Washington - With communities around the country facing the economic and safety challenges of aging water and sewer systems, U.S. Senators Robert Menendez (D-NJ) and Mike Crapo (R-ID) today introduced Senate legislation to help local governments finance these infrastructure projects. The Sustainable Water Infrastructure Investment Act, sponsored in the House of Representatives by Rep. Bill Pascrell (NJ-8), would allow greater use of tax-exempt private activity bonds by local governments to finance these projects. These bonds are currently subject to an annual cap, but the legislation would ensure that bonds for water and wastewater projects are not subject to the cap. Encouraging water and sewage projects creates jobs and generates economic growth while rebuilding critical community infrastructure. It is estimated that the legislation could create 57,000 jobs.

"Part of rebuilding our economy for the 21st Century is renovating the infrastructure that helps our communities prosper," said Menendez. "Many of our communities in New Jersey have been challenged by aging and deteriorating water and sewer systems, which not only jeopardizes the health of our families but also puts significant strain on local budgets. With this legislation, we can help local governments afford water and sewer renovations without burdening taxpayers, and we can create thousands of jobs."

"Many small communities need, and deserve, federal support to comply with federal water and wastewater guidelines," Crapo said. "This bill would allow local communities to leverage private capital markets in combination with other financial mechanisms to finance water and wastewater infrastructure projects. It makes financial sense for communities and will improve public health and water quality."

"It is critical that the Congress effectively and expeditiously respond to two of our nation's most-pressing needs: jobs creation and water system upgrades," said Pascrell, a House Ways and Means Committee member who shepherded passage of the water infrastructure legislation in the House last month as part of H.R. 4849, the Small Business and Infrastructure Jobs Tax Act of 2010. "Our nation's job deficit and deteriorating water systems have gotten to the point that if you randomly pick up a newspaper in any American city, there's a good chance you find a story about a company's job cuts or a community's water main break - maybe both. Taxpayers cannot be expected to foot the entire bill for all of the repairs and updates that our water infrastructure needs. Our legislation will encourage public-private sector partnerships to secure needed resources. I commend Senator Menendez and Senator Crapo for showing their leadership on this very important initiative."

Private activity bonds are a form of tax-exempt financing for a government entity such as a municipality or state that wants to partner with a private party to meet a public need (as defined by law). Interest paid on bonds issued by State and local governments generally is excluded from gross income for Federal income tax purposes. Congress controls the total volume of tax-exempt bonds by limiting issuance in each state with an annual cap. In 2009, the State volume cap was equal to $90 per resident or $273.09 million, if greater.

This legislation would remove issuances of private activity bonds for water and wastewater projects from the annual volume caps. Certain bond issuances, such as bonds to finance airports, ports, certain inter-city rail projects, and solid waste projects are already exempt from the annual caps.

Why It's Needed:

• The Environmental Protection Agency and the Government Accountability Office estimate the investment gap for infrastructure upgrades over the next 20 years to be more than $500 billion to ensure safe drinking water and wastewater treatment.

• The proposal would reduce cost of water projects, which translates into better water infrastructure, better quality water, and lower rates for customers

• According to the Joint Committee on Taxation, the cost to the Federal Government of supporting 57,000 jobs in 2010 (and at increasing levels each year thereafter) through a PAB volume cap exception is $354 million over 10 years.

• There is a tremendous economic feedback effect for dollars invested in modernizing water and sewage infrastructure. In fact, studies show every dollar invested in water and sewer infrastructure, yields a $6.35 increase in Gross Domestic Product.