Background

The legislation would bring water and wastewater projects out from under the federally mandated state volume cap on PABs, which provide tax-exempt financing for a government entity such as a municipality or state that wishes to partner with a private entity to meet a public need. Because current law caps the amount of PABs each state can issue, water infrastructure projects must compete with 23 other categories of public needs and often lose out to housing and education uses. While it is estimated that lifting the cap on these exempt facility bonds would cost the government a modest $354 million over 10 years, it would result in as much as $50 billion in incremental private capital for water and wastewater infrastructure projects, over the same time period.

PABs offer a multitude of benefits. Under a PAB project, the private entity, not the government, assumes much of the financial risk and administrative responsibility. Further, PABs do not affect a municipality's bond rating. At a time when state budgets continue to struggle and the municipal bond market remains in turmoil, opening the door for private investment in these vital projects should be considered good government. Also, the need to reinvest in our environmental infrastructure is unchallenged. Whether looking at estimates from government or the private sector on what is required to even begin to repair and rebuild America's water and wastewater infrastructure, it's clear that hundreds of billions of dollars are needed.

Construction unemployment in 2012 is the highest of any industrial sector.   Enactment of H.R. 1802/S. 939 would significantly contribute to the recovery of the construction industry at a time when it needs it most. In addition to enhancing public health and protecting the environment, investment in this infrastructure also creates scores of high-paying jobs, generates significant economic activity, and expands local tax bases. A recent Clean Water Council study found that every $1 billion invested in water and wastewater infrastructure creates up to 30,000 new jobs with average annual earnings of more than $50,000. National output (i.e., demand for products and services) is increased by up to $3.46 billion, and more than $1 billion in household (personal) income is generated. Importantly, the study also found that each $1 billion invested generates approximately $82.4 million in state and local tax revenue.

Status

H.R. 1802 and S. 939 were introduced on May 10, 2011.  The Senate bill was referred to the Committee on Finance and was incorporated as Section 40205 of the Senate Highway Bill (S. 1813), which passed the Senate by a wide bipartisan margin on March 29, 2012. H.R. 1802 was referred to the Committee on Ways and Means and currently has the support of 69 truly bipartisan cosponsors.