<DOC>
[107 Senate Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:83686.wais]
S. Hrg. 107-954
WATER INVESTMENT ACT AND OTHER
WATER INFRASTRUCTURE BILLS
=======================================================================
HEARINGS
BEFORE THE
SUBCOMMITTEE ON FISHERIES, WILDLIFE,
AND WATER
AND THE
COMMITTEE ON
ENVIRONMENT AND PUBLIC WORKS
UNITED STATES SENATE
ONE HUNDRED SEVENTH CONGRESS
SECOND SESSION
ON
S. 252, A BILL TO AMEND THE FEDERAL WATER POLLUTION CONTROL ACT TO
AUTHORIZE APPROPRIATIONS FOR STATE WATER POLLUTION CONTROL REVOLVING
FUNDS, AND FOR OTHER PURPOSES
S. 1961, A BILL TO IMPROVE THE FINANCIAL AND ENVIRONMENTAL
SUSTAINABILITY OF THE WATER PROGRAMS OF THE UNITED STATES
_________
FEBRUARY 26 AND 28, 2002
_________
Printed for the use of the Committee on Environment and Public Works
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WASHINGTON : 2003
____________________________________________________________________________
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COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS
one hundred seventh congress
second session
JAMES M. JEFFORDS, Vermont, Chairman
MAX BAUCUS, Montana BOB SMITH, New Hampshire
HARRY REID, Nevada JOHN W. WARNER, Virginia
BOB GRAHAM, Florida JAMES M. INHOFE, Oklahoma
JOSEPH I. LIEBERMAN, Connecticut CHRISTOPHER S. BOND, Missouri
BARBARA BOXER, California GEORGE V. VOINOVICH, Ohio
RON WYDEN, Oregon MICHAEL D. CRAPO, Idaho
THOMAS R. CARPER, Delaware LINCOLN CHAFEE, Rhode Island
HILLARY RODHAM CLINTON, New York ARLEN SPECTER, Pennsylvania
JON S. CORZINE, New Jersey BEN NIGHTHORSE CAMPBELL, Colorado
Ken Connolly, Majority Staff Director
Dave Conover, Minority Staff Director
------
Subcommittee on Fisheries, Wildlife, and Water
BOB GRAHAM, Florida, Chairman
MAX BAUCUS, Montana MICHAEL D. CRAPO, Idaho
HARRY REID, Nevada CHRISTOPHER S. BOND, Missouri
RON WYDEN, Oregon JOHN W. WARNER, Virginia
HILLARY RODHAM CLINTON, New York LINCOLN CHAFEE, Rhode Island
JON S. CORZINE, New Jersey BEN NIGHTHORSE CAMPBELL, Colorado
(ii)
?
C O N T E N T S
----------
Page
FEBRUARY 26, 2002
OPENING STATEMENTS
Baucus, Hon. Max, U.S. Senator from the State of Montana......... 45
Bond, Hon. Christopher S., U.S. Senator from the State of
Missouri....................................................... 7
Corzine, Hon. Jon S., U.S. Senator from the State of New Jersey.. 7
Crapo, Hon. Michael D., U.S. Senator from the State of Idaho..... 9
Inhofe, Hon. James, U.S. Senator from the State of Oklahoma...... 14
Jeffords, Hon. James M., U.S. Senator from the State of Vermont.. 1
Smith, Hon. Bob, U.S. Senator from the State of New Hampshire.... 4
Voinovich, Hon. George V., U.S. Senator from the State of Ohio... 12
WITNESSES
Barron, Jim, president, Ronkin Construction, on behalf of the
National Utility Contractors Association....................... 38
Prepared statement........................................... 140
Grumbles, Ben, Deputy Assistant Administrator for Water, U.S.
Environmental Protection Agency, Office of Water............... 21
Prepared statement........................................... 46
Responses to additional questions from:
Senator Baucus........................................... 67
Senator Crapo............................................ 67
Senator Jeffords......................................... 53
Senator Smith............................................ 51
Kukurin, Bill, president, Kukurin Contracting, Associated
Builders and Contractors....................................... 36
Prepared statement........................................... 136
Responses to additional questions from Senator Smith......... 139
Kyl, Hon. Jon, U.S. Senator from the State of Arizona............ 18
Prepared statement........................................... 19
Moore, Joseph A., Alderman, City of Chicago, on behalf of the
League of Cities............................................... 27
Prepared statement........................................... 72
Palmer, Douglas H., Mayor of Trenton, NJ, chairman, Urban Water
Council, Conference of Mayors.................................. 25
Prepared statement........................................... 68
Responses to additional questions from Senator Crapo......... 71
Schwartz, Paul, National Policy Coordinator, Clean Water Action.. 34
Prepared statement........................................... 133
Stoner, Nancy, director, Clean Water Project, Natural Resources
Defense Council................................................ 32
Prepared statement........................................... 74
Responses to additional questions from:
Senator Crapo............................................ 78
Senator Smith............................................ 80
Senator Wyden............................................ 81
(iii)
Yellig, Terry, building trades attorney, Sherman, Dunn, Cohen,
Leifer & Yellig................................................ 40
Prepared statement........................................... 144
ADDITIONAL MATERIAL
Excerpts from Stormwater Strategies, NRDC........................83-132
Statements:
American Society of Civil Engineers.......................... 146
Association of California Water Agencies..................... 150
Texts of bills:
S. 252, Clean Water Infrastructure Financing Act of 2001....204-212
S. 1961, Water Investment Act of 2002.......................152-203
------
FEBRUARY 28, 2002
OPENING STATEMENTS
Clinton, Hon. Hillary Rodhman, U.S. Senator from the State of New
York........................................................... 217
Crapo, Hon. Michael D., U.S. Senator from the State of Idaho..... 215
Graham, Hon. Bob, U.S. Senator from the State of Florida......... 213
Reid, Hon. Harry, U.S. Senator from the State of Nevada.......... 216
WITNESSES
Archuleta, Ed, general manager, El Paso Water Utilities, on
behalf of the Association of Metropolitan Water Agencies....... 228
Chapman, Andrew M., president, Elizabethtown Water Company, on
behalf of the National Association of Water Companies.......... 226
Prepared statement........................................... 250
Hirsch, Robert Associate Director of Water, U.S. Geological
Survey......................................................... 221
Prepared statement........................................... 248
Morrissey, Tom, president, Association of State and Interstate
Water Pollution Control Administrations, and director,
Connecticut Division of Planning and Standards................. 240
Prepared statement........................................... 271
Neukrug, Howard, director, Office of Watersheds, Philadelphia
Water Department, on behalf of the American Water Works
Association.................................................... 233
Prepared statement........................................... 266
Pinault, Paul, executive director, Narragansett Bay Commission,
on behalf of the Association of Metropolitan Sewerage Agencies. 229
Prepared statement........................................... 257
Ronnebaum, Elmer, general manager, Kansas Rural Water
Association, on behalf of the National Rural Water Association. 231
Prepared statement........................................... 261
Rutherford, Jay L., P.E., director, Water Supply Division,
Vermont Department of Environmental Conservation, on behalf of
the Association of State Drinking Water Administrators......... 242
Prepared statement........................................... 276
Sarbanes, Hon. Paul S., U.S. Senator from the State of Maryland.. 218
Prepared statement........................................... 246
ADDITIONAL MATERIAL
Statements:
American Council of Engineering Companies.................... 282
Johnson, Jerry, general manager, District of Columbia Water
and Sewer Authority on behalf of the Association of
Metropolitan Water Agencies................................ 254
Nelson, Valerie I., Ph.D., Coalition for Alternative
Wastewater Treatment....................................... 279
Siems, Rodger, D., board of directors, Eastern Municipal
Water District (EMWD)...................................... 281
WATER INVESTMENT ACT, S. 1961 AND OTHER WATER INFRASTRUCTURE BILLS
----------
TUESDAY, FEBRUARY 26, 2002
U.S. Senate,
Committee on Environment and Public Works,
Washington, DC.
The committee met, pursuant to notice, at 9:34 a.m. in room
406, Senate Dirksen Building, the Hon. James M. Jeffords,
(chairman of the committee) presiding.
Present: Senators Jeffords, Smith, Bond, Crapo, Voinovich,
Warner, Chafee, and Corzine.
Also present: Senator Kyl.
OPENING STATEMENT OF HON. JAMES M. JEFFORDS, U.S. SENATOR FROM
THE STATE OF VERMONT
Senator Jeffords. This committee will come to order.
Our hearing today will be a legislative hearing to examine
five pieces of legislation involving water infrastructure. Our
focus will be S. 1961, the Water Investment Act of 2002. Along
with Senators Graham, Crapo, and Smith, I wrote this
legislation to provide additional resources to States, tribes,
and localities, to meet water infrastructure needs.
This legislation seeks to move the state-of-the-art in
water program management forward by increasing the flexibility
offered to States in administering their water programs.
The Water Investment Act ensures that the ``next
generation'' of water quality issues receives the appropriate
focus and institutionalizes financial management capacity into
our nation's water systems. This legislation authorizes funding
of over $20 billion over 5 years nationwide for clean water,
and $15 billion over 5 years nationwide for safe drinking water
projects.
There is significant new flexibility attached to these
funds. Many of the provisions already authorized in the Safe
Drinking Water Act will allow an extension of loan terms and
more favorable loan terms, including principle forgiveness for
disadvantaged communities. In States such as my own State of
Vermont, these types of provisions are critical, as small
communities struggle to meet their water quality needs.
There is financial accountability built into the Water
Investment Act of 2002. We have included provisions for both
the Clean Water Act and the Safe Drinking Water Act, that are
designed to help water utilities better manage their capital
investments, using asset management plans, rate structures that
account for capital replacement costs, and other financial
management techniques.
We encourage utilities to seek innovative solutions by
asking them to review options for consolidation, public/private
partnerships, and low-impact technology before proceeding with
a project.
Whenever one mentions ``consolidation'', concerns are often
raised about inadvertently providing incentives for excessive
or uncontrolled growth. This legislation recognizes that
concern, and includes a provision that specifically requires
States to ensure that water projects are coordinated with local
land use plans, regional transportation improvement and long-
range transportation plans, and State regional and municipal
watershed plans.
As a package, this legislation will help ensure that your
utilities seek the most efficient organizational structure to
meet their water quality needs.
I am also very pleased that the bill includes provisions
ensuring that the next generation of water quality issues
receives the appropriate focus.
As I worked on this legislation, I became aware that there
are opportunities to use low-impact technologies to solve water
quality issues that may or may not be considered by States and
localities, and they seek to solve water quality issues. In
response, our bill includes several incentives for the use of
nonstructural technologies.
The use of nontraditional technologies is the focus of the
Water Investment Act, to ensure that nonpoint pollution
receives appropriate emphasis under the Clean Water Act. The
modifications this bill makes to the priority listing
requirements in the Clean Water Act ensure that nonprofit
source projects will be a part of the equation when funding
decisions are made at the State level.
I want to thank Senator Graham for his leadership on this
legislation, and Senators Crapo and Smith for their dedication
to introducing a bipartisan package today, and their
willingness to find a compromise when we needed one.
I recognize this issue is of great importance to every
Senator. I look forward to working with each of you to pass
this important legislation that is so important to our nation's
water quality and drinking water safety.
[The prepared statement of Hon. James Jeffords follows:]
Statement of Hon. Senator James Jeffords, U.S. Senator from the State
of Vermont
The committee will come to order. Our hearing today will be a
legislative hearing to examine 5 pieces of legislation involving water
infrastructure. Our focus will be S. 1961, the Water Investment Act of
2002. Along with Senators Graham, Crapo, and Smith, I co-sponsored this
legislation to provide additional resources to States, Tribes, and
localities to meet water infrastructure needs. Simultaneously, it seeks
to move the state-of-the-art in water program management forward by
increasing the flexibility offered to States in administering their
water programs, ensuring that ``next generation'' of water quality
issues receive the appropriate focus, and institutionalizing financial
management capacity into our nation's water systems.
This legislation is critical to our nation's future. We tend to
take clean water in our faucets and well-functioning, hidden sewage
treatment systems for granted in this country. However, without
vigilance, these luxuries can quickly disappear. The Water Investment
Act of 2002 will help our communities be vigilant.
This legislation authorizes funding of over $20 billion over 5
years nationwide for clean water and $15 billion over 5 years
nationwide for safe drinking water projects.
There is significant new flexibility attached to these funds.
Many of the provisions already authorized in the Safe Drinking
Water Act which allow an extension of loan terms and more favorable
loan terms (including principal forgiveness) for disadvantaged
communities. In States such as my home State of Vermont, these types of
provisions are critical as small communities struggle to meet water
quality needs. There is financial accountability built into the Water
Investment Act of 2002. We have included provisions for both the Clean
Water Act and the Safe Drinking Water Act that are designed to help
water utilities better manage their capital investments using asset
management plans, rate structures that account for capital replacement
costs, and other financial management techniques. We encourage
utilities to seek innovative solutions by asking them to review options
for consolidation, public-private partnerships, and low-impact
technologies before proceeding with a project.
Whenever one mentions ``consolidation'', concerns are often raised
about inadvertently providing incentives for excessive or uncontrolled
growth. This legislation recognizes that concern and includes a
provision that specifically requires States to ensure that water
projects are coordinated with local land use plans, regional
transportation improvement and long-range transportation plans, and
State, regional and municipal watershed plans. As a package, this
legislation will help ensure that utilities seek the most efficient
organizational structure to meet their water quality needs.
I am also very pleased that the bill includes provisions ensuring
that ``next generation'' of water quality issues receives the
appropriate focus. As I worked on this legislation, I became aware that
there are opportunities to use low-impact technologies to solve water
quality issues that may or may not be considered by States and
localities as they seek to solve water quality issues. In response, our
bill includes several incentives for use of nonstructural technologies.
We specifically state in the statute that these approaches are eligible
to receive funding under the Clean Water Act State Revolving Fund and
require that recipients of funds consider the use of low-impact
technologies. In addition, we authorize a demonstration program at $20
million per year over 5 years to promote innovations in technology and
alternative approaches to water quality management and water supply.
This program requires that a portion of the projects use low-impact
development technologies.
The use of nontraditional technologies is the focus in the Water
Investment Act to ensure that nonpoint source pollution receives
appropriate emphasis under the Clean Water Act. The modifications this
bill makes to the priority listing requirements in the Clean Water Act
ensure that nonpoint source projects will be a part of the equation
when funding decisions are made at the State level. The bill also
addresses eligibility issues. It clarifies that planning, design, and
associated preconstruction costs are eligible for funds under the Clean
Water Act and Safe Drinking Water Act State Revolving Funds as stand-
alone items. This ensures that small communities who may not have the
resources available to get a project ready to go on their own can
receive assistance. Small communities will also benefit from a
provision in the bill that allows privately owned wastewater facilities
to access the Clean Water Act State Revolving Fund Already permitted
under the Safe Drinking Water Act, this will allow small, privately
owned wastewater systems such as those located in trailer parks, to
obtain much-needed financial assistance.
To ensure that both public and private small systems can actually
develop the projects to solve problems, our legislation provides three
main types of technical assistance for small communities. It authorizes
$7 million per year over 5 years for technical assistance to small
systems serving less than 3300 people located in a rural area. It
reauthorizes the Small Public Water Systems Technology Assistance
Centers for an additional $5 million per year over 5 years. Finally, it
reauthorizes the Environmental Finance Centers for $1.5 million per
year over 5 years.
We have heard from many organizations that public participation in
the execution of the State revolving loan funds needs to be increased.
I hope that every individual interested in how water quality projects
are selected and prioritized in their States takes full advantage of
existing opportunities for public participation. Our legislation takes
action to ensure that there is ample opportunity for public comment
when developing project priority lists and intended use plans.
I want to thank Senator Graham for his leadership on this
legislation and Senators Crapo and Smith for their dedication to
introducing a bi-partisan package today and their willingness to find a
compromise when we needed one.
I recognize that this issue is of great importance to every
Senator, and I look forward to working with each of you to pass this
important legislation that is so important to our nation's water
quality and drinking water safety.
Senator Jeffords. Senator Smith.
OPENING STATEMENT OF HON. BOB SMITH, U.S. SENATOR FROM THE
STATE OF NEW HAMPSHIRE
Senator Smith. Thank you very much, Mr. Chairman, and thank
you for working with us to introduce this legislation on a
bipartisan basis.
One of my top priorities, when I had the Chair, was to
renew our commitment to our nation's water. I am pleased that
you have continued to keep this a priority.
This is particularly timely for my State in New Hampshire,
because it is in the midst of its worst drought in 50 years. It
is having a devastating impact on our water supply. One of the
reservoirs in Bellamie, which provides water for a number of
New Hampshire towns, is down over 50 percent. This bill will
help to alleviate these problems, with new funding for water
conservation, recycling, and reuse.
The bill helps to alleviate these problems, and it will
take steps to address potential water shortages in the future.
It involves the U.S. Geological Survey. It requires them to
provide information on water shortages, as well as planning
models. That requires streamline procedures for local
governments to work with Federal Agencies responsible for water
resources. This would be helpful in the communities in New
Hampshire, who are facing severe water shortages.
These are also being compounded in a couple of communities
by the great trend now in bottled water, where we are taking
hundreds of millions of gallons of water out of the ground, and
selling it all over the world without, in my view, proper
precautions.
But beyond the drought, the nation does face a terrible
water infrastructure problem. So much of our nation's water
infrastructure is aging and it is in desperate need of
replacement.
So coupled with that, and the cost burden that local
communities face with the ever increasing State and Federal
mandates, the problem is exasperating. This bill addresses
these problems, and makes structural changes to ensure that we
do avoid a national crisis now and in the future.
I believe in limited Government, and when it comes to water
infrastructure, I do not believe the primary responsibility of
financing local water needs to lie with Federal Government. I
am adamant, however, that the Federal Government should not
place unfunded mandates on these communities.
We recognize both of these principles, and I think this
bill strikes a balance. Unfortunately, there will be some who
will try to take away the compromise through amendment, which
is always regrettable. But it authorizes $35 billion over the
next 5 years in Federal contribution to water infrastructure,
to help defray the cost of mandates placed on these
communities. This basically is a return to the communities of
their tax dollars to help them.
When the Clean Water Act was amended by Congress in 1987,
there was a debate which many of us will remember, that set up
a revolving fund to provide a continued pool of money for water
needs. But unfortunately, not everybody met their commitment to
plan for those needs, and what was not to be Federal
responsibility became a Federal necessity.
So this bill makes certain that we do not go down that road
again. The Federal Government will help to defray the cost of
Federal mandates, but with the new money comes a new
requirement that all utilities do a better job of managing
their funds and plan for the future.
It will be a tremendous help to many of the struggling
communities in New Hampshire, as we extend the repayment period
for loans to disadvantaged communities. It is my hope that we
can move it through the committee, Mr. Chairman, and see it
passed by the Senate in short order.
I believe that if we keep to the deal and not load it down
with ``poison pills,'' as I said before, we can move the bill
quickly. Unfortunately, the poison pill that always comes up,
and there is usually ample water, no pun intended here, to take
the pill, and that is Davis-Bacon. So Bacon and water, and
Bacon and Davis and water, do not go very well together, in my
view.
I think we need to understand that to take these issues
which really are, in my view, not relevant to the case at hand,
to the question at hand, and load them up, first of all, it is
going to cost more, by adding the Davis-Bacon provisions; and
it is going to increase it by probably 5 to 15 percent
nationally, and it could be as much as 38 percent in rural
areas like New Hampshire; and there are some other Senators
here with States who have lots of rural areas.
So many States, including my own, have long ago eliminated
Davis-Bacon rules from their statute books, because they want
to maximize their investment in clean water. We want the money
to go to clean water, and not to increased labor costs that are
not necessary. That is why it is so particularly outrageous to
think that we may have to face these kinds of amendments.
Big unions are beholding to prevailing wage legislation,
because it supports their members, to the exclusion of other
workers, unfortunately. But all Americans should be treated
equally, and none should be held back the way they are by
Davis-Bacon. Davis-Bacon laws preclude the hiring of helpers,
for example, who not only perform much needed lower-skilled
work, but free up more experienced workmen for the more
difficult tasks.
So the bill is a bipartisan product, which is a testament,
I think, to the hard work of the Chairman and Senators on both
sides. The amendments, however, unfortunately if they pass, are
going to destroy that bipartisan compromise, and I hope it does
not happen, Mr. Chairman. Thank you.
[The prepared statement of Hon. Bob Smith follows:]
Statement of Hon. Bob Smith, U.S. Senator from the State of
New Hampshire
Good Morning. I am pleased to be here to discuss our recently
introduced bipartisan legislation: the Water Investment Act of 2002.
When I became chairman of this committee in 1999, one of my top
priorities was a renewed commitment to our nation's water systems. I am
pleased that Senator Jeffords has continued to make this a priority.
This bill is particularly timely, as New Hampshire is in the midst
of our worst drought in 50 years, and it has had a devastating impact
on our water supply. One of the reservoirs, Bellamy, which provides
water for a number of New Hampshire's towns, is down over 50 percent.
Our bill will help to alleviate these problems with new funding for
water conservation, recycling and re-use projects.
We also take steps to address potential future water shortages. We
require the U.S. Geological Survey to provide information on water
shortages, surpluses and planning models. We also require streamlined
procedures for the local governments to work with Federal agencies
responsible for water resources. This valuable information will be
helpful to communities facing a severe water shortage like so many of
those in New Hampshire. It will also help to minimize the threat of
future droughts.
Beyond the drought, the nation faces a potential water
infrastructure crisis. So much of our nation's water infrastructure is
aging and in desperate need of replacement. Coupled with the aging
problem is the cost burden that local communities face in order to
comply with ever increasing State and Federal clean water mandates.
This bill addresses these problems and makes structural changes to
ensure that we avoid a national crisis now and in the future. I am a
strong advocate of limited government and when it comes to water
infrastructure, I do not believe the primary responsibility of
financing local water needs lies with the Federal Government.
I am equally adamant, however, that the Federal Government
shouldn't place unfunded mandates on our local communities. We
recognize both of these principles and strike a responsible balance.
The legislation authorizes $35 billion over the next 5 years in
Federal contribution to the total water infrastructure need to help
defray the cost of the mandates placed on communities. This is a
substantial increase in Federal commitment, but not nearly as high as
some would have preferred. Even so, this commitment does not come
without additional responsibilities.
When the Clean Water Act was amended by Congress in 1987, a debate
I remember well, we set up a revolving fund to provide a continual pool
of money for water needs. Unfortunately, not everyone met their
commitment to plan for future needs and what was not to be Federal
responsibility became a Federal necessity.
This bill makes certain that we do not go down that road again.
The Federal Government will help to defray the costs of Federal
mandates, but with the new money comes a new requirement that all
utilities do a better job of managing their funds and plan for future
costs. We also make additional structural changes to the law both to
address financial concerns and to help achieve improved management of
these water systems.
One such change to the Clean Water Act is to incorporate a Drinking
Water Act provision that allows States to provide principal forgiveness
on loans and extends the repayment period for loans to disadvantaged
communities. It will be a tremendous help to many struggling
communities in New Hampshire and across the country.
It is my hope that we can move it through the committee process and
see it passed by the Senate in short order. I believe that if we keep
to this deal and not try and load it down with any poison pills, we can
move this bill quickly.
One such poison pill is Davis Bacon.
According to GAO, Davis Bacon will increase by costs by 5-15
percent nationally and perhaps by as much as 38 percent in rural States
like New Hampshire. Many States, like New Hampshire have long ago
eliminated Davis-Bacon-like rules from their State statute books,
because they want to maximize their investment in clean water. Davis
Bacon will result in less capital improvement and less safe drinking
and clean water. We need to spend every penny we can to get safe
drinking water, and the way to do that is this bill, without amendment.
Big unions are beholden to prevailing wage legislation, because it
supports their members to the exclusion of other workers. I believe all
Americans should be treated equally and none should be held back the
way they are by Davis-Bacon.
Davis-Bacon laws preclude the hiring of ``helpers'' who not only
perform much-needed lower skilled work, but free up more experienced
workmen for the more difficult tasks.
This bill is a bipartisan product, which is a testament to the hard
work of the Chairman and Senators on both sides of the isle. It is my
hope that we can move a clean bill--one that will move through the
process quickly and one that I can continue to support.
Senator Jeffords. Thank you.
Senator Corzine.
OPENING STATEMENT OF HON. JON S. CORZINE, U.S. SENATOR FROM THE
STATE OF NEW JERSEY
Senator Corzine. Thank you, Mr. Chairman. I, like my
colleagues, commend you for holding the hearing here. This
focus on water infrastructure proposals is important to the
State of New Jersey and, I think, the nation, as most issues we
address.
Before I begin, I want to say how pleased I am that Mayor
Doug Palmer from Trenton, NJ will be testifying on one of the
panels today for the Conference of Mayors. He is one of the
bright lights of New Jersey, and truly familiar with all of
these various issues, and a terrific leader. I welcome Mayor
Palmer.
Mr. Chairman, like other urbanized States, New Jersey faces
all these issues that you and the ranking member have talked
about: aging infrastructure, urban run-off, combined sewer
overflows. I would say that the problems are exacerbated also
by this growing crisis with regard to drought on the East
Coast.
That said, New Jersey has done a good job in meeting a lot
of these challenges. I think our current EPA Administrator has
led the way in trying to address many of these issues, but
there is a lot more to do.
One of the things about S. 1961 that I am particularly
pleased about is the increase in authorization. The demand in
our State to address many of these issues, both in clean water
and drinking water safety, are real. I visited a number of
places where the demands are high, and we need to push forward
on it. So I congratulate everyone for working to increase these
authorization levels, which I think at today's point are far,
far too small.
I will respectfully argue that the amendment that the
ranking member talked about is one of those things that I think
we are going to have to have debate about, because it is an
issue that I think is important for making sure that we have
high quality efforts with regard to how projects are executed.
I think it is important that we maintain these common
standards. So I, for one, understand or least appreciate the
argument, but will be supportive of Davis-Bacon type
amendments.
I look forward to a good healthy debate on that, but moving
forward with a bipartisan element with respect to the clean
water activities. Thank you.
Senator Jeffords. Senator Bond.
OPENING STATEMENT OF HON. CHRISTOPHER S. BOND, U.S. SENATOR
FROM THE STATE OF MISSOURI
Senator Bond. Thank you very much, Mr. Chairman.
I commend you, Senator Smith, Senator Graham, and Senator
Crapo for your hard work in putting this bipartisan proposal
together. It sounds like we have a little friction building up.
I could certain agree with my colleague from New Jersey that we
ought to maintain high standards. There is no question about
that; but how that translates into a need for Davis-Bacon, I am
afraid we are going to have to have that battle.
I hope that we could stay on the environmental side of it,
to show that we can work together. Because I happen to believe,
from my work in my environmental area, that one of the things
that is the most important is to make sure we have clean water,
that we have safe drinking water, that we cleanup our waste
water.
I have been in small communities in too many areas in
Missouri, where the systems have broken down. I believe any
public health official will tell you that that is a real and
present danger.
There is a lot of talk about environment and the people who
get out and talk about the environment; and then there are
people who do the really tough, dirty work down in the
trenches, who are maintaining the water systems. These are the
true environmentalists. When you look at the total number of
projects that are needed, it is huge.
Then in small communities, as well as large, 84 percent of
the Safe Drinking Water Act violations in 2001 were in systems
serving fewer than 3,300 customers. You know, just because you
live in a small community does not mean you ought to have to
drink impure water.
In Missouri, we have a community like Pickering, in
northwest Missouri, that the waste water treatments works would
be ridiculously expensive. They frankly cannot afford to pay
for it, but we need to help.
We have medium-sized communities like Lebanon, MO, where
they struggle with problems with sanitary sewer overflows. Even
though they tripled the water rates, they still could not get
it done. We have a lot of problems in our big cities like St.
Louis, which has a myriad of problems.
We do need to have a good bipartisan bill. Certainly, I
support the higher authorization levels, although I would
remind my colleagues that what we do here, we can authorize all
day long.
We have a little problem. Senator Mikulski and I have been
working on that problem, as long as we have worked together on
the VA/HUD Independent Agencies Committee, to try to get our
602(b) to where they can justify what we ought to be putting
into the State revolving funds.
There is somebody in OMB who must not like to drink water;
because every year, in the past Administration and in the
previous Administration, they make the politically outrageous,
but I suppose appealing, statement of cutting the State
revolving funds.
It is like, you know, State revolving funds do not matter,
so they just cut them. They think they would rather put in some
fancy pet projects for the Administration. I will tell you,
every time they do that, we go to bat. There is nothing like
having Senator Mikulski, when you go after it. We have cut the
pet projects and put it back in the State revolving funds.
I support the higher authorization levels. I am going to
need the help of everybody on this committee to try to get the
funds available. Maybe one of these days, OMB could come and
tell us why they do not like State revolving funds; why they do
not think clean water and safe drinking water is appropriate.
So we have a lot of battles. I am concerned about the
application of the funding system. We need to work on nonpoint
source pollution problems. We will work with you on that. I am
delighted to support these authorization levels, and look
forward to working with my colleagues on this committee to make
sure that dollars are available to meet the implied promise of
the authorization levels.
[The prepared statement of Hon. Christopher S. Bond
follows:]
Statement of Hon. Christopher S. Bond, U.S. Senator from the State
of Missouri
Mr. Chairman, let me commend you, Senator Smith, Senator Graham and
Senator Crapo for your hard work in developing this bipartisan proposal
to increase funding for water infrastructure. The environmental debate
today is far too polarized. This bill should serve as an example to
those who care about the environment on what can happen when people
come together.
Every person, every family, every community in America depends on
clean and safe water. America can be proud of all that we have
accomplished to bring clean and safe water to so many of us.
However, communities around the nation, and communities in
Missouri, know that we need more funds to provide the water we need and
deserve.
A recent EPA report stated that 84 percent of Safe Drinking Water
Act violations in 2001 were committed by systems serving fewer than
3,300 customers. I doubt that many of these systems want anything other
than clean water for their citizens. I imagine that most all lack the
funds to provide the services they would like to provide.
We have communities in Missouri like Pickering, in the northwestern
Missouri, that are so small that they just plain can't afford
wastewater treatment works. It's hard to tell the 150 residents and one
business in Pickering that they should just raise their rates to build
the clean water they need.
Medium-sized communities like Lebanon, MO, in the southwest part of
the State, struggle with problems like sanitary sewer overflows. They
have tripled their water rates and they are still millions of dollars
behind what they need for wastewater system they deserve.
Then of course, large cities like St. Louis share many of the
problems faced by old urban cities like those here on the East Coast
and across the nation. I once heard that Philadelphia loses enough
water from its pipes every day to supply all of New Orleans. I don't
know how St. Louis and Kansas City would compare, but I believe we are
right in there with everyone else.
So it is good that we have a bipartisan bill before us to meet our
overwhelming need for additional water spending.
There are many positive measures in this bill. I support higher
authorization levels. Although, I would remind my colleagues that our
work will not be complete when we pass a reauthorization. We must also
work to increase the money allocated for water needs in the
appropriations process. Then we can make sure money is actually spent,
and not just wished for.
Measures to increase State flexibility and help disadvantaged
communities are also positive. Although, we must make sure that we
don't overload our States and applicants with too many new
requirements. It doesn't make a lot of sense to give with one hand and
take away with the other in the form of new mandates and requirements.
I support efforts to broaden funding eligibility for nonpoint
source problems. The farmers and communities of Missouri want to do
their part to improve water quality, but they need the help and tools
to do so.
I am concerned with the proposed new formula for allocating money
for the Clean Water SRF. I understand the desire expressed by many that
the current system is outdated and unfair. A new system should be based
on needs. I also understand the advantages of learning from the safe
drinking water formula. However, early indications are that Missouri
will suffer under the new formula. We will need to confirm that point
and examine it in further detail.
For now, thank you again Mr. Chairman, and my fellow members, and I
look forward, for the sake of our communities and the environment, to
working with all of you to make additional water funding a reality.
Senator Jeffords. Senator Crapo.
OPENING STATEMENT OF HON. MICHAEL D. CRAPO, U.S. SENATOR FROM
THE STATE OF IDAHO
Senator Crapo. Thank you very much, Mr. Chairman, for
calling this hearing today. To our witnesses, I want to say
that I look forward to your insight on S. 1961, the Water
Investment Act.
You know, in terms of looking at the environment and the
major issues of our nation, I think that the issues we deal
with in this legislation are probably the single most
significant environmental issue in America today. If not, they
certainly compete for being among the most significant issues
that we deal with.
We are looking at not only improving and strengthening our
effort at clean water, but also at safe drinking water around
this nation, and a long-needed reform and strengthening of the
system.
As you know, when I first joined this committee as Chairman
of the Fisheries, Wildlife, and Water Subcommittee, the late
Senator John Chafee and I began a long process of assessing the
performance of our water and waste water infrastructure
statutes, and exploring needed improvements to addressing these
outstanding problems. This process continued under his
successor as chairman, Senator Smith.
Over the past 3 years, I have convened many hearings and
meetings with the stakeholders and Agency officials to debate
how to address the problems of our communities with unmet water
and waste water infrastructure needs.
With the able partnership of yourself, Mr. Chairman,
Senator Graham and Senator Smith, I am pleased that we have
been able to culminate this work in S. 1961. As has been
indicated here already, this is a very strong, bipartisan
package, and we have had many, many hours of meetings together
to try to resolve the various differences in approach on how to
solve these issues. We have come up with remarkably a strong
basis of common ground with which to move forward.
Although we are likely to hear testimony on other bills
pending before the committee, I want to confine my comments
just to S. 1961.
This legislation has several important provisions and
goals, including modernizing State water pollution control
revolving programs, and ensuring the allocation of funds that
reflect the public health and water quality needs of our
nation; streamlining State assistance programs for maximum
efficient use of funds by States and communities; assisting
disadvantaged communities, and enhancing the capacity of small
systems to better service the public; and ensuring the enhanced
Federal contributions to State assistance programs, as matched
by appropriate accountability from those who are receiving the
funds.
These are strong guiding principles, and the ones that the
committee should remember, as we advance this proposal through
the legislative process.
The needs of our nation's waste water and water
infrastructure systems are enormous. Because Federal
regulations drive the majority of the cost for communities, I
think it is only appropriate for us to recognize that there is
a strong Federal interest to help utilities and the public to
address their needs. To help provide the Federal share, this
bill authorizes a bold investment of $35 billion over 5 years,
to invigorate State and revolving funds with the goal that
these funds will be self-sustaining at the end of that
investment period.
The bill also aims to increase flexibility for States in
managing their assistance programs to explore avenues, to
reduce costs, to target resources to those most in need. It
also embodies my commitment to assist rural areas in our most
distressed communities with additional resources, and to help
them serve the public.
Although it is tempting to turn this legislation into a
vehicle for individual proposals and controversial concepts, S.
1961 represents the collaboration and hard work of many who
recognize that the goal of assisting communities should be our
guiding principle.
If this important bill is to become law, controversial
issues should be put aside for another time. I am not just
referring to the one that was brought up already in this
hearing. There are going to be, I believe, a number of
controversial issues that could be problems for moving this
legislation expeditiously.
Too many communities are waiting for the assistance this
bill will provide to see legislation brought down by other
difficult proposals.
With that, Mr. Chairman, I want to once again welcome our
witnesses from all the panels. Your comments have been helpful
throughout this process, and I look forward to your insights on
S. 1961. Thank you.
[The prepared statement of Hon. Mike Crapo follows:]
Statement of Mike Crapo, U.S. Senator from the State of Idaho
Mr. Chairman, thank you for calling together this hearing. To our
witnesses here today and on Thursday, I look forward to your insights
on S. 1961, the Water Investment Act.
As you know, when I joined this committee as Chairman of the
Fisheries, Wildlife, and Water Subcommittee, then-Chairman, the late
Senator John Chafee and I began a long process of assessing the
performance of our water and wastewater infrastructure statutes and
exploring needed improvements to address outstanding problems. This
process continued under his successor as Chairman, Senator Smith. Over
the past 3 years, I have convened many hearings and meetings with the
stakeholders and agency officials to debate how to address the problems
of communities with unmet water and wastewater infrastructure needs.
With the able partnership of Chairman Jeffords and Senator Graham, I am
pleased that we have been able to culminate this work into S. 1961.
Although we are likely to hear testimony on other bills pending
before the committee, I would like to confine my comments to S. 1961.
This legislation has several important provisions and goals including:
<bullet> modernizing State water pollution control revolving
programs and ensuring the allocation of funds reflects public health
and water quality needs
<bullet> streamlining State assistance programs for maximum
efficient use of funds by States and communities
<bullet> assisting disadvantaged communities and enhancing the
capacity of smaller systems to better serve the public
<bullet> ensuring the enhanced Federal contributions to State
assistance programs is matched by appropriate accountability by those
who receive funding
These are strong guiding principles and ones that the committee
should remember as we advance this proposal through the legislative
process.
The needs of our nation's water and wastewater infrastructure
systems are enormous. Because Federal regulations drive the majority of
costs for communities, it is appropriate for us to recognize there is a
Federal interest to help utilities and the public address their needs.
To help provide the Federal share, this bill authorizes a bold
investment of $35 billion over 5 years to reinvigorate State revolving
funds with the goal that these funds will be self-sustaining at the end
of the investment period.
The bill also aims to increase flexibility for States in managing
their assistance programs, explore avenues to reduce costs, and target
resources to those most in need. It also embodies my commitment to
assist rural areas and our most distressed communities with additional
resources to help them serve the public.
Although it is tempting to turn this legislation into a vehicle for
individual proposals and controversial concepts, S. 1961 represents the
collaboration and hard work of many who recognize the goal of assisting
communities should be our guiding principle. If this important bill is
to become law, controversial items are best put aside for another time.
Too many communities are waiting for the assistance this bill will
provide to see the legislation brought down by difficult proposals.
With that, I want to once again welcome our witnesses for all our
panels. Your comments have been helpful throughout this process and I
look forward to your insights on S. 1961.
Thank you Mr. Chairman.
Senator Jeffords. Senator Voinovich.
OPENING STATEMENT OF HON. GEORGE V. VOINOVICH, U.S. SENATOR
FROM THE STATE OF OHIO
Senator Voinovich. Thank you, Mr. Chairman. I would like to
commend you, Senators Graham, Crapo, and Smith for proposing
this legislation that addresses the incredible unmet water
infrastructure needs that we have in this country.
It is all too clear to me that we are facing an
environmental and public health crisis in the country when it
comes to water infrastructure, and I am pleased that this
committee has made it a priority to address this problem with
the Water Investment Act and other needed measures.
I think Senator Bond really made a point. We are here
authorizing. You know, the last couple of years, we have had a
bill before this committee, in terms of the revolving loan fund
for sewers. We have not been able to get that done, because of
the fact that there was a debate over Davis-Bacon.
So it got nowhere, and I have been working with groups, to
see if we cannot compromise this thing out. We ought to get
into that and try and work it out. All of you ought to
understand, if we do not work that out, the bill is not going
to go anywhere. So that is No. 1.
No. 2, even if we do authorize it, this issue has to be
given a higher priority by the Administration and by this
country. I think the reason why OMB does not pay any attention
to it is, they figure that the cost of this stuff belongs in
the local governments, and why should the Federal Government
pick it up?
Now we had a little bill, a $1.5 billion bill, that Senator
Smith and I and a couple others put together and got through
this committee, that would have made grants over a 2-year
period. There was not a dime for it in the last budget. The
last budget had, what, $1,350,000. In my State, we could use $7
billion a year, to take care of the problem.
So the fact is, you are all going to have your testimony
today. We will listen to you. We will try and get a bill out of
here, but there are some fundamental things that we need to
face up to.
One of them is to get the money to get it appropriated. We
have now, you know, the war on terrorism abroad, at home,
homeland security, and the rest of it, and all these things
that have to be reconciled. I think that that is where we are
going to have to talk about this. I think it gets back, Mr.
Chairman, to the appropriators.
You cannot do it all. You know, if we are going to do
homeland security in our water systems, and we do not have safe
drinking water and we do not have sewers, that is another
threat to the people in their communities. It is a big threat.
So somehow, some of this has to be reconciled. We cannot,
at this stage of the game, say, well, it is all homeland
security, and let us ignore the infrastructure problems that
have been out there. The fact of the matter is that this
Congress and this Administration have a responsibility in this
area. We have foisted upon local communities enormous costs, in
most cases, justifiable; but they are incapable of handling
them, incapable.
In my State, Senator Crapo and I had a hearing in Ohio,
where there was a 100 increase in their water rates, in order
to comply with these new mandates that are coming out. We have
a role to play in helping to pay for this.
So I am very happy to be here. I hope we can get this out
today. I hope we can work out the Davis-Bacon thing, but the
key is, we have to get this as a national priority, if we
expect to get the job done. Thank you.
[The prepared statement of Senator Voinovich follows:]
Statement of Hon. George V. Voinovich, U.S. Senator from the State
of Ohio
Thank you, Mr. Chairman. I would first like to commend you and
Senators Graham, Crapo, and Smith for proposing legislation that looks
to address our nation's incredible unmet water infrastructure needs.
It is all too clear to this Senator that we are facing an
environmental and public health crisis in this country when it comes to
water infrastructure, and I am very pleased that this committee has
made it a priority to address this problem with the Water Investment
Act and other needed measures.
Since coming to the Senate, I have made it a goal of mine to
address the hundreds of billions of dollars of unmet wastewater and
drinking water needs across the country as indicated in the EPA's Clean
Water and Safe Drinking Water needs surveys. Other independent groups,
such as the Water Infrastructure Network have documented a $23 billion
per year gap between infrastructure needs and current spending.
Over the last 2 years, I have held a number of meetings with
officials from Ohio municipalities and sewer districts to discuss their
wastewater infrastructure concerns. In addition, Senator Crapo was kind
enough to conduct a field hearing as Chairman of the Fisheries,
Wildlife and Water Subcommittee in Columbus last April to discuss
Ohio's wastewater infrastructure needs.
Last year, I introduced the Clean Water Infrastructure Financing
Act (S. 252) to reauthorize the highly successful, but
undercapitalized, Clean Water State Revolving Loan Fund (SRF) program.
S. 252, and its companion bill in the House, H.R. 668, have strong
bipartisan support.
Congress created the Clean Water SRF program in 1987 to replace the
construction grants program of the Clean Water Act. Under the
construction grants program, the Federal Government paid up to 75
percent of the cost of a wastewater infrastructure project. Under this
program, our country made a substantial amount of progress to clean our
water. Since then, States and localities have used the Clean Water SRF
loan program to help meet critical environmental infrastructure
financing needs.
However, as I indicated a moment ago, in many States, the need for
public wastewater system improvements greatly exceeds typical Clean
Water SRF funding levels. For instance, in fiscal year 2002, a level of
$1.35 billion was appropriated for the Clean Water SRF program.
However, in Ohio alone, about $7.4 billion in needs have been
identified.
The city of Akron, for example, has proposed a CSO Long-Term
Control Plan that will cost more than $248 million to implement--nearly
20 percent of the total SRF level appropriated in fiscal year 2002 for
the entire nation. Without outside funding, Akron's sewer rates could
more than double.
In many instances, communities face having to increase rates--
sometimes as much as 100 percent or more--in order to comply with a
number of Federal requirements. Without outside help, many of these
communities cannot respond to the needs of their citizens. Simply put,
if the Federal Government mandates it, the Federal Government ought to
help pay for it.
Authorization for the Clean Water SRF expired at the end of fiscal
year 1994, and the continued failure of Congress to reauthorize the
program sends an implicit message that wastewater infrastructure is not
a national priority. Well, Mr. Chairman, we cannot afford to continue
to ignore our unmet needs, and I believe that reauthorizing the Clean
Water SRF program should fit right into our homeland security agenda.
My bill, the Clean Water Infrastructure Financing Act, would
authorize a total of $15 billion over the next 5 years for the Clean
Water SRF program. Additionally, my bill would provide technical and
planning assistance for small systems, expand the typed of projects
eligible for loan assistance, and offer financially distressed
communities extended loan repayment periods and principal
subsidization. The bill would also allow States to give priority
consideration to financially distressed communities.
Mr. Chairman, I am pleased that your bill, the Water Investment
Act, includes the core elements of my Clean Water SRF reauthorization
bill. As someone who has had a long-standing interest in water
infrastructure issues, I would like to see this committee support
legislation that would increase funding for our nation's water
infrastructure needs, increases State and local community flexibility
to use SRF funds, provide our small communities assistance in financing
their water infrastructure needs, and offer financially distressed
additional consideration and assistance.
While the funding levels included in the proposed legislation is
modest compared to what is needed to bridge the enormous water
infrastructure funding gap, passage of legislation which increases the
authorization levels for the Clean Water and Safe Drinking Water SRF
programs would be a great step in the right direction.
Even though the loans provided by the SRF programs can help many
communities finance water infrastructure projects, even a low-interest
or no-interest loan can be too expensive for some communities. That is
why I have also been a strong supported of the 2-year, $1.5 billion Wet
Weather Grants Program that Congress enacted in 2000. I worked last
year to fully fund the first year of the program. Although Congress did
not provide any funding to the program, I will continue to push for the
necessary funding to keep this program viable.
I would like to thank you, Mr. Chairman, for including the Clean
Water Infrastructure Financing Act on today's agenda. I look forward to
the testimony from this morning's witnesses, and I also look forward to
working with you and Senators Graham, Crapo, and Smith as the committee
moves forward with its important water infrastructure legislative
agenda. Thank you.
Senator Jeffords. Well, thank you.
Senator Inhofe asked unanimous consent to place his
statement in the record. Without objection, that is done.
[The prepared statement of Senator Inhofe follows:]
Statement of Hon. James Inhofe, U.S. Senator from the State of Oklahoma
Mr. Chairman, thank you for calling this hearing to discuss the
important issue of water infrastructure. I commend you and Senators
Graham, Crapo, and Smith for the hard work that was done to introduce
this bi-partisan bill. This bill is a step in the right direction
toward the continued improvement of the water infrastructure of this
nation. This is an important bill for the nation and is especially
important for Oklahoma. This bill will be of tremendous benefit not
only to our citizens, by providing safe drinking water, but also to the
environment by the continued improvement of water quality.
Both the Clean Water and Drinking Water Program are very popular
with local communities seeking assistance for clean and drinking water
projects. Both program provide ``lower'' than market rate loans to
assist communities to come into compliance with the respective Federal
acts. Extending and increasing the Federal contribution for these
programs will allow States to better meet the financial demands placed
on these funds.
The Water Investment Act contains many positive measures including
the higher authorization levels, an increase in the percentage of funds
set aside for Indian programs, and the increased flexibility afforded
the States to manage their water programs. The measures contained in
this bill that provide additional help for disadvantaged and small
communities are also sorely needed.
A primary concern with extending and increasing the Federal amount
is the availability of the required 20 percent State matching funds.
For your reference, I have attached a copy of two tables that reflect
how Oklahoma has generated matching funds for both the Clean Water and
Drinking Water SRF programs. As you can see we have had to issue match
notes to provide the required State matching funds for the more recent
capitalization grants. [State funds equaling 20 percent of the Federal
capitalization grant has to remain in the fund.] Currently, we are
utilizing Fund interest and investment earnings as the primary source
to re-pay these State match notes. Future debt for State match notes
and lower investment and interest earnings will continue to increase
the financial burden to our SRFs. Another concern is that this bill
does not do enough to assist our larger communities, those that serve
over 10,000 customers, in meeting the infrastructure needs of their
aging water systems.
Thank you again Mr. Chairman for calling this hearing. I look
forward to working with my colleagues on this piece of legislation to
invest in the water infrastructure of our nation.
State of Oklahoma.--Source of State Match Drinking Water State Revolving Fund
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Federal Appropriated Less Utilized Set- Total Available for
Cap Grant Amount State Match Amount Over Match Amount Notes asides Assistance
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
97.................................................... $17,561,900 $3,512,380.00 $0.00 (1) $5,444,189.00 $15,630,091.00
98.................................................... $10,224,200 $2,044,840.00 $0.00 (2) $3,169,502.00 $9,099,538.00
99.................................................... $10,716,000 $2,143,200.00 $0.00 (3) $2,786,160.00 $10,073,040.00
2000.................................................. $11,137,000 $2,227,400.00 $0.00 (4) $1,781,920.00 $11,582,480.00
2001.................................................. $11,183,000 $2,237,600.00 $1,000.00 (4) $2,254,670.00 $11,165,930.00
2002.................................................. $12,446,500 $2,489,300.00 $0.00 (5) $3,236,090.00 $11,699,710.00
....................... ....................... ....................... ........... $0.00 $0.00
-----------------------------------------------------------------------------------------------------------------------------------------
.................................................... $73,268,600 $14,654,720.00 $1,000.00 $18,672,531.00 $69,250,789.00
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
(1) $3,500,000 of State match from the Constitutional Reserve Fund and $12,380 transferred from OWRB grant account. 6/12/98, S.B. 965
(2) $2,000,000 of State match appropriated by legislature and $44,840 transferred from OWRB grant account.
(3) State match from the Oil Overcharge Fund
(4) 2001 State match note paid from investment and interest earnings on DWSRF accounts and the Guymon Ketchum bond loans. $2,227,400 went toward matching the fiscal year 2000 cap grant and
$2,237,600 toward the fiscal year 2001 grant State match.
(5) Match has not been identified at this time. Currently being considered by Oklahoma Legislature
______
State of Oklahoma.--Source of State Match Clean Water State Revolving Fund
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Federal Appropriated Less 4 Percent Admin. Total Available for
Federal Fiscal Year Amount State Match Amount Over Match Amount Notes Amount Assistance
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1988...................................... $9,278,000 $1,855,600.00 $0.00 (1) $371,120.00 $10,762,480.00
1989...................................... $7,597,400 $1,519,480.00 $0.00 (1) $303,896.00 $8,812,984.00
1990...................................... $7,862,000 $1,572,400.00 $0.00 (2) $314,480.00 $9,119,920.00
1991...................................... $16,580,619 $3,316,124.00 $0.20 (2) $663,224.76 $19,233,518.24
1992...................................... $15,697,737 $3,139,548.00 $0.60 (3,4) $627,909.48 $18,209,375.52
1993...................................... $15,528,546 $3,105,709.00 -$0.20 (3) $621,141.84 $18,013,113.16
1994...................................... $9,632,600 $1,926,520.00 $0.00 (5) $385,304.00 $11,173,816.00
1995...................................... $9,951,183 $1,990,237.00 $0.40 (6) $398,047.32 $11,543,372.68
1996...................................... $16,300,350 $3,260,069.00 -$1.00 (6,7) $652,014.00 $18,908,405.00
1997...................................... $4,986,100 $1,018,670.00 $21,450.00 (7) $199,444.00 $5,805,326.00
1998...................................... $10,879,110 $2,184,466.94 $8,644.94 (8) $435,164.40 $12,628,412.54
1999...................................... $10,880,001 $2,281,647.00 $105,646.80 (9) $435,200.04 $12,726,447.96
2000...................................... $10,996,702 $2,282,330.94 $82,990.54 (10) $439,868.08 $12,839,164.86
2001...................................... $10,746,747 $2,149,349.40 $2,154,818.89 (11) $429,869.88 $12,466,226.52
........................................ $156,917,095 $31,602,151.28 $2,373,551.17 ....................... $6,276,683.80 $182,242,562.48
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Notes
(1) State match from the Statewide Water Development Fund, 07/30/88, H.B. 1571; 04/26/89, S.B. 51
(2) State match from the Special Cash Fund, S.B. 144, 03/20/91
(3) State match from the Constitutional Reserve Fund, 05/28/93, S.B. 390; 05/18/94, H.B. 2761
(4) $200,000 in State match provided by Ute settlement--State of New Mexico and $47,501 in State match provided from OWRB grant account.
(5) 1994 State Match provided by OWRB Note Series 1994. Note paid from moneys in the Debt Service Reserve Fund (the ``1985 Reserve Fund'') for the Board's 1985 Bonds.
(6) 1996 Match note paid from investment and interest earnings on CWSRF accounts and the Guymon and Ketchum bond loans. $1,990,236 toward the fiscal year 95 cap grant State match and
$2,018,545 toward the fiscal year 96 cap grant State match.
(7) 1997 State match note paid from investment and interest earnings on CWSRF accounts and the Guymon and Ketchum bond loans. $1,241,524 went toward matching part of the fiscal year 96 cap
grant and $1,018,670 toward the fiscal year 97 grant State match.
(8) 1998 State match note paid from investment and interest earnings on CWSRF accounts and the Guymon and Ketchum bond loans.
(9) 1999 State match note to be paid from investment and interest earnings on CWSRF accounts and the Guymon and Ketchum bond loans.
(10) 2000 State match note to be paid from investment and interest earnings on CWSRF accounts and the Guymon and Ketchum bond loans.
(11) 2001 State match note to be paid from investment and interest earnings on CWSRF accounts.
Senator Jeffords. The time is now, Senator Kyl.
[Laughter.]
STATEMENT OF HON. JON KYL, A U.S. FROM THE STATE OF ARIZONA
Senator Kyl. Thank you, Mr. Chairman, that was most
instructive. Mr. Chairman, thank you for the opportunity to
testify today.
I will be very brief. I just want to testify about
something in this bill that I think, if we are successful in
getting it through, everybody can be very proud of, and it will
certainly help me a great deal. I have in mind the provisions
that rectify the unfairness with respect to the allocation
formula for the Clean Water State Revolving Fund.
Interestingly, in 1996, when the Safe Drinking Water Act
was adopted, the funds from the Drinking Water Fund were
allocated on the basis of a quadrennial infrastructure needs
survey, which is conducted by the States under EPA's
supervision and guidance.
But that is not true for the much larger Clean Water Fund.
As a result, in the Clean Water Fund, Arizona, which is the
fastest growing State in the country, ranks 53d out of the 50
States, 53. Now that is behind Guam, Puerto Rico, and the
District of Columbia.
Based upon the needs survey conducted by the States under
EPA's supervision, Arizona would rank 16th. Obviously, Arizona
is being shorted considerably, and there are other
unfairnesses, as it is to Arizona, with some other States,
especially fast growing States.
I have just a couple of statistics here. Arizona receives
.41 percent of the documented need, while other States with
comparable population receive 2.4 percent of documented need,
which is six times as great a percentage. In fact, some States
receive as much as 17 percent. So I think everybody can agree
that this is unfair.
I would just take one State, Maryland, a State with roughly
the same population as Arizona, and a similar need in the most
recent survey. It receives almost four times the actual funding
that Arizona receives.
So we have some significant discrepancies. Fortunately,
this bill would correct that. That is why I said, I think the
committee can feel very good about its work in this area.
Let me just mention, Senator Smith asked me, well, how did
the formula get adopted this way? Nobody knows for sure, but we
think we know the culprit. Back 15 years ago, on a conference
committee who developed a formula, it was based on an earlier
construction grant program, that bore no relationship to waste
water infrastructure requirements. That is when the percentages
were fixed. It has been that way ever since.
Mr. Chairman, let me just mention two other quick things.
There is in the legislation that Senator Graham has drafted, a
proposal to fix this, as I said, but it has a very high minimum
share of 1.1 percent. I would urge the committee to look at
that. That will, itself, skew some of the results.
For example, the State of Wyoming receives 17 percent of
its total need each year. Based upon this minimum, in 3 years,
Wyoming would pay for everything that it had to have build out,
and there would not be anything left.
The other thing that I want to say is that I hope EPA will
step up to the plate here. For 15 years, it has been
administering a fund, without ever really raising any
questions, to my knowledge. We have written officials at EPA,
and still have not gotten a response.
I think EPA has a responsibility here, if it is really
concerned about meeting the needs of the country, to help
revise this formula, to be supportive of it, and I hope that
EPA will support the committee in its effort to make this fair.
Let me thank you, again, Mr. Chairman, and also staff, and
my personal thanks especially to Michele Nellenbach and
Catherine Cyr of the committee staff, for their assistance to
my staff in working on this.
I will be very happy to work with you as you move forward
with this. Again, I thank you for seeing to it that a very big
wrong is corrected, as a result of one of the provisions of
this bill.
Thank you again, Mr. Chairman.
[The prepared statement of Senator Kyl follows:]
Statement of Senator Jon Kyl, U.S. Senator from the State of Arizona
Thank you, Mr. Chairman, for allowing me to participate in this
important hearing. I would like to commend you for calling a hearing
that addresses the allocation formula for the Clean Water State
Revolving Fund. You and your staff, along with other committee members
and staff, have been most open and helpful, allowing my staff to become
involved in the work of the committee on this issue. I would like to
extend my personal thanks to Michele Nellenbach and Catharine Cyr of
the committee staff for their efforts on my behalf.
Mr. Chairman, as you and the other members of this committee know,
the reason I am here today is to address the gross inequity of the
current allocation formula for the Clean Water State Revolving Fund.
Mr. Chairman, I have worked throughout the past year to create dialog
on this issue and encourage my colleagues to support a more equitable
Clean Water Funding formula. I am pleased that the committee has
addressed this issue in the Water Investment Act of 2002.
As you know, this issue is important to my home State of Arizona.
Arizona ranks 161 in the most recent needs survey. However, under the
Revolving Fund's fixed allocations, Arizona ranks last among the 53
States, territories and the District of Columbia in proportional share
of need fulfilled. Arizona receives just 0.41 percent of documented
need while other States with comparable population receive 2.4 percent
of documented need, six times as great a percentage. Some States
receive as much as 17 percent. I think we would all agree such a system
of allocations is unfair.
Addressing this inequity is of critical importance to the State of
Arizona. I am here today to urge my colleagues to lend their support to
adopting a needs-based approach for allocations under the Clean Water
Revolving Fund that addresses inequities like those I have just
highlighted.
The State Revolving Fund is crucial in ensuring States have the
fiscal resources to address the most critical shortcomings in
wastewater infrastructure. However, the State of Arizona, along with
many others, including Florida, California, Virginia, and others, do
not receive a fair share of the funds authorized and appropriated by
Congress each year. This is not the fault of the EPA. The EPA allocates
the funds among the States according to the formula that was set forth
in the Clean Water Act in 1987. And that, Mr. Chairman, is the source
of the inequity.
The formula created by Congress was developed behind closed doors,
during the conference for the Clean Water Act. The allocation
percentages were based on an earlier construction grant program that
bore no relationship to the wastewater infrastructure requirements, and
the percentages were fixed. That is to say, once the Act was signed
into law, each State would receive the same share of available funds in
perpetuity, unless the Act itself were amended. As you know, we have
yet to either amend or reauthorize the portion of the act pertaining to
the faulty formula, and I applaud the committee for placing this issue
on the legislative agenda.
It is interesting to note that, when Congress enacted the 1996 Safe
Drinking Water Act, we ensured that no such inequity would haunt the
newly created Drinking Water State Revolving Fund. From its inception,
the Drinking Water Fund was allocated on the basis of a quadrennial
infrastructure needs survey conducted by the various States under EPA
supervision and guidance. The survey involves the States in determining
their own needs for drinking water infrastructure, to ensure compliance
with EPA regulations. The EPA, in turn, validates the State submissions
and compiles them in a report to Congress. The EPA then allocates
Drinking Water Fund appropriations on the basis of each State's
proportional share of the total need.
There is a fundamental fairness associated with allocating the
funds on the basis of the survey. The States themselves participate in
the survey. The EPA has oversight, but in the end, valid needs are
simply compiled into the aggregate, and the resulting shares determine
Drinking Water Fund allocations among the States. Unfortunately, the
same is not true for the much larger Clean Water Fund. A Clean Water
Needs Survey is performed by the States and the EPA in fashion similar
to the compilation of the Drinking Water Needs Survey. The Clean Water
survey, however, has no impact on Clean Water Fund allocations. I
believe, as I'm sure do most of my fair-minded colleagues, that it is
time we take action to right this wrong. There is no reason for the
Drinking Water Fund to be allocated fairly on the basis of actual need,
while the Clean Water Fund is allocated on an arcane set of fixed
percentages that were established before most of us were elected to
Congress.
I ask you if it is equitable for the State of Maryland, a State
with roughly the same population as the State of Arizona, and similar
need according to the most recent survey, to receive almost four times
the actual funding? When looked at in terms of percentage of need
funded, Maryland receives almost seven times what Arizona receives. Is
that fair? No, it is not. And this is only one example.
I have submitted to the committee two potential formula changes for
the Clean Water Fund. I note that the draft legislation proposed by
Senator Graham is similar to one of my proposals, except that Senator
Graham's proposal includes a very high minimum share of 1.1 percent.
The current fixed percentage Clean Water Fund formula also has a
minimum share, of 0.4971 percent. While I support the Needs Survey
basis of Senator Graham's proposal, I believe the 1.1 percent share is
so high that it creates a different sort of inequity: creating a system
that redistributes funds from those States with high levels of
validated need to those with less need. In fact, at current levels of
appropriations, and under the current minimum share of 0.4971 percent,
the State of Wyoming receives 17 percent of its total need per year.
With a 1.1 percent minimum share, Wyoming would receive one third of
its total need per year, and would continue to receive the same amount
after 3 years when, theoretically, all its need would have been met.
Mr. Chairman I would ask the committee to reexamine this provision.
I support a minimum share to ensure the smaller States receive some
meaningful amount of funding for their needs. However, I believe the
floor should not be set at a level that creates new inequities and
perpetuates existing problems.
My friends, it is simply an issue of fairness. Not even my
colleagues from those States that stand to lose funding can argue
against the fairness of a needs-based allocation formula. In fact, in
the vote for my proposed amendment to the VA-HUD Appropriations Bill,
Senators Allard and Feingold, both from States that would have lost
funding under my proposal at the time, voted in favor of my amendment.
There is a sense of fair play within the Senate. I urge the committee
to capitalize on it and support legislation that will ensure the next
budget we pass will allocate the Clean Water State Revolving Fund on a
fair and equitable basis. I pledge my support to any reasonable
legislation, including Senator Graham's proposal, that will create a
needs-based allocation formula.
Mr. Chairman, I call upon the Administration to exercise leadership
on this important issue. For the EPA to have administered the revolving
fund for 15 years despite gross discrepancies between the Agency's own
assessment of needs and the formula allocations is simply wrong. The
time has come for the Administration to support a formula change that
takes account of the needs of every State. I would therefore ask the
Administration to support this bill or a similar formula change.
I thank you again, Mr. Chairman, for the opportunity to participate
in this hearing. At this time I would like to ask one question of the
Administration's witness.
Senator Jeffords. Thank you, Senator.
Are there any questions?
[No response.]
Senator Jeffords. I am going to keep on rolling. Somebody
is going to replace me.
Thank you very much for your testimony.
Senator Kyl. Thank you, Mr. Chairman.
Senator Jeffords. I would be interested in working with
you. I understand, having been in Arizona, the problems are a
little bit different than they are in Vermont. So I think we
have to learn.
Senator Kyl. You might be interested to know, and Senator
Corzine spoke about the urban needs, but Arizona, I think,
after Connecticut, is the most urbanized State in the country,
in the sense that all the population is concentrated in a
couple of big areas; but we also have some of the very poor
rural issues, as well.
So we are really very much like a lot of other States in
the country. As I say, add that to the fast growth, and you can
see why we would rank No. 16 in needs. We have to get the
formula a lot closer to that than 53d.
Senator Jeffords. Well, I will be interested in following
that. In the future, too, maybe you can comment, just where are
we in the ability of water in Colorado, and what does the
future look like?
Senator Kyl. Well, there are some issues. But year after
year, the States of California, Nevada, and Arizona, have
worked more closely together, to ensure that the limited supply
of water is allocated according to the Supreme Court's rule,
and California has been taking way more than its share, as
everybody knows.
California has committed to a 15-year program, or I think
it is 15 years, to get that down to what it is supposed to
take. Unfortunately, last year was the first year of the
program, and they went way over, 100,000 and some feet over of
what they were supposed to take; but we will get that resolved.
The Upper Basin States have been very cooperative in that
regard, as well, Mr. Chairman.
Senator Jeffords. I do not want you to miss your vote.
Senator Kyl. Thank you.
Senator Jeffords. Thank you, it was an excellent statement.
Our second panel is Ben Grumbles, Deputy Assistant
Administrator for Water, U.S. Environmental Protection Agency,
Office of Water. Thank you very much, and please proceed.
STATEMENT OF BEN GRUMBLES, DEPUTY ASSISTANT ADMINISTRATOR FOR
WATER, U.S. ENVIRONMENTAL PROTECTION AGENCY, OFFICE OF WATER
Mr. Grumbles. Thank you, Mr. Chairman.
First of all, I would like to extend my deepest regrets on
behalf of Tracey Meehan, who is not able to be here today to
testify on behalf of the Office of Water.
My second point is that it is indeed an honor to be able to
appear on behalf of the Administration to testify on S. 1961. I
can only hope that my testimony will be received more favorably
than what I used to say as a House staffer, when I would come
over here to try to argue in support of House water projects.
That is often a very tough sell in this room.
It is an honor to be here, and to talk a little bit on some
of the principles and the importance of clean water and
drinking water in S. 1961.
First of all, just a few of the principles and basics to
keep in mind is the year of clean water, and the 30th
anniversary of the Clean Water Act.
There is a wide acknowledgment that there is, and the
Senators have certainly talked about it, a tremendous funding
gap. The basic principle is that to respond to that gap, it
requires a partnership: Federal, State, local, private
entities, all working together to respond to that gap. Second,
through the partnership, there is a need to put more resources
into water and waste water infrastructure. Third, we need to
reduce the costs by ensuring more efficient and productive use
of these resources, through locally tailored, fiscally
sustainable management and technical approaches.
Today, I will address some of the basic concepts and
principles that we have, as we look to engage and to work
constructively with the Congress and other stakeholders on the
whole water and waste, water infrastructure issues. One is to
recognize that there is a fundamental need for a strong
partnership, public/private partnership.
Another is to recognize that there needs to be
encouragement and incentives for fiscal sustainability and
improved management; whether it is asset management, with some
of the other mechanisms, to really get at the gap, and to have
a more cost-effective approach.
Another important principle involves recognizing the
importance of cost-based rates: water and sewer rates. Another
is to encourage innovation, and that is done through a variety
of mechanisms, but certainly through increased research and
development of innovative technologies and more cost effective
approaches to waste water and drinking water treatment.
A couple other principles are encouraging conservation and
re-use reclamation of water and waste water. Then a final one
is to encourage watershed-based approaches.
Certainly, for the Administrator, a high priority of hers,
as included in the budget request for fiscal year 2003, is to
encourage more watershed-based approaches, through targeted
initiatives that bring together drinking water and waste water,
and focus on environmentally important projects.
Now if I could just turn briefly to S. 1961, I am pleased
to be able to say that in many respects, the legislation is
important and a strong step forward. It has many provisions in
it that encourage fiscal sustainability and greater
flexibility.
As you might have imagined, however, with respect to the
funding levels, the Administration cannot support the funding
levels in the bill. They are not consistent with the overall
priorities laid out in the budget.
The Administration believes that we can have a constructive
dialog, and focus on various ways to help meet the needs,
recognizing the funding levels, and that needs to be addressed.
There are many other aspects of the legislation that are
important steps forward. In the interest of time and brevity, I
will just summarize by saying that there are aspects of the
bill that we have provided technical assistance on, and that we
look forward to talking with you about.
There are a lot of good things in the legislation to
encourage fiscal sustainability. I think that is the keystone
that we want to work with you on and focus on, while at the
same time recognizing that there is a balance; and that the
more provisions that are included, in terms of conditions on
the loans, there is a greater recognition that we must keep in
sight that if we add more requirements and conditions, that at
some point, the utilities and the users will have a difficult
process to go through in order to get the loans.
So there is encouragement from our perspective, and we look
forward to working with you and with the committee, and
continuing this extremely important dialog on water and waste
water infrastructure.
Thank you, Mr. Chairman.
Senator Jeffords. Thank you.
Do you favor the approach in this bill in the allocation
formula for the Clean Water State Revolving Fund, moving toward
a needs-based approach, as in the Safe Drinking Water Act?
Mr. Grumbles. Mr. Chairman, I think there are some
excellent aspects to the way the allotment formula is
contemplated in the legislation. I know that traditionally,
certainly as a former staffer on a congressional committee, I
know that the approach is to defer to Congress in coming up
with the allotment formulas.
I know that the model, the approach, that was used in the
Safe Drinking Water Act amendments of 1996, has a lot of
support among the various stakeholders. I certainly have heard,
and I know that Administrator Whitman has heard, the message
from others, including Senator Kyl, that as you do come up with
an allotment formula, that needs has to be a significant part
of that formula.
