The White House released its long-awaited infrastructure proposal Feb. 12 outlining the Trump Administration’s framework for rebuilding infrastructure in America, including water, wastewater and stormwater. In addition, the White House also released its Fiscal Year 2019 (FY19) Budget Proposal on the same day.    

NACWA is pleased that, after the past year of strong advocacy and discussions by the Association and its members with the Administration, clean water was included as a key component of the infrastructure proposal. However, NACWA has concerns regarding other guiding principles and provisions contained – or not included - in the infrastructure proposal.

Regarding the FY19 Budget Proposal, NACWA was pleased that – in the context of a proposal for substantial cuts across many federal agencies, including U.S. EPA – the Budget proposes level funding for the State Revolving Funds (SRFs). However, similar to last year’s White House budget, NACWA has significant concerns over other major cuts proposed for the EPA and other agencies and programs – including geographic watershed programs – important to the public clean water sector.

This Advocacy Alert provides a detailed analysis of the Trump Administration’s infrastructure plan and proposed FY19 budget, including elements that NACWA believes are positive for the public clean water sector and areas of concern.  It is important to view both the infrastructure plan and the proposed budget within the same context, as they were intentionally released on the same day and – when read together – provide important insights on the Administration’s infrastructure priorities.  Most notably, while the infrastructure plan calls for a minimum of $20 billion in federal infrastructure investment per year over the next 10 years, the proposed FY 19 budget does not actually reflect any significant additional infrastructure investment dollars. 

Please contact Jason Isakovic or Kristina Surfus, NACWA’s Legislative Directors, with any questions about this Alert or to discuss the infrastructure proposal or budget and appropriations process further. 

Trump Infrastructure Plan

The Trump Administration has been stating for some time that the purpose of its infrastructure plan is to provide broad conceptual principles across all infrastructure sectors as guidelines for Congress to use in crafting infrastructure investment legislation.  This plan put forth by the Administration is precisely that: broad, high-level principles that could lay the groundwork for Congressional action. Many of the provisions are not laid out in detail and will need clarification and more stakeholder input should they be incorporated into legislative text by Congress.

Accordingly, it is important to understand that the Administration’s proposal represents a starting point in a broader infrastructure discussion, not an end point.  The White House has indicted that it is open to working with Congress to draft an ultimate package which may or may not include all of the ideas in the Administration’s plan.  Given that development of an infrastructure package will ultimately be up to Congress through a deliberative process, it is critical that NACWA and its members play an active role in the upcoming legislative discussions – including highlighting those elements of the White House plan that we like and challenging those elements that we don’t.
The Administration’s proposal includes both funding and policy reform provisions.

Proposed Funding Approach

The funding portion calls for a total of $200 billion in Federal investment across infrastructure sectors over the next ten years, meant to leverage State, local, and private investment to generate at least $1.5 trillion in infrastructure investment. The majority of this $200 billion is broken down into several new programs, rather than funneled into existing programs like the SRFs. The exception is Water Infrastructure Finance and Innovation Act (WIFIA) program, which is proposed for increased funding along with similar federal credit programs for other infrastructure classes.

Each of the proposed funding programs aligns with the overarching priorities of expediting investment by non-federal entities in the nation’s infrastructure. Critically, clean water, stormwater, and drinking water are explicitly identified as eligible infrastructure classes for these programs. Each program which may impact clean water agencies is outlined below.

Infrastructure Incentives Program - $100 Billion Federal Investment Proposed

• This proposed investment would be divided among the U.S. EPA, Department of Transportation (DOT), and United States Army Corps of Engineers (USACE) for infrastructure projects, including "drinking water facilities, wastewater facilities, [and] stormwater facilities".
  
  
• The overall objectives include attracting non-federal investments and private, State or local leverage and ensuring long-term performance of the investment.
  
  
• The ability for clean water agencies to compete for funding under this program would depend in part on their ability to raise new revenues. This could create a positive opportunity for agencies able to raise rates in their communities, who could be strong applicants for additional federal incentives, but may not be accessible or useful for agencies with affordability constraints, small ratepayer bases, or other barriers to increased local, State, and private investment.
  
  
• Evaluation criteria would be based on weighted averages of several factors including a project’s dollar value and how the applicant will secure non-Federal revenues over the short and long-term. No one state could receive more than 10% of available funds.

Rural Infrastructure Program - $50 Billion Federal Investment Proposed

• This proposed investment would be targeted for rural infrastructure including drinking water, wastewater and stormwater projects. Objectives include ensuring the health, safety, and competitiveness of rural America.
  
