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[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[S. 3626 Introduced in Senate (IS)]

112th CONGRESS
  2d Session
                                S. 3626

  To provide financing assistance for qualified water infrastructure 
                   projects, and for other purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                           November 13, 2012

  Mr. Merkley introduced the following bill; which was read twice and 
       referred to the Committee on Environment and Public Works

_______________________________________________________________________

                                 A BILL

 
  To provide financing assistance for qualified water infrastructure 
                   projects, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Water Infrastructure Finance and 
Innovation Act of 2012''.

SEC. 2. FINDINGS.

    Congress finds that--
            (1) it is in the national interest to encourage the timely 
        and cost-effective rehabilitation and replacement of aging 
        water and sewer infrastructure and to support investments in 
        innovative, cost-effective, and sustainable infrastructure 
        approaches to protect public health and clean water;
            (2) the Environmental Protection Agency reports that, in 
        the 20-year period following the date of enactment of this 
        Act--
                    (A) $334,800,000,000 is needed to invest in 
                infrastructure improvements to ensure the provision of 
                safe water; and
                    (B) $298,100,000,000 is needed for publicly owned 
                wastewater systems-related infrastructure;
            (3) customer rates and local charges are and will remain 
        the primary means of paying for water service and 
        infrastructure in the United States;
            (4) the municipal bond market and State revolving fund 
        programs are the primary long-term means for financing water 
        infrastructure projects, but upfront investment needs are too 
        high to be met with those traditional means alone;
            (5) financing constraints make it particularly difficult 
        for State revolving funds to support large water infrastructure 
        projects of regional and national significance;
            (6) the growing funding gap demonstrates the need to invest 
        in innovative and cost-effective approaches such as green 
        infrastructure, water efficiency, and source water protection 
        to obtain the greatest environmental and public health benefits 
        per dollar invested;
            (7) this Act will substantially benefit the drinking water 
        and wastewater systems of the United States by--
                    (A) addressing the gap in funding for large, 
                regionally and nationally significant projects by 
                making available direct loans and loan guarantees to 
                reduce borrowing costs and accelerate water 
                infrastructure investment;
                    (B) enhancing the capacity of State revolving fund 
                programs to assist other projects; and
                    (C) promoting clean and safe water through 
                compliance with the Federal Water Pollution Control Act 
                (33 U.S.C. 1251 et seq.) and the Safe Drinking Water 
                Act (42 U.S.C. 300f et seq.);
            (8) since the historical default rate on water and sewer 
        bonds is 0.04 percent, the risk of default on Federal 
        assistance provided under this Act is minimal;
            (9) keeping the risk of default on water and sewer bonds 
        low requires the alignment of infrastructure investment with 
        environmental sustainability; and
            (10) because loans, loan guarantees, and other credit 
        instruments only incur long-term costs if subsidized or in the 
        event of default, this Act can help to meet the water 
        infrastructure needs of the United States at minimal long-term 
        cost to the Federal Government.

SEC. 3. DEFINITIONS.

