GOP Tax Victory Puts Drinking Water at Risk

In the landmark tax reform overhaul, congressional Republicans axed a critical financing tool that cities and towns have used to upgrade aging drinking water infrastructure: advance refunding bonds. These bonds allowed municipalities to refinance outstanding debt at lower interest rates. The loss of this tool—combined with historically low levels of federal enforcement and support for basic drinking water standards—could deepen the nation’s ongoing lead contamination crisis by making it harder for local governments to fund much-needed infrastructure improvements that would curb lead contaminants in drinking water.

National water industry groups, including the American Water Works Association, expressed alarm about the potential impacts in a November letter to Republican Senator Orrin Hatch of Utah. The groups noted that advance refunding allowed states and local governments to refinance more than 900 municipal bonds for water infrastructure projects, saving $1.36 billion. “A repeal of advance refunding bonds would impact their ability to realize these opportunities to save their communities and ratepayers money and advance critical infrastructure investment,” the groups warned.

Dispensing with advance refunding bonds “seems needlessly punitive,” says Eric Rothstein, a national water issues specialist at the Galardi Rothstein Group, a Chicago-based infrastructure consulting firm. “It will have a dampening effect on municipalities’ ability to raise new capital and fund needed infrastructure.” Rothstein adds. Other financing tools exist, but those instruments are typically more complicated and more expensive for local governments.

The change comes at a particularly bad time for many municipalities, which have struggled in recent years to comply with federal drinking water standards. Last year, a Reuters investigation found that drinking water in more than 3,000 localities had higher lead levels than Flint, Michigan, did at the height of its contamination crisis.

High lead levels have plagued Rust Belt cities like Milwaukee and Cleveland, which still rely on dangerous lead service lines. In impoverished neighborhoods like St. Claire-Superior in Cleveland, and Sandtown-Winchester in Baltimore, nearly half of children tested in the last decade had elevated lead levels, according to the Centers for Disease Control and Prevention.

Chronic underfunding and under-enforcement of federal and state drinking water safety regulations continue to play major roles in this ongoing crisis. According to a 2015 American Water Works Association study, if the Safe Drinking Water Act's Lead and Copper Rule were properly enforced, more than 70 percent of water systems relying on lead service lines, which provide drinking water for more than 96 million Americans, could be deemed unsafe. Even before the GOP changes, only 2 percent of public water utilities could afford to fully replace their lead lines.

A recent study by the Association of State Drinking Water Administrators warned that an additional $240 million per year should be distributed among the states to meet the minimum requirements of the federal Safe Drinking Water Act. The study called for Congress to increase monies that go into the Drinking Water State Revolving Fund, a critical subsidy for local water infrastructure improvements. The funding for the program has remained well below 2010 levels. Congress appropriates money for the DWSRF through the EPA, which then awards capitalization grants to individual states. States then provide a 20 percent match.

Neither the House’s nor the Senate’s version of the EPA budget included increases for the fund. Without a boost in federal support, cash-strapped municipalities had depended on financial tools like advance refunding.

Water quality at the local level has also already suffered through persistent cuts to federal enforcement, and the GOP spending bill is no exception. Along with bringing the agency’s overall budget to its lowest level since 1986 (adjusted for inflation), the Senate bill slashes the Office of Enforcement and Compliance by 10 percent. According to a 2016 Natural Resources Defense Council study, the EPA has taken formal action against only 11 percent of utilities that have violated the Safe Drinking Water Act’s Lead and Copper Rule, while seeking damages from just 3 percent of utilities. Further slashing the EPA’s enforcement powers makes it more difficult for local governments to address elevated levels of lead in drinking water.  

Democrats in Congress have wasted no time in warning about the potential for more trouble. In a December 14 letter to Senate leaders, more than three dozen Democratic senators argued that the GOP spending bill “includes deep and harmful cuts in programs critical to protecting public health and the environment,” adding that that agency is already “badly underfunded, understaffed and struggling to perform its basic and legally required functions.”

Despite repeated assurances about ending Flint’s water crisis and acting to ensure safe drinking water nationwide, President Trump and his allies in Congress have eliminated a key financial tool that municipalities rely on to bring clean water into homes. With cities already struggling to find the funding to replace water lines and comply with federal standards, the lead contamination crisis will continue to threaten the health of millions of Americans.