[Senate Hearing 107-316]
[From the U.S. Government Publishing Office]
S. Hrg. 107-316
WATER AND WASTEWATER
INFRASTRUCTURE NEEDS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
FISHERIES, WILDLIFE, AND WATER
OF THE
COMMITTEE ON
ENVIRONMENT AND PUBLIC WORKS
UNITED STATES SENATE
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
ON
ASSESSING THE STATE OF THE NATION'S SUPPLY OF CLEAN WATER
__________
MARCH 27, 2001
__________
Printed for the use of the Committee on Environment and Public Works
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COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS
one hundred seventh congress
first session
BOB SMITH, New Hampshire, Chairman
HARRY REID, Nevada, Ranking Democratic Member
JOHN W. WARNER, Virginia MAX BAUCUS, Montana
JAMES M. INHOFE, Oklahoma BOB GRAHAM, Florida
CHRISTOPHER S. BOND, Missouri JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio BARBARA BOXER, California
MICHAEL D. CRAPO, Idaho RON WYDEN, Oregon
LINCOLN CHAFEE, Rhode Island THOMAS R. CARPER, Delaware
ROBERT F. BENNETT, Utah HILLARY RODHAM CLINTON, New York
BEN NIGHTHORSE CAMPBELL, Colorado JON S. CORZINE, New Jersey
Dave Conover, Republican Staff Director
Eric Washburn, Democratic Staff Director
------
Subcommittee on Fisheries, Wildlife, and Water
MICHAEL D. CRAPO, Idaho, Chairman
CHRISTOPHER S. BOND, Missouri BOB GRAHAM, Florida
JOHN W. WARNER, Wyoming MAX BAUCUS, Montana
LINCOLN CHAFEE, Rhode Island RON WYDEN, Oregon
BEN NIGHTHORSE CAMPBELL, Colorado HILLARY RODHAM CLINTON, New York
JON S. CORZINE, New Jersey
(ii)
C O N T E N T S
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Page
MARCH 27, 2001
OPENING STATEMENTS
Bond, Hon. Christopher S., U.S. Senator from the State of
Missouri....................................................... 2
Chafee, Hon. Lincoln, U.S. Senator from the State of Rhode Island 20
Clinton, Hon. Hillary Rodham, U.S. Senator from the State of New
York........................................................... 8
Corzine, Hon. Jon S., U.S. Senator from the State of New Jersey.. 18
Crapo, Hon. Michael D., U.S. Senator from the State of Idaho..... 1
Smith, Hon. Bob, U.S. Senator from the State of New Hampshire.... 26
Voinovich, Hon. George V., U.S. Senator from the State of Ohio... 3
WITNESSES
Beecher, Janice, Beecher Policy Research, Inc., Indianapolis,
Indiana, on behalf of the H2O Coalition............. 38
Prepared statement........................................... 88
Responses to additional questions from:
Senator Chafee........................................... 97
Senator Crapo............................................ 94
Biaggi, Allen, Administrator, Nevada Department of Conservation
and Natural Resources, Division of Environmental Protection,
Carson City, NV................................................ 28
Prepared statement........................................... 82
Responses to additional questions from Senator Chafee........ 84
Sandoval, Jon, Chief of State, Idaho Department of Environmental
Quality, Boise, ID............................................. 22
Prepared statement........................................... 53
Responses to additional questions from Senator Crapo......... 65
Schwartz, Paul, National Policy Coordinator, Clean Water Action,
Washington, DC................................................. 40
Prepared statement........................................... 72
Stewart, Harry, Director, Water Division, New Hampshire
Department of Environmental Services, Concord, NH.............. 26
Prepared statement........................................... 77
Responses to additional questions from Senator Chafee........ 82
Struhs, David, Secretary, Florida Department of Environmental
Protection, Tallahassee, FL.................................... 24
Prepared statement........................................... 70
Responses to additional questions from:
Senator Chafee........................................... 71
Senator Graham........................................... 72
Tobey, Hon. Bruce, mayor, Gloucester, MA, on Behalf of the Water
Infrastructure Network......................................... 36
Prepared statement........................................... 84
Whitman, Hon. Christine Todd, Administrator, Environmental
Protection Agency.............................................. 6
Prepared statement........................................... 43
ADDITIONAL MATERIAL
Letters:
Associated Builders and Contractors, Inc..................... 100
Blowe, Bobby................................................. 110
City of Cape Coral, FL....................................... 113
Colorado Department of Public Health and Environmental....... 112
Colorado Water Resources & Power Development Authority....... 113
Iowa Department of Natural Resources......................... 106
Louisiana Department of Environmental Quality................ 108
Michigan Department of Environmental Quality................. 111
Montana Department of Environmental Quality.................. 107
Nebraska Department of Environmental Quality................. 110
Oregon Department of Environmental Quality................... 103
State of Oklahoma Water Resource Board....................... 101
Texas Water Development Board................................ 109
Tucson Water Development..................................... 140
Utah Department of Environmental Quality Division of Water
Quality.................................................... 104
Report, Water Infrastructure Network............................. 123
Statements:
American Society of Civil Engineers.......................... 98
Association of Metropolitan Sewerage Agencies................ 114
Campaign for Safe and Affordable Drinking Water.............. 75
Clean Water Action........................................... 98
Water Environment Federation................................. 67
WATER AND WASTEWATER
INFRASTRUCTURE NEEDS
----------
TUESDAY, MARCH 27, 2001
U.S. Senate,
Committee on Environment and Public Works,
Subcommittee on Fisheries, Wildlife, and Water,
Washington, DC.
The subcommittee met, pursuant to notice, at 9:35 a.m., in
room 406, Senate Dirksen Office Building, Hon. Michael D. Crapo
(chairman of the subcommittee) presiding.
Present: Senators Crapo, Bond, Chafee, Voinovich, Reid,
Clinton, Corzine, and Smith [ex officio].
OPENING STATEMENT OF HON. MICHAEL D. CRAPO,
U.S. SENATOR FROM THE STATE OF IDAHO
Senator Crapo. The subcommittee will come to order.
This is the Subcommittee on Fisheries, Wildlife, and Water
hearing on water and wastewater infrastructure needs. I
appreciate our witnesses joining us here today to examine the
infrastructure needs in America for potable water supplies and
sewage treatment and removal.
Administrator Whitman, it is good to see you here with us
again. Thank you for coming. We appreciate your joining us on
such an important issue to this committee. In fact, I have
noted in a number of context how critical clean water is to us
in America. I should parenthetically note, a very broad survey
was just done in my home State of Idaho asking people to list
what their most important environmental concerns were, and
clean water, in two different ways, were No. 1 and No. 2 on the
list. I think that indicates probably the way it would be in
most States. Clean water and clean air are some of the most
critical things that we can deal with, and that underscores the
importance of this hearing today.
I also welcome our other witnesses here today and
especially want to recognize Jon Sandoval from the Idaho
Department of Environmental Quality. Jon, thank you for being
here. He will be on our second panel.
Infrastructure needs continue to gather attention and
interest from all sides including States, utility providers,
and the public. More and more often, we see reports of failing
infrastructure, in many cases a legacy of previous times and
conditions and of previous management decisions. We are also
seeing growing examples of communities that cannot financially
meet obligations placed upon them by the environmental and
public health regulations.
These episodes are not limited to any region of the country
or to any size of system. Each and every member of this
committee is familiar with a case in his or her own State of a
water or a wastewater system unable to meet current demands.
These examples include: crumbling transmission systems,
treatment works needing upgrades or replacement, weather-
related stresses, and other problems. These situations affect
both the public and private systems.
As public servants, we are driven to want to help. But
before we can do so, we must have a better understanding on the
magnitude of the problem that we are trying to address. That is
what brings us here today.
Future hearings in this subcommittee will explore other
components of this challenge. Today, however, we are trying to
answer one simple underlying question: How big is the problem
of water and wastewater infrastructure needs in America today?
To get there, we ask our witnesses today to help us with
this challenge by providing their perspectives on the size of
the problem. We would also appreciate their ability to document
their findings so that we are able to compare apples to apples,
so to speak.
Although there is undoubtedly no shortage of issues and of
recommendations about how we can solve this problem that many I
am sure are eager to share with us, I hope that our panelists
today will save those for another time and another hearing. I
assure you that we will hold those hearings.
Before too bleak a picture of the needs situation in this
country is projected today, however, I would like us all to
remember that our community utilities are generally solid and
managed well. Despite episodes of pipes failing or public
exposure contaminants, most systems are striving to meet
current demands and responsibilities.
This is simply a question of recognizing that we can do
better to ensure that the public and the environment are served
efficiently and effectively by the resources invested in this
area.
With that, I once again thank our witnesses for joining us.
We look forward to their important testimony that they will
provide on this issue today.
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. Thank you
for outlining the importance of this issue. Drinking water and
wastewater quality are critical elements in environmental
protection and economic success. We can say that the economic
vitality and a community's livelihood is directly tied to its
water systems. But we also know from a few isolated instances
that when the systems break that is when we have some real
human health problems. There is nothing that has a more direct
impact on a community's health than to have either the
wastewater treatment facility go down or the public drinking
supply, the safe drinking water protections become inadequate.
This is an environmental problem. It is a human health problem.
It is one of the very most important environmental problems we
face.
Now my colleagues have probably heard me talk too much
about all the prejudices I carried into this job from being a
Governor. But nothing ticked me off more as Governor than to
look at all the Federal mandates placed on States and local
governments. Without adequate resources, without support for
carrying out the great plans that the Olympians on Capitol Hill
in Congress imposed on States and localities--and very often
they told us to do things that did not make sense--we were
forced to devote our resources to areas that were lower
environmental priorities than the priorities we had established
in the State. So I came in with a history on this. I came in
with a strong feeling that we needed to do our job, and do our
job properly.
I have had the pleasure of serving as chairman of the
appropriations subcommittee that funds EPA. That is why I look
forward to working with my good friend, Administrator Whitman,
fellow former Governor, because in the past we have had to undo
some very bad budget recommendations. Under the past
Administration, they talked the talk about safe drinking water
and clean water but they did not walk the walk. Each year came
in with big slashes in the State Revolving Funds program and
they moved that money into all kinds of new ideas in the
environment. Well, frankly, we need to take care of some of the
old ideas, and clean water, safe drinking water are not only
the old ideas, they are still some of the most important ideas.
I believe that the requirements that we have put on the
States and the communities are good for the environment, they
are good for public health. But the Federal Government has to
continue to provide resources for them. I expect that when the
Bush Administration details will come out on the budget we will
see them recognizing the importance of the drinking water and
clean water revolving funds.
We also know, and I think this is a good place to kick it
off, that we are going to have to revisit the Federal role to
determine what we can do and what we should be doing in this
entire area. There are frightening statistics about the need
for capital investment in the structure. Frankly, as one who
serves on both the Budget and the Appropriations Committee, I
can tell you that these needs are well beyond what is
foreseeable under any reasonable budget scenario that I have
heard of on the Hill.
I intend to continue to champion and fight for the State
Revolving Funds, for other sound investments. We, in this
committee, with the help and leadership of the EPA, must
determine what the appropriate role is and how we can best go
about meeting our needs.
So, Mr. Chairman, this is a vitally important hearing. I
thank you for calling it. I look forward to hearing our
witnesses today.
Senator Crapo. Thank you very much, Senator Bond.
Senator Voinovich.
OPENING STATEMENT OF HON. GEORGE V. VOINOVICH,
U.S. SENATOR FROM THE STATE OF OHIO
Senator Voinovich. Chairman, although I am not a member of
this subcommittee, I appreciate having the opportunity today to
participate.
Senator Crapo. We welcome you.
Senator Voinovich. I look forward to working with you, Mr.
Chairman, to address the incredible unmet water and water
infrastructure needs of our country.
The state of our Nation's water and wastewater
infrastructure has been a longstanding concern of mine. It is
an issue that I have been involved with as a county
commissioner, a State legislator, mayor, Governor, and now a
U.S. Senator. As Mayor of Cleveland, for instance, I saw rates
increase dramatically to deal with the city's dual water
infrastructure problems, drinking water and wastewater
treatment. Currently, my State's water infrastructure needs are
estimated at $12.4 billion; that is $5 billion for drinking
water, and $7.4 billion for wastewater.
We are now faced with a rumbling of a rebellion across the
country as communities struggle to deal with aging
infrastructure, growth, and increasing Federal water quality
requirements. Many communities face the realization that they
will have to obtain the revenues to conduct those costly
overhauls locally. Of course, the general public considers rate
increases as they do taxes. With the reaction to the dramatic
rise in energy costs and other necessities, such as health
care, it is easy to understand why the public is concerned with
increasing water and sewer rates--and they are going up
astronomically all over this country.
As Governor, I worked with the National Governors
Association, as the Administrator knows, to identify unfunded
mandates on our State and local communities, and I thought we
did a pretty good job with the unfunded mandates relief
legislation that we were able to get through Congress. Water
infrastructure is no exception. In December of last year and
earlier this month, I conducted two meetings in Ohio with
several Ohio communities to discuss the extent of their water
infrastructure needs and how the Federal water quality
requirements affect their ability to meet those needs. The
folks dealing with the problem at the local level are being
mandated to fill a whole host of Federal requirements, some of
which appear to defy common sense and cannot be justified
through cost-benefit analysis, risk assessment, and good sound
science. With increasing requirements, these communities just
cannot do it by themselves.
Because of my frustration with unfunded mandates, I have
been working toward improving the condition of our Nation's
water infrastructure and helping communities cope with the high
cost of compliance. That is why I introduced legislation
earlier this year that would reauthorize the highly successful
but undercapitalized Clean Water State Revolving Loan Fund. My
bill, the Clean Water Infrastructure Financing Act of 2001 will
authorize $3 billion per year over 5 years, for a total of $15
billion.
In addition, one of the bills I pushed especially hard last
year was the Wet Weather Quality Act, that is H.R. 828 that
came over from the House. This bill, which was enacted as part
of the Consolidated Appropriations Act in December, created a
$1.5 billion grant program to help localities deal with CSO and
SSO problems. We are hopeful that in the budget of the
Administration and in appropriations that the first $750
million of that grant program will be made available to help
these communities represented here today.
In the longer term, we need a larger program to close the
gap in water infrastructure investment. I do not know what
dollar amount Congress can ultimately approve. But I am in
favor of talking about the cost incurred by localities as a
result of actions taken by the Federal Government, this is the
unfunded mandates that are passed on by Washington, and seeing
what we can do to alleviate the situation.
Toward that goal, I have asked the General Accounting
Office to conduct a study of the unmet infrastructure needs of
our Nation in order to get a better handle on exactly what
those needs are. This includes items such as: highways, mass
transit, airports, drinking water supply, wastewater treatment,
public buildings, water resources, flood control and
navigation, and hydropower generating facilities. For each
infrastructure area, the GAO will look at those needs estimates
and figure out just what they are going to cost. The GAO will
also identify good and bad examples of such estimates and where
there is room for improvement.
I would like to get a sense today from the witnesses of
what you are being asked to do and what you need to do to get
the job done. Does what the Federal Government is asking you to
do make sense? Does it make sense what you are being asked to
do? For example, the city of Mansfield, OH, faces rate
increases of up to 300 percent to improve the quality of wet
water overflows that is already at or better than the water
qualities of the receiving stream. Here they are taking care of
their problem, they have got a holding tank, they put it in,
they treat the water after the storm, they put it back in the
stream, it is at higher quality, and they are being told, ``No,
that is not good enough, we want you to go beyond that.'' So
their bills are going to go from about $40 a month to $100 a
month. So we need to look at that.
If Federal regulations do make sense, does the Federal and
the State organizations have the capacity to implement them?
Finally, how are we going to pay for it? What is the
partnership going to be--how much Federal, how much State, and
how much local--to get the job done?
I thank you all for being here, particularly,
Administrator, your being here today. I look forward to your
testimony and the testimony of the other witnesses.
Senator Crapo. Thank you, Senator Voinovich.
We will have a number of other Senators joining us. It is a
busy morning and a number of other committees are operating. As
those Senators arrive, we will, at appropriate junctures,
interrupt and let them make their opening statements.
However, at this time we will go to our witnesses and begin
the process of hearing from them.
By way of introduction and instruction to all of the
witnesses, you should have each been advised that we ask you to
limit your verbal testimony today to 5 minutes. I realize that
you have a lot more than 5 minutes' worth to say. There are
very few people who come and testify before our panels who can
actually say everything they want to say in 5 minutes. But we
do have your written testimony. We do like the opportunity to
engage in dialog with you following your testimony. That gives
you an opportunity to fill in some of the things that you may
not have had a chance to say when you summarized your
testimony.
But we do have a system of lights up here to help you
remember that we would like you to summarize in 5 minutes. The
green light stays on for I believe 4 minutes, the yellow light
comes on when 1 minute is left, and the red light comes on when
the 5 minutes have expired. We ask that when the red light
comes on you summarize your thought at that point and conclude.
If you miss that, I will kind of lightly tap the gavel here to
remind you so that we can keep the hearing moving along. We
hate to do that but we find that we have incredibly busy
schedules here and we do want to get to the point where we can
have dialog with you.
So with that, Administrator Whitman, we again appreciate
your being with us today and invite you to give your testimony.
STATEMENT OF HON. CHRISTINE TODD WHITMAN, ADMINISTRATOR,
ENVIRONMENTAL PROTECTION AGENCY
Ms. Whitman. Thank you very much, Mr. Chairman. I am
pleased to be here and with members of the subcommittee and the
full committee. With your permission, I would like to proceed
exactly the way you outlined, and offer a brief opening
statement and submit a longer, more detailed one for the
record.
Senator Crapo. Please do.
Ms. Whitman. Mr. Chairman, over the past 25 years, America
has made great progress in reducing water pollution and
assuring safe, affordable, and abundant supply of drinking
water to our people. The Clean Water Act, the Safe Drinking
Water Act have provided a solid foundation for our progress.
We can be proud of the work that has been done with
partnerships among all levels of government and with the
private sector. This work has made a real difference in the
quality of life of all Americans. Our drinking water system is
among the safest and most reliable in the world. The 265
million Americans who rely on public water, they can have full
confidence that the water they use is safe for them and safe
for their families.
We can, however, do better. As you know, the primary
mechanism EPA uses to help local communities finance water
infrastructure projects is the State Revolving Loan Fund, or
SRFs. These funds provide States with moneys from Washington
that they can then use to manage, maintain, or improve their
water systems.
Because this is a revolving fund, the money invested in
SRFs provides about four times as much purchasing power over 20
years as straight grants would. In addition, because the funds
make loans to local communities at below market rates,
communities have over the years saved their taxpayers millions
of dollars.
It is also worth noting that almost three out of every four
loans made for drinking water SRF projects have been provided
to small water systems that usually have a difficult time
obtaining affordable financing. These funds have made an
important contribution to our success in cleaning America's
water.
But the job is clearly not finished.
Under the law, EPA is required to take a periodic look at
water infrastructure investments needed around the country.
Last month, the EPA released the second of such reports. The
bottom line, Mr. Chairman, is that we foresee the need for $150
billion over the next 20 years to ensure the continued safety
of our drinking water supply.
In addition, several interest groups, including the Water
Infrastructure Network and the Association of Metropolitan
sewerage Agencies, have also issued reports estimating water
infrastructure needs. Their estimates are quite a bit above
ours, largely because we only include projects with
documentation that are eligible for SRF funding, and that is
critical to how we administer that program.
No matter which estimates you use, there are several key
components of water infrastructure funding that must be more
fully evaluated. These include: population growth, aging
infrastructure, emerging environmental and public health
demands, increasing operation and maintenance cost, and
maintaining affordability. We need to keep affordability in
mind as we move forward with both funding and regulatory
proposals.
If I may digress for just a moment on a subject with
respect to my recent decision on acceptable arsenic levels in
drinking water. Last week I asked for more time to look at all
the issues in respect to this question. That request for
additional analysis does not mean that this administration will
not lower the standard from the current 50 parts per billion.
We will do so in time to meet the deadlines proposed in the
rule of last January, the year 2006.
What I want to ensure, however, is that we have the
opportunity to review the science behind the standard, and that
the standard we set is not so expensive to implement,
especially for water systems that serve America's small towns,
that it ends up being self-defeating. Let me just give you an
example of what I mean. I was in Denver last week for the
Western Governors Association and in the course of that heard
of the instance of a town in Arizona where water had been found
to contain 90 parts per billion of arsenic. When the company
was ordered to reach 50 parts per billion, they shut down their
system, the 30 people who were left had no water, they had to
drill their own wells, and they are now ingesting water at 90
parts per billion, with no way for us to mitigate that.
I want to make sure that we avoid unintended consequences
such as these. Whether it is providing technical assistance or
something else, we need to remember that these decisions do not
get implemented in a vacuum. They have real consequences and we
need to know how to address them. At the end of the day,
however, we will issue new standards for arsenic and they will
be based on strong science and solid cost-benefit analysis.
That being said, Mr. Chairman, I am pleased to report that
the President's fiscal year 2002 budget maintains Federal
support for both clean water and drinking water infrastructure.
This administration proposes $1.3 billion for wastewater grants
to States. This will provide a substantial and sustained
contribution to clean water infrastructure needs, and is $500
million more than the Clinton administration's fiscal year 2001
request. The grants to States will help communities address
combined and sanitary sewer overflows, in keeping with the
important legislation you recently enacted in response to this
need.