Now there are other criteria that one may want to look at,
such as the level of effort that States have provided. But
certainly, I think we recognize that need is and should be an
important component of an overall formula for allocation of the
funds.
Senator Warner. Mr. Chairman, I had a question.
Senator Jeffords. Yes, Senator Warner.
Senator Warner. I just visited a community in my State this
week, which has been a beneficiary of this program. But in the
last 15 years, it has lost the shoe industry, the textile
industry, and the tobacco industry which touches it is
diminishing. There is the peanut problem, and I could go on and
on, and the furniture business.
They are in gridlock. They want to comply, and without the
benefit of these funds, I just do not know what this community
would do. So I am a strong supporter of the bill, in its
present form, and I do hope we can move along with this. But it
is a life and death matter with a lot of communities; several
of them in my State.
Thank you, Mr. Chairman.
Senator Jeffords. Thank you for that helpful remark.
In your testimony, you say the following. ``A continuing
population growth means that even increasing capacity at
current levels of waste water treatment will not be enough to
prevent water quality degradation, and the development
pressures on unprotected drinking sources will increase.''
But then you finish by saying, ``The President clearly
defined his priorities in the State of the Union as defense and
homeland security. As the increased spending called for in this
bill is not consistent with those priorities, the
Administration does not support the funding levels contained in
S. 1961.''
In summary, you agree there is a great need for water
infrastructure funding. You recognize that at current levels,
our nation will continue to pollute its waterways in an
unacceptable level. But you conclude by saying, ``The President
only supports increased funding for defense and homeland
security.''
We are talking about safe drinking water here. We are
talking about clean, fishable, swimmable lakes, rivers, and
streams. We are talking about protecting human health and the
environment. Are you telling us that this no longer is a goal
of President Bush? Are you indicating that clean water and safe
drinking water are not priorities of this Administration?
Mr. Grumbles. Thank you, Mr. Chairman.
That is an important discussion to respond to and to engage
in. I think very clearly, clean water and safe drinking water
are priorities and important aspects of the Administration and
the budget request. I think there are a couple of things that
need to be mentioned.
One is that the Administration does support the State
revolving funds, but the Administration also recognizes that
that is one tool, one aspect. The Administration recognizes
that there is a large gap.
I think like all of the people in this room, everyone knows
that it is more than just a Federal funding issue. It is an
issue about encouraging an approach that deals not just with
the supply side, but the demand side, and looks at asset
management, looks at privatization incentives, tries to
encourage State and local partnerships, and encourages
innovative technologies and approaches. The point is to try to
have a more cost-effective and equitable approach. As the
testimony points out, there are tremendous needs. There are
growing populations. There is a need for some innovation.
We very much look forward to engaging with the committee in
a discussion over the Federal funding levels, and coming up
with the best possible approach that recognizes that there are
mandates, there are also affordability issues; but working
through the State revolving funds, and exploring with a new
look some of the more cost-effective and innovative approaches,
such as asset management, that will make tremendous progress,
as we face the challenges ahead.
Senator Jeffords. Well, I look forward to further
discussion on this, because I am just not quite sure how all of
that comes about, without sufficient increases in funds.
Anyway, they are holding the Senate up, and we cannot let
them do that. So I will be back, hopefully.
[Recess.]
Senator Corzine [presiding]. The hearing will come to
order.
I think we will move to the third panel in this hearing:
Mayor Doug Palmer from Trenton, NJ, and we are truly pleased he
is here; Joseph A. Moore, Alderman from the city of Chicago.
It is always nice to have my first opportunity to chair a
hearing while someone from my home State, who I care about, is
about to testify. Mayor Palmer, would you like to start off?
STATEMENT OF DOUGLAS H. PALMER, MAYOR, TRENTON, NJ, CHAIRMAN,
URBAN WATER COUNCIL, CONFERENCE OF MAYORS
Mr. Palmer. Certainly, and it is good to see you, Senator.
We are very proud of you in New Jersey, and it is good to be
here with you.
As was stated, my name is Douglas Palmer. I am the Mayor of
Trenton, NJ, and the chair of the Conference of Mayors' Urban
Water Council.
The Conference of Mayors is a national nonpartisan
organization, that represents more than 1,100 cities across the
nation. We represent the largest water and waste water systems
in the United States.
Mr. Chairman, I would like to thank you and the other
members of the committee for introducing S. 1961, the Water
Reinvestment Act of 2002.
I first would like to take a few minutes to discuss some
key components of your bill, and to touch on a few of the
Conference of Mayors and Urban Water Council priorities. Since
I do not want to go over my allotted time, I also would like to
submit my full testimony for the record.
Senator Corzine. Without objection.
Mr. Palmer. As you know, the issue of water and waste water
infrastructure is critical to our nation and to our nation's
cities. To maintain healthy and viable communities, we must
make sure that our water and drinking water supply is clean and
safe. As Mayors, we have recognized that there is not enough
local, State, or Federal money available to satisfy all of the
water infrastructure needs in the nation.
The Urban Water Council was created to focus on these
issues. Its purpose is to assist local governments in providing
high quality water resources in a cost-effective manner.
The bill you have introduced has many excellent components.
First of all, we agree with the committee that the focus of
this bill should be on water infrastructure investment, instead
of a new set of water quality provisions.
Local elected officials are engaged in trying to achieve
water quality goals, but we need a chance like this to focus on
achieving already specified targets, and not be redirected to
new goals.
The bill authorizes $20 billion between 2003 and 2007 for
the SRF categories under the Federal Water Pollution Control
Act, and $15 billion for the SRF categories under the Safe
Drinking Water Act. These SRF authorizations are clearly not
enough to subsidize the funding necessary to close the needs
gap. A combined $35 billion boost over the next 5 years is also
clearly much more than previous funding levels. For this, we
are grateful to the Senate, and we support this approach.
S. 1961 also incorporates some innovate concepts, two of
which are deemed critical by the Conference of Mayors in
creating the right conditions for successful achievement of
water quality goals. First, the proposed Section 103 provision
that would require a recipient of SRF funds to consider, among
other things, forming public/private partners, or other
cooperative partnerships, is a step in the right direction.
It has been our experience, since the mid-1990's, that
alternative approaches to planning, financing, and operating
water and waste water projects can yield greater public
benefits for the amount of money that is invested. While
choosing a public/private partnership approach should not be
prescriptive, it should be made possible for those cities that
want to take advantage of such an approach.
The Urban Water Council has prepared two reports, which are
available on our web site, that describe over 40 public/private
partnership projects that have realized savings. These
partnerships were encouraged through changes in regulations
under the Federal tax code to allow long-term loans, and with
an Executive Order that modified the construction grant
repayment provision.
When Congress and the Administration provide the right
types of financial incentives, local elected officials can
establish public/private partnerships that benefit our citizens
and the environment.
The Conference of Mayors adopted a policy in 2001 to
encourage competition in the different phases of new water and
waste water infrastructure. This policy was adopted once it was
determined that competition for both surface and sub-surface
infrastructure projects need not be as costly as the
traditional methods employed in the past.
The Lynn, Massachusetts experience is an example of what
can be achieved by using a competitive approach. I will not go
into that because of time. But the second demonstration
approach incorporated in the bill is demonstration projects for
water quality enhancement and management.
One of the most difficult problem we face as cities
involves achieving State water quality objectives and total
maximum daily loads, TMDLs, and the virtually unregulated
nonsources, such as agricultural uses, that are usually outside
of our jurisdictions.
The demonstration project provision of S. 1961 can provide
some appropriate financial incentives necessary to bring
voluntary cooperative efforts to solve the water quality
designation TMDL problem that we are facing. The Conference of
Mayors supports this innovative approach. What is also needed,
however, is a strategy that will go beyond demonstration
projects to a long-term solution.
We support the proposed requirement for recipients of an
SRF loan to develop and submit asset management plans that
specify how water and waste water facilities will be properly
maintained over time.
Asset management is critical to the preservation of
infrastructure. We have a long history of experience with using
asset management planning, and we would like to mention that
formalizing such as a requirement as a condition of receiving
SRF funding should be integrated into the loan program in a
cautious way.
The focus of our efforts at the local government level
should remain principally with ensuring the proper treatment of
drinking water and waste water for public health and local
economy reasons.
The asset management plan is important, but the current
proposal on what is acceptable is not entirely clear. We would
be happy to work with the committee to explore what an
appropriate scope and details of an asset management plan
should be.
Just quickly about the bill, we believe the bill specifies
that disadvantaged communities can receive SRF loans with a 30-
year repayment term. Perhaps the most significant shortcoming
of this bill proposal is the lack of a similar 30 years
repayment term for other communities.
Similarly, the bill does not contain any reference to
removing private activity bonds used for water and waste water
from the State volume caps. I understand fully that changing
the tax code is not in the jurisdiction of this particular
Senate committee.
However, I would like to convey to this committee that one
of the most fruitful financial incentives that Congress can
provide for increasing aggregate water infrastructure
investment is to make certain that the largely unfunded
environmental mandates and environmental goals they impose on
local government should not be impeded by a rigid and
inflexible tax code.
Finally, there is no mention in the bill of the imminent
need for water systems to conduct security assessments and
retrofit the proper anti-terrorist controls necessary to ensure
the safety of our water supplies, and the physical integrity of
our water infrastructure. We would be happy to work with the
committee to recommend a provision to address this problem.
In conclusion, on behalf of the Conference of Mayors and
the Urban Water Council, I wish to thank you again for this
opportunity to speak before this committee. We look forward to
working with you, as you move forward on this very important
piece of legislation.
Thank you.
Senator Corzine. Thank you, Mayor Palmer.
Alderman Moore.
STATEMENT OF JOSEPH A. MOORE, ALDERMAN, CITY OF CHICAGO, ON
BEHALF OF THE LEAGUE OF CITIES
Mr. Moore. Thank you, Senator Corzine and members of the
committee. I am Joe Moore. I am an Alderman from the city of
Chicago, and chairman of the National League of Cities Energy,
Environment, and Natural Resources Committee.
I am here today to testify on behalf of the NLC and the
18,000 cities we represent across the United States on Senate
bill 1961, the Water Investment Act of 2002.
I would like to commend Senator Crapo, as well as Senators
Graham, Jeffords, and Smith, for recognizing a need for a
Federal partnership to help finance the rehabilitation and
replacement of our nation's aging water infrastructure. We
deeply appreciate your willingness to commit $35 billion over
the next 5 years to our waste water and drinking water
infrastructure needs.
There are a number of provisions in S. 1961 that NLC
believes to be particularly helpful to cities and towns. Allow
me to briefly highlight six of them: No. 1, the extension of
the transferability provisions; No. 2, the revisions to the
Clean Water Act State Revolving Fund allocation formula to
reflect needs more closely; No. 3, the extended repayment
period for loans from the State Revolving Funds. We recommend
that these provisions be applicable to all loans, not just to
those to small communities. No. 4, the addition of source water
protection as an eligible activity for funding; No. 5, the
inclusion of demonstration projects. We strongly urge you to
add storm water as an appropriate category, as well; and No. 6,
NLC supports the bill's provisions providing nonrefundable
assistance to communities that do not meet the strict
definition of a disadvantaged community.
It is unclear, however, how this provision would be
implemented, and we look forward to working with you to clarify
this matter.
There are two provisions which we believe should be added
to the bill. First, NLC believes water infrastructure should be
expressly highlighted as a principle and primary purpose of S.
1961. While we recognize that the current statutes authorize
the use of State revolving fund resources for infrastructure
replacement and rehabilitation costs, the enormity of our
nation's water infrastructure needs, and a number of the
Senators referred to them today in their own States, mandates
special attention in the bill.
Second, we agree with the Conference of Mayors that water
security be included as a necessary and legitimate use of State
revolving funds, in light of the recent tragic events.
There are some provisions in S. 1961 that we believe need
further clarification or revision. We certainly understand and
appreciate the Federal Government's legitimate desire to ensure
that Federal dollars are spent wisely and prudently. There is
no question about that. We are concerned, however, that too
many mandates and conditions may discourage cities from
applying for funds regardless of how pressing their needs are.
With respect to the provisions on asset management and
local rate structures, NLC would like to work with you to
assure that all water system function effectively and
efficiently to meet the needs of local residents. Again, we
want to make sure that the mandates and the conditions are not
to onerous.
We are concerned about the penalties assessed if States
fail to develop asset management strategies. Reducing Federal
assistance to States penalizes the local governments in those
States. We, again, would like to work with you to ensure an
equitable solution to this problem.
We are concerned about the provision that appears to either
require or encourage public/private partnerships in the water
business. Certainly, we support those when they work. However,
the majority of large private water companies operating in the
United States are foreign owned.
We are now only beginning to understand the full impact of
international trade agreements on the ability of local
governments to regulate and operate local utilities, once they
are under contract with a private partner.
We ask that you fully understand the ramifications of
public/private partnerships in the water business, in light of
the trade agreements, before requiring or encouraging such
activities in Federal law.
Finally, we are unclear as to whether the consolidation
provisions are a funding requirement. Some systems, such as
Chicago's, already serve millions of customers, and further
consolidation is either feasible or sensible.
Furthermore, Federal requirements exist that actually
impede consolidation. One example is Section 1926(b) of the
Agriculture Act of 1961, which disallows absorption of any
drinking system indebted to the Farmers Home Administration.
Many of these systems are inefficient and marginally protective
of public health. Yet, Federal law bars State and local efforts
at consolidation in such areas.
Thank you for the opportunity to testify for the National
League of Cities, and for initiating the legislative process on
Senate bill 1961. NCL looks forward to working with you to make
this one of the most important and significant pieces of
legislation enacted by this Congress. I look forward to
responding to any questions you might have.
Senator Corzine. Thank you.
I am sure Senator Jeffords will be back and has a series of
questions. So I will start, and then we will go to Senator
Crapo, if that is OK.
Let me ask, on some of the financing issues that were
mentioned, Mayor Palmer, you talked about the 30-year repayment
term for disadvantaged communities that you wanted to see
extended to all communities.
Then I would also like to hear how serious an imposition it
is now that the private activity bond caps exist, and what kind
of broader funding we would be able to get for water
infrastructure projects, if we were able to deal with those
volume caps. Is there a dam that is backing up actions that
would work to create greater activity with the revolving funds
if we removed those caps?
So my question is on either one of those or both issues,
and Alderman Moore, if you want to comment, I would appreciate
it, as well.
Mr. Palmer. Well, you know, the volume cap certainly could
help if that were changed. There is no way really for
municipalities to really finance clean drinking water, the
Clean Drinking Water Act. I mean, we just do not have enough
money. The only thing we can do is raise rates, which is
totally unacceptable.
As you know, there is a needs gap. One of the ways that it
can be fixed is if we look at the volume caps of private
activity bonds, and use that as a source of helping the private
sector get involved in forming public/private partnerships, and
moneys that can be used to help narrow that.
Because there is no way, when we look at trillions of
dollars over the next 10, 15, 20 years, in terms of making our
water safe to drink and dealing with the standards that are out
here; there are no real ways to do that, other than continuing
to raise rates, which becomes prohibitive. We should look at
ways in which you can life these caps, so that more private
activity can be involved in the financing of these structures.
Mr. Moore. In Chicago's case, on the basis of a
recommendation from a consulting firm, we have put in the
process of a rate increase of 4 percent every year for the next
4 years. So we are undertaking steps to do what we can, to go
back to rate payers to take care of our very pressing
infrastructure needs.
The problem is, however, that they are so great, and there
are only so many times that you can, if you will, go back to
the well and ask the rate payers to pay more. While we do not
fall under the strict definition of a disadvantaged community,
we have within the city of Chicago large portions of our city
that are disadvantaged, where we have people of very low and
fixed income, who simply would not be able to either directly,
as homeowners, or indirectly, as renters, afford the rate
increases that would be required in order to meet our
infrastructure needs.
Senator Corzine. Are you already in a situation where your
rate increases are reviewed by State boards or other
structures? Are you challenged on those rate hikes on a regular
basis?
Mr. Moore. No, no, we are not. I do not believe we are
subject to any State review.
Mr. Palmer. In New Jersey, before we can raise rates, we
have to go in front of the Board of Public Utilities and state
our case. In my city, and I am bragging now, we have one of the
lowest rates in the State. But as the Alderman said, there are
only so many times you can continue to go back to the rate
payers, when basically, if you raise it too high, they are
really choosing between paying their rent or their mortgage or
their water bills. There are only so many time we can do that.
Senator Corzine. So you would believe that, again, these
volume caps would be one way to get greater authorization for
these projects to be met, without rate increases.
Mr. Palmer. Absolutely; it was scored, and I think it came
out this week, at about $147 million, but that could be
debatable. We had a little higher figure. But it is really a
small price to pay in terms of investment in clean water.
I mean, no one cares about water, as long as they can turn
on the faucet and see it coming out, and it is not green or
brown or something. But the moment it stops coming out, or it
has a funny color or a funny odor, then people get concerned
about it. We want to do things before it gets to that point.
Senator Jeffords. I have one quick followup. Are both of
you up against your volume caps on infrastructure water
projects?
Mr. Palmer. I am not certain, but I believe so.
Mr. Moore. I am not certain of that either, but we would be
happy to get back to you on that.
Senator Jeffords [presiding]. Senator Crapo.
Senator Crapo. Thank you very much, Mr. Chairman. I just
have one question, but before I ask that, I want to thank both
Mayor Palmer and Alderman Moore for your attendance here today,
for your comments, and for your support of this very critical
legislation.
The question I have is that there are a number of concerns
in the country about excessive and uncontrolled growth, urban
sprawl, if you will, and those kinds of issues. The legislation
seeks to assure that water projects are coordinated with local
land use plans, regional transportation plans, and State and
regional municipal watershed plans.
I do not know if you have really focused on the legislation
in that context; but my question is, do you see any
difficulties with requiring that there be coordination with
these types of land use plans or transportation plans, and if
so, would you have any comment on that?
Mr. Moore. I would certainly support that, as long as it is
not too onerous. But we already do cooperate with other local
governmental authorities. Personally, I believe we need to do
more of that.
There is much more of an emphasis now on a regional
approach in northeastern Illinois and northwest Indiana, and an
acknowledgement that we are all dependent on each other.
Decisions that one municipality make have an impact on other
municipalities. So certainly, Chicago does not need a
legislative mandate to cooperate with its neighbors. But to the
extent that cities in this nation do, I think it is a good
thing.
Mr. Palmer. I would agree with the Alderman. Now with
sprawl and preserving open space, in New Jersey, where we have
such little space as it is, and through our State plan, those
collaborations are almost mandated, if I could say that. So
that cooperation and coordination is necessary.
Senator Crapo. Well, thank you, I suspected that, but I
just wanted to be sure. Thank you very much.
Senator Jeffords. Thank you, Senator.
Mayor, as the Mayor of Trenton, NJ, you experience the
effects of building water infrastructure on the grassroots
level. In particular, urban sprawl caused by unplanned and
uncoordinated growth can have a detrimental effect on the
city's cost to the living and quality of life.
For that reason, I included a provision in the Water
Investment Act to ensure that the construction of water
infrastructure is coordinated with land plans, watershed plans,
and transportation plans. Do you believe that there is
sufficient funding to stem urban sprawl that might follow newly
constructed water infrastructure?
Mr. Palmer. Yes, I believe so. I think that is very
necessary in the legislation. As I stated before, in New
Jersey, sprawl is a tremendous problem. Our suburban areas, of
course, want to limit growth. Our urban areas want to increase
growth, because that is where the infrastructure is. Using
waste water sewer capacity is a way of basically expanding
growth in areas where it is not wanted.
I think that coordination has to continue to be there, and
recognize that we all have to work together in a coordinated
approach to limit sprawl, but also not prohibit growth, because
properly planned growth is good. Uncontrolled growth and
uncontrolled expansion of infrastructures without looking at
what is there, in terms of transportation, schools, and open
space could be a problem.
Mr. Moore. Senator, I agree. I think that is a very key
provision of this bill. Like New Jersey, we have had a serious
problem with sprawl in northeastern Illinois. The amount of
land growth that has occurred has far exceeded the population
growth by many, many times, and we simply have to get a handle
on that.
So we have already begun a process of regional cooperation,
of taking steps to begin to curb growth, and also to encourage
Federal legislation that will help us to rebuild our city, and
to rebuild the infrastructure within our city, so as to
discourage the kind of unchecked urban sprawl that has
occurred. Certainly, the provision you are referring to in S.
1961 will be a helpful tool to enable us to stem unchecked
growth.
Senator Jeffords. I thank you both.
Senator Chafee.
Senator Chafee. Thank you, Mr. Chairman.
I heard Senator Voinovich's earlier comments about where we
are going to get the money, and I just concur that it is
distressing to hear the testimony of how important this is. At
the same time, I think it is going to be a tough year ahead of
us, as we try and meet all the priorities. I appreciate and
commend you for your testimony here today.
Senator Jeffords. Thank you, Senator.
Well, I thank you both. This has been a very helpful
testimony.
Mr. Moore. Thank you, we appreciate your sponsorship of
this legislation, and look forward to working with you as we
get it through Congress; thank you, Senator.
Senator Jeffords. Don't worry, we will be in touch.
We will now proceed to the fourth panel. The fourth panel
consists of Nancy Stoner, director of the Clean Water Project,
Natural Resources Defense Council; Paul Schwartz, national
policy coordinator of the Clean Water Action; Bill Kukurin, of
the Associated Builders and Contractors; Jim Barron, president,
Ronkin Construction, testifying on behalf of the National
Utility Contractors Association; and Mr. Terry Yellig, building
trades attorney, Sherman, Dunn, Cohen, Leifer & Yellig,
testifying on behalf of the International Union of Operating
Engineers. We are pleased to have you all with us. Ms. Stoner,
we are going to start with you, I guess, and work down the
line, so go right ahead.
STATEMENT OF NANCY STONER, DIRECTOR, CLEAN WATER PROJECT,
NATURAL RESOURCES DEFENSE COUNCIL
Ms. Stoner. Good morning, Mr. Chairman and members of the
committee. I am Nancy Stoner, director of the Clean Water
Project at the Natural Resources Defense Council, and one of
the co-chairs of the Clean Water Network, which is a coalition
of more than 1,000 groups supporting clean water from across
the nation. I present the testimony of behalf of both NRDC and
the Clean Water Network this morning.
Thank you for holding this timely hearing today on water
infrastructure investment. As Ben Grumbles mentioned, this is
the 30th anniversary of the Clean Water Act this year. This is
a tremendous opportunity for the Congress to provide increased
funding and essential improvements in these programs.
The Federal Government's investment in waste water and
drinking water treatment, over those 30 years, has brought
tremendous progress in cleaning up our waterways. That
progress, however, has been overtaken by water pollution
resulting from urban storm water, agricultural run-off, and
discharges of inadequately treated sewage from our
deteriorating sewage systems.
We need to step up our investment and spend smarter now, to
continue to make progress in keeping the promise of the Clean
Water Act for clean, safe, usable water for the next
generation. I am pleased to hear that many members of the
committee support those goals, and spoke in favor of them
today.
As an initial matter, we urge you not to use
reauthorization of the Clean Water and Safe Drinking Water SRF
as a vehicle for reconsidering clean water or safe drinking
water protections. Developing a new paradigm for water
infrastructure funding that will better meet the needs of our
nation and provide greater environmental benefit for each
dollar spent is a large enough task for the moment.
We would like to see water infrastructure legislation
achieve three major goals: substantially increased funding for
State clean water and safe drinking water projects; spend that
money on more cost effect and environmentally beneficial
projects; improve public participation in the funding process;
and increase State accountability for the expenditure of
Federal funds.
My written testimony describes each of these issues in
depth. I request that I be able to submit that testimony for
the record.
Senator Jeffords. Without objection.
Ms. Stone. We need to authorize substantially more SRF
funds to close the gap between our water needs and available
Federal funding. While there are differing estimates on the
amount of additional funding needed, the need for greater
investment in clean water and drinking water infrastructure is
clear and undisputed. We commend the sponsors of the Water
Investment Act of 2002 for supporting substantially increased
funding over the next 5 years.
We urge you to look ahead, and to authorize additional
spending for at least the next 10 years, since we know now that
we will continue to need vastly increased water infrastructure
financing beyond 2007.
The growing funding gap suggests not just the need for more
funding, but also the need to begin to spend that funding more
wisely, to obtain the greatest amount of environmental benefit
per taxpayer dollar invested in water infrastructure. We should
not merely rebuild our waste water systems, using the hard
infrastructure technologies of the past.
We must become smarter about stretching our Federal
investment in water infrastructure, by spending more on green
infrastructure, nonpoint and nonstructural solutions that are
more efficient and more environmentally effective than
traditional concrete and pipe solutions.
I have brought with me today a poster to illustrate a
number of those green infrastructure approaches. I would ask
you to take a look at those. They include water re-use, the use
of eco-roofs or roof gardens, stream buffers, rain gardens, and
conservation designs.
These can be used in communities across the country, and
are being used in communities across the country, to save
money, and to provide additional benefits, in addition to water
quality, like wildlife habitat, enhanced drinking water
supplies, smog reduction, thermal reduction. These techniques
that mimic Mother Nature can provide tremendous benefits. We
ask you to include additional incentives in the legislation for
the use of green infrastructure.
In particular, we urge you to provide a 10 percent new
funding incentive for States that establish dedicated funds for
nonstructure and nonpoint solutions.
We support a number of other mechanisms to ensure that
taxpayer dollars are spent on projects that will address the
greatest environmental and fiscal needs, including requiring
that clean water SRF funds be spent to address those projects
identified by the State as its top priorities; prioritizing
projects that meet the most significant public health and
environmental needs and those that help disadvantaged
communities; ending subsidies for sprawl development, which
increases water pollution in the long run; and ending funding
subsidies for entities that will not commit to comply with the
law; and improve publicly available information about projects
that taxpayer dollars are used to fund.
As poll after poll has shown, Americans want clean, safe
water, and are willing to invest more to get it. We applaud you
for moving forward with legislation to address the public's
demand for clean water. We urge you to ensure that the bill you
pass will encourage the most cost-effective strategies to meet
that demand.
This year, on the 30th anniversary of the Clean Water Act,
let us move ahead with legislation that will ensure clean and
safe drinking water for years to come.
Thank you for providing me with the opportunity to testify
today. We have drafted specific language on each of these
issues, and would like to work with you to address them.
I would be happy to answer any questions that you may have.
Senator Jeffords. Thank you very much.
Next is Mr. Schwartz.
STATEMENT OF PAUL SCHWARTZ, NATIONAL POLICY COORDINATOR, CLEAN
WATER ACTION
Mr. Schwartz. Great, good morning, Mr. Chairman; good day,
Senator Crapo, Senator Chafee, and the rest of the
distinguished committee. I am Paul Schwartz, the national
policy coordinator for Clean Water Action. We are a community-
based national environmental group in 15 States with 700,000
members.
I also come here today representing the Campaign for Safe
and Affordable Drinking Water, a coalition of over 300
organizations, including not just environmental ones, but
consumers, health care providers, and vulnerable populations
groups such as the National Association of People with AIDS.
As Nancy has touched on the clean water side of the ledger,
I am going to be focusing more on the drinking piece. I want to
make a couple of more general points. Last Thursday, White
House spokesperson, Scott McClellan said, ``we can have
economic growth and protect our environment.'' We think that
this bill, S. 1961, is an example of just that type of blending
that the Administration was alluding to.
We think that it is really important that as we press our
leadership in the war against terrorism, that we do not go AWOL
in the war against environmental pollution. I appreciate your
remarks on that count, Senator Crapo.
The importance that we want to draw out here is a couple of
things. We have talked a lot about environmental and public
health issues. One issue that I want to talk about is jobs,
which is not something that we normally talk about here.
But for each billion dollars of additional investment that
we actually appropriate and put out there over the next few
years, it will generate somewhere between 35,000 and 50,000
jobs at the local level across the country.
So the additional authorizations that we have here in front
of us represent somewhere between 700,000 and 1 million
additional jobs nationally. We think that is important, too,
for the security and health of our country.
Getting back to the bill itself and to the environmental
and public health issues, I think it is important to recognize,
as many have, in talking about the mandates that are in front
of us, that on the drinking water side, there are many pressing
drinking water issues that are right in front of our face,
including arsenic, cryptosporidium and other microbial risks,
radioactive radon, and the groundwater rule.
All of these are critical rulemakings that will be having
an impact on the quality of our public health across the
country, and are going to require additional dollars on the
part of rate payers and tax payers at the local level, State
matches, and we think, an ongoing and longer term set of
Federal funds from the Federal Government.
To that end, although we applaud the bold step that S. 1961
takes in authorizing an increased injection of Federal fundings
for a 5-year period, I would echo Nancy's call that we have a
longer term solution to an ongoing commitment through a Clean
Water Trust Fund, to help funnel Federal dollars to needy
communities across the country for many of our critical
infrastructure needs.
We would suggest that this trust fund should, in part, be
funded by a ``pollute or pays'' mechanism, that imposes a small
fee on those vested interests whose pollution behavior creates
the need for drinking water cleanup and other water cleanup and
public health protection in the first place.
In addition, we would echo the call for more of a focus on
nonpoint source pollution control. We think that it is very
important that 10 percent of the money on the clean water side
gets set aside for nonpoint source control.
Now since I'm focusing in on drinking water, I think it is
fair to ask, why am I on the clean water side of the ledger?
That is because the Safe Drinking Water Act really has no
source water protection provision. So the Clean Water Act is
its first line of defense.
Last, but not least, we would speak out for more
accountability and more public participation provisions to be
included in S. 1961. One of the clear problems is that when you
add together all the sources of funding from the two SRF
accounts and from the State matches, you are looking at, even
under current authorizations and appropriations, $200 billion
being obligated by the States over the next 20 years, with very
little Federal oversight, and almost no citizen participation.
It is a scandal that many communities do not know how to
access these funds, and that citizens are not involved in the
priority setting. So we are asking for a strengthening of those
provisions.
Thank you very much for the opportunity to testify. We look
forward to working with this committee in moving forward this
authorization through Appropriations, and we look forward to
helping out on these specific suggestions that we have put in
front of you.
Senator Jeffords. Thank you, Mr. Schwartz.
Mr. Kukurin.
STATEMENT OF BILL KUKURIN, PRESIDENT, KUKURIN CONTRACTING,
ASSOCIATED BUILDERS AND CONTRACTORS
Mr. Kukurin. Yes, thank you. Good morning Mr. Chairman and
distinguished members of the committee. My name is Bill
Kukurin, president of Kukurin Contracting, located in Export,
PA.
On behalf of the Associated Builders and Contractors, I am
honored to be here and would like to thank Chairman Jeffords,
Ranking Member Smith, and members of the Senate Committee on
Public Works for providing me with this opportunity to discuss
the Water Investment Act of 2002, and the important role it
could play in improving our nation's water quality and
infrastructure.
I will be summarizing my comments, but I would request that
my full statement be submitted for the official record.
Senator Jeffords. Without objection.
Mr. Kukurin. For nearly 30 years, Kukurin Contracting has
been operating in western Pennsylvania as a family-owned and
operated business. Kukurin Contracting has 125 employees, and
focuses primarily on municipal work, specifically in the
construction and maintenance of water and sewer lines, pumping
stations, water tanks, reservoirs, and sewage treatment
facilities.
We have built our reputation through providing quality
workmanship for our clients, and safe, health worksites for our
employees.
In 1997 and 1999, Kukurin was recognized by ABC National as
one of the leaders in the construction industry, and was
presented the annual excellence in construction award for work
on several of our projects.
Kukurin Contracting has been a member of the western
Pennsylvania ABC for 20 years. ABC is a national trade
association, representing more than 23,000 merit shop
contractors, subcontractors, materials suppliers, and
construction-related firms within a network of 82 chapters
throughout the United States and Guam.
Our diverse membership is bound by a shared commitment to
the merit shop philosophy within the construction industry.
This philosophy is based on the principles of full and open
competition unfettered by the Government, and nondiscrimination
based on labor affiliation and the awarding of construction
contracts to the lowest responsible bidder, through open and
competitive bidding.
This process assures that taxpayers and consumers will
receive the most for their construction dollar. With 80 percent
of the nation's construction workers choosing not to be
represented by a Union, ABC is proud to be their voice.
I would like to commend Chairman Jeffords and Senators
Smith, Graham, and Crapo for introducing Senate bill 1961, the
Water Investment Act of 2002. I also commend this committee for
undertaking a comprehensive look at our nation's water
infrastructure needs.
The costs of insufficient attention to clean water issues
are indisputable. Non-point source pollution leaking toxins,
storm water runoff, and coastal pollution pose grave risks to
water quality. Our nation's water quality and environmental
infrastructure could not be more vital to our health, safety,
and overall quality of life.
The Water Investment Act of 2002 would serve to ensure the
environmental and financial stability of our nation's water
programs. This measure would authorize the Clean Water and Safe
Drinking Water State Revolving Loan Fund Program at $35 billion
over 5 years.
THE SRF Program allows States to provide low-cost financing
to communities for the construction, repair, and rehabilitation
of waste water collection and treatment facilities. While this
legislation seeks to provide additional resources to States and
localities to aid them in meeting water infrastructure needs
and increased State flexibility to States in administering
their water programs, the imposition of the Davis-Bacon Act to
this vital program would negate many of these efforts.
While ABC members have concerns regarding a number of waste
water needs, I will focus my comments today on funding for
construction of waste water treatment facilities, and on the
detrimental impact that the discriminatory and antiquated
Davis-Bacon Act would have, if included in the legislation, on
these vital projects.
Congress passed the Federal Water Pollution Control Act,
the Clean Water Act, in 1972, which linked the Federal
Government with States and cities to clean up the country's
waters, providing projects for water supply and waste water
treatment. The Clean Water Act of 1987 phased out the
construction laws grant program by the close of fiscal 1990.
From fiscal year 1990 through 2001, the EPA made available
over $20 billion in grants. Even this number was under the
appropriated amount. While this program has been a significant
success, it is clear that to accommodate the nation's growing
population, to meet new water quality standards, and repair and
upgrade aging facilities, much greater investment must be made.
Estimates for future needs for clean water infrastructure
are staggering; anywhere from $300 billion to $1 trillion, over
20 years.
Small communities and States with large rural populations
are having the largest share of problems with the SRF Program.
Many small towns did not participate in the previous grants
program, and consequently are likely to require major projects
to achieve compliance with the law. Yet, these communities
often lack an industrial tax base, and thus face the prospect
of very high per capita user fees, if their citizens are
required to repay the full capital costs of sewage treatment
projects.
According to the testimony from the General Accounting
Office, SRFs will only meet about one-third of the State's
funding needs, and will generally be unable to meet the needs
of the disadvantaged communities.
There are many small communities that do not have the
capital base necessary to support a State Revolving Fund. More
direct grant money is required for lower income communities.
I see I am running out of time here. I would like to go
more to the Davis-Bacon Act. ABC commends the sponsors of this
vital legislation for not expanding Davis-Bacon Act
requirements to the Clean Water/Safe Drinking Water State
Revolving Fund. The SRF has operated efficiently without Davis-
Bacon since 1995.
ABC encourages the committee to continue to allow States
and municipalities to operate the SRFs without this expensive
and discriminatory requirement.
Davis-Bacon is basically a relic of the infamous Jim Crow
era. The law enacted in 1931 was intended to prevent minority
workers, mostly from the South, from competing with northern,
mostly union, construction firms, for Federal contracts in the
North.
Conceived during a time of discrimination, the act still
has much the same effect today. Davis-Bacon disadvantages
small, emerging businesses and minority businesses. Davis-Bacon
discourages many qualified small and minority-owned contractors
from bidding on public projects, because of the complex and
inefficient wage and work restrictions, which make it nearly
impossible for small businesses to compete with the well
capitalized corporations.
To seek Davis-Bacon contracts, small and minority-owned
firms must not only pay the prevailing wage, and adopt
inefficient work practices and rigid union-based job
classification; but also expose themselves to huge compliance
costs and burdensome paperwork regulations. As a result, few
small or minority firms win Davis-Bacon contracts, and many
others give up trying.
In conclusion, Mr. Chairman, ABC strongly supports the
efforts being made by the Environment and Public Works
Committee to ensure that the nation's water quality is
improved. ABC supports the Water Infrastructure Act of 2002, as
currently written.
We believe that with full funding and without any expansion
to the Davis-Bacon Act, our water infrastructure needs will
begin to diminish, and our nation's water quality will
dramatically improve.
It is imperative to improve the efficiency of the SRF
Program by not imposing outdated and unnecessarily perceptive
administrative requirements that the Federal Government places
on municipalities, namely, the Davis-Bacon Act.
On behalf of the Associated Builders and Contractors, I
again want to thank you and the members of the committee for
the opportunity to testify here today. I will be happy to
answer any questions you may have.
Senator Jeffords. Thank you, Mr. Kukurin.
Our next witness is Mr. Jim Barron. Please introduce
yourself and you may proceed.
STATEMENT OF JIM BARRON, PRESIDENT, RONKIN CONSTRUCTION, ON
BEHALF OF THE NATIONAL UTILITY CONTRACTORS ASSOCIATION
Mr. Barron. Thank you, Chairman Jeffords, I appreciate the
opportunity to speak before the committee today, and thank the
distinguished Senators that are members of the Senate
Environment and Public Works Committee.
My name is Jim Barron. I am president and owner of Ronkin
Construction, which is located just northeast of Baltimore. We
are a small underground utility contracting firm that has been
in existence for 25 years, building infrastructure in the
Baltimore area.
I am here today representing the National Utility
Contractors Association, better known as NUCA. As Senator Bond
spoke earlier on this issue, we are the true environmentalists.
The men and women of NUCA are the people that build and
maintain the nation's water, waste water, gas, electric and
telecommunications infrastructure in this nation.
Our members are also manufacturers and suppliers, that
supply the needed services and materials to do this work. We
are the people that get out there every day and have the
firsthand knowledge about the existence and the depletion of
our existing infrastructure in the United States today.
The picture is bleak. It is getting worse and it is not
going to get any better by itself. We need some help. However,
NUCA and this committee and the Congress of the United States
have an opportunity today to do something about that.
Winston Churchill once said that a pessimist is one that
looks at the difficulty in every opportunity, and the optimist
is the one that looks at the opportunity in every difficulty.
Well, we need to be optimists, and we need to look at the
opportunity that we have before us today, to do something to
the Water Investment Act of 2002. NUCA and this committee can
work together to overcome this great difficulty through
optimism. Through the Clean Water SRF and the Drinking Water
SRF, we can begin to correct the problem.
I would like to thank Senator Voinovich, who was here
earlier today, for his commitment to the SRF through Senate
bill 252. We are very, very happy that the key components of
that bill are embodied in the Water Investment Act of 2002.
I would also like to thank Senator Bond for his commitment
through the VA and HUD Appropriations Committee, and my
Senator, Senator Mikulski, who have worked tirelessly to keep
the funding limits up, every time somebody decides to cut it,
year in and year out. We are very appreciative of their work.
I would also like to thank Senator Bond this morning for
commenting that we are the true environmentalists. You know, it
is very nice to hear, when we are standing knee deep in raw
sewage in Baltimore trying to repair a broken sewer main, that
somebody in the U.S. Senate thinks we are environmentalists and
not a honey dipper. So we do thank Senator Bond for that
comment.
That is the view from the trenches. We are out there every
day, and we see the problems that we face with America's
infrastructure, in the cities and the communities around this
great nation.
In Baltimore alone, which I am most familiar with, 2 weeks
ago in the Baltimore Sun, they reported that due to EPA
requirements right now, in order for Baltimore and the citizens
of Baltimore to not be fined heavily by EPA, the Mayor and the
City Council will have to come up with $982 million over the
next 3 years, just to correct the critical deficiencies in that
crumbling infrastructure. That is a tough chore to accomplish
in a city whose tax base has been cut in half over the last 10
years.
The cornerstone of the entire program has to be the
Revolving Funds. It is a win/win for everybody. It not only
corrects and maintains the existing infrastructure, but it also
creates jobs. Studies have proven that for every billion
dollars spent in SRF funding, that at least 55,000 jobs are
created as a result of that.
Let us look at the ripple effect. Let me give you an
example. I just completed a project in Baltimore City that used
to be a highrise of subsidized housing. They imploded the
project, 35 acres. We put in $2.5 million worth of
infrastructure, and today, they are building 300 townhomes
there, that the citizens of Baltimore can, in fact, buy for
$60,000 to $70,000.
When they buy those homes, they have to get mortgages,
through mortgage bankers and title companies. They have to
furnish those homes with appliances and furniture. They are
going to come back into the city of Baltimore and increase the
tax base. The ripple effect is phenomenal, when this kind of
money gets turned back into the community.
My grandfather once said, ``It takes as long to get better
as it took to get sick.'' This problem did not just surface
overnight. It has been building and building for years and
years, and we are going to have to have not funding just this
year, but in the years to come, to correct the problem. We have
to keep chipping away at it, year after year after year; not
just the utility contractors, not just Congress, but us,
together, have to work to solve this problem.
Let us talk real quickly about the hot potato, Davis-Bacon.
NUCA's membership is made up of open shop and union shop
contractors. So NUCA's organization has to be somewhat neutral
on this issue.
But we believe there is a possible compromise; and that is,
by allowing Davis-Bacon to be part of the first funding round,
it would satisfy and compromise the position of this hot
potato. If we cannot ignore it, we have to find a way to get
around it and compromise that issue.
In closing, I encourage you, when you leave today or when
you go back to your communities, to take a ride. Just get in
your car and take a ride and look around. You can see the
bridges, you can see the highways, you can see the buildings
that are in disrepair that need repaired; but you do not see
the crumbling infrastructure underneath the streets.
We cannot ignore it any longer. We have to work together
and do something with the crumbling infrastructure in this
country, and the SRF in this act will go a long way to
accomplish that.
Thank you very much.
Senator Jeffords. Thank you.
Our final witness is Terry Yellig, business trades attorney
for Sherman, Dunn, Cohen, Leifer & Yellig.
STATEMENT OF TERRY YELLIG, BUILDING TRADES ATTORNEY, SHERMAN,
DUNN, COHEN, LEIFER & YELLIG
Mr. Yellig. Thank you, Mr. Chairman, my name is Terry
Yellig, and I am testifying on behalf of the 14 affiliated
unions that comprise the Building and Construction Trades
Department of the AFL-CIO, as well as the millions of skilled
construction workers who those unions represent.
We commend you, sir, and Chairman Graham, as well as
Senators Crapo and Smith, for introducing S. 1961, the Water
Investment Act of 2002, which would authorize $35 billion over
5 years for investment in America's clean water and safe
drinking water infrastructure. It is nice for a change to be in
the majority. Most of the speakers have endorsed that level.
As we all know, recent annual appropriations have only
funded approximately $2 billion per year to help pay for clean
water and safe drinking water infrastructure projects. This is
a woefully inadequate amount. That is why we are encouraged by
S. 1961, and view it as an indication that this committee
intends seriously to address America's water infrastructure
needs.
Notwithstanding, the Building and Construction Trades Union
strongly feels, like many of the other witnesses, that more
should be done to tackle our massive water infrastructure
needs. We recognize the constraints that looming budget
deficits pose on Federal infrastructure programs.
Nevertheless, we strongly urge the committee to take a
long, hard look at authorizing even higher levels for funding
for clean water and safe drinking water projects in S. 1961, in
order to bring funding levels up to the $50 billion to $60
billion level over the next 5 years, as was recommended in a
needs assessment report prepared by the Water Infrastructure
Network, a broad-based coalition of locally elected officials,
drinking water, and waste water service providers, contractors,
engineers, environmentalists, and labor unions.
As building and construction trades unions, we pledge our
support to moving water infrastructure legislation through
Congress that authorizes as much funding for new and improved
clean water and safe drinking water infrastructure as possible.
In addition to the various other policy considerations that
we have heard about in this legislation, we are concerned about
the labor standards that will be applicable to construction
workers employed on federally assisted water infrastructure
projects.
Specifically, we respectfully urge this committee to take
steps necessary to ensure that Davis-Bacon prevailing wages are
paid on all such projects assisted under the Clean Water and
Safe Drinking Water Acts.
As many members of this committee are aware, Congress has,
for 71 years, consistently applied Davis-Bacon prevailing wage
requirements to Federal infrastructure programs, regardless of
whether it was under Democratic or Republican control, or
whether there was Democratic or Republican Administration in
the White House.
In recent years, as Congress has considered using various
so-called innovative financing techniques that are intended to
leverage a limited amount of Federal capital investment for
maximum public benefit, as well as the more traditional Federal
grant programs, it has steadfastly continued to apply complete
and comprehensive Davis-Bacon wage coverage to construction
projects funding under these programs.
In fact, Congress included comprehensive Davis-Bacon
prevailing wage requirements in the Clean Water Act in 1972,
and in the Safe Drinking Water Act in 1974.
However, as I have explained more fully in my prepared
statement that I have submitted to the committee, EPA has
concluded that Davis-Bacon prevailing wage requirements no
longer apply to the construction of any water treatment
projects assisted by State water pollution control revolving
funds that began after the end of fiscal year 1994, even
though, as I mentioned earlier, the Clean Water Act includes
the Davis-Bacon prevailing wage provision.
Accordingly, it is necessary to amend the Clean Water Act,
so that EPA will have no discretion concerning application of
Davis-Bacon prevailing wage requirements to construction of
water treatment projects, including those supported by funds
directly made available through Federal capitalization grants
and those supported by recycled Federal funds.
Similarly, as I explained in my prepared statement, the
Safe Drinking Water Act already includes a broadly worded
provision that directs the EPA Administrator to ``take such
action as may be necessary to assure compliance with provisions
of the Davis-Bacon Act.''
However, contrary to that obligation, EPA now claims that
the Davis-Bacon prevailing wage requirement in the Act does not
apply to construction projects assisted by Safe Drinking Water
Revolving Funds.
For this reason, the Davis-Bacon wage requirement in the
Safe Drinking Water Act must be amended to make it clear that
the Davis-Bacon requirements apply to all construction projects
supported by Safe Drinking Water Revolving Funds, with
resources directly made available from Federal capitalization
grants or with recycled funds made available by repayment of
those funds.
To fail to provide Davis-Bacon coverage of water
infrastructure projects assisted by State Revolving Funds,
under both the Clean Water Act and the Safe Drinking Water Act
would, in our opinion, amount to piecemeal repeal of Davis-
Bacon prevailing wage requirements applicable to two major
Federal construction programs, contrary to congressional intent
in the original Clean Water Act and the Safe Drinking Water
Act, not to mention the other 60 or so Federal statutes that
have extended Federal prevailing wage requirements to a myriad
of other federally assisted construction programs.
We again commend the committee for coming to grips with our
significant clean water and safe drinking water infrastructure
needs, and we look forward to working with the Senators on both
sides of the aisle, as the process moves forward.
Senator Jeffords. Thank you very much. That was an
excellent statement.
Mr. Yellig, we have heard this morning that the application
of Davis-Bacon, which we have just been discussing here, will
increase the cost of the Federal construction from 5 percent to
38 percent, in some cases. Will you please respond to that
claim, as well as Mr. Kukurin's claim that Davis-Bacon
discourages minority and small contractors?
Mr. Yellig. Well, with regard to the allegation that the
application of Davis-Bacon prevailing wage requirements
increases the cost of construction, first of all, it is
important to understand that in any kind of construction
project, whether it be water treatment or safe drinking water
or housing or whatever, generally speaking the cost of the
construction of the project, the labor cost, is approximately
30 percent and actually going down, as a relative portion of
the overall cost.
Now in order for the Davis-Bacon wages to substantially
inflate the cost of construction, even if the wages were 50
percent higher than otherwise without the prevailing wage
requirement, for example, that would only result in a 15
percent increase in the overall cost, because it only accounts
for 30 percent or less of the entire cost of the project.
The studies that I have seen and read indicate that the
cost of paying prevailing wages is minimal, if anything at all.
But the allegations that Davis-Bacon increases cost of
construction projects like 15, 30 or 35 percent, it is just not
possible. That is not possible.
With regard to opportunities for minority contractors, I
spoke to a gentleman several years ago. He was a mechanical
contractor here in Washington, DC.
He said that the Davis-Bacon Act was the best friend that
he has, because it enables him to compete on a level playing
field, because he knows that the cost of labor is going to be
relatively the same; regardless of whether it is a small
contractor or large contractor, the cost of labor is going to
be the same. So therefore, it is eliminated from the
competition, and places a greater emphasis on productivity and
efficiency.
So the evidence that we have seen indicates that, in fact,
the Davis-Bacon Act is actually a help to minority contractors
in bidding for public work.
Senator Jeffords. Thank you.
Ms. Stoner, in your testimony, you stated that projects
should be funded according to priority. Why is this important
in terms of protecting the environment and public health?
Ms. Stoner. I guess I would say a couple of things about
that. The first is that there is a system for determining
priority of the projects within every State.
That is the public's opportunity, that is everyone's
opportunity to look at those questions about what will be most
environmentally beneficial for that State, and to ensure that
the priority list reflects that, to the best of the ability of
the State, to put together that list.
Once that effort has been made, we feel it is very
important to follow that list, the State's own determination,
based on the information it has received of which projects will
produce the most environmental benefit for the State. That is
why we support funding from the priority list.
There has been a question raised, what about projects that
are not ready to go forward? We would support allowing the
State to fund the next priority project that is ready to go
forward. We certainly would not want to hold up funding for any
project that is ready to go forward, based on waiting for a
project before it in line. But we believe that is the best use
of our taxpayer dollars.
Senator Jeffords. I am interested in your pictures up
there. In the upper left hand corner, that is obviously a drain
pipe, and that water gets stored?
Ms. Stoner. Yes, what this is, it is a storm drain. This is
a gutter off someone's roof, like you probably have on your
home and I have on my home.
What they have at the bottom here is rain barrel with a
hose attached at the bottom, so that the homeowner can store
that water and reuse it for, here you can see it is in the
middle of a garden for watering the vegetation, the lawn, and
so forth. It is a way of reusing water and harvesting storm
water, is what it is sometimes called, to make beneficial use
of it.
Senator Jeffords. Is it all gravity?
Ms. Stoner. Yes, it is just gravity. This is a very
inexpensive little device. You can actually buy it from mail
order catalogs.
Senator Jeffords. Thank you, I might just do that.
You might have made a sale.
[Laughter.]
Senator Jeffords. Mr. Schwartz, in your testimony, you
stated that more funds should be directed toward nonstructural,
nontraditional water facilities. Do you have any sense as to
how those expenses for nontraditional projects compare in terms
of environmental benefit per dollar spent in structural
projects; and are these projects an efficient use of SRF money
to address nonpoint source pollution?
Mr. Schwartz. Thank you for that question. Just before I
answer it, I just want to make one other point on the question
you asked Nancy about the priority projects.
Since there has been a lot of lesson learning from the Safe
Drinking Water SRF, one of the things under the Safe Drinking
Water SRF is that the States are now allowed to go around the
priorities that are established by the rankings, except for
readiness to proceed.
We think that that is a good thing to borrow from on the
clean water side as well. Obviously, it takes away some
flexibility on the part of the States, but it gets you some
real accountability, in terms of scarce SRF funds being used
for real public health and environmental needs.
To answer your question, currently in Washington, DC, and
in cities and counties across the United States, we have
mandates to fix very old problems that this generation did not
put in place. These are things like combined sewer overflow
problems.
The typical solutions that we are turning to are very
expensive end-of-the-pipe deep tunnels. Now in a number of
places, those deep tunnels have not worked too well. In
Chicago, in Milwaukee, and other places, they are in place, and
billions of dollars have been spent, and we are still having
overflows of human sewage and we are still having problems in
central business districts with overflows.
What we are not doing is taking a look at the engineered
nontraditional solutions that Nancy has pointed to, in part,
that can capture storm water, that can slow down the flow, and
that can make sure that not only do we get receiving waters at
the end of a build watershed, like in the Potomac and Anacostia
River without overflows, but that we actually are able to use
that water, say, in drought situations like we have now, to
make sure that trees are getting enough water, that our
communities are not flooding with that water every time it
rains, and we are able to get really ``two-for'' double
benefits.
If you consider spending the money on things like street
cleaning, as opposed to your deep tunnel, you get to pick up
the trash and the toxics that are dropping from cars, and
divert them from the storm water flow.
When you look at the number crunching that has been done by
local municipal experts in Prince George's County, Maryland, by
over 15 Federal and State and local Agencies that are
cooperating in this city and county of Los Angeles with tree
people, to engage in large scale application of these
technologies, you are looking at real cost savings and real
water quality pick-ups at the time you are looking at
neighborhood revitalization.
We can bring to bear some of those numbers for you and put
them in front of the committee, so that you can take a look at
the emerging economics and the emerging science that it backs
up this intuitive notion that people have, that you can use
natural infrastructure engineered as a way to begin to deal
with some of the costs and environmental components of these
problems.
Senator Jeffords. We will followup with you on that. I
would be interested in seeing what you have.
Well, thank you all. We are reaching the end of the
hearing. All of us have other things to do, and I am afraid I
have to roar off, too.
I just want to thank you for your testimony. I ask all of
you to be ready though, because we will probably have some
followup questions for you, and we would ask you to respond as
quickly as possible. I ask all of our members to submit their
questions for the record as soon as possible, so that we may
share them with you.
Thank you for coming. This has been a very, very helpful
morning to me. There has been some excellent testimony. I know
the hard work that goes into preparing testimony, and I want to
let you know that I appreciate it, and I am sure the whole
committee does, especially the staff.
Thank you, and the committee adjourns.
[Whereupon, at 11:30 a.m., the committee was adjourned, to
reconvene at the call of the chair.]
[Additional statements submitted for the record follow:]
Statement of Hon. Max Baucus, U.S. Senator from the State of Montana
Thank you, Mr. Chairman for holding this important hearing today on
the growing water and wastewater infrastructure needs in this country.
I would first like to compliment our chairman and ranking member, and
Senators Graham and Crapo for working so diligently to produce a bi-
partisan water investment bill, S. 1961, that we will hear about today.
This bill is an important first step in the process of dealing with the
critical issue of how the Federal Government can best help local water
systems provide clean and safe water for their communities.
I have spent a lot of time with these issues in the past,
particularly during the development of the Safe Drinking Water
Amendments of 1996. We worked hard to produce legislation that would
relieve local water systems of unnecessary regulatory burdens, while
ensuring that those water systems had the flexibility and the resources
they needed to provide their customers with clean water.
I worked hard to protect the interests of small and rural water
systems in that bill. Small systems cannot spread their costs of
complying with State and Federal regulations among a large number of
ratepayers. This dynamic hasn't changed, and I'm afraid it will become
more of an issue as new regulations come online. In my State of
Montana, we have over 900 separate drinking water systems. Almost all
of them serve fewer than 10,000 people. I've been told some 60 to 70
percent of the water systems in Montana that receive funding through
the Clean Water or Safe Drinking Water Revolving Loan Funds are
considered small and/or disadvantaged communities. Some of them, like
the area around Three Forks, Montana, have significant problems with
arsenic.
I want to make sure that, as we move forward with water investment
legislation, these small systems will again be given the resources and
the flexibility they need to protect public health and the environment,
without being subject to unnecessary or undue regulatory burdens. The
operators of these systems are trying to provide a basic public service
to their neighbors. I don't want us to fall into the trap that led us
to the 1996 Safe Drinking Water Act Amendments, where we unfortunately
required systems, States, and the EPA to do way too much, to dilute
their resources pursuing a lot of different efforts, instead of
concentrating on the most egregious contaminants and problems, and
focusing priorities on the what a system should be doing to make its
water as pure as can be for the consumers. In a tight budget situation,
this is even more important than ever.
That said, I support the increased authorization levels in S. 1961
for both the Safe Drinking Water and the Clean Water State Revolving
Loan Funds. I think this committee can send a strong message that clean
water is a top priority, and that we in Congress must make the
necessary investments in the nation's water and wastewater
infrastructure to protect basic public health and environmental needs.
Few things are as important as clean and safe drinking water for our
citizens.
I look forward to hearing the testimony of the witnesses today and
working with my colleagues on this important legislation. Thank you
again Mr. Chairman.
__________
Statement of Benjamin H. Grumbles, Deputy Assistant Administrator for
Water, U.S. Environmental Protection
INTRODUCTION
Good morning, Mr. Chairman and members of the committee. I am Ben
Grumbles, Deputy Assistant Administrator for Water at the U.S.
Environmental Protection Agency (EPA). First, let me convey Tracy
Mehan's regrets for being unable to be here today to speak with this
committee. Second, I appreciate this opportunity to provide the
Administration's views on S. 1961, the ``Water Investment Act of
2002,'' and being able to discuss how to ensure that the nation's
drinking water and wastewater facilities can meet the challenge of
protecting our public health and water quality in the 21st century.
Through a strong and evolving local, State, Federal and private
partnership, the United States has made great progress over the past
three decades in reducing water pollution and assuring the safety of
drinking water. The Clean Water Act (CWA) and the Safe Drinking Water
Act (SDWA) have served us well and provide the solid foundation we need
to make sure that all Americans will continue to enjoy safe drinking
water and clean rivers, lakes, and coastal waters. In particular, our
cooperative investment in water and wastewater treatment, and pollution
prevention has paid dramatic dividends for water quality and public
health.
The economic and social benefits of improved water quality are
readily evident from urban waterfronts to recreational water bodies to
wild rivers all across America. We have also made dramatic progress in
improving the safety of our nation's drinking water. Today, more than
90 percent of the population served by community water systems receives
water from systems with no reported violations of health-based
standards in place as of 1994.
CLEAN WATER AND DRINKING WATER STATE REVOLVING LOAN FUNDS
The financial demands that communities face in providing clean and
safe water to all Americans are substantial, and the Administration is
committed to helping find ways to meet those demands. The Federal
Government has provided over $80 billion in wastewater assistance since
passage of the Clean Water Act, which has dramatically increased the
number of Americans enjoying better water quality. The primary
mechanism that EPA uses to help local communities finance water
infrastructure projects is the State Revolving Fund (SRF), established
in the 1987 CWA amendments and the 1996 SDWA amendments. The SRFs were
designed to provide a national financial resource for clean and safe
water that would be managed by States and provide a funding resource
``in perpetuity.'' These important goals are being achieved. Other
Federal, State, and private sector funding sources are also available
for community water infrastructure investments.
Under the SRF programs, EPA makes grants to States to capitalize
their SRFs. States provide a 20 percent match to the Federal
capitalization payment. Local governments get loans for up to 100
percent of the project costs at below market-interest rates. After
completion of the project, the community repays the loan, and these
loan repayments are used to make new loans on a perpetual basis.
Because of the revolving nature of the funds, funds invested in the
SRFs provide about four times the purchasing power over 20 years
compared to what would occur if the funds were distributed as grants.
In addition, low interest SRF loans provide local communities with
dramatic savings compared to loans with higher, market interest rates.
An SRF loan at the interest rate of 2.4 percent (the average rate
during the year 2001) saves communities 23 percent compared to using
commercial financing at an average of 5.3 percent.
To date, the Federal Government has provided more than $19.7
billion in capitalization funding to States for their Clean Water SRFs,
more than twice the authorized level for the program. With the addition
of the State match, bond proceeds, and loan repayments, States have
$37.7 billion in assets in their clean water SRFs. Since 1988, States
have made nearly 11,000 individual loans for a total of about $34.3
billion, with another $3.4 billion either unallocated or being readied
for loans as of June 2001. In fiscal year 2001, the Clean Water SRF
issued a record total of 1,370 individual loans with a value of $3.8
billion. The Clean Water SRFs have provided between $3 and $4 billion
in loans each year for several years, and are widely considered a
tremendous success story. For fiscal year 2003, the President's Budget
proposes funding the Clean Water SRF at $1.212 billion.
The Drinking Water SRF was modeled after the Clean Water SRF, but
States were given broader authority to use Drinking Water SRFs to help
disadvantaged communities and support drinking water program
implementation. Through fiscal year 2002, Congress has appropriated
$5.3 billion for the Drinking Water SRF program. Through June 30, 2001,
States had received $3.6 billion in capitalization grants, which when
combined with State match, bond proceeds and other funds, provided $5.2
billion in total cumulative funds available for loans. Through June 30,
2001, States had made close to 1,800 loans totaling over $3.8 billion,
with another $1.4 billion either unallocated or being readied for
loans. Approximately 75 percent of the agreements (41 percent of
dollars) were provided to small water systems that frequently have a
more difficult time obtaining affordable financing. By the end of
fiscal year 2003, we expect the number of loans issued by State
Drinking Water SRFs to reach 2,400, with about 850 SRF funded projects
having initiated operations by that date. The fiscal year 2003
President's Budget proposes to fund the Drinking Water SRF at $850
million.
The Administration will continue to fulfill prior EPA commitments
to capitalize the Clean Water SRF to revolve at a $2 billion average
annual level and the Drinking Water SRF at a $500 million average
annual level.
THE CHALLENGE AHEAD
With the important investments made by and achievements of all
levels of government and the private sector, together we have
substantially improved quality of the water in every State--even while
our population sharply increased and the output of our economy more
than doubled.
But the task America's intergovernmental, public-private
partnership has undertaken--to protect public health and the
environment by maintaining and improving water quality--is a continuing
one. As our economy and population grow, partnership members must
increase their efforts to provide clean and safe water every day. We
must also periodically take a good look at the challenges ahead, and
reassess the adequacy of the tools we have to meet those emerging
challenges.
EPA's most recent Drinking Water and Clean Water Needs Surveys have
identified $150.9 billion and $150.5 billion, respectively (both in
1999 dollars), in documented needs eligible for SRF assistance in the
coming decades. More recent estimates associated with correcting
sanitary sewer overflows may increase the estimated total Clean Water
needs, and the Agency expects to release a new Clean Water Needs Survey
in August 2002. Over the past year or so, several stakeholder groups
have issued reports estimating water infrastructure needs that are
substantially higher, based on different methodologies and definitions.
With that in mind, the Agency is actively working to improve
information about long-term infrastructure needs, assess different
analytical approaches to estimating those needs, and estimate the gap
between needs and spending. Last summer, EPA presented its analysis--
known as the Gap Analysis--to a diverse panel of industry experts.
Overall, the reviewers commended the report as a reasonable effort to
quantify the gap. We have made revisions to the analysis based on peer
review input and we expect to release the Gap Analysis shortly.
In considering these studies and analyses, it is important to keep
in mind a few points of context. First, there is no single ``correct''
number to describe the gap. Any gap study must be built using
methodologies and definitions of need, which in turn rest on
assumptions about present conditions nationwide, and desirable or
appropriate policies to follow in the future. That raises the second
point that while these gap numbers may be helpful to provide a broad
sense of the challenge ahead, they cannot themselves be a clear guide
to policy, because they do not take into consideration how the various
roles of Federal, State and local governments should be balanced.
Third, under any study, funding gaps are not inevitable. They occur
only if capital and operations and maintenance (O&M) spending remains
unchanged from present levels over the time covered by the study. What
a proper analysis may suggest is that a funding gap will result if the
challenge posed by an aging infrastructure network--a significant
portion of which is beginning to reach the end of its useful life--is
ignored.
I believe most partnership members would agree that the nation,
through our partnership, needs to put more resources into water and
wastewater infrastructure in the future than we have been doing; and,
that we need to reduce costs by ensuring more efficient and productive
use of such resources, through locally tailored, fiscally sustainable
management and technical approaches. We need a strategy that addresses
both the fiscal demand side (how to define and manage infrastructure
needs) and the fiscal supply side (how to pay for those managed needs).
While much of the projected gap is the product of deferred
maintenance, inadequate capital replacement, and a generally aging
infrastructure, it is in part a consequence of future trends we can
anticipate today. For instance, continuing population growth means that
even increasing capacity at current levels of wastewater treatment will
not be enough to prevent water quality degradation, and that
development pressures on unprotected drinking water sources will
increase. The same tools we need to make the fiscal demand side of the
gap more manageable--like reducing the flow of wastewater and
stormwater requiring treatment through conservation and nonstructural
alternatives, and protecting our drinking water sources--will help us
to deal with the water quality impacts of a growing population.
To meet these future challenges to clean and safe water the
Administration believes that the touchstone of our strategy should be
building fiscal sustainability. In particular, several basic principles
should guide our pursuit of clean and safe water through fiscal
sustainability:
<bullet> Utilizing the private sector and existing programs.--
Fostering greater private sector involvement and encouraging integrated
use of all local, State, and Federal sources for infrastructure
financing.
<bullet> Promoting sustainable systems.--Ensuring the technical,
financial, and managerial capacity of water and wastewater systems, and
creating incentives for service providers to avoid future gaps by
adopting best management practices to improve efficiency and economies
of scale, and reducing the average cost of service for providers.
<bullet> Encouraging cost-based and affordable rates.--Encouraging
rate structures that cover costs and more fully reflect the cost of
service, while fostering affordable water and wastewater service for
low-income families.
<bullet> Promoting technology innovation.--Creating incentives to
support research, development, and the use of innovative technologies
for improved services at lower life-cycle costs.
<bullet> Promoting smart water use.--Encouraging States and service
providers to adopt holistic strategies to manage water on a sustainable
basis, including a greater emphasis on options for reuse and
conservation, efficient nonstructural approaches, and coordination with
State, regional, and local planning.
<bullet> Promoting watershed-based decisionmaking.--Encouraging
States and local communities to look at water quality problems and
drinking water source water protection on a watershed scale and to
direct funding to the highest priority projects needed to protect
public health and the environment.
This is an important and serious challenge. We would not be in this
room today if we did not recognize that. That's good news in itself;
and there's more, as we can see the tools, the means to realize these
principles in practice, taking shape all across the country. Many
States and local governments across the country have been changing the
way they do business. As a result, they've successfully managed many of
these infrastructure needs, using creative, individualized approaches
that are cost-effective, environmentally protective, and socially
equitable--efficient, clean, and fair.
The two SRFs have proven themselves to be effective means to help
local governments address their needs. Now the task is to refine them
to facilitate and encourage the use of these State and local
innovations in every community in America. Indeed, your bill itself
reflects the learning about SRFs that went on between 1987 and 1996, by
adopting for the Clean Water SRF some of the innovations adopted in the
Drinking Water SRF. It is important that communities have and use all
the necessary tools to close the gap before it widens, so the tools can
work together consistently and effectively in a fiscally sustainable
way.
S. 1961, THE WATER INVESTMENT ACT OF 2002
I would like now to turn to S. 1961, the bill introduced by the
Environment and Public Works Committee leadership.
The Administration shares the committee's goal of improving the
nation's water quality and has submitted a budget that will continue
progress toward achieving that goal by targeting non-point source
pollution, the largest remaining problem. However, the President
clearly defined his priorities in the State of the Union as defense and
homeland security. As the increased spending called for in this bill is
not consistent with those priorities, the Administration does not
support the funding levels contained in S. 1961. The Administration and
Congress should look for creative ways to help the water and wastewater
industries meet their needs.
At this initial stage of the committee's consideration of this
bill, I will give the Administration's response to some of the bill's
key approaches and major components. We would also like to take this
opportunity to state the Administration's support for privatization
incentives. On these, as well as other provisions that this testimony
does not specifically address, we look forward to working with you and
stakeholders during the committee's deliberations in the weeks ahead.
Project Eligibilities.--On the Clean Water side, the bill addresses
project eligibilities, and clarifies that a broad range of projects
that would improve water quality under Clean Water Act programs can be
supported using the SRF. We believe that the provision authorizing
assistance for projects or activities for conservation, reuse or
recycling must be limited to those that have primarily a water quality
benefit, or substantial SRF resources could be diverted to projects or
activities whose primary objective and benefit does not further Clean
Water Act goals.
Capacity Development/Priority List Funding.--The bill closely
adapts for the Clean Water Act two important provisions from the 1996
Safe Drinking Water Act Amendments, on capacity development and SRF
priority list funding, and adds asset management requirements in both
Acts.
We believe that this demonstrates once again the effectiveness and
durability of the approaches Congress adopted in 1996, and welcome the
committee's use of the SDWA model here. In order for water and
wastewater systems to achieve fiscal sustainability, these systems need
to: have long-term technical, financial, and managerial capacity;
optimize the efficient operation and useful life of their capital
assets; and, direct funding to the highest priority projects needed to
protect public health and the environment.
