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Congress Considers Tax-Exempt Bonds for Water and Sewage Facilities

By: Alfred E. Smith

On Thursday, March 16, 2006, the House Ways and Means Committee conducted a hearing to consider a Bill to facilitate a broader use of public-private partnerships for the construction and operation of water and wastewater facilities.  H.R. 1708, introduced by Rep. Clay Shaw (R-Fla.), would eliminate the volume cap for private activity bonds, allowing an alternative source of financing for needed water and sewer infrastructure investment.


The Bill States:  "Removal of State volume caps for water and wastewater infrastructure will make lower interest capital available and enable municipalities, water districts, investor owned utilities, public-private partnerships, rural water corporations, and river authorities to upgrade the Nation's critical water and wastewater infrastructure at the lowest possible cost and comply with Federal mandates."


Mr. Shaw noted that the legislation would end competition for cap with other public projects, including housing, which absorbs much of the allocations in most states, and "would unleash the power of the private sector to assist our cities and towns in meeting their infrastructure replacement challenges," including those mandated by federal law.


Proponents noted that the Bill would allow the private sector to help municipalities more efficiently manage and maintain facilities, as limits on tax-exempt financing are a "significant impediment to broader use of public-private partnerships."  These proponents further argued that in light of constrained federal budgets, increasing private sector involvement is necessary to close an estimated $23 billion annual funding gap for water and wastewater infrastructure nationwide.  To view additional testimony, click here.


To view the complete text of the proposed legislation, click here.


Jeffrey Stava is a Partner in Nossaman's Irvine office who specializes in advising clients in public finance matters.  He represents public agencies as bond counsel or disclosure counsel and also works as underwriter counsel to investment bankers in tax-exempt financing transactions.  He has extensive experience with water/wastewater transactions.  He can be reached at (949) 833-7800 or


Alfred E. Smith, II is a Partner in Nossaman's Los Angeles office who specializes in environmental, water and complex commercial litigation.  He represents public and private water purveyors, major water users, corporations and public agencies on matters including environmental compliance, water rights disputes, conjunctive use, public utility regulation, groundwater management and litigation over allegedly contaminated water and soil.  Alfred is an appointed member of the Association of California Water Agencies' (ACWA) Legal Affairs Committee.  He can be reached at (213) 612-7800 or


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