The administration also proposes to maintain capitalization
of the drinking water SRF in the fiscal year 2002 budget. EPA
expects that over the long term with maintained funding the
drinking water SRF will be able to provide average annual
assistance of $500 million.
Furthermore, in keeping with the President's commitment to
focusing on goals rather than process, the administration
supports the mechanism currently in law to give States
flexibility to move funds between its clean and its drinking
water revolving funds. Mr. Chairman, this proposed financing
will help communities across America finance important clean
water and drinking water projects.
As your committee continues to look at these issues, I am
eager to be able to be part of that discussion, and the agency
commits to working with you in any way that we can to ensure
that we reach the proper decisions as we make these critical
assessments relative to human health and to clean water. Thank
you.
Senator Crapo. Thank you very much, Administrator Whitman.
As I indicated, as Senators arrive, we would interrupt and
let them make their opening statements. We have been joined by
Senator Clinton. So before we go to questions for you, we will
let Senator Clinton make her opening statement.
OPENING STATEMENT OF HON. HILLARY RODHAM CLINTON,
U.S. SENATOR FROM THE STATE OF NEW YORK
Senator Clinton. Thank you so much, Mr. Chairman. I very
much appreciate you holding this hearing today. I think the
issue of how we address our Nation's water and wastewater
infrastructure needs is really one of the most pressing
environmental and public health challenges in our country
today.
I would like to welcome Governor Whitman and the other
witnesses who will be here today.
Now, I know that this may cause some dispute in the
audience, but I would have to say that New York has some of the
best tasting water in the country. That has been proven time
and time again by blind taste tests. It is apparently the
secret to the unmatched quality of New York bagels, at least
that is what we are told. So I have a unique and abiding
interest in today's hearing.
But we also have some of the most pressing water and
wastewater infrastructure needs in the country. According to
the EPA's 1996 Clean Water Needs Survey, which is the most
recent survey available, New York has the highest clean water
infrastructure needs in the country; namely, about $16 billion.
That should not be surprising since so many of our communities
are relying on infrastructure that is 100 years or even older.
According to the EPA's 1999 Drinking Water Infrastructure
Needs Survey, which was released just last month, New York has
the second highest current and total drinking water
infrastructure needs--$10.5 billion, and $13.1 billion,
surpassed only by California.
While the national price tags that are being attached to
our Nation's water and wastewater infrastructure needs may
vary, they do have one thing in common. They are expensive.
They are an issue that we cannot at our peril ignore.
Various agencies and organizations are estimating 20 year
needs in the range of anywhere from approximately $300 billion
to $1 trillion. But while the costs of upgrading and
maintaining our water and wastewater infrastructure may be
high, the cost of not updating these systems will be even
higher.
In New York, for example, the lack of adequate wastewater
treatment has led to significant water quality problems in Long
Island Sound, impacts that are going to be difficult and costly
to reverse. Sewer overflows continue to be the leading cause of
beach closures across the country, including in New York.
Although numbers are down, there were still over 165 beach
closings and advisories in New York in 1999.
When people in this country take their families for a day
at the beach, they do not question, or do not believe they
should have to question, whether it is safe for their children
to go in the water. When people turn on their taps, they should
not have to question whether the water they are about to drink
is safe. These are important quality of life issues that should
not be taken for granted.
I have to say I have been a little concerned that our
health-based drinking water standards have recently come under
question by the new administration, as have the costs of
meeting the new, more protective standards. Other proposed
regulations that would affect the quality of our Nation's
rivers, lakes, and bays are also being scrutinized.
Rather than rolling back standards, like the standard
reducing arsenic in our drinking water, I think we should be
rolling up our sleeves and investing in our Nation's
infrastructure so that our water, whether it be the water we
drink or the water we swim in, can be as clean and safe as
possible. We should continue to update and improve our clean
water and drinking water standards. We should also update and
improve the funding for the systems needed to meet these new
standards. I think that is why this particular hearing is so
timely.
When we look at the needs that are out there, from New York
to California, I think that many people are as concerned as
those of us on the committee are. My guess is that if given a
choice, many, many Americans would vote for clean water as
opposed to a tax cut that might undermine our capacity to
provide for that clean water. My hope is, though, that we have
both, that we have discretion when it comes to the size of the
tax cut, understanding that there are other important national
needs, such as how safe our water is.
Many people today are talking about an energy crisis in our
country. They talk about our infrastructure. They point to a
lack of sufficient natural gas pipelines, or sufficient
electric generating capacity, or sufficient numbers of
transmission lines. But if we do not address our Nation's water
infrastructure needs, some day soon people will be talking
about a water crisis. That is something that I do not see any
reason for us to have to confront. We should be able to take
the steps necessary today to avoid that.
So I look forward to working with my colleagues in a
bipartisan manner and with the administration to ensure that
Americans continue to enjoy the cleanest and safest water in
the world. Thank you, Mr. Chairman.
Senator Crapo. Thank you very much, Senator Clinton.
I think it is pretty evident from the opening statements we
have seen that this is an issue of critical importance. In
fact, as I was thinking about the jurisdiction of this
subcommittee over things such as water, the Endangered Species
Act, and so forth, it represents some of the most critical
environmental issues that this country faces. At the top of
that list is water. We do have to make sure that we make the
commitment at the Federal level to do what is necessary to
assure that we have safe drinking water and clean water
throughout the system.
In that context, Administrator, I will begin with some
questions. As has already been indicated, the projections of
what the need is over the next 20 years differ quite widely. As
you indicated, the EPA's projections are about $150 billion. I
think when you add in the previous reports of the EPA to cover
both safe drinking water and our wastewater systems, it is
about $300 billion. Some of the projections by other groups,
such as the Water Infrastructure Network, get as high as $1
trillion.
Could you explain to us, if you know, why the wide variance
between these projections?
Ms. Whitman. One of the reasons is what is taken into
account. Because we use our estimates to decide on formulas
that we give to the States through the SRF, we include current
and documented future needs. What is happening in some of these
other studies is they are looking at projected needs. As to
what is coming down the pike, we are looking at aging
infrastructures.
That is why the gap analysis is currently underway which
will take a much more comprehensive look. One thing I wanted to
ensure is that as we do that gap analysis, some of the work
which has been done, it is being reviewed within the agency,
but we are also going to be putting it out for peer review so
that we can be able to have a meaningful dialog with you that
will allow an apples to apples comparison. The problem is here
whether you do a modeling system, and most of those others, the
WIN report and others, are based on modeling systems. Ours are
based on actual projects. That is one of the reasons why you
see the big difference in the numbers.
Senator Crapo. Do I understand correctly that the EPA's
analysis includes only those projects that would qualify for
funding under the grant or loan programs?
Ms. Whitman. That is correct.
Senator Crapo. I think it is very critical that we do have
the ability in this committee to compare apples to apples, so
to speak. So it will be very helpful to us that, as the gap
analysis proceeds and the other analyses that you talked about
proceed, that you give us the ability to make those
comparisons. This committee will ultimately have to make the
decisions about whether to change or expand the Federal
Government's approach to the funding for these needs. It is
going to be critical that we not only understand the level and
scope of the need, but that we understand whether we are
talking about current needs or projected needs, and what that
modeling is based on. So your help in that is tremendously
appreciated.
Ms. Whitman. Absolutely. As you know, it is the directives
that we have gotten from Congress that actually limits what we
can look at. So that is why we want to be able to give you the
information you need to make all the determinations required
here.
Senator Crapo. Would it also be fair to say, in your
opinion, that although the EPA has directives as to how it must
analyze and what it can evaluate, that the other projections
that come from other groups, even though they may be based on
different approaches, nonetheless identify critical needs that
we need to address before the committee?
Ms. Whitman. I would say so, yes. Because they use modeling
does not make it incorrect. We may use different tools, but
when you are looking and understanding that you are talking
about systems that are over 100 years old in some cases, you
are talking about areas where you have had a great increase in
growth in population that has put a different strain on the
system, these are all legitimate considerations to be taken
into account.
Senator Crapo. That is going to put a strain on the ability
of this committee and those of us in Congress to identify a
solution, because when you have a disparity of $300 billion to
$1 trillion, which of those estimates or where you fall
somewhere in between can have a tremendous impact on what type
of an approach must be determined and utilized.
So, again, we will look forward to whatever advice and
guidance that the EPA can provide us as we approach this to
evaluate where we must draw the line and how we must provide
those resources. I believe that there will be a very strong
commitment on both sides of the aisle to provide those needed
resources. Which is why we are here, to try and make sure that
we have a good handle on what they are.
The recent Drinking Water Needs Survey indicates a level
comparable to the previous survey. But the proportion of
current needs versus future needs has grown considerably. Would
this indicate to you that many systems are increasingly coming
to the end of their projected life? Or what is the reason that
we see such a shift into current needs as opposed to the future
needs?
Ms. Whitman. That is precisely it. Some of those projects
that back in 1996 were future are now current. The time is now.
The systems are aging. As I indicated, we have new standards on
drinking water in some instances which have required and will
require changes to the infrastructure. Also, you do have new
pressures from development; new people coming on to systems and
asking the systems to provide more than that for which they
were designed.
Senator Crapo. I have also noticed that in the time that
has passed between the previous study and this one there is an
increasing percentage of rural communities or costs in the
rural and small system arena. Can you give any idea as to why
it is we see a larger proportion of the need growing in these
smaller service areas?
Ms. Whitman. Well, a lot of that goes back to the self-same
needs: That they are aging infrastructures, there are new
requirements being put on them, and there are in some instances
growth which is putting additional demand on those systems. You
have a much smaller base over which to spread the cost. That
means that the individual impact, the incremental impact
becomes much greater on the ratepayers in those systems.
Senator Crapo. Thank you. I notice that my red light has
come on. So I will quit asking questions.
Senator Corzine, we indicated we would let Senators make
their opening statements as they arrive. Would you prefer to
make yours now or wait until we have finished with the
questioning?
Senator Corzine. Why don't we wait. Frankly, I will be
happy just to submit my statement so we can go on with the
witnesses.
Senator Crapo. We will be glad, as soon as we finish the
questions, to let you make or submit your opening statement.
In order of arrival, we will turn next then to Senator
Bond.
Senator Bond. Thank you very much, Mr. Chairman.
Administrator Whitman, I am interested in determining the
overall level at which the Clean Water State Revolving Fund is
operating today, and what you see as an operating level that we
need to reach for a sustainable revolving fund. Now I very much
appreciate the information that the official recommendation is
$1.3 billion for the clean water revolving fund. You have
reversed the unfortunate pattern of past submissions where we
have seen those slashed.
But I would like to know, with what we are putting in, what
is being repaid, what the States are putting in with their 20
percent match, what is the annual operating level now, and also
with the $1.3 billion to be added?
Ms. Whitman. Well, right now, we are seeing, as I indicated
in the testimony, that we are getting a good return on the
dollar through the revolving loan system and that the States
have been stepping up and providing their portion of that in
order to maximize the amount of money that is actually going
into infrastructure repair. As you know, that revolving loan
system, $2 billion is where we think we can have an ongoing
significant impact. We believe that the budget submissions that
we will see, and understanding that it is not finalized in all
its details, will allow us to reach that.
Senator Bond. We are going to hold you to that even though
it is not finalized. We are going to assume that is the budget
recommendation.
Ms. Whitman. Right. That will allow us to go forward.
Senator Bond. Now is that $2 billion, are you saying that
you need--are we operating at $2 billion with the payback?
Ms. Whitman. The submission is for $1.3 billion in
wastewater grants. Then we will do the revolving loan. But the
revolving loan fund, because you get more money back, will
stabilize at about $2 billion.
Senator Bond. Do you think $2 billion is adequate for the
needs?
Ms. Whitman. Certainly, everything that we have identified
to date that is currently acceptable to be considered. Now,
obviously, this committee, as you go forward with your
hearings, will perhaps identify other and greater needs. But we
believe that $2 billion will provide the kind of support for
States and localities that will enable them to start to address
these needs in significant ways.
Senator Bond. So, with $1.3 billion going in, you are
saying that the State match plus the repaid funds coming back
in to be loaned out again is only roughly $700 million? So we
are getting $1.3 billion in the direct appropriation to go into
the funds, and then there is about another $700 million coming
back in to the system through State match and revolving----
Ms. Whitman. As the funds get paid off, and what you have
is you get into a position where you are funding that at about
$2 billion.
Senator Bond. What is the operating level for the safe
drinking water fund now?
Ms. Whitman. The operating goal is $500 million.
Senator Bond. OK. That is the sustainable level you are
seeking?
Ms. Whitman. Yes.
Senator Bond. What thoughts are you giving at EPA to
additional financing mechanisms to assist in meeting these
capital improvement needs for both wastewater and safe drinking
water?
Ms. Whitman. I am asking that we look at all, particularly
as it focuses on the smaller water systems where you have the
most difficulty in compliance and meeting infrastructure needs
and repairs, that we ensure that we look at the whole basket of
what we are providing; that is this enough? I cannot tell you
today whether it is or it is not, whether we have all the tools
that we need in order to be able to support this kind of
drinking response and repair, particularly, as I said, as it
relates to the smaller companies where you have a greater
difficulty in achieving standards and finding the funding to do
the repair and getting the kind of financing that is required.
Senator Bond. I realize that you do not have the final
answer, because that would take all the fun out of these
hearings if we had the solution. But we appreciate working with
you.
A quick question about the small rural communities. In
Missouri and across the country they are having difficulty with
financing and meeting the regulatory mandates. Any thoughts on
how EPA can do a better job of assisting these small
communities or expanding the role for rural water technical
assistance?
Ms. Whitman. Again, that is part of what we are looking at.
It all falls into the review I have asked, actually, because of
the arsenic decision. I want to make sure that we have a full
tool chest to provide small and mid-size utility companies,
water systems with everything they need in order to be able to
implement the standards that we think are the safe ones that
people need to have in their drinking water.
Senator Bond. Thank you, Madam Administrator.
Senator Crapo. Thank you.
Senator Voinovich.
Senator Voinovich. Thank you.
Administrator, do you know exactly what the number is, I
was not sure I caught this, for the SRF fund that is going to
be recommended, State Revolving Loan Fund?
Ms. Whitman. We are still finalizing that. That will be
part of the submission made on the 9th of April.
Senator Voinovich. Are you looking at the authorization we
put in the Wet Weather Program for grants, that $3 billion
program over a 2-year period?
Ms. Whitman. With what we are looking at at this point is
out of the $1.3 billion, that part of that goes to the wet
water as a way to prioritize. What we are trying to do, again,
is to achieve the $2 billion level which is consistent with
historic levels of assistance provided. What we need to do is
prioritize and ensure that that money goes where it needs to
go. But those numbers have not been finalized yet.
Senator Voinovich. I would like to suggest that that is
totally inadequate. I will never forget when I went to the
legislature in 1967 my first act was to put a resolution on the
ballot for a $375 million bond issue to take care of waste
treatment in our State where we were doing just primary
treatment and we wanted to move it to tertiary. Then the
Federal Government got involved, and a lot of people have
forgotten about this, but we would not have the waste treatment
facilities we have in this country today if it was not for the
75-25 program that went in during the late 1970's. We had that
until 1985, then went off it and went to the State Revolving
Loan Fund. A little more than 30 years later, we have a real
problem.
There is an organization called WIN that recently met and
talked about spending $57 billion over a 5-year period to deal
with the clean water and wastewater problems that we have in
our Nation. I think that one of the greatest things that the
Bush administration could do, and you could do as
Administrator, would be to sit down with these various
organizations and really look at what the costs are out there
today in this country and put a realistic number on those
costs, rather than having them in the drawer as what we
experienced during the last 8 years around here. It is time to
confront the issue.
One of the things I did as mayor is we came up with a
special program to buildup greater Cleveland, where I was told
it is impossible. So we got everybody together and we
identified clean water, waste water, transit, and so forth, and
then put a program together and that is when we started to move
forward. I would urge the Administration to sit down and really
look at these costs.
Ms. Whitman. Senator, that is the focus of the gap
analysis. As I indicated to you, that is a much more
comprehensive analysis that is going on. While we are reviewing
that internally, we will also put that out for peer review. So
that we will be able to give you a comprehensive understanding
of where we are in these needs and one that will allow you to
compare apples to apples as we try to decide what is the
appropriate balance and what is the appropriate level of
support from the Federal Government.
Senator Voinovich. I think at the same time that you are
doing that, you can get into like this arsenic issue. If it
really is something that we should be doing, then how do we pay
for it. If it is something that is really harmful to health and
it needs to be done, then we have got to do it. On the other
hand, if it is not, then we need to look at it in another way.
But you are never going to get to the issue of some of these
regulations until you put the cost on the table and start to
balance them. Unfortunately, around here we have been doing
that in a vacuum. We have not put everything on the table and
started to weigh it. That is why I like risk assessment, and
cost-benefit, and good science, and peer review, and
alternative regulations.
I just want to switch to one other question. One issue that
is a problem right now out there is the interaction between the
current EPA mandates for CSOs, SSOs, stormwater management, and
the TMDLs. In other words, you have got four programs out
there. What are your views on giving the EPA the authority to
combine these separate regulatory programs into a unified wet
weather regulatory program that would enable municipalities to
evaluate the sources of their wet weather water quality
problems and rank them by environmental benefit, thereby allow
the community to address the most severe environmental
stressors first and getting the most bang for the dollar?
So you have got four programs out there, they are not
coordinated. What would you think of possibly allowing the EPA
to coordinate these and have more input from the local level on
the best way of spending the dollars to get the biggest bang
for their buck?
Ms. Whitman. Senator, I agree with you on the need for
coordination. It is something I have asked the department to
start to do, to step back and look at the broader picture--what
are all the things that we are imposing on States and
localities; how do they integrate with one another; are we
layering things; can we get rid of some things. I had not
thought about the approach particularly that you have outlined.
I would be happy to talk with you further about it.
Senator Voinovich. Most of the national organizations think
it is a great idea. I would suggest that maybe you also get
some input from them on how it could be done.
Ms. Whitman. Certainly.
Senator Voinovich. Thank you.
Senator Crapo. Thank you, Senator.
Senator Clinton.
Senator Clinton. Thank you. I just want to associate myself
with the comments of Senator Voinovich. I really think that
these clean water and wastewater needs should be at the very
top of our national priorities. It is not going to be cheap,
and we know that it is going to expend a lot of Federal dollars
matched by some State and local dollars. But I just do not
think there is a more important priority. I also agree that if
we find through science that there are changes that should be
made, we should have the resources at the Federal level to be
able to assist communities in meeting those changes.
I would urge the Administration, which has an opportunity
now as we look at this new budget, to really take seriously in
our time of surpluses, albeit probably diminishing surpluses,
nevertheless surpluses, to take care of some of these national
needs. I know that many people in a bipartisan way would
certainly work with the Administration to do that.
I am sorry that I missed your opening statement. I
apologize. I know that you mentioned arsenic. I just wanted to
get some clarification, if I could. I have a couple of
questions and maybe I will just ask those and then you could
respond to all of them. Obviously, many of us are concerned
about the decision that has been taken.
I would like to know:
First, in response to some of the statements that have come
out of EPA, what is the new science that you will be looking
at?
What is the process you see as you move forward to withdraw
the standard?
As you know, there is a June 2001 statutory deadline for
issuing the new standard. The deadline was established in a
rider to a fiscal year 2001 appropriations bill, which was
actually an extension of a January 2001 deadline set in the
1996 Safe Drinking Water Act Amendments. So these are issues
that have been around for a number of years. Are you saying
that EPA does not plan to meet this statutory deadline?
Fourth, under the Safe Drinking Water Act, EPA is required
to set a maximum contaminant level that is as close to the
maximum contaminant level goal as is feasible, where feasible
means feasible with the use of the best technology available.
Now it is my understanding, based on the science that I have
reviewed and that led to the decision that was made by EPA,
that the feasible science available could achieve a level of 3
parts per billion arsenic in drinking water. Yet the standard
that was agreed on in a compromise, as all standards usually
are, set a standard three times that level. Do you know of any
other cases where the agency has set a standard above the level
feasible using the best available technology and now is willing
to jettison that standard?
Finally, it is my understanding also that EPA has a cancer
risk policy in place under which the agency sets standards so
that risks of cancer in humans do not exceed 1 in 10,000. In
fact, it is my understanding that the agency usually strives
for a risk rate of 1 in 1,000,000. Do you intend to revise the
agency's cancer risk policy? Because there is significant
evidence that the arsenic standard was keyed to a cancer risk
standard that underlay the science.
If you could answer these questions. If there is additional
information that you need, if you could submit those answers to
the committee, I would appreciate it.
Ms. Whitman. Sure. No, I would be happy to answer them
right off the top.
What is the new science? There have been a couple of new
studies, one actually that indicates that arsenic might be an
endocrine disrupter, something the previous Administration did
not have when they made the decision. Which is why I have said
I do not know what that standard will be. It may be 3, it may
be 5, it may be 15. But we have not, as has been characterized
by some, walked away from a reduced standard. There will be a
reduced standard. But there is that.
