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March 10, 2014
President’s FY15 Budget Cuts EPA, SRF Funding
The $3.9 trillion fiscal year 2015 budget request sent by President Obama to Congress last week proposes new cuts to EPA and the Drinking Water and Clean Water State Revolving Funds (SRFs). The president’s plan would provide EPA with $7.9 billion next year, about $300 million below both its final FY14 appropriation and the amount of funding Obama proposed for the agency last year.
The SRFs would bear the brunt of the cuts, with the DWSRF and CWSRF together reduced by a total of $581 million compared to their FY14 funding levels. The DWSRF would be cut to $757 million (down from $906.9 million this year), while the CWSRF would have its funding cut to $1.018 billion (compared to $1.449 billion this year).
If enacted, the White House’s proposal would provide the DWSRF with its lowest annual appropriation since 1998, while representing the fifth straight year of declining budgets for the program. To justify the cuts, Obama’s budget documents explained the budget would “focus [the SRFs] on communities most in need of assistance” and would “target assistance to small and underserved communities that have a limited ability to repay loans.” According to the White House, even with the reduced levels of funding, the SRFs would finance “approximately $6 billion annually in wastewater and drinking water infrastructure projects.”
These arguments may not be good enough for members of Congress who traditionally support strong water infrastructure investments. One such senator, Water and Wildlife Subcommittee Chairman Ben Cardin (D-Md.), expressed his concerns about proposed reductions in water infrastructure funding. This will be among the issues Sen. Cardin discusses with AMWA members next month at the 2014 Water Policy Conference.
Obama’s EPA budget would continue a requirement that states reserve between 20 and 30 percent of their DWSRF funding to support loan forgiveness in disadvantaged communities, though the percentage of CWSRF funds reserved for such purposes would be reduced to between 10 and 20 percent. States would not be required to set aside a specific portion of DWSRF funding for “green infrastructure” projects, but at least 20 percent of CWSRF dollars would have to be spent for such projects.
AMWA and other water utility and municipal organizations wrote to the White House in January in opposition to any SRF funding cuts. The groups will now turn their attention to Congress in an effort to counter the President’s proposed reductions to the SRFs.
Obama Budget Would Cap Tax Deductions, Limit Muni Bond Benefits
For the third year in a row, President Obama’s budget request to Congress would cap certain tax deductions for high-income families – a provision that could drive up municipal bond borrowing costs for local governments. According to a budget summary released by the White House, the plan would “limit the tax rate at which high income taxpayers can reduce their tax liability to a maximum of 28 percent.” The limit would phase out the ability of high earners to claim a number of itemized deductions and other tax benefits, including tax-free interest earned on municipal bonds.
The current tax-exempt status of municipal bond interest leads investors to accept lower interest rates on the bonds, thus allowing communities to stretch their dollars further when selling bonds to finance water infrastructure improvements. But phasing out this benefit would likely cause these costs to rise, causing investors to demand higher interest rates from communities to make up the difference.
President Obama has recommended capping the value of tax exemptions for high-income earners several times in the past, but Congress never advanced any of the proposals. But just last week House Ways and Means Committee Chairman Dave Camp (R-Mich.) released his own tax reform plan that would impose a 10 percent surtax on certain income (including municipal bond interest) collected by the wealthiest taxpayers.
Despite these proposals, many members of Congress remain staunchly opposed to any rollback of municipal bond tax benefits. One of these members, Rep. Randy Hultgren (R-Ill.), who serves on the House Financial Services Committee, will address the issue next month as part of AMWA’s 2014 Water Policy Conference.
Climate Resilience Fund, New Bond Programs Part Of FY15 Budget
Beyond SRF funding levels and caps on tax-exempt municipal bond interest, the hundreds of pages of President Obama’s FY15 budget request include several other items of interest to the water community:
Many of the President’s proposals, such as the climate resilience fund and the national infrastructure bank, are expected to be dead on arrival in Congress. Lawmakers will now devise their own FY15 budget plans and then begin the work of developing appropriations legislation for FY16.
