While cities welcome a diversity of tools to finance their infrastructure needs, EPA’s proposal to raise the state cap on private activity bonds is incapable of narrowing the gap in any meaningful way. The current cap on private activity bonds is not being met today in 49 out of 50 states. Furthermore, municipalities have experimented with privatization in the past and it generally hasn’t worked.
Economists note that an efficient public utility can outperform an efficient private utility because it does not need to produce profits and need not pay taxes on revenue generated. NACWA believes that a utility’s decision about whether to engage in a public-private partnership must be made locally and, perhaps more importantly, without federal pressure.
In short, the nation’s environment and public health are well-served through a public trust, as exemplified by 35 years of water quality progress enjoyed under the Clean Water Act.
So why has the Administration ramped up its focus on privatization? Because it no longer wants to fund these costly programs. The Administration continues to call for steep cuts in the clean water state revolving fund (CWSRF) and even threatened to veto recent legislation passed by the U.S. House of Representatives that would significantly boost funding for this popular and effective program. In a self-fulfilling prophecy, it may be that by cutting federal funding, cities will be under greater pressure to consider privatization as an option.
The federal government has taken a different approach for other key infrastructure sectors, such as highways and airports, where they have set up dedicated funding mechanisms to support them. If it’s good enough for them, why not for clean water?