What is the new process? One of the things I am asking is
that we take that into account. We also are going to be
reaching out to some outside; the National Academy of Sciences
and then other groups that look at cost-benefit analysis, to
ensure that the standard that we are setting--while the
National Academy of Sciences and everyone agrees that 50 parts
per billion is too high, as you indicate, there are those who
think 3 parts per billion is right, 5, 10. There is,
unfortunately, no definitive scientific study that says that 10
is the magic number, or 3, or 20, for that matter. That is the
frustration we sometimes run into in the agency in setting
these standards. But we are going to be undertaking a complete
review that will allow us to ensure that we have the new
standards in place for implementation by the year 2006, which
is when this particular standard was going to take effect.
You mentioned the June deadline. Obviously, we want to work
with the Congress to see if we can, as you have granted in the
past, provide an extension to allow us to do this more
comprehensive review of impacts. We have no intention of
changing the cancer risk assessment. That is not part of it.
My concern here, Senator, is that--you missed in the
opening statement, but something that I encountered as I have
talked to more and more people who are on the small water
systems, and this is a real life example in Arizona, where the
local water company was providing water at 90 parts per
billion. When they were told that they had to meet the current
standard of 50 parts per billion, they closed shop and walked
away. That left the 30 people on that system with no way to get
water save to drill their own wells, which they did, and they
are now getting water at 90 parts per billion. We have no way
to mitigate that. The unfortunate thing here as far as arsenic
is concerned, there is no way to mitigate that at the tap or in
the home; it has to be at the water supply system. My only
concern is I want a thorough review of what we are able to
provide those small systems to keep this from happening. What
are we going to be able to do if 10 is the standard, if 5 is
the standard, if 15 is the standard? Do we have everything we
need? Financially, are we able to provide them with all the
help? Are there other tools that we can give them? Do we have
everything?
I just want a decision that really has looked at the entire
picture. I was not satisfied as I talked with the staff that
they had really been adequately able to incorporate all the
interested parties in this and the full impact. While they
looked at a cost analysis, that was amortized over the entire
country. The heavy burden here will fall on those least able to
afford it; many of these rural areas, low-income populations,
people for whom an increase in their water bills is just going
to be the straw that breaks their back and they are not going
to be able to stay there. We want them to have safe drinking
water. Because they live in a poor area does not mean that they
should not have the same standard of drinking water that
everybody else has.
I want to make sure that we have everything in place so
that we can give them that support and that everybody
understands what the full impact of this will be. But we are
not talking about revisiting the cancer standard. We will look
to ensure that we have the right number. As I said, I cannot
tell you whether it is 3, 5, 10, or 15. It will be lower than
50. It will be in place by 2006.
Senator Clinton. I would just urge in the strongest
possible terms that we try to meet this June statutory
deadline. Everything that you have just said does not suggest
to me that should be a difficult task to achieve. I am
continuingly concerned that, at the end of this process,
whatever standard you choose based on the science will incur
costs for people. I go back to what Senator Voinovich said. If
we do not have money in this budget which will set the stage
for expenditures for the next 5 to 10 years, we will not be
able to fix the water systems that are going to need the help
to keep the arsenic out of the drinking water.
Again, I am just so concerned that we are not going to have
the resources available to take care of our water needs. Your
setting this standard, whatever it might be, will incur expense
for some communities. We better make sure we have got the money
for it. I do not think it would be appropriate to do otherwise.
I do not want to see us end up as a Third World country in
terms of our water. We have always prided ourselves on being
able to turn on the tap and drink it. Some may want to go out
and buy bottled water, which I have problems with because I
think if they actually did an examination of what is in some of
their bottled water they would go back to the tap water. But,
nevertheless, we should be able to turn on the tap and drink
the water anywhere in America. Right now, we are not sure we
can do that. That is a problem that should be fixed, and it is
going to take resources.
Ms. Whitman. Senator, I could not agree with you more. That
is why this Administration's budget is $500 million more for
this program than the previous Administration's budget.
Senator Crapo. Thank you.
Senator Corzine.
OPENING STATEMENT OF HON. JON S. CORZINE, U.S. SENATOR FROM THE
STATE OF NEW JERSEY
Senator Corzine. Governor, it is good to see you this
morning. Let me say I am particularly encouraged that you have
been very clear that you are talking about reducing these
arsenic standards. I think there is a lot of misconception out
and about with regard to what the actions and the statements
surrounding it were, and we will be anxious to find that
science.
I am curious if you felt that some of the work out of the
National Research Center, the National Academy of Sciences has
not been adequate? Is there a feeling that they have not
reviewed this in a thorough enough fashion?
Ms. Whitman. No, Senator. The frustration comes that we all
want to know what is really the right number, and there is no
definitive scientific report that can say it is 10 versus 20
versus 5, that this is where you really make the difference in
human health. The National Academy of Sciences has agreed with
what everybody agrees with, that 50 parts per billion set more
than 50 years ago is far too high. In our State of New Jersey,
we have gone to 10 parts per billion. We assumed that and went
to that. But, again, there was nothing that said that this was
the number that provided automatic safety for everybody
drinking the water.
We, fortunately, in New Jersey do not have a high
incidence, and most of the East Coast, of naturally occurring
arsenic. Naturally occurring arsenic is everywhere but you tend
to see a greater impact in the West and the Midwest, many times
in very rural areas, in towns that have one source of income,
one particular facility there that provides it, and they do not
have all the resources that they would be required. Again, when
you amortize what the cost is going to be, it has a much
greater impact on them.
So, I just want to make sure that as we reach this standard
everyone has a full understanding of what the implications are
for everyone.
Senator Corzine. This gets at the point about budgets. We
know we are going to need to support some of those communities.
One thing we should know, that 90 parts per billion, which you
talked about in the Arizona case, is off the charts.
Ms. Whitman. Oh, absolutely.
Senator Corzine. It is going to lead more likely than not
to something that is not even close to the cancer standards.
So, as we say often around here, the perfect should not be the
enemy of the good. But we ought to get this down to at least
some level and moving in that direction almost immediately. As
a matter of fact, it actually sounds more threatening when it
is described in that kind of context, and then particularly
when you know that a lot of these standards apply to school
systems and what other ambient or transient systems are, that
is the other term that is often used.
I suggest speed in dealing with this, getting to those
conclusions, and getting them implemented. Even an interim
standard, to cover some of these places where I think our
people are at risk, seems in order.
I also want to identify, as Senator Clinton, Senator
Voinovich, and others have talked about, the overall
expenditures on wastewater infrastructure, which is a big
problem in New Jersey, the CSO and other kinds of issues. Have
you had a chance to scrub down in your own view these needs
surveys that are the basis for a lot of the projections, the
$135 billion, the $157 billion, and then I heard Senator
Voinovich mention the WIN's proposal that might take as much as
$1 trillion. Have you had a chance to work on these and factor
this into budget processes. The $500 million sounds terrific
but it does not sound too big inside a context of $1 trillion.
Ms. Whitman. No, and that is why the issue becomes so huge
and that, while we all agree that this is something we must
achieve in this country, the continued assurance that we are
not even remotely close to Third World status in our water and
do not want to be, have no intention of that, that we are
comparing apples to apples. That is what the gap review is
intended to do. That is why we are also going to put it out for
peer review, so that everybody has an opportunity to look at
these numbers, everybody has an opportunity to see what is
being compared to what.
We have certain constraints in the agency that are
legislated that, because of the way we distribute money under
SRF, we can only consider certain things when we look at needs.
We cannot authorize modeling. We do not use a model that
projects out. That might be something that you can look at as
you go forward. You hear such different numbers being
considered. It is not that anybody is purposely
underestimating; it is not that anyone is overlooking anything
intentionally; there are certain constraints that allow what
can be included in projections and what cannot be, depending on
who is doing it. I am sure the committee will be looking at
this issue.
Senator Corzine. Would you comment on what you think the
quality of the needs surveys projections are?
Ms. Whitman. There is a huge need here, there is no
question. You are looking at infrastructures that are well over
100 years old in some cases. You are looking at infrastructures
that have seen huge increases in population and so they are now
supplying water beyond their design capacity. You are seeing
new requirements from the Federal Government as to what these
water companies are allowed to purvey to their customers and
that has put on increased demands.
So there is no denying that there is an incredible need
here. We are talking about anywhere from $300 billion, that is
a lot of money right there, much less $1 trillion. As you look
at priorities, this is going to become a question of priorities
as we address a lot of these challenges that we have before us.
I would agree with you that this is certainly one of the
primary challenges that we have to face.
Senator Corzine. I certainly appreciate the benefits of
cost-benefit analysis. But I think that as it relates to the
health standards of our communities, I think safety comes first
and making sure that we project this. I hope that that is
factored into the analysis that goes here. I go back to 90
parts per billion or where in similar situations--in New
Jersey, I think your own Department of Environment requested a
5 parts per billion on school districts. I think it is
important to err on the side of conservatism and protection of
our population.
Ms. Whitman. Senator, I agree with you. The only thing that
I do not want to see is unintended consequences, such as that
that occurred in Arizona where people were forced to go to
their own wells. This is an issue that has to be dealt with
through a water treatment plant; you cannot do it at the home.
So now these people are getting 90 parts per billion, which we
all say is unacceptable. This was an effort to get the company
to meet the 50 parts per billion, which is the current
standard, and we have had unintended consequences. We just need
to fully understand all that.
Senator Crapo. Thank you.
Senator Chafee.
OPENING STATEMENT OF HON. LINCOLN CHAFEE,
U.S. SENATOR FROM THE STATE OF RHODE ISLAND
Senator Chafee. Thank you, Mr. Chairman, for having this
hearing on water and wastewater infrastructure needs. I think
it is appropriate a week before we debate the budget to have
this hearing. I certainly have been vocal in our caucuses on
the opportunity we have with surpluses we have not seen for so
many years to do something with our infrastructure. Being that
the Water Infrastructure Network has worked with regulators,
researchers, environmentalists, wastewater and water providers
to have a study completed in 2000 that highlight the needs up
to $1 trillion over 20 years, I just think we have the
opportunity and should, as we go into the budget debate next
week, address some of these needs either through revolving loan
funds, low interest, or, ideally, no interest loans to the
States to address this what Senator Phil Graham calls
nonrecurring expenses. I think that is something we should be
doing with our surpluses.
Thank you, Governor, for being here.
Senator Crapo. Thank you very much.
Administrator Whitman, we appreciate your being with us. As
I think is evidenced from the comments that you have heard from
both sides of the aisle here today, there is going to be a very
strong focus on this committee with regard to the budget needs
of this particular part of our environmental effort. We
appreciate your effort in working with us in that regard. Thank
you.
Ms. Whitman. Thank you, Senator. I look forward to it.
Senator Crapo. Before we move to the next panel, it is my
understanding that Senator Clinton wanted to read part of
Senator Reid's statement welcoming the Nevada representative. I
am right about that?
Senator Clinton. Yes. Thank you, Mr. Chairman.
Senator Crapo. You are welcome.
Senator Clinton. I have never been a Ranking Member before,
so this is all new.
On behalf of Senator Reid, I want to extend his apologies
for not being able to attend this morning's hearing.
Unfortunately, his duties as the Assistant Minority Leader
require that he be on the Senate floor at this time. However,
he would like to thank all of today's witnesses for their
service to the committee. He is keenly aware of the tremendous
challenges that communities in his home State of Nevada and all
across the Nation face in meeting their drinking water and
wastewater infrastructure needs. He appreciates the opportunity
to learn from each one of the witnesses their perspective on
the magnitude of these needs. I will be going with Senator Reid
during the Easter recess to Nevada to see firsthand some of the
needs that Senator Reid is so concerned about.
He would especially like to thank Mr. Allen Biaggi for
taking the time to travel all the way from Carson City, NV, to
participate in today's hearing. That is a considerable expense
and effort to go all this way. It is difficult for anyone, but
Mr. Biaggi is here with an achilles tendon injury on top of
everything else. So we are especially grateful.
Senator Reid would like to commend Mr. Biaggi and his
division for the work they do to support the drinking water and
wastewater treatment needs of Nevada's communities as well as
to protect Nevada's environment.
Finally, the Senator assures Mr. Biaggi that his travels
today will be worth the effort. Senator Reid intends to read
with special attention Mr. Biaggi's testimony on the water and
wastewater infrastructure needs of the Nevada and Southwest
regions. So we thank you and Senator Reid especially thanks you
for making the effort to be here.
Senator Crapo. Thank you very much, Senator Clinton.
As I indicated earlier, this is a very busy morning. I am
sure Senator Reid would be here if he could; he has got a lot
of duties. There are many Senators who will be very carefully
reading this record even though they are not here.
We will now call up our second panel. This panel consists
of representatives of four different States who will represent
not only their own States but regional interests and other
concerns of States in general.
First, we have Mr. Jon Sandoval, who is the chief of staff
of the Idaho Department of Environmental Quality; Mr. David
Struhs, secretary of the Florida Department of Environmental
Protection; Mr. Harry Stewart, who is the director of the Water
Division of the New Hampshire Department of Environmental
Services; and, as has been indicated, Mr. Allen Biaggi, the
administrator of Nevada's Department of Conservation and
Natural Resources in the Division of Environmental Protection.
Gentlemen, we welcome all of you here. I would like to
remind you of the instructions I gave earlier that you try to
keep your comments to 5 minutes. I will give you the light tap
of the gavel if you do not notice the red light when it comes
on. That is because we want to have the opportunity to have
dialog with you.
We will begin then with you, Mr. Sandoval.
STATEMENT OF JON SANDOVAL, CHIEF OF STAFF, IDAHO DEPARTMENT OF
ENVIRONMENTAL QUALITY, BOISE, ID
Mr. Sandoval. Thank you, Mr. Chairman, members of the
committee. My name is Jon Sandoval. I am chief of staff at the
Idaho Department of Environmental Quality in Boise, ID. I bring
greetings to you, Mr. Chairman, from Governor Kempthorne and
Director Steve Allred.
Senator Crapo. Thank you.
Mr. Sandoval. I am testifying to share with you the
perspectives of Idaho and other largely rural Western States
who, along with their small communities, face unique and often
overlooked challenges in meeting water and wastewater needs. On
behalf of the State of Idaho, I very much appreciate your
invitation to share my comments with you today.
Enhancements over the years to the Safe Drinking Water Act
and the Clean Water Act have significantly enabled States to
address major improvements in how infrastructure needs of small
rural communities are served. States have been very successful
in their efforts to work with small communities to better
define current and projected infrastructure needs in rural
areas. It is small communities who are most impacted by lack of
capacity and financial stress in assuring that citizens are
provided safe drinking water and wastewater treatment at an
affordable cost.
Small communities face a unique situation as they must
weigh the costs of necessary capital investments to meet
national environmental and public health goals. Small
communities in Idaho, and in all Western States, face a number
of common issues: How much is available to spend, and are the
revenues adequate; how do they document the need for financial
assistance; can the debt service be properly managed; how do
they obtain the necessary engineering, financial, and technical
expertise at an affordable cost; how do they find and obtain
affordable public financing; how much of the cost will
consumers have to bear?
In Idaho, the mechanics of documenting need is a major
challenge on our small communities. These communities face a
number of obstacles when it comes to defining need as trends
have continued to suggest, first of all: Federal requirements
are increasingly becoming more stringent to improve water
quality and drinking water safety?
Increasing costs of attaining these requirements will
continue to escalate as there is a more directed focus to use
technologies that are more complex and more expensive. We also
need to recognize that energy costs have tripled, especially in
the Pacific Northwest. We also need to acknowledge the rising
costs of capital improvements to replace aging or failing water
distribution systems and wastewater collection systems for many
of these communities is an extreme hardship.
Small communities are at a distinct disadvantage with
Federal requirements for environmental compliance as these
entities lack necessary financial resources, capacity,
structure, access to technology, and the right tools in their
communities to make informed and rational decisions.
The realities we need to address when it comes to
understanding and responding to the infrastructure needs of
small communities is that small towns and rural areas dominate
our Nation. Approximately 90 million people live within
jurisdictions serving less than 10,000 residents. Approximately
75 million people live in small, rural communities of less than
2,500. One-third of all local governments do not have any
employees.
In Idaho, there are 36 rural counties, with 88 percent of
Idaho's land area, and 36 percent of Idaho's population. Idaho
is the seventh most rural State in the country. In Idaho, we
define ``small community'' as a community serving 1,000 people
or less. I would encourage the Environmental Protection Agency
to consider using this definition because it has been our
experience that these are the communities where the greatest
hardship exists. These are the communities where there is a
need for infrastructure improvement and where we do not see
enough Federal response to address the financial stress on
these rural communities.
Changing demographics, high unemployment, declining tax
base, and increased costs of doing business are unique
realities of small communities in rural areas. To not
acknowledge these realities is a great mistake. If there is no
regulatory relief and no flexibility to find innovative
mechanisms to finance small community infrastructure needs, we
will witness regulatory and financial flight by small
communities. The burden is large.
Fiscal concerns at all levels of government, and
particularly for small, rural communities, have dramatically
elevated the issues of Federal environmental protection program
costs and flexibility. Environmental laws depend extensively on
State and local implementation, which raise questions of where
the financial burden should lie.
There is a tension between desired environmental goals at
the national level and the need to finance infrastructure
enhancements at the local level. Issues in this debate include
greater use of market incentives, cost effectiveness and
flexibility in regulation, and more critical attention to who
should pay for environmental protection is the unfunded
mandates issue.
We have read the WIN report. Idaho agrees that we need to
work with EPA and local government to find out how we can
address the gaps in funding. But we also need to address the
gaps in need. Is it $1 trillion? I do not know. Is it $300
billion? I do not know. Somewhere in the middle? I think taking
in a State perspective, we will get a much better handle on
what the infrastructure needs of Idaho communities are.
With that, Mr. Chairman, time is up. But I need to point
out, Mr. Chairman, that Idaho water is better than New York
water.
Senator Crapo. Sorry Senator Clinton is not here to engage
in that debate. We will have to have a water taste test I
think.
Mr. Struhs.
STATEMENT OF DAVID STRUHS, SECRETARY, FLORIDA DEPARTMENT OF
ENVIRONMENTAL PROTECTION, TALLAHASSEE, FL
Mr. Struhs. Thank you, Mr. Chairman, members of the
committee, I appreciate being invited here today. I think you
deserve a lot of credit for reaching out to the States as you
formulate the Federal Government's role.
Florida, like every other jurisdiction, is eager to ensure
that if new Federal resources become available in the future we
get our fair share and a little bit more. But I would also
pause and reflect that at this early stage of our discussions,
we are eager to reflect on the larger question of what exactly
is the appropriate role of the Government in building water
infrastructure.
Florida, at this moment in history, provides an important
object lesson for the Nation. We are in the worst drought in
our State's history. We are in a 100 and 200 years drought that
is drying up rivers, pushing family-owned businesses to
bankruptcy, burning 100,000 acres, and mobilizing an
unprecedented strategy to secure emergency water supplies. If
there was ever a political imperative to expand Government
investment in new water supply infrastructure, this is clearly
it. Yet wise men and women are counselling caution.
Ironically, at the very same moment, with the tremendous
leadership of the Congress, and particularly this committee and
its chairman, we have launched the restoration of America's
Everglades: an environmentally sustainable water resource plan
that will help save 60 endangered species and will quench the
thirst of 12 million Americans who are expected to call South
Florida home.
The lesson to be drawn from these experiences is plain--
Government must take the long view, not the short, or risk the
fate of unintended consequences. In the area of water, this
means understanding the difference between water resources and
water supply.
It is entirely appropriate and necessary for Government to
continue to identify, secure, protect, and conserve the
public's water resources. They are a classic example of the
public commons deserving governmental stewardship. We need to
take care of our water resources whether they be aquifers,
rivers, or lakes because, among other reasons, they are in fact
current and future public water supplies. The Everglades is an
example of this on a grand scale. There are many reasons to
restore the Everglades. The fact that the project will provide
a long term, sustainable future water supply is among them. But
the Federal Government is not, as part of that plan, paying for
the pumps and the pipes that will provide new water supply
service that is made available as a result of Everglades
restoration.
As we move from the stewardship of the public's common
water resources and toward the specific development of water
supplies for particular individuals, Government's role I think
becomes less clear and eventually becomes counterproductive.
Witness Florida's drought.
Drought drives home the value of a robust water supply
infrastructure. So, too, does it drive home the value of
accurate price signals that lead to adjustments in demand. It
is difficult I think to find any drought situation that has not
been made worse by a failure on both counts.
The danger is this: If Government uses revenues from
general taxing authority to subsidize the expansion of a more
robust water supply infrastructure, it risks making the next
drought even more profound because price signals are further
distorted while consumption has grown. This is entirely
unfortunate, because as critical as water is to life, demand
for water is demonstrable inelastic. There are a multitude of
cost-effective opportunities for increased efficiency and
substitution.
Government needs to be a good steward of the public's water
commons. Everyone benefits from and everyone should share in
the cost of this stewardship. Protecting watersheds for water
supplies is an appropriate use of generally collected tax
revenues.
However, the investments that are necessary to collect,
store, treat, and distribute a water supply are probably in the
long run best made by the actual water users, and how much they
pay should be determined, at least in part, on how much they
use.
Sound public policy would lower taxes collected for
subsidizing water supply development and rationalize utility
bills to more accurately reflect the cost of water service. I,
for one, do not know anyone who, if given a choice, would
rather pay a tax than a fee that he or she could control by
adjusting his or her own behavior. This is also obviously the
environmentally preferable choice, because in the end
environmentalism is about the efficient use of natural
resources.