In these regards, S. 1961 moves in a generally positive and useful
direction. As with any new approach, there are some questions about how
aspects of these capacity development and asset management provisions
would work in practice. Here again, we want to work with you and
stakeholders to share and learn from our experiences with SDWA, and
make sure that help in achieving these objectives can reach those who
will need it, especially in smaller communities.
Disadvantaged Assistance.--Regarding disadvantaged assistance, the
bill makes two major modifications. First, it adds to the Clean Water
SRF the disadvantaged community provisions enacted for Drinking Water
in 1996, enabling States to provide additional loan subsidization,
including forgiveness of principal, to such communities as defined by
the States. It also includes in the Clean Water SRF the extended loan
terms available to disadvantaged communities under the Drinking Water
SRF.
Second, it adds to the laws governing both SRFs a new provision,
authorizing States to provide this additional subsidization to
treatment works or public water systems which are not disadvantaged, so
long as the assistance agreement with the recipient ensures that the
subsidy will be directed to disadvantaged users within the community.
We want to work with you to ensure that States or communities can use
programs which are as effective as user rate systems in directing these
additional subsidies to needy users.
The bill's provisions for aid to disadvantaged users specify that
up to 15 percent of capitalization grants can be used for additional
subsidies. It is not clear whether this 15 percent is within the 30
percent limit for disadvantaged communities or on top of it, as the
bill's provisions are worded differently for the two SRFs. We oppose
making the 15 percent additional to the 30 percent limit in both SRFs.
Placing the 15 percent within the 30 percent would protect the
availability of additional subsidies for disadvantaged communities
while giving the States flexibility to provide such help to
disadvantaged users as well.
The revolving loan funds will always face the challenge of striking
a balance between important values--of offering additional support for
low-income residents, small communities, and State programs on the one
hand, and preserving the corpus of the fund so it can assist
communities far into the future on the other. If new assistance to
disadvantaged users is added on top of the 30 percent, it would allow
about half of the capitalization grant to be removed before it ever
enters the States' revolving funds. This would undercut the funds'
capacity to serve as a viable resource for communities in perpetuity,
and would disrupt a vital balance that the Administration believes we
must maintain. We would like to collaborate with the committee to
achieve disadvantaged assistance provisions that strike this important
balance.
Loan Conditions.--For both the Clean Water and Drinking Water SRFs,
the bill creates new provisions requiring several things of loan
applicants as a condition of project approval. Taken together, these
loan conditions are among the key provisions in the bill, and the
Administration supports the objectives behind them as according with
basic principles that should guide our infrastructure revitalization
efforts. At the same time, we want to make sure that the conditions
operate in ways that loan applicants can learn to handle, and that the
SRFs can continue to function to provide the needed kinds of
assistance.
One condition is a requirement that prospective loan recipients
consult and coordinate with local, regional, or State agencies that may
adopt land use, transportation, or watershed plans. S. 1961 also
requires loan recipients: to develop and implement asset management
plans; to have plans to achieve rate structures that reflect, as far as
possible, the cost of service and include capital replacement costs;
and to consider, throughout preconstruction phases, consolidation,
partnerships, or alternative, nonstructural approaches.
We agree that local governments should undertake, and States must
supervise, management and planning changes to ensure fiscally
sustainable solutions. All of the studies indicate that the potential
gap in water and wastewater infrastructure comes largely from
replacement of aging pipes and O&M costs--both, historically, a
responsibility primarily of local government (although pipe replacement
is eligible under both SRFs). Through its loan conditions, S. 1961
encourages States and communities to look at water quality problems and
drinking water source water protection on a watershed scale, and to
adopt comprehensive strategies that integrate water management into
whatever planning for sustainable communities they may be doing. And,
it creates incentives for service providers to adopt best management
practices to improve efficiency and economies of scale, reduce the cost
of service, and avoid future gaps, while encouraging rate structures
that cover costs.
These new conditions on assistance to communities are among the
most important innovations in this legislation. Promoting a
comprehensive examination of all cost-effective tools and options, on
both the fiscal demand and supply sides, is key to building fiscal
sustainability. The Administration believes that the potential gaps
will become more manageable if these conditions can be designed and
implemented effectively.
Having said that, we must all recognize that these new conditions
are going to increase substantially the level of effort required to
obtain an SRF loan. We must make sure that these conditions are framed
in a workable way; that we provide a transition to the new conditions
that equips applicants to address them in a timely way; that those who
need special help in meeting the conditions can get it; and that small
loans can continue to be provided without a level of analysis that's
disproportionate to the investment sought. Here as elsewhere, we look
forward to working with the committee to pursue these shared objectives
in a practical manner.
SRF Fund Transfer Authority.--In addition, the bill would make
permanent the States' authority to transfer funds between the Clean
Water and Drinking Water SRFs. This is an important enhancement of
State flexibility to address their highest priority needs, and we
welcome the committee's proposal to turn what began in 1996 as a short-
term experiment into a well-established tool to promote cost-effective
investment.
Promoting Technology Innovation.--This strategy to renew our water
and wastewater infrastructure for the 21st century puts a high premium
on optimizing the efficient use of our current capital assets and the
new investments we must make. That will require the use of innovative
technologies for improved services at lower life-cycle costs, which in
turn means supporting research and development on these innovative
technologies and practices.
Substantial reductions in life cycle costs are possible through the
use of innovations such as: (1) new construction and repair practices;
(2) remote monitoring and real-time control of water and wastewater
systems; and (3) advanced sensors for contaminants and structural
integrity. Research and development, in coordination with demonstration
efforts, is needed to assure that these and other advancements are
available to community decisionmakers. We want to work with the
committee on ways to promote this objective.
Legal Issues.--EPA has legal concerns regarding two provisions of
S. 1961. On judicial review, the provisions amending both Acts are
written so broadly they could prevent judicial enforcement of virtually
all provisions of the SRF statute and other applicable Federal statutes
as well. On State water rights, one subsection essentially duplicates
existing language in the Clean Water Act, while the second raises
several issues of legal applicability and potentially problematic
unintended consequences. However, we do recognize and want to work with
all interested members of the committee to see that the underlying
concerns reflected in these provisions are addressed.
CONCLUSION
In summary, notwithstanding our continuing concerns with the
funding authorization levels proposed in this bill, we appreciate the
committee's initiative in taking up this important issue, and
particularly in its efforts to build fiscal sustainability in water and
wastewater infrastructure. We look forward to continuing our
constructive participation in your efforts to refine this legislation.
Thank you for the opportunity to present the Administration's views on
this bill. That concludes my prepared remarks, and I would be happy to
answer any questions.
______
Responses of Benjamin Grumbles to Additional Questions from
Senator Smith
Question 1. In discussions with stakeholders before the
introduction of S. 1961, we heard much about needing to maintain State
flexibility but also the need to fund innovative approaches and
nonpoint source pollution. S. 1961 allows States to list nonpoint
sources on their priority lists, a change from current law. We do not
mandate the funding of nonpoint sources instead leaving State the
flexibility to decide which projects to fund. Should these priorities
be mandated by the Federal Government or left to the States, with
public input, to determine?
Response. We believe it is appropriately left to the States, with
public input, to ultimately determine what projects should be funded
through their CWSRF. The CWSRF program is primarily a State-run
program, and a State is in the best position to decide, with input from
its citizenry, how CWSRF funds should be used.
We believe that S. 1961 appropriately requires that States use all
available water quality data (such as data and information developed
pursuant to Clean Water Act sections 303(d), 303(e), 305(b), 319, and
320) to determine their water quality problems across the State and to
develop a priority ranking system to address those water quality
problems. Funding projects in priority order, to the maximum extent
practicable, will bring about the highest level of water quality
benefit.
Question 2. In your testimony, you voice support for encouraging
the private sector's participation in both water and sewer systems. Can
you speak more to what benefits you believe investor-owned utilities
have brought to the management of water and sewer systems and why for
some communities they may be a good alternative?
Response. Privately-owned utilities in capital-intensive operations
such as electric and natural gas service have frequently used asset
management, demand and pricing strategies, and private contracting.
This potentially relevant experience on these approaches should be
considered in the water and sewer context.
Many local governments are seriously considering the possible role
of the private sector in providing water and wastewater services in
their communities, hoping to take advantage of private sector skills
and market experience, to increase efficiency in service delivery, and
to obtain access to investment capital. Private sector involvement can
be as basic as provision of limited services under contract or as
complete as full ownership and operation of the utility.
While some form of public/private partnerships may be completely
appropriate for some communities, we believe that the more important
consideration is technical, financial, and managerial capacity to
operate and maintain a water or wastewater system. High performing
public entities can perform equally well as high-performing privately-
owned or operated facilities. EPA's objective is to improve capacity
when appropriate so as to better protect public health and water
quality across the country.
To help close the infrastructure gap, some communities may decide
to enter into public/private partnerships of one form or another. We
think it appropriate to remove barriers where they exist so that
communities who choose to can engage with the private sector.
Ultimately, though, we believe the decision to engage in privatization
of water or wastewater systems is best left to the community itself
based on their individual circumstances and situation.
Question 3. Can you describe for the committee the various programs
available to small communities to help them not only comply with
Federal and State regulations but also operate and maintain their
facilities? Do these programs include discussion of how to reduce
nonpoint source pollutants which can reduce the cost to the treatment
works and the water system? Given that each of us continues to hear
that there is not enough technical assistance available, what more can
be done?
Response. Training and technical assistance are cornerstones for
building sustainable water and wastewater systems capable of providing
appropriate public health and environmental protection. As discussed
below, numerous training and technical assistance programs are funded
by EPA and other Federal Agencies. The key to helping communities
develop sustainable systems for public health and environmental
protection lay not in providing additional technical assistance, but in
focusing existing assistance on core needs and in establishing
appropriate performance and accountability measures for technical
assistance providers.
The priority direction for all technical assistance should be the
development of sustainable system capacity for performance. The focus
should not be on ``doing'' things for systems but rather on teaching
systems ``how to do'' things and indeed on building system self-
sufficiency for future learning.
In terms of publicly owned treatment works, EPA partners with
several organizations to provide technical assistance and training to
small communities.
Technical assistance programs provide advice, assistance, and
training pertaining to the installation, operation, and maintenance of
treatment works in small communities. They include:
<bullet> The Rural Community Assistance Program (located at http://
www.rcap.org/), which addresses management, financing, construction and
the Clean Water Act compliance needs of wastewater treatment,
collection, and disposal systems in small communities;
<bullet> The Small Community Outreach and Education network, which
helps small communities provide self-sufficient wastewater systems
through technology, financial management, pollution prevention, and
public education;
<bullet> The National Rural Water Association (http://www.nrwa.org)
offers training and technical assistance to small systems in all
aspects of providing safe drinking water;
<bullet> The Drinking Water Technology Assistance Centers, a
network of eight university-based centers, work to protect public
health, improve system sustainability, and enhance compliance by:
verifying technology performance, pilot testing innovative
technologies, and providing training and technical assistance;
<bullet> EPA's On-Site Technical Assistance 104(g) program, which
provides no-cost, over-the-shoulder operation and maintenance,
financial management, and technical assistance to municipal wastewater
treatment plant operators; and
<bullet> An on-line message board (located at http://www.wef.org/
techinfoctr/index.jhtml), which allows small communities to communicate
with each other and obtain answers to their technical questions.
Various education programs provide training to small communities in
the areas of treatment works operation and trouble-shooting. They
include:
<bullet> The National Environmental Training Center for Small
Communities (located at http://www.estd.wvu.edu/netcsc/netcsc--
index.htm), which supports environmental trainers who work with small
communities to improve drinking water, wastewater, and solid waste
services;
<bullet> The National Small Flows Clearinghouse (located at http://
www.estd.wvu.edu/nsfc/nsfc--index.htm), which provides national
information on collection systems in order to help small communities
meet their wastewater treatment needs; and
<bullet> The Youth and the Environment Training & Employment
Program, which provides under-privileged high school students with an
awareness of job opportunities in the environment and allows for hands-
on training in wastewater treatment plant operations.
In terms of nonpoint source technical assistance, EPA has created a
website (located at http://www.epa.gov/owm/decent/index.htm) for
onsite/decentralized wastewater systems that provides information on
management, funding, technology, and public outreach to assist small
communities when using or considering decentralized systems to manage
their wastewater needs. EPA's nonpoint source management program uses a
significant portion of its 319 grant funds to provide technical
assistance for nonpoint source needs.
Note that the Department of Agriculture also provides training and
technical assistance related to point and nonpoint sources in rural
areas.
We believe these programs, and the funding levels included in the
President's FY 2003 budget for these programs, are sufficient to
address technical assistance needs.
Question 4. In crafting this legislation, Senators Jeffords, Crapo
and Graham and I all sought to find ways to prevent another trillion
dollar request 20 years from now. Under the construction grants
program, the Federal Government invested $53 billion over 18 years for
the construction of treatment works. With those facilities now nearing
the end of their useful life, the owners of those facilities are back
asking for more money. You also support a provision in the bill to
extend the Safe Drinking Water Act's capacity development requirements
to the Clean Water Act and require a full assessment of each facilities
assets. How well have the Safe Drinking Water provisions worked in
weeding out systems that did not have capacity and sustaining the
viability of other water systems? What improvements can be made to the
program, if any?
Response. The State capacity development strategies are in the
early stages of implementation, and there is not yet a track record
sufficient to make a judgment on their effectiveness. It is clear at
this early stage that the opportunity presented by strategy development
has been valuable in helping States to define the focus of their
efforts to help systems develop capacity.
The requirement that all DWSRF recipients demonstrate technical,
financial and managerial capacity, has likely helped to improve the
viability of systems receiving assistance. For example, in Vermont, in
evaluating the capacity of 59 systems, the State found that 46 needed
to make changes to ensure that they would meet the State's
requirements. The State required that the systems make the necessary
changes as a condition of the loan. Without the requirement to assess
the capacity, it is possible that these 46 systems would have continued
business as usual.
In addition to requirements for capacity development, we believe
that the provisions for asset management, consideration of cost-
effective nonstructural, conservation, and restructuring alternatives,
and consultation with local, State, or regional planning agencies are
also important for building sustainability for water and wastewater
systems, improving management and reducing life-cycle costs. The
Administration supports the objectives behind these provisions as
according with basic principles that should guide our infrastructure
revitalization efforts. At the same time, we want to make sure that the
conditions operate in ways that are workable for loan applicants and
States alike, and that the SRFs can continue to function to provide the
needed kinds of assistance.
______
Responses of Benjamin Grumbles to Additional Questions from
Senator Jeffords
Question 1. Please provide the committee with data, studies,
analysis of State law and other information on States' requirements for
public participation during the creation of the priority list for
projects to be funded under a State SRF?
Response. Given the time constraints associated with this request,
we are not able to provide data, studies, and analyses of State law for
this question and the two following it. We did ask States to provide us
some information to help inform the committee and have attached them to
this package. While we will provide a general response to each
question, we refer you to the attachments for state-specific material.
Each SRF program has requirements related to public participation
in development of their Intended Use Plan which describes how the State
intends to use funds in its program--including the priority list of
projects to be funded. For the DWSRF program, these requirements are at
40 CFR 35.3555(b). For the CWSRF program, the requirements are at 40
CFR 35.3150(a). Many States are subject to additional legal
requirements or have developed procedures that dictate how public
review is conducted. We have attached information received from several
States to help respond to the question.
West Virginia: For the CWSRF, the draft IUP and list are made
widely available. A public meeting is held, with 30 days advanced
notice, to discuss the contents of the priority list. The State mails
out the draft to all proposed assistance recipients on the priority
list and their respective engineering firms, regional planning and
development councils, and other State agencies. There is a 2-week
period after the meeting when comments can be received that may impact
the list, prior to finalization. For the DWSRF, the State makes the
priority list available through a posting in the State journal, the
website, provides copies to other agencies, and makes copies available
in offices throughout the State. A public meeting is held in the
central office and to date, there has been little or no public input.
Occasionally they will receive some comment from other agencies.
Kansas: The priority List and Intended Use Plan are prepared once a
year. The State gathers information throughout the year on specific
problems, needs, and projects from KDHE staff in the NPDES compliance
(effluent violations and raw sewage overflows), sludge disposal
programs, KDHE field staff that conduct inspections and respond to
complaints, City and County officials, and consulting engineers. A
Draft Priority List and IUP is distributed to cities and counties that
have projects listed in the documents, and also to other Federal and
State agencies, consultants, equipment suppliers, and other interested
parties, 350 copies in total. A Public Hearing notice is mailed with
each copy and is also scheduled and advertised in the Kansas Register
(similiar to the Fed Reg). The comment period is 5 to 8 weeks, and all
comments receive individual written response, including Reg 7 EPA. The
Final List and IUP is prepared and distributed to those who received
the draft, plus anyone else that wants it.
Georgia: The polices of the program which address the priority
point system are updated annually and approved by the Board of
Directors at about the same time as a draft IUP is presented. In
addition, an annual announcement of a public hearing on the draft IUP
is posted on the State's website and is sent to over 1,500 interested.
At the public hearing, the draft IUP is presented and public comments
are solicited. GEFA has not received any adverse comments in over 8
years (potentially longer). Comments normally range from communities/
consultants wanting to add projects or other non-profit groups seeking
funding.
Nebraska: The CWSRF IUP development cycle starts with an annual
needs survey (October) to cities, counties and engineers. In November,
the State holds a stakeholder meeting of about 30 interested
individuals and entities that benefit from the SRF to discuss policies
and direction. Three meetings are held in December around the State to
present program changes and seek comment. The IUP and priority list are
developed January--April 15. Then the draft IUP is public noticed and a
formal hearing is held in June. Changes to the draft are made in the
hearing and the final IUP is approved by the Environmental Quality
Council (a 16 member board representing various interests in the
State).
Maryland: The State makes available for public review and comment
both the draft Project Priority List and Intended Use Plan, and holds a
formal public hearing.
Virginia: The Virginia Dept. of Health 1974 Waterworks Regulations
created a public participation committee known as the Commissioner of
Health's Waterworks Advisory Committee (WAC). The WAC brings together
stake holders every 2 months to discuss current and future issues.
Annually, the State formally solicits input via mail (current mailing
list about 3500) to create the draft project list and then again to
receive comments on the final. The State also holds a public meeting to
receive comment, following requirements in Virginia's Administrative
Processes Act. The same mailings are placed into the Virginia Register
(equivalent to the Federal Register) and on VDH website. The State also
holds workshops (this year at 5 different locations) to discuss the
program details, to respond to questions, and to obtain feedback. The
State also conducted a survey of clients in 2001 to learn ways to
improve their procedures. For the CWSRF, the IUP and Priority Funding
List are presented annually to the public for review and comment. Each
year before the IUP and priority funding list is submitted to EPA, it
is taken before a citizen Board (SWCB) for tentative approval. These
Board meetings are open to the public and the agenda for the meeting is
made available to the public. Special agenda summaries are also mailed
to interested and impacted parties. Following Board action, Virginia's
tentatively approved IUP and yearly funding list is re-opened for
public review and comments. Notice requesting public comment is
published in six regional newspapers. In addition, notice of the
meeting or hearing to receive public impute is subsequently mailed to
appropriate and interested groups and individuals. Also, all proposed
modifications to Virginia's SRF program implementation criteria and/or
its priority ranking structure undergo the same public scrutiny
process.
Alabama: The State publishes its priority lists in the four major
newspapers in the State and are sent to several hundred individuals,
State and Federal agencies, and environmental groups for review, in
addition to being posted on the State's website, for a public comment
period of 45 days.
Utah: The Drinking Water Board approves any revisions to the DWSRF
priority list quarterly. The list is submitted to Utah's Resource
Development Coordinating Committee (RDCC) for review. The RDCC's agenda
is sent to all State & Federal agencies, local association of
governments and town officials, and the media. When major revisions,
occur the list is sent to all drinking water systems, associations of
governments, consultants, etc.
Missouri: Both the CWSRF and DWSRF programs have public hearings
after the draft IUP is mailed to all cities, counties, sewer districts,
legislators, engineering firms and parties on our mailing list (30-day
public notice period).
Alaska: Annually, Alaska mails a notice to all eligible
participants inviting them to submit information for proposed projects.
After a scoring and ranking process, a draft priority list is mailed
out to all eligible participants and made available on the internet for
30 days. The State then considers all comments and publishes a second
priority list for 30 days, again considering any public comment before
finalizing the list. During both of these public comment periods, the
State invites suggestions for improvement to the scoring criteria and
makes appropriate changes.
Washington: For the DWSRF, the State develops a draft priority
project funding list which is part of the draft IUP, and is subject to
a 30-day public review and comment period (including a public hearing).
The public comment period is advertised in three major newspapers
across the State, on the DOH website, and at the State library. Very
few comments and testimony are received, and very few people attend the
hearings. In the event comments are received, they are taken into
consideration when the IUP is finalized. For the CWSRF, virtually all
the information about its water quality financial assistance programs
is posted on the departmental web site. Annually, the State solicits
applications for water quality financial assistance, including loans
from the Washington Water Pollution Control Revolving Fund, generally
January to March. Early in the solicitation period, the State holds
four workshops around the State to answer any questions about the
process, the application materials, and the project priority system.
The draft Intended Use Plan and offer list is then published for a 30-
day public review. During the public review period, at least one public
meeting is held to solicit public comment. The final IUP is then
published on the departmental web site.
New York: The draft IUPs are distributed very widely to public
officials, all known environmental groups, and other interested
parties, is posted on the website, and noticed in the Environmental
News Bulletin. Then the State holds a joint public meetings for DW and
CWSRF and has a comment period after public hearing. The final IUP is
published, widely distributed, and posted on the website. Amendments
are mailed to same mailing list. Public interest has fallen off
considerable since 95-96 for CW, since 99 for DWSRF. Usually no one or
very few people attend meetings or submit comments, outside
representatives from the communities.
New Jersey: The draft IUPs are distributed very widely to public
officials, all known environmental groups, and other interested parties
(a very extensive mailing list: 1200 for CW 2000 for DW), and is posted
on the website at least 45 days. Then the State holds a joint public
meetings for DW and CWSRF and has a comment period after public
hearing. The final IUP is published, widely distributed, and posted on
the website. Public interest has fallen off considerable since 95-96
for CW, since 99 for DWSRF. Usually no one or very few people attend
meetings or submit comments, outside representatives from the
communities.
Puerto Rico: There is only one POTW that is a loan recipient, and
they are really the only ones that show up at the public meetings.
Draft and final IUP are publicly noticed in papers and libraries, but
no one attends the public meetings.
Idaho: Idaho sends all eligible borrowers a letter soliciting
projects for the IUP. After the projects are scored and ranked, a draft
of the IUP and the project priority list are posted on DEQ's website,
sent to all applicants and/or consultants related to projects on the
list, and advertised in statewide papers for a 30-day public comment
period. The draft IUP and project list are also posted on EPA Region
X's website, indicating the 30-day public comment period. After the 30-
day public comment period ends, a public hearing is held, after being
advertised in statewide newspapers and on the DEQ website. The Board of
directors then formally approve the IUP, project priority list, and
projects funded that year.
Oregon: The State sends all eligible borrowers a letter soliciting
projects for the IUP. Any interested community sends the State a
preliminary application which the State uses to score and rank
projects. Only projects that are ready to proceed are considered for
actual funding that year and are placed, in priority order, on the
fundable range portion of the IUP. The entire IUP, project priority
list, and fundable range are advertised in State newspapers for a 30-
day public comment period and sent to EPA Region X, which places the
documents on its website indicating the 30-day public review period.
With every new handbook which determines the method for the priority
listing, there is a public comment and hearing process.
Tennessee: In terms of meeting notices, the State does a mass mail-
out to cities, engineering consultants, county executives, utility
districts, plant operators etc., totaling about 1100 letters. Projects
are scored according to Tennessee regulations, and the State posts the
draft and final priority ranking lists on their website.
Florida: Florida publishes the notice of hearing in the Florida
Administrative Weekly, and send the draft priority list and general
information to all interested parties. The draft priority list includes
a brief description of each project, proposed funding, the type of
funding, the priority score, and the population.
Illinois: In accordance with State statute, Illinois publishes any
proposed rulemaking (including the priority systems for DW and CWSRF)
in the Illinois Register. Annually the State publishes a notice of the
hearing on the Intended Use Plan in a quarterly publication, posts a
notice on their website, and also mails out copies of the priority
lists and draft IUPs to individuals and organizations on the State's
mailing list.
Wisconsin: Wisconsin publishes the project priority list and
includes it as a subject of an annual public hearing. The public has
extensive participation opportunities during the promulgation of the
administrative rule which defines the ranking system used to create the
priority list.
New Hampshire: New Hampshire publishes a public hearing notice in
the Manchester Union Leader (a State-wide newspaper) both 30 days and
14 days in advance of the hearing. The draft priority list is sent to
all the sewered municipalities and those municipalities with landfills
that will require closing. The State holds the public hearing in August
of each year and open the hearing for public comments and accept public
input for 2 weeks after the hearing. The priority list is adjusted
based on public comment.
Mississippi: A notice of a public hearing is run three separate
times in The Jackson Clarion-Ledger (a newspaper with statewide
circulation) regarding the draft IUP, and any draft amended IUPs. The
draft IUP and any amended IUPs are posted on the State's website and
mailed to consulting engineers, municipalities, and rural water
associations who have participated in the program in the past, as well
as any other interested parties. The Executive Director of the American
Council of Engineering Companies, the Executive Director of the
Mississippi Municipal League, and the Executive Director of the
Association of (County) Supervisors are members of the State's Board,
and they notify their members of the draft IUP and the hearing date.
The State will also make presentations (and booths when appropriate) to
the Mississippi Rural Water Association, the Mississippi Water and
Pollution Control Operators' Association, the American Council of
Engineering Companies, the Mississippi Public Works Directors'
Association, the Water Environment Federation, and the Mississippi
Association of (County) Supervisors regarding the priority list process
and the approximate date of availability of the IUP.
Oklahoma: The State holds a public meeting on the SRF Project
Priority List and any revisions made to the priority rating systems. A
notice is published in a statewide publication 30 days prior to the
public meeting. The State also circulates information about the
Priority List and a description of each proposed project. In addition,
prior to the public meeting, copies of draft IUP and Priority List are
mailed to interested parties and potential loan recipients.
Rhode Island: The State holds a public hearing annually.
Arkansas: Arkansas has a statewide public notice, a 30-day public
comment period, and a public hearing for both Intended Use Plans and
the Project Priority Lists.
Louisiana: The priority list and IUP are made available to the
public for comment at a scheduled public hearing.
Massachusetts: Massachusetts holds several public hearings (all
following the same public notification requirements) as a project moves
towards the SRF program. The Notification requirement is two statewide
circulation newspaper, internet, and notification to the Secretary of
State. Both spoken and written testimony is accepted at the hearing;
only written comments after the hearing. Most notably the ``NEPA Like''
review requires a public hearing for each application; all permit
requests require public hearings. The draft priority list is published
30 days in advance of the public hearing and presented at a public
hearing, without project descriptions. The hearing that has a 30-day
notice prior to the hearing and a 30-day comment period after the
hearing. This year the State will hold its first public hearing and 30-
day comment period at the outset of the SRF solicitation process to set
watershed funding priorities. This hearing will give communities notice
that solutions to certain problems in each watershed will be given
watershed planning points in the upcoming project evaluation.
Hawaii: Hawaii publishes a public notice in a statewide circulated
newspaper on the draft IUP and Project Priority List. These documents
are made available at each district health office throughout the State.
A public hearing is scheduled only if there is significant interest.
Vermont: Vermont regulations for IUP and project priority list
development include statewide publication of a meeting notice (in 3
daily newspapers which have general circulation in the State) 30 days
prior to holding a public hearing on a draft Priority List and IUP. The
Draft list, IUP, and a 5-year projection of pollution control projects
are distributed to approximately 300 individuals and organizations
(municipal officials, consultants, legislators, State officials, etc.).
Public comment is received at any time prior to, during, and up to 7
days following the hearing. Following the close of the comment period,
the adopted list and IUP together with a responsiveness summary are
distributed to the above individuals and organizations.
New Mexico: The State notifies entities on its mailing list and
advertises in The New Mexico Register and newspapers of general
circulation, inviting entities to submit applications for funding. When
the priority list is completed, the State again advertises and requests
comments for a 30-day comment period. The State used to schedule public
hearings for the priority list but nobody ever showed up. Based on good
communication with communities and interest groups, the belief is that
they are in favor of the projects. Also, because the State has
sufficient funding to move forward with all projects that have been
ready to proceed, there has not been controversy or competition between
communities for CWSRF funds.
Minnesota: The Project Priority List is prepared according to a
priority system that is established in Minnesota's administrative
rules. The development of the priority system rules followed the
extensive pubic participation process required when any rules are
developed. In addition, the Project Priority List is included as part
of the annual Intended Use Plan which is provided in draft to all
interested parties during a public comment period.
Maine: The draft IUP is mailed to all potential treatment works
projects each year with a copy of the priority system for comments.
Nevada: The State publishes the draft priority list and IUP along
with a notice of a public hearing. The public notice is mailed to over
100 entities (counties, GID, environmental groups, etc.) and is also
published in 4 major newspapers (Reno Gazette, Las Vegas Journal,
Carson Capital Paper, and Elko Free Press). The State also announces
the public hearing on its web page to allow public input concerning the
proposed projects.
North Carolina: The State held a public hearing with prior
notification on the adoption of rules for the priority system. The
State also holds a public hearing on each year's IUP/priority list.
Notification consists of publication of the hearing in the North
Carolina Register, selected newspapers in the State, and notices to
stakeholders and selected interested parties.
California: The State has NEPA-like reviews, environmental
assessments, and environmental impact statements for qualifying
projects which seek input from the various State agencies that may have
an interest in or be impacted by the projects. Even the smallest
projects are sent to public notice (including local government) and
noticed to other State agencies. Additional coordination and
consultation takes place on an informal basis.
Kentucky: Kentucky publishes a statewide meeting notice on the
draft priority list in newspapers and on its website. They then notify
the public and hold a public meeting on the draft and respond in
writing to any comments received.
Montana: Each year, Montana publishes notice in its 5 major
newspapers announcing the availability of draft Intended Use Plans and
project priority lists, along with a scheduled public hearing date. A
30-day public comment period is also provided. The announcement and
IUPs are also posted on the State website. The DWSRF program uses an
advisory committee that includes members representing the Montana
League of Cities and Towns, the Montana Association of Counties, and
each House of the Montana Legislature to help develop the draft list.
Colorado: The State publishes public hearing notices in the
Colorado Journal and the Denver Post. Draft priority lists are sent to
all communities on the list and everyone that requests a copy from the
public notice. To date the only public input has been communities
asking to be added to the list. There have been no controversies in the
program since Colorado (through leveraging) has been able to fund all
communities that requested loans and were ready to proceed.
Iowa: The State prepares a draft funding list and presents it to
its Environmental Protection Commission for information. The following
month it is again part of the EPC meetings. Press releases re hearings
on the draft list go out to the technical/professional organizations,
and everyone that applied for funding is sent a direct notice which
includes the draft IUP. Once the hearing is held, the State prepares a
responsiveness summary and request EPC approval. During each of the
three EPC meetings statewide notice is made, the agenda of the EPC
meeting is made available and if anyone request a copy of the agenda
brief or the IUP they obtain a copy prior to the meeting. Usually, no
one shows up for hearings on the IUP.
Delaware: First, if there are any amendments to the project
priority criteria from the previous year, the changes are presented to
stakeholders at a public workshop with requests for comments. They are
also sent to EPA for comments and approval. Solicitation for projects
sent to all eligible parties and interested stakeholders. The draft
PPL, which is created utilizing Project Priority Criteria, is then sent
to all those who applied for funding. Notice of public workshop to
review the draft PPL is sent to all eligible systems and interested
stakeholders. Comments and questions are accepted prior to and during
workshop. The final PPL is created after all questions and comments
have been addressed.
Louisiana: Public hearings for the priority list are usually
attended only by State staff and a court reporter to make a transcript.
Question 2. Please provide the committee with data, studies,
analysis of State law and other information on whether individual
States require asset management plans when administering loans under
the SRF?
Response. While States may not require recipients to have (or
develop) a formal asset management plan as a requirement of funding,
many require that systems have similar plans or establish replacement
funds to address future infrastructure needs. In the DWSRF program,
systems may have to provide documentation that would speak to elements
of an asset management plan as part of the demonstration of technical,
financial and managerial capacity. See the attached for additional
State information.
West Virginia: No asset management plans are requested or required
when administering SRF loans. The DWSRF requires projects that will
receive funding to have a Capacity Development assessment completed on
the system. This will review the system's financial, managerial and
technical capabilities and make recommendations for improvements. If
there were negative findings, then the DW SRF would require the system
to correct any deficiencies prior to issuing a Binding Commitment. The
Public Service Commission (PSC) also issues a Certificate of
Convenience and Necessity prior to a water system making modifications
to their system. The PSC will review the financial aspects of the
project and make the determination if the system has the rate structure
to make the debt service payments and still be a financially viable
system. The loan applicant has to receive the Certificate from the PSC
before the DW SRF will close the loan.
Kansas: Kansas follows the Construction Grant requirements. The
Operation, Maintenance, and Replacement expenses must be determined by
the engineer for existing and new facilities, and the User Charge
system must provide sufficient revenues for these expenses. O, M, and R
charges must be proportional to use. The Replacement Account is
required to be established to set aside funds for future major
equipment items (usually anything over $2000 cost) that have a useful
life more than 1 year and less than 20 years. The Replacement Account
is a separate sinking fund savings account to insure money is available
at the future time equipment needs to be replaced. The financial
capability review required with SRF loans also insures adequate funds
are collected to repay the loan.
Georgia: The State has no asset management requirement, but an
Operation and Maintenance Manual is required to be submitted within 1
year of project start-up. For some of the more sophisticated
consultants, these manuals are fairly elaborate, often detailing
higher-level operational issues.
Nebraska: State legislation requires loan recipients to develop and
implement a long-term wastewater treatment works management plan for
the term of the loan, including yearly renewals.
Maryland: Maryland has no requirement. However, financial advisory
services may be provided to small communities on how best to achieve/
maintain financial capacity (usually an outcome of the State's
financial/credit review).
Virginia: State law, which existed prior to the Federal capacity
development requirements, allows the State to require a Comprehensive
Business Plan (CBP) for permit issuance or to require corrections at an
ill-performing waterworks. The CBP addresses capacity to operate the
waterworks in the long term. In addition the VDH Waterworks Regulations
require a Preliminary Engineering Report (PER) for any new project to
address that project as well as the existing waterworks facilities.
CWSRF regulations currently do not require the loan recipient to
develop an asset management plan. The existing program does, however,
review and evaluate the recipient's current and proposed operation,
maintenance and replacement (O/M&R) cost and borrowing impacts. The
loan agreement requires that each system be operated in a sound and
economical manner and that the loan recipient maintain the system in
good repair and operating condition. The program requires the
development of an adequate and appropriate sewer use ordinance and the
loan agreement requires that the recipient maintain an adequate user
charge fee structure to assure proper continued operation. The loan
program evaluates the impact borrowing has on the residential users of
the system. This information is shared with the potential recipient in
order to evaluate its yearly operational budgeting impacts. In
addition, DEQ offers and provides technical support and assistance to
any locality or operator experiencing operational problems.
Alabama: The State has no formal asset management plan
requirements. However, a financial advisor under contract with this
Department conducts a thorough review of each SRF recipient and advises
them of any needed changes to ensure viability of the system. This
service has proven effective, as evidenced by a zero default rate for
the SRF programs.
Utah: Utah has nothing directly associated with asset management as
such. Each applicant provides an engineering report summarizing its
needs and the latest inspection report is evaluated and taken into
consideration. The capacity development review is made according to
Utah's adopted standard. Each loan recipient is required to establish
and maintain throughout the life of the loan a capital facilities
replacement account with annual deposits equaling 5 percent of the
system's annual budget including debt service and depreciation. Other
systems are encouraged to do the same since the interest rate is
discounted for those having such accounts.
Missouri: Communities within the State are slowly but steadily
moving to perform asset management pursuant to GASB 34 requirements.
Alaska: The State does not require a formal asset management plan
as a condition of receiving an SRF loan. However, in our project
consultation phase, these types of plans are encouraged and may afford
the project a higher priority ranking. Our experience has been that
this type of incentive is much more effective than requiring an asset
management plan by regulation. If a system misses the funding cutoff by
a few points because they didn't have an asset management plan, the
next year they certainly will have one.
Washington: Water system plans identify necessary capital
construction projects, associated costs, and payment strategies. The
principal goal of water system planning is to make the best use of
available resources in order to provide high quality service and
protect the health of utility customers. The State looks at the
utility's water system plan as the foundation, whereby the utility
takes a comprehensive look at all of its needs, desires, and
requirements. The State considers a water system plan (or small water
system management program) to be part of the system capacity
requirements.
New York: The CWSRF program does not require this at present.
Larger communities such as NYC have well defined planning and budgeting
programs that produce 5- and 10-year capital plans typically. For the
DWSRF, applicants must provide their current adopted capital and
operating budgets, financial statements (audited if available) for the
3 most recent fiscal years, their official statement or document
associated with the most recent public issuance of debt, cost
documentation for the refinancing of costs already paid, and stand-
alone financial reports that have been developed by the applicant
within the last 3 years.
New Jersey: For private water systems, the Board of Public
Utilities determines financial and managerial capabilities and reviews
various financial and organizational documents from the private water
company including Annual Reports and Management Audit Reports. The
Department of Community Affairs looks at annual budgets/audits for the
publicly owned water systems, including municipalities, counties, etc.
Oregon: Asset management plans are not required, but to obtain an
SRF loan, a community must either have a Facility Plan, Plans and
Specifications, and Operations and Management Plan. Additionally, when
reviewing user charge systems prior to awarding a loan, the State
requires a rate system that not only covers the cost of repaying the
CWSRF loan but also O&M costs.
Idaho: Asset management plans are not required, but to obtain an
SRF loan, a community must either have a Facility Plan, Plans and
Specifications, and Operations and Management Plan. Additionally, when
reviewing user charge systems prior to awarding a loan, the State
requires a rate system that not only covers the cost of repaying the
CWSRF loan but also O&M costs.
Tennessee: Asset management information is obtained and reviewed by
the State through the following documents: facilities plans, operating
and maintenance manuals, user rate systems, etc.
Florida: The State requires project sponsors to meet capacity
development requirements. While this does not specifically address
asset management, it does provide documentation that the systems are
managing their resources adequately.
Illinois: Pursuant to State rules on planning, a loan applicant has
to look at what is needed to achieve and maintain compliance. In order
to do that, the engineer has to look at the existing assets and
evaluate their viability. In reviewing user charge systems prior to
loan award, the State makes sure that the established rates are
adequate to not only pay off the loan but are adequate to pay for
operation, maintenance, and replacement.
Wisconsin: Although the State does not require assets management
plans as a condition of receiving SRF loans, it does require that loan
recipients establish and maintain an equipment replacement fund.
Wisconsin also has in place an extensive compliance maintenance program
which requires each POTW to annually assess and report on the physical
conditions and performance of the treatment works. One of the
objectives of the compliance maintenance program is to extend the
useful life of the treatment facilities.
Mississippi: Part of the financial capacity assessment of the water
system capacity assessment program asks the following:
<bullet> Is the municipality current in submitting audit reports to
the State Auditor's Office?
<bullet> Was a copy of the latest audit report available for review
at the time of the survey?
<bullet> Does this audit clearly show that water and sewer fund
account(s) are maintained separately from all other municipal accounts?
or:
<bullet> Has the rural water system filed the required financial
reports with the State Auditor's Office and were these reports
available for review?
<bullet> Does the latest financial report show that receipts
exceeded expenditures?
And regardless of whether the system is municipal or rural:
<bullet> Has the water system raised water rates in the past 5
years or can the system provide acceptable financial documentation
clearly showing that rate increase is not needed and that revenue has
consistently exceed expenditures by at least 10 percent?
<bullet> Does the system have an officially adopted policy
requiring that water rates be routinely reviewed and adjusted as
appropriate, and was this policy available for review during the
survey?
<bullet> Does the water system routinely follow an officially
adopted cutoff policy for customers who do not pay their water bills,
and was this policy made available for review during the survey?
<bullet> At the time of the survey, were 5 percent or less of the
customers (active meters) of the water system delinquent in paying
their water bills?
As part of the loan application process, each applicant is required
to show whether the current rate structure is sufficient to make the
note. If it is not, a proposed rate increase must be included.
Under State law, municipalities must authorize repayment from their
portion of the taxes collected by the State Tax Commission, and
counties must authorize repayment from their homestead reimbursement
funds. Should these not be sufficient to make the repayment amount,
then a check is required.
Listed as part of the Management Capacity Assessment portion of the
Water System Capacity Assessment program is:
<bullet> Have acceptable written policies and procedures for
operating this water system been formally adopted and were these
policies available for review during the survey?
<bullet> Have all board members completed Board Member Training
(required of all members newly elected after passage of State law)?
<bullet> Does the Board of Directors meet monthly and were minutes
of Board meetings available for review during survey?
<bullet> Does the system have any SDWA violations within the past
24 months?
<bullet> Does the water system have the ability to provide water
during emergencies (generator, emergency tie-ins, etc.)?
Oklahoma: Oklahoma SRF loan recipients agree to covenants in the
loan agreement that the system will be operated and maintained in good
condition. The State has implemented an annual asset inspection program
for all completed loan projects to insure that this loan covenant is
being complied with. Asset inspections verify annually if the borrowers
infrastructure is being operated and maintained. Also, all loans
require net revenue available for debt service to equal at least 125
percent of the maximum annual amount required to repay the loan. Excess
revenues may be utilized by the borrower for O, M & R expenditures. Net
revenues and debt coverage ratios of each borrower are verified
annually as annual audits are reviewed by the State. For the DWSRF, all
systems must meet our capacity development guidelines which require the
system to have adequate financial, managerial and technical capacity.
Rhode Island: All CWSRF borrowers received construction grants and
are still operating under those requirements for O, M, and R.
Louisiana: The State does not require an asset management plan, but
does require an annual audit for State review. Plans may exist as part
of the audit report. Louisiana also requires the development of a rate
structure with an annual review to assure that the cost of operating
and maintaining the system will be covered, and the development of an
O&M Manual for use by employees of the system.
Massachusetts: The State has maintained the requirement that O&M
manuals must be reviewed and approved by DEP prior to a treatment works
completion certification can be accepted. Projects funded under revenue
bonds must provide an initial rate structure that covers O&M, debt
service, and budget reserves to maintain the fiscal health and
stability of the system. Future capital debt must be approved and made
subordinate to SRF debt. Annual financial statements and reports are
required for revenue bonds as well.
Hawaii: The State does not require an asset management plan,
however, they conduct an annual operation and maintenance inspection of
all POTWs through which they review their sewer user charge systems in
terms of financing operation, maintenance and replacement costs and
debt service requirements as well.
Vermont: No formal asset management plan is required; however,
municipal loan recipients are required by State law to adopt a capital
budget and program. Also, as part of the pollution control funding
program, the State assists municipalities with development/changes to
user charge systems.
New Mexico: Although the State does not require a formal asset
management plan, they do have the following components in place. They
require review of the existing and/or proposed rate structures as well
as a form of dedicated revenues by pledging a repayment stream via an
ordinance that is adopted through the entity governing body. In
addition, a debt reserve and replacement reserve is required. They also
coordinate technical assistance for operators and managers of
facilities constructed with CWSRF funds. This is considered the most
effective use of limited dollars and staff time to assure that
facilities are operated to meet water quality requirements and to
prolong the useful life of facilities.
Minnesota: Municipalities that have the financial capability to
borrow SRF funds for construction or rehabilitation of water and
wastewater facilities can be reasonably expected to continue to have
sufficient financial capability to incur debt for the capital cost of
future improvements. Many communities do have asset management plans
and some establish a capital replacement fund for future improvements.
Minnesota has a State supplemental assistance program that can provide
grants or other assistance in combination with CWSRF funds for high
cost projects. Recipients of these funds are required to establish a
long-term capital replacement fund which can only be used with approval
from the Public Facilities Authority.
Maine: The State does not require asset management plans, but does
require a facilities plan that addresses age of system and other
pertinent information. Larger communities with staff do assess their
equipment and manage their assets.
North Carolina: DWSRF loan recipients must meet ready to proceed
criteria to receive funding, which include having engineering plans and
specifications approved by the State prior to construction. For an
authorization to construct to be issued, the system must have prepared
a Water System Management Plan which includes asset management
considerations such as the projected useful life of the equipment and
how they plan to fund the maintenance and replacement. The guidance
document requires: a positive cash flow for the upcoming five year
period; adequate capital to finance equipment replacement; an operating
cash reserve greater than or equal to one-eighth of the annual
operating, maintenance and administrative expenses of the water system
that will be fully funded at the end of the first year of operation; an
emergency cash reserve greater than or equal to the cost of replacing
the largest capacity pump that will be fully funded at the end of the
fifth year of operation (or if they applicant owns multiple water
systems, showing reserves affording greater or equal capabilities, or
showing equivalent financial capacity to comply with requirements);
budget and expenditure control procedures and adoption of generally
accepted accounting procedures.
California: California requires several elements that might be
included in an asset management plan. These include a user rate
structure to assure sufficient funds to properly operate and maintain
the facilities and the Wastewater Capital Reserve Fund to provide funds
for replacement of some equipment.
Kentucky: All projects must go through a program and credit review
before being approved. Any asset management issues at that time are
placed as conditions of funding. The State is available to work with
communities to remedy any deficiencies.
Montana: Systems' operating and maintenance budget, which may
include any reserve funds (such as capital replacement), and rate
structure, etc. are addressed in the Preliminary Engineering Reports
and reviewed during the application process. For the drinking water
program, this is also done in conjunction with the capacity development
review.
Colorado: Colorado currently requires communities to have a 10-year
capital improvement plan as well as a user charge system that covers
O&M, Replacement and debt service.
Question 3. Please provide the committee with data, studies,
analysis of State law, and other information on whether coordination
and consultation takes place between water facility planners and State
transportation planners, watershed planners, and land use planners?
Response. Coordination and consultation with relevant State
agencies is commonly conducted as part of the environmental review
process. SRF projects subject to Federal cross-cutting authorities must
also comply with the Demonstration Cities and Metropolitan Development
Act which instructed Federal Agencies to consult with local officials
to ensure smoother coordination of their assistance programs and to
ensure that projects funded under Federal programs are consistent with
local planning requirements. States may also have their own laws and
regulations relating to coordination with State agencies. See the
attached for additional State information.
Alabama: The Intended Use Plan is provided to a large group of
diverse interests. In addition, recipients are required to coordinate
with the USFWS, COE, historic preservation officer, and regional
planning agency prior to submitting a request for funding. The State's
environmental review process again provides for these organizations,
other agencies, and the public at large to comment on these projects.
Alabama's water planning program and SRF programs are both administered
by the same division in the environmental regulatory agency.
Alaska: Both SRF priority lists are available to other State and
local government planning entities. (There are no county governments in
Alaska.) At the planning and design phase of a project, an extensive
coordinated review occurs through the State Division of Governmental
Coordination within the Governor's Office.
Arkansas: The Arkansas Soil and Water Conservation Commission is
responsible for the State Water Plan, NPS planning and monitoring, and
ground water planning and monitoring, plus providing State and Federal
funding for water projects.
California: During the planning process project alternatives are
considered in light of these various plans both as part of the project
report and environmental review. The contents of the project report is
specified in the SRF Policy and the environmental review document, for
the most part, by CEQA.
Colorado: Colorado has a site application/approval process on all
new or upgrades of POTW's. This process requires the POTW to get
comments and approvals from adjacent communities, counties, and
regional water quality planning agencies. Counties also have a similar
1041 permitting process which includes public hearings on proposed
construction. The SRF planning process also requires public meetings on
proposed projects.
Delaware: All DWSRF projects in Delaware must be approved by the
Cabinet Committee on State Planning Issues (CCSPI) prior to issuance of
a binding commitment. The CCSPI is managed through the State Planning
Office and consists of Cabinet Secretaries from many of the Departments
in the State, including Dept. of Natural Resources and Environmental
Control, Dept. of Transportation, Dept. of Public Safety, Dept. of
Education, Dept. of Agriculture, Dept. of Health and Social Services,
Dept. of Finance, State Housing Authority and Budget Office. A project
will not be approved unless it is in compliance with ``Livable
Delaware'', the State Land Use Planning Act and with County
Comprehensive Plans.
Florida: All projects must go through the clearinghouse, so the
appropriate staff in each department have the opportunity to provide
input prior to any design work being authorized. Because each facility
plan is also reviewed by numerous programs within the Department of
Environmental Protection, there are additional opportunities for
coordination on various issues, such as consolidation, watershed/source
water protection, and land use planning.
Georgia: Under Georgia's current Governor, Roy Barnes, GEFA is
taking the lead in addressing water related issues on a regional basis
and the associated issues that the committee may have interest in. More
information is available through the State's website at:
www.northgeorgiawater.org The Executive Coordinator is Ted Larrabee who
can be reached at 404/463-7206.
Hawaii: Hawaii does not have a process of integrating all planners
from different agencies, however, Hawaii's Revised Statutes, Chapter
243, requires that all projects using State land, funds and resources
must submit an environmental assessment which is reviewed by all State
agencies. Also, if a project involves a change of zoning, the Land Use
Commission must submit the proposed project for all State agencies
review.'
Idaho: Facility plans for POTWs include consideration of related
plans such as land use plans, comp. plans, etc. The facility planning
process also includes a detailed environmental review process under the
Federal Environmental Policy Act. There is no formal consultation with
the entities that develop these other plans.
Illinois: Coordination with various levels of government is done on
an as needed basis. It is definitely not needed on every project. There
is no specific requirements for the coordination, although agencies
have opportunity for input into the planning process through the public
participation process.
Kansas: The environmental review process requires a public meeting
and public hearing of the applicant, and intergovernmental review by
interested Fed and State agencies. Planning and Zoning authority is at
the city and county level of government, at their option. Wastewater
projects must be in conformance with county-level and/or city-level
plans, as typically a ``special use permit'' (rezoning) is required for
a new wastewater treatment plant site. Local agencies also do water
long range planning, and land use plans, and transportation plans to an
extent. Watershed planning is done at the State level, if done at all.
(KDHE does TMDLs for water quality, but water quantity (flooding) is by
others.) The environmental clearance documents are sent to about 16
interested Fed and State agencies, the regional Planning Commission if
there is one, the local newspapers, EPA, and other interested parties.
Kentucky: Kentucky has help several ``Smart Growth'' forums across
the Commonwealth over the past year. It is the Governor's intent to
pass legislation relating to Smart Growth initiatives.
Louisiana: There is no coordination between the different planners
in the State.
Maine: A new law passed (PL770) requires that all State and Federal
moneys loaned or granted for sewer extensions must be in growth
designated areas to avoid sprawl.
Maryland: This is at the discretion of the borrower when planning
water/sewer projects. However, prior to providing SRF assistance, the
State undertakes a State Clearinghouse Review, which offers several
State agencies an opportunity to review the proposed project and offer
any comments. Projects also have to be in compliance with the State's
Smart Growth/Priority Funding Area legislation.
Massachusetts: The Massachusetts SRF program is integrating the
Massachusetts Watershed Initiative (MWI) into the annual priority
setting mechanism. The MWI is also implementing the Community
Preservation Act--our version of Smart Growth. This effort just
completed a build-out analysis of all 351 communities. The Community
Preservation Act requires the community to accept the build out plan.
In addition, the acceptance also allows the community to charge 3
percent of the first $100,000 of a property sale to provide funds for
land acquisition, historic property restoration, and affordable
housing. The State will match funds used from the 3 percent to
subsidize expense. Communities that accept the Community Preservation
Act receive 10 points on any State funded program priority lists.
Minnesota: The Minnesota Public Facilities Authority is the
responsible for management of the CWSRF and the DWSRF and the financial
administration of the loan programs. The Authority is made up of the
Commissioners or their delegates from six State departments: Pollution
Control Agency, Health, Agriculture, Finance, Transportation and Trade
and Economic Development. The make up of the Authority and the good
relations between Authority staff and the other departments allows for
extensive coordination and consultation. Authority staff also consult
regularly with staff from the State planning office. Minnesota has also
established a high degree of coordination with Federal Agencies,
including USDA Rural Development and the Army Corps of Engineers, as
well as the State staff that administer HUD block grant funds. This
State-Federal coordination has been very successful.
Missouri: The State does coordination as part of its NEPA-like
environmental review requirements.
Montana: No coordination generally occurs between the water/
wastewater facility and transportation or land use planners unless
those agencies were to provide comment during the environmental review
process. During that process, at a minimum the applicants must provide
information and request comments from Montana Departments of
Environmental Quality, Fish Wildlife and Parks, Natural Resources and
Conservation, the State Historic Preservation Officer, U.S. Fish and
Wildlife Service, and the U.S. Army Corps of Engineers. Other agencies
may also be contacted, as applicable, for a specific project. Some
coordination with transportation planners may also occur at the local
level on a project specific basis when integral to construction.
Coordination does occur regularly between the major State and Federal
Agencies that provide funding for public works projects in Montana.
This organization is called the Water, Wastewater, and Solid Waste
Action Coordinating Team (W2ASACT) and meets bi-monthly to review
status of current and future projects. If a new drinking water source
is proposed as part of a project, the State's DEQ Source Water
Protection program does become involved in the review process. The
WPCSRF program uses an integrated priority list ranking system that
considers TMDL development and watershed issues. Projects are ranked by
these priorities for TMDL development.
Nebraska: Coordination and consultation is generally done at many
levels on a regular basis and specifically to some extent on an
individual project basis. The critical people that need to be involved
in any given situation (program or project) are brought together when
needed.
Nevada: The State promotes coordination and planning across
appropriate levels of government to maximize use of existing
infrastructure, to control sprawl, to promote watershed protection,
etc. The Infrastructure Of Nevada Communities (INC) was established to
bring together groups like RCAC, the Nevada Bureau of Health, State
Division of Water Planning, Groundwater Task Force, Conservancy Boards,
Nevada Division of Environmental Protection and others to address water
quality infrastructure needs at the most affordable cost.
New Hampshire: The State requires that each application for a SRF
loan be forwarded to the Office of State Planning to undergo the
Intergovernmental Review Process.
New Jersey: Depending on the level and scope of a given project,
the Department requires coordination with different groups and
permitting agencies such as the Watershed Management and Permitting
Program which promotes a watershed-based approach enabling the
Department to better address regional problems and opportunities,
assess the implication of various water supply issues, and better
evaluate pollution from all sources including identifying the most
effective way to control non-point source pollution in the project
area. The existing SRF program structure in New Jersey requires that,
as a condition to qualify for funding, applicants must receive all
applicable permits and approvals to undertake the project.
New Mexico: There is coordination done with the Surface Water
Bureau and the Ground Water Bureau of the New Mexico Environment
Department. All CWSRF projects are funded in coordination with the
State water quality management plan. There is currently no coordination
with State transportation planners or land use planners. There are no
State land use planners. There is no State land use planning
requirement or even a State planning office in New Mexico.
New York: Environmental review process and documents and forms that
have to be prepared by local communities address land use and watershed
issues; transportation issues not as much. Public notice of
environmental review documents is made to all affected agencies. There
is significantly more coordination in urban areas than in rural areas.
Formalization of the coordination efforts among drinking water and
wastewater planners, specifically State and Federal funding agencies,
has recently taken place in New York. Part of this effort is devoted to
providing training and outreach to planners and officials at all levels
of government and to the private sector. This outreach is aimed at
raising the level of interest for other planners to consult and
coordinate their efforts with the water planners.
North Carolina: NEPA-like reviews, environmental assessments, and
environmental impact statements for qualifying projects seek input from
the various State agencies that may have an interest in or be impacted
by the projects. Even the smallest projects are sent to public notice
(including local government) and noticed to other State agencies.
Additional coordination and consultation takes place on an informal
basis.
Oklahoma: With respect to water facility plans, all SRF loans are
coordinated with the appropriate regional planning agencies, State
water regulatory agency. Prior to project planning approval concurrence
must be gained from the State regulatory agency (208 & facility
standards). Substate planners are all notified during the planning
process. There is no coordination with State transportation planners.
There is coordination with watershed plans. All SRF loans are
coordinated with the appropriate Federal/State/local water shed
planners (208 Management Plan Water Quality Standards, NPDES, State
construction permits/stormwater runoff), COE 404 permitting process,
and local floodplain coordinators. This coordination is done during the
planning and/or design stage. Coordination with land use plans is done
as it applies to prime farmland protection and threatened or endangered
species. Generally, the Oklahoma SRF projects are not development
projects, but upgrades or expansion existing facilities to enhance
watershed protection and to bring communities into compliance with the
appropriate Federal act.
For DWSRF projects, the DEQ also requires each DWSRF project to
submit a environmental and engineering report to be reviewed first by
the project coordinator and district engineer respectively. The
environmental assessment is sent out to local, State and Federal
Agencies for comment prior to approval.
Oregon: For POTWs the State's facility planning requirements
include consideration of related plans such as land use plans, comp.
plans, and watershed plans. The facility planning process also includes
a detailed environmental review process under the State's Environmental
Policy Act. Through master plans, water planners must consider traffic
patterns & proposed development in planning for source capacity,
storage capacity & water movement in the distribution system. Less
coordination historically goes on with watershed planners here, though
it is increasing. Oregon's Drinking Water Program has a land use
planning requirement. A construction plan is reviewed or approved only
when accompanied with a signed statement of land use compatibility from
the local land use planning authority based upon a State approved land
use plan. Oregon Revised Statutes 448.165, Water Systems.
Rhode Island: At the facility planning stage, communities must get
in contact with State historical, DOT, statewide planning. Facility
plans are not approved until the statewide planning office has provided
comments.
Tennessee: Coordination and planning across appropriate levels of
government agencies is done through the existing Interdisciplinary
Environmental Reviews. The Tennessee Division of Community Assistance
Contacts the following Agencies during the planning phase of all CWSRF/
DWSRF projects: Department of Agriculture, Department of Economic and
Community Development, Department of Transportation, Division of Air
Pollution Control, Division of Archaeology, Division of Groundwater
Protection, Division of Natural Heritage, Division of Solid Waste
Management, Division Water Pollution control Division of Water Supply,
Tennessee Historical Commission, Tennessee Wildlife Resources Agency,
Tennessee Valley Authority, US Army Corp of Engineers, US Fish and
Wildlife Service.
Utah: The SRF program does not talk directly to the planners at the
State level. The local association of government coordinates those
issues as, at times, the county commissions. The usual projects that
are funded involve renovation of existing works or are so small they
don't impact local planning. Communities vary as to the involvement of
planners in their infrastructure, its maintenance, improvement or
expansion. Water conservation and management are big issues and a water
management and conservation plan are required of each recipient of
financial assistance as are inclining block rates for water service.
Vermont: ANR is currently proposing a change to the priority system
that would limit funds to projects that will support ``smart growth''
and avoid those projects defined as sprawl inducing. There has been
increased coordination on new projects between growth analysts, land-
use planners, project engineers, and department staff to address growth
issues/secondary impacts at the outset of facilities planning. An
initiative is underway to develop ways for addressing water quality
impacts related to sprawl in regulatory reviews conducted by the
department.
Virginia: For the DWSRF--Virginia law created an entity--the
Planning District Commission (PDC)--that is charged with coordinating
resources. Each PDC is responsible for a particular geographic area
that usually will encompass 4 to 5 counties (http://
www.institute.virginia.edu/vapdc/pdcmap.htm) and serve as a
clearinghouse for review of application for DWSRF Federal funds. The
PDCs receive advance information regarding any impending DWSRF
activity. The environmental review process involves these types of
entities described in the question. In addition, VDH issues transmittal
letters with construction permits to approve projects. Reference is
made that local permits that apply must be obtained. Of course this
includes land zoning.
For the CWSRF--While loan procedures do not specifically require
that each loan recipient coordinate its planned wastewater project
activities with area and State water facility planners, transportation
planners, watershed planners and land use planners, it would be
unrealistic to imply that no communication or coordination is apparent.
Any proposed wastewater and sewer conveyance projects is required to
obtain the necessary permits to construction and alter land use. Local
governments and its consultants know the importance of early and
adequate communication and coordination during the planning stage of a
project in order to obtain necessary permits. State law requires local
governments to develop and maintain land use plans. When the
capitalization grant is prepared, DEQ is required to notify the State's
regional planning authorities of the SRF contemplated projects across
the Commonwealth. In addition, all environmental assessments (reports)
prepared for a SRF planning project are required to be formally
submitted to various State and local regulatory agencies. Each loan
recipient must schedule, properly notice and hold a public hearing to
receive comments on its planned activity. Once this is finalized, the
State issues and publishes its environmental review statement or a
categorical exclusion statement. This again is published in a local
newspaper and public comments are solicited in regards to the State's
environmental clearance being issued for the project. In Virginia, it
would be highly unlikely that any agency, group or individual could
claim that they were not given ample notice of any impending project
and/or given the opportunity to comment and be consulted during the
planning process of a project.
Washington: DOH (DWSRF) coordinates with a variety of Water
Resource Inventory Areas across the State at various levels;
participates in regional planning efforts/coordination that cross all
planning boundaries (land use, transportation, watershed, critical
areas, adequacy, fish and wildlife). Water system plans are submitted
to local governments for review and all plans for systems over 1000
connections are required to follow the SEPA process. Each plan is
developed by the water system/consultant and submitted to DOH for
review and approval. The process coordinates with Ecology on water
resource issues.
For POTW projects funded through the CWSRF, the State's facility
planning requirements include consideration of related plans such as
land use plans, shoreline management plans and watershed plans. The
facility planning process also includes a detailed environmental review
process under the State's Environmental Policy Act.
West Virginia: There is no official coordination, per se, however
the West Virginia Infrastructure and Jobs Development Council (IJDC)
coordinates the water and wastewater projects that seek any State funds
in West Virginia and water systems may request funds at the same time
wastewater systems are, or economic development requests in areas that
may be pursuing loans. The projects are reviewed technically and
financially prior to receiving approval from IJDC. The review process
also includes alternatives to the proposed projects. Specifically if
there is existing infrastructure that could provide the same service as
the project proposes. If there are less expensive alternatives, then
the project will have to be justified to receive approval from IJDC.
The DW SRF is a member of the IJDC. As a part of each project, an
environmental review is conducted and if there are potential impacts,
then the project design may have to be reevaluated.
Wisconsin: The State requires that all projects receiving loans
undergo a review under the State equivalent of the National
Environmental Policy Act. This review involves coordination between
State and local government planners. The State also requires approval
of a facilities plans for each treatment facility. The facility plan
approval requires that the project conform with water quality
management plans developed under Section 208 of the Federal Water
Pollution Control Act Amendments by local government planning agencies.
Facility plans must also conform with water basin plans that are
developed by WDNR staff. There is also a requirement that the
wastewater facility plans be reviewed by A-95 planning agencies
(regional planning agencies or local government planning agencies) with
comments provided to WDNR. In all cases it is likely that some level of
unmandated consultation does occur between water facility planners,
land use planners and transportation planners, appropriately at the
local government level. In addition, the WI priority scoring system
assigns additional points to projects that are consistent with local
resource management plans.
Louisiana: Coordination currently exists through the clearinghouse
review that affords other agencies an opportunity to review and comment
on proposed projects. In addition, Louisiana is in the process of
making the SRF a part (Volume 7) of the Louisiana Water Quality
Management Plan under Municipal Waste Treatment. The SRF program is
being used as part of the watershed planning effort under the WQM plan,
which depends on the SRF program to provide a substantial part of the
program for municipal waste treatment. This is useful to both the
watershed planning part and the land use planning since the two
overlap.
Question 4. In meeting with stakeholders before introduction of S.
1961, I came to understand that the problem of nonpoint source
pollution is one of the most unmet problems confronted by the Clean
Water Act. To address that problem, we made nonstructural projects
eligible for funding under a State SRF in S. 1961. However, in
subsequent meetings, I have learned that nonstructural projects are
rarely considered because the plans to implement their construction and
the mechanisms for their payment are different than wastewater
treatment facilities. How can we ensure that nontraditional projects
are funded so as to address the unmet need of nonpoint source pollution
problems?
Response. We believe that the requirements related to the priority
setting system will go far to increase the number of nonpoint source
projects that are funded through the Clean Water SRF. As written, the
bill would require that States use available water quality data (e.g.,
information developed by the State under CWA sections 303(d) and
305(b); the State's continuing planning process developed under section
303(e), the State's nonpoint source management program under section
319, any estuary plans developed under section 320 etc.) to determine
their overall water quality problems in the State. Inherent in this is
an acknowledgment of the various sources of water quality problems and
their relative contributions, whether they be point or nonpoint source.
Then the States would have to develop a priority ranking system that
ranks eligible projects to address those problems. The priority ranking
system combined with the requirement to fund projects in priority
order, to the maximum extent practicable, will work together to achieve
improved water quality benefits, whether they are related to point
source or nonpoint source solutions. EPA is working with the States to
streamline the water quality data reporting process and improve the
quality of the data.
______
Response of Benjamin Grumbles to Additional Questions from
Senator Baucus
Question. Other panelists have testified that the infrastructure
for water and sewer systems is in considerable disrepair. Does this
situation pose a significant public health hazard? If it does pose a
major risk to public health, should that affect the budget priority
afforded water and wastewater infrastructure funding by this
Administration?
Response. Substantial work remains to address remaining risks
associated with wastewater infrastructure in our nation. In terms of
the 900 cities across the country with combined sewer systems, EPA
reported in its January 29, 2002, Report to Congress that although
cities have made substantial progress and investments in CSO control
and are realizing public health and water quality benefits, CSOs
continue to pose a public health and environmental threat.
Sanitary sewer overflows also represent public health and water
quality threats. EPA estimates that there are at least 40,000 sanitary
sewer overflows each year. Untreated sewage from these overflows can
contaminate our waters, causing serious water quality problems and
threatening drinking water supplies in addition to fish and shellfish.
Untreated sewage can also back up into basements, causing property
damage and threats to public health for those exposed to untreated
sewage. As collection systems continue to age, sanitary sewage
overflows may increase unless substantial effort is made to properly
manage, repair, and replace systems.
Any time there is a failure in a drinking water transmission or
distribution pipe, there is a potential risk to public health caused by
disruptions to the treatment process and introduction of contaminated
water into the distribution system. As pipes continue to age and
deteriorate, deficiencies could contribute to an increase in waterborne
disease outbreaks. The vulnerability of surface and ground water
sources of drinking water to contamination can also pose a risk to
public health. States are conducting assessments to determine the
susceptibility of sources to contamination, but if States and water
systems fail to take the next step of actually implementing protection
measures, there will be little benefit to public health.
The Administration considers water quality and public health
protection as priorities and is committed to improving the nation's
water quality and ensuring the safety of drinking water. The
President's FY 2003 budget request underscores this commitment. The
President's budget provides the largest SRF request in the history of
the SRF programs. However, the President did clearly identify in his
State of the Union address his highest priorities as defense and
homeland security. Appropriation levels that are higher than those
included in the President's budget would not be consistent with those
priorities.
______
Responses of Benjamin Grumbles to Additional Questions from
Senator Crapo
Question 1. Although S. 1961 proposes a higher authorization level
than the EPA supports, do you believe an investment of $20 billion for
clean water and $15 billion for drinking water projects over 5 years
can be effectively managed to meet the nation's needs? At what
financial level will the State Revolving Funds be self-sustaining after
this investment period?
Response. The President's Budget proposes funding of $1.212 billion
for the Clean Water SRF and $850 million for the Drinking Water SRF. At
these funding levels, the CWSRF will revolve at an average level of
over $2 billion and the DWSRF will revolve at an average level of $500
million annually through FY 2035. As of June 2001, approximately $3.4
billion in CWSRF funds and $1.4 billion in DWSRF funds remained
unallocated by the States.
While the SRFs have proven to be highly effective programs, the
bill's authorization levels are not consistent with the President's
Budget.
The Administration looks forward to working with the committee on a
fiscal approach centered appropriately on shared responsibility,
particularly on incentives for creative and innovative approaches now
being used to address these issues by numerous States and communities.
Question 2. Are the levels of technical assistance for small
communities over the next 5 years called for in the bill ($7 million
per year for communities of less than 3,300 people located in a rural
area, $5 million a year for Small Public Water Systems Technology
Assistance Centers, and $1.5 million a year for the Environmental
Finance Centers) appropriate investments?
