Infrastructure Investment and Jobs Act – Water

Points of Contact:

Bill Viney, Principal, State and Local Advocacy and Appropriations – bviney@bgrdc.com

Patrick Dolan, Senior Director State and Local Advocacy Practice Headpdolan@bgrdc.com

Infrastructure Investment and Jobs Act

Water

Topline Funding: $68.8 billion ($55 billion in new spending)

The Infrastructure Investment and Jobs Act (IIJA) authorizes roughly $69 billion (B) for water infrastructure. This represents roughly $14B in increased funds for State Revolving Loan Funds (SRF), as well as $55B programmatic funding in new funding FY22-26. This includes $23.4B for traditional SRF activities, $15B for lead service line replacement, $10B for per- and polyfluoroalkyl substances (PFAS) remediation efforts, $3.5B Tribal communities, roughly $2.5B for Indian Water Rights Settlements, a roughly $1.3B Water and Sewer Tax Exemption, and $1B for Bureau of Reclamation Water Programs.

Programs & Funding Streams

DRINKING WATER AND CLEAN WATER STATE REVOLVING FUNDS

Authorizes $23.4B to the Drinking Water and Clean Water State Revolving Funds (SRF), which provide below-market rate loans and grants to fund water infrastructure improvements to protect public health and the environment. These funds provide $11.7B to regular investment activities for Drinking Water SRF and for Clean Water SRF, which help finance investments in local drinking water and wastewater facilities.

Agency of Jurisdiction: Environmental Protection Agency (EPA) – Clean Water State Revolving Fund (CWSRF) ­– Drinking Water State Revolving Fund (DWSRF)

Eligible Grantees: Capitalization grants are awarded to each state for their revolving funds for programs that help localities finance drinking water and wastewater infrastructure facilities. Additionally, 49% of funding will be administered as grants and completely forgivable loans.

Timing: Immediately.

Federal Cost-share: For FY22 and FY23, states matching requirements are reduced to 10% of the annual capitalization grant received from EPA for each revolving fund. The regular 20% match will be reinstituted in FY24. Further, 50% of funding must be set-aside for rural and financially distressed communities.

LEAD SERVICE LINE REPLACEMENT

Authorizes $15B for Drinking Water State Revolving Funds to be directed completely towards lead service line replacement. For states that do not have a use for the lead allocation, funds will be redistributed to other states (using the SRF formula) for the purposes of lead pipe replacement.

Agency of Jurisdiction: EPA – Lead Service Line Replacement

Eligible Grantees: A municipality that is served by a community water system or a non-transient, non-community water system in which more than 30% of the service lines are known, or suspected, to contain lead. Corrosion control programs are not eligible for funding. Additionally, 49% of funding will be administered as grants and completely forgivable loans.

Timing: Immediately.

Federal Cost-share: N/A

Notes: The EPA Administrator is subject to submit a report to the Senate Committee on Environment and Public Works and the House Committee on Energy and Commerce within two years of the grants being awarded under the pilot program.

PER- AND POLYFLUOROALKYL SUBSTANCES (PFAS) SMALL AND DISADVANTAGED COMMUNITIES PROGRAM

Authorizes $10B to provide funding for states and water utilities (drinking water and wastewater). These funds are authorized for the use in the treatment of any pollutant that is a perfluoroalkyl or polyfluoroalkyl substance. The funds are split into three separate programs: $5B through the EPA’s Assistance to Small and Disadvantaged Communities Program and State Response to Contaminants program to address emerging contaminants; $4B through the Drinking Water State Revolving Fund for emerging contaminants with a focus on PFAS; and $1B through the Clean Water State Revolving Fund to address emerging contaminants.

Agency of Jurisdiction: EPA – Small, Underserved, and Disadvantaged Communities Grant Program

Eligible Grantees: An eligible entity includes an owner or operator of a public water system that facilitates in connecting the household of the eligible individual to the public water system; or a nonprofit entity that assists eligible individuals with the costs associated with connecting the household of the eligible individual to a public water system. Up to 100% of the funding will be administered as grants.

Timing: Immediately.

Federal Cost-share: N/A

Notes: The EPA Administrator must submit a report to Congress that describes the implementation of the program, including a description of the use, within 3 years of enactment.

INDIAN HEALTH SERVICE WATER AND SEWER

Authorizes $3.5B for domestic and community sanitation facilities for Indians, which includes $1.7B is set aside for drought resiliency for the Indian Health Service Sanitation Facilities Construction program. Additional, funds are made available to Tribes and Tribal organizations under the Indian Self-Determination and Education Assistance Act on a one-time basis.

Agency of Jurisdiction: Department of Health and Human Services (HHS) – Indian Health Service – Safe Water and Waste Disposal Facilities

Eligible Grantees: Federal agencies, states, and organizations that collaborate and provide resources to Tribes for community sanitation facilities.

Timing: The HHS Secretary is required to provide Congress a detailed spending plan, as part of the annual budget, no later than 90 days.

Federal Cost-share: N/A

INDIAN WATER RIGHTS

Authorizes $2.5B for settlement funds, to establish the “Indian Water Rights Settlement Completion Fund” under the Treasury Department. The deposited funds are to be utilized by the Secretary of Interior for transfers, authorized Native American water rights claims, to satisfy obligations under an Indian water settlement approved and authorized by an Act of Congress.

Agency of Jurisdiction: Department of Interior (DOI)– Indian Water Rights Settlement

Eligible Grantees: Entities on the federal, state and local level that collaborate with tribes in conducting water resource investigations, implementations, and settlements.

Timing: The Secretary of the Interior is granted discretion to determine the sequence and timing of transfers of funds to complete settlements as expeditiously as practicable.

Federal Cost-share: N/A

WATER AND SEWER TAX EXEMPTION

Modifies the Internal Revenue Code for a $1.3B tax exemption, which provides an exclusion from gross income for contributions to the capital of a corporation. This excludes from taxable income, any “contribution in aid of construction” (CIAC) or any other contribution as a customer or potential customer, as well as any contribution by any government entity or civic group (other than a contribution made by a shareholder as such) for purposes of water or sewerage improvements.

Agency of Jurisdiction: Internal Revenue Service

Eligible Grantees: An amount is expended for the acquisition or construction of water and sewer construction and accurate records are kept of the amounts contributed and expenditures made.

Timing: This provision applies to contributions made after December 31, 2020, unless the contribution is made by a government entity pursuant to a master development plan that is approved prior to the effective date by a government entity.

Federal Cost-share: N/A