An interesting footnote, as we prepared for today's
hearing, we attempted to research water bills to determine, on
average, how much of the actual water supply service is
reflected in the bill and how much is actually paid through
taxes. The fact that we found nearly impossible to answer that
question I think makes the case for improving transparency to
our water consumers.
If you accept the basic premise of this analysis, there are
a few simple steps that would help ensure that any new Federal
commitments to water will move us to this more pro-environment
and pro-market vision that many of us share.
First, focus on protecting and restoring basic water
resources, not on supply system infrastructure.
Second, if there is a decision to apply some resources to
subsidize infrastructure, the money should be loaned and not
granted. Loans are more likely to be made transparent to the
water consumer.
Third, reward those entities that have conservation-based
water rate schedules.
Fourth, reward entities that close the loop and recycle
their water resources. The re-use of advance-treated domestic
effluent for irrigation and other nonpotable uses must become a
bigger part of our water future.
Fifth, recognize and support unconventional and new
techniques for water resource management, whether they be
aquifer storage recovery, engineered wetlands, et. cetera.
These are all steps aimed at creating a sound public water
policy that are fair and transparent to the taxpayer and the
water consumer and are good for the environment.
I genuinely appreciate the opportunity to appear before you
today and look forward to your questions.
Senator Crapo. Thank you very much, Mr. Struhs.
Before we move to our next witness, we have been joined by
the Chairman of our full Committee, Senator Smith, who just
happens to come from the State that our next witness comes from
and may want to say something before you speak, Mr. Stewart.
I should indicate I failed to give Senator Corzine the
opportunity to make his statement. But he has indicated he will
submit his statement for the record, and we thank you, Senator.
Senator Crapo. Senator Smith, would you like to say
anything at this point?
OPENING STATEMENT OF HON. BOB SMITH,
U.S. SENATOR FROM THE STATE OF NEW HAMPSHIRE
Senator Smith. Yes. Thank you, Mr. Chairman. I will submit
my statement for the record. I want to thank you for holding
these hearings. Certainly, water and water infrastructure are
problems for every State, almost every locality in the United
States. I apologize for being late. We had an Armed Services
Committee meeting at the same time. As we do around here, we
schedule two or three hearings on the different committees at
the same time and we have not yet figured out a way to be in
all places at the same time.
But I am proud to say in large part that New Hampshire has
done an outstanding job in protecting waters of the State. One
of the reasons for that is people like Harry Stewart, the
director of the Water Division of the New Hampshire Department
of Environmental Services. We are pleased to have you here
today, Mr. Stewart, and I know you will provide perspective on
the concerns that face not only New Hampshire but similar
concerns of other States. So, welcome. Glad to have you here.
Mr. Stewart. Thank you.
Senator Crapo. Thank you very much, Senator Smith.
Mr. Stewart, you may begin.
STATEMENT OF HARRY STEWART, DIRECTOR, WATER DIVISION, NEW
HAMPSHIRE DEPARTMENT OF ENVIRONMENTAL SERVICES, CONCORD, NH
Mr. Stewart. Good morning, Mr. Chairman, members of the
committee. I am Harry Stewart, director of the Water Division,
Department of Environmental Services. As Senator Smith
indicated, I am here to present the New Hampshire view on water
and wastewater infrastructure.
Like the rest of the United States, New Hampshire has made
great progress over the last 30 years in improving the quality
of our surface water, groundwater, and drinking water supplies.
These accomplishments would not have been possible without
Federal and State assistance. In New Hampshire, that has been
on the order of $0.9 billion in grants, and $0.3 billion in
State and Federal loans to municipalities. Municipal share has
been way beyond that over the years.
We have long recognized that municipal environmental
infrastructure upgrades need to be given priority and
considered in an integrated fashion to ensure environmental and
public health protection in an affordable manner to our
citizens.
In spite of what we have accomplished, New Hampshire still
has major challenges that will require State and Federal
funding well into the future to upgrade and improve our core
infrastructure and improve water quality.
New Hampshire's characteristics I think generally would be
described as rural in some areas, with some old urban areas
which have some of the oldest water and sewer systems in the
country, like Portsmouth, Manchester, and Nashua. We have aging
infrastructure, more stringent permit limits for water quality
and drinking water. Storm water combined sewer overflows are a
very significant issue in New Hampshire and New England. These
all need to be addressed in the next 10 to 20 years.
Our estimated needs in the drinking water arena are on the
order of $500 million over this period based on the most recent
needs survey. Wastewater needs are on the order of $1 billion
for the same period. In New Hampshire, we are enabled to use
the SRF for landfill closures also as a nonpoint source
pollution. The $1 billion includes $300 million for landfill
closures which will need to occur within the next 10 years.
When you factor out all the grants and loans that might be
available, which are on the order of $50 million a year, the
local share is $20 to $100 million a year if you spread the
cost over 10 to 20 years in New Hampshire alone. Local funding
is provided by either increasing user rates or through property
taxes, or both in some cases. Thus, affordability becomes the
dominant issue particularly for small rural communities and
water supplies.
Many New Hampshire communities have significant problem
with high water and sewer rates. In fact, 40 percent of
municipal utilities in New Hampshire have combined water and
sewer rates that exceed 2 percent of their median household
incomes. Two percent is the commonly accepted threshold by
State and Federal agencies in considering what is an excessive
water and sewer rate.
To illustrate, consider Berlin, Ashland, and Jaffrey, New
Hampshire, where the median household incomes range from
$25,000 to $32,000 a year. Their annual water and sewer rates
are in the $1,000 to $1,300 dollar range. That translates into
3 to 5 percent of median household income, which is very
expensive for low-income households. So this is an
affordability issue.
With regard to Jaffrey, in particular, as an example, they
are under an administrative order to develop and implement a
multimillion dollar wastewater treatment plant upgrade to meet
stringent water quality standards. Berlin has drinking water
infrastructure needs. These are going to increase rates further
above that 3 to 5 percent of median household income level. We
have a real need to augment existing funds with more ability to
subsidize the State Revolving Loan Fund with discounts on loans
and grants.
Thank you.
Senator Crapo. Thank you very much, Mr. Stewart.
Mr. Biaggi.
STATEMENT OF ALLEN BIAGGI, ADMINISTRATOR, NEVADA DEPARTMENT OF
CONSERVATION AND NATURAL RESOURCES, DIVISION OF ENVIRONMENTAL
PROTECTION, CARSON CITY, NV
Mr. Biaggi. Good morning, Mr. Chairman, subcommittee
members. My name is Allen Biaggi, and I am the Administrator of
the Nevada Division of Environmental Protection. I would like
to thank you for allowing me to appear before you this morning
to discuss water and wastewater infrastructure needs of Nevada.
I greatly appreciate your interest in bridging the gap that
exists between needs and financial resources in our water
programs.
At the outset, I would like to recognize Senator Reid and
Senator Ensign for their leadership in addressing these serious
public health and economic concerns and thank them for
advancing this dialog on the national level.
As the fastest growing and one of the most urbanized States
in the country, infrastructure development and maintenance are
critical to the health and well-being of our citizens and our
visitors. Obviously, the need is great in Nevada's major urban
centers where the majority of our growth is occurring.
Paradoxically however, the need is no less important in our
rural communities where mining and agriculture are struggling
and where funding is often not available for even the most
basic wastewater collection and treatment systems or for
providing adequate and safe supplies of drinking water.
Nevada has long supported its communities with State
supported grant and loan programs for water and wastewater.
Like all States, however, we have been asked to undertake
significant new responsibilities under the Clean Water Act and
Safe Drinking Water Act without the resources necessary to
carry out those responsibilities. As a result, Federal
assistance is vitally important and, frankly, the only way
communities can achieve and maintain regulatory compliance to
protect public health and maintain and improve environmental
quality. Without increased funding at the Federal level, State
drinking water and wastewater programs are facing crisis
conditions.
Let me give you some examples within our small State.
On the clean water side of the equation, the State of
Nevada has operated a construction grants program or a
revolving loan program for over 20 years and has provided
greatly needed financial assistance to rural and urban
communities alike. For example, the rapidly growing communities
of Henderson, Reno, and Sparks have taken advantage of programs
and constructed some of the most sophisticated wastewater
treatment systems in the country. This has allowed these
communities to meet the requirements of the Clean Water Act and
maintain and enhance water quality in the Colorado and in the
Truckee Rivers. This provides high quality water for downstream
users, for wildlife habitat, and the sustainability of
endangered species. Similarly, small communities in Nevada,
such as Silver Springs, have used these funds to meet waste
collection and treatment needs and, for the first time, provide
this basic service while protecting vital groundwater
resources.
The problem is that demand for these funds greatly exceeds
availability. For the year 2000, we had $152 million in
proposed projects submitted to the Clean Water SRF for funding;
for 2001, $166 million, and we anticipate similar increases
throughout the next decade. Compare this demand with the
average available program funding of a mere $14 million.
In an attempt to overcome this gap, we work closely with
other entities such as economic development agencies and the
Departments of Agriculture's Rural Assistance Program to
leverage available funds and meet community needs. Yet dramatic
shortfalls still occur. This means that facilities must be
funded using alternative sources, or, as most often occurs,
projects simply do not happen.
What does this mean for a community? Sometimes it means
that collection lines cannot be built to serve a residential
development historically on septic tanks where groundwater
contamination is occurring. Perhaps new treatment units cannot
be constructed at wastewater treatment plants resulting in
environmental impairment and the potential for fines and
litigation. In some communities, it means they cannot meet the
needs of growth and must initiate moratoriums or limits on
residential and industrial development.
On the drinking water side of the equation, the prospects
are not any brighter. In Nevada, as in the rest of the country,
there is a need to refurbish and, in many cases, replace the
pipes, lines, and treatment facilities that supply our drinking
water. Systems age and without the proper care and maintenance
reliability is reduced, costs increase, and, in extreme cases,
public health impacted.
The year 2000 priority list for Nevada through the Drinking
Water Revolving Loan program showed that over three quarters of
a million dollars was needed to address acute health concerns
associated with community water systems. An additional $35.8
million is needed to address chronic concerns, and $94.8
million for system rehabilitation.
Add to this the ever-increasing demands of the regulatory
environment. In the next few years we can expect new Federal
rules dealing with groundwater disinfection, enhanced surface
water treatment, and modified contaminant monitoring and
screening. All these have good intentions with the goal of
public health in mind, but they are costly to implement and to
maintain. Nationally, it has been estimated that for the
drinking water programs alone an $83 million gap exists for
States to implement the program and billions per year for
system upgrades and repairs.
In closing, we in Nevada intend to do our part to continue
to fund programs, provide grants and loans to our communities
both large and small, and to advocate for increased support for
water and wastewater infrastructure. We will continue to
participate in the dialog along with our fellow State
representatives and through national associations such as the
Environmental Council of the States, Association of State Water
Pollution Control Administrators, and Association of State
Drinking Water Administrators.
The challenges are great, the resources, however, are
limited, and the stakes of public health and environmental
quality high. I ask for your careful consideration in making
water and drinking water infrastructure funding a national
priority. Thank you.
Senator Crapo. Thank you very much, Mr. Biaggi.
I think I will begin and limit my questions to you, Mr.
Sandoval. We have quite a few Senators here who have questions
and we may run short on time.
The first question I have is, from what I have seen,
approximately 15 percent of the infrastructure projects that
are submitted by the States and utilities are rejected by the
EPA in both the drinking and the wastewater arena. Do we have a
similar experience in Idaho? If so, could you comment on what
causes this discrepancy.
Mr. Sandoval. Mr. Chairman, as I talked a little earlier in
my testimony, I talked about a gap in the needs as well as a
gap in funding. I think when we are talking about dealing with
the Environmental Protection Agency we are also talking about a
gap in definition. We in Idaho certainly have experienced that
shortfall, that 15 percent window in terms of rejected
applications.
As we look at what the definition of what ``small
community'' is at EPA, EPA defines it as communities of 2,500
or less. In Idaho, we use a small community definition of 1,000
or less. We have identified this and we have found that these
communities are impacted severely by a lack of financial
capacity, lack of staff, and a lack of ability to arrange
public financing. We really find that our experience in working
with EPA to try to bridge the gap between the definitional
issues versus what needs to happen on the ground in order to
achieve an environmental result is something that we need to
come to the table with in terms of how do we find a realistic
solution to addressing this issue.
Senator Crapo. It seems to me that, when we talked earlier
with the Administrator about making sure we compare apples to
apples, that the definitional gap that you just talked about is
something that we need to evaluate in terms of getting a handle
on what the overall need in the country is. Would you agree
with that?
Mr. Sandoval. I certainly would agree with that very much.
Senator Crapo. All right. Thank you very much.
I am going to limit my questions at this point in the
interest of time. We will turn next to Senator Voinovich.
Senator Voinovich. What I am hearing is that we need more
money to deal with the infrastructure problems that we have in
our respective communities. I have not heard very much comment
from any of you on whether or not you think that the new water
quality standards and other things that are being required from
you are sensible and make sense. I think that is an issue that
I would like your opinion on. Are you being asked to do some
things that you ought not to be asked to do?
Second, I was very much involved as Governor and active in
the National Governors Association in promoting the amendments
to the Safe Drinking Water Act which we hoped would help
alleviate some of the problems that smaller communities
particularly were having in the country. I would like to know
whether it is your impression that those changes that we made
in the Safe Drinking Water Act have been helpful to you.
Mr. Sandoval. Mr. Chairman, Senator, I guess I would like
to respond by saying that in looking at the number of
regulatory changes coming down in terms of the Clean Water Act
or Safe Drinking Water Act, and looking at 5 years out, the
notable changes are going to have a significant financial
impact on small communities and on the capacity of State
government to deliver service.
I think if anything could happen in terms of how do we
address the gap, we need to look at finding better ways to
service our communities and our States and work with EPA and
Congress to look at creating a funding mechanism and a solution
that drives down the ability of money to get where it needs to
be. We are looking for an on-the-ground environmental result.
We have to be able to identify how we pass that money on to
local government.
In regards to the changes in the Safe Drinking Water Act, I
would have to say since Senator Kempthorne, now Governor
Kempthorne, was one of the authors of revising the Safe
Drinking Water Act, and we did have a lot of participation in
Idaho in that legislation, we do think it is a good piece of
legislation and it does create some opportunities for some
innovation while at the same time responding to a number of
challenges to drinking water systems all across Idaho.
In Idaho, 97 percent of our drinking water systems are in
compliance. We have good quality water. But when we start to
look at what the impacts are going to be in terms of new
changes in regulations and new standards, we are not so sure
that the science is there in order to support the costs of
those regulatory changes.
Mr. Stewart. I will address the Clean Water Act element.
The trend is toward increasing standards not just for the
organics and the nutrients, but also for heavy metals. For our
poorer communities, it is hard to sell to impose a heavy metal
standard for water quality in a headwater area with low flow
that are more stringent than the drinking water standard at the
other end of the pipe. So that is a bit of a problem.
I think what is happening, at least in New Hampshire, is
that these headwater communities, like Jaffrey that I
mentioned, are getting hammered by costs for water supply, for
wastewater, and landfill closures all at once. So it is a very
difficult situation and it is very difficult to sell more
stringent standards in those kinds of situations.
Mr. Biaggi. Mr. Chairman, Senator, I would like to address
the nonpoint source issue because I think it is critical and it
is where we need to head for the next few years with regard to
water pollution control and get that remaining incremental
contamination. The problem is, however, like everything else,
it is going to be extremely expensive. Those dollars need to
funnel down from the Environmental Protection Agency through
Congress to the States in order to help implement those very
expensive programs over the next 10, 15, and 20 years.
Senator Voinovich. You think those programs make sense?
Mr. Biaggi. I think that the policy and the direction make
sense. We have had some concerns about specific provisions, but
I think it is a direction that we need to go in for the future,
yes.
Senator Voinovich. You are specifically concerned that you
are being forced to take care of cleaning up some things as a
result of nonpoint sources, and that you think there should be
something done about that to not have the burden fall totally
on your systems?
Mr. Biaggi. That is correct. Quite frankly, we do not have
the resources to implement the full range and complement of
nonpoint source issues. There is going to need to be some
assistance at the Federal level to the States to help push that
agenda forward.
Senator Crapo. Thank you.
Senator Corzine.
Mr. Struhs. Mr. Chairman, I dare not be the only panelist
to not respond to Senator Voinovich.
Senator Crapo. Please take a brief moment and do so.
Mr. Struhs. You had earlier in your comments, Senator,
talked about the value of regulatory relief. In many cases, we
are hesitant to talk about regulatory relief because it sounds
like we are trying to get away with something. Indeed, I think
the better term in some instances is regulatory
rationalization. It is rationalizing the regulations, not
getting relief from them.
A specific point in Florida, which I think you are familiar
with, is aquifer storage recovery. There are currently on the
books a set of rules that are one-size-fits-all, which means
anytime you want to use aquifer storage recovery, which is the
storage of water underground for later use, it has to meet
drinking water standards because that was the assumption, that
these technologies would always be used for that purpose. As
you well know, as we move forward to restore America's
Everglades, we are going to rely heavily on that ASR technology
and yet we are not using it for drinking water. So, query: Why
be required to treat that water to drinking water standards
prior to injection to be stored only to be pumped out later and
again cleaned at that standard? It is clearly something that
does not make sense from a rational point of view.
Our Florida legislature right now is dealing with it at the
State level, and we look forward to cooperation at the Federal
level to make sure that our plan can go forward to do that kind
of rationalization. The net effect would be to save about
three-quarters of a billion dollars off the price tag of
Everglades restoration, which is something that I think we can
all support.
Senator Reid. Mr. Chairman, if my friend Senator Corzine
would withhold for just a brief minute. My beeper just went off
and I have been called back to the floor. We are going to have
a vote at 11:50.
Senator Crapo. Certainly.
Senator Reid. I just wanted, first of all, to extend my
appreciation to Senator Clinton for welcoming my friend from
Nevada. We appreciate very much the work you do and are very
proud that you are back here representing the State at this
part in the hearing.
Mr. Biaggi. Thank you, Senator.
Senator Crapo. Thank you very much, Senator Reid, and thank
you for that information about the vote. We will all have to
hurry I think.
Senator Corzine. Mr. Stewart, I am glad to hear you talk
about some of the age issues that are associated with some of
these wastewater and water systems. In New Jersey, we have a
very similar problem. We have a number of systems that still
have wood-lined pipes which are certainly a problem along this
line.
But I wanted to ask a question with regard to cancer
standards. We are talking often about the amount of dollars
that are involved. But I am wondering, from any of your
perspectives, whether you work with the EPA's standard and the
NRC's view on what the maximum risk is. Is that a practical
standard that you apply in your daily work as you work with
your local communities? Because, ultimately, the benefit is
hopefully to fall within those standards, and that is one of
the reasons we have these costs. I just wonder whether that is
being as much focused on as price signals or total overall cost
of programs that are mind-boggling, $300 billion to $1
trillion. Can anyone comment on how you think about the cancer
standards or the goals that we are trying to achieve with the
various standards that EPA has established.
Mr. Biaggi. I can take a quick shot at that, Senator. In
the State of Nevada, obviously, and I think most States, we do
not have the resources or the abilities to establish those
maximum contaminant levels. We have to look to the science and
the evaluations, to the Federal Environmental Protection
Agency, to the National Science Foundation, and other agencies
in order to establish those MCLs. In other programs, however,
such as the remediation programs, we always strive to achieve
the greatest health protection standards possible, and usually
that is 1 in 1,000,000 cancer risk. So in those programs, that
is what we always strive for.
Mr. Stewart. In New Hampshire, there are a number of
contaminants, such as MTBE, where we have had to actually move
out in front of EPA in terms of setting standards. We use a
similar approach to EPA in terms of the risk associated with a
particular contaminant.
With regard to arsenic, we actually have proposed a rule of
10 micrograms per liter. We did that in December, just ahead of
EPA, and we are in our public hearing process. Obviously, we
are going to weigh what EPA does in addition to what we get for
public comment.
Senator Corzine. That leads to an obvious question. Did you
feel like you had science backing for that standard?
Mr. Stewart. We rely on our Department of Health and Human
Services to assess the science, and they were comfortable with
10 as about the right level. I think the Administrator
indicated that they are going to fall somewhere around between
5, 10, 20. What we were concerned about in New Hampshire in
particular was getting the word out that 50 is too high, and we
were concerned not just for public water supplies, but also for
private water supplies. So we moved forward to announce a
proposal.
Senator Crapo. Thank you.
Senator Chafee.
Senator Chafee. Thank you, Mr. Chairman.
Mr. Struhs, you said in your statement that you recommend,
``If there is decision to apply some resources to subsidize
supply system infrastructure, the money should be loaned, not
granted. Loans are more likely to be made transparent to the
water consumer.'' Could you just elaborate on that. I think
there was some other testimony that the grants were working.
Mr. Struhs. Grants are always popular. We run a loan
program and a grant program in our department in the State of
Florida. The line at the grant window is always longer than the
one at the loan window.
Senator Chafee. That is why I am asking.
Mr. Struhs. But if you believe that people make more
rational decisions when they recognize the cost of the money,
you will find priorities shake out and the truly important
things will move to the front of the line.
I think there is clearly a role for grants, particularly is
you are talking about subsidizing rates for purposes of
affordability. There will always be those who are unable to pay
the full freight. I think a subsidization for purposes of
affordability is one thing, and it is an appropriate thing. But
subsidizing rates to the point where the true cost of water is
camouflaged, you price signals become distorted. What you are
actually doing is taking control away from the consumer.
