[Congressional Record Volume 147, Number 81 (Tuesday, June 12, 2001)]
[Extensions of Remarks]
[Page E1077]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




 INTRODUCTION OF A BILL TO HELP OUR MILITARY INSTALLATIONS BECOME MORE 
 EFFICIENT BY FACILITATING THE PRIVATIZATION OF DEPARTMENT OF DEFENSE 
                     WATER AND WASTEWATER UTILITIES

                                 ______
                                 

                            HON. SAM JOHNSON

                                of texas

                    in the house of representatives

                         Tuesday, June 12, 2001

  Mr. SAM JOHNSON of Texas. Mr. Speaker, today I am joined by 
Representative Matsui in the introduction of an important piece of 
legislation to help our military installations become more efficient by 
opening up their water and wastewater installations to competition. 
This legislation will allow the Department of Defense to use these 
savings to accomplish their main mission, protecting our nation.
  In 1998, Congress realized that an innovative and more efficient 
system was needed to rid the Department of huge backlogs in their 
capital infrastructure and to free up funding for meeting readiness and 
procurement needs. Specifically, the Strom Thurmond Defense 
Authorization Act directed the military to outsource the operation of 
its water and wastewater utilities.
  The intention of the program is to have a private contractor take 
control of the facility and be solely responsible for its operations. 
The Government would then repay these costs over the term of the 
contract in the form of utility rates.
  Unfortunately our tax code has kept these important savings from 
happening. Existing law requires the Internal Revenue Service to 
subject this transfer to the so-called ``Contribution In Aid of 
Construction''--or CIAC--tax on the full replacement value of the 
system. This federal transfer tax is paid by the DoD and it amounts to 
a circular transfer of money with no net benefit to the U.S. 
Government.
  Not only does the CIAC penalize competition and efficiency, it also 
discriminates against new entrants into the water and wastewater 
market. Through guidelines crafted for an out-of-date system, the tax 
code currently only exempts traditional water and wastewater providers 
from this CIAC tax. This uneven application creates a huge distortion 
and will likely discourage many potential private sector bidders to 
operate the DoD's systems. Without robust competition to offer these 
services, DoD will never realize the needed savings intended by the 
1998 defense authorization bill.
  My legislation corrects this tax-code discrepancy among all potential 
providers. DoD will be able to maximize competition and evaluate all 
potential bidders under its utility privatization programs based upon 
the true cost of their services. It will ensure the successful 
implementation of this cost-saving effort and provide desperately 
needed financial flexibility to meet other pressing national defense 
priorities. I urge my colleagues to join me on this proposal.

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