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# Legislative Bulletin..........................................March 9, 2007

**Contents:**

> **H.R. 720 ---** Water Quality Financing Act of 2007

H.R. 720 --- Water Quality Financing Act of 2007 *(Oberstar, D-MN)*

**[Order of Business]{.underline}**: The bill is scheduled for
consideration on Friday, March 9, 2007, likely subject to a modified
open rule requiring pre-filing of all amendments in the *Congressional
Record* by noon on Wednesday, March 7, 2007.

**[Summary by Title]{.underline}**:

*Title I: Technical and Management Assistance*

-   **Authorizes \$375 million over five years (FY 2008- FY 2012) for
    the creation of a new federal grant program** at the Environmental
    Protection Agency (EPA) to provide technical assistance to rural and
    small municipalities to develop wastewater infrastructure.

-   Directs the EPA to establish procedures to promote competition and
    openness in the award of grants to nonprofit, private agencies,
    institutions, and organizations.

-   **Reauthorizes at \$1.5 billion over five years (FY 2008-FY 2012),
    the state grant pollution control programs.**

-   **Reauthorizes through 2012, at \$20 million annually, an expired
    "pilot" program** that provides technical assistance grants for
    treatment water works projects.

*Title II: Construction of Treatment Works*

-   Provides that certain sewage collection systems are eligible for
    existing federal funding provided to address "an adverse
    environmental condition existing on the date of enactment."

-   Expands the definition of "treatment works" to include land
    acquisition. Currently the definition is as follows:

> "any devices and systems used in the storage, treatment, recycling,
> and reclamation of municipal sewage or industrial wastes of a liquid
> nature, or necessary to recycle or reuse water at the most economical
> cost over the estimated life of the works, including intercepting
> sewers, outfall sewers, sewage collection systems, pumping, power, and
> other equipment, and their appurtenances; extensions, improvements,
> remodeling, additions, and alterations thereof; elements essential to
> provide a reliable recycled supply such as standby treatment units and
> clear well facilities; and any works, including site acquisition of
> the land that will be an integral part of the treatment process
> (including land used for the storage of treated wastewater in land
> treatment systems prior to land application) or is used for ultimate
> disposal of residues resulting from such treatment."

*Title III: State Water Pollution Control Revolving Funds*

-   **Authorizes \$14 billion over five years for the Clean Water State
    Revolving Fund** (SRF), which is a program that provides grants to
    states in order to pay for the construction of clean water projects.
    Originally established in 1961 as a grant program, Congress amended
    the program in 1987, to require states to contribute to their
    state's revolving fund, at least 20 percent of the amount of the
    capitalization grant they receive from the federal appropriation.
    The intent was for each state, by 1995, to maintain a
    self-sustaining revolving fund through which local water projects
    would be funded. At that point, the federal government would be able
    to withdraw its initial start-up funding for this program, and the
    states would be self-sufficient. Although these revolving funds are
    fully operational in the states, and the fund has been unauthorized
    since 1995, Congress has continued to annually provide approximately
    \$1 billion for this program through the appropriations process.

-   **Applies the Davis-Bacon prevailing wage requirement to
    construction projects funded through this revolving fund.**
    Specifically, Davis- Bacon requires that each federal government
    contract worth over \$2,000 for the construction, alteration, or
    repair of public buildings or public works (including airports and
    public housing) set the minimum wages to be paid to laborers and
    mechanics employed under the contract at no less than the *locally
    prevailing wages* paid on projects of a similar character (as
    determined by the Secretary of Labor).

> In 1987, Congress continued to require that the Davis- Bacon
> prevailing wage requirement apply to water projects constructed before
> FY 1995. As noted above, it was assumed that Congress would stop
> funding this program in 1995, and that no additional reauthorizations
> would be necessary. Thus, although Congress continued to fund the
> program, the authorization expired, as did the various authorized
> requirements, such as the Davis-Bacon provision. As such, the
> Davis-Bacon requirement has not applied to construction projects
> funded through the revolving funds. However, this bill would
> reinstitute this requirement. To read an RSC backgrounder on
> Davis-Bacon, please click [here](http://www.house.gov/hensarling/rsc).