  
• The funding would be allocated through the States to invest in their rural areas, defined as those with populations of less than 50,000.
  
  
• 80 percent of funds would be provided as a block grant to governors of each State via a formula distribution, to be used for rural area projects at a state’s discretion.
  
  
• 20 percent of funds would be reserved for rural performance grants. States would apply for funding by submitting a rural infrastructure investment plan (RIIP) focused on projects that leverage non-federal funding, provide long-term operations and maintenance, facilitate efficient project delivery, and spur economic and social returns.

Transformative Projects Program - $20 Billion Federal Investment Proposed

• This proposed investment would be aimed at financing innovative and transformative projects including drinking water and clean water. Funds would be awarded on a competitive basis for projects which generate revenue and are deemed commercially viable, yet which also possess unique technical and risk characteristics that would otherwise deter private sector investment. Water projects, broadly-defined, are eligible.
  
  
• The Department of Commerce would administer the program with a federal interagency selection committee. Funding would be provided under three tracks: demonstration, planning, and capital construction.

Infrastructure Financing Programs – $20 Billion Federal Investment Proposed

• This provision includes a $14 billion expansion of several existing Federal credit programs, including the WIFIA program for clean and safe water, its transportation and railway equivalents, and the U.S. Department of Agriculture (USDA) Rural Utilities Service lending programs.
  
  
• WIFIA project eligibility would be expanded to include remediation of water quality contamination at Brownfield and Superfund sites; non-federal flood management, water supply and navigation projects; and for water system acquisitions and restructurings for projects/facilities which already have been constructed – allowing WIFIA to be used as a mechanism for water sector consolidation.\

NACWA believes there are potential positive and negative implications to this broadening of WIFIA.  On the one hand, broadening eligibility and enabling multiple project uses could align with a more holistic one-water approach for this program.  But on the other hand, Brownfield/Superfund projects are often extremely expensive, and providing them access to WIFIA funds could divert money from more “traditional” water projects.  This is a concept that deserves additional scrutiny and evaluation.

• Other programmatic changes proposed include that WIFIA applicants only be required to provide one rating agency opinion letter (not two), and that costs incurred prior to loan closing be recoverable as part of a WIFIA loan.
  
  
• This program includes $6 billion to be used toward increasing the use of Private Activity Bonds (PABs). Allowable PAB usage would expand to include stormwater facilities and flood control, along with a number of additional infrastructure categories. The state volume caps would be lifted, and a safe harbor provision enacted. Under these changes, long-term leases by private operators in certain categories would have additional access to PAB funding, and private entities buying or leasing public infrastructure funded by tax-exempt debt would no longer be required to pay off the tax-exempt debt if proceeds were to be used for new infrastructure investment. 

Overall, with regard to the funding element, NACWA is pleased that the Administration’s proposal includes water, wastewater and stormwater as a funding priority and finds the ideas of competitive funding to help drive innovation in the sector intriguing. However, the Association is concerned about the increased degree of reliance on local and state spending – which already provide over 90% of the nation’s investment in water and wastewater – and on the private sector, which despite significant interest in water infrastructure investment has provided a relatively small share of the nation’s overall funding for clean water infrastructure.

In short, the White House proposal clearly favors private investment and private leveraging of federal dollars to solve the nation’s infrastructure problems.  And while the private sector can play a critical role in addressing infrastructure needs, significant federal funding will still be an important component – and it is not clear that the White House proposal will provide enough federal investment to meaningfully address public clean water infrastructure needs.  As countless communities and their ratepayers face growing clean water challenges and investment needs – in many cases directly stemming from federal laws and regulations – increased, dedicated federal investment that is accessible by utilities of all sizes for critical clean water needs will remain crucial.
Meanwhile, the plan is largely silent on improvements or increases to existing tools, notably the SRFs, which have been working well in many states for decades.  President Trump campaigned on a pledge to triple funding for the SRFs, and NACWA is disappointed that the White House proposal does not reflect this level of investment.  And while the expansion proposed for WIFIA funding is very welcome, the increase in the types of projects eligible for WIFIA funding raises questions about how much money would be available for core water infrastructure projects. NACWA will continue to discuss these provisions in greater depth with our water sector partners.

