White House’s “Jump Ball” Infrastructure Financing Plan: Unpacking Its Impact on Water Projects

The White House’s long-awaited proposed national infrastructure financing plan was unveiled earlier this month. Given the country’s substantial water infrastructure needs that NACWA has identified over the years, please share your reactions.

Adam Krantz: There are two ways we evaluate proposals like this. First: Is water included in the proposal in a serious way? In many infrastructure bills and stimulus packages, water is not considered on an equal basis with highways, transportation, ports, bridges, schools, etc. The good news is that in this particular bill, water is a critical focus—at times, even the majority focus.

The funding is split among the Department of Transportation, the U.S. Army Corps of Engineers, and the Environmental Protection Agency. Two of those three agencies are governed by core water projects, so it does put the levers of decision-making and control for the funds into agencies that have a clear focus on water. That’s very important—and it’s something we haven’t seen before. We’re proud that the water sector is becoming recognized as a core infrastructure sector; that’s the silver lining of this proposal.

The problem is that it takes what is being called a “jump ball” approach —where infrastructure projects from different sectors have to compete, and those who come to the table having leveraged the most money on their own are the most likely to succeed in getting federal dollars. About $100 billion over the next 10 years—or $10 billion a year—is meant to leverage state and local funds as well as private-sector investment into a $1.5 trillion investment in infrastructure. That is not sufficient.

Already, local and state governments shoulder the lion’s share of infrastructure investment for water across this country. A 20 percent federal share, while an improvement, is still insufficient—especially since the projects likely to be chosen would be in addition to projects already planned. Most importantly, we’d like to see a more even cost-share that brings the federal government in as an equal partner over the long-term.

We’d also like greater certainty that a significant portion of the funds will go toward water infrastructure. With jump ball money, where that money goes and how much goes to which municipality or state or to which type of project remains a question mark.

After his election, President Trump said that one of his core infrastructure goals was to triple federal funding for the state revolving funds (SRFs). That was not in this package, and it should have been. In our view, though, the game has just begun. The real meat on the bones will be developed in the House and the Senate, where we’re working diligently to encourage more direct funding for water.

Compare and contrast the administration’s proposal with other congressional proposals on water infrastructure financing currently being debated in Washington D.C.

The important difference is that many in Congress support more direct federal spending. We are intimately involved with the bipartisan House Problem Solvers Caucus Infrastructure Working Group.

A Senate bill has also been put forward several times by Senators Schumer (NY), Sanders (VT), Gillibrand (NY), and Cardin (MD). It was a trillion-dollar-plus infrastructure funding bill that devotes direct funding to water and wastewater projects across the country.

There have also been numerous bills to reauthorize the SRF, which has not been reauthorized in decades, as well as bills to create a trust fund for water on equal footing with the Highway Trust Fund, and to address low-income water affordability. There is no shortage of good ideas circulating in the halls of Congress on water infrastructure investment that could strengthen a broader infrastructure package.

From the White House, on the other hand, we’re seeing a limited federal contribution intended to leverage more spending at the local level. That’s not, in and of itself, a bad idea—but we know that direct spending works, and that the SRFs and the Water Infrastructire Financing Innovation Act (WIFIA) are already oversubscribed. At a certain point, this package has to evolve to mirror some the proposed legislation that provides more direct funding for water and wastewater.

If the administration’s infrastructure package were adopted as proposed, how successfully would it meet the needs and affect the cost of local water infrastructure projects across the United States?

It’s important not to take the White House package out of context of their other recent actions. When the tax reform package passed, municipal interests were pleased to see that they were able to still take advantage of tax-exempt bonds, which are the core means by which municipalities fund capital improvement projects (as well as rate increases).

But the tax bill also took away advanced refunding, which allowed municipalities, once a decade, to buy back bonds when interest rates are low and then reissue them. That saved cities significant funds—sometimes in the tens of millions of dollars. That’s no longer available, and we estimate that that fact will cost municipalities up to $3 billion that they otherwise could invest in infrastructure. Already, that puts municipalities at a deficit.