-   Makes several changes to the state revolving fund program, including
    a requirement that states use at least 15 percent of the amount of
    their grant to provide assistance to municipalities of fewer than
    10,000 individuals that meet certain affordability criteria.

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-   Reauthorizes the Water Pollution Revolving Loan Fund that was
    authorized in FY 1989, which provides funding through a revolving
    fund---similar to the Clean Water Fund---for wastewater treatment
    construction. The Fund's authorization expired in 1994, however
    Congress has continued to appropriate funds to the program. H.R. 720
    makes several changes to this revolving fund program, including the
    following:

    -   Allows up to 30 years (up from 20) for grantees to repay their
        loans to the revolving fund.

    -   Allows states to use up to \$400,000 (or 1/5 percent of the
        grant) for administrative expenses.

    -   Requires states to use up to two percent of their grant to
        provide owners and operators of treatment works, that serve a
        population of 10,000 or fewer, with technical and planning
        assistance and assistance in financial management, user fee
        analysis, budgeting, capital improvement planning, and other
        activities.

    -   Allows states to provide additional subsidization to
        municipalities, including loan forgiveness of principal and
        negative interest rates in certain, defined circumstances.
        Requires states to use 25 percent of federal funds provided
        above \$1 billion for this additional subsidy.

-   Adjusts the current formula for allocating funds from the SRF. Under
    current law, a statutory formula determines the amount of the SRF
    grant given to each state. H.R. 720 would provide that the first
    \$1.35 billion appropriated through this program would continue to
    be distributed to states based on this formula. However, the bill
    requires that any appropriation beyond the \$1.35 billion, be
    distributed based upon a new formula based on certain requirements.

*Title IV: General Provisions*

-   Provides that of all funding authorized for SRF, not less than 0.5
    percent and not more than 1.5 percent, is to be used for grants
    given to projects serving Indian tribes, former Indian reservations
    in Oklahoma (as defined by the Secretary of the Interior, and native
    villages, as defined in the Alaska Native Claims Settlement Act.
    Current law sets aside 0.5 percent for these groups.

*Title V: Studies*

-   Directs the Comptroller General to "study of the funding mechanisms
    and funding sources available to establish a Clean Water Trust
    Fund." The study is to include "an analysis of potential revenue
    sources that can be efficiently collected, are broad based, are
    related to water quality, and that support the annual funding levels
    authorized by this bill." The study is to be submitted to Congress
    no later than January 1, 2008.

-   Directs the Comptroller General to "study of "funding mechanisms and
    funding sources potentially available for wastewater infrastructure
    and other water pollution control activities under the Federal Water
    Pollution Control Act." The study is to include an "analysis of
    funding and investment mechanisms and revenue sources from other
    potential supplemental or alternative public or private sources that
    could be used to fund wastewater infrastructure and other water
    pollution control activities under the Federal Water Pollution
    Control Act." The study is to be submitted to Congress no later than
    January 1, 2008.

*Title VI: Tonnage Fees*

-   Increases net tonnage fees (net tonnage refers to a measurement of
    the vessel's weight) on vessels entering the United States from any
    foreign port. Specifically, the bill increases for FY 2006 and FY
    2007, tonnage fees (duties) from 2 cents to 4.5 cents (with a 22.5
    cents per ton per year limit, up from 10 cents) on vessels entering
    the United States from most foreign ports in the Western Hemisphere
    (see additional information for specific list). The bill would then
    increase the fee from the 4.5 cents to 9 cents per ton for FY 2008
    through FY 2017. In addition, the legislation increases fees for FY
    2006 and FY 2007, from 6 cents to 13.5 cents (with a 67.5 cents per
    ton per year limit up from 30 cents), on vessels arriving in the
    U.S. from foreign ports in the Eastern Hemisphere. The bill would
    then increase the fee from 13.5 cents to 27 cents for FY 2008
    through FY 2017.