Response. We believe the appropriation levels included in the
President's FY 2003 budget represent appropriate funding levels for
technical assistance to small communities.
Question 3. Have State program managers generally demonstrated
appropriate competency and expertise to fully implement the goals of
the Clean Water Act and the Safe Drinking Water Act? If so, is the
flexibility provided in S. 1961 adequate to reflect the role of States
on the front-line of environmental management and utility
infrastructure oversight?
Response. Yes, we believe that Clean Water and Drinking Water SRF
program managers demonstrate appropriate competency and expertise to
fully implement the goals of the Clean Water Act and the Safe Drinking
Water Act, although some States report resource constraints in managing
their programs. We believe in providing States with flexibility to meet
the goals of the Clean Water Act and Safe Drinking Water Act. For
example, the FY 2003 President's Budget proposes extending through FY
2003 States' authority to transfer funds between their Clean Water and
Drinking Water SRFs, which will allow States to address their highest
priority water infrastructure needs. We appreciate the committee's
recognition of this useful authority.
As was noted in the Deputy Assistant Administrator for Water Ben
Grumbles' testimony on February 26th, the Administration supports the
objectives behind the new loan conditions in S. 1961 as according with
basic principles that should guide our infrastructure revitalization
efforts. At the same time, we want to make sure that the conditions
operate in ways that are workable for loan applicants and States alike,
and that the SRFs can continue to function to provide the needed kinds
of assistance.
Question 4. How do you believe the EPA would administer the
demonstration program to promote the goals of the title?
Response. Although it is difficult to provide much detail at this
early stage, we would anticipate that the demonstration program would
be run through a competitive process in which potential projects are
ranked and selected based on their ability to promote technology and
management innovations and increased efficiency, and S. 1961's specific
criteria.
__________
Statement of Douglas H. Palmer, Mayor, Trenton, NJ, on Behalf of the
U.S. Conference of Mayors
Mr. Chairman and members of the committee. My name is Douglas
Palmer. I am the Mayor of Trenton, NJ and Chair of the Conference of
Mayors' Urban Water Council.
The Conference of Mayors is a national nonpartisan organization
that represents more than 1,100 cities across the nation. We represent
the largest water and wastewater systems in the United States.
Mr. Chairman, I would like to thank you and the other members of
the committee for introducing S. 1961, the Water Investment Act of
2002.
I would also like to thank you for holding these hearings and for
inviting me to give the Mayoral perspective on water and wastewater
investment issues.
As you know the issue of water and wastewater infrastructure is
critical to our nation and to our nation's cities. To maintain healthy
and viable communities, we must make sure that our water and drinking
water supply is clean and safe.
However, to do that, costs money. The estimate to build, rebuild
and maintain our water and wastewater infrastructure has been estimated
to cost close to $1 trillion.
As Mayors we have recognized that there is not enough local, State
or Federal money available to satisfy all the water infrastructure
needs in the nation.
The Urban Water Council was created to focus on these issues. Its
purpose is to assist local governments in providing high quality water
resources in a cost-effective manner.
The Urban Water Council has identified three basic approaches to
help cities finance the water and wastewater infrastructure development
necessary to comply with clean and safe drinking water laws. These
include:
<bullet> Providing grants to municipalities, either directly or
through States, for water and wastewater infrastructure where there is
an affordability issue or when a community faces severe environmental
problems;
<bullet> Expanding the 30-year no-interest loan category under the
State Revolving Fund loan program for water and wastewater
infrastructure investment; and
<bullet> Modifying current tax law by removing Private Activity
Bonds (PABs) used for water and wastewater infrastructure from the
State volume cap.
In our opinion, these approaches are the best means to meet our
water infrastructure needs.
what we find productive and positive about the bill
The bill you have introduced has many excellent components.
We agree with the committee that the focus of this bill should be
on water infrastructure investment instead of a new set of provisions
that would require municipal water and sewer operators to assume even
greater responsibilities when the current infrastructure is clearly
insufficient to deal with current water quality compliance criteria.
Local elected officials are engaged in trying to achieve water quality
goals, but we need a chance like this to focus on such achievements,
and not be redirected to new goals.
The bill authorizes $20 billion between 2003 and 2007 for the SRF
categories under the Federal Water Pollution Control Act; and $15
billion for the SRF categories under the Safe Drinking Water Act. These
SRF authorizations are clearly not enough to subsidize the funding
necessary to ``close the needs gap'', but a combined $35 billion boost
over the next 5 years is also clearly much more than previous funding
levels. For this, we are grateful to the Senate, and we support this
approach.
S. 1961 also incorporates some innovative concepts, two of which
are deemed crucial by the Conference of Mayors in creating the right
conditions for successful achievement of water quality goals. First,
the proposed Section 103 provision that would require a recipient of
SRF funds to consider, among other things, ``forming public-private
partnerships or other cooperative partnerships'' is a step in the right
direction. It has been our experience since the mid-90's that
alternative approaches to planning, financing and operating water and
wastewater projects can yield greater public benefits for the amount of
money invested. While choosing a public-private partnership approach
should not be prescriptive, it should be made possible for those cities
that want to take advantage of such an approach.
The Urban Water Council has prepared two reports, which are
available on our website at www.usmayors.org, that describe over 40
public-private partnership projects that have realized savings related
to operation and maintenance of water and wastewater facilities.
Regulations under the Federal tax code were modified in 1997 to allow
long-term (20-year plus) outsourcing of public infrastructure
facilities. This tax regulation modification, along with Executive
Order 12803 which modified the construction grant repayment provision,
have removed serious Federal impediments that cities have faced When
Congress and the Administration provide the right types of financial
incentives, local elected officials can establish public-private
partnerships that benefit our citizens and the environment.
The Conference of Mayors adopted policy in 2001 to encourage
competition in the design-build-operate phases of new water and
wastewater infrastructure. This policy was adopted once it was
determined that competition for both surface and sub-surface
infrastructure projects need not be as costly as the traditional
design-build methods employed in the past. The Lynn, Massachusetts
experience is an example of what can be achieved by using competitive
approaches to design, build and operate water infrastructure that is
intended achieve compliance with the zero discharge requirements for
storm waters. In that example, the city was required to eliminate
overflows and traditional design-build-operate planning anticipated a
$400 million (plus) solution. A competitive bid process, however,
anticipating a public-private partnership approach yielded a zero
discharge solution that cost less than one-quarter of the traditional
approach. Hence, it is possible through competition to achieve
compliance with water quality goals at a cheaper price.
The second innovative approach incorporated in S. 1961 is under
Title III, Section 302--the demonstration program for water quality
enhancement and management. One of the most difficult problems we face
as cities involves achieving State water quality objectives and total
maximum daily loads (TMDLs) and the virtually unregulated nonpoint
sources that are usually outside our jurisdictions.
The U.S. Environmental Protection Agency (EPA) has recognized that
agricultural and livestock land uses contribute a major portion of
nonpoint source pollution in many areas. Many of our cities are engaged
in watershed management efforts to deal with nonpoint sources
(including urban runoff). Yet there is a critical lack of regulatory
drivers forcing the agricultural and livestock land users to contribute
to the solution. In some cases, the timing of pending TMDL requirements
will force cities to pay for water treatment caused in part by the
upstream, non-urban land users.
The Conference of Mayors adopted an action plan for sustainable
watershed management in 1998. One of the five principles of that plan
is to focus on non-urban, nonpoint source water pollution, and pursue
public policy that would assign responsibility to pay for the treatment
of polluted water commensurate with the contribution of the pollutant
loadings. The action plan also clearly calls for allowing the
agricultural and livestock land users to employ best practices and
least cost approaches that are effective in lieu of stringent and
costly regulations. Mayors fully recognize that these land users,
although they may or may not be part of our cities, are important
contributors to our regional economies. While we prefer to use the
powers of persuasion to convince them to participate in the water
pollution solutions, we have begun to experience failure in cooperative
efforts, and have in some instances resorted to legal actions.
The demonstration projects provision of S. 1961 can provide some of
the appropriate financial incentives necessary to bring voluntary
cooperative efforts to bear to solve the water quality designation/TMDL
problems that we are facing. The Conference of Mayors supports this
innovative approach. It is our belief that Congress can do more to
specify in this bill that achieving water quality goals in watersheds
through the use of SRF financing to install technology that is
currently available to ameliorate the impact on streams lakes and
estuaries from animal feeding operations will be more cost effective
than requiring downstream cities to pay for the upstream pollution.
We support the proposed requirement for recipients of an SRF loan
to develop and submit asset management plans that specify how water and
wastewater facilities will be properly maintained over time. Asset
management is critical to the preservation of infrastructure. We have a
long history of experience with using asset management planning; this
is not a new or radical concept. We would like to mention that
formalizing such a requirement as a condition of receiving SRF funding
should be integrated into the loan program in a cautious way. The focus
of our efforts at the local government level should remain principally
with ensuring the proper treatment of drinking water and wastewater for
public health and local economy reasons. The asset management plan is
important, but the current proposal on what is acceptable is not
entirely clear. We would be happy to work with the committee to explore
what an appropriate scope and details of an asset management plan
should be.
WHAT CAN BE IMPROVED IN THE BILL
The bill specifies that disadvantaged communities can receive SRF
loans with a 30-year repayment term. Perhaps the most significant
shortcoming of the S. 1961 proposal is the lack of a similar 30-year
repayment term for other communities. A 30-year, no-interest loan
program administered under the SRF program would provide a financial
incentive that many local elected officials would welcome. It obviously
would make new infrastructure investment more affordable than the
traditional 20-year loan period. It also has the potential to increase
aggregate water infrastructure investment because local government now
has to make difficult choices on where to spend limited financial
resources.
Similarly, the bill does not contain any reference to removing
private activity bonds used for water and wastewater from the State
volume caps. I understand fully that changing the tax code is not in
the jurisdiction of this particular Senate Committee. However, I would
like to convey to this committee that one of the most fruitful
financial incentives the Congress can provide for increasing aggregate
water infrastructure investment is to make certain that the largely
unfunded environmental mandates and environmental goals they impose on
local government should not be impeded by a rigid and inflexible tax
code.
If public-private partnership approaches based on competitive
pricing in the market place is increased, then more water projects can
be completed with a given amount of financing than what would occur via
traditional financing approaches. If this hypothesis is true, then
shifting some, but not all, of the water investment financing to
private activity bonds should lead to improved water quality in the
aggregate. What we have found to be true in general is that more money
spent on water treatment results in improved water quality. While there
are some exceptions to this assumption, the reverse is almost
inevitable--``no investment leads to continually deteriorating water
quality''.
There is also no mention in S. 1961 of the imminent need for water
systems to conduct security assessments and retrofit the proper anti-
terrorist controls necessary to ensure the safety of our water
supplies, and the physical integrity of our water infrastructure. We
would be happy to work with the committee to recommend a provision to
address this problem in S. 1961.
We also support the committee's provisions addressing clarification
of the State intended use and priority projects lists. It is important
to the cities we represent to ensure that states fully understand the
close relationship between water quality and watershed management, and
that the SRF program can play a critical role if states prioritize
solutions that focus on the other, non-urban land uses in the watershed
that contribute to impacts on streams, lakes and estuaries.
CONCLUSION
On behalf of the Conference of Mayors and the Urban Water Council I
wish to thank you again for this opportunity to speak before this
committee. We look forward to working with you as you move forward on
this very important piece of legislation.
______
Responses of Mayor Douglas Palmer to Additional Questions from
Senator Crapo
Question 1. Recognizing that there are concerns about excessive and
uncontrolled growth in several areas in the United States, the proposed
legislation requires that States consider a number of factors to ensure
that water projects do not encourage sprawl. The legislation seeks that
water projects are coordinated with local land use plans, regional
transportation plans, and State, regional, and municipal watershed
plans. Do you think that this requirement can be implemented with
noticeable results?
Response. It is the Conference of Mayors belief that better
comprehensive planning is essential to discourage sprawl. Comprehensive
planning needs to include transportation systems, housing developments,
placement of schools, and placement of water and sewer lines. Requiring
water projects to be coordinated with local land use plans will serve
as a valuable tool to assist local officials as they attempt to
implement better regional growth plans. New housing developments are
usually dependent upon water and sewer lines being available. If they
are not available, housing developments may have to consider areas
where the infrastructure is already in place. We believe this will
significantly encourage development to occur in already existing
communities.
Question 2. Some communities are concerned that the community
development requirement to consult and coordinate with other plans may
become an unintended mandate and discourage projects from participating
in SRFs. How do you believe communities would respond to this
requirement?
Response. Each community will respond differently to this
requirement depending upon the way input is currently solicited. As
long as there is enough flexibility to allow a community to meet these
needs in their own fashion, we think it would serve as a valuable
mechanism for better planning and community development.
Question 3. Is a call for consideration of consolidation, public-
private partnerships, and other approaches a positive outcome for
communities?
Response. A call for considering consolidation, public-private
partnerships and other approaches will be a very positive outcome for
many communities. It has been our experience that communities who
consider public-private partnerships realize cost-saving solutions
regardless of whether they decide to go with the public-private
solution due to the increased competitive process. For those
communities who have done public-private partnerships, we have many
examples of cost-savings solutions being employed, additional private
sector investment and resources being brought to bare, and
environmental risk-sharing being undertaken from both parties. For many
communities it has been a very positive solution.
Question 4. How do you think your communities would participate in
the demonstration program established under the bill?
Response. There are a number of different ways communities may
utilize the demonstration program outlined in the Senate bill. A
problem that many cities are dealing with involves animal waste and
non-point source pollution in watersheds. Traditionally, efforts to
improve water quality involved the application of treatment technology
at the POTW. This approach reaches an economy of scale when the POTW is
designed to handle point source discharges from households,
institutions and commercial establishments. Industrial point sources
also must employ pretreatment before discharging effluent into the
sewer. When the source of the pollution is up-stream in the watershed
the technology employed at the POTW may not be the right technology or
sufficient technology. Such situations call for treatment or mitigation
measures in the watershed. A new project in Chino, California addresses
non-point source pollution, water quality and energy generation. An
anaerobic animal waste digester was built by the Inland Empire Water
Authority that is capable of managing the manure from roughly 4,000
head of cattle. The digester generates methane gasses in a closed
system and converts the gas into 450,000 kilowatts of electricity via a
gas turbine. The electricity is used to clean and reclaim brackish
water, and the remaining electricity is sold to the grid. The residual
from the digester still has nutrient value, and is mixed with
greenwaste in a composting operation. This arrangement provides answers
to non-point source water quality problems, animal waste management,
and energy needs. It is out thought that other communities may want to
address. This is just one example of a potential demonstration project
that could turn into a best practice that is implemented by other
communities. Without these demonstration projects, a community may not
be able to explore innovative, cost-saving solutions to their problem.
Question 5. S. 1961 calls for a nationwide assessment that
identifies areas of the United States at risk for water shortage or
surplus in the next 50 years. The assessment, to be conducted by the
USGS, would provide a ``State of the water resources'' for the nation,
identify Federal research priorities, and share information to States
and all stakeholders. Do you perceive that such an assessment will be
helpful to the strategic planning and operation activities to respond
to the identified regional risks?
Response. Yes, it would be helpful. At the national, State, and
local level, it is imperative that we have good, current data that
addresses the ``State of water resources'' in this country. This is
necessary to better understand the situation, to frame up the
appropriate issues to our constituents, and to make sound decisions to
deal with the issues in the present and the future.
__________
Statement of Joseph A. Moore, Alderman, Chair, on Behalf of The
National League of Cities
Mr. Chairman, members of the committee: I am Joseph Moore, Alderman
from the city of Chicago, and chair of the National League of Cities'
Energy, Environment and Natural Resources Committee. I am here today to
testify on behalf of NLC and the 18,000 cities we represent across the
United States on S. 1961, the Water Investment Act of 2002.
First and foremost, I would like to congratulate the four
cosponsors of S. 1961 for recognizing the need for a renewed Federal
partnership in helping finance the rehabilitation and replacement of
the nation's aging water infrastructure. We deeply appreciate your
willingness to commit $35 billion over the next 5 years to our
wastewater and drinking water infrastructure needs. The introduction of
S. 1961 demonstrates your understanding that the nation's cities and
towns truly face an uphill struggle in assuring the continuation of the
environmental progress made in the past 30-plus years and need your
help in protecting the significant investments we have jointly made.
Accordingly, while we understand that the current statutes--the
Clean Water Act and the Safe Drinking Water Act--authorize the
expenditure of SRF resources for infrastructure rehabilitation and
replacement, NLC nevertheless believes water infrastructure should be
one of the expressed priority purposes of S. 1961. As the committee
well knows, infrastructure replacement costs are expected to approach
$1 trillion over the coming two decades and should therefore be
highlighted as a principal and primary purpose of this statute.
NLC also advocates including water security as an appropriate use
of these funds. Our wastewater and drinking water facilities were
constructed with little, if any, thought given to? the potential for
the unprecedented terrorist activities of the type witnessed on
September 11th. The security mechanisms built into these systems were
not designed for anything; of that magnitude. We believe Federal
assistance to enhance wastewater and drinking; water security needs--
especially those involving vulnerability assessments and capital
investments--is both necessary and a legitimate use of these funds.
While NLC applauds the bill's attempt to provide non-refundable
assistance to communities that do not meet the definition of a
``disadvantaged community'' by providing subsidies that will benefit
the poor populations in those cities, it is unclear how this provision
would be implemented. The idea is laudable in concept; we are uncertain
whether it will work in practice. We would like the opportunity to work
with you on developing this provision so that it is acceptable to you
and accomplishes the intended objectives for us.
Other provisions in S. 1961 affecting funding which NLC supports
include:
<bullet> the extension of the transferability provisions allowing
the use of a portion of the wastewater and/or drinking water funds to
be used interchangeably;
<bullet> revisions to the ;allocation formula in the Clean Water
SRF to reflect needs more closely;
<bullet> the extended repayment period for loans from the SRFs. We
would recommend, however, that these provisions be applicable to all
loans, not just those for small communities;
<bullet> the addition of source water protection as an eligible
activity for funding; and,
<bullet> inclusion of demonstration projects to promote innovative
technology and new approaches to water quality management and supply.
For too long, the Federal Government has been inadequately involved in
the development of new and more cost-effective ways to come into
compliance with the requirements of the Clean Water and the Safe
Drinking Water Acts. We would strongly urge you add stormwater as an
appropriate category for demonstration programs as well. Given that
most municipalities will begin implementation of the stormwater program
next month, and given the likely application of TMDLs to stormwater at
some point in the future, we are sorely in need of information and
demonstration programs on how to accomplish such objectives.
ISSUES OF CONCERN
In parts, S. 1961 seems rather overly prescriptive. While we
understand the legitimate concerns of the Federal Government in
protecting its investments, NLC believes that if the proposal imposes
too many mandates as a condition for the receipt of funds, they may
prove to be a disincentive to apply for them--regardless of need.
Many water systems already have asset management programs in place.
Likewise, many utilities have kept their rate structures up-to-date. It
is important to recognize these achievements in the context of
eligibility requirements. While there are utilities which have not
implemented new management techniques and/or updated their rates, NLC
believes there may be better alternatives to assure proper operations
and adequate rate structures than new mandates with respect to such
activities. Furthermore, NLC is concerned that utilities that already
have asset management programs in place, and have imposed rate
increases to maintain and operate their systems effectively, not be
barred from, or have lesser status in, accessing these funds. We would
like to work with you to assure that all water systems are well managed
and that rate structures--to the maximum extent feasible--are adequate
to meet the short- and long-term needs of local water utilities.
NLC is also concerned that states may not have adequate capacity,
or the expertise to develop the required strategies. Congress is aware
that the states are currently struggling with the TMDL program, and are
expected to have significant resources involved in these activities for
the foreseeable future. If, because of these or other priority
responsibilities at the State level, asset management strategies are
not developed, we also have concerns about the penalty. From the local
government perspective, reducing Federal assistance to the State by 20
percent penalizes the local governments in that state. We are aware
that these types of penalties are supposed to insure that the affected
local governments pressure the states to develop their strategies. But,
such pressures don't always work--especially when the states are
overloaded with their own responsibilities--responsibilities that are
subject to lawsuits if not completed.
Other criteria of concern to NLC are those with respect to public/
private partnerships and consolidation.
Public/Private Partnerships.--NLC is newly arrived at discussions
about the impact of international trade agreements on the privatization
of local services and the relationship of such agreements to the
maintenance of local control and autonomy. So while having little
expertise, NLC considers it important to raise the issue for further
review by the committee. As the committee undoubtedly knows, the
majority of the large private water companies operating in the United
States are foreign owned. At the local level, we have concerns that
contracting with these foreign-owned companies may--because of the
terms and conditions of international agreements--adversely affect the
ability of a local government to make many critical determinations
about the utility once it is under contract with such a private
partner. We would be happy to provide expert resources and additional
information to the committee on this issue and ask only that there is a
full understanding of the ramifications of public/private partnerships
in the water business before requiring or encouraging; such activities
in Federal law.
Consolidation.--The provisions relating to consolidation of systems
are also somewhat perplexing. As we read the proposal, systems are
encouraged to consider consolidation to become more effective and
efficient. Our first question is whether this is a requirement to be
eligible for funding. If so, there are some systems that already serve
millions of customers and further consolidation is neither feasible nor
sensible. Our second question is whether the committee is willing to
remove Federal impediments to consolidation--for example, Sec. 1926(b)
of the Agriculture Act of 1961, which disallows absorption of any
drinking system indebted to the Farmers Home Administration. Numerous
cities have attempted to expand their service areas to unincorporated
areas served by this small system, or to areas surrounding the small
system service area. Federal law precludes their doing so. States that
have attempted to deal with this issue find that even they may not
override Federal law. Many of these small systems are inefficient and
marginally protective of public health. State and local efforts at
consolidation in such areas have been barred by Federal law.
Mr. Chairman, members of the committee, thank you for the
opportunity to testify for the National League of Cities and for taking
the initiative in developing, proposing and starting the legislative
process on S. 1961, the Water Investment Act of 2002. NLC looks forward
to continuing to work with you on making this one of the most important
and effective pieces of legislation in the 108th Congress.
__________
Statement of Nancy Stoner, Director, Clean Water Project, Natural
Resources Defense
Good morning, Mr. Chairman, and members of the committee. I am
Nancy Stoner, Director of the Clean Water Project at the Natural
Resources Defense Council (NRDC), a national environmental group that
has a long history of working to protect our nation's waters through
the Clean Water Act. I am also one of the cochairs of the Clean Water
Network, a coalition of more than 1,000 groups supporting clean water
from around the country. I present this testimony on behalf of both
NRDC and the Clean Water Network. My expertise is primarily on clean
water, not safe drinking water issues, so while I will touch on both, I
will focus my remarks on the Clean Water State Revolving Fund.
Thank you for holding this timely hearing today on S. 1961, the
Water Investment Act of 2002, which would reauthorize the Clean Water
Act and Safe Drinking Water Act State revolving funds (SRFs). This is a
tremendous opportunity for the Congress to provide increased funding
and essential improvements in these programs.
RESTORE OUR WATER INFRASTRUCTURE INVESTMENT
The Federal Government's investment in wastewater and drinking
water treatment over the last 30 years has brought tremendous progress
in cleaning up our rivers, lakes, and coastal waters and in ensuring
the safety of our drinking water. For example, EPA has documented a
dramatic decrease in loadings of sewage contaminants into our waterways
from the wastewater treatment plants that we built through the
construction grants and clean water State revolving fund programs.
Progress in Water Quality: An Evaluation of the National Investment in
Municipal Wastewater Treatment, U.S. EPA 2-72 (June 2000)
That progress, however, has been eroded by water pollution
resulting from urban stormwater, agricultural runoff and of discharges
of inadequately treated sewage from our deteriorating collection
systems and wastewater treatment facilities. In fact, the same EPA
report that trumpets our tremendous success to date in reducing sewage
contamination predicts that, if we do not substantially increase
investment and treatment efficiency, by 2025, we will again have
pollutant loadings from domestic sewage that are as high as they were
in 1968--the highest in our nation's history.
And untreated sewage is not the only growing water pollution
problem. NRDC's annual report on beach pollution shows increasing beach
closures and advisories due to bacterial contamination of coastal
waters for 10 of the 13 years reported. Testing the Waters (Eleventh
Edition), Natural Resources Defense Council (August 2001). The number
of closures in 2000 was the highest ever. While some of the increase is
due to better monitoring and reporting of beach pollution, stormwater
pollution continues to increase as development replaces soil and
vegetation with paved surfaces that collect and convey pollutants
directly into our waterways. Stormwater Strategies, Natural Resources
Defense Council 23-38 (May 1999). We need to step up our investment now
to keep these sources of pollution from overshadowing our previous
water quality gains.
INCREASE FUNDING AND SPEND IT ON MORE ENVIRONMENTALLY BENEFICIAL
PROJECTS
The environmental community would like to see water infrastructure
legislation achieve three major goals:
1. Substantially increase funding for State clean water and safe
drinking water projects.
2. Spend that money on more cost-effective and environmentally
beneficial projects.
3. Improve public participation in the funding process and increase
State accountability for the expenditure of Federal funds.
I will describe each of these issues and our proposals addressing
them through this legislation in turn, but, as an initial matter, I
would also note that we are concerned that reauthorization of the Clean
Water and Safe Drinking Water SRFs not be used as a vehicle for rolling
back clean water or safe drinking water protections. We urge the
Congress to stick narrowly to the issue of developing a new paradigm
for water infrastructure funding that will better meet the needs of our
nation and will provide greater environmental benefit for each dollar
spent. That is a large enough task for the moment.
MIND THE GAP
As was discussed extensively at the Fisheries, Wildlife & Water
Subcommittee's oversight hearing last spring, the funding gap between
water infrastructure needs and available resources is very large and
continues to grow. Yet, the current Clean Water and Drinking Water SRFs
are grossly insufficient to meet our nation's water quality needs,
which include repairing and replacing aging sewer plants and collection
systems, controlling contaminated stormwater, minimizing polluted
runoff, and remedying decaying and out-of-date drinking water
treatment, protection, and distribution systems. We need to authorize
substantially more SRF funds to close the gap between our water needs
and available Federal funding. The U.S. Environmental Protection Agency
and the Water Infrastructure Network estimate that $23 billion must be
invested annually in the next 20 years to replace aging infrastructure
and to meet the requirements of the Clean Water Act and the Safe
Drinking Water Act.
While there are differing estimates of the amount of additional
funding needed, the need for greater investment in clean water and
drinking water infrastructure is clear and undisputed. Any
reauthorization of the Clean Water and Safe Drinking Water SRFs must
substantially raise the funding levels for those programs. We commend
the sponsors of the Water Investment Act of 2002 for supporting
substantially increased funding over the next 5 years, but urge you to
look ahead and to authorize additional spending for at least the next
10 years. We know now that we will continue to need vastly increased
water infrastructure financing beyond 2007. We should begin to plan now
to meet those future needs by authorizing them in this legislation.
FUND THE SMARTEST, MOST BENEFICIAL PROJECTS
The growing funding gap suggests not just the need for more
funding, but also the need to begin to spend that funding more wisely
to obtain the greatest amount of environmental benefit per taxpayer
dollar invested in water infrastructure. We should not merely rebuild
our wastewater systems using the hard infrastructure technologies of
the past. We must become smarter about stretching our Federal
investment in water infrastructure by spending more on ``green
infrastructure''--non-point and non-structural solutions that are more
efficient and more environmentally effective than traditional concrete
and pipe solutions. We need to take advantage of the innovative
approaches that have been developed over the past several decades that
allow us to use onsite source controls (like rain gardens), stream
buffers, conservation practices, and other approaches to prevent
pollution. These approaches reduce the amount of water that needs to be
conveyed to centralized treatment facilities, thereby reducing the cost
of operating those facilities.
INCREASE FUNDING TO ADDRESS POLLUTED RUNOFF
For years we have known that polluted runoff is the most
significant source of water pollution in the nation for lakes, streams,
and coastal waters. Yet, year after year, we continue to direct the
vast majority of Federal funding to point source discharges. According
to EPA, between 1987 and last summer, only 4 percent went to non-point
source projects. Four years ago, EPA adopted a goal of increasing the
annual percentage of Clean Water SRF funds loaned for non-point source
projects to 10 percent by 2001. EPA pledged to ``work with States and
territories to ensure that State loan funds are used for the highest
priority polluted runoff projects that meet the programs' financial
criteria.'' Clean Water Action Plan, U.S. EPA 57 (Feb. 1998). This goal
has not been met. In fact, the percentage of Clean Water SRF funds used
for non-point sources has not increased in the 4-years since this
pledge was made. We need to do more than continue talking if we are
going to begin to see the real changes in water quality that are the
goal of the SRF program.
PREVENT POLLUTION AND REDUCE COSTS WITH ``GREEN INFRASTRUCTURE''
APPROACHES
While States are allowed to fund non-point source projects under
the Clean Water SRF, many of them continue to fund traditional,
centralized wastewater treatment approaches even when a non-point or
non-structural solution would be less expensive, more effective, and
provide non-water quality benefits. Similarly, while States are also
authorized to fund non-structural drinking water protection (such as
buffer zones or easements), many States have failed to use this
authority despite the cost-effectiveness and environmental benefits of
such projects. While hard infrastructure projects are an important
component of addressing our wastewater needs, we can often mitigate
these needs and do a better job of cleaning up the water by funding a
combination of cost-effective, non-structural, preventive projects
(green infrastructure) and innovative and alternative engineering
strategies. Use of distributed, nonstructural, pollution prevention
approaches in addition to modernization of aging, decaying treatment
plants, collection systems, and distribution systems can forestall the
need for even more costly approaches and investments in the future.
Non-structural and non-point approaches can also provide a wider
array of benefits than hard infrastructure, like pipes and wastewater
treatment facilities, can. Those benefits include improved wildlife
habitat, enhanced drinking water supplies, energy savings, smog
reduction, decreased flooding, and higher property values. Stormwater
Strategies, NRDC, Chapter 12 (Sept. 2001). These approaches result in
cleaner bodies of water, a greener environment, and better quality of
life. Green infrastructure is already working in a number of
communities across the nation, saving money and enhancing environmental
quality.
PROVIDE A SPECIFIC FUNDING INCENTIVE FOR NON-STRUCTURAL AND NON-POINT
SOLUTIONS
The Water Investment Act of 2002 takes a step in the right
direction on this issue by clarifying that non-structural and non-
traditional approaches to wastewater needs are eligible for funding
under the Clean Water SRF. However, this clarification alone is not
sufficient to overcome the institutional barriers to using SRF funds
for non-point and non-structural solutions to address wastewater and
stormwater pollution. Those institutional barriers include the relative
ease of making one large loan for a major construction project rather
than making many small non-point source loans, the greater voice of
sewer authorities than most potential non-point loan recipients in
setting priorities at the State and local level, the bias of many
engineering firms for traditional, hard infrastructure projects, and
the greater difficulty that many non-point source recipients have in
paying back loans since they often do not have a guaranteed source of
revenue as water and sewer authorities do. Some States also have laws
or regulations that prevent non-point sources from obtaining SRF loans,
even when their projects can provide greater environmental benefit at
lower cost.
State and local officials repeatedly tell us that these
institutional barriers to funding non-point and non-structural
solutions with Clean Water SRF moneys will be overcome only if we
provide incentives for their use. That's why NRDC and the Clean Water
Network support providing a specific incentive for non-point, non-
structural approaches for cleaning up our waters. In particular, we
support providing an incentive of additional funding of up to 10
percent of base funding for any State that voluntarily sets up a SRF
clean water fund for projects that provide non-structural protection to
surface waters, including agricultural best management practices that
benefit impaired watersheds, non-structural stormwater and low-impact
development practices, conservation easements, land acquisition for
water quality protection, stream buffers, wetlands restoration and
other non-point source or estuary projects.
This incentive approach relies on lessons learned from the
Intermodal Surface Transportation Efficiency Act of 1991 and its
successor, the Transportation Equity Act for the 21st Century, which
allocated 10 percent of State surface transportation funds for
environmental enhancement projects that improve transportation systems
and the quality of life in our communities. Transportation enhancements
preserve the human and natural environment, increase the transportation
mode choices available to citizens, and encourage coordinated State,
local, and public involvement in transportation decisions. This multi-
billion dollar program has received broad support from State and local
communities by making funding available for non-traditional
transportation projects, including the restoration of a historic train
station in Tampa, Florida, creation of a park in Manchester, Vermont,
and the construction of a rail-trail in Mineral Wells, Texas.
The Water Investment Act of 2002 contains funding a demonstration
program to promote innovations in water supply and treatment
technology. While such a program would helpful to spur continued
innovation in water and wastewater technologies, many green
infrastructure approaches have been in use for more than a decade. They
have been demonstrated to be effective and should be promoted for
widespread use, not merely piloted, at this point.
DIRECT FUNDING TO THE GREATEST ENVIRONMENTAL AND FISCAL NEEDS
In addition to the monetary incentive for non-point and non-
structural solutions, we support a number of other mechanisms to ensure
that taxpayer dollars are spent on projects that will address the
greatest environmental and fiscal needs.
FUND ONLY ENVIRONMENTAL PRIORITIES
First, we need to require that Clean Water SRF funds be spent to
address those projects identified by the State as its top priorities.
The Safe Drinking Water SRF already has such a provision. There is no
good reason why clean water funds, unlike safe drinking water funds,
should be squandered on projects that are not identified as top
priorities. This loophole in the current statute must be closed.
GIVE PRIORITY TO PROJECTS ADDRESSING SIGNIFICANT PUBLIC HEALTH AND
ENVIRONMENTAL NEEDS AND NEEDS OF DISADVANTAGED COMMUNITIES
Second, we need to prioritize projects that meet the most
significant public health and environmental needs and those that help
disadvantaged communities the most. We support providing an explicit
priority for projects on these bases, as the Safe Drinking Water Act
already does, and also support principal forgiveness and other means to
ensure that disadvantaged communities and users receive greater access
to SRF funds. We also recommend two mechanisms to ensure that this
mandate is adhered to--improved EPA oversight of State priority lists
and intended use plans and increasing public participation and
involvement in setting priorities and in monitoring use of the funds.
With little oversight by US EPA and almost no public involvement today
in the creation of intended use plans and identification of priorities,
there is very little indication of whether Federal dollars are
supporting the most pressing public health or environmental needs.
Meaningful public participation in the best way to ensure that
environmental and fiscally sound choices are made. Ensuring such
participation is the best way for Congress to protect and build support
for its clean, safe water investment.
END SRF FUNDING FOR SPRAWL DEVELOPMENT
Third, we need to stop using SRF funds to subsidize new sprawl
development. Sprawl development makes pollution worse in the long run
by bringing more and ever-larger parking lots, roadways, and driveways
to more and more watersheds. The volume of polluted runoff is
significant--a 1-acre parking lot produces 16 times more runoff than an
undeveloped meadow. And the aggregate costs to our environment are
adding up. Urban runoff causes nearly half of the impairment of estuary
miles assessed by EPA. Disturbingly, U.S. Department of Agriculture
figures show that sprawl is accelerating. The 2.1 million acre-a-year
development rate in the 1990's is 50 percent higher than in the
previous decade. The increase in paved surfaces leads directly to
increased flooding, stream channel degradation, habitat loss, increased
water temperature, contamination of water resources, and increased
erosion and sedimentation. By using our scarce taxpayer dollars to fund
sprawl, instead of repair, rehabilitation, and replacement of existing
sewer systems, we could exacerbate water pollution in the long run.
Sprawl will happen, but the Federal Government shouldn't help foot the
bill. Congress should make the Safe Drinking Water Act requirement that
projects in State plans not support future growth a part of the Clean
Water Act State Revolving Loan Fund as well.
FUND ONLY LAW-ABIDING ENTITIES
Fourth, we need to discontinue funding for entities that are in
significant noncompliance with the Clean Water Act and that have not
made a commitment to remedy those violations in the future. Funding of
significant violators undermines efforts of law abiding entities to
raise funds for their wastewater needs. We will never have enough
Federal funding to address all wastewater needs. We need to provide
incentives for communities to step up to the plate now and raise funds
at the State and local level as much as possible to address their
wastewater and stormwater problems, not to stay in violation and wait
until more funding becomes available. The Clean Water Act SRF should be
available only to entities that have committed to comply, not those
that have thumbed their noses at the regulatory requirements.
INFORM THE PUBLIC ABOUT PUBLICLY FUNDED PROJECTS
Fifth, we need to improve the publicly available information about
the projects that taxpayer dollars are used to fund. Currently required
reports on the use of SRF funds provide little useful information and
are not routinely available to the public. The public has a right to
know which projects are being funded at taxpayer expense and what they
are accomplishing. The Water Investment Act of 2002 does little to
improve State accountability for the use of funds or public
availability of such information.
AMERICANS WANT CLEAN, SAFE WATER
As poll after poll has shown, Americans want clean, safe water and
are willing to invest more to get it. We applaud you for moving forward
with legislation to address the public's demand for clean water. We
urge you to ensure that the bill you pass is the best, most effective
one possible to meet that demand. Only if Congress substantially
increases funding for State clean water and safe drinking water
projects, spends that money on more cost-effective and environmentally
beneficial projects, improves public participation in the funding
process, and increases State accountability can we hope to achieve the
clean and safe water Americans want and deserve. This year is the 30th
Anniversary of the Clean Water Act. Let's move ahead this year with
legislation that will ensure clean and safe drinking water for years to
come.
Thank you for providing me with the opportunity to testify today.
We have drafted specific language on each of these issues and would
like to work with you to address them. I would be happy to answer any
questions you may have.
______
Responses of Nancy Stoner to Additional Questions from Senator Crapo
Question 1. The bill specifically encourages development and use of
non-structural alternatives and low-impact development technologies.
These approaches are eligible to compete for State Revolving Fund
moneys. Additionally, the new demonstration program would be authorized
at $20 million per year over 5 years to promote innovations in these
technologies and approaches. Do you believe that these incentives will
increase the implementation of these technologies and approaches?
Response. Non-structural approaches and low-impact development
technologies are eligible for funding now under the SRF program. While
it is helpful to identify these approaches as among those eligible for
funding, it is, in our view, insufficient to overcome the barriers to
their use. The demonstration program is also a step in the right
direction, but it is not enough to address the problem. First, the
demonstration projects are not limited to non-structural means of
protecting surface waters. In fact, they are not even limited to
projects that provide greater environmental benefit than existing
projects or to projects focused on water quality as opposed to other
water issues. The demonstration program is authorized to fund only 10
projects per year, yet nonstructural methods of protecting surface
waters are well beyond the pilot project stage. They are well-
established and documented means of providing multiple environmental
benefits, often at lower cost than conventional methods, particularly
for controlling contaminated stormwater. While we appreciate that the
intent of this provision is to promote these approaches to those who
may be unfamiliar with them, we are concerned that setting up only a
small pilot program for these types of approaches will wrongly suggest
that these approaches are experimental and marginal, and will not
encourage communities to consider these as integral components of any
program to effectively control sewage, stormwater, and other nonpoint
source loadings into impaired waterways. Many communities will
incorporate these strategies into their resource protection programs if
the financial and institutional platform is available.
We urge you to provide direct incentives to applicants through
subsidization incentives as well as a set-aside to encourage States to
direct more funding for nonpoint and nonstructural solutions. We urge
that the final Senate bill ensure that nonstructural surface water
protections receive no less than 10 percent of States' total SRF
allocations. We urge you to consider incentives for potential loan
recipients as well, including additional subsidization for these types
of projects in the form of principal forgiveness or negative interest
loans. Due to the multiple barriers to efficient use of non-structural
projects (as discussed more fully below), incentives at every level of
the funding process would be helpful to begin spending our limited
Federal resources more wisely on the most environmentally beneficial
projects.
Question 2. In your testimony, you mentioned that many ``green''
infrastructure approaches have been in use for some time throughout the
country. Could you elaborate on why some communities are resistant to
more widely adopting them?
Response. Incentives are needed to overcome significant
institutional barriers at the State level to using SRF funds for non-
point and non-structural solutions to address wastewater and stormwater
pollution. State and local officials repeatedly tell us that these
institutional barriers to funding non-point and non-structural
solutions with Clean Water SRF moneys will be overcome only if we
provide significant incentives for their use. Those barriers include
the relative ease of making one large loan for a major construction
project rather than making many small non-point source loans, the
greater voice of sewer authorities than most potential non-point loan
recipients in setting priorities at the State and local level, and the
biases of many engineering firms for traditional, hard infrastructure
projects. Some States also have laws or regulations that prevent non-
point sources from obtaining SRF loans, even when their projects can
provide greater environmental benefit at lower cost.
There was a lot of discussion of barriers to the use of non-point
and non-structural approaches to water protection at the EPA conference
on ``Paying for Water Quality: Managing Funding Programs to Achieve the
Greatest Environmental Benefit'' that concluded on March 15, 2002.
Federal, State, and local SRF experts from the across the country
attending the conference expressed their support for mechanisms to
increase Federal funding for non-point, non-structural, and watershed
approaches. Several participants described our current allocation of
SRF resources as ``grossly inefficient.'' Participants identified a
number of barriers to effective use of this money now. Among the
barriers discussed at the conference were limitations on eligibility
(including operations and maintenance funding for decentralized systems
and funding for stormwater controls on private lands within NPDES
permitted municipalities), State prohibitions on using SRF funds for
non-point source activities, State prohibitions on funding private
entities, insufficient resources at the State level to fund staff to do
many small loans for non-point projects (as opposed to one large loan
for a treatment works), a ``stovepipe mentality'' among SRF
administrators, traditional funding priority for large communities, and
the lack of knowledge of many smaller communities about funding
options.
Question 3. Since there is an inherent risk in trying new
approaches, should communities that undertake innovative, but untested
approaches be compensated if the proposal fails to serve its intended
purpose or inadvertently contributes to increased water pollution?
Response. Non-structural and non-point approaches are not
inherently more risky than traditional approaches for protecting
surface waters. Traditional approaches also fail, at least
occasionally, and when they do fail, they are likely to have more
catastrophic effects than an approach that relies on multiple barriers
to protect the water (such as distributed stormwater storage and
filtering throughout a watershed) rather than a centralized solution.
One example of the type of problems that traditional approaches can
have is found in Milwaukee, WI, which spent $2.8 billion on deep
tunnels to store combined sewage during rain events, but which
underestimated the amount of storage needed and the amount of seepage
into the tunnels, and has consequently had to divert more than 13
billion gallons of untreated sewage into Lake Michigan since 1994,
despite that investment. In addition to raw sewage discharges into Lake
Michigan, which is Milwaukee's primary source of drinking water,
Milwaukee's groundwater contamination is also reported to have resulted
from sewage exfiltration from Milwaukee's deep tunnels. The long-term
experience with conventional approaches is that over time they begin to
deteriorate and not operate in accordance with the design efficiency.
Large-scale maintenance requirements are often ignored or postponed,
particularly in times of reduced municipal funding. Many end-of-pipe
approaches require sophisticated operations and maintenance, which, if
not consistently performed, may cause significant pollutant loadings to
receiving waters.
While it is certainly true that technologies for restoring
wetlands, installing stream buffers, and implementing distributed
stormwater controls continue to evolve and improve over time, they are,
we believe, inherently less risky than centralized controls because
they incorporate a treatment train approach that offers redundant and
multiple opportunities to treat pollutants. While one rain garden or
eco-roof that is improperly designed or maintained may fail, it is very
unlikely that 100 or 1000 such micro-scale facilities in a community
would all fail. Furthermore, a component in the design of distributed
stormwater approaches relying on soil and vegetation is to have a
backup system (often underdrains) that capture overflow runoff in the
event of a very large rain event. See, e.g., Start at the Source (Bay
Area Stormwater Management Agencies Association, 1999)
______
Responses of Nancy Stoner to Additional Questions from Senator Smith
Question 1. In your testimony, you say low impact development
technologies and innovative approaches have been used with great
success across the country, and yet, cities may still be reluctant to
use them. Unless we address some of the reasons why States and
municipalities are not using these technologies, the 10 percent bonus
you suggest in your testimony will go unused.
I cannot support a mandate on States that would eliminate their
flexibility. Short of doing that, what would you recommend we do at the
Federal level to increase the comfort level with these technologies?
Response. We believe that providing one or more monetary incentives
for the use of non-structural means of protecting surface waters will
encourage States and municipalities to remove a number of barriers to
the use of these cost-effective approaches. We agree with you that we
need to structure the funding for these initiatives so that there is
not unspent money. We can do that by allowing EPA to hold the new money
set aside in reserve for States that spend at least 10 percent of their
funding on eligible projects. That money could be distributed to other
States for such projects in subsequent years in the event that any
money was left in the fund at year's end.
We appreciate your inquiry concerning other options for increasing
SRF funding for nonstructural and non-point projects as well. Although
there are several improvements that we would suggest to the language,
the provision in the companion House bill (H.R. 3930) that would allow
States to provide additional subsidization, including forgiveness of
principal and negative interest loans for innovative and alternative
processes, materials, and techniques is worthy of your consideration.
We believe that the incentives provided should be focused on the most
environmentally beneficial of these approaches including, agricultural
best management practices that benefit impaired watersheds, non-
structural stormwater and low-impact development practices,
conservation easements, land acquisition for water quality protection,
stream buffers, and wetlands restoration. Non-municipal non-point and
non-structural recipients often have greater difficulty in paying back
loans since they often do not have a guaranteed source of revenue for
repayment. We urge that the final bill ensure that nonstructural
surface water protections receive no less than 10 percent of States'
total SRF allocations and that incentives be provided to States and
potential loan recipients, including non-municipal entities, to use
green infrastructure approaches.
Question 2. There is one community in New Hampshire who is
considering a few of these low impact development technologies. They
are currently awaiting an engineers report on what different approaches
there are to addressing CSOs. Rain gardens and constructive wetlands
would reduce the amount of storm water overflowing into the local
waterbody.
However, will they take away enough water to significantly reduce
the amount of pipe separation or the size of the holding reservoir to
actually reduce a communities costs? Can you quantify this?
Response. There are several communities within the United States
and internationally that are using nonstructural and non-point measures
to reduce combined sewer overflow volumes. We commend New Hampshire
communities for evaluating what such approaches can do to improve water
quality, save money, and provide non-water quality environmental
benefits for its citizens. Portland, Oregon's Clean River Plan
addresses the very questions that you pose. Portland Clean River Plan
relies upon streambank restoration, downspout disconnection, eco-roof
installations, tree plantings, naturescaping, wetlands restoration and
enhancement, and distributed stormwater controls as well as more
traditional sewer separation and pumping techniques to reduce
overflows. Portland estimates that its Clean River Plan will reduce CSO
volume by 94 percent, reduce stormwater runoff by almost 1 billion
gallons each year (495 million gallons from additions of trees and
vegetation and 500 million gallons from inflow projects), relieve
basement flooding for 8,000 properties currently at risk, and prevent
100,000 cubic yards of sediment from entering waterways each year.
Portland's Clean River Plan; Frequently Asked Questions, Portland
Department of Environmental Services (Feb. 2000).
Portland has also demonstrated on a lot-level basis that non-
structural approaches save money. For example, Portland, Oregon's
Museum of Science and Industry (OMSI) used green infrastructure
stormwater management techniques in its 20-acre site, including grass
swales and ``mini-wetlands,'' that store and filter nearly 70 percent
of the runoff from a 6-acre parking lot. These techniques have been
documented to remove 50 percent of sediment and other contaminants that
would otherwise have poured into the city's stormwater system, and have
saved the museum $78,000 in hard infrastructure costs (e.g., manholes,
pipes, trenching, catch basins). A Cost Comparison of Conventional and
Water-Quality-Based Stormwater Designs, Portland Department of
Environmental Services, pp 1-3, (1996).
There are also monitored data to answer your question as well from
Tokyo, Japan, where infiltration has been used to mitigate CSO volume,
reduce urban runoff, and recharge groundwater since 1983. Within a 5.5
square mile area, Tokyo installed 33,300 infiltration pits, 122 acres
of permeable pavement, and over 175 miles of infiltration trenches. The
cost of this approach was determined to be about 33 percent less than
conventional open pond detention systems and only 10 percent of the
cost of storage vaults. Tokyo found that this approach reduced CSO
volume by 81 percent and storm drain flows by up to 50 percent. It also
reduced suspended solids loads by 91 percent and biochemical oxygen
demand (a measure of the amount of oxygen-depleting pollutants) by 95
percent (Fujita and Koyama).
Question 3. You have also raised the issue of funding in priority
order. My State has a well run program that is small enough to allow
them to fund projects as those projects are ready to go. In other
words, funding can continue to flow if the No. 2 project on the list
has its local bond denied.
Or take for example a very small community a long a small waterway
in a State that also has a major estuary, like Chesapeake Bay or Long
Island Sound which are likely to consume most of a State's priority
list. A State may want the flexibility to give that small community
money as it becomes available but isn't a position to make it one of
the top priorities in the State because it impacts so few people.
Why is this flexibility a problem?
Response. We support allowing the State to move forward with the
next priority project if one project is not ready to proceed. We also
support allowing the State to have a priority system that allows
funding for both large and small projects, but would suggest that the
system be transparent and that the public have a meaningful opportunity
to comment upon those funding priorities. In other words, the State's
approach to funding should not solely be based on only the applicant
and the State's view of funding priorities, but should take into
account the perspectives of members of the public who have a different
view than State officials and staff.
______
Responses of Nancy Stoner to Additional Questions from Senator Wyden
Question 1. Ms. Stoner, in your written testimony you stated: We
should not merely rebuild our wastewater systems using the hard
infrastructure technologies of the past. We must become smarter about
stretching our Federal investment in water infrastructure by spending
more on ``green infrastructure''--nonpoint and non-structural
solutions.
As an incentive to promote this strategy you recommend providing
additional funding of up to 10 percent of the base for any State that
voluntarily sets up a clean water State revolving fund for projects.
that would include: Best management practices that benefit impaired
watersheds, nonstructural stormwater and low-impact development
practices, conservation easements, stream buffers, and other non-point
source or estuary projects.
Could you provide examples to illustrate these ``non-structural''
wastewater strategies are in fact ``smarter'' and that they will help
stretch Federal investments to improve water quality?
Response. While hard infrastructure projects are an important
component of addressing our wastewater needs, we can often mitigate
these needs and do a better job of cleaning up the water by funding a
combination of cost-effective, non-structural, preventive projects
(green infrastructure) and innovative and alternative engineering
strategies. Use of distributed, nonstructural, pollution prevention
approaches in addition to modernization of aging, decaying treatment
plants, collection systems, and distribution systems can forestall the
need for even more costly approaches and investments in the future.
They should represent a significant component of every State's Clean
Water State revolving fund.
Once again, some of the best information comes from Portland,
Oregon, which identifies the following among the benefits of its Clean
River Plan:
<bullet> Greatly improved water quality
<bullet> Reduced stormwater volume and pollutant loadings
<bullet> Better habitat for fish and other wildlife due to lower
pollution levels, streambank restorations, and in-stream habitat
restoration
<bullet> More green space for people to enjoy
<bullet> Less frequent flooding
<bullet> Improved fish recovery efforts
<bullet> Thermal pollution reduction
<bullet> Improved air quality
<bullet> Greater community involvement and stewardship
Portland's Clean River Plan: At a Glance, Portland Department of
Environmental Services (Feb. 2000).
Case studies on a variety of non-structural means of protecting
surface waters from contaminated stormwater runoff are included in
NRDC's 1999 report, Stormwater Strategies: Community Responses to
Runoff Pollution, which is available in full on NRDC's website,
www.nrdc.org. Those case studies include the following:
<bullet> Staten Island Bluebelt (NY)--New York City estimates that
its use of natural systems (open space, streambeds, and wetlands) will
save it $50 million as compared to the cost of additional subsurface
storm sewer lines
<bullet> Charles River Valley (MA)--Preserving wetlands to store
flood waters cost $10 million or one tenth the cost of constructing a
dam to prevent flooding of $100 million and provides aesthetic and
ecological benefits as well
<bullet> Hillsborough County (FL)--Residential development that
preserves vegetation and open space cost lowers maintenance costs and
increases property value for residents as well as providing secondary
environmental benefits for the neighborhood.
<bullet> Fort Bragg (NC)--Environmental design for new vehicle
maintenance facility saved $1.6 million out of an $8 million site
design budget while serving both environmental and non-environmental
goals.
<bullet> Village Homes (CA)--Stormwater-sensitive site design for
residential community in Davis saved $800 per lot in construction
costs, provide higher resale values than adjoining traditional
neighborhoods, and yields excellent floodwater protection and water
filtration as well as aesthetic and recreational benefits for
residents.
<bullet> Prairie Crossing (IL)--Conservation design that includes
restored prairies, wetlands, and swales reduces pollution, provides
valued homeowner amenities, and provided cost savings for developer of
between $1.6 and $2.7 million.
Information about the economic and environmental benefits of one
type of non-structural approach to controlling stormwater, i.e., ``low
impact development,'' is discussed in depth in the update to Stormwater
Strategies: Community Responses to Runoff Pollution, which NRDC
released in CD-ROM format in September of 2001. That chapter is
attached in full for your reference.
Question 2. Would you describe how a 10 percent incentive to States
for funding nonstructural wastewater approaches might work, and given
the States interest in retaining as much flexibility as possible, why
you believe we should set aside funds exclusively to promote these
types of investments?
Response. The incentive funds would be reserved by EPA to provide
to States that had enough qualifying projects to use 10 percent of
their allotted funds. If one or more States did not reach that goal and
there was, therefore, unused money, it would be provided the following
year for the use of any State on qualifying projects. This structure
would accomplish several things:
<bullet> it would ensure that at least 10 percent of SRF funds
nationally were spent on the more environmentally beneficial projects
<bullet> it would encourage every State to spend at least 10
percent of these projects, but would not mandate that they do so
<bullet> it would provide additional incentives to States to fund
even more of these projects if there were some States that chose not to
do so; and
<bullet> it would not allow any SRF funds to go unspent.
We support directing funds to projects involving non-structural
protections for surface waters to try to redirect some of the resources
that are not now being spent on the most environmentally beneficial
approaches to pollution control. We recognize, however, that there are
very worthy traditional sewer and stormwater projects and support
continuing to provide substantial funding to those projects as well,
particularly to address economically stranded treatment works and
collection systems in our urban centers. We do not believe it necessary
to direct SRF funds to those projects because they already receive a
large share of the funding, but we do support prohibiting SRF funds to
be used for new collection systems in previously undeveloped areas or
to fund anticipated future growth. Such a provision will not only
prevent our SRF dollars from subsidizing sprawl, but will also ensure
that existing systems receive adequate funding.
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Statement of Paul D. Schwartz, National Policy Coordinator, Clean
Water Action
Good day, Mr. Chairman and other distinguished members of
committee. I am Paul Schwartz, National Policy Coordinator of Clean
Water Action, a national environmental organization working for clean,
safe and affordable water, prevention of health-threatening pollution;
creation of environmentally safe jobs and businesses; and empowerment
of people to make democracy work. Clean Water Action has organization
in 15 States and has 700,000 members across the nation. Additionally, I
serve as cochair of the Clean Water Network's Wet Weather and Funding
Workgroup and am on the Steering Committee of the Campaign for Safe and
Affordable Drinking Water.
Mr. Chairman, thank you for holding this hearing today on S. 1961,
the Water Investment Act of 2002, and other water infrastructure
proposals. The committee's sustained focus on water infrastructure
funding and the two State clean and safe water revolving funds is
timely and of vital importance to the nation's environment, economy and
public health. This hearing is a crucial next step toward securing more
dollars for critical drinking water and wastewater infrastructure
needs. While Ms. Stoner of NRDC focused on the ``clean water'' issues,
I'll be focusing most of my remarks today on drinking water issues.
1. FUNDING NEEDS & DRIVERS
It has been well established by the USEPA, the Water Infrastructure
Network (WIN) and others that there is a gap between all available
sources of revenue and the financial resources needed by our
communities, small and large; rural, suburban and urban; well off and
hard-pressed, to meet urgent public health and environmental
protections. WIN puts the estimate of the need at $1 trillion and
projects that $23 billion must be invested annually over the next 20
years to begin to close the gap. Others have set the number at a
somewhat lower level.
<bullet> Over the next few years communities across America are
facing the need to deal with many pressing drinking water issues
including: arsenic, cryptosporidium and other microbial risks,
radioactive radon, and the groundwater rule.
<bullet> Also, the U.S. national drinking water infrastructure
(both pipes and treatment works), once the envy of the world, is old
and out of date. There is no other sector of the nation's
infrastructure that relies primarily on a physical infrastructure built
50 to 100 years ago, and that mostly utilizes treatment technology that
was developed during the Victorian-era before WWI. As municipalities
and private operators delay repair, replacement and modernization, the
costs escalate exponentially.
<bullet> Further, Clean Water Action notes with dismay how few
drinking water providers have moved from a purely end-of-the-pipe
engineering focus to an integrated watershed approach to dealing with
many pressing drinking water issues. There are many reasons for this
failure, including: the lack of integration between the Clean Water Act
and the Safe Drinking Water Act in both the policy and implementation
arena, and at all levels of government; an institutional bias toward
big pipe and plumbing projects and against incorporation and
integration of green infrastructure, distributive and low impact
development pollution prevention approaches; and finally, an almost
total freezing out of the tax-paying and rate-paying public from the
priority setting and approval process that determines which projects
and approaches are funded and move forward.
2. NECESSARY NEXT STEPS
Below are some elements that Clean Water Action wants to be
incorporated in any water infrastructure bill that moves forward this
year:
<bullet> Clean Water Action advocates that any new pot of
dollars gets used primarily to deal with core water quality
problems by being targeted: (1) to modernize our water
distribution system, and (2) to assist the move to modern-broad
spectrum water treatment. But drinking water spending cannot be
focused just on the traditional modes and methods of end-of-
the-pipe engineering solutions. Heretofore, 98 percent of water
infrastructure funding has gone to brick and mortar projects.
But the committee also needs to support those pollution
prevention measures that enhance the performance and cost
effectiveness of needed traditional infrastructure investments.
The committee needs to give the States the flexibility to
invest in pollution prevention as part of an integrated core
infrastructure package. Traditional ``core'' infrastructure
needs can be mitigated by putting an emphasis on funding a
combination of non-structural, preventive projects (green
infrastructure), with innovative and alternative appropriate
engineering strategies. When joined with needed modernization
of old, decaying and out of date treatment plants, and
collection and distribution systems we will finally lay the
foundation that will forestall the need for even more costly
approaches and investments in the near future.
Clean Water Action and the Clean Water Network and the
Campaign for Safe and Affordable Drinking Water all stand
behind the proposal to set aside a full 10 percent of the Clean
Water SRF to allow for these approaches and hope that
subsequent versions of the S. 1961, or other bills, reflect
this cost-effective priority.
<bullet> While S. 1961 proposes a substantial increase for the
two water SRF accounts over the next 5 years, from $3 billion
to $7 billion per year, the assumption of the bill is that the
Federal role in funding water infrastructure ends after this
injection of cash takes place. Clean Water Action appreciates
the substantial increased authorizations proposed in S. 1961
but challenges this committee to set in place a permanent Clean
Water Trust Fund and ``polluter pays'' funding mechanisms that
will augment the funding burden which falls primarily on the
small consumer and taxpaying public.
<bullet> Clean Water Action seeks for Congress to inject more
accountability along with more dollars into the SRF programs.
Any reauthorization of the Clean Water and Safe Drinking Water
SRF's must incorporate mechanisms that ensure open information
and public involvement. Many communities don't know how to
access the SRF accounts; all too often it is the politically
connected that are able to take away the dollars not those with
the most pressing existing needs. Also, meaningful public
participation in the decisionmaking process about which
projects get funded is usually absent. S. 1961 makes a
rhetorical nod toward fixing this problem but does not back up
its rhetoric with meaning steps and measures that will turn
this problem around.
In addition environmentally sound principles for project
design and siting should be observed. In many cases State
NEPA--like procedures are not followed or do not include any
real review by the public. With little oversight by USEPA and
almost no public involvement in the intended use plans (IUPs)
there is very little indication whether or not Federal dollars
are supporting real public health, compliance or environmental
needs. Effective public participation is the best way to ensure
that environmental and fiscally sound choices are made.
Ensuring such participation is the best way for Congress to
protect and build support for its clean safe water investment.
<bullet> One concern that makes the call for increased water
infrastructure funding very urgent, and clearly marked as a
Federal matter, is the growing permanence of a two-tier water
infrastructure picture across the country. Both, big cities
that have lost much of their rate base while their
infrastructure, beyond its useful life, deteriorates, and small
systems that lack the necessary scale to spread out costs to
install or maintain new technologies, are threatened to be left
behind. Not only are millions of people's health on the line,
but the basic economy's of many cities and whole regions of the
country are put at risk.
Clean Water Action believes that it should be made mandatory
that priority be given to projects that help systems/
communities with the greatest need based on affordability
criteria. An example of this need can be seen in all the small
communities where millions of American's are currently drinking
water with significant amounts of arsenic. The conundrum is
clear, either we can help these communities with necessary
funding and technical innovation support or we can bury our
collective heads in the sand and just shift the standard until
we ensure that most communities are in compliance. And the fact
is that in Fallon, NV and in small communities like Fallon
across the country, no matter how un-health protective the
final arsenic standard is set, Fallon will still have to get
the arsenic out of its water. That is why Clean Water Action
supports efforts such as the Reid/Ensign Small Communities Safe
Drinking Water Infrastructure Funding Act, S. 503.
The intention of S. 1961 to help small communities, cities
with declining and impoverished rate bases, and needy
consumers, address affordability concerns is on the face of it
evident. Clean Water Action thinks that the committee must
revisit these provisions and consider a true grant program that
supplements (not replaces) the existing loan program. The
loans, which in fact act in part as grants, are a good base to
start from, but more direct help is needed. Additionally, Clean
Water Action wants clarification as to how the low-income
assistance program would work.
<bullet> While Clean Water Action supports additional funding
to address existing wastewater and drinking water needs we
oppose using scarce Federal dollars to subsidize drinking water
and waste water systems that support new sprawl development.
Core water infrastructure systems, most of which were built
using taxpayer funds, are now in need of rehabilitation,
replacement and repair. As we have said before, this is an
investment in the future worth making to ensure that our lakes
and streams are safe and support revitalization of our
waterfronts and to provide safe drinking water throughout
America. On the other hand funding should not be used to
subsidize new systems (unless it can be shown that the new
system would simply serve existing populations--new capacity
should not be subsidized).
S. 1961 misses an opportunity to make sure that State SRF
funds do not funnel scarce dollars to sprawl development. S.
1961 should clarify the ``reasonable growth'' loophole in the
Safe Drinking Water Act (SDWA). Under the Drinking Water State
Revolving Fund (DWSRF) it is left up to each State to determine
some standard for defining ``reasonable growth.'' An uneven and
all too flexible set of practices has sprung up among the
States in some cases allowing for major diversion of funds into
sparking sprawl development not for meeting existing
environmental and public health needs. On the clean water side
the problem is even more egregious. States with a much more
elastic definition of ``reasonable growth'' are rewarded by
EPA's drinking water needs survey which is the basis for
determining the allocation of the Federal drinking water
infrastructure dollars to the States. Thus States that
constrain the use of their dollars more narrowly to existing
needs instead of growth lose out when it comes time for
allocating the scarce DWSRF dollars.
Even though the States must develop a priority list for
doling out the Clean Water State Revolving Fund (CWSRF) dollars
based on a clear set of public health and environmental
criteria, the State has the right to ignore the priority list
rankings altogether and fund whatever project it wants. S. 1961
should fix this unfair, dangerous and unaccountable loophole.
This loophole, which is used heavily in some States, goes
beyond needed flexibility and potentially undermines the
integrity of the CWSRF.
<bullet> Clean Water Action is heartened by the restructuring
and consolidation language contained in S. 1961 and feel that
many drinking water problems of small systems could be solved
by the taking of such measures. More should be done to insure
that States are doing all they can to carry out such cost
effective steps.
Additionally, Clean Water Action believes that S. 1961 takes
a good stab at extending SDWA capacity development principles
over to the world of wastewater. However, S. 1961 does not do
enough to limit Federal investment to those facilities that
have the financial, technical and managerial capacity to ensure
compliance. Facilities which are in significant non-compliance,
should only be allowed funding to restructure or consolidate to
achieve compliance or where consolidation or restructuring is
impossible, if the facility has made a good faith effort to
comply and the facility is adhering to an enforceable
compliance schedule, and the funding is necessary to avoid
making water or sewer unaffordable to a significant portion of
the facility's retail customers.
3. CONCLUSION
Clean Water Action applauds the $35 billion 5-year authorization
proposed in S. 1961, the Water Investment Act of 2002. We also are
heartened by proposed increased authorizations in Senator Reid's
``Small Community Drinking Water Funding Act, S. 503; and, S. 252,
Senator Voinovich's bill. While there are many refinements and
improvements to S. 1961 that Clean Water Action would like to see it is
important that the final bill be both fair and clean.
Make the Bill Fair--Keep the Bill Clean
As S. 1961 moves forward from today, the key question for the
Congress is how do we act in a way that invokes, to the maximum extent
possible, water infrastructure equity, affordability, and
sustainability while meeting the triune goals of preserving the
environment, enhancing the public's health and helping to lay a new
foundation for broad economic prosperity. How Congress disposes of this
question is why Clean Water Action is at this table. We do not want
this process to devolve into narrow interests fighting over turf. We
are concerned about the possibility that this process might be used as
a way to revisit important but contentious Clean Water Act and Safe
Drinking Water Act reauthorization issues. Our approach, and we hope
your approach, is to stick narrowly to the issues before us--to define
what the needs are and to figure out how best we can collectively
structure a new water infrastructure funding paradigm which meets the
criteria and goals enumerated by Nancy Stoner of NRDC earlier. The
environmental and consumer movements are united in their demand that
any final water infrastructure legislation:
1. Substantially increases funding for State clean and safe
drinking water funding projects.
2. Provides significant incentives to States to direct more
Clean Water SRF funds to nonpoint pollution and non-structural
approaches, ensuring that (1) today's greatest source of water
pollution (nonpoint runoff) is addressed; and (2) that cost-
effective ``green infrastructure'' solutions are used to repair
and improve existing wastewater and drinking water systems.
3. Ensures that SRF funds are not used to subsidize new
sprawl development, but instead are used to repair and improve
existing wastewater and drinking water systems.
4. Funds SRF projects based on the States' priority system
ranking after meaningful public input, by closing the loophole
(in the Clean Water SRF) that allows States to fund projects
not on their own priority list. Also, tighten-up and make
consistent the ``reasonable growth'' loophole in the Drinking
Water SRF.
5. Removes incentives for noncompliance with the Clean Water
Act, to ensure that CWSRF funding is only going to utilities
that are making efforts to come into compliance with the law.
As the committee considers the myriad of policy options and funding
levels, know that the American public is fully behind your effort to
address this pressing problem. Clean Water Action is heartened by the
introduction of the Water Investment Act of 2002, and other serious
efforts introduced by Senators Reid and Voinovich. The emergence of the
Senate's bills and the hearings today and this Thursday are most
encouraging. Let's keep the bipartisan and interest group comity and
pursue water infrastructure solutions that lay the foundation for clean
and safe water for the next century to come. On the other hand, failure
to move a clean and fair funding bill will be a sure sign of Congress
having failed the clean and safe water test. The time to act is now.
Thank you for the opportunity to comment. I would be happy to
entertain any question or concern.
__________
Statement of Bill Kukurin, Kukurin Contracting, Inc. of Export, PA
Good morning, Mr. Chairman and distinguished members of the
committee. My name is Bill Kukurin and I am president of Kukurin
Contracting, Inc. located in Export, PA. On behalf of Associated
Builders and Contractors (ABC), I would like to thank Chairman
Jeffords, Ranking Member Smith and the members of the Senate Committee
on Public Works for providing me with this opportunity to discuss the
Water Investment Act of 2002 and the important role it could play in
improving our nation's water quality and infrastructure. I will be
summarizing my comments, but I would request that my full statement be
submitted for the official record.
For nearly 30 years, Kukurin Contracting, Inc. has been operating
in Western Pennsylvania as a family owned and operated business.