It’s also important to note that, counter to popular perception, this administration has not stopped regulating the water sector. But at the same time, it has decreased funding in many areas. One of the only three rules that the administration has passed since the election requires municipal wastewater agencies to work with hundreds of thousands of dentists’ offices to ensure that mercury doesn’t make its way into the nation’s waterways. Another rule requires the Great Lakes States to adhere to stringent sewer overflow notification requirements.  And now, they’re looking at surveying 15,000 wastewater treatment plants across the country to determine how effectively they’re removing nutrients from their plants.

Despite these regulations, we are seeing a decline in federal funding overall. To make up for that, there has to be direct federal investment that is both long-term and reliable for water infrastructure. But the new infrastructure package does not provide that.

It would increase eligibilities under WIFIA to include Army Corps and Superfund projects—without adding more funding. That would simply take money away that was intended by Congress solely for water and wastewater infrastructure. Similarly, the package expands Clean Water State Revolving Fund eligibilities to private entities—again, not adding money to the pool, but watering it down. That’s the White House proposal again costing municipalities money.

Now, I think wastewater utilities are in a fairly good position to access the money in this package, because they have a ready rate base that they can draw from in order to piece together the required 80 percent share for a project. But ultimately, this is not going to save municipalities money. It’s going to require municipalities to raise more money—more capital and more investment dollars—to do large new projects.

The money in this package is meant to be additive—for new projects that are large and innovative, not for existing infrastructure. Yet there is a trillion-dollar funding gap for existing infrastructure. It’s also not going to help with the affordability issues that utilities are facing across the country. Many utilities are seeing 30-40 percent of their population paying 4-7percent of their median household income on water and wastewater infrastructure services.

The White House proposal is insufficient to get at those larger, cloying issues that already exist. And that’s where other bills looking at more traditional funding streams—or some mix of the two approaches—would be appropriate. 

Are responses to the White House’s infrastructure financing proposal garnering different response based on geography? Is Southern California, for example, which already contributes a large share of local money, reacting differently than jurisdictions in the Midwest or Southeast? 

I don’t think so. Whether you want to work on water quantity in California or on aging infrastructure and wet weather in the Midwest, the needs are the same—and they’re vast.

Municipalities are still shouldering 95-97 percent of infrastructure costs. All are facing similar issues of affordability. Many are facing similar needs to upgrade capacity. And all believe quite strongly that the federal government, to the extent that it has consistently ramped up regulatory requirements, should ramp up funding going forward as well. 

You participated in the annual VerdeXchange Conference this past January, joining water resiliency officials from cities like Houston, Mexico City, Los Angeles, and San Francisco. Speak to how the administration’s proposed infrastructure investment program addresses the “new normal” impacted by climate change.

All cities have a great to become resilient, whether by building a seawall or using green infrastructure. But I don’t think anyone is holding their breath for anything coming out of Washington, DC to meet that need.

To reiterate, we’re talking about $10 billion a year divided among a host of different types of projects. Even then, the money has to be leveraged with an 80 percent match from local, state, or private investment. It’s better than nothing. But at the end of the day, we’re not talking about a sum of money that can cut at the vast climate resiliency needs across this country—whether it’s wet weather or drought.

That being said, resiliency projects may be particularly well suited for this administration’s approach. I’m already seeing municipalities coming to DC to talk to their representatives about building off of the administration’s opening salvo to create a meaningful infrastructure bill. Everyone is rolling up their sleeves and getting their hands into this effort. But I don’t think anyone has blinders on; we don’t view this package as a solution.

Municipalities should move forward under the assumption that whatever comes out of DC—if anything—may be helpful, but they shouldn’t delay core projects out of some hope that this will be a funding solution. 

To close, what do you ultimately anticipate will be Congress’ formula and funding level for water infrastructure?

It's going to require a lot of stars to align. After a tax reform bill and a budget agreement that added to the deficit, it might be hard to get deficit hawks in the House to look at a new spending bill with an open heart.

Ideally, I would like to see a mix of the administration’s effort and the Legislature’s approach. The administration’s overlay of innovation is a good thing, and should stay part of any bill. But there also has to be a very strong grant component that builds on programs proven to be successful. We need both if we are to make any headway on the funding gap and affordability issues plaguing utilities across the country.