The question is not whether we are going to pay the bill
for this new infrastructure, indeed, it is not even about who
pays because it is all of us who are going to pay it. The
question I think is how we are going to pay. I think there is a
preference amongst many conservative environmental thinkers
that to the extent you can rationalize the price of the water
service, you will see better decisions made in terms of
efficiency and conservation.
So I think it is a happy coincidence in which conservative
market principles can actually be brought to bear to provide a
positive environmental good and, at the same time, to use a
term that is not popular, show some compassionate conservatism
in terms of subsidization for those who cannot afford it.
Senator Chafee. Thank you. Anybody else from the panel wish
to comment on that? I know we are pressed for time, so quickly
on grants versus loans.
Mr. Stewart.
Mr. Stewart. I think that one thing that is happening,
certainly in New Hampshire, is that, again, the headwater
communities, the small, rural, low-income, headwater
communities are getting hammered with very, very stringent
NPDES permit requirements, for example, so that the burden of
environmental protection in the global sense, is really being
skewed to those communities if we do not have some reasonable
level of subsidy to address the affordability issue.
Senator Crapo. Thank you.
Senator Smith.
Senator Smith. Picking right up on that point, and others
may wish to respond to it in terms of the smaller communities
along the headwaters, if you will, if you look in the Merrimack
River in New Hampshire, looking at it in a holistic way, we
have lined up a number of communities along that river to
assess the CSO problem, and you can pick any river in any of
your States, and when you look at the dollars that are required
by EPA to focus on 3 or 4 percent of the river's problem as
opposed to where you might put those dollars somewhere else,
fixing sewage pipes or whatever, are we better off to give you
more flexibility in that area, No. 1. No. 2, what about
regional partnerships as opposed to focusing on one community
at a time to clean up not only the water, but the communities
themselves? Anybody want to comment?
I will start with you, Mr. Stewart, and then move on.
Mr. Stewart. Yes. The idea of cost-benefit and the marginal
cost of getting a smaller amount of pollutant versus going
somewhere else and getting a greater bang for the buck
obviously makes sense. We try to do that, to the degree that we
can, with our priority list in New Hampshire. But more
flexibility would be useful there.
Mr. Struhs. Senator, I would add that the exercise that all
the States are now embarking on in terms of establishing total
maximum daily loads and then making the hard choices in terms
of how you would then allocate those loads amongst the various
watershed users can, if done correctly, reveal where those more
efficient investments can actually occur, rather than looking
at it on sort of a permit-by-permit basis. So I think, again,
if you approach the TMDL with the right frame of mind, it can
identify those efficiencies. Our hope would be that our Federal
Government would provide us the flexibility to then act on
those opportunities.
Senator Smith. Anybody else want to comment?
Mr. Sandoval. I guess I would echo that as well from Idaho.
Flexibility is certainly I think the order of the day. I think
there has to come a time when we make sense out of the
nonsense. I think States have to have some flexibility and some
decisionmaking to really decide where their resources need to
go. The State of Florida picked out a really good example in
terms of TMDLs and how we address the nonpoint source
pollution. I think if we really combined our resources, and
really focused our attention on arriving at flexibility, I
think we would achieve a more sustainable, long-term, on-the-
ground result.
Mr. Biaggi. Senator, I think you brought up a very good
point of regionalization of looking at watersheds. In Nevada,
we are in the unique situation that the majority of the heads
of our watersheds are actually in the State of California, our
neighbors to the West. We have started to develop those
coalitions and those regional groups in order to address some
of the water quality issues associated with the Carson River,
the Truckee River, and the Walker River which have bi-State
components to it and multiple counties.
Senator Smith. Yet under current law, as you know, a small
community below those headwaters that are in California along
that river could be hammered with CSO standards where dollars
would be forced to be spent on, say, a CSO problem that is much
less important or significant than something else might be in
that community. Is that, in essence, correct?
Mr. Biaggi. That potential always exists, yes, sir.
Senator Smith. I know the chairman has to move on with the
next panel because of the upcoming vote. So I will stop there,
Mr. Chairman.
Senator Crapo. Thank you very much, Senator Smith.
We would like to thank and excuse this panel. We have a lot
more questions but we have just been informed that we have a
real time pressure here.
So thank you very much.
Senator Crapo. We will now call up our third panel which
consists of the Honorable Bruce Tobey, the mayor of Gloucester,
MA, on behalf of the Water Infrastructure Network; Ms. Janice
Beecher, Beecher Policy Research, Inc. of Indianapolis, IN, on
behalf of the H2O Coalition; and Mr. Paul Schwartz, the
National Policy Coordinator of the Clean Water Action.
We would like to welcome each of our witnesses here. Again,
I will remind you of the 5-minute requirement, which is even
more important now since we are moving up toward a vote.
We will start with you, Mayor Tobey.
STATEMENT OF HON. BRUCE TOBEY, MAYOR, GLOUCESTER,
MASSACHUSETTS, ON BEHALF OF THE WATER INFRASTRUCTURE NETWORK
Mayor Tobey. Thank you, Mr. Chairman, members of the
subcommittee. I am going to try to take off my individual mayor
hat, which I know from past mayors on the panel may be a
difficult thing to do, and speak first of all for the National
League of Cities today, which represents 18,000 cities, towns,
and villages from around this country, that range in member
size from 8 million to 653. So we cover the gamut. So, too,
does the second group I speak for, the WIN coalition, 29
organizations that have come together, that, in the final
analysis, I believe they represent the interests of America
across the board in water and wastewater infrastructure issues.
Speaking for those groups as well as for my own community,
I seek your support today for a renewed Federal partnership in
financing the capital needs of our wastewater and water
infrastructure systems. There is a core fact here, Senators:
the needs are large, they are unprecedented, and local sources
just cannot handle them on their own.
Local government and regional entities around this country
currently are annually spending on water and wastewater
infrastructure $60 billion a year. We are doing it with local
rates that we have steadily increased to keep pace with costs
that are escalating at a rate in excess of 6 percent above
inflation annually. Those local resources that we now are
relying on can only cover over the course of the next 20 years
about half of the $2 trillion that reasonable and sound
research from a number of sources has shown we are gong to need
to come up with to fund the needs of our water and wastewater
systems.
Now, why is there this gap?
Let me suggest, if I may, four reasons. I will just briefly
touch on each of them.
First, we are simultaneously seeing the expiration of the
useful life of water infrastructure systems built over the
course of history at different times. The sad fact is there
were systems built 100 years ago and the good news then was
they had a useful life of about 100 years given the materials
used. Then there is another phase about 75 years ago. But guess
what? Useful life, 75 years. On it goes. It is coming in, it is
roosting today on our families, families like ours across this
Nation.
Second, population growth. These systems were not built
with the expectation of the kind of population growth we have
seen and they are, if you will, bursting at the seams.
Third, we are witnessing the implementation of new, more
costly, and much more complex Federal mandates which, in
effect, are substituting Federal priorities for local
priorities. If there is only so much money in the kitty and we
have to make a tough choice between maintaining what we
currently have and thereby deferring very costly capital
replacement and keeping the regulators from being at our door
with fines and consent orders and all that, regrettably, we
wind up dealing with regulatory standards all too often and not
being able to do both, which is what we want to be able to do.
Local government wants to do the right thing on these
environmental issues.
Fourth, and that is why we are here, there has been a
substantial decline in Federal financial participation in
meeting wastewater mandates. I would just footnote Senator
Voinovich and others for that proposition.
This is a situation already costing real people real money.
Just a couple of examples. Helena, MT, a recent increase in
rates, 61.43 percent. Baton Rouge, LA, a proposed increase from
the nexus of $21 a month to in excess of $37 a month, a 76-
percent increase to fuel a $450 million CSO project. Des
Moines, IA, a proposed increase of basic monthly charges by
24.5 percent and a volume charge by 35.5 percent over 2 years
to cover $28 million in improvements. My own city, I had the
distinct privilege, as we expanded our sewer system to 800
families in a very difficult piece of terrain. to then have to
send them their share of the bill for the construction of that
system's expansion; $20,300 per home, and that is for
construction. What they will pay for the use of that through
rates hereafter is on top of that.
What we seek, very simply, is a 5-year, $57 billion
authorization beginning in fiscal year 2003 for loans, grants,
loan subsidies, and credit assistance to meet these basic water
infrastructure needs. It is a further refund for the people who
built the surplus that the Federal Government now enjoys. I
would ask you to consider it in this context: The $2 trillion
deficit soon to be paid off at 6 percent, that is $120 billion
a year in interest. That is going to be gone. That is a good
piece of news. We are seeking, spread over 5 years, about half
of the interest saved in a single year.
We can reestablish the partnership of the Clean Water Act.
We do not need that poster child of the burning Cayahoga River
to move us on. That is in the past. Let's build on that
success. We can maintain a sound infrastructure that is good
for our economies, good for our people's public health, good
for America.
America's infrastructure of transportation systems, of
aviation systems have a steady guaranteed source of funding,
our defense system, too. I would respectfully contend that our
water and wastewater infrastructure systems are no less
critical. They warrant the same degree of guarantee.
I am pleased to say that the League of Cities and the
entire WIN network is here today to work with you in
partnership to advance meeting that goal. Thank you, sir.
Senator Crapo. Thank you very much, Mayor Tobey.
Dr. Beecher.
STATEMENT OF JANICE BEECHER, BEECHER POLICY RESEARCH, INC.,
INDIANAPOLIS, IN, ON BEHALF OF THE H2O COALITION
Ms. Beecher. Thank you, Mr. Chairman, and members of the
committee. I find it a real privilege to be here. My name is
Jan Beecher and I am an independent research consultant. I
specialize in the structure and regulation of the water
business. My testimony here today is actually based on an
independent analysis that I conducted and I was invited then to
come here and present these findings to you.
Let me begin by emphasizing that my purpose is not to
dispute the fact that the water and wastewater industries face
substantial infrastructure needs, although I think we can have
further dialog about what is driving those needs. My purpose is
to promote further discussion, dialog about some of the
assumptions behind the concept of a funding gap and some of the
presumptions about how to best address it.
The $1 trillion number has become a real focal point for
discussion. My concern is that it is imprecise, I think we all
sort of agree about that, in that it actually may be inflated.
We spent a lot of time increasing the number and I would like
to see us spend some time on decreasing the number. Estimates
to the need seem to give little weight to the potential for
lowering total costs through restructuring, innovation,
operational efficiency, markets, and integrated resource
management.
The gap is basically a construct, not an inevitability. The
projected shortfall will result if, and only if, the need
estimate is accurate, and funding and expenditure levels are
not increased. Thus, the gap will materialize only if we take
no action to close it.
A number of interrelated myths have emerged in the context
of this debate. First, that a national crisis is looming;
second, that the cost of water services cannot be supported
through rates; third, that a funding gap is inevitable; and
fourth, that Federal funding solutions are essential or should
be the centerpiece of the solution.
I believe it is appropriate to challenge some of these
assumptions that are contributing to these beliefs. To this
end, I will highlight a half a dozen basic reality checks,
again for just further dialog.
First of all, local governmental expenditures in the
aggregate for water and sewer services exceed revenues from
water and sewer charges. This observation can be contrasted to
municipal energy services which tend to generate a positive
revenue stream. Such findings generally suggest that municipal
water customers do not pay for the full cost of service through
rates today.
Second, a related point is that some communities may
deliberately, no matter how well-intentioned, try to maintain
low prices for water and wastewater services. Persistent
underpricing of water services is a contributing cause of the
anticipated funding gap. Underpricing sends inappropriate
signals to customers about the value of water, leading to
inefficient usage. According to basic economic theory,
underpricing leads to over-consumption as well as inefficient
supply strategies to meet inflated demand.
Third, water services today are a relative bargain for many
households, including mine. Water and other public services
actually account for a relatively small share of the average
household utility budget, less than 0.8 percent of total
expenditures. Again, these are aggregate numbers and I realize
there are differences. But particularly in comparison to energy
and telecommunications services, water is a bargain.
On average, a four-person household spends about the same
each year on cable television and tobacco products as on water
services. Total expenditures for other discretionary services,
such as cellular phones, internet services, and other
communication devices, are rising. In addition, water prices in
the United States are comparatively much lower than prices
charged for water services in other developed countries of this
world.
Fourth, Americans are very concerned, as we have heard
today, about the quality of their drinking water and the
protection of our precious water resources. But consumers also
seem to sometime show a greater willingness to buy bottled
water than to support the cost of community water through
rates. Conservatively, the average price of 1 gallon of
community-supplied water, conveniently delivered to the tap, is
about one-third of one penny. In general, every other water
alternative is no more safe, much less convenient, and
astronomically more expensive. At $1.15 a gallon, designer
water costs 347 times the price of tap water. The bottled water
industry is earning about $5 billion in revenues.
Local funding priorities may be similarly skewed. For
example, the price tags for municipal stadiums often are in the
range of the amounts needed for our water infrastructure.
Fifth, it is important for the water industries to have
realistic expectations about future Federal funding for water
programs in order to plan sufficiently to meet their obligation
to fund infrastructure needs and maintain their systems. A
massive grant subsidies seem neither likely, nor beneficial,
from a societal standpoint. Subsidies will only continue to
perpetuate inefficiency.
Finally, many systems can, and do, manage their assets
effectively and charge the cost of water through rates. The
transition to cost-based rates for services can trigger rate
shock and raise legitimate affordability concerns for
disadvantaged communities and disadvantaged households. There
are financing rate-making and assistance methods to address
those, and I believe the Safe Drinking Water Act provides an
excellent framework for addressing some of those issues.
In sum, the concept of a funding gap merits further
consideration and debate. The need to invest in our
infrastructure is very real but the funding gap is a construct.
The water industries need to take responsibility and provide
leadership and action to address these issues. I believe that
the essential tools for closing the gap involve finding
increased efficiency as well as finding ways of charging the
true cost of water. Subsidies should be used minimally,
judiciously, and on a needs basis, and the goal should be
sustainable systems, not sustainable subsidies. Thank you.
Senator Crapo. Thank you, Dr. Beecher.
Mr. Schwartz.
STATEMENT OF PAUL SCHWARTZ, NATIONAL POLICY COORDINATOR, CLEAN
WATER ACTION, WASHINGTON, DC
Mr. Schwartz. Good afternoon, and thank you for your
patience with all of us. I really appreciate your work,
Chairman Crapo, and the other subcommittee members and full
committee members, thank you. My name is Paul Schwartz, and it
is my pleasure to be testifying before you today. The Clean
Water Action has large membership organizations in three of the
four States of the remaining Senators; from New Jersey, with
the New Jersey Environmental Federation, in New Hampshire, and
in Rhode Island. We look forward to working with you in
sculpting some type of solution to the types of problems that
we have heard today.
I think it is important, as some people have said, to
remember that we have had three decades of Federal water
investments and those three decades have made a big difference
in improving the quality of both our rivers, lakes, and streams
and our drinking water quality. But that difference can be
transitory and can go away.
I think we can also all agree that the funding gap, whether
it is a construct or a reality, as you add up the potential
costs and the real costs, has the possibility of being very
large. Whether we are talking about a construct or whether we
are talking about real needs facing particular communities
right now, there is a new need for a shot of Federal investment
as the systems are growing old and their life is coming due.
There is no other infrastructure in the United States that
is relying on pre-World War I technology as the basis for the
technology that we use. There is no other infrastructure in the
United States whose physical plant is as old as our water
infrastructure. In many other infrastructures, we talk about
trading on our grandparents' generation. For water
infrastructure, we are talking about trading on our great
grandparents' generation. We used to have an infrastructure
that was the wonder of the world. Folks would come from all
over the world to look at our systems. That is not the case any
more.
Congress has heard and will continue to hear a steady and
almost unremitting drumbeat of information about funding gaps
and about the needed and available resources. At Clean Water
Action, the specific overall dollar figure that we understand
may vary somewhat depending on the specific frame, model, or
method used to generate the numbers, but everybody agrees that
without significant new investment we face some sobering
environmental and public health and economic issues. We have
taken a look at the various surveys, the WIN survey, the
Drinking Water and Clean Water surveys from EPA, and we think
that the order of magnitude of the problem approaches something
like what is in the WIN survey.
The key question is how do we act in a way to maximize, to
the extent possible, equity, affordability, and sustainability
while maintaining the goals of preserving the environment,
enhancing public health, and laying a new foundation for broad
economic prosperity. Now how we dispose of that problem and
your role in doing that is at the center of the debate. That is
why we believe we are at the table.
We think there are some common sense, fiscally
conservative, market-driven principles that should guide how we
think about moving forward in these areas.
First, we believe that we should give the States
flexibility to invest in ``green'' infrastructure as well as in
the traditional infrastructure needs. The WIN report and others
have supported this notion of looking at cost-effective
pollution prevention, source control, and innovative and
alternative technologies. The WIN report also talks about a
$250 million science, technology, and best management fund,
which we believe is key in figuring out how to maximize the
dollars that we have available to us.
Second, we need to make sure that the dollars actually go
for cleanup, not sprawl development or environmentally
destructive projects. Currently, EPA has no way of tracking how
the States are actually spending the money in the sense of
knowing whether the dollars are going for real environmental
compliance or public health needs, or whether that money is
going to spur sprawl development. We would like to see that
situation change. We would like to see some more fiscal
restraint and some more capacity for transparency on the part
of our States in the way they spend their dollars.
Additionally, ratepayer and taxpayer protections should be
supported by conservative approaches in utilizing market-based
incentives. There are five points that we would like to throw
out and suggest that we consider as we move through this
process: First, I----
Senator Crapo. I would like to ask you to try to summarize
quickly. We are running tight on time.
Mr. Schwartz. Sure. I appreciate that. I will skip then to
the back.
Let me address grants. Requiring a local match for any
grant program is what we think is necessary to make sure that
as we layer grants, if we do, on top of loan programs, we have
some buy-in from the communities. Maybe that match could be
keyed to some affordability index.
Second, we really want to protect taxpayers and ratepayers
by assuring that costs are fairly apportioned between users of
all water resources. That is why we suggest that there is a
mechanism that already exists that could result in the raising
of billions of dollars for water infrastructure needs in the
sense that we have vastly under-utilized NPDES permits for
discharges where there is either free or very low cost for
those permits. We think this is a way that you could raise
tremendous numbers of dollars. The Federal role there would be
to recognize a preference to States who choose to use this type
of funding mechanism.
Last, we think it is very important, as we have heard
today, to fund safe and affordable water for small communities.
We are very concerned that we have a two-tier drinking water
system being set up in this country in a de facto way. Because
of this, we support the type of moves that Congress made in the
1996 Safe Drinking Water Act that gave States the flexibility
to use up to 30 percent of their funds to aid small systems in
a variety of ways. A current early read shows that many of the
States are not taking advantage of those funds. So we believe
that Congress needs to move beyond mere suggestion to really
mandating more of that usage. We support the type of approaches
such as the Reid-Ensign Small Communities Safe Drinking Water
Infrastructure Funding Act that look at the special needs of
small systems.
To conclude, we are very concerned that as we move forward
in this process we not take advantage of the distress that we
see in our communities as a way to reopen difficult and complex
issues under the Clean Water Act and Safe Drinking Water Act
reauthorizations. If we choose to use this setting and this
scene to do that, that will be the quickest way to undercut the
vast coalition of political forces who have come together here
in this room to support solutions to pressing environmental and
public health and economic problems in our communities. Thank
you.
Senator Crapo. Thank you very much, Mr. Schwartz.
We have about 5 minutes before the vote and four Senators.
I will forego my questions and ask each of the Senators to try
to be brief.
Senator Corzine.
Senator Corzine. I will defer.
Senator Crapo. Thank you, Senator.
Senator Chafee.
Senator Chafee. I will just ask Mayor Tobey how he is still
in office after sending his constituents the bill for $20,000.
[Laughter.]
Mayor Tobey. Otherwise delivering good government has its
rewards.
Senator Crapo. Congratulations.
Senator Smith, you get the remainder of the time.
Senator Smith. Just a quick question. Dr. Beecher, one of
the concerns you hear about is if the Federal Government tries
to provide incentives for privatization the Federal Government
will wind up with the worst systems and the privatization will
move toward the better systems, if you will; we will get the
inefficient and the private sector will pluck off the better
systems. How do you avoid that?
Ms. Beecher. I am not sure that that is a real significant
issue. I think, certainly, if you are talking about investor
ownership, there are protections there in the form of State
public utility regulatory oversight.
I think that the goal might be to leverage money and use it
accordingly to meet goals, to have it very goal-based and
performance-based so that rewards follow performance. Use those
incentives to have the private sector play a more central role
and, clearly, tie incentives to performance and the ability to
address the hardest problems. So I think it can be done. I
think it just takes a lot of creative energy and program
design.
Senator Smith. Mr. Schwartz, where does water
infrastructure stand in terms of priorities? Of all the
environmental problems we have in America, where would you put
it?
Mr. Schwartz. Right at the top. I sit on the steering
committees of both the Campaign for Safe and Affordable
Drinking Water and the Clean Water Network, representing
thousands of environmental organizations around the country. We
believe, as ``Deep Throat'' put it so well in Watergate, follow
the money. The dollars are at the center of the politics and of
the solutions, and that is where we need to address it if we
are serious about maintaining clean water in this country.
Senator Smith. Thank you, Mr. Chairman. Thank the
witnesses.