Kukurin Contracting, Inc. has 125 employees and focuses primarily on
municipal work, specifically the construction and maintenance of water
and sewer lines, pumping stations, water tanks, reservoirs and sewage
treatment facilities. We have built our reputation through providing
quality workmanship for our clients and safe, healthy worksites for our
employees. In 1997 and 1999, Kukurin Contracting, Inc., was recognized
by ABC National as one of the leaders in the construction industry and
presented the annual Excellence in Construction Award for our work on
the Long Run Sewage Retention Facility and the Plum Creek Sewage
Retention Facility, respectively.
Kukurin Contracting, Inc. has been a member of the Western
Pennsylvania Chapter of ABC for 20 years. ABC is a national trade
association representing more than 23,000 merit shop contractors,
subcontractors, materials suppliers and construction-related firms
within a network of 82 chapters throughout the United States and Guam.
Our diverse membership is bound by a shared commitment to the merit
shop philosophy within the construction industry. This philosophy is
based on the principles of full and open competition unfettered by the
government, and nondiscrimination based on labor affiliation and the
awarding of construction contracts to the lowest responsible bidder,
through open and competitive bidding. This process assures that
taxpayers and consumers will receive the most for their construction
dollar. With 80 percent of the nation's construction workers choosing
not to be represented by a union, ABC is proud to be their voice.
I would like to commend Chairman Jeffords and Senators Smith,
Graham and Crapo for introducing S. 1961, the Water Investment Act of
2002. I also commend this committee for undertaking a comprehensive
look at our nation's water infrastructure needs. The costs of
insufficient attention to clean water issues are indisputable. Non-
point source pollution, leaking toxics, stormwater run-off and coastal
pollution pose grave risks to water quality. Our nation's water quality
and ``environmental'' infrastructure could not be more vital to our
health, safety and overall quality of life.
The Water Investment Act of 2002 would serve to ensure the
environmental and financial sustainability of our nation's water
programs. The measure would authorize the Clean Water and Safe Drinking
Water State Revolving Loan Fund (SRF) Program at $35 billion over 5
years. The SRF program allows States to provide low-cost financing to
communities for the construction, repair and rehabilitation of
wastewater collection and treatment facilities. While this legislation
seeks to provide additional resources to States and localities to aid
them in meeting water infrastructure needs and increased State
flexibility to States in administering their water programs, the
imposition of the Davis-Bacon Act to this vital program would negate
many of these efforts.
While ABC members have concerns regarding a number of wastewater
needs, I will focus my comments today on funding for construction of
wastewater treatment facilities and on the detrimental impact that the
discriminatory and antiquated Davis-Bacon Act would have, if included
in the legislation, on these vital projects.
BACKGROUND
Congress passed the first Federal Water Pollution Control Act, the
Clean Water Act (CWA), in 1972, which linked the Federal Government
with States and cities to clean up the country's waters by funding
projects for water supply and wastewater treatment. The Clean Water Act
of 1987 phased-out the law's construction grant program by the close of
fiscal year 1990. It was replaced by a State Revolving-Loan Fund (SRF)
to help finance clean water infrastructure projects. The SRF is a low-
interest program by which States fund local wastewater treatment
facilities and similar infrastructure. From fiscal year 1990 through
fiscal year 2001, the EPA made available over $20 billion in grants to
States. While this program has seen significant success, it is clear
that to accommodate the nation's growing population, meet new water
quality standards and repair and upgrade aging facilities, much greater
investments must be made. Estimates for future needs for clean water
infrastructure are staggering-anywhere from $300 billion to $1 trillion
over the next 20 years.
The commitment Congress made with the States beginning in 1972 to
clean up the country's waters by funding projects relating to water
supply and wastewater treatment is responsible for the significant
progress made in restoring the quality of our nation's waters. When
Congress decided to turn the program over to the States in the Water
Quality Act of 1987, a schedule was set to phaseout direct grants for
construction and provide seed money to the States to establish
revolving loan funds. These funds would eventually become self-
sustaining and fund the States' wastewater treatment construction
needs.
All States have established the legal and procedural mechanisms to
administer the new loan programs and are now eligible to receive State
Revolving Fund (SRF) capitalization funds under title VI.
Some with prior experience using similar financing programs moved
quickly, while others had difficulty in making a transition from the
previous grants program to the one that requires greater financial
management expertise for all concerned. Moreover, many States have
complained that the SRF program is unduly complicated by Federal
Rules--some contained in the statute, others in EPA guidance-even
though the States were intended to have greater flexibility.
Small communities and States with large rural populations are
having the largest share of problems with the SRF program. Many small
towns did not participate in the previous grants program and
consequently are likely to require major projects to achieve compliance
with the law. Yet these communities often lack an industrial tax base
and thus face the prospect of very high per capita user fees if their
citizens are required to repay the full capital cost of sewage
treatment projects. According to testimony from the General Accounting
Office, SRFs will only meet about one-third of the States' funding
needs and will generally be unable to meet the needs of disadvantaged
communities. States simply have not been provided enough time or seed
money to sufficiently capitalize their revolving funds. There are many
small communities that do not have the capital base necessary to
support a State revolving loan fund.
ABC believes inadequate and insufficient wastewater facilities
represent a large segment of clean water problems facing our nation
today. It is imperative that the Federal Government immediately address
our country's need for clean water infrastructure investment. ABC is
encouraged by the efforts being made by the Senate Environment and
Public Works Committee and the House Transportation and Infrastructure
Committee and supports the arrangements being made for small
communities, such as modifying the procedural or repayment requirements
of the SRF loan program.
Combined sewer overflows (CSO) are an example of a significant
problem in over a thousand cities nationwide. Billions of dollars are
needed to clean up previously overlooked and outdated systems. Nearly
1,200 municipalities have combined sewers where domestic sanitary
sewage, industrial wastes, infiltration from groundwater and stormwater
runoff are collected and treated together. These systems serve
approximately 40 million persons, mainly in older urban and coastal
cities.
Combined sewers are categorized as point sources under the Clean
Water Act, yet they have not been considered a high regulatory or
permitting priority for EPA or States. There are no express provisions
in the Clean Water Act dealing with CSOs, except to the extent that
they are subject to permit requirements and deadlines as are other
point sources. The cost of controlling CSOs is potentially very high
and local governments say that resources are not available for a
program of that size. Conceivably, an extended program can also address
improved drinking water filtration or solid waste disposal facilities.
ABC supports the idea of allowing localities greater flexibility to
consider costs and site-specific factors when designing various
wastewater-treatment facilitates.
ABC also supports continued Federal funding to further capitalize
State revolving funds for the construction of wastewater treatment
facilities or environmental infrastructure projects. Clearly, our clean
water needs are vast and the Federal Government must maintain a certain
level of participation. Shifting resources to State revolving funds to
provide a self-sufficient program and stable revenue source is a
productive use of Federal funds. Requirements for State revolving funds
should be as uncomplicated as possible to facilitate an accessible and
efficient program.
Other forms of innovative financing and cooperative efforts will
expand the power of Federal resources and should be encouraged.
Privatization and public-private partnerships for example, are being
used more frequently to augment Federal, State and local activities--
and they work. These efforts bring experience, business savvy and
financial strength of the private sector to government entities for the
benefit of all. ABC supports the provision in S. 1971 that would allow
private utilities to access Clean Water and Drinking Water SRFs.
ABC urges Congress to rely on market incentives rather than
pursuing taxes to induce environmental conformance. To that end, ABC
commends the sponsors of the legislation for including a provision that
encourages competitive bidding of all projects to help reduce overall
project costs. In addition, any funding plan should consider that
States would have to impose user fees to meet their share requirements.
Continued Federal funding is not a panacea. A long-term integrated
plan that takes into account new environmental problems and establishes
realistic and achievable clean water goals should be adopted. We also
believe every State must develop an environmental needs inventory and
strategy for the future to ensure efficient management of resources.
DAVIS-BACON ACT
ABC commends the sponsors of this vital legislation for not
expanding burdensome Davis-Bacon Act requirements to the Clean Water
and Safe Drinking Water State Revolving Funds. The SRF program has
operated efficiently without Davis-Bacon since 1995, and ABC encourages
the committee to continue to allow States and municipalities the
flexibility to operate the SRFs without this expensive and
discriminatory requirement.
During this time of economic recession, while fighting a costly war
on terrorism and facing a Federal budget deficit, any expansion of the
Davis-Bacon Act would be fiscally irresponsible and unjustified. In an
era of constrained resources, the promotion of higher Federal
construction costs to the benefit of a few and to the detriment of the
American taxpayer can no longer be accepted. The Davis-Bacon Act
unnecessarily raises the cost of Federal construction by an average of
5-15 percent and an enormous 25-38 percent in rural areas--where clean
water infrastructure improvements are most desperately needed. This is
a needless waste of taxpayer dollars and thwarts the progress of
additional projects that could be built.
Davis-Bacon is a relic of the infamous Jim Crow era. The law,
enacted in 1931, was intended to prevent minority workers, mostly from
the South, from competing with northern, mostly union construction
firms for Federal contracts in the North. Conceived during a time of
discrimination, the Act still has much the same effect today. Davis-
Bacon disadvantages small, emerging and minority businesses. Davis-
Bacon discourages many qualified small and minority-owned contractors
from bidding on public projects, because the complex and inefficient
wage and work restrictions make it nearly impossible for small
businesses to compete with well-capitalized corporations. To seek
Davis-Bacon contracts, small and minority owned firms must not only pay
the ``prevailing wages'' and adopt inefficient work practices and rigid
union-based job classifications, but also must expose themselves to
huge compliance costs and burdensome paperwork regulations. As a
result, few small and minority firms win Davis-Bacon contracts, and
many others give up trying.
According to the Congressional Budget Office, repealing the Act
would save taxpayers $10.5 billion over 10 years. Eliminating Davis-
Bacon requirements would reduce unnecessary Federal spending and
guarantee more construction for the dollar for important public
projects such as water infrastructure needs, schools, roads, bridges,
low-income housing, hospitals and prisons. It would also remove
barriers that preclude emerging businesses and entry-level workers
(helpers) from working on public projects paid for with their own tax
dollars. If funds wasted on Davis-Bacon wage rates were utilized in a
more efficient manner, they could be put toward meeting our
overwhelming national demand for environmental and infrastructure
improvements.
The Federal Davis-Bacon law hurts States and localities because its
requirements are imposed even if the Federal Government contributes a
minimal amount of funds. For example, the Federal Government could
offer a small amount of money for a primary State, local or privately
funded project, and the artificially inflated Davis-Bacon wage rate
would have to be paid to all workers on that job. Often times these
increased costs nullify the Federal contribution and States are better
off not accepting Federal help. The Federal Government should not
impose costly Davis-Bacon requirements on financially strapped State
and local governments.
Especially in the case of State revolving funds, where the Federal
Government does not directly appropriate money for projects, Davis-
Bacon requirements are not applicable. In the Clean Water Act of 1987,
Davis-Bacon requirements sunset on all SRF assistance in fiscal year
1995, and has not applied to such funds since. This loan program,
whereby the funds are repaid and then revolved, is no place for
federally mandated Davis-Bacon.
Davis-Bacon violates States' rights for those 20 States that have
chosen not to have a State prevailing wage law because the wage
mandates inflate construction costs. These States should not be saddled
with the outdated Federal law, which serves as an expensive and
burdensome ``unfunded mandate'' imposed on State and local governments.
In fact, even States that have ``little Davis-Bacon'' laws have voiced
their opposition to federally mandated Davis-Bacon on Clean Water Act
SRF projects. When the building trades sued to re-impose Davis-Bacon on
CWSRFs, 13 States, 6 of which have their own State prevailing wage
laws, formally wrote the EPA in opposition to the re-application of
Federal Davis-Bacon requirements.
CONCLUSION
In conclusion, Mr. Chairman, ABC strongly supports the efforts
being made by the Environment and Public Works Committee to ensure that
our nation's water quality is improved. ABC supports the Water
Infrastructure Act of 2002 as currently written. We believe that with
full funding and without any expansion of the Davis-Bacon Act our water
infrastructure needs will begin to diminish and our nation's water
quality will dramatically improve. It is imperative to improve the
efficiency of the State Revolving Loan Fund program by not imposing
outdated and unnecessary prescriptive administrative requirements the
Federal Government places on municipalities, namely the Davis-Bacon
Act.
On behalf of Associated Builders and Contractors, I again want to
thank you and the members of the committee for the opportunity to
testify here today, and I will be happy to answer any questions you may
have.
______
Responses of Bill Kukurin to Additional Questions from Senator Smith
Question 1. How does Pennsylvania's Prevailing Wage Law restrict
your business' use of semi-skilled laborers or other trainees?
Response. The Pennsylvania Prevailing Wage Law restricts a
contractor's use of semi-skilled laborers or other trainees in the
following ways:
1. Any contractor without union affiliation (which is more than 80
percent of the construction industry today) must develop and implement
a complex and expensive State approved apprentice training program in
order to hire individuals as semi-skilled workers or trainees and pay
them the reduced rate. The labor unions have historically had strong
apprenticeship programs but cannot train enough workers to support the
entire construction industry. Most contractors do not have a State
approved training program in place due to a variety of reasons. For
example, State approved apprenticeship programs do not allow for task
based training, which is more often found in open shop contracting
training. Moreover, State approved programs do not recognize
``helpers''. As a result, the construction industry is losing youth to
other technical trades.
2. Separate apprentice programs must be in place for each trade on
any given project (i.e. operating engineer, carpenter, skilled
laborer). A trainee is not permitted to work on multiple trades at a
trainee rate. Many of our skilled employees are multiple trade workers.
These skilled workers could mentor a trainee, teaching several trades,
if given the flexibility of working in any trade as a trainee. The
State approved apprenticeship program does not allow this flexibility.
Question 2. Can you also speak of some of the ways in which Davis
Bacon interferes with your company's efficiency and production?
Response. Davis Bacon requires that a new hire learning a trade be
paid the same rate as a skilled worker, but the contractor does not get
the same labor production from a trainee. Without ``helper'' or
``trainee'' rates, it is not cost effective to hire a trainee. Most
construction companies can only compete and remain productive by
employing the highest skilled individuals. Skilled workers are very
difficult to find and trainees are not as efficient and productive. The
construction industry needs to continuously train new workers to be
skilled workers and encourage more individuals to seek a career in
construction.
Davis Bacon does not allow a contractor to hire an unskilled worker
at a lower rate and mentor and train that individual to become a
skilled worker. Some say that contractors are looking for cheap labor.
Contractors need the opportunity to pay an individual (in training) a
lower rate while they receive on-the-job training to become a future
journeyman.
Under Davis Bacon, the both the contracting firm and the
construction worker looking to gain invaluable experience, lose. In the
private sector, helpers work under direct supervision of higher
skilled, journey--level workers. They gain valuable entrance into the
industry, a well paying job and on-the-job training. Despite the fact
that helpers is not considered a ``prevailing'' practice, I can tell
you that it is and it would be if not for Davis Bacon. A ``helpers''
classification would help create lifelong learning opportunities in
local communities. Helpers could help address the shortage of skilled
workers, provide new jobs and cut government waste.
Moreover, Davis Bacon is extremely rigid and ignores modern
construction management and classifies workers on an inflexible basis.
These rigid job classifications hinders productivity by not allowing
competent craftsmen to work across craft lines.
__________
Statement of Jim Barron, Ronkin Construction, National Utility
Contractors Association
INTRODUCTION
The National Utility Contractors Association (NUCA) is a family of
more than 2,000 companies from across the nation that build, repair,
and maintain water, wastewater, gas, electric, and telecommunications
systems, and manufacture and supply necessary materials and services.
Every day utility contractors witness the atrocious conditions of
America's failing wastewater infrastructure facilities that threaten
our public health and the environment. These conditions grow worse as
Federal funding for clean water projects continues to be woefully
inadequate. On the job, utility contractors see firsthand the benefits
of the Federal water programs like the Clean Water State Revolving Fund
(SRF), an extremely effective financing program that provides the
capital resources to build and rehabilitate this infrastructure.
NUCA supports the Water Investment Act of 2002 (S 1961), which
would increase resources provided to the Clean Water SRF and Drinking
Water SRF programs that would boost State's efforts to address the
looming crisis facing America's water and wastewater infrastructure. We
applaud the Senate Environment and Public Works Committee for holding
today's hearing, and we hope to see quick action on this important
legislation.
A VIEW FROM THE TRENCHES
Last year, the American Society of Civil Engineers awarded the
nation's wastewater and drinking water categories ``D'' grades in their
annual Report Card on America's Infrastructure. Aging wastewater
systems are failing in every State. Each year, 400,000 homeowners find
sewage backing up in their basements. Another 40,000 municipal sanitary
sewers overflow into the nation's streets, waterways, and beaches,
dumping potentially deadly pathogens.
It is difficult to describe the appalling State of clean water
infrastructure as utility contractors see it in the trenches, building
and repairing America's unglamorous but vital water infrastructure
system. What is out of sight and out of mind to most people is clearly
visible to utility contractors on a daily basis. In our work, it is not
uncommon to find dilapidated pipes with gaping holes spilling raw
sewage into the surrounding ground in residential neighborhoods. This
leakage can go undetected for months, even years in some cases. To make
matters worse, these conditions are often within yards of waterways
where we fish, beaches where we swim, and playgrounds where our
children play.
The U.S. Environmental Protection Agency's 1996 Clean Water Needs
Survey Report to Congress placed a $139.5 billion price tag for 20-year
capital investment needs for publicly owned wastewater treatment
facilities. By March 1999, an EPA Needs Gap Study found that sanitary
sewer overflow needs in the 1996 study were grossly underestimated.
Originally estimated at a total $10.3 billion, sanitary sewer overflow
needs are today estimated at $81.9 billion, bringing the total national
wastewater infrastructure needs to more than $200 billion. Neither the
$139.5 billion nor the $200 billion EPA estimate reflects replacement
costs. EPA now indicates that the current needs for water and
wastewater infrastructure could exceed $500 billion.
Independent studies report a $23 billion gap in Federal investment,
and there are groups that claim that the current water and wastewater
needs are approaching $1 trillion over the next 20 years. However, NUCA
believes that whether the needs are $200 billion or $1 trillion is not
the key issue when recognizing the current Federal contribution to
remedy this situation is continually less than 1 percent of the lowest
needs estimate. The priority should be to provide increased resources
immediately to begin closing this spending gap.
CLEAN WATER STATE REVOLVING FUND
The Clean Water State Revolving Fund (SRF) program is a pragmatic
and cost-effective program that provides States with vital financial
resources to address their wastewater infrastructure needs. It has been
hailed as the most successful federally sponsored infrastructure-
financing program in history. The SRF program plays a key role in
enhancing public health and safety, protecting the environment, and
maintaining a strong economic base. It increases labor productivity,
creates jobs, rehabilitates old neighborhoods, restores brownfields
properties, and ensures the availability of recreational use of our
waterways and shorelines.
Congress annually capitalizes each State's revolving fund programs,
and loans are made to local communities to be paid back over time, at a
low interest rate. The money paid back to the fund ``revolves,'' and is
available to loan out to other communities, thus sustaining the money
for future projects.
Besides serving as the key mechanism to finance water
infrastructure installation and rehabilitation projects, the SRF
creates scores of jobs for American workers. Up to 55,000 jobs are
created with every $1 billion of Federal capitalization in the Clean
Water SRF program. Recent research conducted by the Association of
State and Interstate Water Pollution Control Administrators suggests
that several billion dollars of Federal resources for Clean Water
projects could put hundreds of thousands of Americans to work in the
near future. This work will have a ripple effect, multiplying project
funding through the economy. Rehabilitation of key infrastructure
brings revitalized communities and opportunities for future business
and investment. Thus, increasing SRF funding will provide economic
stimulus in the short term as well as the long term at a time when
America needs all the jobs it can get.
Authorization for the Clean Water SRF lapsed in 1994, but because
of its effectiveness, Congress has continued to fund the program every
year through the annual appropriations process. The 15-year performance
record of the SRF has been spectacular. Federal capitalization grants
totaling approximately $18 billion have leveraged capital to more than
$34 billion in perpetuity loans that are continually redistributed.
When authorization expired, appropriations were just over the $2-
billion mark. However, that level has dropped to $1.35 billion, which
has been the amount provided in the last few years.
EVOLVING LEGISLATION
For the past several years, NUCA has worked with Senator George
Voinovich (R-Ohio) to gain support for the Clean Water Infrastructure
Financing Act (S 252), which would reauthorize the Clean Water SRF at
$3 billion per year for 5 years. Similar legislation in the House (HR
668) gained the bipartisan support of more than 100 cosponsors from
over 30 States. NUCA is very pleased that the EPW Committee has
incorporated all key components of the Voinovich bill into S. 1961,
which will authorize $20 billion to the Clean Water SRF program over 5
years and $15 billion to the Drinking Water SRF program over the same
period for a total of $35 billion toward refurbishing our water and
wastewater infrastructure. NUCA applauds the Senate EPW Committee for
incorporating the fundamental elements of S. 252 into the Water
Investment Act of 2002.
In addition to the substantial funding increases authorized for
water and wastewater infrastructure projects, S. 1961 would modernize
the Clean Water SRF to ensure that funds better address State needs,
expand the eligibility for SRF projects, streamline State programs to
maximize use of Federal funds, and provide for additional assistance to
disadvantaged communities.
The committee's comprehensive legislation would increase the SRFs'
operational effectiveness by allowing States to operate their Drinking
Water and Clean Water SRF programs in a more similar fashion. Water and
wastewater infrastructure management is, and should continue to be, a
State function. Federal resources should be allocated to assist the
States without getting in the way of SRF program managers who know the
best ways to operate their unique systems.
CONCERNS
While NUCA fully supports the intent of this legislation, NUCA is
concerned with certain parts of the ``community development'' provision
in Sec. 103 of Title I. While coordination and consultation with land
use officials is appropriate, we are concerned that requiring
substantial coordination may obstruct and delay the progress of many
necessary water and wastewater installation and rehabilitation
projects.
NUCA is in full support of the concept of quality growth. NUCA is a
member of the Quality Growth Coalition, and participated in the
development of ``Building Better Communities: Quality Growth Toolkit,''
a document designed to help citizens, civic leaders, and elected
officials identify effective, common-sense solutions to traffic
congestion, overcrowding in schools, and management issues regarding
future development. NUCA believes that maintaining communications with
State and local land use officials is beneficial in any infrastructure
rehabilitation program to ensure consideration of the concerns and
perspectives of local communities. However, contrary to the opinions of
certain environmental organizations, water and wastewater treatment
work is not a catalyst for what is known as ``sprawl.'' These projects
are fundamental to ensure the safety and viability of these
communities. NUCA suggests the committee clarify the ``community
development'' provision in Sec. 103 to require ``coordination and
consultation'' and not approval of water projects by land use
officials.
Another concern NUCA has pertains to the assumption that only five
more years of Federal investment will eliminate the need for future
funding. The SRF originated as a way of moving away from costly and
politicized construction grants. The objective was to build the SRF
over time until it reached self-sustainability. The plan for this
investment was to help service providers to gain solid financial
footing, after which fees would be sufficient to cover costs. However,
this has not come to pass, and current conditions indicate that the
objective of financial self-sufficiency is far from a reality. This is
especially true when recognizing that needs estimates nationwide are
skyrocketing. NUCA commends the EPW Committee for it's commitment to
increasing funding to address this environmental problem, but we
believe some form of Federal financial support will be essential in the
future to ensure the availability of safe and clean water.
THE DAVIS-BACON ISSUE
For the past several years, the main issue that has prevented some
Members of Congress from co-sponsoring SRF reauthorization legislation
was the application of prevailing wage requirements under the Davis-
Bacon Act, which requires that local prevailing wages be paid on all
Federal construction projects valued over $2,000. While collective
bargaining and wage determination are important aspects of the
construction bidding process, the issue of Davis-Bacon coverage should
not delay or block legislation that will increase the resources that
fund clean water projects.
NUCA supported the Voinovich legislation (S. 252), which would have
restored Davis-Bacon coverage for the first round of Clean Water SRF
funding, leaving coverage of subsequent rounds to the discretion of the
States. This was the way Davis-Bacon applied to the SRF before
authorization expired in 1994. S. 252 would have restored Davis-Bacon
provisions, but would have limited them to the first round of funding.
NUCA believes that this was a middle of the road solution that many
members on both sides could agree on, and it seemed like the only
compromise that could move the bill forward.
Opponents of the Davis-Bacon Act argue that the Depression-era law
is no longer relevant in today's construction market. They say Davis-
Bacon requirements force employers to pay higher wages for specific
crafts, regardless of the workers' skill level in that craft, which can
lead to reductions in productivity and inflated costs. Some say the
requirements can also hurt small businesses that can't keep up with the
complex work rules on Federal projects. Opponents generally believe the
free market and competition should determine wages, not the Federal
Government.
Advocates of Davis-Bacon believe the requirements provide a level
playing field, and ensures fairness to workers on Federal construction
projects. They maintain that Davis-Bacon requirements provide for
community standards for workers, and avoid pay discrimination based on
religion, sex, race, etc.
Since Clean Water SRF authorization lapsed in 1994, Federal Davis-
Bacon requirements have not accompanied appropriations to the SRF
program. In June of 2000, EPA issued a settlement agreement with the
AFL-CIO's Building and Construction Trades Division (Building Trades),
agreeing to restore Davis-Bacon requirements in the same manner as they
were applied to SRF projects before the program's authorization expired
in 1994. This would apply Davis-Bacon to the first round of Federal
funding, leaving subsequent rounds to States' discretion. The Building
Trades argued that Davis-Bacon requirements should have applied to SRF
projects as Federal money was appropriated to the SRF program. Although
EPA previously ruled that Davis-Bacon requirements did not apply to SRF
projects after reauthorization expired, EPA later announced that
prevailing wage rate requirements should continue to apply regardless
of reauthorization. The agreement was to begin in January 2001, but the
Bush Administration has suspended the implementation of the
settlement's provisions, which have been under review ever since.
Thirty-one States have Davis-Bacon coverage at the State level. It
seems to us that Federal Davis-Bacon coverage should only be an issue
for the 19 ``right-to-work'' States that do not cover Davis-Bacon at
the State level. Many of NUCA's construction company members, union and
open shop, will tell you that the current construction industry labor
shortage, across-the-board drug testing, and technical know-how warrant
employers to pay higher wages regardless of Davis-Bacon requirements.
If construction companies want the workers, they must pay prevailing
wages, or more in some cases. This is dictated by the free-market, not
by Federal or State requirements. Others will tell you that Davis-Bacon
stabilizes the construction market by making wage determination easier
during the bidding process. Rather than haggle over wage rates for
different job functions, employers simply pay the prevailing wage.
The bottom line is that only time and extensive debate will resolve
the Davis-Bacon issue, and time is something that we cannot afford when
it comes to the problem with our wastewater and drinking water
infrastructure. While our nation's elected officials argue about wage
determination, our nations infrastructure deteriorates and the
infrastructure crisis continues to grow.
CONCLUSION
Over the years, the annual Federal investment in the Clean Water
SRF Program has been cut in half, yet there remain thousands of miles
of barely functioning sewer pipelines that are leaking raw sewage into
underground aquifers daily.
A few years ago, Congress passed the Transportation Equity Act for
the 21st Century, or TEA-21. The legislation provided a blueprint for
development and maintenance of America's highways and roads. TEA-21 has
paid off, and Congress is to be commended for its investment in the
nation's roadways. Now it's time to focus on what is underneath the
roads. The underground water infrastructure is literally falling apart
as we speak.
The math is simple. The past several years have shown a decline in
Federal investment in ensuring the resources to maintain our wastewater
and drinking water infrastructure. At the same time, while the existing
infrastructure continues to age, failure rates continue to grow, as the
declining investment is not able to keep up with the aging pipes. This
has created a major financial gap that will only get worse if a firm
commitment is not made and continual Federal resources are not provided
to needy communities.
People understand that their quality of life is linked to water
quality and the collection and treatment of wastewater. The SRFs have
become increasingly efficient and effective, but need more resources.
Sufficient Federal seed money must be invested to ensure that human and
environmental costs of the multi-billion dollar funding gap are
prevented. The provisions in S. 1961 would be a huge step in that
direction.
__________
Statement of Terry R. Yellig on Behalf of the Building and Construction
Trades Department, AFL-CIO
My name is Terry R. Yellig, and I am testifying on behalf of the 14
affiliated unions that comprise the Building & Construction Trades
Department of the AFL-CIO and the millions of skilled construction
workers who they represent. We commend Chairmen Graham and Jeffords, as
well as Senators Crapo and Smith, for introducing S. 1961, the Water
Investment Act of 2002, which would authorize $36 billion over five (5)
years for investment in America's clean water and safe drinking water
infrastructure.
Authorization of funds of this magnitude is a critically important
first-step in meeting the well-documented water infrastructure needs
throughout this country. Various governmental entities, as well as
private groups, have documented the hundreds of billions of dollars of
water infrastructure needs facing our nation. EPA Administrator
Christine Todd Whitman testified before this committee that estimated
water infrastructure needs could total as much as a ``trillion
dollars.'' As we all know, recent appropriations have only provided
approximately $2 billion per year worth of the nation's clean water and
safe drinking water infrastructure needs. These are woefully inadequate
amounts given the acknowledged needs assessments. That is why we are
encouraged by the introduction of S. 1961, the Water Investment Act,
and view it as an important congressional statement that begins
seriously to address the water needs of America.
Notwithstanding, the building and construction trade unions
strongly feel that more should be done at the Federal level to address
our massive water infrastructure needs. We recognize the constraints
that looming Federal budget deficits impose on Federal infrastructure
programs, especially on those without dedicated revenue streams such as
those that fund the Highway and Aviation Trust Funds. Nevertheless, our
nation's water needs demand a broader based Federal commitment.
Investment in critical water infrastructure by the Federal
Government is as important to our country's economic well being as
investment in our highways, transit systems and airports. From our
perspective, significant Federal infrastructure investment is the
predicate to, and the catalyst for, long-term economic growth and
vitality. Robust economic growth will be stymied without sufficient
investment in new and improved wastewater treatment facilities, as well
as an abundant supply of safe drinking water and the systems to deliver
it.
Given enactment in recent years of legislation addressing
significant surface transportation and aviation infrastructure issues
facing this country, we strongly urge the committee to take a long hard
look at authorizing even higher levels of spending in S. 1961 in order
to bring investment levels up to the $50 billion to $60 billion level
over the next 5-year authorization period.
Clearly the needs are there. We call to the committee's attention
the persuasive needs assessment report, ``Water Infrastructure Now,''
prepared by the Water Infrastructure Network (``WIN''), a broad-based
coalition of locally elected officials, drinking water and waste water
service providers, contractors and engineers, environmentalists and key
building trade unions. This report makes a compelling case for a $57
billion investment program over a typical 5-year authorization cycle.
Many of the witnesses at this and other hearings this committee has
scheduled will discuss a variety of discreet policy issues pertaining
to various aspects of S. 1961, and other important pieces of water
legislation such as Senator Voinovich's bill to reauthorize the Clean
Water Act State revolving loan fund program, S. 252. As building and
construction trades unions, we pledge our support to moving water
infrastructure legislation through Congress that authorizes as much
funding for clean water and safe drinking water as possible.
One of our primary responsibilities as building and construction
trades unions is to provide the skilled manpower necessary to address
this country's water infrastructure needs under whichever legislative
framework Congress enacts into law.
From heavy equipment operators to laborers, from ironworkers to
carpenters, bricklayers and cement masons, we are prepared to provide
the skilled craft workers who will build the water infrastructure
projects authorized by S. 1961 in a timely, efficient and safe manner.
As we stated earlier, the magnitude of this country's water
infrastructure needs is such that Congress needs to authorize higher
funding levels that will enable State and local water authorities
seriously to begin addressing this problem within a reasonable
timeframe. In addition to the various other policy considerations in
this legislation, it obviously would create tens of thousands of jobs
and provide real economic stimulus to this country's economy. In our
judgment, there is no better economic stimulus than to put paychecks
into the hands of the American workers, contractors and suppliers who
will build this country's water infrastructure.
We are also concerned about the labor standards that will be
applicable to construction workers employed on federally assisted water
infrastructure projects. Specifically, we respectfully urge this
committee to take steps necessary to insure that Davis-Bacon prevailing
wages are paid on all such projects assisted under the Clean Water and
Safe Drinking Water Acts.
As many members of this committee are well aware, for 71 years
Congress has consistently applied the Davis-Bacon prevailing wage
requirements to Federal infrastructure programs regardless of whether
it was under Democratic or Republican control, or whether there was a
Democratic or Republican Administration in the White House.
The original policy of the Davis-Bacon Act was to acknowledge the
potentially disruptive impact of Federal construction programs on local
construction markets. Accordingly, the public policy interest set forth
repeatedly by Congress in more than 60 Federal statutes over the past
71 years has been to require contractors working on federally assisted
construction programs to pay locally prevailing wages as determined by
the U.S. Department of labor.
In recent years, as Congress has considered using a variety of so-
called innovative financing mechanisms such as revolving loan fund
programs, credit enhancement programs, and loan guarantee programs, all
of which are intended to leverage limited Federal capital for maximum
public benefit, as well as more traditional Federal grant programs, it
has steadfastly continued to apply complete and comprehensive Davis-
Bacon prevailing wage coverage to these programs.
In fact, Congress included comprehensive Davis-Bacon prevailing
wage requirements in the Clean Water Act in 1972 and in the original
Safe Drinking Water Act in 1974. However, the 1987 Water Quality Act
shifted Federal support for water treatment projects under the Clean
Water Act from a program of direct Federal grants to a program of
Federal capitalization grants to support State Revolving Loan Funds
(``SRF'') with the intention of phasing out the Federal capitalization
grant program by the end of fiscal year 1994.
Notwithstanding Congress' expectation that State Revolving Funds
would become completely self sufficient by fiscal year 1995, they were
not. On the contrary, Congress has continued to appropriate funds for
new Federal capitalization grants to the States every year since fiscal
year 1995. Moreover, after enactment of the 1987 Water Quality Act, the
Administrator of the Department of Labor's Wage and Hour Division
concluded that, under newly enacted Sec. 602(b)(6) of the Clean Water
Act, the Davis-Bacon prevailing wage requirement did not apply to
``state matching funds required to be contributed into the SRF, moneys
repaid to the SRF, or other moneys.''
Under this interpretation, the first time State Revolving Funds
provided assistance that is supported by Federal capitalization grant
funds to help finance construction of a water treatment project, the
Davis-Bacon requirement was applied; however, when the assistance was
repaid to the State Revolving Fund and then ``recycled'' to assist
construction of another water treatment project, according to DOL and
EPA, Davis-Bacon prevailing wage requirements would not apply.
This interpretation would, in the long-term, undermine the
longstanding policy of assuring that all workers on projects supported
by Clean Water Act grants are paid not less than the prevailing wage.
This committee attempted to set EPA and DOL straight on this issue in
1994 when it reported S. 2093, the Water Pollution Prevention and
Control Act, which stated, among other things, that the Davis-Bacon
prevailing wage requirement in the Clean Water Act applies to any
project assisted by a loan or other type of assistance given by a State
Revolving Fund, including projects assisted by recycled funds.
Unfortunately, the full Senate failed to take action on S. 2093.
In addition, Sec. 602(b)(6) of the CWA currently provides that the
Davis-Bacon prevailing wage requirement only applies to construction of
water treatment works projects financed by Federal funds made directly
available to State Revolving Funds that began before the end of fiscal
year 1994. Notwithstanding continuation of Federal financial assistance
to the State Revolving Funds, EPA says that the Davis-Bacon prevailing
wage requirement no longer applies even to construction of water
treatment projects financed in whole or in part with funds directly
made available through Federal capitalization grants, because of the
language in Sec. 602(b)(6) of the Clean Water Act.
Accordingly, it is necessary to amend Sec. 602(b)(6) of the CWA so
that the Davis-Bacon prevailing wage requirement applies to
construction of all water treatment projects assisted in whole or in
part by SRFs with Federal funds, including those supported by funds
directly made available through Federal capitalization grants and those
supported by ``recycled'' Federal funds.
Similarly, the Safe Drinking Water Act includes a broadly worded
provision that directs the EPA Administrator to ``take such action as
may be necessary to assure compliance with provisions of the [Davis-
Bacon Act].'' In 1994, the Senate passed, but the House failed to act
on the Safe Drinking Water Act amendments that, among other things,
would have encouraged States to create revolving loan funds for
drinking water projects funded by Federal capitalization grants to
finance loans and other types of financial assistance to public water
systems.
The proposed 1994 Act anticipated that, like the SRF program
created in the Clean Water Act, as the loans and other types of
financial assistance were repaid, the revolving loan fund would be
replenished, and new loans and other types of financial assistance
could be made for other eligible drinking water projects. The proposed
1994 Act included an additional Davis-Bacon labor standards provision
that clearly applied Federal prevailing wage requirements to laborers
and mechanics employed on projects assisted by State Revolving Loan
Funds, including any assistance financed by repayments to the SRF.
Subsequently, Congress enacted the Safe Drinking Water Act
Amendments of 1996, which finally created a State Revolving Fund
program that provides annual capitalization grants to each State in
order to fund a State Revolving Fund that provides financial assistance
to local agencies to facilitate compliance with EPA's National primary
drinking water standards. The Safe Drinking Water Act Amendments of
1996 did not, like the 1994 bill that passed the Senate but was not
acted upon by the House, include a separate Davis-Bacon provision.
There was no attempt to add a Davis-Bacon provision to the 1996
Act, because it was my opinion as Counsel to the Building and
Construction Trades Department that the Davis-Bacon provision already
in the Safe Drinking Water Act was sufficiently broad to cover all
construction projects supported by State Revolving Funds with funds
directly made available from Federal capitalization grants or with
``recycled'' funds made available by repayment of Federal
capitalization grant funds.
However, contrary to the EPA Administrator's obligation under the
Act to ``take such action as may be necessary to assure compliance with
provisions of the [Davis-Bacon Act],'' she now claims that the Davis-
Bacon prevailing wage requirement in the Safe Drinking Water Act does
not apply to any construction projects supported by State Revolving
Funds. Accordingly, the Davis-Bacon prevailing wage requirement in the
Safe Drinking Water Act must be amended to make it clear that Davis-
Bacon requirements apply to all construction projects supported by SRFs
whether with funds directly made available from Federal capitalization
grants or with ``recycled'' funds made available by repayment of
Federal capitalization grant funds.
To fail to provide full Davis-Bacon coverage of water
infrastructure projects assisted by State Revolving Funds under both
the Clean Water Act and the Safe Drinking Water Act would, in our
opinion, result in the piecemeal repeal of Davis-Bacon prevailing wages
on a major Federal construction program contrary to congressional
intent in the original Clean Water and Safe Drinking Water Acts, not to
mention the other 60 or so Federal statutes that have extended Federal
prevailing wage requirements to a myriad of other federally assisted
construction programs.
We again commend the committee for coming to grips with our
significant clean water and safe drinking water infrastructure needs,
and we look forward to working with Senators on both sides of the aisle
as the process moves forward.
__________
Statement of the American Society of Civil Engineers
Mr. Chairman and members of the committee:
The American Society of Civil Engineers (ASCE) is pleased to
provide this statement for the record on the drinking-water and
wastewater infrastructure needs in the United States today and on the
bill S. 1961, the Wastewater Investment Act of 2002.
ASCE was founded in 1852 and is the country's oldest national civil
engineering organization. It represents more than 125,000 civil
engineers in private practice, government, industry and academia who
are dedicated to the advancement of the science and profession of civil
engineering. ASCE is a 501(c)(3) non-profit educational and
professional society.
EXECUTIVE SUMMARY
ASCE is pleased to support passage of S. 1961, the Water Investment
Act of 2002. The proposed funding levels in the bill are a far-sighted,
responsible attempt to rebuild the nation's aging and corroded
wastewater and drinking-water facilities and to upgrade their
performance to meet the nation's health and security needs in the 21st
century.
I. THE ISSUE
In March 2001, ASCE released its 2001 Report Card for America's
Infrastructure in which the nation's life-sustaining foundation
received a cumulative grade of ``D+'' in 12 critical areas. The reasons
for such a dismal grade include the growing obsolescence of an aging
system; local political opposition and red tape that stymie the
development of effective solutions; and an explosive population growth
in the past decade that has outpaced the rate and impact of current
investment and maintenance efforts.\1\
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\1\ American Society of Civil engineers, the 2001 Report Card for
America's Infrastructure (2001), http://www.asce.org/reportcard.
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The 2001 Report Card follows one released in 1998, at which time
the 10 infrastructure categories rated were given an average grade of
``D.'' This year wastewater declined from a ``D+'' to a D,'' while
drinking water remained a ``D.'' Wastewater and drinking-water systems
are both quintessential examples of aged systems that need to be
updated.
We know, of course, that the Federal budget condition is less
healthy now than it was in early 2001. When the Report Card was issued,
the nation anticipated budget surpluses well into the future. The
Congressional Budget Office (CBO) projected in January 2001 that, if
the tax and spending policies then in effect remained the same, the
government would run surpluses totaling more than $5.6 trillion over
the 10-year period from 2002 through 2011. CBO revised those
projections in August, reducing the 10-year surplus to $3.4 trillion.
But in January 2002 CBO estimated that the cumulative surplus for
2002 through 2011 under current policies would total $1.6 trillion--a
drop of $4 trillion from last January's figure. More significantly, if
current tax and spending policies remain in place, the total budget
will show a deficit of $21 billion in 2002 and $14 billion in 2003,
according to CBO. Indeed, total Federal receipts in the first 4 months
of fiscal year 2002 were down by $11 billion (1.6 percent) compared
with the same period a year ago.
ASCE is well aware of the fiscal quandary that Congress must
resolve. These short-term budget realities, however, should not blind
Congress to the enduring need for a strong Federal investment in public
health and in the security and stability of the nation's wastewater and
drinking-water infrastructure. Naturally the Federal Government cannot
overcome these problems without help. To remedy the current nationwide
infrastructure problem, ASCE estimates we will need to invest $ 1.3
trillion in all U.S. infrastructure over the next 5 years. This
unprecedented need must be met by all levels of government--Federal,
State and local--as well as the private sector.
II. DRINKING-WATER INFRASTRUCTURE NEEDS
The nation's 54,000 drinking water systems face staggering
infrastructure funding needs over the next 20 years. Although America
spends billions on infrastructure each year, we estimate that drinking-
water systems face an annual shortfall of at least $11 billion to
replace aging facilities that are near the end of their useful life and
to comply with existing and future Federal water regulations. The
shortfall does not account for any growth in the demand for drinking-
water over the next 20 years.
Although the Safe Drinking Water Act Amendments of 1996 (SDWA)
authorized the Environmental Protection Agency (EPA) to spend $1
billion annually to construct and repair drinking water facilities,
Congress has failed to appropriate the full amount. In fiscal year
2002, the appropriated amount is $825 million. The total appropriated,
which represents 82.5 percent of the $1 billion authorized level, is at
the same level as the fiscal year 2001 appropriation and equals less
than 10 percent of the total amount needed this year.
In January 1997, EPA presented to Congress the first drinking-water
needs survey that indicated the nation's 54,000 community water systems
will need to invest $138.4 billion over the next 20 years to install,
upgrade, or replace infrastructure to ensure the provision of safe
drinking-water to these systems' 243 million customers.
But the most recent study by the EPA reveals that the need is even
greater. In 1999, the Agency conducted the second Drinking Water
Infrastructure Needs Survey. The purpose of the survey is to document
the 20-year capital investment needs of public water systems that are
eligible to receive Drinking Water State Revolving Fund (SRF) moneys.
The survey found that the total drinking-water infrastructure need
nationwide is $150.9 billion for the 20-year period from January 1999
through December 2018.
Of course, notwithstanding the great need for further investment in
replacement pipes and related infrastructure, we as a nation are making
great strides in improving the quality of our drinking-water.
Health-based violations of Federal drinking-water standards are
declining steadily, according to data from the EPA. In 1993, 79 percent
of Americans were served by water systems that did not experience
health-based violations. By 2000, that number rose to 91 percent.
Nevertheless, without a significantly enhanced Federal role in
providing assistance to drinking water infrastructure, critical
investments will not occur. Possible solutions include grants, trust
funds, loans, and incentives for private investment. The question is
not whether the Federal Government should take more responsibility for
drinking-water improvements, but how.
III. WASTEWATER INFRASTRUCTURE NEEDS
Although the Federal Government has spent more than $71 billion on
wastewater treatment programs since 1973, the nation's 16,000
wastewater systems still face enormous infrastructure funding needs in
the next 20 years to replace pipes and other constructed facilities
that have exceeded their design life. Congress, however, has not
authorized new funding for wastewater treatment plants since 1987, and
the current benchmark authorization of $600 million (established for
fiscal year 1994 in 1987) is far too low to meet current needs.
With billions being spent yearly for wastewater infrastructure, the
systems face a shortfall of at least $12 billion annually to replace
aging facilities and comply with existing and future Federal water
regulations. As with drinking-water needs, this total does not account
for any growth in demand from new systems.
Funding for wastewater infrastructure has remained essentially flat
for a decade. In Fiscal Year 2002, Congress appropriated $1.35 billion
for wastewater infrastructure, the same appropriation as fiscal year
2001. The amount represents about 11 percent of the annual need
nationally. Requirements for communities that have not yet achieved
secondary treatment or must upgrade existing facilities remain very
high: $126 billion nationwide is required by 2016, according to the
most recent estimate by the EPA.
The largest need, $45 billion, is for projects to control combined
sewer overflows. The second largest category of needs, at $27 billion,
is for new or improved secondary treatment (the basic statutory
requirement of the Clean Water Act). In addition to costs documented by
EPA, States estimate an additional $34 billion in wastewater treatment
needs for projects that do not meet EPA documentation criteria but,
nevertheless, represent a potential demand on State resources.
Between 35 percent and 45 percent of U.S. surface waters do not
meet current water-quality standards. According to the EPA, sewer
overflows are a chronic and growing problem. Many of the nation's urban
sewage collection systems are aging; some sewers are 100 years old.
Many systems have not received the essential maintenance and repairs
necessary to keep them working properly.
IV. THE WATER INVESTMENT ACT OF 2002 (S. 1961)
The Water Investment Act of 2002 (S. 1961) would amend and
reauthorize the Clean Water Act and the Safe Drinking Water Act to
provide substantially greater funding for wastewater and drinking-water
facilities.
The bill is intended to modernize State water pollution control
revolving funds and the allocation for those funds to ensure that the
funds distributed reflect water quality need; to streamline State water
pollution control assistance programs and State drinking-water
treatment assistance programs to maximize the use of Federal funds and
encourage maximum efficiency for States and localities; to provide
additional structure to the water supply research conducted in the
United States; and to ensure that the Federal Government is performing
the appropriate role in analyzing regional and national water supply
trends.
The bill would authorize funding of $35 billion over 5 years. It
would authorize more than $20 billion for clean water and $15 billion
for safe drinking water projects, respectively. There are provisions
for the Clean Water Act and the Safe Drinking Water Act that are
designed to help water utilities better manage their capital
investments using asset management plans, rate structures that account
for capital replacement costs, and other financial management
techniques.
In addition, there are provisions that seek to ensure that the
``next generation'' of water-quality issues receives a major focus. The
bill includes incentives for use of non-structural technologies. The
bill would make these approaches eligible to receive funding under the
Clean Water Act State Revolving Fund and require that recipients of
funds consider the use of low-impact technologies. Moreover, it would
authorize a demonstration program at $20 million per year over 5 years
to promote innovations in technology and alternative approaches to
water quality management and water supply. This program requires that a
portion of the projects use low-impact development technologies.
V. RECOMMENDED IMPROVEMENTS TO S. 1961
The Water Investment Act of 2002 could be amended to enhance its
effectiveness and improve on its ability to build modern wastewater and
drinking-water facilities and protect national security. ASCE strongly
encourages the committee to adopt the following provisions to S. 1961
as it deliberates the legislation:
<bullet> The bill should give a State the discretion to use
the design-build project delivery method for each facility
financed under the SRFs. The use of this method should be
consistent with State law. Once a State decides that the
design-build project delivery system is appropriate for a given
project, the recipient should be required to the use of the
two-phase competitive source-selection procedures authorized
under section 303M of the Federal Property and Administrative
Services Act of 1949.
<bullet> The bill should require that each contract and
subcontract for architectural and engineering design services,
program and construction management and other professional
services should be awarded in the same manner as contracts that
are awarded under title IX of the Federal Property and
Administrative Services Act of 1949.
<bullet> The bill should expressly authorize the Environmental
Protection Agency to use the Clean Water Act State Revolving
Loan Fund (SRF) and the Safe Drinking Water Act SRF to provide
financial assistance for the construction of physical security
measures at wastewater and drinking-water plants. Certain
terrorist groups have made it clear that the destruction of
U.S. water-treatment facilities is one of their aims. Federal
funds should be made available through the SRFs to deal with
specific security needs, including improved building design and
construction requirements, fencing and other physical security
measures. No funds should be made available to hire security
guards, establish private police forces or implement other non-
structural protections, which should be addressed through
operating funds.
<bullet> Some have argued that Federal regulatory programs
establishing water-quality standards under the Clean Water Act
and drinking-water standards under the Safe Drinking Water Act
are too restrictive; others argue that the current regulations
may not be protective enough of human health and the
environment. Without taking a position either way at the
present time, ASCE does not believe that legislation designed
to provide indispensable financing for our aging infrastructure
should be the forum to address controversial regulatory changes
about which there is little consensus at the moment.
VI. FUTURE POLICY OPTIONS
ASCE recommends that funding for water infrastructure system
improvements and associated operations ultimately be provided through a
comprehensive program that addresses the infrastructure needs of
drinking-water and wastewater systems. At some point, Congress needs to
create a Federal water trust fund to finance the national shortfall in
funding for water and wastewater infrastructure. Money in the trust
fund should not be diverted for non-water purposes.
Moreover, we support the use of Federal appropriations from general
treasury funds and the issuance of revenue bonds and tax-exempt
financing mechanisms at the State and local levels, as well as public-
private partnerships, State infrastructure banks, and other innovative
financing procedures.
Congress also should consider the use of Federal capitalization
grants to purchase or refinance outstanding debt obligations of water
or wastewater service providers; guarantee, or purchase of insurance
for, an obligation of a water or wastewater system; and secure the
payment or directly repay principal or interest on general obligation
bonds issued by the State if proceeds of the bonds will be deposited
into the SRF.
As part of the Federal funding package designed to lower the cost
of capital for recipients that choose to leverage their Federal
capitalization grants and for individual issuers seeking to borrow in
the public capital markets, Congress should exempt from State private
activity bond volume caps State and local private activity bonds for
water and wastewater infrastructure, where such bonds (1) are used to
finance core water or wastewater infrastructure, as defined below, and
(2) produce public health or environmental protection benefits that are
generally available to the public.
__________
Statement of the Association of California Water Agencies
The Association of California Water Agencies (ACWA) is pleased to
submit comments for the record to the Senate Environment and Public
Works Committee on S. 1961, which seeks to address water infrastructure
funding needs. ACWA is the largest and oldest collection of public
water agencies in the country, and the association's members are
responsible for 90 percent of the water delivered in California for
municipal, agricultural and industrial use.
Unless Congress acts now to invest in and repair our nation's water
infrastructure, ACWA believes that a looming water crisis in California
and the west is inevitable. In general, ACWA supports the increase in
funding levels within S. 1961, recommends some changes to the bill, and
believes the bill can work in concert with other innovative resource
approaches like the CALFED Bay-Delta Program.
Western States in general, and particularly California, face a
dizzying array of resource demands that compete for finite supplies of
water. Heavily urbanized areas depend on reliable supplies of high
quality water to meet drinking water needs. Burgeoning high tech
industries expect even higher quality water to develop the products
that have transformed California's and the nation's economy.
Agricultural communities today must vigorously safeguard water
supplies, growing more food with less water, on ever-smaller tracts of
usable land. And new environmental mandates have reduced flexibility of
operations within California's water system.
At the same time, the administration of the Clean Water Act and the
Safe Drinking Water Act has imposed increasingly expensive requirements
on water suppliers. New treatment technologies for arsenic, MTBE,
cryptosporidium, disinfection biproducts and other agents have been
developed and are working to meet these mandates. Local agencies have
helped pioneer many of these innovations, and while the benefits to
public health have been great, they have not come without a cost.
The ``infrastructure funding gap'' cited by EPA Administrator
Christie Todd Whitman, the Water Infrastructure Network (WIN) and
others this year is very real. Estimates vary, but according to the
General Accounting Office the figure is between $300 billion and $1
trillion over the next 20 years\1\--a widening shortfall between
Federal funds appropriated and those needed to keep up with needs in
cities, counties and rural communities. This funding gap becomes
especially glaring in the face of new Federal water quality standards,
environmental mandates and population shifts, factors which can wring
the last ounce of flexibility from water networks, and make it
difficult for States to contemplate necessary regional environmental
water resource plans.
---------------------------------------------------------------------------
\1\ Water Infrastructure: Information on Federal and State
Financial Assistance, GAO November 2001/GAO-02-134
---------------------------------------------------------------------------
CALFED-S. 1961 IS COMPLIMENTARY
California's CALFED Bay-Delta Program is one example of innovative
environmental and water resource planning whose future will be acutely
impacted by water infrastructure investment. CALFED is the largest
ecosystem restoration project in California's history, tasked with the
commensurate goals of improving water quality and water supply
reliability for farms and 20 million urban residents. Legislation like
S. 1961 will complement CALFED by repairing the water networks in
cities that rely on water from the Bay Delta ecosystem. The bill will
enable urban water conservation, drinking water quality improvements,
pipeline and canal upgrades, and the expansion of water recycling, all
of which will relieve pressure on the fragile Bay-Delta and allow its
multi-faceted restoration work to proceed.
The two major arteries for delivered water in California, the
Federal Central Valley Project (CVP) and the State Water Project (SWP)
are both more than 40 years old. Each is managed by agencies
participating in CALFED. Neither one, however, has been completed to
the extent its planners envisioned, and while both are feats of
engineering, they were built when the State's population was less than
one third of where it stands today, with a vastly different economy,
and virtually no Federal environmental laws to enforce.
The investment of S. 1961, as well as the restoration promised by
CALFED, are both direly needed for California and its western neighbors
to meet water demand into the 21st Century. Just as the restoration of
the Everglades, the Chesapeake and the Great Lakes have proceeded in
concert with ongoing Federal water management initiatives, CALFED
requires that infrastructure funding move forward with the Program's
long-term resource goals.
RED TAPE CONCERNS
As demonstrated by the debate surrounding 1996 amendments to the
Safe Drinking Water Act, a delicate balance must be struck between the
benefits of water investment and the costs of new regulations that
often accompany it. S. 1961 dedicates substantial resources to water
systems, but some sections of the bill impose broad new requirements,
which may be unnecessary. The bill needs to focus on funding for repair
and investment in water infrastructure.
Section 103(e)(3) would mandate a new coordination process between
local land use, transportation, and watershed plans in order for States
to take advantage of water pollution revolving loan funds. Under ACWA-
supported State legislation enacted in 1995 and revised in 2001,
California already makes approval for new developments contingent upon
adequate water supplies, giving hydrologic forecasts a loud voice in
land use decisions. Section 103(g) of the bill creates new expectations
of ``Technical, managerial, and financial capacity for optimal
performance,'' but States and local districts in California already
employ best management practices to seek every possible efficiency from
their systems.
ACWA recommends that the specific language of S. 1961 be changed in
the committee process to achieve both operational and public policy
improvements. One example is the section singling out ``Disadvantaged
Communities'' for extended loan terms. While many of ACWA's members
would undoubtedly fall into this category, the bill now provides a
limited loan allotment for each district. While attempts to help
disadvantaged entities are always valued, it is unclear how the
presence of several separate 'disadvantaged communities' inside many of
California's large, demographically mixed water districts could meet
this test without competing with one another for a single districts'
loan allotment. The disadvantaged community designation could also
distort the use of funds meant for district operation and maintenance
under language on page 9 of the introduced version.
REGIONAL PARTNERSHIPS
California's water districts have met with considerable success in
the development of regional partnerships. These arrangements consist of
two or more drinking water providers pooling resources together so that
expertise and equipment can be shared, or so that strengths in one
agency can be used to offset limitations in another. Across the
country, water districts have begun to stratify into two groups of
water systems, the small (<10,000) and the large (>100,000). Because
regional partnerships are used by many of the small districts that S.
1961 seeks to assist, ACWA believes the bill should enable small
districts to more easily access the financial, technical, and
managerial resources available through regional partnerships. Regional
partnerships could be made eligible to apply for grants and loans, and
could take the form of water supply agreements, operating agreements,
construction contracts, joint powers authorities or other approved
arrangements.
WATER REUSE
Every day, water managers in California and the west are confronted
with a unique set of resource constraints not found in other parts of
the country. Naturally arid climates where water is scarce, along with
a much greater incidence of endangered species (California leads the
nation with over 260 designations), bring constant uncertainty to water
deliveries. For that reason, every effort must be made to reclaim and
reuse all available water supplies. ACWA supports the funding for these
programs found in S. 1961 as progressive and needed investment for
chronically water-short communities of the western United States.
Finally, it is unclear how language in Section 403 of the bill
would influence Federal water management. This section calls for ``an
assessment of the state of water resources in the United States,'' and
requires that this report ``be used by Federal agencies as a guide in
making decisions on the allocation of water research funding.'' While
more information is always better than less when making water
management decisions, it may be useful to clarify whether the
assessment will create priority lists or influence the disbursement of
Federal funding.
Thank you for the opportunity to provide comments to the committee.
ACWA stands ready to provide any information or assistance in the
furtherance of water infrastructure investment and the enactment of
improvements to S. 1961.
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WATER INVESTMENT ACT, S. 1961, AND OTHER WATER INFRASTRUCTURE BILLS
----------
THURSDAY, FEBRUARY 28, 2002
U.S. Senate,
Committee on Environment and Public Works,
Subcommittee on Fisheries, Wildlife, and Water,
Washington, DC.
The committee met, pursuant to notice, at 9:30 a.m. in room
406, Senate Dirksen Building, Hon. Bob Graham (acting chairman
of the subcommittee) presiding.
Present: Senators Graham, Reid, Clinton, Crapo, Chafee, and
Jeffords [ex officio].
Also present: Senator Sarbanes.
OPENING STATEMENT OF HON. BOB GRAHAM, U.S. SENATOR FROM THE
STATE OF FLORIDA
Senator Graham. I will call the hearing to order. We will
soon be joined by the ranking member, Senator Crapo.
Last March, this subcommittee began a series of hearings
and meetings on the nation's water infrastructure needs. The
Subcommittee on Fisheries, Wildlife, and Water continues our
commitment to address the water infrastructure concerns of our
nation with today's legislative hearing.
The focus of this hearing is going to be on S. 1961, the
Water Investment Act of 2002. Witnesses are also asked to
provide testimony on a number of related bills currently
pending before the subcommittee.
On February 15, I introduced the Water Investment Act with
Senator Crapo, Senator Jeffords, and Senator Smith, in an
attempt to address the critical challenges facing our nation's
wastewater and drinking water infrastructure. These problems
include: funding levels, allocation of funds, water supply,
project prioritization, and project planning and management.
Specifically, this legislation authorizes $35 billion over
5 years to assure the financial and environmental
sustainability of our nation's water programs. In addition, we
have revised the allocation formula for Federal money under the
State Revolving Fund Programs to reflect a needs-based
approach. I think that these two factors are crucial if we are
to succeed in maintaining the nation's existing infrastructure
and planning for our future needs.
The Water Investment Act also encourages smart planning by
assuring that communities look at regional transportation
plans, land use plans, and watershed plans. From the
perspective of my State of Florida, one of the most improvement
provisions of the bill is the analysis of water supply and
drought information. This information will be compiled by the
Federal Government and shared with State and local governments,
so that we can more adequately prepare for our future water
needs. This represents a recognition on the part of the Federal
Government that our water supply is becoming an increasingly
precious and frequently threatened resource. Sections of our
country that had an abundance of water are now looking at
restrictions.
This legislation moves us toward suggestions of ways in
which the supplies we have can be used more effectively while
new supplies are being developed. The Water Investment Act
represents the culmination of a year of hearings, meetings,
correspondence with national organizations and other
governmental entities. The bill responds to the pleas we have
heard from those organizations to fund our nation's looming
water infrastructure needs.
In closing, I wish to thank my friend and colleague on this
subcommittee, Senator Crapo, as well as our chair and ranking
members, Senators Jeffords and Smith, and the staff for all the
work that they have put into the Water Investment Act. I look
forward to hearing from the witnesses about the specific
provisions of this legislation, as well as other legislation
relating to water infrastructure which has been referred to
this subcommittee.
[The prepared statement of Senator Graham follows:]
Statement of Hon. Bob Graham, U.S. Senator from the State of Florida
Last March, this subcommittee began a series of hearings and
meetings on our nation's water infrastructure needs. The Subcommittee
on Fisheries, Wildlife and Water continues our commitment to address
water infrastructure concerns with today's legislative hearing.
Although the focus of this hearing is S. 1961, the Water Investment
Act of 2002, witnesses are also asked to provide testimony on a number
of related bill currently pending before the subcommittee.
On February 15, I introduced the Water Investment Act with Senator
Crapo, Senator Jeffords, and Senator Smith in an attempt to address the
critical challenges facing our nation's wastewater and drinking water
infrastructure. These problems include funding levels, allocation of
funds, water supply, project prioritization, and project planning and
management. Specifically, the bill authorizes $35 billion over 5 years
to ensure the financial and environmental sustainability of our water
programs.
In addition, we have revised the allocation formula for Federal
money under the SRF programs to reflect a needs-based approach. I think
that these two factors are crucial if we are to succeed in maintaining
the nation's existing infrastructure and planning for our future needs.
The Water Investment Act also encourages smart planning by ensuring
that communities look at regional transportation plans, land use plans,
and watershed plans. From the perspective of Florida, one of the most
important provisions of the bill is the analysis of water supply and
drought information. This information will be compiled by the Federal
Government and shared with State and local governments so that we can
more adequately prepare for our future water needs. This represents
recognition on the part of the Federal Government that our water supply
is becoming an increasingly precious resource.
Sections of the country that had an abundance of water are now
looking at restrictions. This legislation moves us toward suggestions
of ways in which the supplies we have can be used more effectively and
new supplies can be developed.
The Water Investment Act represents the culmination of a year of
hearings, meetings, and correspondence with national organizations and
government entities. The bill responds to the pleas that we have heard
from these organizations to fund our nation's looming water
infrastructure needs.
In closing, I want to thank Senator Crapo, Senator Jeffords,
Senator Smith and their staffs for all of their work on The Water
Investment Act I look forward to hearing from the witnesses about the
specific provisions in this legislation.
Senator Graham. Senator Crapo, did you have an opening
statement?
OPENING STATEMENT OF HON. MICHAEL D. CRAPO, U.S. SENATOR FROM
THE STATE OF IDAHO
Senator Crapo. Yes, thank you very much, Mr. Chairman. I
had the opportunity to give a full opening statement on
Tuesday, so I'll confine myself to just a few remarks right
now.
Once again, I want to welcome our witnesses to this
hearing. Your review and comments on S. 1961, the Water
Investment Act, will be of great use to this subcommittee as we
work to perfect and advance this legislative proposal. As you
know, S. 1961 is the result of several years of discussions and
work by this subcommittee and is in response to the many issues
that you and others have raised.
Although the legislation cannot accommodate all of the
requests that have been made, I believe it represents an
important improvement in our current infrastructure statutes by
modernizing State Revolving Fund Programs to ensure assistance
is effectively directed to public health and water quality
needs, assisting communities in need, and enhancing the
capabilities of smaller systems to better serve the public, and
ensuring the enhanced Federal investments in State assistance
programs are matched by appropriate accountability by those who
manage and receive funding. These are strong guiding principles
and ones that we should commit ourselves to as S. 1961 moves
through the legislative process.
Being the result of a strong collaborative process, S. 1961
recognizes this with an increased Federal investment to assist
communities to meet their public health and environmental
needs. Simply put, the legislation is possibly the most
environmentally significant legislation that we'll handle in
Congress this year.
I know I can speak for all of us on the subcommittee that
we welcome your thoughts on the bill as witnesses, as well as
any constructive improvements that can be made.
Mr. Chairman, I want to thank you for being willing to work
with us. There were a lot of issues that we had to resolve. I
think we did come together in a good compromise with
collaboration that did come forward with a good, strong bill. I
appreciate the work that we have been able to do together on
this legislation. Thank you very much.
Senator Graham. Senator, I appreciate those gracious words,
and I reciprocate in the way in which you and those who have
represented you have worked so effectively toward the goal of
getting legislation that will be of assistance to the nation in
one of its most critical resource areas.
Senator Crapo. Thank you.
Senator Graham. We've been joined by two other members of
the subcommittee, Senator Reid of Nevada and Senator Clinton of
New York.
Do you have an opening statement?
OPENING STATEMENT OF HON. HARRY REID, U.S. SENATOR FROM THE
STATE OF NEVADA
Senator Reid. I do have a brief opening statement, Mr.
Chairman. I apologize to my friend from Maryland for having you
wait, but I appreciate also the work that you and Senator Crapo
have done--and not only the work that you have done, but the
timing in drafting this water infrastructure bill. This is so
important.
It will not only help us provide clean and safe water
across our nation, but it will also be a major catalyst for new
jobs. Major infrastructure projects generate good jobs. For
every billion dollars we invest, we create approximately 42,000
new jobs. During our debate on the Economic Stimulus Package, I
argued that we needed a major new investment in our
communities, and that infrastructure funding was the key to
stimulating that investment.
After September 11th, Nevada's tourism industry suffered
tremendously as tens of thousands of workers lost their jobs.
Then, as well as now, we need to stimulate investment that will
create jobs. Infrastructure investment is one of the best ways
to create jobs in Nevada and the rest of the country. So I'm
glad to see this committee picking up where that debate has
been on the Senate floor.
I want to mention two ways in which I think we can improve
this bill. First, it's critically important that the bill be
modified to include comprehensive Davis-Bacon prevailing wage
rate protections. There were a lot of things said about these
protections during the Tuesday hearing on this water bill. The
main argument used by those opposed to such protection was that
the market alone should determine wages in our communities. The
first response to this argument is Davis-Bacon, named after two
Republicans. Prevailing wage protections are set by the Labor
Department, which calculates then based on the prevailing wages
in that community.
The timely response, however, is that we have recently
relearned a very powerful lesson about the market. Enron shows
us what happens when we leave the protection of our workers
completely in the hands of the market.
The second important issue relates to the needs of our
small communities in providing safe, affordable drinking water.
There was a lot of heated debate and conflicting views last
year about the Bush Administration's response to the arsenic
rule, but one area where there seemed to be consensus was that
we need to help our smaller communities comply with new
drinking water requirements.
While S. 1961 makes several great improvements to the
Drinking Water Act Revolving Loan Fund, small communities can't
afford to use them. They need more traditional grants to get
some of the important work done. In response to that, I
introduced the Small Community Drinking Water Funding Act with
Senator Ensign to provide grants to help small communities
comply with this and other drinking water requirements.
Treating small communities differently than large ones makes
sense, and this grant component of this legislation should be
added to S. 1961.
Why? As some of my colleagues know, the per-household cost
of providing water infrastructure improvements in small
communities is four times greater than the large communities.
Part of the reason for this is that there are just so many
small systems across our nation. In Nevada, for example,
upwards of 98 percent of the systems are small, another reason
that smaller communities have a much smaller tax base to share
in the cost of these expensive improvements.
So, again, I thank you both very much for your leadership.
I would hope that when we report this bill next week, we can
include the Davis-Bacon prevailing wage protection and also
that part of my bill that I talked about earlier.
Senator Graham. Thank you, Senator. Senator Clinton.
OPENING STATEMENT OF HON. HILLARY RODHAM CLINTON, U.S. SENATOR
FROM THE STATE OF NEW YORK
Senator Clinton. Thank you, Mr. Chairman. Mr. Chairman, I
want to thank you and the ranking member for the extraordinary
work you've done on this legislation. I appreciate your holding
this hearing. I apologize, I was not able to be here for the
Tuesday hearing, but I know that a number of important points
were made at that hearing as well. I want to associate myself
with the remarks made then by Senator Voinovich about the need
to not just authorize, but appropriate the funding required for
our nation's water infrastructure. I would like to associate
myself also with the remarks made by the distinguished Senator
from Nevada, because I agree with him on both counts with
respect to Davis-Bacon and with respect to the difficulty small
communities face.