    In this Act:
            (1) Administrator.--The term ``Administrator'' means the 
        Administrator of the Environmental Protection Agency.
            (2) Borrower.--The term ``borrower'' means an eligible 
        entity that owes payments of interest or principal on a credit 
        instrument.
            (3) Community water system.--The term ``community water 
        system'' has the meaning given the term in section 1401 of the 
        Safe Drinking Water Act (42 U.S.C. 300f).
            (4) Cost of a direct loan; cost of a loan guarantee.--The 
        terms ``cost of a direct loan'' and ``cost of a loan 
        guarantee'' mean the ``cost of a direct loan'' and ``cost of a 
        loan guarantee'', respectively, as those terms are used in 
        section 502 of the Federal Credit Reform Act of 1990 (2 U.S.C. 
        661a).
            (5) Credit instrument.--The term ``credit instrument'' 
        means--
                    (A) a direct loan made under this Act; or
                    (B) a loan or other debt obligation that is subject 
                to a loan guarantee under this Act.
            (6) Direct loan.--
                    (A) In general.--The term ``direct loan'' has the 
                meaning given the term in section 502 of the Federal 
                Credit Reform Act of 1990 (2 U.S.C. 661a).
                    (B) Inclusions.--The term ``direct loan'' includes 
                the purchase of a bond by the Federal Government.
            (7) Eligible entity.--
                    (A) In general.--The term ``eligible entity'' 
                means--
                            (i) an entity (other than a State or local 
                        agency with jurisdiction over highways or 
                        roads) that owns or operates a treatment works 
                        that serves the general public, including a 
                        municipal or regional separate storm sewer 
                        system management agency;
                            (ii) an entity that owns or operates a 
                        community water system;
                            (iii) 1 or more entities described in 
                        clauses (i) and (ii) that are cooperating on an 
                        eligible project;
                            (iv) for an eligible project described in 
                        paragraph (8)(B), a State infrastructure 
                        financing authority;
                            (v) any entity eligible to receive a loan 
                        or loan guarantee under a State water pollution 
                        control revolving fund established under title 
                        VI of the Federal Water Pollution Control Act 
                        (33 U.S.C. 1381 et seq.); and
                            (vi) any entity eligible to receive a loan 
                        or loan guarantee under a State drinking water 
                        revolving loan fund established under section 
                        1452 of the Safe Drinking Water Act (42 U.S.C. 
                        300j-12).
                    (B) Inclusions.--The term ``eligible entity'' 
                includes a public-private partnership, except that only 
                the public entity-owned or investor-owned utility shall 
                receive assistance under this Act, not the private 
                financing or development partner.
            (8) Eligible project.--The term ``eligible project'' 
        means--
                    (A) a capital project--
                            (i) to construct, replace, or rehabilitate 
                        a treatment works or a community water system;
                            (ii) to reduce the energy consumption needs 
                        of a treatment works or a community water 
                        system, including the implementation of energy 
                        efficient or renewable generation technologies;
                            (iii) to increase water efficiency, reduce 
                        the demand for water, or reduce the demand for 
                        treatment works or community water system 
                        capacity;
                            (iv) to manage or control stormwater;
                            (v) to reuse municipal wastewater or 
                        stormwater;
                            (vi) for the consolidation of 2 or more 
                        treatment works or community water systems;
                            (vii) to increase drinking water source 
                        protection for surface and groundwater sources;
                            (viii) for construction activities 
                        involving--
                                    (I) the repair, replacement, or 
                                upgrading of a treatment works or 
                                sewage collection system in a community 
                                that exists on the date of enactment of 
                                this Act to address an adverse 
                                environmental condition existing on 
                                that date of enactment;
                                    (II) the construction of an 
                                advanced decentralized wastewater 
                                treatment system, including planning, 
                                design, associated preconstruction 
                                planning activities (as defined in 
                                section 212 of the Federal Water 
                                Pollution Control Act (33 U.S.C. 
                                1292)); and
                                    (III) implementation measures to 
                                control, manage, reduce, treat, 
                                infiltrate, or reuse municipal 
                                stormwater, the primary purpose of 
                                which is the protection, preservation, 
                                or enhancement of water quality to 
                                support public purposes (including 
                                decentralized or distributed stormwater 
                                controls, low-impact development 
                                technologies and nonstructural 
                                approaches, stream buffers, and 
                                wetlands restoration and enhancement, 
                                the procurement and use of equipment to 
                                support minimum measures, such as 
                                street sweeping and storm drain system 
                                cleaning, and acquisition of other land 
                                and interests in land to meet the needs 
                                of existing development that are 
                                necessary for those activities and 
                                measures);
                            (ix) to implement a management program 
                        established under section 319 of the Federal 
                        Water Pollution Control Act (33 U.S.C. 1329);
                            (x) to develop and implement a conservation 
                        and management plan under section 320 of the 
                        Federal Water Pollution Control Act (33 U.S.C. 
                        1330);
                            (xi) to increase the security of wastewater 
                        treatment works or a community water system 
                        (excluding any expenditure for operations or 
                        maintenance);
                            (xii) to carry out water conservation or 
                        efficiency projects, the primary purpose of 
                        which is the protection, preservation, or 
                        enhancement of water quality to support public 
                        purposes;
                            (xiii) to implement measures to integrate 
                        water resource management planning and 
                        implementation;
                            (xiv) to carry out water, rainwater, and 
                        wastewater reuse, reclamation, recycling, and 
                        rainwater harvesting projects, the primary 
                        purpose of which is the protection, 
                        preservation, or enhancement of water quality 
                        to support public purposes; and
                            (xv) for capital costs associated with 
                        monitoring equipment for combined or sanitary 
                        sewer overflows;
                    (B) a non-capital project that is--
                            (i) associated with a capital project; and
                            (ii) the aim of which is to promote the use 
                        of environmentally sustainable projects, 
                        including utility-backed stormwater and water 
                        efficiency retrofit programs; and
                    (C) 2 or more projects described in subparagraph 
                (A) that are combined to receive a single direct loan 
                or loan guarantee.
            (9) Loan guarantee.--The term ``loan guarantee'' has the 
        meaning given the term in section 502 of the Federal Credit 
        Reform Act of 1990 (2 U.S.C. 661a).
            (10) State infrastructure financing authority.--The term 
        ``State infrastructure financing authority'' means the State 
        entity established or designated by the Governor of a State to 
        receive a capitalization grant provided under, or to otherwise 
        carry out the requirements of, title VI of the Federal Water 
        Pollution Control Act (33 U.S.C. 1381 et seq.) or section 1452 
        of the Safe Drinking Water Act (42 U.S.C. 300j-12).
            (11) Treatment works.--The term ``treatment works'' has the 
        meaning given the term in section 212 of Federal Water 
        Pollution Control Act (33 U.S.C. 1292).