Further, NACWA is concerned that the plan falls short in light of the more than $650 billion of investment needed for our nation’s water and wastewater infrastructure in the next two decades. The plan proposes a laudable wide range of ideas for funding infrastructure, but the broad eligibility for infrastructure from water to highways does not appear clearly linked to the relative needs, challenges, and policies impacting the different types of infrastructure categories. And while proposing $200 billion over ten years, the plan does not suggest funding sources or off-sets – creating an uphill challenge for Congress to find the money to advance any of these proposals.

Proposed Policy Changes and Streamlining

Beyond these funding provisions, the infrastructure proposal recommends policy reforms and streamlining for many infrastructure sectors, including clean water. Many appear promising, aimed at improving efficiency and outcome-based investments. The impact of others would be determined by how legislation comes together.

• Expanding National Pollutant Discharge Elimination System (NPDES) permit terms from 5 to 15 years with automatic renewals "if the water quality needs do not require more stringent limits."

NACWA has been advocating with both the White House and Congress for expanded NPDES permit terms and the possibility of automatic renewals where appropriate. This was a top advocacy priory for NACWA, and the proposal mirrors the Association’s suggestions on this issue to the White House. We are pleased this was included as it could be an important change for many clean water agencies.

• Authorizing use of Clean Water State Revolving Funds (CWSRF) for Privately Owned Public-purpose Treatment Works, in addition to the currently-eligible Publicly Owned Treatment Works.

Under existing statute, private entities can access the Drinking Water State Revolving Fund but not the CWSRF. NACWA is open to discussion of CWSRF access for private entities operating for a public clean water purpose IF the change is accompanied by increased federal CWSRF funds to ensure public agencies’ federal funding resources are maintained. Unfortunately, the White House Plan did not propose additional dollars to the SRFs, failing to meet the President’s campaign pledge to triple the SRFs.

• Modifying the current structure of the Clean Water Act (CWA) to apply identical regulatory requirements for Publicly Owned Treatment Works to that of Privately Owned Public-purpose Treatment Works.
  
  
• Encouraging innovation and efficiency in the environmental review process, including through National Environmental Policy Act (NEPA) changes requiring expedited federal environmental review; consolidated reviews across the federal government under one lead agency; allowing a wider range of entities beyond public sector to contribute funds to federal agencies to expedite environmental review and permits; and a simplified mitigation banking review process.
  
  
• Pursuing changes to how CWA jurisdiction is determined, including recommendations to consolidate authority for Clean Water Act jurisdictional determinations under the USACE, not EPA.
  
  
• Providing the EPA Administrator authority to encourage tests and experimentation in the water projects development process, to explore efficient, innovative approaches to the overall project development process including planning, project development, finance, design, construction, and operations and maintenance.
  
  
• Addressing workforce development in a section aimed at ensuring "our country has enough skilled workers to perform not only existing work but also fill the new jobs” created by any infrastructure legislation.  Provisions include expanding eligibility for Pell Grants, which are currently focused on 4-year degrees, to include grants for short-term educational programs, trade apprenticeships, and certifications. This section also includes reforms to federally-funded career and technical education programs and work study programs to better connect students to careers.

NACWA is encouraged by the attention paid to infrastructure workforce development, a concern of many NACWA members. These provisions could provide opportunities for utilities to work with local colleges and students to address utility workforce needs and create needed jobs in local communities.

As mentioned at the outset, with the White House infrastructure plan now public, attention will shift to Congress to begin crafting an infrastructure package. NACWA has been working with the key Members and Committees of Jurisdiction on a bipartisan level to advocate for the needs and priorities of clean water agencies.

At this time, it appears that while Congress may take up aspects of the Administration’s proposal, any legislative package will not only include a greater level of detail, it will also likely take a different approach in many ways toward advancing the overall goal of increased infrastructure investment. While it is possible that Congress pushes ahead with crafting a comprehensive infrastructure package, it appears more likely that a number of individual legislative proposals will emerge and potentially gain traction on their own, or in tandem with other important legislative vehicles. It will be critical that these proposals have bipartisan support and propose actual funding sources the support the proposed investments.

Either way, over the coming months we anticipate significant legislative activity on infrastructure issues by both parties in the House and Senate. NACWA will continue working with Congress to ensure clean water priorities are included in any infrastructure package, as well voice our support and concerns with provisions included in the Administration’s proposal.

Water Week 2018 and the National Water Policy Fly-In in April will be a critical opportunity for all clean water advocates to come to Washington and advocate for clean water investment – the Association strongly encourages all members to attend.  NACWA will also continue to keep members updated on important legislative developments and notify members of strategic opportunities to engage with Congress to bolster strong advocacy for the water sector.