Senator Crapo. Thank you very much, Senator Smith.
I, too, would like to thank the witnesses. I apologize to
you that we did not have the opportunity for the dialog we
would ordinarily have liked to have had with the panel. It
happens a lot. But I can assure you that we will carefully
review your written testimony.
Frankly, if there are points that you would like to add to
supplement the record, either in terms of questions that
members may want to submit to the panelists, or in terms of
additional information the panelists would like to submit to
us, we will keep the record open through Friday for an
opportunity for that to happen.
I agree with the comments of many who have testified here
today about the critical importance of our clean water, whether
it be water for safe drinking water or the clean water of the
other water uses and sources that we have in our country. I
think it is at the highest level. We must provide the
commitment at the Federal level, but make sure we do it smart
and in a way that will make sure that we address the priorities
without devastating communities. I believe we can do that. We
are going to be looking for the path forward to do this as we
complete this hearing and move into the other hearings and as
this subcommittee addresses this critical issue.
Again, I thank you very much, all of you, for attending.
Senator Crapo. This hearing is adjourned.
[Whereupon, at 11:52 a.m., the subcommittee was adjourned,
to reconvene at the call of the chair.]
[Additional materials submitted for the record follow:]
Statement of Hon. Christine Todd Whitman, Administrator,
U.S. Environmental Protection Agency
Good morning, Mr. Chairman and members of the subcommittee. I am
Christine Todd Whitman, Administrator of the Environmental Protection
Agency. I welcome this opportunity to discuss the Nation's investment
in drinking water and sewage treatment facilities to protect human
health and the environment.
As a Nation, we have made great progress over the past quarter
century in reducing water pollution and assuring the safety of drinking
water. The Clean Water Act and the Safe Drinking Water Act 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.
Our success in improving drinking water and surface water quality
is the result of many programs and projects by local, State and Federal
Governments in partnership with the private sector. But our cooperative
investment in water infrastructure--in pipes and treatment plants--has,
more than any other single effort, paid dramatic dividends for water
quality and public health.
This morning, I want to give you a brief overview of the progress
we have made in improving water quality and the water pollution and
public health challenges we still face. I also will summarize what EPA
knows about the need for future investment in clean water and drinking
water facilities and identify the key challenges I see in meeting this
need. I will conclude with some thoughts about how Congress and others
could proceed when addressing the problems of financing water
infrastructure.
clean and safe water--accomplishments and challenges
Most Americans would agree that the quality of both surface waters
and drinking water has improved dramatically over the past quarter
century.
Thirty years ago, the Nation's waters were in crisis--the Potomac
River was too dirty for swimming, Lake Erie was dying, and the Cuyahoga
River had burst into flames. Many of the Nation's rivers and beaches
were little more than open sewers.
The 1972 Clean Water Act has dramatically increased the number of
waterways that are once again safe for fishing and swimming. The Act
launched an all out assault on water pollution, including new controls
over industrial dischargers, support for State efforts to reduce
polluted runoff, and a major investment by the Federal Government to
help communities build sewage treatment plants.
The $76 billion in Federal wastewater assistance since passage of
the Clean Water Act in 1972 has dramatically increased the number of
Americans enjoying better water quality. The economic and social
benefits of improved water quality are readily evident all across the
country. Some of the most dramatic improvements are seen in urban
areas. In cities such as Boston, Cleveland, St. Petersburg and
Baltimore, the efforts to restore the health and vitality of our waters
has also led to economically vibrant, water-focused urban environments.
The dramatic progress made in improving the quality of wastewater
treatment since the 1970's is a national success. In 1972, only 84
million people were served by secondary or advanced wastewater
treatment facilities. Today, 99 percent of community wastewater
treatment plants, serving 181 million people, use secondary treatment
or better.
We have also made dramatic progress in improving the safety of our
Nation's drinking water. Disinfection of drinking water is one of the
major public health advances in the 20th century. In the early 1970's,
growing concern for the presence of contaminants in drinking water
around the country prompted Congress to pass the Safe Drinking Water
Act. Today, the more than 265 million Americans who rely on public
water systems enjoy one of the safest supplies of drinking water in the
world.
Under the Safe Drinking Water Act, EPA has established standards
for 90 drinking water contaminants. Public water systems have an
excellent compliance record--more than 90 percent of the population
served by community water systems receive water from systems with no
reported violations of health based standards. In the past decade, the
number of people served by public water systems meeting Federal health
standards has increased by more than 23 million.
Despite past progress in reducing water pollution, almost 40
percent of the Nation's waters assessed by States still do not meet
water quality goals established by States under the Clean Water Act. On
a national scale, States report that leading sources of pollution
include urban runoff and storm sewers, agriculture and municipal point
sources. Other sources, ranging from factories to forestry operations,
cause water pollution problems on a site-specific basis. Point-source
pollution has been so greatly reduced, that now non-point sources are
the leading cause of water pollution. Also, although compliance with
drinking water contaminant standards is good, public health risks from
drinking water can be further reduced.
clean water and drinking water state revolving loan funds
The primary mechanism that EPA uses to help local communities
finance water infrastructure projects is the State Revolving Loan Funds
(SRFs) established in the Clean Water and Safe Drinking Water Acts. The
SRFs were designed to provide a national financial resource for clean
and safe water that would be managed by States and would provide a
funding resource ``in perpetuity.'' These important goals are being
achieved. Other Federal, State, and private sector funding sources are
available for community water infrastructure investments.
Under the SRF programs, EPA makes grants to each State 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 twenty 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 2.6 percent (the average rate
during the year 2000) saves communities 25 percent compared to using
commercial financing at an average of 5.8 percent (see Chart 1).
To date, the Federal Government has provided more than $18 billion
in capitalization grants to States for their clean water SRFs through
fiscal year 2001. With the addition of the State match, bond proceeds,
and loan repayments, the cumulative funds available for loans of the
clean water SRFs were more than $34 billion, of which $3.4 billion was
still available as of June 30, 2000.
Since 1988, States have made over 9,500 individual loans for a
total of $30.4 billion. In fiscal year 2000 the Clean Water SRFs issued
a record total of 1,300 individual loans with a value of $4.3 billion
(see Chart 2). The Clean Water SRFs have provided about $3 billion in
loans each year for several years.
In 1996, Congress enacted comprehensive amendments to the Safe
Drinking Water Act which created a SRF program for financing of
drinking water projects. 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 2001, Congress has appropriated $4.4 billion
for the Drinking Water SRF program. EPA has reserved $83 million for
monitoring of unregulated contaminants and operator certification
reimbursement grants. Through June 30, 2000 States had received $2.7
billion in capitalization grants, which when combined with State match,
bond proceeds and other funds provided $3.7 billion in total cumulative
funds available for loans. Through June 30, 2000, States had made close
to 1,200 loans totaling $2.3 billion and $1.4 billion remained
available for loans. Approximately 74 percent of the agreements (38
percent of dollars) were provided to small water systems that
frequently have a more difficult time obtaining affordable financing.
States also reserved a total of approximately $420 million of SRF
capitalization grants for other activities that support the drinking
water program.
water infrastructure--future needs
The Safe Drinking Water Act and Clean Water Act both require that
EPA periodically develop a ``needs survey'' to identify water
infrastructure investments.
One month ago, EPA released its second report on drinking water
infrastructure needs. The new survey shows that $150.9 billion is
needed over the next 20 years to ensure the continued provision of safe
drinking water to consumers.
The survey found that water systems need to invest $102.5 billion,
approximately 68 percent of the total need, in what the report calls
``current needs.'' In most cases current needs would involve
installing, upgrading or replacing infrastructure to enable a water
system to continue to deliver safe drinking water. A system with a
current need therefore, usually is not in violation of any health-based
drinking water standard. For example, a surface water treatment plant
may currently produce safe drinking water, but the plant's filters may
require replacement due to their age and declining effectiveness, if
the plant is to continue to provide safe water. Future needs account
for the remaining $48.4 billion in needs; for example, projects that
systems would undertake over the next 20 years as part of routine
replacement such as reaching the end of a facility's service life.
Transmission and distribution costs are the largest category of
need. The survey includes needs that are required to protect public
health, such as projects to preserve the physical integrity of the
water system, convey treated water to homes, or to ensure continued
compliance with specific Safe Drinking Water Act regulations (See Chart
3). Transmission and distribution costs are the largest category, at 56
percent of the total need, or $83.1 billion. Treatment projects make up
the second largest category of needs (i.e. 25 percent) and have a
significant benefit for public health.
Approximately 21 percent, or $31.2 billion, is needed for
compliance with current and proposed regulations under the Act. Nearly
80 percent of the regulatory need is to comply with rules which protect
consumers from harmful surface water microbial contaminants, such as
Giardia and E. coli. Most of the total needs derive from the costs of
installing, upgrading and replacing the basic infrastructure that is
required to deliver drinking water to consumers--costs that water
systems would face independent of any Safe Drinking Water Act
regulations.
As you may know, EPA's most recent survey of clean water
infrastructure needs was released in 1996 and we plan on releasing a
new clean water needs survey in 2002.
The 1996 clean water needs survey estimated wastewater needs of
$140 billion, including $26.5 billion for secondary treatment projects,
$17.5 billion for advanced treatment, and $73.4 billion for various
types of sewage conveyance projects, including collectors,
interceptors, combined sewers, and storm water and $10 billion for
nonpoint pollution control projects (see Chart 4). EPA is working to
supplement the 1996 clean water needs survey as more accurate
information becomes available. For example, the Agency has developed a
model to estimate costs associated with reducing sanitary sewer
overflows that predicts costs significantly higher than the estimate in
the 1996 needs survey.
The Agency is also reviewing issues related to long-term needs,
assessing different analytical approaches to estimating those needs,
and estimating the gap between needs and spending. Some elements of
this analysis--known as the Gap Analysis--have been presented to a
range of interested parties and EPA is committed to improving and
refining this important work. To this end, the EPA plans to make this
analysis available for peer review by expert organizations in the near
future.
broader context of water infrastructure financing
Over the past year, several interest groups including the Water
Infrastructure Network, the Association of Metropolitan Sewerage
Agencies, and the Water Environment Federation issued reports
estimating water infrastructure needs. These estimates were all
substantially above those of EPA's Needs Surveys. In general, these
cost estimates differ from EPA's because the methodologies and
definitions for developing them differs. For example, EPA Needs Surveys
include only projects that are eligible for SRF funding under the Clean
Water Act and Safe Drinking Water Act. Also, EPA requires that costs
included in the Needs Surveys be established by planning or design
documentation.
Nevertheless, EPA recognizes that effective decisionmaking
concerning water infrastructure financing would benefit from a better
understanding of the broader context of this effort. Key components in
the broader context of water infrastructure that need to be more fully
evaluated are described below.
Population Growth. Steady growth and shifts in population
puts substantial pressure on local governments to provide expanded
drinking water and sewer services.
Aging Infrastructure. Many sewage and drinking water pipes
were installed between 50 and 100 years ago and these pipes are nearing
the end of their useful life.
Emerging Environmental and Public Health Demands. As our
knowledge of threats to water quality and public health improves, the
public expects its water infrastructure to continue to provide clean
safe water at reasonable cost.
Increasing Operation and Maintenance Costs. As the size
and complexity of water and sewer systems increase, and facilities get
older, the costs of operations and maintenance tend to increase.
Affordability. Although water has historically been
underpriced, some systems may find it difficult to replace or update
aging water and sewer systems and keep household user charges at
affordable levels. This issue needs to be kept in mind as future
regulations are developed.
fy 2002--water infrastructure investments
The President's fiscal year 2002 budget proposes to maintain
Federal support for both clean water and drinking water infrastructure.
The Administration proposes $1.3 billion for wastewater grants to
States in fiscal year 2002. This funding will provide a substantial and
sustained contribution to clean water infrastructure needs. The $1.3
billion requested for wastewater grants to States is $500 million more
than the previous Administration's fiscal year 2001 request.
Because of the revolving nature of the clean water SRFs, this
fiscal year 2002 capitalization amount will allow the SRFs to provide
$3 billion in loans over the next several years. In addition, EPA
expects that, over the long-term, the clean water SRFs will be able to
provide average annual assistance of $2 billion (see Chart 5).
The Congress recently enacted important new legislation to help
communities address water pollution problems caused by overflows of
combined and sanitary sewers. In response to this new legislation, the
Administration will propose grants to States for these important
projects in fiscal year 2002.
In the case of safe drinking water projects, the Administration
proposes to maintain capitalization of the drinking water SRF in fiscal
year 2002. By the end of fiscal year 2002, 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.
In addition, the law currently grants a State flexibility to
transfer funds between its clean water and drinking water SRFs. The
Administration supports this mechanism to help States fund their
priority needs.
This proposed fiscal year 2002 funding will help communities across
the country finance important clean water and drinking water projects.
As your committee continues to study the water infrastructure needs,
the Administration would like to encourage a constructive dialog on the
appropriate role of the Federal Government in addressing these needs.
conclusion
Thank you, Mr. Chairman, for giving me the chance to outline EPA's
view of the water infrastructure challenges the Nation is facing.
Let me conclude by identifying some of the key issues that
Congress, the Administration, the private sector and other interested
parties will need to consider as we work toward a common approach to
solving water infrastructure problems.
(1) We need a common view of the scale of the water infrastructure
problem that we face and the long-term timeframe for making needed
investments.
(2) We need to consider the best role for the Federal Government to
play in helping States and local governments finance both Drinking
Water and Wastewater infrastructure projects and evaluate any barriers
faced by local governments in getting access to needed capital as part
of this process (e.g. poor bond ratings, interest rates).
(3) We need to consider the strengths and weaknesses of the
existing funding mechanisms and consider the best mix of financing
under various circumstances. We also need to review the role that
privatization might play in the future.
(4) We need to review water and sewer rate structures, encourage
rates that make systems sustainable and address concerns that rates are
affordable, especially in poor communities.
(5) We need to look closely at Federal mandates to ensure that
those mandates are not needlessly costly and burdensome.
(6) Finally, addressing water investment needs in years to come
will not only require a strong commitment from Federal, State and local
governments, it will call for innovative funding mechanisms, public/
private partnerships, and advancements in technologies.
Ensuring that our water infrastructure needs are addressed will
require a shared commitment on the part of the Federal, State and local
governments, private business, and consumers. I pledge that EPA will
continue to work in partnership with Congress, States, local
governments, the private sector and others to better understand the
water infrastructure challenges we face and to play a constructive role
in helping to define an effective approach to meeting these needs in
the future. I will be happy to answer any questions.
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Statement of J.R. Sandoval, Chief of Staff, Idaho Department of
Environmental Quality
Mr. Chairman and members of the committee: My name is Jon Sandoval.
I am chief of staff at the Idaho Department of Environmental Quality in
Boise, Idaho. I bring greetings to you, Mr. Chairman, from Governor
Kempthorne, and director, Steve Allred.
I am testifying to share with you the perspectives of Idaho and
other largely rural Western States who, along with their small
communities, face unique and often overlooked challenges in meeting
water and wastewater needs. On behalf of the State of Idaho, I very
much appreciate your invitation to share my comments with you today.
water and wastewater infrastructure needs of small communities
Enhancements over the years to the Safe Drinking Water Act (SDWA)
and the Clean Water Act (CWA) have significantly enabled States to
address major improvements in how infrastructure needs of small rural
communities are served. States have been very successful in their
efforts to work with small communities to better define current and
projected infrastructure needs in rural areas. It is small communities
who are most impacted by lack of capacity and financial stress in
assuring citizens are provided safe drinking water and wastewater
treatment at an affordable cost.
Small communities face a unique situation as they must weigh the
costs of necessary capital investments to meet national environmental
and public health goals of the CWA and the SDWA with other pressing
public needs. These communities struggle with the need to replace
outdated and failing infrastructure in order to achieve environmental
compliance. Small communities in Idaho, and in all Western States face
a number of common issues:
How much is available to spend, and are revenues adequate?
How do they document the need for financial assistance?
Can debt service be properly managed?
How do they obtain the necessary engineering, financial
and technical expertise at an affordable cost?
How much does it cost to operate and maintain their
facilities?
How do they find and obtain affordable public financing?
How much of the cost will consumers have to bear?
Small communities in Idaho, and throughout the Western
United States, find themselves facing what they perceive are
unrealistic regulatory burdens. These same communities have serious
funding limitations and few opportunities to address drinking water
quality and wastewater treatment infrastructure needs in rural areas.
In Idaho, the mechanics of documenting need is a major challenge on
our small communities. While limited technical assistance is available
from State and Federal sources, these communities face a number of
obstacles when it comes to defining need as trends have continued to
suggest:
Federal requirements are increasingly becoming more
stringent to improve water quality and drinking water safety.
Increasing costs of attaining these requirements will
continue to escalate as there is a more directed focus to:
use technologies that are more complex and expensive
recognize energy use costs have tripled in the Pacific
Northwest
Lacknowledge the rising costs of capital improvements
to replace aging and/or failing water distribution systems and
wastewater collection systems is, for many of these
communities, an extreme hardship.
Small communities across the western portion of the United States
face substantive environmental challenges and responsibilities. Local
leaders find themselves, as one Mayor of a small community of 1500 in
Eastern Idaho Stated ``being documented to death''. Documenting needs
of small communities to a host of jurisdictional and public financing
agencies results in a great deal of dialog and discussion but,
unfortunately, yields little or no on-the-ground results. As the Mayor
from that small town in Eastern Idaho concludes: ``It's all talk. I am
asked to make de-facto decisions about complex financing and technical
issues about water treatment processes without the benefit of knowing
exactly what it means to my community''.
Small communities are at a distinct disadvantage with Federal
requirements for environmental compliance--as these entities lack
necessary financial resources, capacity, structure, access to
technology, and the right tools in their communities to make informed
and rational decisions. The debate in small communities traditionally
focuses on the merits of upgrading a 20-year old wastewater treatment
plant, buying a fire truck, or upgrading a 50-year old elementary
school. What should the community determine is the best value for their
tax dollar: Environmental compliance? Schools? Public Safety? This is
the reality of the issues and the decisions small communities have to
make.
It is increasingly difficult for small towns to manage and
implement environmental requirements, even though EPA and States have
broadened and expanded their capacity to provide direct technical
assistance. States, as well as the Federal Government, often impose
unrealistic expectations on these communities to document need at a
level of detail without acknowledging the reality of the issues and
decisions these small communities in rural areas must make.
The realities we need to address when it comes to understanding and
responding to the infrastructure needs of small communities is that
small towns and rural areas dominate our nation. Approximately 90
million people live within jurisdictions serving less than 10,000
residents. Approximately 75 million people live in small, rural
communities of less than 2,500. One-third of all local governments do
not have any employees. 97 percent of the country's landmass is
classified as ``rural''.
In Idaho, there are 36 rural counties, with 88.3 percent of Idaho's
land area, and 36.2 percent of the State's population. Idaho averages
14.8 persons per square mile, compared to 74.6 persons for the United
States. Idaho is the seventh most rural State in the country with rural
counties averaging 6.1 persons per square mile. Counties with fewer
than six persons per square mile are often referred to as ``frontier
areas'' with six counties having less than two persons per square mile.
In Idaho, we define a ``small community'' as a community of 1,000
people or less. I would encourage the Environmental Protection Agency
to consider using this definition because it has been our experience
using our definition of small communities . . . these are the
communities where the greatest hardship exists. These are the
communities where the need for infrastructure improvement and
enhancement are Idaho's biggest challenge and where we do not see
enough Federal response to address the financial stress of rural
communities.
People who live in small rural communities in Idaho are proud of
their communities and their rural heritage. They want to comply with
reasonable health and environmental standards. However, local officials
are concerned about requirements where no consideration for the unique
circumstances and challenges of small communities has been factored.
These same local leaders take issue with unnecessary and cumbersome
regulations restricting a small community's ability to respond
intelligently to local priorities and needs.
Small communities want to provide the necessary infrastructure for
safe drinking water supplies and wastewater treatment facilities but
need to have the Federal Government recognize the limited financial
capacity these small communities are experiencing. Changing
demographics, high unemployment, declining tax base and increased costs
of doing business are unique realities of small communities in rural
areas. To not acknowledge these realities is a grave mistake. If there
is no regulatory relief and no flexibility to find innovative
mechanisms to finance small community infrastructure needs, we will
witness ``regulatory and financial flight'' by small communities. As it
stands, small communities in Idaho and across all States in the West
cannot viably comply with overly prescriptive environmental mandates or
find innovative ways to obtain and secure financing for infrastructure
needs.
We have a responsibility as public policymakers to assist small
communities to build capacity to comply with reasonable environmental
regulations and to solve the financing issues in a collective effort to
ensure public health and environmental protection.
Fiscal concerns at all levels of government, and particularly for
smaller, rural communities, have dramatically elevated the issues of
Federal environmental protection program costs and flexibility.
Environmental laws depend extensively on State and local
implementation, which raise questions of where the financial burden
should lie. Public health values are also raised, as it is our
responsibility to extend these values uniformly to all citizens, which
can also lead to unequal cost burdens because of variations in local
conditions, services involved, populations affected and economies of
scale. Environmental compliance has become more costly, especially for
small communities struggling with other competing public and community
needs. Environmental statutes (i.e., CWA and SDWA) are not consistent
in addressing the sharing of cost burden of achieving local public
health and environmental benefits.
