By Rich Anderson
August 11, 2008

Fayetteville (AR) Mayor Dan Coody, Co-Chairman of the Conference of Mayors Water Council, was invited on July 24 to address Congressional staff on the topic of “Water Infrastructure – Why Congressional Action is Urgently Needed.” The U.S. Chamber of Commerce’s research arm, the National Chamber Foundation, organized the panel of speakers to raise the profile of water and sewer investment needs and what role Congress can play in helping local government meet those needs.

Coody commented on the fact that local government pays for more than 95 percent of all spending on water and sewer infrastructure and services in the United States; and that the annual cost has increased from $45 billion in 1992 to $82 billion in 2005. Coody stated that public water ranked as the eighth highest local government expenditure in 2005; and sewer ranked as the 11th highest expenditure that same year. When the two categories are combined they rank as the third highest local government expenditure after public education and non-water utilities.

Coody presented information on historical spending by local and federal government on public water and sewer. The U.S. Census Bureau reports local government expenditures on water and sewer from 1956 through 2005 exceeded federal spending virtually every year with the exception of a brief period in the late 1970s when the construction grants program reached its peak. Federal contributions, however, quickly declined, and later phased out grants to be replaced by loans through the State Revolving Fund programs under the Clean Water Act (CWSRF) and later the Safe Drinking Water Act (DWSRF).

Since the decline of the construction grants program, federal spending has remained flat and declining while local government spending has increased by an average of five percent per year. Coody stated that cities will be lucky to see only a five percent increase in annual spending for water and sewer. He mentioned that a 2005 National City Survey by the U.S. Conference of Mayors reported that 35 percent of cities could face a critical water shortage by 2025; and cities anticipate dramatic increases in spending to address adaptation to climate change and its many impacts on our nation’s water resources.

Coody appealed to Congress to take action on recapitalizing the SRF programs, creating a grant program to help cities with capital needs to correct wet weather overflows, and to create a more sensible tax policy to allow local government to harness private equity under public control to provide public water and sewer investment. Private Activity Bonds (PABs) can be used for this purpose if Congress alters the tax code by removing state volume caps on bonds used for this purpose. Coody mentioned that the public water and sewer PABs is the one tool in the financing tool kit that has been stifled by Congress, but can provide a near immediate stimulus to the economy and the public health and environmental protection needs of the nation’s cities.