I represent a State that, according to EPA's 1999 Drinking
Water Infrastructure Needs Survey, has the highest current and
total infrastructure needs when it comes to complying with
Federal drinking water regulations. Now some of that is because
we've been around a long, long time. Unlike some of the States
that developed in the 20th century, we have communities that go
back to the 17th century. Unfortunately, we have some water
infrastructure that seems like it goes back that far, although
it's probably only about a 100-plus years old.
We have the highest clean water infrastructure needs in the
country, $16 billion, and that's according, also, to the 1996
EPA Clean Water Needs Survey. If you look at the total drinking
water infrastructure, both current and total, we have $10.5
billion and $13.1 billion in needs. So we have a lot to gain
and possibly even more to lose with respect to getting this
water legislation reauthorized and getting sufficient funds
appropriated.
We have seen the results of inadequate infrastructure
investment. In the Long Island Sound, for example, we have
rather severe water quality problems because we have not had
sufficient effective wastewater treatment coming out of New
York City into the Long Island Sound. Some of you have learned
about that issue and have followed it, and that's only one of
many of comparable problems that we currently face in New York.
I think that one way that we can demonstrate the commitment
that this committee feels toward this important issue is to
recognize that having clean drinking water, having adequate
wastewater treatment infrastructure, shouldn't even be
debatable. We've always been so fortunate in our country that,
historically, we have been able to turn on the tap and drink
the water, and when we traveled out of our country and went to
other places, one of the things we often learned was we
couldn't do that. We didn't have those kinds of difficulties
that other places faced. Although we didn't have the total
national infrastructure commitment that we needed, we certainly
did better than any place I'm aware of. We're in danger of
losing that tremendous investment and the kind of commitment to
the health and safety that people should be able to take for
granted.
So I want to thank you again, Mr. Chairman, for the work
that you've done on a bipartisan basis to ensure that Americans
and New Yorkers continue to enjoy the cleanest, safest water in
the world, both by providing the necessary authorization and
the necessary resources. They have to go hand-in-hand or we're
just going to get further and further behind in the effort to
try to make sure we make good on the promise of clean water
here in our country. Thank you, Mr. Chairman.
Senator Graham. Thank you very much.
Senators, our first witness today is our colleague, Senator
Sarbanes, who is here to testify on legislation that he has
introduced relative to Chesapeake Bay, one of America's
beautiful and most productive water areas.
Senator Sarbanes.
STATEMENT OF HON. PAUL S. SARBANES, U.S. SENATOR FROM THE STATE
OF MARYLAND
Senator Sarbanes. Well, thank you very much, Mr. Chairman,
Senator Crapo, Senator Clinton. I appreciate this opportunity
to testify in the context of your consideration of S. 1961, the
Water Investment Act, about S. 1044, the Chesapeake Bay
Watershed Nutrient Removal Assistance Act, which Senator
Mikulski and I, Senators Warner and Allen of Virginia, and
Senators Specter and Santorum of Pennsylvania have introduced.
At the outset, I want to commend you and the other members
of the committee for focusing this attention on our nation's
clean water infrastructure needs. The issue is of vital
importance to my State, and, indeed, it's of vital importance
to the country, and I very much welcome the attention you have
brought to it and the indication of a very prompt schedule for
acting.
Despite improvements over the past two decades, Maryland--
and, indeed, the entire Chesapeake Bay region--still face very
significant water quality problems and needs. In December 2001,
a Task Force on Upgrading Sewage Systems, commissioned by
Governor Glendening of Maryland, completed an assessment of the
cost to implement needed sewerage requirements, to address
combined sewer overflows, sanitary sewer overflows, and other
upgrades of wastewater treatment plants throughout Maryland,
and identified $4.3 billion of capital needs.
Maryland's most recent allotment under the Clean Water Act
State Revolving Loan Fund was $32.5 million--$4.3 billion just
in this survey, let alone other concerns--as opposed to $32.5
million, and even when combined with State and local funds, the
Task Force report estimates a gap of $80 to $140 million a year
in needed sewerage infrastructure spending.
Clearly, continuing and enhancing the State Revolving Loan
Fund is a vital part of the assistance which is required, and I
commend the committee's efforts in that regard.
Before I turn to the Bay bill specifically, let me just say
a word about S. 1961 and the formula in there under Needs
Survey to Determine State Apportionment. I would hope the
subcommittee could consider a couple of what I regard as
complicating factors.
One is the Needs Survey was designed for traditional sewer
needs. It doesn't account very well for restoration and
reconstruction, which is, of course, particularly a problem in
older States and older systems; and stormwater and non-point
source control needs, which are difficult to quantify.
Moreover, it may end up--and I think we need to look at this--
penalizing States which have worked aggressively to upgrade
sewage treatment facilities by utilizing State funds and
overmatching Federal Revolving Loan Funds. In other words, if
we have worked very hard to do a good job in the past and met
some of our needs, so we reduce the need level, and other
States have done nothing, then we revise the formula. I think
we have to take that into consideration, to make some
adjustment or accommodation to extra effort which may have
taken place. So I hope some of these broader water quality
measures can be factored in as the committee works toward
addressing the formula under which the State Revolving Loan
Fund will be determined.
Now in the Chesapeake Bay watershed, we face a special
challenge of finding ways to further reduce the level of
nitrogen and phosphorous in wastewater effluent. Nutrient over-
enrichment from both point and non-point sources remains the
most serious pollution problem facing the Chesapeake Bay. In
1987, the Governors of Maryland, Virginia, Pennsylvania, the
Chesapeake Bay Commission, the Mayor of the District of
Columbia, and the Administrator of the EPA, acting on behalf of
the Federal Government, signed a Chesapeake Bay Agreement which
set a goal of a 40 percent reduction of nitrogen and
phosphorous loads to the main stem of the Bay by the year 2000.
That was the most ambitious voluntary commitment for restoring
water quality projected in any region of the country.
During that 13-year period, tremendous efforts and
investments were made by all the jurisdictions in upgrading
sewage treatment plants as well as implementing best management
practices on agricultural lands to meet that goal. I want to
commend the farmers in those States for their response to this
initiative in terms of cooperating on the best management
practices approach.
Two years ago, the States and the Federal Government
conducted an extensive evaluation of cleanup progress since the
1980's and determined, unfortunately, that we have fallen
considerably short of the 40 percent reduction goal. Estimates,
through the use of computer models, indicated that although
nitrogen loads delivered to the Bay and all its tributaries
declined by nearly 53 million pounds a year and phosphorous
loads declined nearly 7 million pounds a year, that we were
still well short, 21 million pounds on nitrogen loads and 3
million pounds on phosphorous, from the 2000 goal.
In 2000, a new Chesapeake Bay Agreement was signed,
reaffirming the 40 percent nutrient reduction goal agreed to in
1987 and committing the signatories to go well beyond that to
correct all nutrient-related problems by the year 2010. But we
need Federal funds in significant amounts for the wastewater
treatment plant upgrades that are required.
Recent modeling of the EPA's Bay Program found that total
nutrient pollution must be further reduced by more than 45
percent from current levels to restore the Bay and its
tributaries to health. Municipal wastewater treatment plants,
in particular, can be a major source of those needed
reductions.
Now, as you can see from this map, there are approximately
300 major wastewater treatment plants in the Chesapeake Bay
Watershed. Now, Mr. Chairman and members of the committee,
maybe you can't see it by this map because those red dots are
kind of small, but on that map everywhere you see sort of a
name and a red dot, that's a wastewater treatment plant, major
plant. They contribute about 60 million pounds of nitrogen per
year. They discharge typically 18 milligrams per liter of
nitrogen in their effluent. Some 71 of them have been upgraded
with some form of nutrient removal technology to reduce
nitrogen concentrations to about 8 milligrams per liter. We can
upgrade them under the state-of-the-art technology where we get
them down to where they produce 3 milligrams per liter. That,
obviously, would make an enormous impact on this nitrogen
removal problem.
The legislation which Senators Mikulski, Warner, Allen,
Specter, Santorum, and I have sponsored would establish a
grants program to encourage States and municipalities in the
six-State Bay Watershed to go the extra mile and install
nutrient-reduction technologies at major wastewater treatment
facilities. Our legislation would provide grants for 55 percent
of the capital cost of upgrading the plants. We estimate the
total cost would be about $1.2 billion. So the Federal share
would be slightly over half of that; the rest of it would have
to be provided at the State and local level.
This effort would be the most reliable, the most immediate,
and the most cost-effective way to reduce nutrient loads on the
Chesapeake Bay. Mr. Chairman, I think it's pretty obvious that
if we're going to achieve our long-run objectives, we need
Federal assistance in upgrading these sewage treatment plants,
reducing the nutrient loads. The States can't do it alone,
particularly given the interstate nature of the pollution
problem facing the Chesapeake Bay.
We regard the Bay as a unique national resource. It's the
largest and most productive estuary in the country, has a
watershed encompassing 64,000 square miles and parts of six
States and the District of Columbia. Its unique ecological
features combine with its tremendous economic and cultural
importance to make it a resource that deserves national
protection. I'm reminded of the Florida Everglades as I think
of unique resources that require national commitment and a
national protection effort.
I very much hope that the committee can see its way clear
to approve this measure and include it in the legislation it's
considering reporting to the floor of the Senate.
Thank you very much, Mr. Chairman, for the opportunity to
appear before you today on this important issue.
Senator Graham. Thank you very much. Senator, you are not
only unusually persuasive, but your selection of analogies
helped to explain the significance of your proposal.
[Laughter.]
Senator Graham. Let me just ask a couple of factual
questions. What is the share of the nutrient discharge into the
Chesapeake that comes from point source such as wastewater
treatment plants or industrial or other facilities, and how
much comes from non-point runoff from agriculture and other
such sites?
Senator Sarbanes. I am not sure I have those exact figures
in front of me. The point source is the easiest, obviously, to
get it, because it can be identified, and that's why we're
focusing on these wastewater treatment plants which are, of
course, spread throughout the Bay.
We also do have a very aggressive program to try to address
non-point source pollution, but that's more difficult. That's
harder to quantify, and it's harder to get at. It requires, of
course, the cooperation of literally thousands and thousands of
people. But I'll try to get the exact figures for you and
submit it. Well, I'm told that point sources, including
industrial and sewage treatment, make up 25 to 30 percent of
the total nutrient load coming into the Bay from all sources,
but we focus on that because it's the most easily located and
identified, and the quickest to get at, and we have a very good
technology for bringing about these very significant
improvements.
As I said, we're now at the 18 milligrams per liter. We
reduced that by upgrading the technology to 8, and we now have
state-of-the-art technology where, if we take the facilities up
to that level, we can reduce it to 3 milligrams per liter,
which is obviously a huge improvement over where most of these
plants now find themselves.
Senator Graham. Senator Crapo.
Senator Crapo. Thank you, Mr. Chairman. I don't have any
further questions. I appreciate Senator Sarbanes bringing this
important issue to our attention.
Senator Graham. Thank you very much, Senator. We will look
forward to working with you as we proceed with S. 1961.
Senator Sarbanes. Yes, we would certainly place ourselves
at the call of the committee. We're very anxious to work with
you both on S. 1961 and the inclusion of this as well. Thank
you very much.
Senator Graham. Our second panel consists of Mr. Robert
Hirsch, Associate Director of Water, U.S. Geological Survey.
Mr. Hirsch, thank you very much.
STATEMENT OF ROBERT HIRSCH, ASSOCIATE DIRECTOR OF WATER, U.S.
GEOLOGICAL SURVEY
Mr. Hirsch. Thank you, Mr. Chairman. Mr. Chairman and
members of the subcommittee, thank you for the opportunity to
testify today on S. 1961, the Water Investment Act of 2002. As
you know, the mission of the U.S. Geological Survey is to
provide scientific information to support decisionmaking on
issues of resources, environmental quality, and natural
hazards. Information about water has been a central part of our
Agency's mission throughout our 123-year history. My remarks
will be limited to Title IV of the bill, which relates to USGS.
EPA has provided the administration's views on the remainder of
the bill.
We agree that the role defined in Title IV of the bill is
an appropriate one for the USGS, but we would welcome an
opportunity to work with the committee on the bill language to
refine the assigned tasks for the USGS. Let me begin my remarks
by providing some general context.
Competition for water to meet the needs of families,
communities, farmers, and industries in many parts of the
country is increasing, as are requirements to leave water in
the streams to meet environmental and recreational needs.
Information on water resources is needed to help inform
decisions about potential changes in water policies and
investments.
In this regard, the USGS received a directive from Congress
as part of the report on our Fiscal Year 2002 appropriations to
prepare a report describing the scope and magnitude of efforts
needed to provide periodic assessments of the status and trends
in the availability and use of fresh water resources. Our
efforts over the past 6 months in preparing that report have
provided us with insights that may be useful to this
subcommittee as it considers this legislation.
In preparing our report to Congress, the USGS has solicited
input from many individuals and organizations involved in
issues of water availability and use. In response to our
request, we received nearly 100 responses from the water
management and policy communities. Two messages stood out.
First, there was a consensus that a better set of water
facts is needed for informed decisions related to water
availability and use. National organizations, in particular,
noted the need for consistent indicators of water availability
across the nation. However, individuals representing State and
local governments reminded us that many States have conducted
extensive planning to quantify water availability and that the
availability and use of water is largely a State, local, or
tribal issue.
Our report to the House Appropriations Committee is in the
final stages of review at the present time. Based on the
comments we received from others, we believe that the critical
need is for regular reporting of indicators of the status and
trends of storage volumes, flow rates, and uses of water
nationwide. This information is not available in an up-to-date,
nationally comprehensive and integrated form at the present
time.
An assessment such as called for in this bill would need to
rely on up-to-date, nationally consistent indicators that would
reflect the status in surface water flows and storage,
groundwater levels and storage, and water use. Currently, the
USGS provides a number of assessment-type streamflow products
on daily, weekly, and monthly time scales. Under a new program
such as called for in this bill, the USGS would also produce
indicators that describe streamflow at longer time scales.
Long-term, systematic measurements of groundwater level
provide essential data needed to evaluate changes in
groundwater storage over time. However, at the present time, no
Agency prepares a regular report of long-term changes in
groundwater storage in our nation's aquifers.
Tracking water use is an important part of understanding
water availability. The USGS has compiled and disseminated
estimates of water use for the nation at 5-year intervals since
1950. The National Research Council recently reviewed the USGS
program for water use information and will be making a number
of recommendations for improvement in the program. This NRC
report will be released within the next few months. We would
encourage the committee to seek their input on this important
component of the water resource equation. Valid and consistent
water use data are as vital as river flow or groundwater data
and are often more difficult to acquire.
In summary, if this bill were enacted and funds
appropriated, the USGS would develop and report on indicators
of the status and trends of storage volumes, flow rates, and
uses of water nationwide. The development and reporting of
national indicators of water availability and use would be
analogous to the task of other Federal statistical programs
that produce and regularly update indicator variables that
describe economic, demographic, or health conditions of the
nation.
In regard to Section 403(b) on water resource research
priorities, we would note that we are currently contracting
with the National Research Council, at the direction of
Congress, to conduct a study of the priorities for, and best
means of, organizing water research across the Federal
Government. We would suggest that this National Research
Council effort may provide very valuable inputs to help carry
out the objectives of this section.
In regard to Section 403(c) on information delivery
systems, the objectives defined here are very much in concert
with the existing charge to the USGS under OMB Memorandum 92-01
on coordination of water resources information. This section
would reinforce our ongoing role of coordination of water
information across the Federal Government.
We do have some concerns about the feasibility and
appropriateness of some of the tasks defined in the bill. For
example, the bill directs the USGS to identify areas of the
United States that are at risk for water shortages or
surpluses. However, long-range predictions of water supplies
cannot be determined solely by physical science, but are
heavily dependent on human decisions to invest in
infrastructure, restrict use, change water laws, et cetera,
which are largely State decisions.
The USGS can make a significant contribution to these
issues by regularly providing indicators of the changing status
of the nation's water resources derived from long-term
monitoring. However, defining areas of shortage and surplus
over long timeframes is neither feasible nor is it appropriate
for a Federal scientific Agency.
We would welcome an opportunity to work with the committee
on the language of Title IV to assure that it defines a task
that is appropriate and useful. I welcome any questions you may
have.
Thank you, Mr. Chairman.
Senator Graham. Good. Mr. Hirsch, thank you for your
testimony, and particularly your several indications that the
USGS will work with the committee as we try to construct in
Title IV an appropriate capacity to get the best scientific
information as to the current status and the future direction
of water supply, recognizing that there is a considerable time
gap between the recognition that you have a problem and your
ability to take actions that will begin to affect that problem.
We accept your generous offer and look forward to doing so.
Frankly, I was one, with Senator Crapo, who had urged that
Title IV be heavily oriented toward the U.S. Geological Survey
because both of us have had experience with the USGS and
recognize its professionalism and the degree of credibility
which many of the stakeholders in this area invest in the USGS.
We also come out of a strong background of State water
rights and recognize the special role of the States in the
management of their water, are not by any means in this title
suggesting that the Federal Government is going to become
authoritarian and take over water supplies, but rather use its
special scientific knowledge, particularly as invested in the
U.S. Geological Survey, to be of assistance to the States.
With having said that, you raise some concern about
projecting future water needs, and all of the factors, many of
which are non-scientific there, they are demographic or public
policy judgments. But do you think, can USGS give to the States
such as mine, which is one of those that used to think of
itself as having an abundance of water and has only recently
started to recognize its restraints, the scientific basis upon
which then better public policy decisions, and including land
use and others that affect demographic distribution, can be
made?
Mr. Hirsch. Thank you for those comments and question. I
think we can and do make significant contributions, and I would
point particularly to something called our Cooperative Water
Program, in which we cooperate with over 1,400 State and local
agencies nationwide, and that program is extraordinarily and
productive in the State of Florida, in which we provide a great
deal of information of that kind.
I think what this particular legislation would do is add
another dimension to what we do, particularly as things move
beyond the boundaries of a State into multi-State issues, so
that we have consistent look at, for example, large river
basins that cross State lines, aquifer systems that cross State
lines, which is somewhat difficult for us to deal with simply
through the mechanism of our cooperative program, which is
cooperative just with individual State governments or
localities. So I think this program would add a dimension to
our ability to answer those kinds of questions.
Senator Graham. Senator Crapo.
Senator Crapo. Thank you very much, and, Mr. Chairman, I
appreciate you highlighting our concern about State sovereignty
over water. Mr. Hirsch, I also appreciate the fact that you
also mentioned it in your testimony.
One of the very important considerations that we undertook
as we prepared this section of the legislation was to do
everything we could to assure that it was clear that we are not
in this section of the legislation seeking to in any way
undermine State sovereignty over the allocation, management,
and use of water.
The question I have for you is, viewing Title IV, the
entire section under which you would be involved, do you see
any way in which the authorities that we establish here and the
studies that we establish here could undermine State
sovereignty of water?
Mr. Hirsch. Let me give an example. I was particularly
struck in the reading of it by the use of the word ``surplus.''
Hypothetically, if we were to issue a report sometime in the
future that says a particular State has a surplus of water, and
that State were to enter into negotiations with an adjoining
State or even international, I think that would have perhaps an
undesirable effect on those negotiations.
I know of no jurisdiction that probably thinks that it has
a surplus of water. On the other hand, a declaration from us
that there is a shortage of water, when State officials feel,
based on their information and their policy decisions, that it
is appropriate to allocate additional water, we would set
ourselves in a position of really contradicting those State
authorities, who I think should be the ones to say, from a
legal sense, is there a shortage or is there is a surplus, and
how should we deal with it?
So the other aspect of it is that a community could be in
severe State of shortage at a particular moment in time, but a
decision to invest in certain infrastructure, such as
additional dams, pipelines, wells, et cetera, could remedy that
shortage very rapidly. So that statement is very much subject
to those investment decisions that it chooses to make.
Senator Crapo. So is this one of those areas of the
language in the legislation that you felt you----
Mr. Hirsch. Right.
Senator Crapo.--could work with us on the committee to
further refine----
Mr. Hirsch. Right.
Senator Crapo.--so that we make it clear that we achieve
the objectives of the legislation but don't create any possible
undermining of State sovereignty?
Mr. Hirsch. Exactly. I think our attempt would be to make
objective statements of, for example, in areas where there are
major aquifers that are being mined, where the water is being
depleted over the long-term to simply quantify the extent of
that mining of groundwater just as one would define the mining
of coal or the extraction of oil, and to put a number on that,
but as opposed to projecting it or calling it a shortage or a
surplus.
Senator Crapo. Leave it to the policymakers to call it a
surplus or a shortage?
Mr. Hirsch. Exactly.
Senator Crapo. You define what it is, quantifiably?
Mr. Hirsch. That's right.
Senator Crapo. Well, thank you very much. I appreciate
that.
Senator Graham. Thank you very much, sir.
The members of panel three would please come forward. I
will introduce you by name and affiliation: Mr. Andrew Chapman,
who is testifying on behalf of the National Association of
Water Companies; Mr. Ed Archuleta, testifying on behalf of the
Association of Metropolitan Water Agencies; Mr. Paul Pinault,
testifying on behalf of the American Metropolitan Sewerage
Association; Mr. Elmer Ronnebaum, testifying on behalf of the
National Rural Water Association, and Mr. Howard Neukrug,
testifying on behalf of the American Water Works Association.
I wish, on behalf of the subcommittee, to express our
appreciation to each of you for your joining us this afternoon.
We look forward to hearing your remarks. I will ask you to make
your remarks in the order in which you were introduced. Mr.
Chapman.
STATEMENT OF ANDREW M. CHAPMAN, PRESIDENT, ELIZABETHTOWN WATER
COMPANY, ON BEHALF OF THE NATIONAL ASSOCIATION OF WATER
COMPANIES
Mr. Chapman. Good afternoon, Mr. Chairman and Senator
Crapo. My name is Andrew Chapman. I'm president of the
Elizabethtown Water Company, which serves a million people in
central New Jersey, and I am also vice president of the
National Association of Water Companies, which is a nonprofit
trade association representing the investor-owned drinking
water utilities.
Mr. Chairman, NAWC commends you and the subcommittee for
taking on this issue and introducing S. 1961, the Water
Investment Act of 2002. We're particularly encouraged with your
bipartisan approach to this legislation, and this practice has
characterized your committee's and the Congress' work on
drinking water for many years, and we certainly hope that that
bipartisan approach continues.
We are not here to complain or suggest substantial changes
to S. 1961. In fact, NAWC, along with our colleagues in the
H<INF>2</INF>O Coalition, support S. 1961 in its current form.
We do so for the following reasons:
First, the bill requires, as a condition for getting State
Revolving Fund assistance, that a potential recipient consider
consolidating ownership and management functions with other
utilities. There are over 50,000 community water systems in the
United States, and many of these systems are very small. In
many cases the financial challenges facing these utilities can
be addressed by achieving economies of scale through
consolidation, and by tying consideration of consolidation with
SRF assistance. S. 1961 will encourage localities to look for
these economies of scale. To do so, they are, of course,
putting aside their own parochial interests, but they're doing
what's right for the customer in providing safe, adequate, and
proper service at minimum cost.
Second, the bill encourages utilities to use public/private
partnerships. Municipalities all over the country, large and
small, have realized substantial savings and success through
these partnership arrangements. Cost savings that localities
have realized over the years from such arrangements can run up
to 40 percent. I can tell you from personal experience with my
company, that these approaches can work, and your inclusion of
this provision in the bill and tying that to SRF funding makes
a lot of sense.
Third, the bill will also keep the industry moving on the
path toward self-sustainability from the standpoint of
financial operations because you need rational, cost-based rate
structures to cover the full cost of providing services, and
also supporting good asset management policies.
Fourth, the authors of the bill have wisely gone outside
the box to an innovative program designed to assist
disadvantaged consumers, instead of an entire utility operation
and in circumstances where only some of the utility's customers
are disadvantaged. Programs like this have been used in the gas
and electric utilities with substantial success, and they
enable Federal financial support to be targeted exactly toward
those consumers who need that support, rather than to the
overall utility.
Finally, as you can imagine, NAWC, which represents the
private water industry, is particularly happy to see that all
utilities are being treated equitably under S. 1961 regardless
of ownership. The bill makes private utilities eligible for the
first time for assistance under the Clean Water Act SRF, which
is good. This is a long delayed and much-needed innovation for
the program that will place all systems in the wastewater field
also on a level playing field with respect to access to the
SRF.
We are also very supportive of the provisions in S. 1961
that will bring fairness to the State SRF allocation process.
The bill's provisions require States that include private
utilities in their needs survey to ensure that private
utilities are actually eligible for assistance.
We're glad that S. 1961 does not authorize a large grant
program, which some have been advocating. We think that these
grant programs can encourage inefficient application of capital
within the industry and can impede the industry's progress
toward being a financially self-sustaining industry, which it
needs to be going forward.
Also, by requiring asset management and full cost-of-
service rates, S. 1961 requires utility managers who chose to
take the SRF financing to take the steps necessary to assure
self-sustainability of these utilities over the long-term.
Without provisions like these, history has shown that water
utilities will keep coming back to the government for
additional subsidies at cost to the taxpayer, and with good
ratemaking procedures, this is unnecessary.
Senator Graham. Could you conclude your statement in 25
seconds?
Mr. Chapman. There are two other issues that I would like
to raise.
First of all, the industry strongly believes that the caps
on private activity bonds for water and wastewater facilities
should be removed. This simple change will make capital easier
for both private and public sector water and wastewater
investments, and would be a step in the right direction.
Finally, we're encouraging the committee to include
language in S. 1961 to make compliance with drinking water
standards a defense in lawsuits. This would address a problem
the entire water industry is facing. Failure to address this
issue will undermine the entire standard-setting process, which
is a terrific bipartisan achievement of Congress, the executive
branch, the States, and the industry.
Mr. Chairman, Senator Crapo, thank you for the opportunity
to speak, and I'm happy to take any questions.
Senator Graham. Thank you very much, Mr. Chapman. We'll
withhold questions until all the members of the panel have had
an opportunity to present their opening statement.
Mr. Archuleta.
STATEMENT OF ED ARCHULETA, GENERAL MANAGER, EL PASO WATER
UTILITIES, ON BEHALF OF THE ASSOCIATION OF METROPOLITAN WATER
AGENCIES
Mr. Archuleta. Yes, good afternoon, Mr. Chairman and
Senator Crapo. My name is Ed Archuleta, and I'm the general
manager of El Paso Water Utilities. I'm testifying today on
behalf of the Association of Metropolitan Water Agencies, AMWA,
which represents the nation's largest publicly owned drinking
water systems.
We want to thank you for introducing Senate bill 1961,
which is the first legislation to increase the Federal
investment in drinking water infrastructure since the 1996
amendments to the Safe Drinking Water Act. Our association
believes the bill takes a major step in the right direction by
proposing to triple the authorization of the Drinking Water
State Revolving Fund.
Senate bill 1961 reinforces the drinking water SRF support
of small water systems, but AMWA would like the subcommittee to
consider how legislation could help metropolitan water systems,
too. Earlier this afternoon Senator Clinton mentioned New York
and its tremendous infrastructure issues, and these are
indicative of major needs that we have in large systems across
this country.
These are the systems that serve our nation's largest
communities. To get a sense of the needs facing these very
large systems, consider this: According to a recent survey,
just 32 metropolitan systems reported that they must spend $27
billion over the next 5 years on drinking water and wastewater
infrastructure. Nationwide the needs of metropolitan water
systems are much higher. Yet, 31 States provided no assistance
to metropolitan water agencies in Fiscal Year 2001.
To help these cities, AMWA recommends a 15 percent set-
aside for metropolitan drinking water agencies to make certain
that States address their needs. Among the new requirements
established by this bill are implementation of responsible rate
structures and asset management plans, coordination with State
planning agencies, and consideration of partnerships and non-
structural alternatives. These practices embody those commonly
used in metropolitan water agencies today.
For example, in my city we have a number of public/public
and public/private partnerships. I'm currently doing planning
with Mexico, with WTAS in Mexico under our own initiative. So
these are already in place in regional metropolitan areas.
In our particular city, over the next 10 years we will have
to spend $800 million in capital. We just raised rates by 9
percent, effective March 1, and we anticipate a 60 percent
increase over the next 10 years. In our particular city, we
have major water supply issues that we face in the future as a
desert community. We face a new arsenic standard we must comply
with, and, of course, rehabilitation and replacement, as well
as growth of our city.
In our city we also have an asset management plan, which
major cities have, to ensure capital is available for future
upgrades. Like most large water systems, the authority complies
with the general accounting standards for State and local
governments known as GASB-34.
So AMWA encourages the subcommittee to maintain these best
practices as ideals and provide the opportunity for utilities
that have not yet adopted them to do so. But these areas are
not in the realm of State environmental agencies or the U.S.
EPA, both of which would have to develop rules or guidance and
criteria for enforcement and compliance. AMWA urges the
subcommittee to avoid a situation in which the States or U.S.
EPA enter the domain of local government and attempt to
reinvent the wheel.
Also among the requirements of Senate bill 1961 is, one, to
require water systems to consider public/private partnerships,
but whether a water agency specifically considers public/
private partnerships should remain at the discretion of local
government, because local factors will dictate whether the
partnership is in the interest of the consumers or not.
Also, privatization experts have identified some of the
issues that need further exploration. Among them are those
surrounding accountability and the blurring of roles and
responsibilities. For example, who is responsible for complying
with environmental regulations, resolving service complaints,
and planning to meet future needs? Who pays if the private
partner fails? If the private partner takes on more liability
than it can afford, who's responsible when something goes
wrong?
Another issue that has recently emerged is a concern about
the implications of international agreements on domestic
privatization, since four of the major companies involved in
the United States water market are located in other countries.
Therefore, the association urges the subcommittee to look into
public/private partnerships more closely before so strongly
endorsing them. Privatization can be a very contentious issue
in communities and worth a full exploration before Congress
legislates it.
In summary, we thank you for introducing the Water
Investment Act of 2002, and our association is willing and able
to work with you on any appropriate language changes, as we
have suggested. Thank you.
Senator Graham. Thank you very much, sir.
Mr. Paul Pinault.
STATEMENT OF PAUL PINAULT, EXECUTIVE DIRECTOR, NARRAGANSETT BAY
COMMISSION, ON BEHALF OF THE ASSOCIATION OF METROPOLITAN
SEWERAGE AGENCIES
Mr. Pinault. Good afternoon, Chairman Graham, Senator
Crapo, Senator Chafee. My name is Paul Pinault. I'm executive
director of the Narragansett Bay Commission in Providence, RI,
and I also serve as vice president of the Association of
Metropolitan Sewerage Agencies, AMSA.
Thank you for introducing the Water Investment Act and for
holding this hearing today. AMSA commends you for moving toward
a strong financial commitment that would significantly increase
the authorization levels of the SRFs to $35 billion over 5
years. AMSA is grateful for your recognition that our nation's
clean and safe water is a priority worth paying for. We urge an
increase in the proposed funding level to help meet the
documented gap between local financing and long-term needs,
several of which were discussed this afternoon by your
colleagues.
The magnitude of the challenges we face are daunting. The
continued viability of our nation's core water and wastewater
infrastructure requires long-term Federal funding, including
grants. Without this commitment, we will face an environmental
and public health crisis that is simply unthinkable.
Municipalities today shoulder nearly 90 percent of
infrastructure costs and face costly regulatory requirements,
including combined sewer and sanitary sewer overflow rules. The
tragedies of September 11th have also increased our operating
costs, as many facilities face expensive vulnerability
assessments and security upgrades.
Our local ratepayers simply cannot fund all these
requirements and also modernize and repair their plants and
collection systems without a long-term Federal commitment. For
example, my Commission's current debt service as a percentage
of total operating budget is 22 percent. By 2007, debt service
will jump to 48 percent, due to $365 million in planned capital
projects over the next 5 years, a total of $746 million over
the next 10 years, including startup costs on a federally
mandated combined sewer overflow project.
The fact that 48 cents out of every dollar we receive will
go to debt service clarifies the urgent need for a long-term
Federal infrastructure commitment. Accordingly, we respectfully
recommend the following modifications to S. 1961, beginning
with streamlining SRF funding procedures:
As written, the bill assigns new Federal and State roles in
reviewing local wastewater rate structures, public/private
partnership efforts, and asset management programs, and makes
many of these prerequisites to SRF loans. Municipalities
already consider all of these issues regularly and carefully.
Adding layers of oversight will narrow the pool of SRF
applicants, the precise opposite of S. 1961's stated purpose.
We also recommend that the committee consider modifying the
bill to encourage and assist communities in developing asset
management programs, instead of making asset management a
prerequisite to apply for an SRF loan, which will only
discourage applicants. In fact, the market is already directing
us toward this goal, and AMSA is leading the way.
For example, AMSA recently released this Asset Management
Workbook, and starting today we're running a series of
workshops around the country to educate our members on asset
management tools and the growing demand for asset management.
AMSA shares the committee's concern for our disadvantaged
communities and populations. States and municipalities are,
however, addressing many of these concerns under existing
programs. We are worried that the bill's allowance of up to 45
percent of all SRF funds to be directed to disadvantaged
communities and asset management programs will direct funds
away from core infrastructure funding. As such, we recommend
States be given broader flexibility to target grants, principal
forgiveness, and negative interest rates on loans where they
are most needed. Similarly, we recommend that the bill allow
all communities to take advantage of the 30-year or life-of-
the-project loan repayment schedule.
AMSA would also like the committee to revisit the provision
requiring a National Academy of Sciences rate study. Much of
the data is already available and AMSA's financial survey
demonstrates this. We can make copies available to you and your
staff.
AMSA believes authorization of a program for innovative
technologies and research is vitally important. We would like
to see funding levels for the program increased and eligibility
expanded to help municipalities meet core infrastructure and
regulatory challenges.
We applaud your leadership efforts and look forward to
working with you on S. 1961 to ensure a lasting, long-term
fiscal partnership with the Federal Government to meet the
nation's core water and wastewater infrastructure needs. Again,
we're available to answer your questions.
Senator Graham. Thank you very much, sir.
Mr. Ronnebaum.
STATEMENT OF ELMER RONNEBAUM, GENERAL MANAGER, KANSAS RURAL
WATER ASSOCIATION, ON BEHALF OF THE NATIONAL RURAL WATER
ASSOCIATION
Mr. Ronnebaum. Mr. Chairman, Senator Crapo, Senator Chafee,
good afternoon.
Thank you for the opportunity to be here today to discuss
small communities and their water funding needs. My name is
Elmer Ronnebaum. I'm general manager for Kansas Rural Water.
We're a member of the National Rural Water Association in
Kansas. We have approximately 900 public water supply systems,
700 of which are members of Kansas Rural Water. National Rural
Water represents some 22,000 small water and community water
and wastewater utilities.
We thank you for your efforts to assist small communities
in finding solutions to the Clean Water Act and Safe Drinking
Water Act, and to provide the safest drinking water and
cleanest effluent possible. Rural Water looks forward to
working with you as you move these ideas into laws and actual
dollars in the field.
I feel the principal dynamics of small communities that we
believe need to be recognized in discussing funding policies
include: first, that small communities make up 90 percent of
the systems in the country; second, that a lack of economics
due to scale, small town consumers often pay high water rates.
In Kansas it's not uncommon to have a water bill of $50 for
5,000 gallons. Many of these communities do not have other
funds on which to pay that water bill. It's simply a revenue
base.
Small systems often have limited technical and
administrative resources to deal with compliance and navigate
through funding programs. Consolidation and privatization are
options, yes, but only when economies make sense. We can't run
a pipeline 42 miles to connect Atwood to Stockton, KS.
In 1996, another Senator from Idaho had a great idea, and
he introduced a great amount of flexibility into this program
called the State Revolving Loan Fund. Small communities'
message here today is that that was a monumental step in the
right direction. This flexibility has made State SRFs better
and more responsive to nearly every stakeholder. Small systems
have seen a level of inclusion and involvement and the benefits
for drinking water that we would not have imagined, given the
history of the Clean Water Act SRF.
My State of Kansas is exemplary. The State Drinking Water
Revolving Loan Fund is the highest leveraged in the United
States. It leverages $1 to $4. We've made $133.4 million in
loans to 65 communities. Fifty-two of those communities were
populations of less than 10,000. Of the dollar amount, that is
$65 million. So that's a big percentage to small systems.
We would like to summarize the key elements for small and
rural communities in modifying the wastewater and drinking
water SRFs as follows:
Make the Wastewater Fund more like the Drinking Water Fund
and put more money in both.
We urge you to include three legislative provisions
contained in the current drinking water SRF in both water and
wastewater to ensure communities with the greatest public
health and economic need receive prioritization: No. 1, that
communities exhibiting the greatest need should receive
priority, No. 2, provide both loans and grants, and No. 3, a
minimum portion of the funds should be set aside for small
systems.
Our specific comments on Senate bill 1961 include: First,
we appreciate that the bill did not include a myriad of new
priorities for funding set-asides for various sized systems and
changes in the disadvantaged communities' determination.
Second, we appreciate that the bill retains the three SDWA
provisions to ensure funding results in the greatest
advancements in public health and protection. We urge the
committee to include the same set-aside amounts for the
wastewater as in the drinking water program, a minimum of 15
percent.
We believe that corporate water systems should not be
eligible for State revolving funding. Taxpayer subsidies should
be prohibited from profit-generating companies or companies
paying profits to shareholders and investors.
The bill includes many new requirements for applicants,
including environmental, land use planning, capacity, actual
cost of water, common industry practices. We urge you to
exercise caution for increasing demands on these, as more and
more complicated application processes will detract the small
systems from participating in the program.
We urge the committee to limit the ability of any portion
of the water system or wastewater system to be eligible as a
disadvantaged-type subsidy or other special treatment. To
assist a portion of a system moves the effort from an
infrastructure program into a social program.
We urge the committee to consider including provisions
guiding a percent of the project for professional services' use
for engineering and consulting, similar to what USDA has in its
programs.
Last, it's not clear what defines public/private
partnerships. This may be too ambiguous, and it means various
things to various people.
Thank you, Mr. Chairman and members of the committee. We
would be happy to take questions later.
Senator Graham. Thank you very much, sir.
Mr. Neukrug.
STATEMENT OF HOWARD NEUKRUG, DIRECTOR, OFFICE OF WATERSHEDS,
PHILADELPHIA WATER DEPARTMENT, ON BEHALF OF THE AMERICAN WATER
WORKS ASSOCIATION
Mr. Neukrug. Well, good afternoon, Mr. Chairman and Senator
Crapo.
I am Howard Neukrug. I'm the director of the Office of
Watersheds with the city of Philadelphia Water Department. I am
speaking today on behalf of the American Water Works
Association, where I serve as chair of the Water Utility
Council. AWWA has 57,000 members, 4,700 utility members. We
represent not just small and not just large, but both small and
large utilities, and not just municipal or private, but both
municipal and private utilities serving drinking water
throughout the United States.
I'm honored by this opportunity to express to you the views
of the American Water Works Association concerning this
important legislation. This bill marks a significant step by
Congress toward solving our nation's enormous water
infrastructure challenges. We appreciate the time and
consideration already given to the drinking water suppliers by
the committee and its staff. We look forward to continuing our
work with you and to see this bill passed and signed into law
this year.
As you know, the drinking water community faces many new
and expensive Federal mandates, including standards for
arsenic, radon, disinfection byproducts, and enhanced surface
water treatment. Wastewater utilities also face enormous
challenges related to CSOs and SSO programs. Over the next 20
years it is clear that the Safe Drinking Water Act and the
Clean Water Act mandates, combined with other infrastructure
requirements and new security-related upgrades, will compete
for limited capital resources.
We must respectfully note that this bill's authorization
levels are a very small fraction of the $250 billion in
infrastructure replacement needs identified by AWWA in this
publication, which is available to committee and staff, and the
$57 billion recommended by WIN over 5 years. Under this bill,
the burden of paying for public water system improvements will
remain overwhelmingly with the utilities and their ratepaying
customers.
Further, significant assistance in the form of both grants
and higher levels of authorization for loans is, indeed,
justified to help meet the costs of these Federal mandates.
Without the support, we risk deferment of infrastructure repair
where Federal mandates overwhelm local capital programs.
Concerning project eligibility, we applaud the provisions
of the bill that authorize the use of SRF moneys to support
source water protection projects. As you know, source water
assessments are required under the 1996 Safe Drinking Water Act
amendments, but there are no requirements to implement source
water protection. The ability to use SRF funds to support
source water initiatives will be of significant assistance.
With respect to distribution system infrastructure repairs
and security upgrades, AWWA respectfully suggests that these be
explicitly listed in the statute as SRF-eligible. Specific
congressional language would not only signal your strong
support for SRF funding for infrastructure repairs and security
upgrades, but will help clarify any remaining ambiguity.
With respect to streamlining procedures for obtaining
drinking water SRF loans, we believe careful attention is
required to strike an appropriate balance between Congress'
desire to encourage certain behaviors at utilities and the need
to keep the SRF as unencumbered as possible by unproductive red
tape. We believe that Section 202 requires significant review
with this in mind.
In particular, while we strongly support the concepts of
asset management best practices, self-sustaining rate
structures, procurement competition, and optimizing management
strategies, these are most appropriately local decisions based
on local circumstances. Federal oversight of these management
tools does not, in our opinion, either improve nor streamline
the drinking water SRF program.
Finally, we respectfully recommend that the American Water
Works Association Research Foundation be identified in the bill
to manage many of the studies and demonstration projects listed
under Sections 302, 303, and 304. The Foundation is an
internationally recognized research organization of the
drinking water community. With over $37 million in Federal
support over recent years, the AWWARF has leveraged almost $260
million in total research on both technical and policy issues
facing drinking water utilities.
In conclusion, AWWA believes that S. 1961 is an appropriate
first step to achieving our joint goals. In our testimony we
have made recommendations that we believe will improve the
bill. AWWA pledges to work with Congress to develop a
responsible and fair solution to the nation's growing drinking
water infrastructure challenge. I thank you for your
consideration of our views. Thank you.
Senator Graham. Thank you very much. To each of you, we
would be very appreciative, if you have any specific
recommendations beyond what is in your prepared statement for
modifications of the legislation. As was indicated earlier, we
are going to be moving on, I hope, a fast track on this
legislation with the possibility of having a mark-up hearing on
this bill within the next 2 to 3 weeks, and then move it to the
floor. So your comments would be timely and very much
appreciated.
Mr. Pinault, you made a comment--we've been jointed by our
chairman, Senator Jeffords, who is typically generous enough to
say that we should proceed with our questions.
You made a statement that we should preserve the 30-year
loan repayment schedule. My State had a State Revolving Fund
before the national program was initiated, and our thesis was
that the principal problem that local water facilities had was
in the preoperational phase; that is, in the period in which
they were doing land acquisition, planning, design, and
construction, and there was no revenue coming in. That was a
hard phase to finance; that once the plant was completed and
operational and generating revenue, you could then go to other
sources of financing for that.
So I have been influenced by that experience to say that
the SRF ought to be primarily focused not on permanent
financing, but rather on that difficult-to-finance, early stage
of plant design, planning, and construction. One of the
benefits of focus is that that means the money turns over more
rapidly, and is, therefore, available to more communities that
want to use the State Revolving Fund.
Have you experienced some difficulty in getting revenue-
based financing for the plant once it is in operation and is an
ongoing economic entity?
Mr. Pinault. That hasn't been an issue in New England. In
the Providence metropolitan area, which we serve, it's
basically been sewered since the 1800's, and development is not
an issue as much as it is in your area of the country.
The problem we have faced, though, is, because we have $746
million in projects in various stages of planning, design, and
construction, we have been warned by the rating agencies,
Standard and Poor's and Moody's, that they are concerned about
the impact on rates. We had a 25 percent rate increase last
January. In December of this year we applied for another 25
percent rate increase, and we will be doing that annually just
to pay for the $300 million first phase of our CSO project over
the next 5 years.
So one of the things we've looked at is we can only borrow
up to 20 years. We always try to pay back the loan as quickly
as possible because, obviously, the longer you spread it out,
the more it costs you. But there may be a situation in time
where, because the facilities we're putting in the ground are
going to last at least 50 years, at least the pipelines, we
feel that there is a justification to at least have the
provisions to pay back up to 30 years, which we feel gives some
flexibility which could be added to this bill.
Right now the 30-year provision is limited to disadvantaged
communities only. Whether or not you're a disadvantaged
community is left up to the definition by each State. It could
vary from State to State. So we feel that this is a flexibility
tool. Whether or not it is used will be determined on a case-
by-case basis, and that's our position on that matter.
Senator Graham. Are there any other comments on the
question of whether the State Revolving Funds should be focused
on the initial period pre-revenue-generating or should be
available as permanent financing?
Mr. Neukrug. Yes, we fully support the eligibility for the
SRF funding to be for pre-revenue-producing times of the
project.
Senator Graham. Any others? Yes, Mr. Chapman?
Mr. Chapman. I wouldn't want the availability of the
program for permanent financing to be reduced. With an
investor-owned utility where you have a State commission
setting the rates, the typical practice is that the lower cost
of capital provided through the Revolving Fund Program is
passed through to the customers when the utility goes in and
files for rates.
So, to the extent that we don't have permanent financing
through the program anymore, but only construction financing,
and then you would shift to market-based permanent financing,
the rates would kick up at that time; the customer rates would
kick up to cover that higher cost of capital.
We have used the program in our company in several
circumstances where it is providing a good long-term source of
capital under a 20-year repayment scheme, and that's been very
successful for us, and our customers are enjoying the benefit
of that lower cost of capital.
Senator Graham. The concern is, however, if you have your
money tied up in long-term permanent financing, then does that
not make it more difficult for other communities within the
State to be able to access the State Revolving Loan Fund for
their initial pre-revenue construction phases?
Mr. Chapman. Our experience has been, as long as that
permanent financing either is in place or reasonably can be in
place, the availability of construction period financing or
financing prior to the in-service date has not been a problem.
Senator Graham. My 5 minutes are up.
Senator Crapo.
Senator Crapo. Thank you very much. In fact, Senator
Graham, you have covered the issue I was going to cover. I just
would like to specifically direct this question to Mr.
Ronnebaum.
That is, as Senator Graham has indicated, S. 1961 provides
eligibility for standalone projects to do design, planning, and
engineering, and to be covered in the loan process. I just
wanted to get for the record your feelings about whether that
is a positive development in the utilization of these funds.
Mr. Ronnebaum. Rural Water would support that, Senator. In
Kansas, any work in design and planning presently can be
covered by an SRF loan once it's approved. However, that
doesn't sometimes kick in the local community to work on the
regional concept; that otherwise may not be ever brought to the
table. So if you have that incentive possibly out there to
allow those types of grants, there would be more communities
participating.
Senator Crapo. Thank you. I have no further questions, Mr.
Chairman.
Senator Jeffords. I have just one question for you. What do
you think is the appropriate Federal responsibility for water
infrastructure, and how does that affect the future of the SRF
program? All the hands leaping into the air there.
[Laughter.]
Senator Jeffords. Go right ahead, Mr. Ronnebaum.
Mr. Ronnebaum. Senator, with all due respect, most of the
communities--you hear a lot about self-sufficiency. If they
didn't have increasing Federal mandates to comply with, they
could be self-sufficient. It's the Federal mandates and the
decreasing standards that cost more and more money.
In the city of Atwood, KS, when it has a 12-part-per-
billion arsenic standard, it's going to cost that community of
1,300 people from $1.3 to $2 million additional money to change
that standard possibly by a total of two. So that is what is
adding to the cost of infrastructure improvements.
Mr. Archuleta. Yes, representing AMWA, our largest cities,
I think it's a combination of, in the West, for example, as
well as in other parts of the country, growth is a big issue.
In most communities development is not paying entirely for
growth of the system, particularly for large water plants,
wastewater plants, and large infrastructure. Typically, there's
fees or other revenues associated with some parts of the
infrastructure, including subdivisions, and what have you.
So it's a growth issue. You do have the regulations, which
are a big impact, particularly on drinking water, to us as
large systems. Then, of course, the rehabilitation. But the
answer is I think there has to be a reasonable program of at
least low interest loans.
In our particular city, we've used commercial paper. I
think most large cities do not necessarily have to have the
access to the engineering and pre-construction moneys, like
small cities, because we can access that. It's when you get
into construction, and we've had to go longer, too. We're
having to go longer-term, more than 20 years, like we used to,
because of the fact that, otherwise, you upload all your fees
and cause big rate impacts on customers.
Senator Jeffords. Mr. Chapman.
Mr. Chapman. Senator, this SRF program really works. It's
been incredibly effective in my State, in New Jersey. I was
actually the treasurer of the State organization that was
established to do the State side of the funding. Many of our
municipalities and privately owned/investor-owned water
companies have participated in this program, and it's been a
huge success.
Senate bill 1961 is an appropriate next step in the
evolution of a really successful program. There is certainly an
ongoing Federal role for providing low-cost capital to those
communities that need it, but there is also language in this
bill which is appropriate in that it pushes the water utility
industry further toward financial self-sustainability. I think
that ultimately gets us to the point where you have water
provided on a cost-of-service basis in the communities where it
can be provided on that basis, where you do not have the
industry coming in year after year or decade after decade
trying to get substantial amounts of Federal money. I think
that is an appropriate direction for the industry to take. I
applaud the provisions of this bill that continue to move the
industry in that direction.
Mr. Neukrug. Senator, in the State of Pennsylvania, we find
that the State Evolving Fund Program is also a very successful
program and we are very pleased to see this bill put in place.
If there is a complaint that we had with it, probably the
biggest one is the appropriations, the level of appropriations,
compared to the amount of Federal mandates, particularly in the
CSO programs and on the drinking water side with the new
regulations coming down, a significant amount of additional
cost coming in.
We look forward to continuing a partnership with the
Federal Government funding the SRF program and seeing it
continue for many years.
Mr. Pinault. I noted earlier, Mr. Chairman, that in the
State of Rhode Island we have the largest wastewater authority.
We are under a consent agreement to spend at least $600 million
to solve combined sewer overflow problems. Right now we're the
largest borrower from the SRF program. We receive over 50
percent of the loans.
But even with that help, rates are going up at an average
of 25 percent a year, and they will go up by about 120 percent
in the next 5 years, just because of the CSO project. So any
assistance that we can get from the government would help.
In addition, we just awarded a contract last week for $60
million for nutrient removal for our smaller treatment plant.
So it's ongoing Federal requirements, meeting TMDLs, SSO, CSO;
it never ends. We're trying to do the best we can, but it's
very difficult, especially in our community we have 22 percent
below the poverty level, 16 percent are elderly, 65 percent of
the poor children in the State live in our district, and a lot
of people have trouble paying their bills right now.
Senator Jeffords. Thank you. Thank you, Mr. Chairman.
Senator Graham. Thank you, Mr. Chairman.
One of the objectives of this legislation, which authorizes
an additional $35 billion for the State Revolving Fund, is that
this be the last authorization for the State Revolving Fund.
The theory has been that there would be a block of Federal
funds allocated among the States, and the States would manage
that in a manner that, as one loan is paid off, then that would
release funds which could be used for future loans.
In fact, the original structure of the program called for
the last Federal payment under the State Revolving Fund for the
Clean Water Act to be in 1995. Do you believe that the $35
billion that we are appropriating here, in conjunction with the
previous appropriations for this purpose, will, in fact, be
such that no further Federal funds after this 5-year
authorization period is expended will be required?
Mr. Pinault.
Mr. Pinault. Again, Senator Clinton mentioned the needs in
her State, billions of dollars, similarly in the State of Rhode
Island, billions of dollars, with current requirements. As we
all know, requirements continue to increase. If things were
fixed and we could make a judgment today, we may be able to say
that the funds that you are proposing may be adequate. However,
the gap is significant. We're talking about a trillion dollars
here and there, looking at the various studies. Obviously, this
is a step in the right direction. Will it be sufficient
funding? I think only time will tell.
Senator Graham. Clearly, this is not going to be sufficient
to finance all of the future water needs, even in conjunction
with the significant previous Federal appropriation for this
purpose, but can it be managed, along with those previous
appropriations, in such a way as to fulfill this difficult-to-
finance, early phase of pre-revenue activity?
Mr. Neukrug. Senator, I don't think it's appropriate to
think at this point that we have sufficient funding and
sufficient partnership in the Federal Government to consider
that this $35 billion is really going to do the trick in
bringing our infrastructure issues to a completion. We really
need to look at this more on a long-term basis. This is the
infrastructure; we're talking not just 5 years out; we're
talking 20, 100 years out. We're putting things into the ground
today that we will have to replace 100 years from now. I think
that the program of the SRF concept is to buildup a bank
sufficient to provide that money, but I don't know if we are
there yet with the suggested authorizations that are in this
bill.
Mr. Ronnebaum. Mr. Chairman, the other gentleman, panelist,
mentioned the increasing regulations, and that is really what's
driving a lot of the infrastructure needs. As another thing
just to think about, when the Rural Development Agency,
Farmers' Home Administration's Agency, sold its assets back in
1988, we had interest rates of 10.5 and 11 percent. Just think
of what we would be looking at today out on the street if you
had to issue a bond, a revenue bond, and you had to pay 7.5
percent versus 5.25 percent, for example, in Kansas. I mean,
the interest rate is a big component of that water rate. We are
enjoying presently very low interest rates, historically low
interest rates. So we're in the best of all times in that
regard.
Senator Graham. Mr. Chapman.
Mr. Chapman. The $35 billion, obviously, is a small number
relative to what everybody's estimates of the long-term needs
are, but what you're doing in this bill by requiring
consideration of asset management planning, privatization,
consolidation to take into account or get the benefits of the
economies of scale, and establishing/moving the industry more
toward cost-based ratemaking, you're encouraging the industry
to become self-funded. So these provisions by themselves over
time require utilities to start funding their own depreciation,
and so forth, reinvesting in these assets, which should
minimize the requests of this industry of the Federal taxpayer
in the future.
So I can't give you a quantified answer, but I can
definitely say that the qualitative provisions of this bill
will mitigate future requests, which I think is totally
appropriate Federal policy.
Senator Graham. Again, gentlemen, thank you very much for
your contribution. If you have any additional thoughts that you
would like to submit for the record, the record will be open
for 2 days for that. I would particularly appreciate any
specific suggested language changes in the legislation itself.
Thank you. Best wishes.
Would the participants on panel four please come forward?
Mr. Tom Morrissey is the president of the Association of
State and Interstate Water Pollution Control Administrations
and is the director of the Connecticut Division of Planning and
Standards. Mr. Morrissey, thank you very much.
Mr. Jay Rutherford is from Vermont, and Senator Jeffords
will introduce Mr. Rutherford.
Senator Jeffords. I am very pleased to do so. Nice to have
you here.
I am very pleased today to welcome a representative of the
Green Mountain State, Mr. Jay Rutherford. Jay is testifying on
behalf of the Association of State Drinking Water
Administrators. Jay has had a long career of environmental
service not only in Vermont, but around the world. A graduate
of the University of Vermont with a degree in civil
engineering, Jay has his skills to the test, building small
public water systems for villages in the Northeastern. In 1980,
he took a position as environmental engineer with the Vermont
Department of Environmental Conservation, DEC, and he has
remained there ever since. Jay has held the position of
director of Water Supply and ASDWA member twice, with a brief
stint in between with the DEC as director of enforcement.
Jay, it is a pleasure to have you with us.
Do you want a second introduction or do you want him to go
right ahead?
Senator Graham. If you don't mind, Mr. Morrissey, we have
been asking our panelists to speak in the order in which they
were introduced, which has basically been alphabetical. So
following that precedent, Mr. Morrissey.
STATEMENT OF TOM MORRISSEY, PRESIDENT, ASSOCIATION OF STATE AND
INTERSTATE WATER POLLUTION CONTROL ADMINISTRATIONS, AND
DIRECTOR, CONNECTICUT DIVISION OF PLANNING AND STANDARDS
Mr. Morrissey. Thank you, Chairman Graham. Thank you,
Chairman Jeffords and Senator Crapo. We appreciate very much
and thank you for inviting us here to testify before your
committee today and to provide you input on Senate bill 1961.
As you may not know, the Association of State and
Interstate Water Pollution Control Administrators is an
organization representing water pollution control
administrators from all 50 States and many territories within
the U.S. domain. As you may not know, by way of background,
ASIWPCA was very much involved in the transition which occurred
in 1987, when we went from a Title II grants program to really
the SRF program as we know it today.
That evolution has created a very effective program for
financing wastewater infrastructure facilities. The Clean Water
SRF has become one of the most, if not the most, successful
public works programs in history, which is attributable to its
careful design as a streamlined State-based program.
Senate and House authors intended to address a vast array
of State water quality program priorities under the States'
Clean Water Fund Program, and I believe they achieved that
objective when they passed that law.
Having just passed the 15th anniversary of the last Clean
Water Act reauthorization, we now have had sufficient time to
build and document the track record of our SRF successes. We
know, for example, that projects built are built under the SRF
program in half the time than those constructed under the
Federal Grants Program, the old Title II program. We know that
the Clean Water SRF has saved taxpayers hundreds of millions of
dollars, and we know that with each Federal dollar spent, there
is almost an equal contribution at the State level to the same
program.
Mr. Chairman, States are committed to the Clean Water State
Revolving Loan Fund because it has met and exceeded the
expectations set by its creators and its customers, including
the provision of funding to address State water pollution
control priorities, including the development of a funding
mechanism that would revolve and provide in perpetuity funding
sources and support for those programs, and the establishment
of the States as the program lead to manage and operate the
fund, providing close and consistent assistance to its
recipients, the loan recipients.
ASIWPCA believes that in reauthorizing the Clean Water SRF
program, it is vitally important to increase the funding for
the program, to assure that the SRF remains competitive in the
financial marketplace, to maintain a streamlined program which
is accepted by its customers, principally municipalities and
private entities, and to enable States to direct the fundings
with priority water quality needs, which brings me to the Water
Investment Act of 2002.
The association takes great pride in the fact that the
Clean Water SRF program continues to enjoy strong support of
both the administration, the Congress, and this committee. We
appreciate the committee's effort to propose and develop S.
1961 and to hold hearings to address issues associated with it.
Mr. Chairman, as we have discussed with you in prior
meetings, the association appreciates your leadership in
developing the Year of Clean Water legislation to commemorate
the 30th anniversary of the Clean Water Act. We can think of no
better way to celebrate the 30th anniversary of the Clean Water
Act than reauthorizing the SRF, which is the engine which
drives clean water fund programs throughout the United States.
The goals of S. 1961 are laudable and the bill, if enacted,
could advance the program with increasing funding levels and
authorization levels, extended eligibilities for what funding
can be dedicated to, extended loan repayment periods,
particularly for distressed communities, loan subsidies for
distressed communities and for hardship situations, and fund
transfers between the clean water and drinking water SRF, which
would promote flexibility within the States.
These enhancements will, for example, better enable States
to address small communities' onsite systems non-point source
pollution, urban stormwater, and combined sewer overflow
pollution problems. We do have several concerns with the bill,
and we're very anxious to work with you and your staffs to
address those concerns.
One of those concerns involves loan conditions. The loan
conditions include land use planning at the planning stages,
evaluating the cost of services, capital replacement, rate
structures, restructuring, and private partnership
enhancements, and capacity development for loan recipients.
In many cases States already have programs in place to
address those needs. For instance, in Connecticut we provide a
55 percent grant from State funding to do the planning work
upfront to plan and design facilities. We believe that to
improve the bill you may want to consider State equivalency
tests, so that if States have these programs in place already,
there's not a need to overlay it with another Federal
requirement.
Another area of concern where we know we have problems now
is in the area of administrative fees. In the proposed
legislation there are certain administrative requirements that
will consume resources at the State level. We want to provide
assistance and technical capabilities to the people who receive
our loans, and we do now, but in order to enhance that program,
States would probably have to allocate a greater amount of
administrative fees charged to the program, both at the State
and the Federal level, so that we can enhance those services.
But, again, in general, we very much support the bill. We
look forward to working with you and your staffs to improve it,
and we would be very happy to provide you with detailed
comments and suggestions on the draft legislation as it exists
today. Thank you very much.
Senator Graham. Thank you, Mr. Morrissey.
Mr. Rutherford.
STATEMENT OF JAY L. RUTHERFORD, P.E., DIRECTOR, WATER SUPPLY
DIVISION, VERMONT DEPARTMENT OF ENVIRONMENTAL CONSERVATION, ON
BEHALF OF THE ASSOCIATION OF STATE DRINKING WATER
ADMINISTRATORS
Mr. Rutherford. Mr. Chairman, Mr. Chairman Jeffords, and
Senator Crapo, good afternoon and thank you, Chairman Jeffords,
for the introduction.
I am Jay Rutherford, director of Vermont's Drinking Water
Program, and I'm here today speaking to you on behalf of the
Association of State Drinking Water Administrators, which
represents the 50 States, territories, and the District of
Columbia in helping to ensure the provision of safe water to
all Americans.
We'll continue our comments today to the provision in S.
1961 that affect the Safe Drinking Water Act. We thank you for
the opportunity to address this bill, and we very much
appreciate the committee's interest in ensuring that this much-
needed and successful program will continue to receive funding,
and that drinking water SRF funding will be enhanced
substantially to a total of $14.5 billion through Fiscal Year
2007.
We also strongly support the purposes of this bill to
streamline the drinking water SRF, to maximize use of Federal
funds, and to encourage efficiency. The several of the
provisions will assist in this area, such as extending the
transferability of funds between the drinking water and clean
water SRFs, authorizing fund use for source water protection
activities, calling for increased accountability for the 10
Technology Assistance Centers, and the information generated by
the proposed NAS rate study and USGS assessments.
We're concerned, however, that some provisions of the bill
may, in fact, hinder, rather than help, meet the designated
purposes of the bill. Our written testimony details our
concerns, so I'll only touch on three examples.
Under Title II, the legislation proposes to strengthen
activities relating to the use of the SRF for source water
protection, consolidation initiatives, assistance for small and
disadvantaged communities, and coordination with other planning
programs. These activities would be authorized under SDWA
Section 1452(g), which currently requires a dollar-for-dollar
or 100 percent State match in order to access these funds.
Many States cannot take full advantage of these funds now,
and certainly may not be able to access them for these
additional activities. We suggest that the bill strike the 100
percent match and replace it with a 25 percent match for these
important activities. In addition, States would also like to
see drinking water security added to the list of drinking water
SRF-eligible activities.
Another example concerns Section 203, which authorizes
States to use up to 15 percent of the capitalization grant to
provide assistance to the poverty pockets in communities which
are otherwise not disadvantaged. This 15 percent is in addition
to the 30 percent cap on loan subsidies to disadvantaged
communities, meaning that up to 45 percent of the
capitalization grant may be used for grants or grant-like
assistance. We think this threatens the corpus of the Revolving
Loan Fund, since these funds will not be repaid and will not
then be able to be used for loans for new projects.
Finally, there are requirements in this bill for States to
ensure that water system set rates for full-cost recovery and
that the systems follow through on providing the subsidies to
individual households. These types of activities have typically
been local determinations over which the States have no control
and very little experience in this area.
We're very concerned that water systems will forgo the use
of the drinking water SRF rather than subject themselves to
such close State scrutiny. We fear that if this happens, of
course, it will lead us away from the purposes of the bill.
Although the States have a number of concerns with several
of the initiatives in S. 1961, we would very much like to
continue to work with this committee to ensure that these
provisions will not be excessively burdensome to either States
or drinking water systems, and that this legislation will,
indeed, maximize the effectiveness and enhance efficiency of
the drinking water SRF.
Mr. Chairman, I very much appreciate the opportunity to
speak with the committee today, and I would be pleased to
answer any questions you or Mr. Chairman Jeffords might have.
Thank you.
Senator Graham. Thank you very much, Mr. Rutherford.
First, Mr. Morrissey, you, after stating your concerns
about some of the pre-conditions that had been added, then
suggested that maybe adopting the principle of State
equivalency should be allowed to substitute. As an example,
several of the conditions relate to compatibility of decisions
on water policy with areas such as land use, transportation,
and other, what I would call, growth management-type decisions.
There are a number of States which already have in place
some form of a comprehensive planning requirement that
incorporates all of the above plus more. Would you find it to
be desirable if, for instance, there were to be a waiver of the
specific requirements that are called for in this legislation
upon a demonstration that the State already had the equivalent
type of comprehensive reviews through some other methodology?
Mr. Morrissey. Yes, sir. Our fear would be, if there were
additional Federal requirements and they were imposed,
superimposed, upon our existing State requirements, those
States would have to do it twice or do it in a different
format, and we would be wasting resources. Our hope is that
with an equivalency waiver, we would only have to do it once,
do it at the State level, in a manner in which we're used to
doing, and therefore, forgo or not have to involve ourselves in
another layer of review similar to Federal requirements.
So I'll give you an example. When we conduct a facilities
plan for a wastewater treatment system in Connecticut, we first
study what area we're going to sewer and we assure the local
communities that we're not going to induce growth by sewering
areas outside of this. We build the capacity and we limit the
hydraulic capacity of the facility which will be serving this
sewer area to prescribe the growth area that this will induce.
From our perspective, that meets with the Connecticut Plan of
Conservation and Development, and it has to be consistent with
zoning laws throughout the local communities. We see that as a
similar requirement as you've outlined here, and we would not
have to do that twice or, to do different standards, if you
will.
Senator Graham. I would be interested, Mr. Morrissey, if
you might suggest some language that we could consider that
would accomplish what seems to be an imminently reasonable
suggestion.
Mr. Morrissey. Another thing to keep in mind is this: The
old Title II program did not allow for growth in the
development of sewage treatment plants financed with those
grants. Many States have held over those requirements, so that
there may be already a no-growth statute prohibition at the
State level as a remnant, if you will, of the old Title II
program.
Senator Graham. Mr. Rutherford, the issue of requiring
asset management plans an including full cost recovery rate
structures has as one of its goals to assure that there's going
to be enough money available for maintenance and repair, so
that we don't 30 years downstream have a system that was
designed to last 75 years collapse on us because it hasn't been
adequately maintained.
You raise some objection to doing it the way this bill
proposes to do it. How would you, if you agree that it is a
reasonable objective that there should be some asset
management, including the capability to do necessary ongoing
maintenance and repair and rehabilitation, how would you
suggest we accomplish that objective?
Mr. Rutherford. Mr. Chairman, I'll have to fall back on my
more parochial role from Vermont rather than speaking
nationally to this question. We have encouraged systems for a
long time--in fact, we do have a State requirement for
assistance to set up a sinking fund, if you will, to be able to
make necessary repairs over the useful life of a system. It
does not require that it have any funds in it, however. So the
purpose of it has not quite met its need.
The concern that I have over that particular portion is
that I interpret it to mean that systems would have to not just
recover or not just cover the costs of ongoing maintenance and
repairs to keep that system going for its useful life, but that
it would also have to be setting aside a sinking fund to be
able to pay for future capital construction needs, which I'm
guessing is going to happen sooner than 60 or 75 years out.
Given Federal drinking water regulations just in the last
decade, there's been a substantial amount of construction
that's needed to happen just to stay up with those, and there
are more still coming.
So if that interpretation is correct, then I think we would
be looking at a water system paying back the loan that they got
today over a 20- or even a 30-year period while at the same
time they're having to save up money to be able to pay for the
next set of improvements.
My experience has been that with many of the small systems
that we have in Vermont, which are virtually all of them--we
have no large systems in the State--is that, even with all of
the assistance that we can give them, the best that they can do
is just to keep up with that assistance. I don't know how we're
going to be able to have in 20 years' time an independent set
of systems in the country that would be able to finance their
own improvements when they needed them. I think there will
continue to be a need for Federal or State assistance.
Senator Graham. Senator Jeffords, I was a little concerned
that Mr. Rutherford started his response to that last question
by saying that he was not going to be looking at this from a
national perspective, but from the perspective of Vermont.
You've taught us that Vermont is the national perspective.
[Laughter.]
Senator Jeffords. I didn't see any conflict.
[Laughter.]
Senator Jeffords. For both of you, S. 1961 includes a
provision to coordinate planning for water infrastructure
projects with land use planning and transportation planning
entities. How does this coordination, if any, actually happen
today? That's an easy one for you, Mr. Rutherford.
Mr. Rutherford. Yes, it is, Mr. Chairman. Planning has been
a difficult process, as we both know, in our State. But so much
of the work that we've done in the Drinking Water Revolving
Fund has been associated with addition of treatment to address
Federal regulations or infrastructure improvements, that the
issue of planning and growth has always struck me as something
that should have been considered perhaps years ago, before
these small systems, which we have so many of in Vermont, were
created.