There is a tension between desired environmental goals at the
national level and the need to finance infrastructure enhancements at
the local level. Issues in this debate include greater use of market
incentives, cost effectiveness and flexibility in regulation, and more
critical attention to who should pay for environmental protection--the
unfunded mandates issue.
A general perception in small communities in the West is that the
costs to States and localities imposed by Federal mandates are growing
disproportionately faster than Federal assistance. We calculate in
Idaho, if we are to meet the infrastructure needs of all small rural
communities, we will need to spend considerable State resources and
need to find more innovative ways to fund infrastructure needs. We
suggest grant funding or, at minimum, very low interest loans in order
to allow federally mandated projects to meet new requirements.
If we realistically want to address the small community water and
wastewater infrastructure need, we need to see more Federal dollars
directed to local government in the form of grants for costs related to
National Environmental Policy Act (NEPA) requirements. While the SRF
programs in Drinking Water and Wastewater work well for larger
municipalities, small communities are distinctly at a disadvantage when
it comes to capacity, documenting need, securing the necessary
financing package to service to debt obligations.
Compounded by the cost factor is the additional perception that
there is no flexibility. State and local interests are at stake. The
perceptions of small communities is not to ``roll back'' environmental
and other laws designed to protect the public health and welfare--but,
on the contrary, to have firm support that Congress should address the
funding issues directly without altering requirements to comply with
pollution standards.
Local government is most affected by the costs of complying with
federally mandated pollution standards, particularly for meeting
drinking water and sewage treatment requirements. The capacity to
borrow money at commercial financing institutions is not a viable
option. It is our experience that ``small communities'' without staff,
technical and financial expertise, access to technology, and no money--
need a much better solution to address their infrastructure needs.
Small communities will have to spend considerably more money per year
than they now spend if they are to meet the total investment,
operation, and maintenance needs to replace aging and failing
distribution and collection systems.
Small communities are most frequently at a disadvantage when it
comes to ``documentation''. Small communities lack capacity, know-how,
and sophistication to produce Capital Improvement Plans, Environmental
Impact Statements (EIS), or Engineering Reports describing capital
improvements necessary to provide safe water or demonstrate adequate
capacity to treat waste.
In Idaho, as in most rural States, where capital improvement plans
and engineering reports are unavailable or cannot be produced by small
communities, the State response has been effective. State Water Quality
engineering staff take the lead to compile required documentation
onsite or through contractual assistance to the community via a State
initiated ``planning grant'' to obtain the necessary data to be
submitted to EPA. We sometimes experience great frustration in
obtaining approval of priority projects with EPA as approximately 15
percent of our proposed projects are ``disapproved'' for lack of
adequate documentation. While the documentation is provided, there is a
general perception in Idaho that there is heavy reliance at EPA to
support ``modeling data and applications'' over documented needs
submitted by individual States.
Based on the documentation we collect from small communities, or
when small communities have generated and submitted detailed
explanations of infrastructure needs on their own, we make
determinations for funding based on:
Public Health Emergency or Public Health Hazard
Highest Priority to Protect Water Quality and the
Environment
Watershed Restoration
Watershed Protection from Impacts
Preventing Impacts to Uses
Highest Priority to Protect Water Quality and the
Environment
Ability to Pay and Secure Public Financing
Water Quality Violation
General Conditions of Existing Facilities
Under Consent or Administrative Order
Incentives:
Source water assessment
Master or facility plan complete
Replacement fund established
Regionalization/consolidation plan implemented
Rate structure
Monitoring requirements met
Affordability
(O.M.R and debt service greater than 2 percent of median household
income (MHI)
Small communities incur pollution control costs because they own or
operate public water supplies for drinking water, sewage treatment and/
or waste disposal facilities. The 1987 revision to the Clean Water Act
began a phaseout of the long-standing federally funded sewage treatment
grant program with a revolving loan program that local governments
could tap, but would have to repay. When it comes to the needs of small
communities, there have to be better solutions and a much better
Federal response to provide direct funding assistance to communities of
1,000 or less.
Our experience in Idaho, as it is with most States in the West, is
that we have to do a much better job of serving the needs for water and
wastewater infrastructure needs of small rural communities. It means,
States and EPA must be more flexible, innovative and more responsive to
the needs of communities who are experiencing severe financial
hardship.
We must work with EPA to find better ways to increase State
capacity to provide more technical assistance to these impacted
communities. A mandatory Wastewater Operator Certification Program is a
good idea in respect to evolving and expanding Federal testing and
monitoring requirements--but we need to ensure funding is available to
train operators before requirements are implemented if we want to
ensure we are protecting water treatment in small rural communities.
In respect to the WIN Report, Idaho does agree there will be a
substantial funding gap for water and wastewater systems between
current investments in infrastructure and the investments that will be
needed annually over the next 20 years to replace aging and failing
pipes and to meet increasing Federal compliance requirements. Idaho has
voted to support the resolution of the Environmental Council of the
States (ECOS) passed unanimously at its 2001 Spring Meeting on the
Water Gap Analysis.
Providing additional resources to fix aging infrastructure is
essential, but no matter how it is ultimately done, States will be
expected to play a significant management role. In addition to the gaps
in funding, States also continue to face extraordinary needs to manage
nonpoint source issues, TMDLs, as well as new proposed rules to manage
animal feeding operations . . . which in turn, have an impact on the
infrastructure needs of small communities. Increased assistance for
State capacity to meet these needs must also be factored into the
debate as we attempt to address the rest of our water quality
challenges at the local, State and Federal level.
It is the financial and prescriptive ``Federal strings'' attached
to the revolving loan programs for drinking water and wastewater
treatment that raise the hackles and the tempers of local government
officials trying to find reasonable financing mechanisms to comply with
pollution abatement requirements. The Federal Government must come to
fully recognize that local governments and ratepayers fund 90 percent
of clean and safe water infrastructure costs while struggling to
resolve competing demands to educate children, maintain roads, fight
crime, and provide other basic access to primary health care services.
Small communities should not have ``to choose between providing
safe and clean water and funding other necessary community and public
needs''. Better solutions are needed because what we have is not
working for small communities.
Overall infrastructure spending, according to the Congressional
Budget Office, was about $200 billion per year by the mid-1990's. The
Federal capital expenditure, however, has remained relatively flat at
about $50 billion per year from 1977 to 1998, or about 2 percent of the
total Federal budget''. Local government, and in particular, small
communities, has born the brunt of infrastructure improvements and
spending since the late 1950's.
The economic history of rural communities is closely linked with
natural resources: soils, and water for crop and livestock production;
hardrock minerals, coal, oil, and natural gas extraction; and forested
lands for timber. Be it rural Idaho, or the Mora Valley of Northern New
Mexico; the agricultural production of the San Luis Valley in Southern
Colorado; the forested areas of Western Montana; or the Gas Hills in
North Central Wyoming--small communities in these areas and throughout
the West have continued to depend on water as the life blood of their
communities. However, new technologies coupled with globalization of
labor and the economy are changing where and how Americans work. New
applications in resource extraction industries as well as growth in
``service'' occupations are helping to diversify many rural economies.
Such diversification offers opportunities for small communities.
Until the 1960's, environmental protection, whether to preserve
environmental amenities such as swimmable and fishable water, to
protect economic values or public health--was almost solely the
responsibility of local and State government.
Idaho believes it can manage environmental programs at reduced cost
and with more efficient service delivery mechanisms if given requisite
flexibility and the ability to decide and determine State environmental
protection priorities. In order to maximize our resources, the correct
Federal response will be to address the economic issues of communities
of 1,000 people or less.
The cost of environmental compliance and environmental protection
vary widely from one area to another. States are concerned about the
need and the cost to replace inadequate or aged drinking water and
wastewater treatment facilities. States are concerned about the impacts
of these costs in rural areas on small communities in particular.
Without a significantly enhanced Federal role in providing direct
financial assistance to drinking water and wastewater infrastructure,
critical investments in small communities will not occur.
Idaho, as well as other Western States, would consider entering
into a serious discussion with EPA to closely assess and evaluate the
water and wastewater treatment infrastructure needs of communities of
1,000 people or less. The area of focus needs to be directed at
increasing State capacity to address impacted community issues,
financing, documentation of needs, transmission costs, regulatory
compliance, and establishing standards appropriate to small rural
communities. We would ask Congress to seriously consider other funding
options to get financial resources to these communities in order to
respond appropriately to the infrastructure needs.
It has been the Idaho experience that small communities do not have
the financial resources available to shoulder the immediate and long-
term infrastructure improvement or replacement costs of aged
facilities. There is a definitive need for targeted financial
assistance to pay for expensive water treatment facilities and adequate
public water supplies in small rural communities.
The Federal Government must come to fully recognize that local
governments and ratepayers fund 90 percent of clean and safe water
infrastructure costs while struggling to resolve competing demands to
educate children, maintain roads, fight crime, and provide other basic
access to primary health care services.
Small communities should not have ``to choose between providing
safe and clean water and funding other necessary community and public
needs''. Better solutions are needed because what we have is not
working for small communities and the infrastructure needs are not
being adequately addressed in spite of State government efforts to find
more creative ways to assist these communities.
Local capacity for developing long-term funding strategy is very
limited in rural communities due in large to the complexity of the
policies. Economies of scale do not favor small communities. Greater
assistance is needed to help communities address infrastructure issues
and the need for capital asset management.
The complex matrix of Federal, State and private funding sources
provides flexibility in water quality efforts; however, this
flexibility only exists if knowledge and capacity are present. Greater
funding is needed to help build financial knowledge and capacity of
rural communities.
We need to work together to design and develop an integrated vision
of the economic, environmental and social characteristics of small
communities. This requires strong leadership at all levels.
Thank you, Mr. Chairman and members of the committee, for this
opportunity to comment on this important issue to States and to the
small communities we serve in rural areas.
what do we need to do?
Appropriate flexibility needs to be incorporated into new
environmental regulations, and added to existing ones to account for
small community priorities and needs. Moreover, regulations should be
written in user-friendly language the average citizen can understand.
We need to switch gears. We need to focus on results and
not process. Rules and regulations should identify a result to be
achieved rather than a process to be followed.
SDWA statutory requirements for new contaminants are not
based on sound science or risk factors. We need to identify a process
to select contaminants for regulation based on sound science, relative
risk, and on the real dollar cost of implementation.
Revisit testing and monitoring requirements for
contaminants in SDWA and for effluents and background ambient water
criteria related to wastewater treatment under the CWA. If we set
requirements, the requirements should consider standards for which
there is affordable technology to undertake testing and implement
adequate monitoring activities.
The provisions of the Davis-Bacon Act often have the
effect of setting wages at a much higher rate than the local market can
sustain. Small communities should pay a fair wage based on a local
competitive market, rather than a prevailing wage based on a wage scale
that is influenced by larger, metropolitan areas.
The process for approving new analytical methods for
monitoring and testing drinking water and wastewater should be
streamlined and expedited.
A review of the necessity for small rural communities to
comply with: National Environmental Policy Act (NEPA); Davis-Bacon wage
rates; Minority and Women's Business Enterprise (MBE/WBE) goals; and,
Equal Employment Opportunity (EEO) requirements, are costly relative to
the amount of money small communities need for infrastructure
improvements and/or enhancements. We need to eliminate the red tape.
If Water and Wastewater Infrastructure Financing
Authorities (WWIFAs) are required, this creates a difficulty in Idaho.
It is not likely the Idaho Legislature would be agreeable to creating
another Financing Authority, as there is no indication specifying how
much of the fund could be used for administering programs or what the
scope and magnitude of the entity would entail.
EPA needs to improve methodologies for assessing the
environmental impacts, costs, and practical and technical applications
of proposed regulations and funding mechanisms. Special consideration
should be given to how regulations will impact communities with
populations less than 2,500. We need to make sense of the nonsense.
EPA needs to formulate a reasonable method for allocating
Federal resources and funds for water and wastewater infrastructure
needs targeted on the basis of need . . . recognizing that small
communities often pay a disproportionate share of the expense.
States need to be fully recognized and funded for their
ability to solve local problems in the most economically feasible and
timely manner and to manage water and wastewater infrastructure
programs based on experience, capacity, and ability to work with local
communities to solve issues. The Federal Government is too far removed
to effectively become ``your locally involved Federal Government.''
Small communities know their needs, potential, and limitations.
EPA and Congress need to recognize that States have the
capacity and the experience to provide technical assistance to assist
small communities to comply with water and wastewater requirements with
less Federal oversight and intervention.
FY 2001 State Loan Drinking Water Project Priority (Sorted By Rank and Rating--DW)
----------------------------------------------------------------------------------------------------------------
FY 2001 Regional DEQ Est.
Rank Project Rating Pop Office Loan Amt. Project Description
----------------------------------------------------------------------------------------------------------------
1 Rivers Pointe HOA.............. 215 140 BOI 50,000 Expand Filtration System
(SWTR)
2 Bruneau Water & Sewer Dist..... 196 80 BOI 286,000 Fluoride Treatment
3 Four Seasons Ranch #2.......... 172 160 POC 60,000 Reverse Osmosis Filter and
Pressure Tank
4 Ashton......................... 148 1,180 IdF 450,000 Treatment Improvements
5 McCall, City of................ 134 2,005 BOI 5,000,000 Installation of Filtration
(SWTR)
6 Valley View WS Dist............ 133 150 LEW 500,000 New well and wellhouse
7 Parkview Water Assn............ 132 90 CdA 20,000 2nd well needed to eliminate
nitrate contamination
8 Black Cliffs MH Park........... 130 100 POC 70,000 Connect to Pocatello Water
System
9 Central Shoshone Cnty Wtr Dst.. 104 4,052 CdA 1,500,000 Upgrade Shoshone County well,
lead-copper treatment,
replace transmission line
10 Pocatello...................... 95 51,344 POC 2,000,000 Drinking Water Aeration
Facility
11 Laclede Wtr District........... 94 400 CdA 150,000 Phase II Water Treatment Plant
Improvements
12 Burke-East Shoshone County 90 100 CdA 400,000 SWTR Compliance
Water Dist.
13 Idaho City, City of............ 87 397 BOI 118,000 Install Chlorine Contact
14 Kingston Wtr District.......... 84 800 CdA 600,000 Install Filtration or Well
(SWTR) Corrosion Control
(SDWA)
15 Bancroft, City of.............. 81 430 POC 100,000 New wells and water lines
16 Little Blacktail Ranch Park.... 81 60 CdA 30,000 New Wells
17 Riverside Independent W/S Dist. 80 77 LEW 1,180,000 New Storage Tank, WTP Upgrade
18 Clifton........................ 79 250 POC 150,000 New Well and Distribution
Upgrade
19 Salmon, City of................ 76 154 IdF 5,500,000 Upgrade Coagulation and Filter
System and Add 1.5 MG storage
20 Priest River, City of.......... 71 2,000 CdA 750,000 Additional storage reservoir
and addl contact time
21 Bloomington.................... 70 300 POC 200,000 New Storage System
22 Weiser, City of................ 69 5,262 BOI 2,000,000 New flocculation,
sedimentation, chem feed and
storage bldg, change from
chlorine gas to another
disinfectant, new clear well.