Senate Panel To Mark Up Chemical Spill Legislation April 2
The Senate Environment and Public Works (EPW) Committee will mark up chemical storage facility oversight legislation on April 2, panel Chairman Barbara Boxer (D-Calif.) announced last week.
The EPW Committee will consider S. 1961, the “Chemical Safety and Drinking Water Protection Act,” which West Virginia Democratic Senator Joe Manchin introduced in the aftermath of January’s chemical spill in Charleston, West Virginia. The spill contaminated the community’s drinking water supplies with the chemical MCHM and left Charleston residents unable to drink or bathe in their tap water for several days.
S. 1961 would require regular state inspections of any chemical storage facility that “poses a risk of harm” to a nearby public water system. Chemical facility owners would have to meet minimum leak detection, spill control and employee training standards, and would have to provide information to nearby water utilities about the potential toxicity of each chemical held on-site and “safeguards or other precautions … to detect, mitigate, or otherwise limit the adverse effects” of a chemical release.
AMWA has not taken a formal position on S. 1961 but is in the process of meeting with staff of Sen. Manchin and EPW Committee members to discuss improvements to the bill. These suggestions include requiring chemical facilities to immediately notify downstream water systems after discovering chemical spills and clarifying that a water utility’s receipt of information about chemicals stored upstream confers no new responsibilities or liabilities on the utility.
EPA Announces First NDWAC Lead And Copper Rule Working Group Meeting
EPA announced the dates for the first meeting of the National Drinking Water Advisory Council (NDWAC) Lead and Copper Rule (LCR) Working Group. The meeting is scheduled for March 25 and 26 in Arlington, Va., and it is the first of a series of anticipated meetings that will take place over the next year to evaluate and make recommendations for potential revisions to the LCR. The March meeting will focus on issues related to optimization of corrosion control.
AMWA utilities are represented on the working group, and AMWA staff will be attending the meeting, but attendance is also open to any interested public stakeholders. Details on logistics and registration information are included in the Federal Register notice announcing the meeting.
EPA Seeks Nominees For Environmental Finance Advisory Board
EPA is seeking nominations for persons to serve on its Environmental Finance Advisory Board (EFAB). The EFAB advises EPA on many diverse financial issues including increasing investment in environmental resources, easing the challenges of financing environmental projects and creating incentives to increase private investment in environmental services. Among the qualifications the agency is seeking are experience in water and wastewater utility management and finance, green infrastructure financing and sustainability community partnerships. EPA encourages nominations from individuals from southeastern, southwestern, western and mid-western parts of the United States.
The deadline for nominations has been extended to March 14. Additional information is provided in EPA’s February 20 Federal Register notice.
GOP Senators Renew Opposition To Office Of Water Nominee
Six Republican senators circulated a letter to their colleagues last week encouraging opposition to President Obama’s nomination of Ken Kopocis to lead EPA’s Office of Water, due to his previous work on legislation to expand the scope of waters subject to federal Clean Water Act jurisdiction.
The letter, signed by Sens. John Barrasso (R-Wyo.), David Vitter (R-La.), James Inhofe (R-Okla.), Mike Crapo (R-Idaho), Roger Wicker (R-Miss.) and Deb Fischer (R-Neb.), urges senators to vote against Kopocis on the Senate floor because as a congressional staffer he “was instrumental in failed efforts to remove the term ‘navigable’ from the CWA’s jurisdictional limitation to ‘navigable waters.’” The letter goes on to say Kopocis, who is currently a senior advisor in EPA’s water office, would “continue to advance and support EPA’s march towards an expanded federal encroachment of private property.”
The Senate Environment and Public Works Committee advanced the Kopocis nomination last month on a party-line vote. Democratic Senate leaders have not announced when the full chamber may consider it.