So it seemed to me that it's going to be hard to address
this particular part of the legislation because we don't have
strong regional statewide planning to coordinate with, and yet
our systems are there. They are in the ground. They need to
make improvements, whether they're well-thought-out or not.
Senator Jeffords. Mr. Morrissey.
Mr. Morrissey. Senator Jeffords, we in Connecticut have
what we call a Plan of Conservation and Development. That plan
maps all of Connecticut into growth areas and non-growth areas,
conservation areas and open space areas. We are prohibited, by
State statute, through the Connecticut Environmental Protection
Act, in sewering areas which are designated as protection or
open space. Therefore, when we develop a facilities plan, as I
was saying before, with a municipality to determine a sewer
shed, we can only delineate the sewer shed in those areas
designated for growth. We cannot use Federal or State funds to
build sewers outside those areas which would induce growth in
the rural conservation or in the open space areas. So it is
part of our system already, as part of the CEPA review, if you
will, in Connecticut.
Senator Jeffords. Has it created any serious problems, as
you rethink that, or is it working pretty well?
Mr. Morrissey. Oh, it creates problems. There's no doubt
about that.
Senator Jeffords. Yes.
Mr. Morrissey. For instance, recently, we have a town which
historically planned on building an industrial park within its
watershed for its water supply reservoir, and we've had quite a
row about whether or not we're going to build sewers there, and
if sewers are built there, what special land use controls will
we place on that industrial development, such as limiting
impervious areas to less than 10 percent, so that we don't
adversely affect that reservoir and the drinking water supply
for that town.
So it does lead to conflicts. Several of the conflicts are
resolved legislatively, but typically we can work them out
through negotiation. By and large, though, it works. It keeps
sewers within the designated sewer sheds that we agree to with
municipalities during the planning stages for our projects.
Senator Jeffords. Thank you, Mr. Chairman.
Mr. Morrissey. May I ask, what is that?
[Laughter.]
Senator Graham. Well, the answer to that question is that
is a quorum call, which is the parliamentary equivalent of
timeout, which means that, for various reasons, whatever is
currently transpiring will be suspended until people can figure
out what they want to do next.
[Laughter.]
Senator Jeffords. These are some, well, shall we say,
awaited moments where nobody's talking on the Senate floor, and
so everybody relaxes a little while, and sometimes that helps,
but we'll see.
[Laughter.]
Senator Jeffords. Well, it's a close balance between the
help that you get by a few seconds of respite from talk and the
mental distress at having to listen to those ``blank'' buttons
go off.
[Laughter.]
Senator Graham. Gentlemen, thank you very much. I would
like to make the same request that I did of the previous
witnesses. If there are any specific modifications--to use as
an example, Mr. Morrissey, your suggestion of an equivalency
standard--we would like the benefit of your specific wording,
and similarly, Mr. Rutherford.
As I indicated, because we are operating under the whiplash
of Senator Jeffords, we're trying to move this bill
expeditiously, and we would appreciate having your suggestions,
say, within the next week, and the record will be open for the
next 2 days, if you would like to supplement the statements
that you have made.
Mr. Rutherford. Thank you, Mr. Chairman.
Mr. Morrissey. Thank you.
Senator Jeffords. Thank you very much.
Senator Graham. Thank you.
[Whereupon, at 12:05 p.m., the subcommittee was adjourned,
to reconvene at the call of the chair.]
[Additional statements submitted for the record follows:]
Statement of Hon. Paul S. Sarbanes, U.S. Senator from the State
of Maryland
Thank you, Mr. Chairman, for this opportunity to testify on S.
1044, the Chesapeake Bay Watershed Nutrient Removal Assistance Act. At
the very outset, I want to commend you, and other members of the
Committee, for focusing attention on our nation's clean water
infrastructure needs. This issue is of vital importance to the State of
Maryland and to our continued efforts to restore the Chesapeake Bay.
Despite improvements over the past two decades, Maryland and,
indeed, the Chesapeake Bay region still face very significant water
quality problems and needs. In December 2001, a ``Task Force on
Upgrading Sewerage Systems,'' commissioned by Governor Parris
Glendening completed an assessment of the costs to implement needed
sewerage requirements to address combined sewer overflows (CSOs),
sanitary sewer overflows (SSOs), and other upgrades at wastewater
treatment plants throughout Maryland and identified $4.3 billion of
capital needs. Maryland's most recent allotment under the Clean Water
Act's State Revolving Loan Fund was $32.5 million, and even when
combined with State and local funds, the Task Force report estimates a
gap of $80--$140 million a Year in needed sewerage infrastructure
spending. Clearly, continuing and enhancing the State Revolving Loan
Fund is a vital part of the assistance needed to help address that gap.
But I am concerned about using just the needs survey to determine
State apportionments for the SRF, as proposed is S. 1961. The survey
was designed for traditional sewer needs and does not account very
accurately for restoration, reconstruction, storm water and non-point
source control needs, which are difficult to quantify. Moreover, it
unfairly penalizes States, like Maryland, which have worked
aggressively to upgrade sewage treatment facilities--utilizing State
funds and overmatching Federal revolving loan funds. In addition, it
fails to measure very well the overall water quality challenge a State
or region faces. In my judgment, the ultimate formula for the SRF
should have a broader water quality measure in it--some factor related
to the percent of waters not meeting designated uses or water quality
standards. I hope that the Committee will work with us to address these
deficiencies in the needs survey, which is being used as the basis for
the new formulas in S. 1961.
In the Chesapeake Bay watershed, we face a special challenge of
finding ways to further reduce the level of nitrogen and phosphorus in
wastewater effluent. Nutrient over-enrichment from both point and non-
point sources remains the most serious and ubiquitous pollution problem
facing the Chesapeake Bay. In 1987, the Governors of Maryland,
Virginia, Pennsylvania, the Chesapeake Bay Commission, the Mayor of the
District of Columbia and the Administrator of the EPA, on behalf of the
Federal Government, signed a Chesapeake Bay Agreement which set a goal
of a 40 percent reduction of nitrogen and phosphorous loads to the main
stem of the Bay by the year 2000--the most ambitious voluntary
commitment for restoring water quality of any region in the nation.
During that 13 year period, tremendous efforts and investments were
made by all the jurisdictions in upgrading sewage treatment plants as
well as implementing Best Management Practices on agricultural lands to
meet that goal.
Two years ago, the States and the Federal Government conducted an
extensive evaluation of cleanup progress since the 1980's and
determined that, unfortunately, we have fallen short of the 40 percent
goal. Estimates through the use of computer models indicated that,
although nitrogen loads delivered to the Bay and all its tributaries
declined by nearly 53 million lbs/year and phosphorus loads declined
nearly 7 million lbs/year, Bay-wide nitrogen loads fell about 21
million lbs/year short and phosphorus loads fell nearly 3 million lbs/
year shy of the 2000 goal. A new Chesapeake 2000 agreement was signed
reaffirming the 40 percent nutrient reduction goal agreed to in 1987,
and committing the signatories to go much further by correcting all
nutrient related problems in the Chesapeake Bay by the year 2010. But,
without Federal funds for wastewater treatment plant upgrades, the
States will be unlikely to meet the 2010 water quality goal.
Recent modeling of EPA's Bay Program has found that total nutrient
pollution must be further reduced by more than 45 percent from current
levels to restore the Chesapeake Bay and its major tributaries to
health. To do so, the current annual nitrogen discharge of 285 million
pounds will need to be cut by at least 130 million pounds. Municipal
wastewater treatment plants, in particular, can be a major source of
these needed reductions.
As you can see from this map, there are approximately 300 major
wastewater treatment plants in the Chesapeake Bay watershed. These
plants contribute about 60 million pounds of nitrogen per year, more
than one-fifth, of the total load of nitrogen to the Bay. Typically,
these plants discharge about 18 mg/liter of nitrogen in their effluent
but 71 of the plants have been upgraded with some form of nutrient
removal technology to achieve nitrogen concentrations of about 8 mg/
liter. By further upgrading these plants with nutrient removal
technologies to achieve nitrogen reductions of 3 mg/liter--state-of-
the-art reductions--scientists estimate that we would remove 42 million
pounds of nitrogen in the Bay each year or about 40 percent of the
total nitrogen reductions needed.
The legislation which Senators Mikulski, Warner, Allen, Specter,
Santorum and I sponsored, would establish a grants program to encourage
States and municipalities in the six-State Chesapeake Bay watershed to
go the extra mile and install nutrient reduction technologies at major
wastewater treatment facilities to achieve state-of-the-art nitrogen
reductions of 3 mg/liter. Our legislation would provide grants for 55
percent of the capital cost of upgrading the plants. The total cost of
these upgrades is estimated at $1.2 billion, with a Federal share of
$660 million. Any publicly owned wastewater treatment plant which has a
permitted design capacity to treat an annual average of 0.5 million
gallons per day within the Chesapeake Bay watershed portion of New
York, Pennsylvania, Maryland, West Virginia, Delaware, Virginia and the
District of Columbia would be eligible to receive these grants. These
nutrient reduction technologies are the most reliable, immediate and
cost-effective ways to reduce nutrient loads to the Chesapeake Bay.
Mr. Chairman, if we are to achieve the ultimate, long-term goal of
the Bay Program--improving and protecting the water quality and living
resources of the Chesapeake Bay--Federal assistance in upgrading sewage
treatment plants and in this nutrient reduction effort is absolutely
essential. The States cannot do it alone, particularly given the
interstate nature of the pollution problem facing the Chesapeake Bay.
The Bay is a unique national resource. It is the largest and most
productive estuary in the country, with a watershed encompassing 64,000
square miles and parts of six States and the District of Columbia. Its
unique ecological features combine with its tremendous economic and
cultural importance to make it a resource that deserves national
protection. I hope that the Committee can act quickly to approve this
measure and report it to the full Senate for consideration.
__________
Statement of Robert M. Hirsch, Associate Director for Water, U.S.
Geological Survey, Department of the Interior
Mr. Chairman and Members of the Subcommittee, thank you for the
opportunity to testify today on S. 1961, ``The Water Investment Act of
2002.'' As you know, the mission of the U.S. Geological Survey (USGS)
is to provide scientific information to support decisionmaking on
issues of resources, environmental quality, and natural hazards.
Information about water has been a central part of our agency's mission
throughout our 123-year history. My remarks will be limited to Title IV
of the bill, which relates to USGS. EPA has provided the
Administration's views on the remainder of the bill.
As such, we agree that the role defined in Title IV of the bill is
an appropriate one for the USGS and that it could improve Federal
coordination of water information, but we would welcome an opportunity
to work with the Committee on the bill language to assure that the
tasks are feasible and clearly defined and that they are appropriate
for the USGS as a Federal scientific agency. Let me begin by providing
some general context for my remarks.
Competition for water to meet the needs of homes, cities, farms,
and industries in many parts of the country is increasing, as are
requirements to leave water in the streams and rivers to meet
environmental and recreational needs. Information on water resources is
needed at many levels to address these issues. Included among these is
information to help shed light on overall changing conditions of
scarcity, use, and competition for water to help inform discussions
about potential changes in policies and investment plans related to
water. In this regard, the USGS received a directive from Congress as
part of the report on the fiscal year (FY) 2002 Appropriations for
Interior and Related Agencies (House Committee on Appropriations) to
prepare a report describing the scope and magnitude of the efforts
needed to provide periodic assessments of the status and trends in the
availability and use of freshwater resources.
Our efforts over the past 6 months in preparing that report have
provided us with some insight that may be useful to this Subcommittee
as it considers this legislation. In preparing our report to Congress,
the USGS has solicited input from many individuals and organizations
involved in issues of water availability and use. We asked them what
types of decisions and policy issues would benefit from improved water
facts today and in the future, how to build on existing efforts, and
where to expand collaborative opportunities. In response to our
request, we received nearly 100 responses from the water-management and
policy communities.
There were several clear messages. First, there was consensus that
a better set of facts is needed for informed decisions related to water
availability and use. National organizations, in particular, noted the
need for consistent indicators of water availability across the
country. However, individuals representing State and local governments
reminded us that many States have conducted extensive planning to
quantify water availability now and in the future, and that the
availability and use of water is a State, local, or tribal issue in
most respects.
Our report to the House Appropriations Committee is in the final
stages of review at the present time. Based on the comments we received
from others, we believe that the critical need is for regular reporting
on indicators of the status and trends in storage volumes, flow rates,
and uses of water nationwide. This information is not available in an
up-to-date, nationally comprehensive and integrated form.
Water availability is a function of the total flow of water through
a basin, its quality, and the structures, laws, regulations, and
institutions that control its use. Information is currently synthesized
about the Nation's water quality by the USGS National Water-Quality
Assessment (NAWQA) program--A program that has recently been reviewed
by the National Research Council (NRC) after completing its first
decade. The NRC/NAWQA review committee stated ``NAWQA is providing key
national leadership, reporting, and assessing the quality of surface
water and groundwater resources across the Nation. Furthermore, NAWQA
is playing a vital role in balancing its good science with
responsiveness to policy and regulatory needs. This is a vital
function.'' The assessment required by this bill could be used with
water-quality information from NAWQA and other existing water-quality
programs to provide a more complete national picture of both the
quantity and quality aspects of water availability.
Data that are germane to issues of water availability include
population statistics, land uses, water costs and pricing, climate
data, and instream-flow requirements for aquatic habitats. These data
are compiled by State and local agencies, by universities and water-
resource organizations, and by several Federal agencies.
INDICATORS OF WATER AVAILABILITY AND USE
An assessment, such as called for in this bill, would need to rely
on up-to-date, nationally consistent indicators that would reflect the
status and trends in water availability and use nationwide, for
surface-water flows and storage, ground-water levels and storage, and
water use.
Surface Water
Currently, the USGS provides a number of assessment-type streamflow
products at daily, weekly, and monthly time scales. These products,
such as the online WaterWatch Internet site, are useful to emergency
managers, public officials, and others tracking floods and droughts and
to private citizens planning recreational activities. The USGS will
continue to produce these types of information on daily to monthly
conditions through our existing programs. Indicators that support
longer-term water-availability decisions, however, require compilation
of streamflow information at longer time scales.
Groundwater
Long-term, systematic measurements of ground-water levels provide
essential data needed to evaluate changes in ground-water storage over
time. The density of existing monitoring wells varies considerably from
State-to-State, and even more so among major aquifers, with very
limited monitoring in many aquifers. Thus, an inventory of existing
water-level networks for major aquifer systems would be useful to
identify data gaps across the Nation and determine the detail to which
we can provide this information.
Water Use
Tracking water use is an important part of understanding water
availability. The USGS has compiled and disseminated estimates of water
use for the Nation at 5-year intervals since 1950. The National
Research Council (NRC) recently reviewed the USGS program for water-use
information and will be making a number of recommendations for
improvement of the program to address inconsistencies in the
availability of water-use data from State to State. This NRC report
will be released within the next few months. We would encourage the
Committee to seek their input on this important component of the water
resource equation. Valid and consistent water-use data are as vital as
river flow or ground-water data and are often even more difficult to
acquire. An assessment such as is envisioned by this legislation
depends on water-use data. The responsibility for collecting and
analyzing these data must be shared by the States and the Federal
Government.
SUMMARY
In summary, in response to the directive from Congress and with
input from many others, the USGS has developed concepts for a national
assessment of freshwater availability and use. The proposed assessment
would develop and report on indicators of the status and trends in
storage volumes, flow rates, and uses of water nationwide. Currently,
this information is not available in an up-to-date, nationally
comprehensive and integrated form. The development and reporting of
national indicators of water availability and use would be analogous to
the task of other Federal statistical programs that produce and
regularly update indicator variables that describe economic,
demographic, or health conditions of the Nation. Any such effort would
comply with the Office of Management and Budget's (OMB) recently issued
Information Quality Guidelines.
The assessment would be highly collaborative, involving the USGS
along with Federal and State agencies, Indian tribes, universities, and
non-governmental interests. Collaboration across agency boundaries
would ensure that information produced by the USGS could be aggregated
with other types of physical, social, economic, and environmental data
that affect water availability.
In regard to Section 403(b) on water resource research priorities
we would note that we are currently engaged in contracting with the
National Research Council, at the direction of Congress, to conduct a
study of the priorities for, and best means of organizing, water
research across the Federal Government. We would suggest that this
National Research Council effort may provide very valuable inputs to
help carry out the objectives of this section.
In regard to Section 403(c) on information delivery systems, the
objectives defined here are very much in concert with the existing
charge to the USGS under OMB Memorandum 92-01 on ``Coordination of
Water Resources Information.'' This section would reinforce our ongoing
role of coordination of water information across the Federal
Government.
In closing, again, we agree that the role defined in the bill is an
appropriate one for the USGS, but we would welcome an opportunity to
work with the Committee on the language of Title IV, to assure that the
tasks are clear and feasible and that they are appropriate for the USGS
as a Federal scientific agency. For example, the bill directs the USGS
to identify areas of the United States that are at risk for water
shortages or surpluses. However, long range predictions of water
supplies cannot be determined solely by physical science but are
heavily dependent on human decisions to invest in infrastructure,
restrict use, change water laws, etc., which are largely State
decisions. The USGS makes a significant contribution to these issues by
regularly providing indicators of the changing status of the Nation's
water resources derived from long-term monitoring.
We appreciate this opportunity to discuss USGS capabilities and I
welcome any questions you may have.
__________
Statement of Andrew M. Chapman, President, Elizabethtown Water Company
on Behalf of The National Association of Water Companies
Good afternoon, Mr. Chairman and Members of the Subcommittee, my
name is Andrew Chapman. I am the President of Elizabethtown Water
Company in New Jersey, and I am a Vice-President of the National
Association of Water Companies.
NAWC is a non-profit trade association that exclusively represents
private and investor-owned drinking water utilities. I am offering this
testimony on behalf of NAWC's membership-the 200 members in 39 States-
which provide safe reliable drinking water to more than 22 million
Americans everyday. I'm pleased to report that NAWC has members in
nearly every State represented on this Subcommittee; Florida, Idaho,
Montana, Missouri, Nevada, Virginia, New York, Rhode Island, New
Jersey, and Colorado.
Mr. Chairman, NAWC commends you and this Subcommittee for taking on
the important issue of water infrastructure financing, introducing S.
1961, the Water Investment Act of 2002, and holding these hearings
today. The challenge of replacing and upgrading infrastructure is one
of the greatest and most pressing facing our industry today.
Congressional interest in this challenge, as demonstrated by the
introduction of S. 1961 and the several hearings on the issue held over
the last year, underlines this fact.
We are particularly encouraged that this legislative project is
being undertaken in a bipartisan fashion, a practice that drinking
water issues have enjoyed in this committee for some time, and one that
we sincerely hope continues far into the future.
GENERAL COMMENTS
NAWC along with our colleagues in the H<INF>2</INF>O Coalition1\1\
support S. 1961 and urge this committee to consider and report the bill
to the full Senate at the earliest possible date.
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\1\ The H<INF>2</INF>O Coalition is made of the National
Association of Water Companies, the Water and Wastewater Equipment
Manufacturers Association, and the National Council on Public-Private
Parnerships.
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This bill embraces many of the principles the H<INF>2</INF>O
Coalition has been advocating for more than a year now. It encourages
utilities to use creative public-private partnerships, consolidation
and other solutions in addressing their infrastructure challenges. The
bill will also keep the industry on the path to self-sustainability
through rational rate structures and sound asset management practices.
The authors of the bill have wisely thought outside the box with an
innovative program designed to assist disadvantaged consumers, instead
of the entire utility in circumstances where only some of the utility's
customers are disadvantaged. Finally, S. 1961 at last puts the
customers of privately owned utilities on full and equal footing with
those of municipal utilities by extending private utility eligibility
to the Clean Water SRF (CW-SRF) and encouraging all States to extend
private utility eligibility to both the CW-SRF and Drinking Water SRF
(DW-SRF).
Conversely, S. 1961 wisely does not authorize a large grant program
which some have been advocating. We are encouraged, Mr. Chairman, that
you and your colleagues in drafting this bill saw the error in
authorizing an old fashioned and outdated grant program that would do
more harm than good for the entire water industry, waste taxpayers'
money, and add to the Federal budget deficit.
SPECIFIC COMMENTS
DW-SRF and CW-SRF Restructuring.--First, S. 1961 signals
congressional support for creative non-governmental solutions to the
infrastructure financing challenge by explicitly tying SRF assistance
(both DW-SRF and CW-SRF) to:
1. Consolidating ownership and/or management functions with other
facilities.
There are over 50,000 community water systems in the United
States many of which are very small. In many, but not all,
cases the financial challenges facing these utilities can be
addressed by achieving economies of scale through
consolidation. By tying consideration of consolidation with SRF
assistance, Congress will encourage localities to put aside
parochial interests, expand their vision and do what is right
for the customer.
2. Forming public-private partnerships or other cooperative
partnerships
Municipalities large and small all over the country have
realized great savings and success through partnerships with
private firms. These partnerships take many forms, from
contracting out small portions of a utility's operations, such
as billing or meter reading, to multi-year all inclusive
management contracts wherein a private firm runs and manages
all aspects of a municipally owned utility, to the transfer of
assets to a private company. Cost savings that localities have
realized over the years from such arrangements range up to 40
percent, freeing up much needed capital for infrastructure
replacement, without burdening either the customers or the
American taxpayer.
Second, S. 1961 seeks to avoid some past mistakes of government
assistance programs by requiring utilities receiving DW-SRF and CW-SRF
assistance to have in place:
1. A rate structure that reflects the actual cost of service,
taking into account capital replacement funds, and
2. A sound asset management plan conforming to generally
accepted industry practices and including a schedule of
investments to meet and sustain performance objectives.
These provisions require managers to take an enterprise approach to
utility management and move all systems toward self-sustainability. The
provisions will force utilities to solve their infrastructure problems
in ways that are the least onerous to the American taxpayer, yet are
responsible, efficient and effective.
Absent these important safeguards we could relive many of the
problems of past government subsidy programs wherein:
1. Small or inefficient utilities were artificially propped up,
discouraging consolidation and regionalization;
2. Utilities became dependent on the government funds and needed
regular infusions creating greater reliance on government money;
3. Because of the subsidy, the American people got a false
impression of the true cost of water, discouraging conservation; and
4. The private sector was effectively barred from participation in
the industry, thus denying utilities the benefits of the free
marketplace and its associated innovations and economies.
Some will argue that these provisions represent a too heavy-handed
government approach to legislating, and are thus a step backward. We
disagree. While both the CW-SRF and DW-SRF are administered through the
States and include some State matching money, the vast majority of the
SRFs' corpora are made up of Federal money coming from the American
taxpayer. Therefore, the Federal Government has a responsibility to the
American taxpayer to be sure their money is distributed and used in an
efficient and accountable manner, as S. 1961 would do.
Subsidization for Disadvantaged Users.--Section 203 introduces a
new and innovative approach for targeting SRF moneys to subsidize the
water rates of economically disadvantaged customers, as opposed to
giving assistance to utilities in a form that subsidizes everyone's
water rates. The bill provides for favorable loan terms, including
principal forgiveness, to directly assist disadvantaged customers. NAWC
and the H<INF>2</INF>O Coalition have long championed this target use
of DW-SRF assistance and we are greatly encouraged to see the sponsors
of this bill moving the DW-SRF in this direction.
There may be many instances, particularly in larger utilities,
where there are many disadvantaged customers who need assistance paying
their bills, even though the vast majority of the customers of the
particular utility have the means to pay the full cost of service. In
such cases it makes no sense for the DW-SRF to subsidize the entire
utility, when in fact only a percentage of customers need the
assistance. This innovation will allow States to target assistance to
where it is most needed, freeing up money for the worthiest projects.
Private Utility Access.--As you can imagine, the NAWC, as the
representative of the private water industry, is particular happy to
see that all utilities are treated equally in S. 1961, regardless of
ownership. First, the bill makes private utilities eligible for the
first time for assistance from the CW-SRF. This is a long delayed and
much needed innovation to that program that will place all systems on a
level playing field.
Private utilities have had access to the DW-SRF since it was
established in 1996. When Congress established the DW-SRF it correctly
determined that benefits of the DW-SRF would flow to the customers of
the utilities, not to the owners or shareholders. This is no less true
for the customers of privately owned wastewater utilities.
Second, we are also greatly supportive of provisions in S. 1961
that will bring fairness to the State SRF allocation process. The
bill's provisions require States that include private utilities in
their needs survey (thus maximizing the State's total DW-SRF
allocation) to also ensure that private utilities are actually eligible
for such assistance. As incredible as it may sound, currently there are
13 States that include private utilities in their needs survey but
exclude those same utilities from eligibility for loans because of
State laws or practices. S. 1961 will end this practice in the DW-SRF
and keep it from happening in the CW-SRF.
Authorizations.--S. 1961 would authorize $35 billion over the next
5 years for the two SRFs, with a combined $7 billion in fiscal year
2006, and an eye-popping $12 billion in fiscal year 2007. We question
whether Congress will ever appropriate anything close to these levels,
considering that such appropriations would increase EPA's budget about
2.5 times.
We are concerned that such large authorizations, with relatively
little chance of similar appropriations, may send counterproductive
signals to utility operators. Utilities may defer making the necessary
investments and hard choices required today with the false hope of
significant Federal assistance coming their way in the future.
Section 205: Competition Requirements.--While we embrace the
concept of competition in procurement, we are concerned with the
requirements in Section 205 that might force utilities to specify
``brand name or equal'' in their procurement documents. We have found
from long experience that ``equal'' often means in practice inferior
equipment. We believe the procurement process today under the Drinking
Water SRF is highly competitive, encourages innovation, and need not be
modified.
ADDITIONAL ISSUES FOR CONSIDERATION
Private Activity Bonds.--As we have testified here before, one of
the easiest and least expensive incentives Congress can provide to
address the infrastructure issue in a sound and efficient manner is to
remove the existing volume caps on Private Activity Bonds for water and
wastewater infrastructure improvement. This simple change will make
capital both easier to obtain and less expensive for partnerships
between the public and private sector, thus making such partnerships
much more economically attractive to all concerned.
I understand that this, being a tax issue, is outside of the
jurisdiction of this committee. It is, however, one of the most
important modifications Congress can make to give local governments the
tools they need to meet this coming infrastructure challenge.
Since 1986 Congress has limited, under arbitrary State volume caps,
the use of tax-exempt financing by private entities working for the
public good. The cap has the unfortunate effect of limiting the use of
private sector approaches for providing vital services, such as water
services. Preliminary modeling indicates that this minor alteration in
the tax code would cost the Federal Government very little ($147
million over 10 years\2\), yet leverage huge sums of private capital.
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\2\ According to the Joint Tax Committee; February 12, 2002.
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This proposal has precedent. Congress has exempted other
environmental facilities (certain waste disposal facilities) from the
State volume caps because of a perceived public need.
This proposal enjoys far reaching support. In the House, bipartisan
legislation has been introduced which would make these changes. Also,
the U.S. Conference of Mayors, the Water Infrastructure Network (WIN),
and the U.S. Environmental Protection Agency's Environmental Financial
Advisory Board have endorsed the proposal.
Compliance with Drinking Water as a Defense in Lawsuits.--We have
reported many times to this Committee on a disturbing trend that has
been observed recently in many parts of the country, which could
directly affect the ability of all utilities (both publicly and
privately owned) to face the infrastructure financing challenges.
This trend involves coordinated litigation aimed squarely at
America's water industry, and the drinking water quality standard
setting and regulatory system under which it has operated for many
years. Massive civil lawsuits involving hundreds of plaintiffs have
been organized and commenced against water suppliers in several States
for allegedly supplying contaminated water even when these utilities
have been in full compliance with State and Federal drinking water
quality standards. These suits have targeted both privately owned and
municipal water systems.
To address this problem the entire drinking water industry has come
together to support legislation that would make compliance with
drinking water standards a defense in such lawsuits. Such legislation
would not only deter unfounded lawsuits but would also assure the
viability of Federal standards that would otherwise be eroded by juries
second-guessing the national regulatory process. A regulatory process
that has given our citizens the safest water in the world. Therefore,
NAWC, along with five other associations representing public, private
and rural utilities support legislation that would make compliance with
Federal drinking water standards a defense in lawsuits involving
contaminants covered by such standards.
If Congress does not pass such legislation the repercussions of
expensive, unfounded lawsuits could be extremely costly to our
industry, the EPA, and the public. Costs include significant utility
defense costs, higher liability insurance costs, and the costs of any
adverse judgments that may be imposed by the courts, even when the
utility has been in full compliance with EPA's standards.
In addition, if lawsuits like these are successful and proliferate,
it will be a terrible blow to the drinking water standard setting
process. In effect EPA's standards, which are developed through an open
and scientifically based regulatory process established under the SDWA
of 1996 after long deliberations, will be replaced with standards
established by juries all around the United States, who have no
scientific training or water expertise. Any new ``safe'' levels
established by these juries will become de facto standards and
undermine the legal authority of EPA's national standards, producing
chaos within the industry, since utilities will not know which standard
to comply with.
We do not need this at a time when there are other pressing needs,
such as infrastructure replacement, increased security, and compliance
with new standards, such as arsenic. These costs will eventually have
to be borne by the customers of the water utilities, increasing their
costs without providing any commensurate benefits, and increasing the
chance that water, America's best value, will become unaffordable.
Two years ago the U.S. Supreme Court confirmed the principle of
compliance with Federal regulations as a defense in a tort action Geier
v. American Honda Motor Company. The action alleged that Honda was
negligent in failing to equip its 1987 Accords with airbags, even
though Honda was in compliance with U.S. Department of Transportation
(DOT) standards, which provided for a phase in of passive restraints
over time. The Court held that the plaintiffs attempt to establish a
different standard was pre-empted by the uniform Federal regulations.
The Honda case is directly controlling over the recent drinking
water cases, and we believe that utilities that are in compliance will
ultimately win these lawsuits-but only after expensive trials and
lengthy appeals. In a time of scarce resources we believe that Congress
has an opportunity to resolve the issue now, and we encourage this
Committee to include in S. 1961 language making compliance with
drinking water standards a defense in lawsuits.
CONCLUSION
Mr. Chairman, we appreciate the leadership role that you and this
Subcommittee have taken to address drinking water infrastructure
problems. S. 1961 is an excellent response to the infrastructure
challenge and we look forward to working with you, the entire
Committee, and your staffs in advancing this legislation through
Congress.
In conclusion, Mr. Chairman, thank you very much for the
opportunity to present our views, and I would be happy to respond to
any questions.
__________
Statement of Jerry Johnson, General Manager, District of Columbia Water
and Sewer Authority on Behalf of the Association of Metropolitan Water
Agencies
Good afternoon, Mr. Chairman, members of the subcommittee.
My name is Jerry Johnson, and I'm the General Manager of the
District of Columbia Water and Sewer Authority. I'm testifying today on
behalf of the Association of Metropolitan Water Agencies (AMWA). AMWA
is a nonprofit organization representing the nation's largest publicly
owned water agencies. These large systems provide drinking water to
approximately 110 million people from Anchorage, Alaska to Miami,
Florida.
The DC Water and Sewer Authority provides retail water services to
residents and businesses in the District of Columbia and parts of
Virginia. WASA also provides wastewater treatment for the District of
Columbia, portions of Montgomery and Prince Georges counties in
Maryland and Fairfax and Loudon counties in Virginia as well as the
town of Vienna, Virginia. WASA's Blue Plains Wastewater Treatment
Plant, located in South West Washington, is the largest advanced
wastewater treatment facility in the world.
Thank you for introducing S. 1961, the Water Investment Act of
2002, which is the first legislation to increase the Federal investment
in drinking water infrastructure since the 1996 amendments to the Safe
Drinking Water Act.
The association believes the bill takes a major step in the right
direction, by proposing to triple the authorization of the Drinking
Water State Revolving Fund (SRF). While the needs of drinking water
agencies over the 5-year period covered by the bill are nearly $60
billion, the bill's proposed authorization, if enacted and
appropriated, would fund hundreds of projects to ensure safe drinking
water for decades to come.
ASSISTANCE TO METROPOLITAN WATER AGENCIES
Like current law, the bill's main focus is to help drinking water
systems comply with the Safe Drinking Water Act. The bill also
reinforces the Drinking Water SRF's support of small water systems,
through the capacity development program, restructuring assistance,
technical assistance and, most importantly, a 15-percent set aside for
small systems. (Some States make loans to large water systems to ensure
the funds revolve, especially where small systems are not prepared to
apply for assistance.)
AMWA would like the subcommittee to consider ways to help
metropolitan water agencies with replacing aging infrastructure.
(Metropolitan water agencies serve the nation's larger communities.) To
get a sense of the needs facing metropolitan water agencies, consider
this: according to a recent survey, just 32 metropolitan systems
reported that they must spend $27 billion over the next 5 years on
drinking water and wastewater infrastructure\1\. Nationwide, the needs
of metropolitan water agencies are much higher. Yet 31 States provided
no assistance to metropolitan water agencies in fiscal year 2001. If
the proposed authorization in S. 1961 is appropriated, States will have
more money to lend to metropolitan water systems, but higher
authorizations and programmatic changes are necessary, too.
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\1\ Waterworld, December 2001
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The cities that are served by metropolitan water utilities are the
economic engines of their States and the Nation, and a significant
Federal investment in these large publicly owned agencies will
translate into stronger water delivery systems, better fire protection,
and thousands of new jobs.
Therefore, AMWA recommends a 15-percent set-aside for metropolitan
drinking water agencies, to make certain that States address their
needs. Under this proposal, small systems would continue to get the
help they need to comply with the Safe Drinking Water Act, and
metropolitan water agencies could invest the billions of dollars needed
to replace aging infrastructure. In States where there are few
metropolitan systems or where the systems do not need assistance, the
funds set aside could be used for small systems.
SECURITY
The capital needs facing water systems to make their facilities and
consumer more secure are likely to run into the billion of dollars, and
AMWA believes the Safe Drinking Water Act should specifically authorize
Drinking Water SRF assistance for capital projects related to security.
EPA guidance to States indicates these projects are eligible for
funding, but something more substantial, namely legislation, is needed
to show congressional intent to allow such assistance.
RATE STRUCTURE AND ASSET MANAGEMENT
Among the new requirements established by S. 1961 are
implementation of responsible rate structures and asset management
plans. These practices embody those commonly used in metropolitan water
agencies today. For instance, WASA has developed a comprehensive, 10-
year capital improvement program that totals $1.6 billion, of which
approximately $505 million is attributable to drinking water
infrastructure projects. Since its creation in 1996, WASA has raised
its rates by 52 percent. Over the next 10 years, WASA projects that it
will need to raise its rates by 5 to 7 percent annually, due primarily
to infrastructure upgrade and replacement needs.
In addition, WASA has an asset management plan to ensure capital is
available for future upgrades, and, like most large water systems, the
authority complies with the general accounting standards for State and
local government known as GASB 34.
These concepts are nothing new to metropolitan water systems.
Maintaining our bond ratings and accessing capital in open market
necessitate our adherence to these good practices.
For these reasons, AMWA applauds the sponsors of S. 1961 for
highlighting them, and AMWA encourages the subcommittee to maintain
these best practices as ideals and provide the opportunity for
utilities that have not yet adopted them to do so. There are a wide
variety of equally reasonable approaches to defining the full cost of
service and responsible asset management, and these areas are not in
the realm of State environmental agencies or the U.S. EPA, both of
which would have to develop rules or guidance and criteria for
enforcement and compliance. Rate design is a particularly complex
issue. For instance, consider the possibility that charging the full
cost of service, covering all Federal and State regulations and
replacement of aging infrastructure, could put rates far beyond U.S.
EPA's affordability criteria.
AMWA urges the subcommittee to avoid a situation in which the
States or U.S. EPA enter the domain of local government and attempt to
reinvent the wheel. Instead, industry organizations have many years of
experience in this area and could be relied upon to provide technical
and educational service to those utilities that have not adopted the
practices. Let's not discard what responsible water agencies have
already accomplished and create a layer of bureaucracy that could make
applying for SRF assistance too cumbersome, thus undermining the
purpose of the program.
CONSULTATION WITH STATE PLANNING AGENCIES
AMWA appreciates S. 1961 highlighting the importance of
coordinating planning decisions with relevant State planning agencies,
but the association is concerned that a Federal requirement to consult
these agencies may be burdensome or may intrude on the domain of local
government. Metropolitan water agencies are naturally a part of local
land use planning efforts, and consulting and coordinating with the
appropriate bodies is standard practice.
CONSOLIDATION, PARTNERSHIPS AND NONSTRUCTURAL ALTERNATIVES
AMWA applauds the bill's sponsors for emphasizing the importance of
creative approaches to managing a water utility by encouraging
consolidation, partnerships, and adoption of nonstructural
alternatives. Many water systems are already considering various
approaches to regional water management and it is important that these
types of arrangements be evaluated and supported.
An excellent example is the Contra Costa Water District, a
metropolitan system in California. Contra Costa is working with other
local water entities in a variety of partnerships, ranging from
providing less costly water supplies to cooperation in obtaining new
supplies and developing needed infrastructure. One Contra Costa
partnership with a local water system will save more than $7 million
over the cost of separate solutions. Another Contra Costa partnership,
involving three agencies, provided an alternative water supply that
will save up to $13 million. In a third, 10 water and sanitation
agencies joined to conduct a water supply and infrastructure study that
focused on the region, thereby providing a more beneficial plan for the
region as a whole.
Rather than require consideration of alternative approaches as part
of a loan application process, the SRF should provide financial
incentives in the form of grants or loan forgiveness for those drinking
water systems that develop alternative arrangements that provide more
effective and efficient management of local resources. In particular,
financial incentives should be provided to those drinking water systems
that agree to partner with small systems facing compliance problems.
PUBLIC-PRIVATE PARTNERSHIPS
Among the partnerships water systems would be required to consider
under S. 1961 are public-private partnerships. These could include
design-build solutions, contract management or other forms of
privatization.
Whether a water agency specifically considers public-private
partnerships should remain at the discretion of local government,
because local factors will dictate whether the partnership is in the
interest of the consumers. Therefore, the association urges the
subcommittee to look into public-private partnerships more closely
before so strongly endorsing them. Privatization can be a very
contentious issue in communities and worth a full exploration before
legislated by Congress.
Privatization experts have identified some of the issues that need
further exploration. Among them are those surrounding accountability
and the blurring of roles and responsibilities. For example, who is
responsible for complying with environmental regulations, resolving
service complaints and planning to meet future needs.\2\ Who pays if
the private partner fails? If the private partner takes on more
liability than it can afford, who's responsible when something goes
wrong?
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\2\ Dr. Janice Beecher, Beecher Policy Research, Public Works
Financing, November 2000.
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Another issue that has recently emerged is a concern about the
implications of international trade agreements on domestic
privatization since four of the major companies involved in the U.S.
water market are located in other countries. For example, once a
municipality contracts with a foreign provider, can that municipality
withdraw from the agreement? What impact could the General Agreement on
Trade in Services (GATS) and the authority of the World Trade
Organization (WTO) have on future contracts?
Members of the subcommittee, AMWA is not here today to oppose
private-public partnerships. Many drinking water utilities have entered
into such arrangements for a variety of purposes. It is another matter,
however, to sanction these arrangements and make consideration of
public-private partnerships a requirement in Federal law.
AMWA is simply urging the subcommittee to look into public-private
partnerships more closely before endorsing them. Legislating
privatization may not be in the public interest.
PROCUREMENT REQUIREMENTS
Section 205 of the bill proposes imposing on drinking water
agencies procurement provisions that were abandoned in the Clean Water
Act when the Clean Water SRF program was adopted. The requirements were
abandoned because they encumbered both State agencies and local
government, overrode State and local procurement laws and created many
disputes. The same would hold true for today, and AMWA urges the
subcommittee to drop those provisions from the bill.
RATE STUDY AND WATER RESOURCE PLANNING STUDIES
Among the provisions of Title III is a study on rates,
affordability and how to define disadvantaged communities. Rate setting
is a very difficult process and many water systems will appreciate
assistance. Information on determining affordability and disadvantaged
communities will be very beneficial, too. AMWA believes that U.S. EPA's
current affordability criteria in many States does not fully capture
the conditions that create disadvantaged communities. Most States
determine whether a community is disadvantaged by looking at median
household income and, sometimes, water rates. A more well-rounded
analysis would consider additional facts such as: the number of people
living below the poverty level, inflation and the loss of a tax base.
Title IV contains provisions for a study (and periodic update) of
the nation's water resources. The study and the updates will provide a
wealth of information that will help Federal, State and local
government make well-informed decisions. We applaud the sponsors'
appreciation of water resource shortages.
Again, thank you for introducing the Water Investment Act of 2002
and for the opportunity to provide testimony on it.
__________
Statement of Paul Pinault, Executive Director, Narragansett Bay
Commission on Behalf of the Association of Metropolitan Sewerage
Agencies (AMSA)
INTRODUCTION
Good morning Chairman Graham, Senator Crapo and members of the
Subcommittee, my name is Paul Pinault. I am Executive Director of the
Narragansett Bay Commission in Providence, Rhode Island and Vice
President of the Association of Metropolitan Sewerage Agencies (AMSA).
AMSA represents more than 270 publicly owned treatment works (POTWs)
across the country. AMSA's members treat more than 18 billion gallons
of wastewater each day and service the majority of the U.S. sewered
population.
On behalf of AMSA and the Narragansett Bay Commission, I thank you
and your colleagues for introducing S. 1961, the Water Investment Act
of 2002, and for holding this hearing. Like you, AMSA and its members
are committed to one very serious and important goal--commemorating
this year's 30th Anniversary of the Clean Water Act by passage of a
meaningful funding bill for our nation's core water and wastewater
infrastructure. This bill should:
<bullet> Focus on core infrastructure needs, including repair and
replacement of aging pipes and facilities;
<bullet> Fully fund the documented water infrastructure funding
needs at an authorized level of $57 billion over 5 years through a
combination of grant and loan funding options;
<bullet> Streamline State funding procedures; and
<bullet> Invest in clean and safe water technology and management
innovation to reduce infrastructure costs, prolong the life of
America's water and wastewater assets, and improve the productivity of
utility enterprises.
The Senate during hearings last year laid the foundation necessary
to introduce S. 1961 by reinforcing the need to reinstate a long-term
financial partnership between the Federal Government, States, and
communities, which is essential to achieve our nation's water quality
goals. Water quality should be a priority at every level of government,
and America's municipalities should not be left alone to face the
challenge of providing clean and safe water to every citizen. Existing
and new regulatory requirements continue to strain local budgets,
including the tremendous expenses needed to comply with total maximum
daily loads (TMDLs), and combined sewer (CSO) and sanitary sewer (SSO)
overflow programs and requirements. The events of September 11, 2001
added to these already tremendous operating costs by requiring
expensive facility security upgrades. The reality is that without a
significant fiscal partnership that includes long-term Federal
participation to meet these core infrastructure challenges, we will see
a continued and devastating decline in both our national wastewater
treatment and collection systems and the nation's public health and
environmental well being.
S. 1961 addresses two essential issues at the heart of the water
infrastructure matter--the vast dollars needed to ensure the continued
viability of our water systems, and the efficiency of our wastewater
treatment systems. However, many of the bill's provisions send a
troubling message to all of us in the wastewater treatment community.
They suggest that the Federal Government is not with us for the long
haul, that Congress does not have confidence in our management skills
and believes we are not charging Americans enough for their water, and
that the States and the U.S. Environmental Protection Agency (EPA) need
to micromanage our operations. The provisions of S. 1961 suggest that
after this bill's infusion of Federal funds, we will once again be left
on our own. The reality, however, is that even with Congress'
appropriation of Federal infrastructure funds at the WIN recommended
level of $57 billion over 5 years, local water rates will continue to
rise and local rate payers will still assume between 85 and 90 percent
of infrastructure costs.
Accordingly, I now would like to provide the Subcommittee with
AMSA's and my perspective on these issues as they are addressed in the
bill.
INFRASTRUCTURE FUNDING
S. 1961 comes part way toward addressing the true, significant
funding gap addressed by so many sources, including EPA, the General
Accounting Office (GAO), and the Water Infrastructure Network (WIN).
The bill authorizes $20 billion over 5 years for the Clean Water SRF
and $15 billion over the same period of time for the Drinking Water
SRF. This authorization is an important and significant step toward
bridging the funding gap. However, S. 1961 falls short of the WIN-
recommended $57 billion over the next 5 years needed to truly address
core infrastructure investments. We urge the Subcommittee to amend the
bill to fully fund both SRFs at the WIN recommended levels. Our focus
on core infrastructure funding leads us also to urge that the
Subcommittee add to the bill's Section 2 ``Purposes'' the following
additional issue--``to recognize the national, environmental and public
health importance of maintaining our nation's water and wastewater
infrastructure.''
We also recommend that the Subcommittee add to S. 1961 a provision
to make grant funding available to all communities. Only grant funding
in significant amounts provides sufficient resources and incentives to
gain local support for increasing utility rates to pay for new
regulatory costs and the costs of replacing or rehabilitating aging
infrastructure. If there is any doubt regarding whether water
infrastructure grants are in fact an essential part of addressing the
significant core infrastructure needs of our nation's communities, one
need look no further than the fiscal year 2002 VA-HUD appropriations
bill for EPA. In this bill, Congress approved direct grants for 337
core water infrastructure projects totaling nearly $344 million to
communities across the country. The fact is that grants are, and always
have been, a necessary part of a real solution to our local
infrastructure needs. Without a grant component specifically targeted
to address core infrastructure concerns, S. 1961 will not succeed in
addressing the most critical of our communities' investment needs.
srf payment terms and reservation of srf funds for specific purposes
S. 1961 offers ``disadvantaged communities,'' as defined by their
States, up to 30 years to fully amortize a SRF loan. AMSA encourages
the Subcommittee to amend the bill to allow all communities to take
advantage of a 30-year repayment schedule or to choose repayment ``over
the life of the project.'' Longer repayment terms for all communities
are an essential way to add flexibility to the SRF program, and an
important way to achieve the bill's stated purpose of ``maximizing use
of Federal funds.''
S. 1961 also allows up to 15 percent of SRF funds to be used for
additional subsidization for all communities so long as the funds are
``directed through the user charge rate system to disadvantaged users
within the residential user class of the community.'' Title I, Sec.
103(c)(8)(A)-(B). Title I, Section 103(e)(2) further provides that
States can direct up to 30 percent of SRF loans to:
<bullet> Fund the development of ``technical, managerial, and
financial capacity'' and asset management plans (Sec. 103(c)(7)) in all
communities; and
<bullet> ``Provide additional subsidization (including forgiveness
of principal) to a disadvantaged community, or to a community that the
State expects to become a disadvantaged community as the result of a
proposed project'' (Sec. 103(c)(9)).
We address the bill's asset management provisions in the next
section. As to disadvantaged communities, we understand the
Subcommittee's desire to ensure that low-income and disadvantaged
persons and localities are given a variety of flexible ways to afford
water service and finance core infrastructure upgrades. In fact, many
AMSA members have these systems in place. In addition, local support
systems in the form of third parties such as churches, community
service organizations, and other organizations provide direct
assistance to water users. The reality is, however, that many local
rate setting and billing methods do not give POTWs the ability to
target subsidization to individual ratepayers as S. 1961 directs.
Further, we are concerned that the bill's allowance of a total of
up to 45 percent of the already limited SRF dollars to be directed to
low income users within communities, disadvantaged communities, and for
the development of asset management plans will seriously jeopardize the
availability of adequate funds for core critical infrastructure
projects. We urge the Subcommittee to delete these requirements, and
instead express the sense of Congress that SRF funds should be directed
as much as possible to needy communities, and that Congress expects the
States will carry out this responsibility as they review and prioritize
SRF fund applications.
EFFICIENCY AND STABILITY OF WASTEWATER TREATMENT SYSTEMS
S. 1961 creates several new requirements for communities to receive
SRF loans. AMSA is seriously concerned that these provisions will only
slow down and hinder the SRF process, rather than streamline the fund
as the bill's ``Purposes'' intend, and as many stakeholders have
recommended over the years.
Demonstration of Technical, Managerial, and Financial Capacity,
Including Asset Management
One new requirement in S. 1961 is that within 3 years, each POTW
receiving ``significant'' SRF assistance--we note this is an undefined
term--must demonstrate ``adequate technical, managerial, and financial
capacity, including the establishment and implementation of an asset
management plan'' to receive the funds. Title I, Sec. 103(i)(5). States
are given 3 years to implement a detailed strategy to assist treatment
works in attaining and maintaining such technical, managerial,
operations, maintenance, and capital investments, and meeting and
sustaining compliance with Federal and State laws. Sec. 103(i)(2)(A)-
(B). States with inadequate strategies would lose 20 percent of their
SRF funds within 1 year, and significant future funding if the strategy
remains unacceptable to EPA. Sec. 103(i)(3)-(4). States must submit
annual reports to EPA on their progress improving the technical,
managerial, and financial capacity of POTWs.
We are seriously concerned that this entire ``hammer'' approach,
which would make States responsible for keeping the asset management
ball rolling, combined with loss of SRF funding for both States and
communities, will create an enormous disincentive to access the SRF at
all. This is the complete opposite result contemplated in the bill's
stated ``Purposes.'' The bottom line is that without any Federal
requirements, the type of asset management S. 1961 contemplates is
already happening. Asset management and long-term planning are an
essential part of protecting our nation's water infrastructure
investments. AMSA and its member agency operators are working
consistently to improve the efficiency of their operations. In fact,
the AMSA Index has been reporting significant reductions in operations
and maintenance costs since 1996. In addition, AMSA just released a
comprehensive asset management handbook to POTWs across the country,
and we are holding workshops throughout the year--including later this
week--to train hundreds of facility managers in asset management
techniques. The asset management plan outlined in the bill, including
the mandate to develop an asset inventory, useful life projection, and
an optimal schedule of capital and maintenance expenditures to sustain
performance objectives, are precisely the techniques advanced in AMSA's
handbook and workshops. In addition to knowing that asset management is
the right way to manage a facility and its infrastructure assets, the
legal requirements of Government Accounting Standards Board Statement
34 (GASB 34) are requiring cities across the country to document and
discuss in detail the condition of their major infrastructure assets.
Let us not be lulled into believing that good management can repair
the aging infrastructure of the past. Although extremely important,
good management does not provide the bricks, mortar, concrete, and pipe
to build and maintain a sewer system. And this is where S. 1961 must
focus--on giving communities the funds they need to make their core
infrastructure investments. We recommend that the Subcommittee remove
these asset management requirements, and instead, revise the
congressional statement of policy in the bill to express the sense of
Congress that asset management is essential and strongly encouraged. We
urge the Subcommittee to recognize that making asset management a
prerequisite for SRF funds will have the effect of denying communities
the very funds they need to fix their core infrastructure.
Coordination with Local Land Use and Transportation Planning
Another new requirement in S. 1961 is that States must ensure that
SRF applicants consult and coordinate with local land use plans,
regional transportation improvement and long-range transportation
plans, and watershed plans. Title I, Sec. 103(e)(2). This type of
coordination is already occurring across the Nation, and in fact,
already is required by many SRFs, making this provision of the bill
duplicative and potentially confusing. In fact, the State and regional
clearing house process long-implemented under the Demonstration Cities
and Metropolitan Development Act of 1968 and OMB Circular A-102 already
provides sufficient local coordination in the areas contemplated in S.
1961. For these reasons, we recommend that the Subcommittee remove this
requirement from the bill.
Consolidation of Management Functions; Rates Reflecting ``Actual Cost
of Service''
A third new requirement in S. 1961 is that communities may only
receive SRF funding if they have considered ``consolidating management
functions or ownership with another facility; [and] forming public-
private partnerships or other cooperative partnerships.'' Title I, Sec.
103(j)(1). A fourth new requirement is that the community must have in
effect ``a plan to achieve, within a reasonable period of time, a rate
structure that to the maximum extent practicable . . . reflects the
actual cost of service provided by the recipient'' as well as an asset
management plan. Sec. 103(j)(2). These provisions would introduce an
inappropriate level of Federal and State oversight into the setting of
local wastewater rates and the management of local utilities--areas in
which they do not have sufficient expertise--and will deter communities
from applying for the very SRF funds the bill intends them to receive
more easily and directly. The subjective nature of the wording in these
provisions only causes us greater concern. As a result, we strongly
recommend they be deleted.
Let me be clear--AMSA members are committed to supporting our
operations and capital needs through our rates. In fact, most AMSA
members operate as an authority or division of government with tight
enterprise accounting procedures, and already recover full costs of
service, including a payment to the underlying government for
``services rendered'' or ``in lieu of taxes.'' AMSA's own triennial
financial survey of our industry, which we have provided to this
Subcommittee, supports this statement. Most AMSA members' rates also
address capital replacement funds to the extent they are identified.
While some replacement costs and future regulatory requirements may not
be typically captured in the traditional capital replacement programs,
POTWs are working to fine tune their projections every day. In
addition, we regularly explore new ways of doing business, including
consolidating management functions or ownership with another facility,
and forming public-private partnerships or other cooperative
partnerships. Where these partnerships and business structures make
sense for a locality, they are pursued. However, these decisions should
be made at the local level, and not be legislated by the Federal
Government as a requirement for a community to receive SRF funds.
INNOVATIVE TECHNOLOGY/DEMONSTRATION PROJECTS
For many years, AMSA and WIN have supported the addition of
provisions that will promote investment in clean and safe water
technology and management innovation to reduce infrastructure costs,
prolong the life of America's water and wastewater assets, and improve
the productivity of utility enterprises. Title III, Section 302 of the
bill establishes a demonstration program for water quality enhancement
and management. We urge the Subcommittee to increase the $100,000,000
authorized for this important initiative, and to expand the types of
projects that would be eligible for the program.
nas rate, affordability, and disadvantaged communities study
We also recommend removal of S. 1961's provision at Title III,
Section 303 for a National Academy of Sciences (NAS) study of public
drinking and wastewater treatment system rates, affordability, and
disadvantaged communities. The study would, among other things:
<bullet> Assess whether rates adequately address the cost of
service and infrastructure replacement needs;
<bullet> Recommend best practices to establish rate structures
addressing the ``true cost of service'' and the needs of disadvantaged
communities and individuals;
<bullet> Evaluate existing standards of affordability;
<bullet> Describe how a ``disadvantaged'' community is determined
in various parts of the country; and
<bullet> Assess how various factors affect whether a community is
considered ``disadvantaged.''
AMSA believes the answers to many of these questions already exist
and render the study unnecessary. We also are concerned that S. 1961
requires POTWs to make rate structure assurances, and the States to
define ``disadvantaged'' through notice and comment rulemaking, well
before this NAS study would be complete and its results examined. AMSA
also does not believe it is the best use of the NAS' expertise to study
topics that not only have been studied by academics and social
scientists across the Nation for many years, but also that are as
locally driven and diverse as these issues.
SUMMARY OF AMSA'S KEY RECOMMENDATIONS
AMSA is pleased to provide the following summary of our recommended
revisions to S. 1961:
<bullet> Fully fund the documented water infrastructure funding
needs at an authorized level of $57 billion over 5 years using a
combination of grants and loans, consistent with the WIN Report;
<bullet> Focus on core infrastructure needs;
<bullet> Recognize the national, environmental and public health
importance of maintaining our nation's water and wastewater
infrastructure;
<bullet> Allow all communities to take advantage of a 30-year or
``life of the project'' repayment schedule;
<bullet> Remove provisions allowing up to 45 percent of SRF dollars
to be directed toward assistance to disadvantaged communities, low-
income individuals, and asset management work. Instead, express the
sense of Congress that SRF funds should be directed to needy
communities and individuals in the States' discretion as they review
and prioritize SRF fund applications, and that municipal asset
management is an essential activity for which SRF funds may be used;
<bullet> Add provisions to truly streamline State funding
procedures consistent with the bill's stated purposes, and to ensure
the swiftest possible fund allocations for local infrastructure needs;
<bullet> Remove provisions making asset management a prerequisite
for SRF funds and instead, include in the congressional statement of
policy that asset management is encouraged;
<bullet> Remove provisions that introduce an inappropriate Federal
and State role in the setting of local wastewater rates, utility
partnerships, and land use planning;
<bullet> Increase the $100,000,000 authorization for the
demonstration program for water quality enhancement and management, and
expand the types of projects eligible for this program; and
<bullet> Remove the provision for a National Academy of Sciences
study on public drinking and wastewater treatment system rates and
factors creating disadvantaged communities.
CONCLUSION
The Water Investment Act of 2002 is an important first step toward
reaching the $57 billion over 5 years needed to address core water
infrastructure projects. The needs of communities across the Nation are
not being met by EPA's current SRF program. AMSA believes that S. 1961
should be amended to streamline SRF requirements and to direct funds to
support the core needs of our industry--infrastructure repair and
replacement, and compliance with new and forthcoming regulatory
requirements.
Wastewater agency executives like myself face our environmental
challenges each day. Wastewater treatment plants operate 24/7 to
provide secure systems, upgrade and replace our treatment plants and
pipes, control sewer overflows and stormwater, protect wetlands, manage
coastal areas, and meet a host of other water quality responsibilities.
Simply stated, a lasting, long-term fiscal partnership with the Federal
Government and the States is the answer to our call for assistance with
this tremendous responsibility.
Chairman Graham, we look forward to working with you to modify S.
1961 to reflect our suggestions and those of other stakeholders in the
coming weeks. Thank you for the opportunity to present AMSA's
perspective on the bill. At this time, I will be happy to answer any
questions.
__________
Statement of Elmer Ronnebaum, General Manager, Kansas Rural Water
Association for the National Rural Water Association
Good afternoon. Mr. Chairman and Members of the Subcommittee, thank
you for the opportunity to be here today to discuss small communities
and their water funding concerns.
My name is Elmer Ronnebaum. I am General Manager of the Kansas
Rural Water Association. We have more than 650 small community members
that operate water utilities and most operate wastewater utilities.
Kansas Rural Water Association is governed by the local communities.
The mission of the Association is to improve and protect water quality
through grassroots technical assistance of utility operation and
maintenance and training. Every community wants to provide the best
possible water quality to their consumers. Rural Water provides the
resources and training to achieve this objective in a common sense,
hands-on manner systems can utilize. I have personally worked with
hundreds of small communities in Kansas on problems ranging from
securing SRF or other funding, to water supply, to explaining to a new
operator or city council member what the Safe Drinking Water Act, the
Clean Water Act, and the Federal Register are and what they require.
Kansas Rural Water is similar to the State rural water association in
each of your States. I am honored to speak on their behalf today.
On behalf of all small and rural communities, I would like to thank
the Committee for your efforts to assist small communities with
compliance with the Federal Clean Water Act and Safe Drinking Water Act
and to provide the safe drinking water and highest quality of effluent
possible. Rural Water looks forward to working with you to move these
ideas into laws and actual dollars in the field.
The five principle dynamics of small communities that we believe
need to be recognized in discussing funding policies are:
<bullet> One, that small communities make up the overwhelming
percentage of water and wastewater utilities--over ninety percent of
regulated communities.
<bullet> Two, that due to a lack of economies of scale, small town
consumers often pay high water and sewer rates. Water bills of more
than $50 for 5000 gallons of water are not uncommon in rural areas.
This dynamic often results in very high compliance costs per household
in rural systems. Simultaneously, the rural areas have a greater
percentage of the nation's poor and a lower median household income.
This results in very high compliance cost per household in rural
systems coupled with a lesser ability to pay.
<bullet> Three, small systems often have limited technical and
administrative resources to deal with compliance and navigate through
funding programs. In the smallest systems, one person may run both the
water and sewer system and in some cases communities can only afford a
part-time or volunteer operator. This lack of resources makes small
systems a challenge for State agencies--the more complicated we make
funding programs the more likely the small communities, which need the
funds most, will not be able to participate.
<bullet> Four, small community water systems have been the
historical solution to rural families living without water. Small water
systems were ONLY started to improve the public health. The result is
dramatic improvements in public health by providing an alternative for
families from gathering their drinking water from untreated streams,
shallow and contaminated wells, roof collection and cisterns. In 2001,
there are hundreds of thousands of rural families that still don't have
piped water in their homes. Millions of rural families still have water
delivered to their homes. According to the USDA at least 2.2 million
rural Americans live with critical quality and accessibility problems
with their drinking water, including an estimated 730,000 people who
have no running water in their homes. About five million more rural
residents are affected by less critical, but still significant, water
problems.
<bullet> Five, consolidation and privatization are limited
solutions for small systems. Consolidation can work in some situations,
but only for a small portion of small systems and only when the systems
are in close proximity and the economics make sense. Rural Water is the
lead proponent of consolidation when it makes sense (when it results in
better service for the consumer) and we have consolidated numerous
communities in all the States. Consolidation and regionalization that
is in the consumers' best interest will happen naturally at the local
level regardless of Federal policy on issue. Federal policy that favors
consolidation over the locally preferred solution is a step in the
wrong direction for consumers (i.e. 42 U.S.C. Sec. 300g-3(h)
Consolidation Incentive). Privatization is rarely a less costly
solution for very small communities. In the very small communities it
is, perhaps, more common to see private systems being transferred to
public bodies so they can obtain better financing and local
governmental control. The missions of private water and rural water
systems are fundamentally different, the reason being the lack of
profitability in sparse rural populations.
In 1996, another Senator from Idaho, Dirk Kempthorne, made a
significant policy change in the Safe Drinking Water Act. At every
opportunity, he ameliorated the Act by including as much flexibility as
possible. Nowhere is this more apparent than in the State revolving
fund section. Under the Kempthorne approach States were given all sorts
of discretion on how to spend the money to meet their local priorities.
For example, a State can make grants, can fund set-asides, expand
technical assistance efforts, create new prevention programs, increase
State staff, or choose to do none of these and retain the traditional
low interest loan focus.
Small communities' message here today is that this was a monumental
step in the right direction. This flexibility has made State SRFs
better and more responsive to nearly every stakeholder. Small systems
have seen a level of inclusion and benefits from the drinking water SRF
that we could not imagine based on our experience with the wastewater
SRF that does not include these flexible provisions.
Some State rural water associations have not been impressed with
the way their State has chosen to utilize their discretion. Some States
have steered funds to larger systems with less urgent needs, in their
opinion, to make fund administration easy and keep bond ratings high.
However, this is not a complaint that is appropriate for this
committee. Those concerns are best handled in the States and each year
locals have a better chance to improve their own State's program.
My State of Kansas is an exemplary case for success in SRF
implementation. Many of our small systems are receiving large funding
packages from the SRF. The State has made small system funding a
priority in Kansas and we have expanded technical assistance to small
systems. Assistance is also provided to help small systems through the
funding process. The Kansas application for drinking water funding is
streamlined and simple enough for a small system operator (with too
little time and too much to do) to complete.
Also in Kansas, Mr. Kempthorne's creative experiment in policy
ignited innovation in governmental programs. Our State's drinking water
administration has exploited the provisions in the SRF to invent one of
the best local-State partnerships in all of government. As you consider
crafting new funding legislation, small and rural communities urge you
to include a few key provisions dealing with flexibility and targeting
of funding that have made the drinking water program more responsive to
small systems.
Mr. Chairman, I would like to summarize the key elements for small
and rural communities in modifying the wastewater the drinking water
SRFs as follows: Make the wastewater fund more like the drinking water
fund and put more money in both.
We urge you to include three legislative provisions in both water
and wastewater that would ensure communities in the greatest public
health and economic need receive prioritization in funding programs.
One, the communities exhibiting the greatest need should receive
funding first. Second, programs should not be limited to making loans
because in many situations, small communities will not have the ability
to pay back a loan--even with very low interest rates. Third, a minimum
portion of the funds should be set-aside for small systems. This
ensures that a State must set up a process for dealing with small
communities. Once established, local pressures and priorities will
determine the actual portion directed to small systems, which we expect
will often be greater than the minimum prescribed. All of these
provisions were included in some manner in the drinking water SRF--
balancing the Federal priorities with the State's flexibility to tailor
individual programs and discretion on implementation of each these
programs.
The SDWA included the following three provisions to ensure that
funds would result in the greatest advancement in public health/
environmental protection and be used to assist the consumer with the
most economic needs.
(1) A small system set-aside like the drinking water SRF (this
serves as an incentive to create a useful process for outreach to small
systems). Section 1452 (a)(2) Use of Funds.--Of the amount credited to
any State loan fund established under this section in any fiscal year,
15 percent shall be available solely for providing loan assistance to
public water systems which regularly serve fewer than 10,000 persons to
the extent such funds can be obligated for eligible projects of public
water systems.
(2) A requirement to target systems most in need like the drinking
water SRF. Section 1452 (b)(3)(A) In General.--An intended use plan
shall provide, to the maximum extent practicable, that priority for the
use of funds be given to projects that--(i) address the most serious
risk to human health; (ii) are necessary to ensure compliance with the
requirements of this title (including requirements for filtration); and
(iii) assist systems most in need on a per household basis according to
State affordability criteria.
(3) Grants (some type of mechanism to make funding useful for
hardship communities). Section 1452 (d) Assistance for Disadvantaged
Communities (1) Loan Subsidy.--Notwithstanding any other provision of
this section, in any case in which the State makes a loan pursuant to
subsection (a)(2) to a disadvantaged community or to a community that
the State expects to become a disadvantaged community as the result of
a proposed project, the State may provide additional subsidization
(including forgiveness of principal). (2) Total Amount of Subsidies.--
For each fiscal year, the total amount of loan subsidies made by a
State pursuant to paragraph (1) may not exceed 30 percent of the amount
of the capitalization grant received by the State for the year. (3)
Definition of Disadvantaged Community.--In this subsection, the term
`disadvantaged community' means the service area of a public water
system that meets affordability criteria established after public
review and comment by the State in which the public water system is
located. The Administrator may publish information to assist States in
establishing affordability criteria.
Our specific comments on Senate Bill 1961 include:
1. We appreciate that the bill did not include new priorities for
funding, set-asides for various size systems, and changes in the
disadvantage community determination. We have been told that large
system groups believe too high a percentage of the present drinking
water SRF funding is going to small communities. However, a significant
portion of the funding should flow toward small systems because,
generally, they need it more. Rates are often much higher per household
in small communities--often from compliance requirements. EPA rules on
the horizon will likely triple water rates in rural systems. Also,
rural communities often have lower median household incomes. The CWA
and SDWA axiom in rural areas is: much higher cost per household with
much lower income. No large system is facing cost increases on a per
household basis comparable to what is facing small systems. It only
makes sense that federally subsidized funding would flow toward the
communities with the greatest need--that is to small systems.
2. We appreciate that the bill retains the three SDWA provisions
(mentioned above) that ensure funding results in the greatest
advancement in public health/environmental protection and be used to
assist the consumer with the most economic need. This keeps the money
tied to the regulations. Funds should be used for the greatest health
protection, which should be what the regulations are targeting. To
target funding for issues outside of the scope of the regulations would
infer that the regulations are not covering the greatest health risks.
3. We urge the Committee to include the three SDWA provisions [sec.
1452 (b)(3)(A)--above] in wastewater program in a comparable form. This
will ensure the more critical projects with the greatest need receive
priority.
4. We urge the Committee to include the same set-aside amounts for
the wastewater and drinking water programs; 15 percent minimum for
small systems as like the drinking water program and 30 percent
disadvantaged community subsidy like in the drinking water programs.
This parity will ensure States have the tools to help the systems most
in need and will be especially important if the two funds have transfer
authority between them.
5. Corporate water systems should not be eligible for State
revolving funding. Taxpayer subsidies should be prohibited from profit
generating companies or companies paying profits for shareholders/
investors. Private companies argue that they have to comply with the
same regulations. However, they voluntarily chose to get into this
``business'' and compliance is not the over-riding principle that
should be considered in this discussion. We believe that the
distinction in mission between public and private is the core principal
that should be considered. Private systems are in the business to
maximize profit. Public water utilities were and are created to provide
for public welfare (the reason why public water continues to expand to
underserved and non-profitable populations). This is a significant
difference. And while we believe that maximizing profit is a noble
virtue and as American as safe water, we do not think that taxpayers
should help the cause of privately owned systems. In addition, the
needs of less affluent public water systems and families with no piped
water dwarf the current SRF allocations. The State of Florida has a
novel compromise to this issue. Florida limits SRF funds to private
water systems less than 1,500 people--ensuring funds are limited to the
class of private water systems that did not get into the business as a
corporate enterprise. Also, this group of private systems could be
included in the State's needs assessment which determines allocations
under the bill.