The President’s Proposed Fiscal Year 2019 Budget

Undeterred after releasing a Fiscal Year 2018 budget last year that was met with immense criticism from both Republicans and Democrats in Congress, the Trump Administration stayed course for the coming fiscal year and released a Fiscal Year 2019 (FY19) Budget Proposal with many of the same significant cuts to discretionary non-defense funding.

While the Administration’s FY19 budget release coincided with the release of its infrastructure proposal, it is notable that numerous agencies and programs that could be an integral part in building or improving the nation’s infrastructure are drastically reduced or zeroed out, further underscoring this Administration’s priorities for establish new programs with a reliance on non-federal funding and reducing federal agency staffing.

The U.S. Department of Agriculture and the U.S. Army Corps of Engineers would both see their budgets reduced by 20% in FY19 under this proposal.  And similar to last year, the White House proposed a cut of 34% for EPA compared to currently enacted levels. The EPA’s budget proposal is promoted as advancing a core focus on air, water, and land revitalization but with a greater reliance on states to achieve these goals through cooperative federalism.

Despite the proposed cuts to EPA, the Clean Water and Drinking Water State Revolving Funds (SRFs) would receive level funding in FY19 of $2.3 billion. While this is far from the tripling of SRF funds that President Trump proposed during his campaign, it is a positive sign that the funding is maintained in the face of 34% cuts across-the-agency and the value of the program remains understood. The WIFIA program would not be fully funded at its authorized level but would receive $20 million. 

Significant cuts or eliminations proposed for programs that are utilized and supported by many NACWA members include:

• EPA's Geographic Programs, which fund watershed restoration and utility partnership projects, would be reduced about 90%. The Great Lakes Restoration Initiative (GLRI) is proposed for $30 million – compared to $300 million in recent years – and the Chesapeake Bay is proposed for $7 million, rather than more than $70 million. Other Geographic Programs, like Puget Sound and Long Island Sound restoration, are zeroed out.
  
  
• EPA's Clean Water Act §319 Nonpoint Grants are zeroed out (from $169M in FY17).
  
  
• EPA's Critical Infrastructure Protection Program, providing cybersecurity assistance for utilities, is reduced to $5.2 million (loss of $10M in FY17).
  
  
• EPA's Clean Water Act §106 Grants to States are reduced by $75 million (from FY17).
  
  
• EPA's Research Budget is reduced by 50% (loss of $235M from FY17).
  
  
• EPA’s Office of Enforcement and Compliance Assurance budget is reduced by $129 million (from FY17).
  
  
• USDA’s rural water and waste disposal program grants and guaranteed loans are zeroed out (loss of $557 million from FY17 – based on the Administration’s sense that USDA applicants could look to the SRFs for assistance).
  
  
• USDA's Regional Conservation Partnership Program is proposed for elimination.

With all of these proposed cuts, which would further reduce the federal role in funding clean water infrastructure and present further affordability and compliance challenges for the clean water sector, it is critical to keep in mind that the President's Budget is typically considered a guidance document or a blueprint for Congress.  Regardless of the President’s suggestions, Congress has ultimate responsibility for crafting and bringing forward a final spending package for the President's approval.

As we saw last year when the FY18 budget proposal was released, countless Congressional Republicans and Democrats objected to many of the proposed cuts and the Appropriations Committees began drafting legislation with notably different spending targets and priorities than that of the Administration’s budget. Continued advocacy on this front will be crucial moving forward. NACWA anticipates that once again many of these proposed cuts will be successfully reversed through strong advocacy and education. NACWA will keep members updated on budget developments and strategic opportunities to engage your Congressional delegation – such as by attending Water Week 2018 or contacting your Members and their staff.

Fiscal Year 2018 Appropriations Still Being Negotiated

While the FY19 Budget process has begun, the FY18 Appropriations process still has not yet been completed. The government has been operating under Continuing Resolutions (CR) since the October 1, 2017 start to the Fiscal Year. However, with Congress passing a budget agreement in early February to lift the discretionary spending limits by $141 billion over the next two fiscal years, Congress is working toward completing an “omnibus” final FY18 Appropriations deal by the next CR deadline on March 23. As Congress works on final spending allocations, NACWA is working to support robust funding for municipal clean water priorities as the FY18 Congressional budget and appropriations process finally nears the finish line.