> Similar provisions increasing vessel tonnage fees were included in the
> Deficit Reduction Act of 2005. This provision is designed to increase
> money coming into the Treasury, in order to offset other provisions in
> the bill that reduce federal revenues. Vessel tonnage fees were
> originally established in Payne-Aldrich Tariff Act of August 5, 1909,
> a law which modified the amount of duty collected from imported
> merchandise. At that time, fees placed upon vessels entering the U.S.
> from the following list of countries, all located in the Western
> Hemisphere, were less than those placed upon vessels arriving from all
> of the other regions/countries, most of which are located in the
> Eastern Hemisphere:

-   North America

-   Central America

-   West India Islands

-   Bahama Islands

-   Bermuda Islands

-   States along the cost of South America bordering the Caribbean Sea
    or Newfoundland

> According to U.S. Customs, the lower fee was designed to encourage
> trade and activity with those countries closest to the U.S. Since that
> time, this fee structure has continued to be enforced.

**[Possible Conservative Concerns]{.underline}: Some conservatives may
be concerned that this bill authorizes \$16 billion for the creation of
two new programs and other existing programs, and significantly expand
the State Revolving Fund. In addition, some conservatives may also be
concerned that this bill would apply the Davis-Bacon prevailing wage
requirement to construction contracts funded through the SRF.**

**[Committee Action]{.underline}**: H.R. 720 was introduced on January
30, 2007, and referred to the House Committee on Transportation and
Infrastructure, which held a mark-up, and reported the bill on February
7, 2007, by a vote of 55-13. The Committee reported out an amended
version by voice vote on March 5, 2007.

**[Cost to Taxpayers]{.underline}**: According to CBO, H.R. 720 would
authorize discretionary spending of \$2.4 billion in FY 2008, and \$16
billion over five years.

In addition, the Joint Committee on Taxation estimates that enacting
H.R. 720 would reduce revenues coming into the SRF by minimal amounts in
FY 2008, but by \$49 million over five years. In order to avoid a PAYGO
point of order, the bill increases vessel tonnage fees. CBO estimates
that these increased fees would increase offsetting receipts (money
coming into the Treasury) by \$256 million over five years. In total,
enacting H.R. 720 would increase revenue coming into the Treasury in
total by \$80 million in FY 2008, and by \$416 million over five years.
However, as noted above, the bill [authorizes]{.underline} \$16 billion
in *discretionary* spending over five years (authorizations are not
subject to PAYGO requirements even though they represent intent to spend
later in the appropriations process

**[Does the Bill Expand the Size and Scope of the Federal
Government?]{.underline}**: Yes, the bill creates 2 new programs, and
increases an existing program.

**[Does the Bill Contain Any New State-Government, Local-Government, or
Private-Sector Mandates?]{.underline}**: Yes. According to CBO, by
increasing vessel tonnage fees, enacting H.R. 720 would "impose a
private-sector mandate on operators of vessels entering the United
States from any foreign port or place."

**[Does the Bill Comply With the House Earmark Rule?:]{.underline}**
According to Committee Report 110-30, H.R. 720 does not contain any
congressional earmarks, limited tax benefits, or limited tariff
benefits.

**[Constitutional Authority]{.underline}**: The Transportation and
Infrastructure Committee, in Committee Report 110-30 cites
constitutional authority in Article I, Section 8, but fails to cite a
specific clause.

House Rule XIII, Section 3(d)(1), requires that all committee reports
contain "a statement citing the *specific* powers granted to Congress in
the Constitution to enact the law proposed by the bill or joint
resolution" *(emphasis added).*

**[Statement of Administrative Policy]{.underline}**: Although an
official SAP has not been released from the White House, at press time
the Administration is expected to issue a veto threat against H.R. 720
because of the increased spending the Davis-Bacon provisions.

**[RSC Staff Contact:]{.underline}** Joelle Cannon;
<joelle.cannon@mail.house.gov>, 202.226.0718.

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