Lawmakers to Offer Bill to Allow Bonds To Be Used to Increase Water Supply

Federal Tax & Accounting
Friday July 6, 2007 Page G-2
No. 129, ISSN 1522-8800

House Ways and Means Committee members Reps. Xavier Becerra (D-Calif.) and Jon Porter (R-Nev.) are expected to introduce legislation the week of July 9 that would allow public water utilities to issue tax credit bonds as a way for municipalities to fund innovative water supply facilities.

In a Dear Colleague letter sent June 26, Becerra and Porter asked colleagues to support the Clean Renewable Water Supply Bond Act of 2007, which they said would help localities keep up with the growing demand for abundant and clean drinking water.

The lawmakers noted that a number of innovative technologies are available to help provide new sources for clean water and, while the costs are on the decline, "the initial capital expenditures required to build their infrastructure are still too high to use conventional financing mechanisms."

According to an example provided in the letter, construction costs for desalination and water recycling plants can run as high as $400 million. "A more comprehensive subsidy is needed and can be achieved through the use of tax credit bonds," the lawmakers wrote.

Under their plan, they said, "the proceeds from the sale of the bonds would result in an interest-free loan to the public water agency." They said public water agencies would be able to save about $62 million in interest payments on a $100 million project, which would help them offset the upfront capital expenditure.

The lawmakers said that, based on data complied by the New Water Supply Coalition, over the next 10 years, their legislation would generate $7.8 billion to be used for new water supply projects.

A Becerra staffer said the legislation is necessary because some areas do not have enough clean drinking water and efforts must be taken to ward off crises around the country.

 

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