SEC. 4. ESTABLISHMENT.

    The Administrator may make a direct loan, including a subordinated 
loan, or a loan guarantee to an eligible entity to carry out activities 
for an eligible project in accordance with this Act.

SEC. 5. APPLICATIONS.

    (a) In General.--As a condition of receiving assistance under this 
Act, an eligible entity shall submit to the Administrator an 
application at such time, in such manner, and containing such 
information as the Administrator may require.
    (b) Combined Projects.--In the case of an eligible project 
described in section 3(8)(C), the Administrator shall require from the 
eligible entity a single application for the group of projects.

SEC. 6. USE OF ASSISTANCE.

    An eligible entity shall only use amounts received under this Act 
for eligible projects--
            (1) to carry out--
                    (A) development phase activities, including 
                planning, feasibility analysis, revenue forecasting, 
                environmental review, permitting, and other 
                preconstruction engineering and design work;
                    (B) construction, reconstruction, rehabilitation, 
                and replacement activities necessary for the project; 
                and
                    (C) environmental mitigation and construction 
                contingencies;
            (2) to acquire real property (including interests in real 
        property) and equipment;
            (3) to provide for any funding mechanisms necessary to meet 
        market or affordability requirements, reasonably required 
        reserve funds, capitalized interest issuance expenses, and 
        other carrying costs during construction of the project; and
            (4) to refinance interim construction financing, long-term 
        project obligations, or direct loans or loan guarantees made 
        under this Act.

SEC. 7. SELECTION AMONG ELIGIBLE PROJECTS.

