New water infrastructure projects have limited options for federal funding. Under the U.S. House of Representatives earmark ban, Title XVI funding is limited to currently authorized projects and is subject to yearly appropriations. Below are two water infrastructure funding proposals circulating in Washington, D.C.

Long-Term Loans:

Modeling a new water infrastructure funding program after the Railroad Rehabilitation and Improvement Financing program allows the federal government to provide long-term, low-cost loans without the burden of going through the budget and appropriations process.

Highlights:

• The program may finance up to 100 percent of the project for 35 years, at interest rates equal to the federal government’s cost of borrowing.
• Application fee is capped at .5 percent of the loan principal.
• Successful applicants must pay a credit risk premium before disbursement and cannot be financed with the loan proceeds.
  • This is the key aspect of the program. These funds make it possible for the loan program to avoid needing federal appropriations.
  • This premium generally ranges between 0 and 5 percent of the loan amount.
• Interest would accrue from loan execution, but loan repayments can be deferred.

Additional Thoughts:

• The U.S. Bureau of Reclamation does not administer any similar programs. There would need to be some initial investments for infrastructure and staff to support the new program. That initial money would be subject to the appropriations process.
• Will the application fee and the credit risk premium cost deter applicants?

Competitive Grants:

Rep. David Valadao recently released a draft water package proposal that he wants to include in “must pass” legislation by the end of the year. This language includes several provisions similar to Sen. Dianne Feinstein’s “California Emergency Drought Relief Act of 2015.”

Included in this proposal is the authorization of a new competitive grant program for water recycling and reuse projects. This program would authorize $200 million for projects that reclaim and reuse “municipal, industrial, domestic, or agricultural wastewater or impaired ground or surface waters” and have completed feasibility studies. There are additional criteria for priority projects.

The proposal would be subject to the yearly appropriations process. While the program may have $200 million in spending authority, Congress could potentially allocate less money for this program on any given year.