through local rates and charges,” Arndt said. “However, the current sources of funding are woefully inadequate to finance our future water infrastructure needs, leading to the difficult question of how to do that.

“The recent events in Flint, Mich., have highlighted how vital it is to operate, maintain and reinvest in our nation’s water infrastructure. Reducing the costs of these necessary expenditures through a variety of financial mechanisms which lower the cost of debt service should be the goal of all responsible water utility administrators and elected officials.”

Source: AWWA

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