    (a) In General.--The Administrator shall select eligible projects 
to receive assistance under this Act based on--
            (1) the significance of the infrastructure needs addressed 
        by the project, including the economic, environmental, and 
        public health benefits of the project;
            (2) the creditworthiness of the project under 
        consideration, including the terms, conditions, financial 
        structure, and security features making up the proposed 
        financing, and the financial assumptions upon which the project 
        is based;
            (3) the need for Federal assistance, including the 
        likelihood that the provision of assistance by the 
        Administrator under this Act will cause the project to proceed 
        more promptly and with lower costs for financing than would be 
        the case without the assistance;
            (4) the degree to which the project financing plan includes 
        public or private financing in addition to assistance under 
        this Act;
            (5) the cost of the direct loan or loan guarantee to the 
        Federal Government for the project;
            (6) the extent to which the project is nationally or 
        regionally significant;
            (7) whether the project, to the maximum extent practicable, 
        incorporates environmentally sustainable approaches, including 
        conservation, efficiency, reuse, source water protection, 
        energy efficiency, green infrastructure, and other innovative 
        techniques;
            (8) whether the project is consistent with--
                    (A) the State priority system established pursuant 
                to section 603(g) of the Federal Water Pollution 
                Control Act (33 U.S.C. 1383(g)); and
                    (B) the types of projects described in section 
                1452(b)(3) of the Safe Drinking Water Act (42 U.S.C. 
                300j-12(b)(3)); and
            (9) the priority system established under subsection (b).
    (b) Priority System.--The Administrator shall establish a priority 
system that gives greater weight to an application for an eligible 
project that includes--
            (1) an inventory of the assets of the treatment works or 
        community water system, including a description of the 
        condition of those assets;
            (2) a schedule for replacement of the assets of the 
        treatment works or community water system;
            (3) a financing plan that factors in all lifecycle costs 
        and describes the sources of revenue from ratepayers, grants, 
        bonds, loans, and other sources designated to meet those 
        lifecycle costs;
            (4) a description of any options for restructuring the 
        treatment works or community water system;
            (5) any new models or techniques, other than a traditional 
        wastewater model, to treat or minimize sewage or urban 
        stormwater discharges using--
                    (A) decentralized or distributed stormwater 
                controls;
                    (B) advanced decentralized wastewater treatment;
                    (C) low-impact development technologies and 
                nonstructural approaches;
                    (D) stream buffers;
                    (E) wetland restoration and enhancement;
                    (F) actions to minimize the quantity of and direct 
                connections to impervious surfaces;
                    (G) soil and vegetation or other permeable 
                materials; or
                    (H) actions that increase efficient water use, 
                water conservation, or water or wastewater reuse, 
                including rainwater harvesting;
            (6) to the maximum extent practicable, the use of water 
        efficiency and conservation techniques to generate cost-
        effective sources of new water supply; and
            (7) a demonstration of consistency with State, regional, 
        and municipal watershed plans, water conservation and 
        efficiency plans, or integrated water resource management 
        plans.
    (c) Special Rule for Combined Projects.--For an eligible project 
described in section 3(8)(C), the Administrator shall consider only the 
criteria described in paragraphs (1), (2), (3), and (5) of subsection 
(a).
    (d) Reasonable Assurance of Payment.--The Administrator may select 
an eligible project for assistance only if the Administrator finds that 
there is a reasonable assurance that all payments will be made on the 
credit instrument.

SEC. 8. CREDIT EVALUATION.

    (a) In General.--The Administrator shall develop and implement a 
credit evaluation process before providing any assistance under this 
Act.
    (b) Preliminary Rating Opinion Letter.--For purposes of determining 
creditworthiness under section 7(a)(2), the Administrator may--
            (1) require an eligible entity to provide a preliminary 
        rating opinion letter from at least 1 rating agency; or
            (2) use an alternative (including an internal) credit 
        rating process.
    (c) Rule for Certain Combined Projects.--For an eligible project 
described in section 3(8)(C) for which a State infrastructure financing 
authority is the eligible entity, in addition to the creditworthiness 
consideration under section 7(a)(2), the Administrator shall evaluate 
the creditworthiness of each entity represented by the State 
infrastructure financing authority that will be carrying out any 
eligible project described in section 3(8)(A) that will be a part of 
the eligible project.

SEC. 9. TERMS AND CONDITIONS.