6. The bill includes many new requirements for applicants
including: environmental, land use planning, capacity, actual cost of
water, common industry practices, etc. We urge you to exercise caution
for increasing demands on applicants as each new demand makes the
process too complicated for small systems and therefore less
attractive. We believe that the current review process is fully
adequate to ensure repayment of loans, progressive environmental
planning, and long-term capacity of applicants. Nationalizing policy
industry practices and determining actual cost of water could lead to
gold-plating of water utility practices which is not in the best
interests of consumers.
7. We urge the Committee to limit the ability of any portion of a
water or wastewater system to be eligible for disadvantage type
subsidies or other special treatment. To assist any portion of a system
moves the effort from an environmental-public health program to a
social program. If particular low-income consumers are having problems
paying their water bills, we don't think the SRF should be used as the
solution. That may be an issue for agencies other than the EPA. It is
important to note that a State can determine a large system
disadvantaged as well as a small system. Funding a portion of a system
seems to be a way to skirt the current process which is working so well
at prioritizing systems most in need. Also, this moves the SRF in a
direction contrary to the CWA and the SDWA's regulatory structure which
only applied on a system-by-system scope.
8. We urge the Committee to consider including provisions guiding
the percent of a project that can be used for engineering/consulting
services on projects. USDA has such a provision [Part 1780-Water and
Waste Loans and Grants, Sec. 1780.39(b) Professional services and
contracts related to the facility]. In Kansas, our research shows that
engineering fees are sometimes charged at twice as much in programs
that don't have such guidance on engineering fees.
9. It is not clear exactly what defines ``public-private''
partnerships. This may be too ambiguous and means various things to
various people--left open to EPA or State determinations may result in
unintended consequences. Also, the States are doing a fine job of
public outreach under the current rules. Before requiring more
``significant'' public outreach, we should first conclude the current
is not working (which states and why would be useful information).
10. The proposed wastewater program is limited to ``municipal''
systems and privates. We urge you to consider opening it up to a
variety of non-profit systems including districts and other quasi-
governmental systems, which we believe was intended and is consistent
with the drinking water programs. Many rural wastewater systems are not
legally municipalities, but rather district or other non-profit
utilities.
11. We urge the Committee to consider allowing States the
discretion to 30 years loans to any small community--not just to
communities designated disadvantaged.
The coming arsenic rule will increase the number of small systems
facing funding challenges. Dozens of small systems in Kansas (thousands
across all the States) will need funding to comply with the arsenic
regulation.
One municipality in Kansas that will be greatly affected by Arsenic
Rule, established at 10 ppb, is the city of Atwood (population of
1,300) surrounded by farmland and an agricultural economy.
Past arsenic water quality results for the city of Atwood has shown
a range of 12 to 18 ppb in the three currently used municipal wells.
The proposed arsenic MCL of 10 ppb allows the City two general feasible
options to attain the MCL. The community has an option to develop new
well fields in the Ogallala formation located several miles from the
community. However, while Ogallala formation generally provides better
water quality and perhaps an arsenic concentration below the 10 ppb, it
is a much more cemented and finer formation. This fine formation
decreases production of wells. Thus to develop a sufficient municipal
water supply, more area for wells is required since they must be a
greater distance apart. The estimated cost of this option would be
$2,200,000 based on a 5-mile transmission main with four wells to meet
daily water demand. A second option available is treatment of the
existing water supply sources.
The city presently does not have a single point of entry into the
distribution system. Each well is directly connected into the
distribution system. All wells are located in separate areas of the
existing system. Over 3,000 feet of distance exist between the two
farthest wells. In order to implement a point of use treatment plant, a
new dedicated transmission main would have to be constructed between
the wells. Land and easements would have to be procured to build a
treatment facility. Atwood's sulfate concentrations in the range of 90
to 309 mg/L will affect treatment efficiencies in an ion exchange
process requiring frequent regeneration. This creates higher operation
and maintenance cost (O&M). The estimated treatment facility cost would
range from $1,300,000 to $2,100,000 depending on the Best Available
Technologies (BAT) selected. Atwood could experience a budget increase
of $50,000 to $75,000 per year with the incorporation of a treatment
plant. These budget increases are due to operation and personnel
requirements. Special by-product disposal requirements could require
more operation costs.
In order to provide funding for capital construction and O&M
assuming a 5 percent interest rate and 20-year loan period that
corresponds with the life of a treatment facility with 700 connections,
the monthly water rate would have to increase by $18 to $29 per
connection. Again, please keep in mind this does not include the
current water rate and upgrades currently necessary to keep the system
in compliance. [Miller & Associates Consulting Engineers, P.C., McCook,
NE 2001]
This is a conservative estimate and does factor in all the costs
for compliance. Rate increases on this type of a community could be
devastating.
However, Mr. Chairman, while no system will be in greater need for
Federal assistance than Atwood, KS the challenge is how to craft a
funding program that will work for those most in need. Cost estimates
of the funding needed to sustain a healthy U.S. water supply are
staggering. The Water Infrastructure Network, of which Rural Water is a
member, estimates an $11 billion annually funding gap over the next 20
years. This estimate is over 4 times the current combined Federal
contribution in the USDA, EPA Drinking Water, and EPA Wastewater
programs.
Rural Water is not the type of organization that can present an
accurate cost figure on the future need for funding. However, we can
acknowledge the extreme shortfall in both EPA SRF and the USDA water
programs, as indicators that the current needs are not being met. The
USDA program, which is the core-funding program for small water and
wastewater projects, is currently experiencing a $3.2 billion backlog.
We believe this is the most accurate indicator of need because all of
the systems in USDA's backlog have applied for funding. They have met
the requirements of USDA's strict needs requirement (including lack of
commercial funding availability and high ratios of median household
income to water rates).
In addition to this current need, EPA is proposing more
regulations. Many of the regulations will force small towns to come up
with millions in financing--many systems will be stressed to comply. I
think it is significant to observe a new dynamic in EPA regulations:
the regulation of naturally occurring contaminants and the regulations
of operations and maintenance in utilities. The result of this new
effort by EPA will be to greatly expand the number of systems forced
into costly compliance with EPA rules. For example, very few systems
were required to treat for EPA's previous rules on organic
contaminants, many with anthropogenic origins. However, the forthcoming
arsenic rule could capture as many as 4,000 communities; this will
greatly drive the demand for additional funding resources. Upcoming EPA
rules that may be expensive in thousands of rural communities include:
standards for certification of operators, filter backwash, radon,
surface water treatment rules, arsenic, disinfection byproducts,
groundwater disinfection, etc.
__________
Statement of Howard Neukrug, Director, Office of Watersheds,
Philadelphia Water Department on Behalf of the American Water Works
Association
INTRODUCTION
Good morning Mr. Chairman. I am Howard Neukrug, Director of the
Office of Watersheds for the Philadelphia Water Department in
Pennsylvania. The Philadelphia Water Department is a municipal water,
wastewater and storm water utility serving over two million people in
the Philadelphia metropolitan area. I serve as the Chair of the
American Water Works Association (AWWA) Water Utility Council (WUC). I
am here today on behalf of AWWA. AWWA appreciates the opportunity to
present its views on S. 1961, Water Investment Act of 2002 and drinking
water infrastructure needs.
Founded in 1881, AWWA is the world's largest and oldest scientific
and educational association representing drinking water supply
professionals. The association's 57,000 members are comprised of
administrators, utility operators, professional engineers, contractors,
manufacturers, scientists, professors and health professionals. The
association's membership includes over 4,300 utilities that provide
over 80 percent of the nation's drinking water. AWWA and its members
are dedicated to providing safe, reliable drinking water to the
American people.
AWWA utility members are regulated under the Safe Drinking Water
Act (SDWA) and other statutes. AWWA believes few environmental
activities are more important to the health of this country than
assuring the protection of water supply sources, and the treatment,
distribution and consumption of a safe, healthful and adequate supply
of drinking water.
AWWA and its members commend you for introducing S. 1961 to address
the growing needs facing public water systems and their customers in
the coming years. In previous testimony before this committee last year
and in our report entitled Dawn of the Replacement Era: Reinvesting in
Drinking Water Infrastructure, that we provided to all members of the
Committee, AWWA called for a new partnership for investing in drinking
water infrastructure. AWWA recommended changing and expanding the
existing Drinking Water State Revolving Fund to significantly increase
Federal funding for projects to repair, replace, or rehabilitate
drinking water infrastructure to include the aging distribution pipes.
We are pleased that many of our recommendations have been incorporated
into S. 1961. We appreciate the time and consideration given to
drinking water suppliers by the committee staff in the drafting of this
bill. AWWA looks forward to working with the committee to continue
making improvements and to see this bill passed and signed into law
this year. In our testimony today, we will confine most of our specific
comments to the Safe Drinking Water Modifications in Title II of the
bill, with a general comment about wastewater funding issues.
FEDERAL MANDATES AND THE CONTEXT FOR WATER AND WASTEWATER FUNDING
ISSUES
Both drinking water and wastewater utilities face enormously
expensive Federal mandates that set the context for all other funding
issues. The drinking water community faces a complex array of expensive
new Federal requirements and new standards, including standards for
arsenic, radon, disinfection byproducts, enhanced surface water
treatment, and others. Wastewater utilities also face enormously
expensive Federal mandates, such as those relating to Combined Sewer
Overflows (CSO) and Sanitary Sewer Overflows (SSO). For both water and
wastewater utilities, these needs significantly skew financing for
other investments, including the replacement of aging pipes,
appurtenances, and other infrastructure. Local ratepayers are often
seriously challenged to pay for these mandates, and little, if any,
room is left in the ratepayer's budget for other vital spending. In
many cases, it appears that mandatory spending for clean water mandates
has ``driven out'' the ability to raise rates for drinking water
services.
We believe that significant Federal assistance, including grants,
is necessary and justified to help meet the cost of these very
expensive Federal mandates on water and wastewater utilities, and to
meet the costs of infrastructure repair and replacement that have been,
in many cases, deferred because Federal mandates have consumed the
ratepayer's budget.
We would point out that, in the case of CSO and SSO mandates,
Federal support for the cost of those requirements is not only
justified in the community receiving Federal support, it also lowers
costs for drinking water utilities downstream in the form of improved
water quality. This is especially true in critical source water
protection areas.
DWSRF AUTHORIZATIONS
AWWA applauds the increase in authorizations for the Drinking Water
State Revolving Fund (DWSRF) capitalization grants from the current $1
billion per year to $6 billion per year in fiscal year 2007. This
represents more than a threefold increase in total authorized funds
above the current authorized levels for this period of time. We believe
that this authorization marks a significant step by Congress toward
assisting in the enormous challenge public water systems and their
customers face in meeting Federal mandates and at the same time
replacing aging distribution pipes in the coming years. As illustrated
in AWWA's report entitled Dawn of the Replacement Era: Reinvesting in
Drinking Water Infrastructure, the ``demographics'' of pipe replacement
is real, it is big, and the bill is coming due soon. This challenge is
exacerbated by population shifts and growth patterns over the years,
economic conditions and the changed demographics of urban populations.
While AWWA certainly appreciates the significant increase in Federal
funding for the DWSRF, we must note that the authorization is a very
small fraction of the $250 billion in infrastructure replacement needs
identified by AWWA. And even if every penny of the funds in this bill
is appropriated and every State gives out loan subsidies to the maximum
extent allowed under the bill, Federal loan subsidies will amount to
less than 4 percent of total spending by drinking water utilities over
the coming 5 years. It is clear that the burden of paying for public
water system improvements will remain overwhelmingly with utilities and
their rate-paying customers.
In recognition of these facts, we believe that, if the needs of
older cities with large economically disadvantaged populations are to
be met, an increase in the authorization is warranted. The Water
Infrastructure Network has recommended an authorization of $57 billion
over 5 years, and we ask you to consider that level of funding. We look
forward to working with the committee to ensure that authorization
levels will be adequate to address the needs of older cities with
economically disadvantaged populations.
LARGE PUBLIC WATER SYSTEMS
AWWA does not believe that S. 1961 adequately addresses the
challenges presented by large urban public water systems and
particularly those with declining and economically disadvantaged
populations. In Section 203, the bill authorizes up to 15 percent of a
State capitalization grant to be used for subsidizing the water bills
of economically disadvantaged customers. AWWA believes that is a
significant step forward for the Nation. However, during the short
history of the DWSRF, large public water systems have not been
receiving a fair share of SRF loans. According to EPA, States have made
approximately 75 percent of all SRF loans to small communities. In per
capita terms, assistance to very small communities has averaged over
$400, while loans to large communities (with over 100,000 people) have
averaged a little over $50 per capita.
Committee staff has told AWWA that they believe that the overall
increased authorization for the DWSRF will provide States the ability
to provide assistance for more projects and thus be able to provide
more assistance to large public water systems than was possible
previously. AWWA is not convinced that the authorization levels in this
bill are sufficient to ensure this will happen.
Current law mandates that 15 percent of a State capitalization
grant shall be reserved for small systems serving populations under
10,000 to the extent that such funds can be obligated for eligible
projects. AWWA supported that set-aside in 1996, to ensure that small
systems could participate in the loan program. We did not anticipate
that large systems would be left out of the program, relatively
speaking, and there is no corresponding set-aside for large public
water systems serving populations over 100,000. As noted, the bulk of
DWSRF funding is going to small systems. To assure that systems of all
sizes can participate in the SRF program, AWWA believes that a
corresponding set-aside of 15 percent of a State capitalization grant
should be reserved for public water systems serving a population of
100,000 or more, assuming there are eligible project applications. This
will ensure that large system can participate in the DWSRF program in
all States.
ELIGIBLE PROJECTS
Aging Infrastructure.--As mentioned in the introduction in the AWWA
report entitled Dawn of the Replacement Era: Reinvesting in Drinking
Water Infrastructure, AWWA recommended changing and expanding the
existing Drinking Water State Revolving Fund to significantly increase
Federal funding for projects to repair, replace, or rehabilitate
drinking water infrastructure to include the aging distribution pipes.
This, we believe should be the major purpose of the increased DWSRF
authorizations. However, S. 1961 makes no mention of this purpose for
the DWSRF. In discussions with committee staff, the staff notes that
the U.S. Environmental Protection Agency (USEPA) has interpreted the
current provisions of the Safe Drinking Water Act (SDWA) to authorize
the use of DWSRF funding for the replacement and rehabilitation of
aging distribution pipes as furthering the health protection objectives
of the SDWA as authorized in Section 1452 of the Act. While this
interpretation of the SDWA is welcome, it is not universally accepted.
Nor does it signal EPA and the States that the Congress believes repair
and replacement of aging infrastructure is an important priority. AWWA
recommends that the DWSRF eligibility of projects for the replacement
and rehabilitation of aging distribution system pipes and appurtenances
be made explicit in the statute.
Security Upgrades.--Since September 11, 2001, AWWA has been
advocating for Federal assistance for public water systems to help pay
for security upgrades to protect public water systems from terrorist
attack. Since that time events have validated this concern, and water
utilities are undertaking comprehensive vulnerability assessments and
emergency planning to protect both water quality (for health
protection) and water supply (for fire suppression and sanitation). Of
note are documents found in the possession of al Queda terrorists in
Afghanistan that could be used to help plan an attack on a drinking
water utility. Security concerns thus represent a large, immediate, and
unprecedented cost for public water systems. AWWA strongly recommends
that bill make explicit the DWSRF eligibility of capital projects to
address security concerns.
In discussions with committee staff, staff notes that the U.S.
Environmental Protection Agency (USEPA) has interpreted the current
provisions of the Safe Drinking Water Act (SDWA) to authorize the use
of DWSRF funding for security upgrades as furthering the health
protection objectives of the SDWA as authorized in Section 1452 of the
SDWA. While this interpretation of the SDWA is welcome, it rests on
interpretation and is subject to change. Moreover, it does not signal
that Congress believes capital projects to address security concerns
should be priority projects for DWSRF funding. We strongly recommend
that Congress send that signal to both EPA and the States.
Source Water Protection.--We applaud the provisions of the bill
that authorize the use of DWSRF moneys to support source water
protection projects. It is increasingly important to consider source
water protection as an integral part of utility resource planning, and
to do so on a watershed basis. Many utilities have been in the
forefront of doing this, and the ability to use DWSRF funds to support
source water initiatives can be of significant assistance in those
efforts.
ADDITIONAL SUBSIDIZATION
AWWA endorses the intent of Section 203 concerning additional
subsidization for disadvantaged users. AWWA believes this is a
significant step forward to address the affordability of drinking water
for economically disadvantaged drinking water customers. AWWA remains
committed to the principle that utility operations should be fully
supported by rates in the long run. This provision will enable a public
water system to charge higher rates if they are appropriate, without
placing an unacceptable burden on economically disadvantaged customers.
However, we believe it is important to ensure maximum flexibility
in how this provision is carried out. Many public water systems
currently provide some form of rate subsidy for their economically
disadvantaged customers. This is done in a variety of ways. AWWA wants
to ensure that this flexibility remains, and that no public water
system is mandated to create a bureaucracy to administer what is
essentially a social welfare program that is beyond the capability and
expertise of most public water systems. Many public water systems
contract with a third party, such as a community service organization,
to administer their rate subsidy programs. AWWA recommends that Section
203 be amended to clarify that a public water system has flexibility in
how to meet this requirement, including contracting with third party
organizations.
NEW DWSRF LOAN REQUIREMENTS
AWWA has recommended streamlining many of the requirements and
procedures for obtaining loans from the DWRSF. With respect to the
bill, we believe careful attention is required to strike an appropriate
balance between Congress' desire to encourage certain behaviors at
utilities, and the need to keep the SRF as unencumbered as possible by
unproductive red tape. Congress or EPA should exempt certain types of
projects or projects below a certain size threshhold from SRF red tape
requirements that don't make sense. For example, under current law SRF
funds may not be used for growth. In a project that is not directed at
(and with certain very tight exceptions cannot even anticipate) growth,
it is not clear why it makes sense to require consultation with
regional transportation planners, etc. A requirement to do so simply
makes the whole notion of SRF funding less attractive for that project,
without advancing any reasonable social goals. Similarly, capital
investments to improve the security of the nations' drinking water
should be exempt from ``red tape'' to the maximum extent possible. We
believe that Section 202 requires significant review with this in mind.
Planning and Engineering Phase Requirements.--AWWA recommends
deleting the requirements identified for consideration during the
planning and engineering phase of SRF projects. These are inappropriate
Federal requirements for a DWSRF loan. If a public water system is
otherwise financially sound, can repay the loan, and can comply with
applicable drinking water regulations, these requirements are
irrelevant and an additional burden to obtaining a loan. The Federal
requirement to consider consolidation, public-private partnerships and
the use of non-structural alternatives or technologies is redundant to
State requirements in most cases. AWWA believes that public-private
partnerships are an appropriate utility management option; however,
this is a local decision based on local circumstances. These
requirements involve local planning and open the door for inappropriate
Federal involvement in local decisions. These provisions add nothing to
improving or streamlining the DWSRF and are an invitation to Federal
one-size-fits-all requirements.
Rate Structure Requirements.--AWWA remains committed to the
principle that utilities should be self sustaining through their rates.
In the long run, the objectives must be to manage the costs of
replacing pipes and treatment plants and ensure financial
sustainability through local rate structures. However, AWWA wishes to
ensure that the provisions of S. 1961 do not lead to inappropriate
Federal involvement in local rate setting. Particularly in light of the
enormously expensive Federal mandates mentioned earlier, there are
cases in which recovering the full cost of service through rates may
not be possible in the short term at rates that are acceptable and
affordable. We recommend that public water systems review their rates
as a condition a DWSRF loan. After the National Academy of Sciences
report on rates (as required in Section 303 of the bill) is published,
USEPA should provide the report to States and drinking water utilities.
AWWA would strongly oppose any requirement that would involve the
Federal Government in reviewing or approving drinking water rates.
Asset Management.--AWWA advocates that public water systems have an
asset management plan as part of good utility management. However, it
is important to ensure that the provisions of S. 1961 do not lead to
Federal micro-management, such as review or approval of these asset
management plans. One way to accomplish this is to make the provision a
``self certification'' requirement with no USEPA or State role in
judging the method by which the asset management plan was developed or
its adequacy.
Local Planning Requirements.--AWWA believes that this provision
requires clarification as to what is intended and how the provision
would be implemented. It appears to only require consultation in
``appropriate'' circumstances but it's not clear who determines what is
``appropriate.'' Moreover, as noted above, many projects for which
utilities might seek SRF support are not likely to be connected in any
meaningful way to growth or open space considerations. At a minimum,
those projects should be exempted, and for other projects, the
requirement should be satisfied by a certification that utility has
consulted with other local agencies as it deems appropriate.
COMPETITION REQUIREMENTS
AWWA recommends that Section 205 concerning competition
requirements be deleted from the bill. The provision appears to come
from the old construction grants program of the Clean Water Act and has
no place as a Federal mandate for a drinking water loan program. This
provision that governs utility procurement would get the Federal
Government into local procurement decisions. The provision is redundant
because every States already has procurement procedures in effect.
Rather than streamlining the DWSRF, this provision is an unnecessary
encumbrance on the DWSRF that we cannot endorse.
RESEARCH AND DEMONSTRATIONS
S. 1961 includes several provisions relating to research and
demonstrations, including the demonstration program in Section 302, the
rate study in Section 303, and the water resource planning provisions
of Section 401. We believe it is critical that the public water supply
community be substantially involved in planning and carrying out those
sections of the bill to ensure that the research is relevant, credible,
and coordinated with other drinking water related research efforts. The
American Water Works Association Research Foundation (AWWARF) is the
internationally recognized research organization of the drinking water
community. With over $37 million in Federal support over recent years,
the AWWARF has leveraged almost $260 million in total research on both
technical and policy issues facing drinking water utilities. AWWARF
should select and manage several of the demonstration projects under
Section 302, carry out the rate study under Section 303, and have
substantial involvement in the water resources study under Section 401.
CONCLUSION
How we address our emerging drinking water infrastructure needs is
a critical question facing the Nation and this Congress. America needs
a new partnership for reinvesting in drinking water infrastructure.
There are important roles at all levels of government.
AWWA does not expect that Federal funds will be available for 100
percent of the infrastructure needs facing the nation's water
utilities. However, AWWA does believe that due to concurrent needs for
investment in water and wastewater infrastructure, security projects,
replacement of treatment plants, new drinking water standards, and
demographics, many utilities will be very hard pressed to meet their
capital needs without some form of Federal assistance. Over the next 20
years, it is clear that Safe Drinking Water Act (SDWA) and Clean Water
Act (CWA) compliance requirements and infrastructure needs will compete
for limited capital resources. Customers are likely to be very hard
pressed in many areas of the country. Compliance and infrastructure
needs under the SDWA and CWA can no longer be approached as separate
issues. Solutions need to be developed in the context of the total
drinking water and wastewater compliance and infrastructure needs.
AWWA believes that S. 1961 is an appropriate first step to
achieving these goals. In our testimony we have made recommendations
that we believe will improve the bill. AWWA pledges to work with
Congress to develop a responsible and fair solution to the Nation's
growing drinking water infrastructure challenge. We thank you for your
consideration of our views.
This concludes the AWWA statement on S. 1961, Water Investment Act
of 2002. I would be pleased to answer any questions or provide
additional material for the committee.
Statement of Tom Morrissey, President, Association of State and
Interstate Water Pollution Control Administrators
Mr. Chairman, Members of the Committee and Subcommittee, my name is
Tom Morrissey. I am the President of the Association of State and
Interstate Water Pollution Control Administrators (ASIWPCA) and
Director of the Planning and Standards Division for the Connecticut
Department of Environmental Protection.
I would like to provide a little history as a backdrop to the
Association's testimony here today. In the early 1980's,
representatives of our organization, along with the then chair of the
National Governors' Association (NGA), were called to the White House
to discuss the future of the construction grants program. The $5
billion program authorized by Congress for the construction of
wastewater treatment facilities was under attack. The Director of the
Office of Management and Budget told the State officials that the
Administration intended to phaseout the grants program. OMB's Director
said that if there was to be any subsidy for municipal wastewater
treatment works, States and Congress would have to find a better
vehicle. From the Administration's perspective, the grant program had
lost credibility and was too expensive, too burdensome and a drag on
the national economy.
NGA and ASIWPCA took OMB's counsel to heart, as did a member of
this Committee (John Chafee (RI), Mack Mattingly (GA), David
Durenberger (MN), etc.). Congress and the States met the challenge,
drafted legislation in early 1987 and the Clean Water State Revolving
Loan Fund (CWSRF) was born. The CWSRF has become one of the most
successful Federal public works programs in history, which is
attributable to its careful design as a streamlined, State-based
program. Senate and House authors intended to address the vast array of
State Water Quality Program priorities under a States' Water Program
fund.
Having just passed the 15th anniversary of the last Clean Water Act
reauthorization, we have had sufficient time to build and document a
track record of SRF success. We know, for example, that projects are
built in half the time than those constructed under the Federal grants
program. We know that the CWSRF has saved taxpayers hundreds of
millions of dollars and we know that, with each Federal dollar, there
has been an almost equal contribution at the State level. Since 1987:
<bullet> More than $18.3 billion in Federal funds have been awarded
and $37.7 billion is currently available for program use.
<bullet> States have made over 10,919 loans totaling over $34
billion.
<bullet> 25 percent of assistance agreements were for nonpoint
source (NPS).
----------------------------------------------------------------------------------------------------------------
Loan Amount [in
Communities Funded by the CWSRF Since 1987 Assistance Agreements billion of dollars]
----------------------------------------------------------------------------------------------------------------
Up to 9,999 population........................................ 6499 (60 percent) $8.2
10,000--99,999 population..................................... 3175 (29 percent) 12.5
Over 100,000 Population....................................... 1245 (11 percent) 13.7
-------------------------------------------------
Total....................................................... 10,919 $34.4
----------------------------------------------------------------------------------------------------------------
Mr. Chairman, States are committed to the Clean Water State
Revolving Loan Fund, because it has met and exceed the expectations set
by its creators.
1. To provide funding to address State water quality program
priorities,
2. To develop a funding mechanism that would revolve and provide a
perpetual source of support and
3. To establish the States as the program lead to manage and
operate the Fund.
ASIWPCA believes that in reauthorizing the CWSRF to it is vitally
important:
<bullet> Increase funding for the program,
<bullet> Assure the SRF remains competitive in the financial market
place,
<bullet> Maintain a streamlined program, and
<bullet> Enable States to direct the funding to priority water
quality needs.
THE WATER INVESTMENT ACT OF 2002 (SENATE BILL 1961)
The Association takes great pride in the fact that the CWSRF
program continues to enjoy the strong support of the Administration,
the Congress and this Committee. We appreciate the Committee's effort
to develop S. 1961 and hold hearings. And, Mr. Chairman, as we have
discussed with you in prior meetings, ASIWPCA appreciates your
leadership in developing Year of Clean Water Legislation to commemorate
the 30th anniversary of the Clean Water Act. The goals of S. 1961 are
laudable and the bill, if enacted, could advance the program in key
areas particularly related to:
<bullet> Increased CWSRF funding authorization levels,
<bullet> Expanded eligibilities,
<bullet> Extended loan repayment periods,
<bullet> Expansion to forgive principal in hardship situations, and
<bullet> Fund transfers between the Clean Water and Drinking Water
SRFs.
These enhancements will, for example, better enable States to
address small communities, onsite systems, nonpoint source pollution,
urban stormwater and combined sewer overflows.
As appreciative as we are of the Senate Committee efforts to
enhance the CWSRF, our hope and expectation was that this proposed
legislation would modernize and minimize the program to make it more
user friendly. To the contrary, we note certain provisions that appear
to make matters more difficult by adding greater complexity. The
Association does have some concerns relative to effective
implementation. Some of these provisions pertain to:
New requirements that need to be simplified and reduced.--The
cumulative effect of S. 1961's provisions would seriously weaken the
effectiveness of the CWSRF. The coordination required between State
water quality and State SRF programs will be extensive at many levels.
In some instances, we question the necessity of the new requirements,
since there is no compelling demonstrated need. Overall, we are
concerned that some of the new requirements will lead to extensive
bureaucracy, burdensome implementation and oversight, project delay,
increased costs and potential litigation. These concerns primarily
relate to provisions on:
<bullet> Consistency with local land use and other plans,
<bullet> The State priority system and intended use plan, and
<bullet> Federal requirements for State regulation of local
technical, management and fiscal capacity building through CWSRF loan
assistance.
The significant increase in State management and administrative
burdens that should be addressed.--The additional administrative and
regulatory requirements will be very costly unfunded mandates, will
slow the program and will yield minimal, if any, water quality
improvement.
The need to recognize that the CWSRF is a financing mechanism
focused on addressing priority water quality problems.--States are held
accountable for pollution abatement and control, yet several provisions
in the bill would suggest that the CWSRF become a panacea for solving
environmental, management, development and social issues.
Mr. Chairman, we recognize and appreciate the fact that this bill
represents the collective work of a lot of fine minds, those who care
about clean water. However, unless you are on the front lines of day-
to-day CWSRF implementation, it would be difficult to know that the
collective impacts of many of these individual provisions would have
serious and unintended negative consequences. The CWSRF's
competitiveness as an effective tool to accomplish environmental
results must not be weakened in any significant way. Unless refinements
are made, provisions of S. 1961 will be perceived by a significant
number of potential recipients as so onerous as to outweigh the value
of CWSRF assistance. Again, we are looking for modernization and
streamlining of the existing program.
The Association strongly urges the Committee to consider the
enhancements recommended by the State professionals who have the
responsibility for the success of the SRF. And, because the States and
our ASIWPCA membership have had limited time to review the bill in
detail, additional suggestions may be forth coming.
ASIWPCA RECOMMENDATIONS
SRF Authorization Funding: We applaud the Committee for the
increased authorization levels and we look to this Committee to work
through the appropriation process to secure ultimate approval by
Congress for S. 1961's higher levels of funding. Infrastructure needs
under the Clean Water Act (the Act) are well in excess of $200 billion
and the bill represents a significant move in the right direction.
Eligibilities: We are encouraged that the bill supports coverage of
facility siting, related elements and other new coverage. We urge that
the Committee also recognize the following:
<bullet> The need to support restoring impaired and addressing
threatened waters (implementation of TMDLs and watershed protection
plans should be broadly eligible).
<bullet> States need CWSRF funds to support technical assistance--
this workload will increase significantly under S. 1961.
<bullet> The need to minimize the distinction between point and
nonpoint source projects which inhibits State ability to address
priority water quality problems. There are necessary and worthwhile
improvements (such as facilities and best management practices for
concentrated animal feeding operations (CAFOs), which should be
eligible for CWSRF assistance.
<bullet> The State's lead role (e.g., Sections (1)(C and D) should
read: ``water quality benefits as determined by the State'').
<bullet> The need to protect the corpus of the fund, (e.g.,
``Private utility'' may be more appropriately changed to ``privately
owned system'').
Maintenance of the Fund: The language in (c)(2)(B) needs to clarify
what constitutes ``balances in the fund.'' States are uncertain what
the term means.
Loan Terms and Repayments: 40-year loans should be allowable with
the same condition, i.e., that the loan term cannot be longer than the
project life. Interceptor sewers and collection systems can last 40-50
years.
We recommend that this Section 603(d)(1)(D) on repayments be
changed to read ``A State shall determine that the recipient of a loan
has provided a dedicated source of income, and as appropriate adequate
security, for the repayment of the loan.'' The proposed language in S.
1961 could be read to require septic tank owners to provide security
for loans. It also seems to require all private systems to demonstrate
security. Further, it restricts the security requirement only to
privately owned systems, whereas the intent should be that all loans
are adequately secured, as necessary.
Meeting Hardship Community Needs: States strongly support principal
forgiveness. We appreciate the Committee's recognition that the
definition of disadvantaged community should be a State responsibility.
<bullet> States support the goal of addressing hardship needs
within larger community jurisdictions. However, we have some concerns
relative to the wording in Section 103(c)(8) of S. 1961 on dealing with
communities to charge different rates on the basis of user income
levels (pockets of hardship). This appears to be an open invitation to
litigation. It should be left to each State to decide how to craft an
approach to get to this issue under the framework of disadvantaged
community.
<bullet> We need to be cognizant of the fine line States need to
walk between meeting hardship needs, which under S. 1961, could take up
to 45 percent of the annual capitalization grant and the importance of
protecting the corpus of the Fund.
Administrative Costs: Increasing the percentage of capitalization
grants which can be used for State administration of the CWSRF from 4
percent to 5 percent is helpful, but falls short of the amount needed
to cover CWSRF administration in the current program. This need would
be exacerbated by the new responsibilities S. 1961 imposes on the
States. Should capitalization end or be held in abeyance, no funds
would be available for administration. Several options should be
considered:
<bullet> Increase the percentage (e.g., up to 4 percent of the
authorization and State match); allow States to use up to \1/2\ percent
of the CWSRF's current valuation (the total assistance outstanding plus
any funds available for new loans, including State match); or allow
States to use up to $400,000 per year--which ever is greater. (However,
to the extent that S. 1961 contains new requirements, these levels will
need to increase)
The Act should allow fees and surcharges collected by a State for
CWSRF administration to be deposited in the fund to help defray
administrative costs.
Community Development: Applicants should be able to certify as to
consultation/coordination, but shifting the burden to the CWSRF to
``ensure'' they do so in a certain way is an unreasonable and difficult
standard to meet.
<bullet> Requirements for clearinghouse review by the local
planning agencies already exist. The Act requires coordination with all
water quality plans; if land use plans, especially those designed to
encourage smart growth, have been prepared--local entities are required
to comply. The States question what more is envisioned and what problem
this provision is designed to resolve.
<bullet> With the addition of a significant number of new
requirements, ASIWPCA has concerns about the potential for significant
delays in program implementation at the State and Local level.
Priority System Requirements: The proposed changes to the States'
priority systems should be minimized, because such a major
restructuring will delay project funding, divert staff and resources
and, is frankly not necessary.
<bullet> The development of the State's priority system and
intended use plan already involve extensive public outreach and
involvement. The requirement for ``significant public outreach'' (a new
and undefined term for the Act) should be deleted. It implies a level
of intensity that will be difficult to achieve and will undoubtedly
delay and over complicated the CWSRF program. States feel strongly that
the CWSRF should not be held to higher standard than other existing
Clean Water Act programs.
<bullet> States are required to use ranking criteria that are
extensive, well documented and emphasize environmental benefit. The
CWSRF is a primarily mechanism States have to focus limited resources
on TMDL implementation in impaired waters and a extensive water quality
information feeds into that process. It is reasonable for the CWSRF to
consider relevant information in the 305(b) report. States and USEPA
are investing significant time and resources integrating the 305(b)
report and the 303(d) listing process. S. 1961 should not have the
CWSRF move in a different direction, duplicate other efforts or use a
different standard with no demonstrable improvement in water quality.
(States should not be required to ``take into consideration all
available water quality data'', because this is too ambiguous, differs
from how data is considered in the water quality program and invites
litigation.)
<bullet> Under the proposed S. 1961, there appears to be little to
no latitude to consider critically important factors, including
readiness to proceed. Is the Senate promoting a strict funding in
priority sequence? The bill appears to also be in conflict with the
existing statute and the current State priority systems, which are
based on water quality contributions, rather than project type. The
bill should be modified accordingly. If our national goal is clean
water, then programmatic decisions need to be based on water quality
improvement.
<bullet> It is beneficial to prioritize Section 319 and 320
projects. However, requiring one integrated priority ranking system for
Section 319, 320 and 212 projects may, in some States, diminish the
ability to fund 319/320 projects, because they may not rank well in
such a competitive process. To develop and implement a successful
program overall, States need to be able to prioritize 319 projects with
other similar projects.
<bullet> Requiring States to identify and prioritize each and every
Section 319 project upfront (with schedules) in the yearly priority
funding list is a major change and is close to impossible to implement,
because such details are often not known that far in advance. We
question what it means to require States to publish a summary of
projects every 2 years and how that differs from the lists currently
required. This program needs to be simple, straightforward and
unintrusive if we are to expect and secure the participation of the
nonpoint source community. It would be desirable for States to accept
applications from farmers on a monthly basis.
<bullet> S. 1961 in Section (g) (4) should clarify that the
determination of ``optimum water quality management'' is a State
decision.
TECHNICAL, MANAGERIAL AND FINANCIAL CAPACITY
We agree with the Committee that there is a need for capacity
building. Loan recipients should be required to demonstrate the ability
to effectively manage their wastewater system and successfully repay
loans. However, ASIWPCA is concerned that S. 1961 goes beyond what is
reasonable and realistic. The Association would suggest that this
provision be streamlined, because as currently written, it entangles
the program in extensive, unnecessary and burdensome bureaucratic
process. In addition:
<bullet> We question whether the CWSRF is the appropriate tool to
accomplish this objective and whether it is fair to hold recipients of
CWSRF funds to a higher standard than other facilities, including those
funded annually under set asides or site specific appropriations. We
also question the equity of placing such requirements on CWSRF loan
recipients that own treatment works--while not imposing such mandates
on owners of collection systems or interceptor sewers.
<bullet> States, under the leadership of the National Governors'
Association have consistently raised concerns about Federal unfunded
mandates. If S. 1961 were to be enacted, higher levels of funding would
be necessary to carry out these provisions.
<bullet> ASIWPCA remains concerned about the long-term integrity of
the fund corpus. Each requirement has the potential to erode the fund
and hence limit the utility of the SRF. To make CWSRF funding
attractive, States would need to move to a zero interest rate which
further erodes the corpus. Even that may not be sufficient to overcome
the added burden of participation.
Strategy.--The provision that States have a strategy in place to
assist applicants in their development of financial, managerial and
technical capability is laudable and supportable. In the development of
such a strategy, the States need latitude to design it to meet their
diverse challenges.
<bullet> As a house keeping measure, whenever (i) refers to
``State'' the term should be replaced by ``State agency''.
<bullet> Section (B) should be deleted--as unnecessary and overly
prescriptive. In order to develop a meaningful strategy, States do not
need to describe or analyze the litany of ``institutional, regulatory,
financial, tax, or legal factors at the Federal, State, and local
levels that encourage or impair the development of technical,
managerial, and financial capacity.'' Requiring States to describe
``the manner in which the State intends to use the authorities and
resources of the State'' implies more than a strategy and clearly
invites litigation that could be misused. Sanctions could apply to
successful and effective State programs, if there is a perceived
failure to carryout a particular element in precisely a certain way.
<bullet> Given the potential for misinterpretation and misuse of
this provision, a 20 percent sanction is excessive. In making a
determination of failure: (1) USEPA should be required to notify the
State of the decision, justification and actions that need to be taken,
and (2) States should have at least 1 year to correct the inadequacy
before sanctions apply.
<bullet> A simplified report every 3-5 years to USEPA on progress
made under State strategies is the most efficient and effective means.
Annual updates to measure and report on local improvements in
technical, management and financial capacity is an undue burden for a
CWSRF, especially since trends are difficult to detect and measure
annually. The Committee needs to take a step back and generally review
reporting requirements under the Act and how they can be most efficient
and effective.
Condition for Receipt of Assistance.--States support asset
management and it may be workable to have treatment works certify they
have needed capacity and make that rationale transparent to the public.
However, ASIWPCA urges the Committee to reconsider how best to
accomplish the objective, before adding statutory requirements and
deadlines. Specifically we would ask the Committee to consider the
following:
<bullet> Overseeing development and evaluating local technical,
managerial and financial capacity and asset management plans will be a
substantial workload, and we question the utility of this provision.
The provision for States to require treatment works to demonstrate
``adequate'' capacity will require a fair amount of subjective judgment
and new USEPA bureaucracy. This may not yield the desired result.
<bullet> States should not be expected to police asset management,
unless there is consensus on: (1) The content of the plans with respect
to capital replacement, etc. and (2) A clear definition of adequacy.
<bullet> If asset management is a good idea, it should be required
of all systems, not just those that receive future SRF assistance.
Restructuring.--This section should be deleted and the Committee
should consider other avenues. We make this suggestion because (j)(1)
(A)-(C) will require: (1) Additional hoops which will result in
disincentives to participate in the program, (2) The provision will be
accompanied by considerable Federal bureaucracy, (3) The requirements
will entail considerable State work load, (4) The policy assumptions
are not necessarily valid (e.g., that consolidation, public/private
partnerships and nonstructural alternatives are environmentally
beneficial) and (5) The focus of the Act should be on clean water and
not bureaucratic processes and procedures. Regarding (j)(2):
<bullet> Rate structures are not appropriate for regulation under
the CWSRF. Other State agencies (public utility commissions) have
purview and since the definition of ``adequate'' is unknown (does it
include complete capital replacement, for example), the program would
be extremely difficult to implement in the CWSRF. Does the Committee
really want to use the CWSRF for this purpose and is the Committee
prepared to deal with unintended consequences? How is the CWSRF going
deal, for example, with loan recipients that apply an inappropriate
burden on certain customers through double and triple rates?
<bullet> Making the requirement effective upon enactment seems
premature--since the National Academy of Science study is not required
until 2 years after enactment. Time should be allotted to thoughtfully
consider the results of the congressionally mandated study. Hence, any
provisions to address rates at the State and local level in S. 1961
would need to apply at least 30 months (or later) after study
completion.
<bullet> States question the need for and the workability of
applying the requirement to non-traditional needs such as nonpoint
sources.
Technical Assistance: States have a long and successful history
providing technical assistance to loan recipients. This provision
(Section 206) is disturbing in that it seems to presume that States are
incapable of, or are not interested in, providing assistance to small
systems. This is not an accurate assumption. Furthermore, the provision
takes the circuitous route to reach an unspecified goal--e.g., creating
a program to fund non-profit entities to provide small community
assistance for CWSRF participation. States do not see the need for this
provision, especially since it is not clear how the program would
operate and relate to the CWSRF and Section 104(b). If there needs to
be a grant program, State, Regional and Local initiatives should be
eligible. Activities funded should be coordinated with State efforts so
they are mutually supportive. S. 1961's reliance on USEPA (the Agency
furthest from the point of need) is, at best, an ineffective approach.
If this provision is to be included in national legislation, a State/
Local advisory committee should be used to help create, focus and
administer the program.
Competition Requirements: Requirements of the old construction
grants program (Section 204(a)(6)) should not be reinstated. This is a
good example of the bureaucracy and pitfalls that the CWSRF was created
to avoid. The Association would ask what documented problem in the loan
program is this provision intended to address.
Formula: States have questions about the formula and request
additional information relative to how the numbers were derived and the
effects of the proposed formula on States' allotments at various
appropriation levels. The results of the 2000 Needs Survey should be
released as soon as possible, so that States can gage the full impact
of proposed changes. And, if the eligibilities are expanded to include
CAFOs, etc., the allocation formula should reflect such needs.
Furthermore clarification is needed relative consistency. If the
Committee intends that all needs (which are included in the calculation
of a State's allocation formula) be eligible under a State's CWSRF
program (to receive funds for those needs under Title VI)--the
provision needs wordsmithing (i.e. the issue may pertain to not just
private utilities).
Clean Water Act/Drinking Water Act Fund Transfers: ASIWPCA is
supportive of this provision and suggests that, in addition to
providing for the transfer of funds between the Clean Water and
Drinking Water SRFs, S. 1961 should also allow for full cross-
collateralization between the funds.
Demonstration Program for Water Quality Enhancement: The goals of
this effort are at once broad and inclusive of watershed protection of
surface and source water, and yet focused on primarily municipal
boundaries and wastewater facilities. The ASIWPCA suggests that: (1)
Eligibilities go beyond municipalities to include State, regional and
watershed based entities--governmental and non-governmental, (2) The
list of project types be expanded to include integrated water
management, etc. and (3) A advisory group with balanced stakeholder
representation be convened to assist in carrying out the intent of
Congress.
NAS Rate Study: This study should be carried out in consultation
with a balanced group of stakeholders, including a significant number
of State and Local government officials responsible for on-the-ground
implementation of the Clean Water Act requirements.
Water Resource Planning: State water quality agencies question the
need for this provision and are concerned about adverse impacts on
other efforts of the US Geologic Survey (USGS). It appears to duplicate
what States currently have underway with other Federal agencies,
including the Bureau of Reclamation. USGS services are already being
reduced and further mandates are counter-productive. For example, the
stream-gauging program is critical to the State development of TMDLs.
To further divert USGS attention away from its highest priorities to
other activities, especially when they are already being performed by
other agencies, seems counterintuitive. States need USGS to do what it
does best--provide accurate timely water quality data for program
implementation and decisionmaking. There may be a role for USGS within
the context of the Clean Water Act and Mr. Robert Hersh will be
articulating such activities in his testimony. In any event, State
Water Quality Agencies must be integral to the creation of any clean
water related authorities for USGS. The Department on Interior should
be directed to closely coordinate and consult with the State water
quality officials and agencies in carrying out the objectives of S.
1961.
Again Mr. Chairman, we applaud the Committee for beginning the
discussion on the Clean Water Act SRF reauthorization and we, at
ASIWPCA, are eager to work with you and your fine staff to refine
legislation that will move this country forward in the pursuit of
cleaner water. We thank you for the opportunity to come before you and
we are available at any time to meet with you and the members of your
staff on the recommendations provided in the statement. Please contact
our Executive Director, Robbi Savage, at 202-898-0917. Thanks again for
inviting the State Water Program Administrators.
__________
Statement of Jay L. Rutherford, P.E., Director, Water Supply Division,
Vermont Department of Environmental Conservation on Behalf of the
Association of State Drinking Water Administrators
INTRODUCTION
The Association of State Drinking Water Administrators (ASDWA) is
pleased to provide testimony before the Senate Environment and Public
Works Subcommittee on Fisheries, Wildlife, and Water regarding the
Water Investment Act of 2002. ASDWA represents the drinking water
programs in each of the fifty states, territories, and the District of
Columbia in their efforts to ensure the provision of safe, potable
drinking water to all Americans nationwide. ASDWA's primary mission is
the protection of public health through the effective management of
state drinking water programs that implement the Safe Drinking Water
Act. For these reasons, our testimony will focus only on the drinking
water-related provisions of S. 1961.
OVERVIEW
States have been implementing the Federal requirements for safe
drinking water for more than 25 years. The 1996 amendments to the Safe
Drinking Water Act created a host of new program responsibilities
including a new Drinking Water State Revolving Loan Fund (DWSRF). The
DWSRF was established to offer low cost loans to public water systems
to enhance both their infrastructure and compliance capabilities. The
Act authorized a total of $9.6 billion in annual appropriations through
FY-03. ASDWA appreciates the Committee's interest, through this
legislative initiative, in ensuring that this much needed program will
continue to receive funding over the next several years and is
especially pleased that the authorized funding equals $14.5 billion
through FY-07. ASDWA also appreciates the acknowledgement that state
drinking water programs must have additional funds to administer the
program in an efficient and responsible manner.
TITLE II PROVISIONS
ASDWA endorses the goal of streamlining the DWSRF process to
maximize use of Federal funds and encourage efficiency. However, state
drinking water programs are concerned that some of the elements
contained in this Title will hinder rather than help efforts to achieve
the stated goal. One overarching example lies in the legislation's
proposal to strengthen activities relating to use of the DWSRF for
source water protection, consolidation initiatives, assistance for
small and disadvantaged communities, and coordination with other
programs such as land use and transportation. However, the
authorization to address many of these issues lies in SDWA Section
1452(g). This section requires a dollar-for-dollar match for any state
wishing to use additional program administration funds to address
technical assistance for source water protection, capacity development,
and operator certification initiatives. These are the very programs
that get to the heart of the goals for S. 1961. States are hindered in
their ability to find dollar-for-dollar match funds over and above the
20 percent match required for the DWSRF program and the 25 percent
match required for state public water supply supervision (primacy)
grants program. As a result, many states cannot take advantage of these
funds now and certainly may not be able to access them when the
increased DWSRF authorizations are appropriated. The states ability to
administer the DWSRF efficiently will decline, despite increased
authorizations, unless the funds can be accessed for the purpose for
which they were intended.
Action: ASDWA recommends that the proposed amendment to SD WA
Section 1452(g)(2)(A-D) strike the requirement for a dollar-for-dollar
match and replace it with language calling for a 25 percent state match
for these critical activities.
Section 202
(b) Public Outreach: Since the inception of the DWSRF, state
drinking water programs have made significant investments in
establishing communication and outreach networks to ensure public
participation in the DWSRF process. Since its inception, states have
worked to design opportunities for public notice and comment that best
respond to the needs, interests, and concerns of their citizenry.
States have created advisory boards, held community meetings, and met
state statutory requirements that regulatory initiatives relating to
DWSRF activities be published in the media as well as the state-level
equivalent of the Federal Register. This flexibility has already
allowed states to design programs that are responsive and responsible.
A call for undefined ``significant public outreach'' is, therefore,
unnecessary for the DWSRF.
Action: ASDWA requests that this additional requirement for
``significant public outreach `` be removed.
(c) Types of Assistance: Current SDWA language does not address the
pressing need for capital improvements related to infrastructure
security.
Action: ASDWA recommends that capital improvements for security be
specifically added to the list of eligible DWSRF activities.
(c)(F) Types of Assistance: While state drinking water programs,
through their capacity development initiatives, have worked with
systems to ensure their technical, financial, and managerial
capabilities, no drinking water program has the authority to direct or
regulate how any system develops and/or applies its rate structure. As
well, state drinking water programs do not possess the expertise
required to ensure that a particular rate structure ``reflects the
actual costs of service.'' These are local decisions, often politically
driven, and are well beyond the authority of drinking water programs to
direct or control.
Action: ASDWA requests that the language on setting rates be
removed.
(d) Consultation and Coordination with State Agencies: ASDWA is
concerned with the requirement that state drinking water programs shall
``ensure'' that applicants have appropriately ``consulted and
coordinated'' with other regulatory bodies. Rather, this responsibility
must fall on the applicant system.
Action: ASDWA recommends that this language be modified to reflect
the need for a loan applicant to consult and coordinate with other
regulatory bodies and provide the results of that consultation to state
programs rather than have states ``ensure `` that such consultation has
occurred.
Section 203
Under the 1996 SDWA Amendments, state drinking water programs
received the authority to reserve up to 30 percent of their DWSRF
capitalization grants to address the needs of disadvantaged
communities. This section proposes that states may reserve an
additional 15 percent to address ``poverty pockets'' in otherwise non-
disadvantaged communities. Further, states are directed to ensure that
an appropriate ``user charge rate system'' is in place within the
community. ASDWA has two significant concerns with this proposal:
First, reserving up to 45 percent of a state's DWSRF program to
address disadvantaged communities may not be the best use of limited
resources to address public health protection on a statewide basis and
has the real potential to quickly erode the corpus of the loan fund.
State drinking water programs must balance the competing needs of all
applicants to ensure that the broadest public health protection
benefits are derived from the most efficient award of funds.
The second concern with this proposal lies in the requirement for
state drinking water programs to ensure the efficacy of any individual
user charge rate system as part of an assistance agreement. This level
of responsibility goes far beyond state drinking water programs'
expertise and mandate to protect public health.
Action: ASDWA requests that this section be modified to add
``disadvantaged users `` within an otherwise non-disadvantaged
community to the existing SDWA Section 1452(d) language, and leave the
reservation of funds up to a maximum of 30 percent. In addition, ASDWA
requests that the requirement to ensure the efficacy of a user charge
rate program be directed toward the applicant rather than the state.
Section 205
(1) Competition Requirements: ASDWA is uncertain of the value of
this proposed addition to the SDWA. The language appears to have been
taken from the old Clean Water Act construction grants program. It is
ASDWA's understanding that the current Clean Water Act no longer
contains these provisions and that they were removed due to their
complexity and resulting burden placed on state programs and loan
applicants alike.
Action: ASDWA requests that this language be removed from the
section.
Section 206
(a) Small Public Water Systems Technology Assistance Centers: ASDWA
is pleased to see addition of accountability requirements under this
section.
Section 207
(3) Reservation for Needs Survey: Under current law, EPA is
required to conduct a drinking water needs survey once every 4 years.
Yet, the language in this section authorizes the Agency to reserve $1
million annually from the DWSRF to cover their associated costs. Is it
the intent of this section to provide $5 million over the course of FY-
03 through FY-07 for EPA to conduct one needs survey?
Action: ASDWA requests clarification under this section.
TITLE III PROVISIONS
Section 301
(b)(1) Safe Drinking Water Fund: ASDWA is pleased that this
legislation proposes to increase the allowable percentage of DWSRF
funds that may be reserved for program administration. However, given
the additional responsibilities outlined in this legislation,
particularly those directed toward the very large number of very small
systems, ASDWA believes that the percentage reservation for program
administration should reflect the true cost of efficient
administration.
Action: ASDWA recommends that the level of funding reserved for
state DWSRF program administration should be increased to 6 percent.
(b)(2) Transfer of Funds: ASDWA is pleased that this legislation
extends the ability of the Governors to transfer funds between the
DWSRF and CWSRF.
Section 303
(a) Rate Study: ASDWA is pleased to support the call for a study
regarding rate structures. ASDWA is also pleased by the requirement for
such a study to be completed within 2 years. However, ASDWA is
concerned that the statutory provisions for state drinking water
programs to address rate structures and disadvantaged communities take
effect upon enactment--without benefit of the information afforded by
the rate study and without benefit of the to-be-developed new
definition of ``disadvantaged community.''
Action: ASDWA requests that, in concert with our earlier
statements, the troublesome provisions in Sections 202 and 203 affected
by this section be removed. However, in the event that the provisions
are retained, ASDWA requests that implementation of these provisions be
delayed until the results of the study are published and analyzed.
CONCLUSION
ASDWA extends its appreciation to the Committee for taking
significant first steps to address the critical need for drinking water
infrastructure funding. This legislative proposal also offers some
relief to states that must administer these programs. However, ASDWA
cautions that several of the proposed refinements to the SDWA will not
achieve the stated goals for this legislative initiative. Adding new
and more complex requirements to a drinking water utility's DWSRF
application will not streamline the process, reduce the burden, or make
the program more appealing. Adding additional requirements for state
oversight in areas such as ratemaking, designated user charge programs,
ensuring consultation and collaboration by systems with other agencies,
and the like will not make the program more efficient and will hinder
the states' best efforts to award loan funds in a timely manner.
ASDWA would be pleased to work with members of the Committee to
address these concerns and ensure successful implementation of the SDWA
DWSRF program.
__________
Statement of Valerie I. Nelson, Ph.D., Coalition for Alternative
Wastewater Treatment
I appreciate the opportunity to submit testimony to the
Subcommittee on Fisheries, Wildlife and Water concerning S. 1961, the
Water Investment Act of 2002, which would reauthorize the Clean Water
Act and Safe Drinking Water Act State revolving funds (SRFs). I am the
Director of the Coalition for Alternative Wastewater Treatment, which
was formed 8 years ago to promote reform of Federal, State, and local
policies and practices concerning decentralized wastewater treatment. I
would also like to present the recommendations for SRF reauthorization
developed at a national workshop on integrated water resource
management that was held on February 19-20, 2002 in Arlington, VA.
The central recommendation of my testimony is for the Congress to
provide incentives in the SRF program for States to fund decentralized
wastewater, distributed stormwater, and other non-point source
projects. After several decades of investment in wastewater treatment
plants and sewer collection systems, progress has been made by the
Nation in water quality protection. However, estimates are now that a
majority of water quality problems stem from non-point sources. The
costs of addressing equivalent amounts of non-point pollution are
substantially less than the costs for point-source treatment. And yet,
the States are currently directing only 4 percent of SRF loans to non-
point source projects. This represents a serious misallocation of
Federal resources, and raises the question of how States can be
encouraged to utilize SRF funding more cost-effectively. While EPA has
issued guidance in recent years allowing States to provide SRF loans
for non-point source projects, a majority of States have not broadened
their eligibility lists to allow these projects to be funded.
I would suggest that the best approach for the Federal Government
to promote a more efficient use of Federal resources by the States is
to create a 10 percent set-aside of new SRF funding for States to use
for non-point source projects. This approach would maintain the
flexibility in the use of the SRF which states request, but at the same
time would assure greater accountability by the States to the goals and
objectives of the Clean Water Act. States would be eligible to apply to
the EPA for 10 percent in additional funds beyond the baseline
allotment for the Clean Water SRF capitalization grant. Funds could be
used for principal forgiveness, interest subsidies, and other creative
financing mechanisms which each State would have the flexibility to
develop.
The 10 percent set-aside proposal is modeled on the successful
enhancement grant set-aside established in the Intermodal Surface
Transportation Efficiency Act of 1991. Because of this initiative,
successful environmental enhancements have been constructed throughout
the States, and reform of transportation planning and mainstream
practice have occurred more generally.
INTEGRATED WATER RESOURCE MANAGEMENT WORKSHOP
On February 19-20, 2002 a group of 35 leaders in water quality
protection met in Arlington, Virginia to discuss the future of
distributed and natural system approaches to integrated water resources
management. Participants included public officials, engineers,
academics, and environmental advocates from across the country. In
recent years, much progress has been made in the development of
decentralized or distributed approaches, including for example:
advanced onsite and cluster system technologies and management for
wastewater treatment; distributed stormwater remediation, including
stream restoration; low impact development practices that retain
natural infiltration/treatment zones and distribute infiltration and
biorentention best management practices throughout a development;
agricultural stream buffers and other best management practices; and
``soft path'' flood control measures such as parkland stream buffers.
Water resource management in the United States has been dominated
in recent decades by ``hard path'' centralized infrastructure
solutions, including sewer collection systems and treatment plants,
stormwater collection and underground storage tunnels, centralized
water lines and filtration plants, and stream channeling and dams for
flood control. And, permitting, funding, and management of these
systems have been segregated into separate agencies, rather than
integrated into a holistic watershed framework.
The premise of the workshop was that this reliance on centralized
solutions constructed without regard to the broader watershed and
groundwater forces at work in the ecosystem has cumulatively led to
major unintended consequences and environmental damage. Sewer
collection systems and point-source discharges, by moving locally
supplied water and infiltration/inflow water great distances to point-
source discharges have led to depleted aquifers, saltwater intrusion in
the coastal zone, and dried-up streambeds. Sewer systems have also
promoted growth and development, with large-scale increases in
stormwater runoff, and leaking sewer pipes now constitute the single
greatest source of drinking water microbial contamination. Channeling
to control floods has also led to disruptions in natural systems for
water purification. And, finally, failure to fully utilize cost-
effective water efficiency and distributed water reuse measures
exacerbates the surface and groundwater impacts of water supply
systems.
Distributed and natural-system or ``soft path'' approaches hold
great promise to achieve water resource protection at substantially
lower cost than traditional centralized technologies, and in
particular, entail far fewer adverse impacts to public health and the
environment when considered in an integrated framework. The reason is
that distributed, ``green'' solutions to sewage and stormwater
treatment rely on and blend into large, natural surface water and
groundwater systems that have evolved and stabilized over centuries.
Centralized approaches constitute a much larger disruption of these
natural systems than decentralized approaches. For example,
decentralized wastewater systems, by widely dispersing the release of
treated wastewater into the soil, help replenish aquifers. Distributed
approaches also provide communities with more options and greater
control over development, natural resource protection, and public
amenities such as parks and open space.
Workshop participants discussed the range of environmental,
economic, and community benefits to decentralized and nonpoint-source
approaches to water quality protection and integrated water resource
management, and developed recommendations for reform of engineering
practice, regulatory structures, management, and research. In addition,
recommendations for the SRF reauthorization were discussed, and options
from various workshop sub-groups include the following:
1. Nonpoint-source or soft path projects need incentives in the
SRF. These would include such approaches as:
a. a 10 percent non-point source set-aside of new SRF funds
b. a reduced match requirement for non-point source or
distributed treatment projects
c. a reduced interest rate
d. principal forgiveness
2. Extra funding should be provided for State and local entities to
cover the additional administrative costs of developing non-point
source projects, as well as integrated water resource plans.
3. Eligibility should also be expanded to include:
a. monitoring costs (as already exists in the Drinking Water
SRF)
b. pollutant trading
c. training
4. Funding approval should be tied to consistency with plans:
a. drinking water grants should be tied to source water
protection plans
b. wastewater projects should be tied to integrated water
resource plans developed by local entities
c. transportation planning links should also be required
5. States should be required to demonstrate that water quality
goals are being met cost-effectively. Build assessment and feedback on
environmental outcomes and cost-effectiveness into the process.
a. One suggestion was for a focus on GPRA requirements to be
imposed on State SRF agreements with EPA.
b. Another suggestion was to revitalize the CWA planning
process or 303e. Bring back the better elements of the water
resources council that were dropped in the early 80's.
6. Research projects are needed on such topics as: biological
integrity before and after projects; lifecycle costs of non-point and
soft path approaches; fate and transport of pollutants; analysis of the
impediments to integrated water resource management; soft path best
management practices; effectiveness of education campaigns, land-use
controls, etc.
7. Demonstration projects are needed on: integrated water resource
management; regulatory changes needed to implement plans; stormwater
decisionmaking; real-time water quality monitoring and technology
programs, and community involvement; and others.
__________
Statement of Rodger D. Siems, President, Board of Directors, Eastern
Municipal Water District (EMWD)
Good morning Chairman Jefford, Senator Smith, Senator Graham,
Senator Crapo, and members of the Committee, my name is Rodger Siems. I
am the President of the Board of Directors for Eastern Municipal Water
District in Perris, California.
Eastern Municipal Water District (EMWD) supports the purposes of S.
1961, the Water Investment Act of 2002. We believe S. 1961 takes a
meaningful first step toward addressing the infrastructure funding gap
through the authorization of increased funding for State revolving
funds (SRFs). EMWD provides water and wastewater service to a
population of 480,000 in the arid west region of the Nation where
native water resources are scarce. Due to the lack of plentiful
indigenous water sources, EMWD is committed to water conservation and
recycled water programs and sustainability of our groundwater
resources. EMWD is therefore very pleased that S. 1961 provides funds
for water conservation, reuse, reclamation, and/or recycling projects.
EMWD is particularly supportive of the requirement in S. 1961 that
loan recipients adopt, in both policy and practice, basic elements of
asset management. Water and wastewater infrastructure systems provide
services essential to public health. EMWD believes that proficient
asset management is core to managing utility operations. Water and
wastewater managers must ensure adequate operation of their facilities
by using all the tools available to them and asset management is the
most effective tool for managing present and future infrastructure.
Requiring good asset management as a loan condition helps ensure wise
and effective spending.
EMWD also supports the concept of requiring loan recipients to
achieve a rate structure that reflects the true cost of service and
addresses capital replacement funds. EMWD is concerned that agencies
that have not adopted a rate structure that pays for the true cost of
their operations are undercharging for their services and are placing a
tremendous burden on future ratepayers.
EMWD believes these loan recipient requirements, asset management
and rate restructuring, will promote self-sustaining water and
wastewater operations and help limit future requests for Federal
funding.
Thank you for introducing S. 1961. It is a crucial first step to
ensure the needs of America's water and wastewater infrastructure are
met.
__________
Statement of the American Council of Engineering Companies
The American Council of Engineering Companies (ACES) is pleased to
provide this statement in support of S. 1961, The Wastewater Investment
Act of 2002. The Water Investment Act of 2002 would amend and
reauthorize the Clean Water Act and the Safe Drinking Water Act to
provide substantially greater funding for wastewater and drinking-water
facilities. We commend the Committee for taking the lead on the
increased authorization for water infrastructure and we applaud this
bi-partisan effort.
The American Council of Engineering Companies (ACEC) is the
business association of America's engineering industry, representing
6,000 independent engineering companies throughout the United States
engaged in the development of America's transportation, environmental,
industrial, and other infrastructure. Founded in 1910 and headquartered
in Washington, DC, ACEC is a national federation of 51 State and
regional organizations.
ACEC is pleased to support passage of S. 1961, the Water Investment
Act of 2002. The proposed funding levels in the bill are a far-sighted,
responsible attempt to rebuild the nation's aging and failing
wastewater and drinking-water facilities and to upgrade their
performance to meet the nation's health and security needs in the 21st
century. As a founding member of the Water Infrastructure Network
(WIN), ACEC has worked with our coalition partners to raise awareness
among Members of Congress and the public about the critical gap that
exists between our nation's water infrastructure funding needs and what
is currently being appropriated.
WIN has released reports that outline a projected shortfall of $23
billion per year over the next 20 years in water infrastructure needs
and what is currently being appropriated. The report, Water
Infrastructure NOW: Recommendation for Clean and Safe Water in the 21st
Century, suggests that the Federal investment for water infrastructure
is $57 billion over the next 5 years. Although the authorization in S.
1961 does not reach that goal, it represents a significant commitment
on the part of the Federal Government to rectify the problems
associated with our nation's water infrastructure. For too long, the
Federal Government has relied on States, local governments and
utilities to fill essentially all of this funding gap. Administrations
have failed to request, and Congress has consistently failed to
appropriate, the full authorization of $1 billion for the Safe Drinking
Water SRF. With the implementation of S. 1961, the Federal Government
is taking a significant step toward fulfilling its obligation.
During his State of the Union speech last month, the President
outlined his fiscal priorities of defense and homeland security. These
are important priorities, but we should not lose sight of other
critical national concerns. Improving the nation's water quality and
water systems through infrastructure investment makes good economic
sense. For every billion dollars we invest in environmental
infrastructure we create over 30,000 jobs. Beyond the creation of
thousands of new jobs in the design and construction industry, millions
of existing American jobs depend on clean and safe water including
those in the $45 billion commercial fishing industry and the $100
billion water recreation industry.
The nation's 54,000 drinking water systems face staggering
infrastructure funding needs over the next 20 years. Although America
spends billions on infrastructure each year, we estimate that drinking-
water systems face an annual shortfall of at least $11 billion to
replace aging facilities that are near the end of their useful life and
to comply with existing and future Federal water regulations. The
existing pipes, bricks and mortar that are holding together our current
infrastructure system are severely outdated and in need of repair.
States are forced to delay construction projects in order to comply
with important health and safety mandates by the EPA. With Federal
requirements on TMDLs, combined sewer overflows, SSOs and arsenic
removal, States will likely fall further behind in their efforts to
repair and replace pipes. Without a significantly enhanced Federal role
in providing assistance to drinking water infrastructure, critical
investments will not occur. Federal assistance can come in the way of
grants, trust funds, loans, and incentives for private investment. The
question is not whether the Federal Government should take more
responsibility for drinking-water improvements, but how.
ACEC acknowledges the Committee's efforts to streamline the Federal
requirements that hampered accessibility to the SRF program. We support
the provisions in S. 1961 that broaden the definition of projects and
communities that are eligible for Federal assistance through the State
revolving funds and the flexibility with which those projects can be
implemented.
The Water Investment Act of 2002 could be amended to enhance its
effectiveness and improve on its ability to build modern wastewater and
drinking-water facilities and protect national security. ACEC strongly
encourages the Committee to adopt the following provisions to S. 1961
as it deliberates further on this legislation:
<bullet> The bill should expressly authorize the Environmental
Protection Agency to use the Clean Water Act SRF Loan Fund and the Safe
Drinking Water Act SRF to provide financial assistance for the
construction of physical security measures at wastewater and drinking
water plants. Certain terrorist groups have made it clear that the
destruction of U.S. water-treatment facilities is one of their aims.
Federal funds should be made available through the SRFs to deal with
specific security needs, including improved building design and
construction requirements, fencing and other physical security
measures. No funds should be made available to hire security guards,
establish private police forces or implement other non-structural
protections, which should be addressed through operating funds.
<bullet> The bill should require that each contract and subcontract
for architectural and engineering design services, program and
construction management and other professional services should be
awarded in the same manner as contracts that are awarded under title IX
of the Federal Property and Administrative Services Act of 1949.
<bullet> The bill should give a State the discretion to use the
design-build project delivery method for each facility financed under
the SRFs. The use of this method should be consistent with State law.
Once a State decides that the design-build project delivery system is
appropriate for a given project, the recipient should be required to
the use of the two-phase competitive source-selection procedures
authorized under Section 303M of the Federal Property and
Administrative Services Act of 1949.
In conclusion, we would like to reiterate our support for S. 1961
and we thank the four co-sponsors of the legislation, Senators
Jeffords, Smith, Crapo and Graham for their leadership on this issue.
The engineering community stands ready to help rebuild and replace the
aging and failing infrastructure that puts so many communities and
citizens at risk.