Today the Association of Metropolitan Water Agencies (AMWA) welcomed introduction of S. 4921, the Financing Lead Out of Water (FLOW) Act, Senate legislation that will help drinking water systems nationwide more efficiently finance the replacement of lead service lines. The new legislation, introduced by Sen. Michael Bennet (D-Colo.) and supported by six original cosponsors, mirrors a House bill introduced earlier this year by Rep. Dan Kildee (D-Mich.) during AMWA’s Water Policy Conference.
Both the House and Senate versions of the FLOW Act would amend the federal tax code to allow public water systems to pay for the replacement of privately-owned lead service lines with tax-exempt bonds, without first navigating IRS’ “private business use test.” Currently, water systems must certify to IRS that proceeds from a tax-exempt debt issuance do not benefit private entities above a certain threshold – a requirement that, in practice, has meant that water systems must verify whether a business operates out of any residence with a privately owned lead service line that would be replaced with those funds.
AMWA member Denver Water went through this process last year and found that it added months of work and administrative expense to the utility’s lead service line replacement program. Denver Water approached AMWA to seek a solution, and the association collaborated with Sen. Bennet and Rep. Kildee to introduce the legislation in both chambers of Congress.
“Every day, AMWA members protect public health by providing clean and safe drinking water,” said AMWA CEO Tom Dobbins. “But many communities are still working to eliminate thousands of lead service lines below the ground. This task should not be made more difficult by IRS red tape that complicates efficient financing options, and the FLOW Act will help solve this problem. We commend Senator Bennet for his work on this issue, and we look forward to engaging our members in support of this legislation.”
The FLOW Act would amend Section 141 of the tax code to specify that “qualified lead service line replacement” projects are not subject to analysis through the private business use test, thereby allowing water systems to pay for them more easily with tax-exempt bonds. The bill would not require any water system to cover the cost of replacing a privately owned lead service line but would merely ease administrative burdens on water systems that elect to do so.
“This legislation is really important in helping make safe water accessible to everyone,” said Jim Lochhead, CEO of Denver Water. “It will make it easier for utilities across the country to finance the replacement of lead service lines by incorporating the replacement into their capital programs, spreading the cost over the life of non-taxable municipal bonds. In developing Denver Water’s program to remove all lead service lines from our system, it was critical that we covered that cost without putting a charge directly on the customer, because most customers can’t afford to replace their own service lines.”
Passage of the FLOW Act is one of AMWA’s top legislative priorities, and the association looks forward to working with Sen. Bennet and Rep. Kildee to build support for the proposal.