    (a) In General.--Each direct loan and loan guarantee made under 
this Act shall be on such terms and conditions and contain such 
covenants, representations, warranties, and requirements (including 
requirements for audits) as the Administrator may prescribe.
    (b) Interest Rate.--
            (1) In general.--The interest rate applicable to a direct 
        loan shall be the rate that is set by reference to a benchmark 
        interest rate on marketable Treasury securities with a similar 
        maturity to that direct loan, as of the date of issuance of the 
        direct loan.
            (2) Higher interest rates.--The Administrator may charge a 
        higher interest rate on a direct loan if the Administrator 
        determines that the risk profile of the eligible project 
        indicates a higher interest rate is necessary to protect the 
        interests of the United States.
    (c) Term of Loan.--The Administrator may provide assistance under 
this Act only with respect to a credit instrument the final maturity 
date of which is not later than 35 years after the date on which funds 
are disbursed.
    (d) Security Features.--The Administrator shall require a borrower 
receiving assistance under this Act to use a rate covenant, coverage 
requirement, or similar security feature supporting the project 
obligations to ensure repayment.
    (e) Direct Loan Repayments.--
            (1) Schedule.--The Administrator shall establish a 
        repayment schedule for each direct loan under this Act based on 
        the projected cash flow from project repayment sources.
            (2) Commencement.--Scheduled repayments of principal or 
        interest on a direct loan made under this Act shall commence 
        not later than 5 years after the date of substantial completion 
        of the project, as determined by the Administrator in a manner 
        set forth at the time the direct loan is made.
            (3) Deferral of payments.--
                    (A) In general.--If the Administrator determines 
                that a borrower lacks the resources to make scheduled 
                payments on a direct loan made under this Act based on 
                circumstances not foreseeable at the time the direct 
                loan is made, the Administrator may allow for the 
                deferral of the payments.
                    (B) Interests.--Any payment deferred under 
                subparagraph (A) shall--
                            (i) continue to accrue interest until fully 
                        repaid; and
                            (ii) be scheduled to be amortized over the 
                        remaining term of the direct loan.
                    (C) Criteria.--Any payment deferral under 
                subparagraph (A) shall be contingent on the project 
                meeting criteria established by the Administrator, 
                which shall include standards for reasonable assurance 
                of repayment.
            (4) Prepayment.--Payments on the direct loan may be made in 
        advance with no penalty.
    (f) Special Rules for Loan Guarantees.--
            (1) Terms.--The terms of a credit instrument that is the 
        subject of a loan guarantee under this Act shall be consistent 
        with the terms set forth in this Act for a direct loan, except 
        that the interest rate and any prepayment features on the 
        credit instrument shall be negotiated between the borrower and 
        the lender, with the approval of the Administrator.
            (2) Interest rate.--The Administrator may make a loan 
        guarantee under this Act only if the Administrator determines 
        that the interest rate on the credit instrument that is subject 
        to the loan guarantee is appropriate, taking into account the 
        prevailing rate of interest in the private sector for similar 
        obligations.
            (3) Eligible lender.--The Administrator may not make a loan 
        guarantee under this Act unless the lender of the loan or 
        purchaser of the debt security that will be the subject of the 
        loan guarantee is a non-Federal, qualified institutional buyer 
        (as defined in section 230.144A(a) of title 17, Code of Federal 
        Regulations (or successor regulation)), including--
                    (A) a qualified retirement plan (as defined in 
                section 4974(c) of the Internal Revenue Code of 1986) 
                that is a non-Federal qualified institutional buyer; 
                and
                    (B) a governmental plan (as defined in section 
                414(d) of the Internal Revenue Code of 1986) that is a 
                non-Federal qualified institutional buyer.
            (4) Adequate servicing provisions required.--No loan 
        guarantee may be made under this Act for a loan unless the 
        Administrator determines that the lender with respect to the 
        loan is responsible and that adequate servicing provisions have 
        been made for the loan that is the subject of the loan 
        guarantee that are reasonable and protect the financial 
        interest of the United States.

SEC. 10. PROGRAM ADMINISTRATION.

    (a) In General.--The Administrator shall establish a uniform system 
to service each direct loan and loan guarantee made under this Act.
    (b) Assistance From Expert Firms.--The Administrator may retain the 
services of expert firms, including counsel, in the field of municipal 
and project finance to assist in the underwriting and servicing of a 
direct loan or loan guarantee made under this Act.
    (c) Fees for Administrative Expenses.--
            (1) In general.--In providing assistance under this Act, 
        the Administrator may--
                    (A) collect fees for administrative expenses, 
                including premiums for loan guarantees, at a level that 
                is sufficient to cover the costs of services of expert 
                firms and all or a portion of the costs to the Federal 
                Government of servicing the direct loans and loan 
                guarantees made under this Act; and
                    (B) as provided in advance in appropriations acts, 
                use the amounts described in subparagraph (A) to cover 
                the expenses described in that subparagraph.
            (2) Level of fees.--The Administrator shall set the fees 
        described in paragraph (1) at a level that will minimize the 
        cost to the Federal Government and maximize the assistance that 
        can be provided under this Act, while providing competitive 
        credit terms to eligible projects, in order to reduce borrowing 
        costs and accelerate water infrastructure investment.

