Bipartisan Infrastructure Package Achieves Historic Investments, But More Is Needed

After months of back-and-forth negotiations, and some intense work in the last few weeks, the bipartisan infrastructure package known as the Infrastructure Investment and Jobs Act (IIJA) was passed by the Senate on August 10 by an solidly bipartisan vote of 69-30. The 2,702 page bill includes roughly $555 billion in spending for roads, bridges, rail, water, electric grid, and broadband infrastructure. As previously reported, the foundation for the water section of the bill was taken from the Drinking Water and Wastewater Infrastructure Act (S. 914), which overwhelmingly passed the Senate back in April. This Bipartisan Infrastructure Bill represents a tremendous and historic investment in the nation’s infrastructure.

The water infrastructure portion of the package includes roughly $48 billion in funding, generally dispersed over five years. About $23.5 billion of that is normal water infrastructure money, divided evenly between the Clean Water and Drinking Water State Revolving Loan Fund (SRF) programs ($11.713 billion each to be exact).

Additionally, the legislation includes $15 billion for “lead service line replacement projects and associated activities directly connected to the identification, planning, design, and replacement of lead service lines.” That $15 billion would be distributed through the Drinking Water SRF.

The legislation also includes $10 billion for dealing with emerging contaminants. This is split into three pots of money:

Several authorizations from S. 914 were carried over into this legislation but did not receive funding. Perhaps most notably, the creation of a 40-city pilot program for a federal low-income assistance program housed at EPA is included in the bill, but with no funding attached. Other programs on climate resiliency and workforce development fared the same.

A primary concern about the IIJA is how much of money distributed through the State Revolving Fund programs will be grants and how much will be loans that need to be paid back. Under the IIJA, of the money going out through the SRFs, no more than 49 percent of the money is designated to go out as principal forgiveness or grants, meaning at least 51 percent will go out as loans. The exception would be the PFAS money, which goes out as 100 percent principal forgiveness and grants. With the grants proportion acting as a ceiling rather than floor, and not a requirement, the exact breakdown of grants to loans will vary state to state based on how each state puts the money out.

A second issue is that State Revolving Loan Fund programs typically require the states to co-fund projects. Under current law, the state match requirement for SRF money is 20 percent. With the $23.5 billion in funds under the regular SRF section, the state match is reduced to 10 percent for the first two years but returns to 20 percent for the remaining three years. The lead removal funds, and all the emerging contaminants funds referenced above, fully waive any state match or cost sharing requirements.

The IIJA will pour resources into programs proven to be effective at getting funding into the hands of localities. This is a remarkable first step towards reversing the widening investment gap between the amount of money our water infrastructure needs and what we annually spend on it.

But this legislation is far from perfect. It was disappointing that programs we consider very important were authorized but not funded in this bill, particularly the low-income water assistance program pilot. We also wish the low-income assistance program would have been more in line with the full, national program envisioned in the House-passed infrastructure legislation. The language around the loans/grants breakdown also sets the grants percentage as a ceiling rather than a floor, so some states could see significantly less grant money, or none at all. And while the SRFs are a proven, effective tool to get money out into the hands of communities, there are plenty of lower-capacity systems that are not able to apply with the SRF. Those smaller systems are often the most in need for funds. Finally, with low interest rates, some water systems are already at their debt capacity and will not be able to take on additional loans, and hence will be excluded from large portions of this funding.

Initially, the Biden Administration had proposed spending more on water, announcing the goal of replacing every lead line in the United States. The Brookings Institute estimates that would cost anywhere from $28-47 billion, while the American Water Works Association estimates that it could cost as much as $60 billion. While the $15 billion that made it into the IIJA is a laudable down payment on this endeavor, it is unclear if it could fund the removal of every lead line in the country. Since many states have prioritized lead line removal, some of the traditional SRF money will go to lead line removal even if it was not flagged specifically for that purpose in the bill. There are many local nuances to how lead line removal can be funded, so we anticipate this will be an ongoing debate and require additional funding at all levels for years to come.

Ultimately, the US Water Alliance is very pleased to see this historic investment in our nation’s water infrastructure and we look forward to deploying our network to achieve the best implementation for these funds. With the measure passed in the Senate, the bipartisan package moves to the House, where we anticipate it will wait for several weeks until it is taken up. There are still many unknowns about how the House will react to this bill, but we hope members will remember that investing in infrastructure—and specifically water—is something with vast support from the overwhelming majority of Americans. Water is too essential to wait.