SEC. 11. TECHNICAL ASSISTANCE.

    The Administrator may use amounts made available to carry out this 
Act to provide technical assistance to applicants and prospective 
applicants in creating financing packages that leverage a mix of public 
and private funding sources.

SEC. 12. RESTRICTIONS.

    (a) Assistance Threshold.--The Administrator may provide assistance 
under this Act only with respect to a credit instrument in an amount of 
not less than $20,000,000.
    (b) Refinancing.--The Administrator shall make available to 
eligible entities for refinancing activities described in section 6(4) 
not more than 15 percent of the total amounts made available to carry 
out this Act.

SEC. 13. PREVAILING WAGES.

    (a) In General.--Notwithstanding any other provision of law and in 
a manner consistent with other provisions in this Act, all laborers and 
mechanics employed by contractors and subcontractors on projects funded 
directly by, or assisted in whole or in part by and through, the 
Federal Government pursuant to this Act shall be paid wages at rates 
not less than those prevailing on projects of a character similar in 
the locality as determined by the Secretary of Labor in accordance with 
subchapter IV of chapter 31 of title 40, United States Code.
    (b) Administration.--With respect to the labor standards specified 
in this section, the Secretary of Labor shall have the authority and 
functions set forth in Reorganization Plan Numbered 14 of 1950 (64 
Stat. 1267; 5 U.S.C. App.) and section 3145 of title 40, United States 
Code.

SEC. 14. USE OF AMERICAN IRON, STEEL, AND MANUFACTURED GOODS.

    (a) In General.--Except as provided in subsection (b), none of the 
amounts made available under this Act may be used for a project for the 
construction, alteration, maintenance, or repair of a public building 
or public work unless all of the iron, steel, and manufactured goods 
used in the project are produced in the United States.
    (b) Exception.--Subsection (a) shall not apply in any case or 
category of cases in which the head of the Federal department or agency 
involved finds that--
            (1) applying subsection (a) would be inconsistent with the 
        public interest;
            (2) iron, steel, and the relevant manufactured goods are 
        not produced in the United States in sufficient and reasonably 
        available quantities and of a satisfactory quality; or
            (3) inclusion of iron, steel, and manufactured goods 
        produced in the United States will increase the cost of the 
        overall project by more than 25 percent.
    (c) Public Notice.--If the head of a Federal department or agency 
determines that it is necessary to waive the application of subsection 
(a) based on a finding under subsection (b), the head of the department 
or agency shall publish in the Federal Register a detailed written 
justification as to why the provision is being waived.
    (d) International Agreements.--This section shall be applied in a 
manner consistent with United States obligations under international 
agreements.

SEC. 15. FUNDING.

    (a) Authorization of Appropriations.--
            (1) Direct loans and loan guarantees.--There is authorized 
        to be appropriated for the cost of providing direct loans and 
        loan guarantees under this Act such sums as are necessary.
            (2) Administrative expenses.--
                    (A) In general.--There is authorized to be 
                appropriated for administrative expenses under this Act 
                an amount equal to the amount of fees collected under 
                section 10(c).
                    (B) Additional authorization of appropriations.--In 
                addition to amounts authorized to be appropriated under 
                subparagraph (A), there are authorized to be 
                appropriated for administrative expenses under this Act 
                such sums as are necessary.
    (b) Payment of Subsidy Cost.--A borrower may pay for the cost of a 
direct loan or loan guarantee under this Act, along with the 
appropriate amount of related administrative expenses, with payment the 
Administrator may use, as provided in advance in appropriations Acts, 
instead of using amounts authorized under subsection (a), to make a 
direct loan or loan guarantee to the borrower.
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