23 Deary, City of................. 68 529 LEW 120,000 New well or well upgrade
24 Genesee, City of............... 67 775 LEW 500,000 New well and Wellhouse
25 West Mtn. Water User Assn./ 66 150 BOI 500,000 New Supply and/or Filtration
South Lake Wtr & Sewer Dist. (SWTR) and Distribution Lines
26 North Oakley Holding Co........ 66 100 TwF 517,000 Second Source, Storage,
Distribution
27 Filer, City of................. 66 1,640 TwF 350,000 Well, Pump Controls and
Distribution System
28 Elm Park....................... 65 130 TwF 75,000 Upgrade
29 Atlanta Water Assn............. 65 50 BOI 20,000 Re-coat Storage Tanks
30 Smith Road Wtr Users........... 62 66 POC 50,000 New Well and Storage Tank
31 Arimo, City of................. 61 320 POC 300,000 New Well and Distribution
System Upgrade
32 North Forks Water Works........ 60 64 IdF 30,000 Install Corrosion Control/
Disinfection
33 Pocatello, City of............. 58 53,074 POC 750,000 Three (3) new wells
34 Weippe, City of................ 56 805 LEW 250,000 New Storage Reservoir
35 Homedale, City of.............. 55 1,963 BOI 500,000 System Upgrade
36 Rapid River Subdivision........ 55 89 LEW 200,000 Disinfection and Contact Time
37 Whitney-Nashville Wtr Dst...... 55 400 POC 235,000 New Storage and Meters
38 Georgetown..................... 54 1,557 POC 100,000 Spring reconstruction
39 Carey Water & Sanitation Dist.. 54 150 TwF 250,000 New Source & Wellhouse
40 Twin Falls Joslin Field........ 54 32,000 TwF 400,000 Storage, Pump Station Retrofit
and Distribution
41 New Hope....................... 53 49 LEW 40,000 New Well
42 Jerome......................... 52 7,250 TwF 1,764,954 Distribution System, Retrofit
Small Water Lines
43 Valley View Heights............ 52 65 IdF 30,000 Install Corrosion Control
44 Challis, City of............... 50 1,073 IdF 800,000 Needs to Increase Contact Time
for SWTR
45 Kootenai County Water Dist..... 48 450 CdA 447,000 Water Treatment and
Disinfection
46 Serenity Terrace MH Park....... 47 26 CdA 25,000 Water Treatment, Construct
Well house and land purchase
47 Rexburg........................ 47 15,000 IdF 250,000 Disinfection System
48 Franklin....................... 46 500 POC 50,000 Acquire Property Adjacent to
Source
49 Stites......................... 46 253 LEW 6,000 Reservoir Repair
50 Del Rio Estates................ 46 46 TwF 10,000 New Source
51 Donnelly, City of.............. 44 135 BOI 210,000 Back-up Well
52 McCammon....................... 44 800 POC 250,000 Upgrade Distribution System
53 Scriver Woods HOA.............. 43 75 BOI 25,000 Corrosion Control for Lead and
Copper
54 New Horizon Wtr Assn........... 43 85 BOI 125,000 Back Up Well, Storage and
Distribution Improvements
55 Murtaugh, City of.............. 43 130 TwF 750,000 Well, Distribution and Storage
56 Orofino, City of............... 42 1,609 LEW 2,000,000 New Tank, Distribution Upgrade
and WTP Upgrade
57 Eagle Water.................... 42 8,000 BOI 700,000 Construct a 2-million gallon
reservoir
58 Fishhaven Pipeline Co.......... 41 200 POC 250,000 Upgrade Dist. System
59 Leisure Acres.................. 41 180 CdA 50,000 Corrosion Control and Dist.
System Replacement
60 Tammany Alternative Ctr........ 41 225 LEW 115,000 35,000 ft of 8" pipe--top
connect to LOID
61 Driggs, City of................ 41 835 ldF 2,000,000 Install filter system
62 Cambridge, City of............. 41 383 BOI 1,500,000 Distribution, Storage, and
Upgrade Well #1
63 Star Water & Sewer Dst......... 41 1,344 BOI 20,000 Telemetry system, treatment
system, and bldg for well #2
64 Rolling Hills Wtr Co........... 40 250 BOI 30,000 Replace old 50 hp pumps
65 Payette, City of............... 40 5,592 BOI 500,000 Construct a 1-million gallon
reservoir
66 Burley, City of................ 40 9,500 TwF 2,250,000 Dist. System, storage,
telemetry
67 Blackfoot, City of............. 39 9,600 POC 200,000 New water line installation
west of Snake River
68 Sagle Valley Water/Sewer Dist.. 39 70 CdA 136,000 New well and water main
replacement
69 Lewiston, City of.............. 39 14,052 LEW 9,075,000 New Water Treatment Plant, New
1-million gallon storage tank
70 Groveland Wtr Swr Dst.......... 39 200 POC 330,000 New well, addl storage,
upgrade dist. system
71 Shoshone County................ 38 4,052 CdA 500,000 Upgrade Enaville Well
72 Montpelier, City of............ 36 3,000 POC 520,000 New Well, Storage Reservoir,
Dist. Upgrade
73 Round Valley Water Assn-Challis 35 125 IdF 150,000 Addl water storage and repair
of existing well
74 Dubois, City of................ 35 300 LdF 20,000 Replace Pump and shaft at well
#1
75 Aberdeen, City of.............. 33 1,800 POC 3,200,000 New well and water lines
76 Atomic City, City of........... 33 60 POC 200,000 New Well and dist system
upgrade
77 Grandview Water & Sewer Assn... 33 450 BOI 150,000 Wastewater Treatement upgrade-
nitrate problem
78 Riverend Estates............... 33 25 POC 50,000 New well
79 Island Village MH Park......... 32 70 BOI 20,000 New well, new pumphouse
80 Eagle West Subdivison.......... 32 92 BOI 100,000 Replace water main
81 Buhl, City of.................. 32 3,600 TwF 1,700,000 Loop system and storage
82 Notus, City of................. 32 3,380 BOI 500,000 New source distribution and
storage improvements
83 Hulen Meadows Wtr Sys.......... 30 390 TwF 350,000 New well source, new reservoir
and meter system
84 Hauser Lake Wtr Sys............ 30 850 CdA 850,000 New reservoir, replace
transmission and dist. piping
85 New Plymouth, City of.......... 30 1,313 BOI 800,000 Back up source, dist. and
storage improvements
86 Valhalla Hillis................ 30 75 LEW 120,000 Fix water lines, install new
well
87 Albion, City of................ 28 310 TwF 10,000 Increase well depth
88 Kimberly, City of.............. 27 2,361 TwF 400,000 Dist. system and meters
89 Picabo, City of................ 26 50 TwF 35,000 New source
90 Riggins, City of............... 26 430 LEW 5,000 Upgrade chlorination system
91 El Rancho Heights.............. 25 235 BOI 100,000 Back up well and storage
92 Hailey, City of................ 25 6,500 TwF 1,669,850 Storage reservoir and new
sorce
93 Hazelton, City of.............. 25 550 TwF 522,000 Storage, new well, systems
control and distribution
94 West Bonner Water Dist......... 24 500 CdA 800,000 Replace Transmission Line
95 Greenleaf Water Assn........... 24 500 BOI 250,000 System upgrade
96 Lapwai, City of................ 23 932 LEW 150,000 New storage tank, distribution
system upgrade
97 Victor, City of................ 22 292 IdF 300,000 Upgrade Spring (GWUDI)
98 Eden, City of.................. 21 345 TwF 60,000 Generator and distribution
system
99 Holbrook, City of.............. 20 50 POC 50,000 New pump and distribution
system
100 Cottonwood, City of............ 20 941 LEW 70,000 New well and remodel
101 Spendid Acres.................. 20 88 BOI 16,000 Upgrade distribution system
102 Elm Park Water System.......... 19 130 TwF 75,000 Dist. and Generator upgrade
103 Wymosa Water Assn.............. 19 30 BOI 10,000 Replacement of water lines,
update of pumps
104 Plummer, City of............... 18 800 CdA 565,000 New Transmission Line
105 Hayden Lake Irrigation Dst..... 18 1,850 CdA 1,500,000 New water storage tank
106 Preston, City of............... 18 4,355 POC 1,400,000 Water main extension and
meters
107 Snake River RV Resort.......... 17 28 BOI 20,000 Install secondary water
treatment
108 Sky Ranch Estates.............. 17 27 BOI 100,000 Increase storage capacity
109 Grangeville, City of........... 16 3,226 LEW 800,000 Upgrade high pressure zone,
repair leaks, upgrade dead-
end lines
110 Wayside Estates................ 16 50 TwF 30,000 New source
111 Skin Creek Wtr Assn............ 16 150 CdA 45,000 Dist. system upgrade to
correct pressure problems
112 Dalton Gardens Wtr Assn-Inc.... 16 2,000 CdA 150,000 Water main replacement
113 Northside Water Users Assn..... 16 350 CdA 55,000 New transmission line
114 Beeline Water Assn, Inc........ 14 121 CdA 140,000 Upgrade Dist. System
115 Ahsahka Wtr System............. 12 85 LEW 120,000 New Well and System Upgrade
116 Ross Point Wtr Dist............ 12 3,000 CdA 200,000 New well and transmission
line, pumphouse
117 Arco, City of.................. 12 700 POC 300,000 Upgrade Dist. System
118 Cottonwood Point Wtr Assn...... 12 63 CdA 50,000 New storage tank
119 North Fork Trailer Court....... 11 70 TwF 30,000 Filter system
120 Pineridge Wtr & Swr Dst........ 11 390 LEW 300,000 Replace 4" water main with 6"
wtr main, replace galv,
service lines, control valves
and hydrants
121 Craigmont, City of............. 10 542 LEW 120,000 Replace hydrants, water mains,
service lines, separate water/
sewer lines
122 McKinney MH Park............... 10 45 LEW 40,000 New well
123 Buffalo River Estates.......... 5 120 IdF 1250,000 Install new well and dist.
lines
124 Happy Valley Rancho Water Inc.. 5 250 CdA 20,000 Recoat and/or replacement
water storage tanks
125 Onaway, City of................ 2 290 LEW 5,000 System upgrade
126 Travel America Park............ 2 50 CdA 20,000 New well
127 Garden Valley School Dst....... 2 200 BOI 3,000,000 Drill potable well for school
----------------------------------------------------------------------------------------------------------------
WARNING: USE OF THIS LIST AS A MAILING LIST OR A TELEPHONE NUMBER LIST IS PROHIBITED BY IDAHO CODE SECTION 9-348
AND IS PUNISHABLE BY A CIVIL PENALTY OF UP TO $1,000.
(SWTR)--Improvements required to comply with Surface Water Treatment Rule
(SDWA)--Improvements needed to comply with Lead-Copper Rule
FY 2001 State Loan Wastewater Project Priority (Sorted By Rank and Rating--WW)
--------------------------------------------------------------------------------------------------------------------------------------------------------
DEQ Est. Needs Discharge Permit
Rank Project FY 2001 Reg Loan Amount Category Project Description STEP # BOD SS
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 South Fork CdA River Sewer Dist... 44 CdA 4,000,000 I,IIIA Plant Upgrade & I/I Removal...... 4 ID-002130-0 30 30
2 Pine Ridge SD..................... 40 LEW 1,000,000 I Plant Upgrade.................... 4 No Discharge
3 Outlet Bay Water/Sewer Dist....... 40 CdA 2,293,000 I Plat Upgrade and Land App. System 4 No Discharge
Upgrade.
4 Coolin SD......................... 40 CdA 1,000,000 I Plant Upgrade Land Application... 4 ID-002150-4 30 30
5 Kamiah............................ 40 LEW 3,500,000 I,IVB Plant Upgrade/New Interceptor.... 4 No Discharge
6 Valley County So Lake Sewer Dist.. 31 BOI 6,000,000 I,IVA-B New Plant/New Collectors and 4 No Discharge
Interceptors.
7 Pocatello......................... 30 POC 13,000,000 IVA-B Treatment Plant/Interceptor 4 ID-002178-4 30 30
Upgrade (Phase II) Phase III-
Dist. upgrade.
8 Fremont Cnty Last Chance/Ponds 30 IF 1,088,100 I Plant Upgrade.................... 4 No Discharge
Lodge.
9 Granite/Reeder Sewer District..... 27 CdA 2,000,000 I,IVA-B New Secondary/New Collectors and 4 No Discharge
Interceptors.
10 Fremont County Sawtelle Area...... 24 IF 1,000,0000 IVA-B New Collectors & Interceptors.... 4 No Discharge
11 Rupert............................ 22 TwF 4,500,000 I Plant Upgrade.................... 4 No Discharge
12 Fremont County Buffalo River Area. 22 TF 1,000,000 IVA-B New Collectors & Interceptors.... 4 No Discharge
13 St. Charles/Fish Haven............ 20 POC 500,000 I Expand Land Application.......... 4 No Discharge
14 Fremont County Henry's Lake....... 20 IF 3,500,000 I,IVA-B New Secondary/New Collectors and 4 No Discharge
Interceptors.
15 Coeur d'Alene..................... 20 CdA 2,000,000 I Plant Upgrade--Nitrification 4 ID-002285-0 30 30
Facilities.
16 Williams Lake..................... 19 IF 750,000 I,IVA-B New Secondary/New Collectors and 4 No Discharge
Interceptors.
17 Fremont County Island Park Res. 18 IF 3,500,000 I,IVA-B New Secondary/New Collectors and 4 No Discharge
Area. Interceptors.
18 Meridian.......................... 17 BOI 5,000,000 I,IIIB Plant Upgrade/Sewer Rehab........ 4 ID-002019-2 10 30
19 Nampa............................. 17 BOI 10,000,000 I Plant Upgrade.................... 4 ID-002206-3 30 30
20 Valley View Heights Lemhi......... 17 IF 500,000 IVA-B New Collectors & Interceptors.... 4 ID-002000-1 30 35
21 Payette........................... 17 BOI 3,000,000 I,IIIB Plant Upgrade/Sewer Rehab........ 4 ID-002067-2 30 30
22 Lava Hot Springs.................. 17 POC 255,000 I New Main Line, Land App. 4 ID-002182-2 60 60
Irrigation Equipment, and
Purchase Land App. Site.
23 Lake Cascade Ranch Sub NLRSWD..... 17 BOI 106,000 IV-A Collection System................ 4 No Discharge
24 Lemhi Co/Salmon................... 17 IF 500,000 IVA-B New Collectors & Interceptors.... 4 ID-002000-1 30 35
25 West Mtn. Estates................. 17 BOI 111,000 IV-A Cameron Drive South-Collection 4 No Discharge
System.
26 Boise Sewer #2.................... 16 BOI 1,600,000 IIIB Sewer Rehab.-NW Trunk............ 4 ID-002044-3 20 30
27 Hagerman.......................... 16 TwF 1,000,000 I,II,IVB Additional Capacity/Advanced 4 ID-002594-1 45 70
Secondary/New Interceptor.
28 Donnelly.......................... 16 BOI 150,000 IIIB Sewer Rehabilitation............. 4 No Discharge
29 Burke Canyon Area................. 15 CdA 500,000 I,IVA-B New Secondary/New Collectors and 4 ID-002129-6 30 30
Interceptors.
30 Horseshoe Bend.................... 15 BOI 500,000 I Plant Upgrade.................... 4 ID-002102-4 30 30
31 Spirit Lake....................... 15 CdA 1,000,000 I Plant Upgrade.................... 4 No Discharge
32 Bloomington....................... 15 POC 525,000 I New Lagoon, chlorination and land 4 No Discharge
application.
33 Emmett............................ 15 BOI 1,500,000 I,IIIB Plant Upgrade/Sewer Rehab........ 4 ID-002031-1 30 70
34 Lewisville........................ 14 IF 1,500,000 I,IVA-B New Secondary/New Collectors and 4 No Discharge
Interceptors.
35 Burley............................ 14 IF 8,000,000 I WWTP Upgrade..................... 4 ID-00200-95 30 30
36 Melba............................. 13 BOI 500,000 I,IIIB Plant Upgrade/Sewer Rehab........ 4 No Discharge
37 Eagle Sewer Dist.................. 12 BOI 500,000 I,IV-B Plant Upgrade/Pump Station....... 4 No Discharge
38 Tensed............................ 12 CdA 500,000 I,IIIA Treatment Plant Upgrade/I/I 4 No Discharge
Correction.
39 Athol............................. 12 CdA 2,000,000 I,IVA-B New Secondary/New Collectors and 4 No Discharge
Interceptors.
40 Paul.............................. 12 TwF 200,000 IIIB Sewer Rehabilitation............. 4 No Discharge
41 Downey............................ 11 POC 300,000 I Expand Lagoon Treatment.......... 4 No Discharge
42 Bannock Co/Tyhee.................. 11 POC 2,000,000 IVA-B New Collectors and Interceptors 4 ID-002178-4 30 30
to Chubbuck.
43 Greenleaf, City of................ 11 BOI 2,500,000 I,IVA-B New Treatment Plant and New 4 No Discharge
Collectors & Interceptors.
44 American Falls.................... 10 POC 110,000 I Anaerobic Digested Sludge 4 ID-002075-3 30 30
Disposal Facilities.
45 Bingham County Riverside/Moreland. 10 POC 3,500,000 I,IVA-B New Collectors & Interceptors to 4 No Discharge
Blackfoot.
46 Preston........................... 10 POC 600,000 I Interceptors & Collectors Upgrade 4 ID-002021-4 30 30
(Phase II).
47 Kendrick.......................... 10 LEW 1,000,000 I,IVB Plant Upgrade/New Interceptors... 4 ID-002455-4 45 70
48 Wendell........................... 10 TwF 550,000 IVA-B New Collectors & Interceptors.... 4 No Discharge
49 Rigby............................. 10 IF 1,000,000 I,IIA Plant Upgrade/Evaluate I/I....... 4 ID-002001-0 30 30
50 Plummer........................... 10 CdA 800,000 IIIB,IVB Upgrade facility, I/I Rehab, New 4 ID-002278-1 30 30
Interceptor.
51 Culdesac.......................... 10 LEW 500,000 I Treatment Facility Upgrade....... 4 No Discharge
52 Kimberly.......................... 9 TwF 2,000,000 IV Rehab............................ 4 No Discharge
53 Buhl.............................. 9 TwF 500,000 I,IVB New Interceptor.................. 4 ID-002066-4 60 90
54 Lapwai............................ 8 LEW 100,000 I Plant Upgrade.................... 4 No Discharge
55 Southside Sewer District-Sagle 8 CdA 500,000 I,IVA-B New Secondary/New Collectors and 4 No Discharge
Area. Interceptors.
56 Meridian.......................... 8 BOI 3,000,000 IVA-B New Collectors & Interceptors.... 4 ID-002019-2 10 30
57 Star Sewer District............... 8 BOI 4,000,000 I,IIIB Plant Upgrade/Sewer Rehab........ 4 ID-002359-1 45 70
58 Grace............................. 7 POC 300,000 IVA-B New Collectors/Interceptors...... 4 ID-002382-5 30 30
59 City of Ketchum................... 7 TWF 3,500,000 I,IIIB Plant Upgrade.................... 4 ID-002028-1 30 30
60 Boise............................. 6 BOI 1,000,000 III-B Miscellaneous Sewer Rehab........ 4 ID-002044-3 20 30
61 Aberdeen.......................... 6 POC 100,000 I Treatment Plant Sludge Handling 4 ID-002017-6 30 30
Upgrade.
62 Kuna.............................. 6 BOI 1,200,000 I Plant Upgrade.................... 4 No Discarge
63 Hayden Reg Swr Bd................. 6 CdA 300,000 I Septage Handling Facility........ 4 No Discarge
64 Montpelier........................ 6 POC 250,000 IIIB Sewer Rehabilitation............. 4 No Discarge
65 Challis........................... 6 IF 300,000 I Plant Upgrade.................... 4 No Discarge
66 Jerome............................ 6 TWF 2,500,000 I WWTP Upgrade..................... 4 ID-002016-8 30 30
67 Dover............................. 6 CdA 500,000 IVA-B New Interceptors & Collectors.... 4 No Discarge
68 Sandpoint......................... 6 CDA 1,000,000 ........ Plan Upgrade.....................
69 Sagle Valley WS Dist.............. 6 CDA 115,000 ........ Collection system replacement 4 No Discharge
replace drainfield.
70 Orofino........................... 6 LEW 1,000,000 I Improve Biosolids Management 4 No Discharge
Systems at WWTP.
71 Malad............................. 4 POC 350,000 IIIB Sewer Rehabilitation............. 4 No Discharge
72 Boise............................. 4 BOI 10,300,000 II Phosphorus Removal/Advanced 4 ID-002044-3 20 30
Treatment.
73 Boise............................. 4 BOI 16,000,000 I Upgrade Existing West Boise 4 ID-002398-1 20 30
Facility.
74 Georgetown........................ 3 POC 150,000 I,IVA New Interceptor and Replacement 4 ID-002514-3 30 30
Aerators.
75 Mountain Home..................... 2 BOI 1,500,000 I,IIIB, Plant Upgrade/Sewer Rehab New 4 No Discharge
IVA-B Collectors & Interceptors.
76 Nampa............................. 2 BOI 1,000,000 IIB, Sewer Rehab/New Collectors and 4 ID-002206-3 30 30
IVA-B Interceptors.
77 Caldwell.......................... 2 BOI 1,000,000 IIB, Sewer Rehab/New Collectors 4 ID-002150-4 30 30
IVA-B Interceptors.
78 McCall............................ 2 BOI 1,500,000 IVA-B New Collectors & Interceptors.... 4 ID-002023-1 20 20
79 Homedale.......................... 2 BOI 300,000 I,IIIB Plant Upgrade/Sewer Rehab........ 4 ID-002042-7 45 70
80 Troy.............................. 2 BOI 500,000 I Plant Upgrade.................... 4 ID-0023604 45 70
--------------------------------------------------------------------------------------------------------------------------------------------------------
Needs Category
I: Secondary Treatment
II: Advanced Treatment
IIIA: Infiltration/Inflow Correction
IIIB: Replacement/Rehabilitation
IVA: New Collector Sewers
IVB: New Interceptor Sewers
V: Combined Sewer Overflows
VI: Storm Water
WARNING: USE OF THIS LIST AS A MAILING LIST OR A TELEPHONE NUMBER LIST BY IDAHO CODE SECTION 9-348 AND IS PUNISHABLE BY A CIVIL PENALTY OF UP TO $1,000.
(SWTR)--Improvements required to comply with Surface Water Treatment Rule
(SDWA)--Improvements needed to comply with Lead-Copper Rule
Responses by Jon Sandoval to Additional Questions from Senator Crapo
Question 1. Approximately 15 percent of infrastructure projects
submitted by States and utilities have been rejected by the EPA in both
the drinking water and wastewater areas. To what do you credit this
discrepancy?
Response. The discrepancy in the 15 percent rejection is due in
part to several factors. One apparent reason could be the rigid
software modeling applications and protocols developed by the
Environmental Protection Agency (EPA) to be used in the Needs Survey
for projects. The software modeling applications, as I understand the
process, rejects data that is not available from a submitted document
such as a completed engineering report. Some projects that have been
submitted have, on occasion, exceeded the parameters of the modeling
application software and have been rejected back to individual States
for additional clarification. Another example for the discrepancy could
be that Needs Surveys submitted in the past, were subject to third-
party reviews of data conducted prior to the data being entered into
the system at EPA Headquarters. The mechanics of documenting need is a
major challenge to small communities in Idaho. Increasing costs of
meeting requirements coupled with lack of technical expertise,
financial capacity, staff, and access to state-of-the art technologies
all factor into recognizable limitations.
Question 2. What data collection system improvements do you
recommend for increasing the reliability and confidence in the needs
information?
Response. As in all data collection systems developed by the
Federal Government, feeding data into a Federal repository is not
necessarily the answer. There is a significant need to:
Improve the accuracy and reliability of environmental data;
Make the data more accessible to constituents; and,
Reduce the cost and burden of exchanging such information.
It is possible for Federal agencies to be ``data rich; but
information poor.'' Integrated data systems with relational databases
to allow the uploading and downloading of relevant State data needs
information would be a substantive step forward.
To EPA's credit, there is some recognition that States are well out
in front of EPA in designing efficient data systems that are accessible
and user-friendly. More flexibility in data entry, QA/QC would improve
the speed of data validation in the area of needs surveys . . . relying
primarily on an increase in trust between governmental entities.
We have experienced one major improvement in the data collection
systems as we have been allowed to ``directly input'' data through user
friendly software on our computer network. There will be no ``third
party'' review of the data. We see this improvement as a step in the
right direction toward more flexibility and less oversight in
determining need.
Question 3. What role can technology innovation play in reducing
utility needs?
Response. Innovation in technology, when affordable and accessible
to small communities, could play a significant role in reducing utility
needs. This requires ``out-of-the box'' thinking, and suggests a more
collaborative process to identify ways States and the Federal
Government can work together to reduce these needs. The Environmental
Council of the States (ECOS) has assembled a Small States Technical
Assistance Initiative comprised of small States addressing major
environmental issues such as improvements in data collection systems
and finding ways to reduce cost and increase service to local
government jurisdictions.
small states technical assistance initiative
The goal of the Small States Technical Assistance Initiative
(SSTAI) is to build the institutional and informational capacity of
``small'' States to provide timely, accurate, and high quality
information internally, to the public and EPA. Broadly defined,
``small'' States are characterized by inconsistent funding for
enterprise wide information projects, small and dispersed funding
sources, limited IT staff, and fewer regulated facilities. Small States
have fewer options on how to approach IT system development and
maintenance due to fiscal and human resource limitations. The central
theme of the SSTAI is to develop a collaborative network of States that
will function to provide shared information technology assistance and
work towards investments in State capacity building. By addressing
information management issues as a group, the SSTAI may better leverage
development costs and human resource knowledge, maintain greater
institutional momentum, provide consistent investment payback, and more
economically produce readily usable materials and approaches that can
be efficiently shared and implemented.
Question 4. Does the State of Idaho coordinate with other Federal
agencies when working to establish accurate community needs information
and documentation.
Response. The State of Idaho coordinates wherever possible with
other Federal agencies on a limited basis. The extent of our
involvement has been through the Environmental Council of the States
(ECOS) where a major focus has been to address issues primarily with
the EPA. In recent years, Idaho, in conjunction with ECOS has worked
with other Federal agencies such as: Department of Energy; Department
of Interior; Corps of Engineers; Department of Transportation; Federal
Highways; and, other Federal land management agencies. The discussions
have not centered around establishing accurate community needs
information and documentation, but have been along general terms to
address impacts on small communities, sustainability, public
involvement, and finding better solutions to address the needs of
small, rural communities. The former Mayor of Fairfield, Idaho at one
time chaired the EPA Small Towns Task Force that was a great vehicle to
identify, discuss, and present small community issues on a national
scale from a rural State perspective.
Question 5. Does the relative younger age of systems in western
States indicate that future costs will increasingly be a problem?
Response. The age of our systems, when we factor in infrastructure
life span, capacity, and ability to meet forecasted growth, definitely
means there are strong economic and physical indicators that cost will
be an increasing problem well into the future.
Question 6. How do growth and demographic issues complicate
assessing infrastructure needs?
Response. In reviewing the 2000 Census data for Idaho, and from our
experience in the field, Idaho does have small cities that have doubled
or even tripled in size during the last ten years. The State is
currently undergoing major change in population centers and economic
development. Southwest Idaho (Ada, Canyon, and Elmore counties) has
seen dramatic increases in population, economic development, commercial
and residential construction, and significant changes in land use
patterns in recent years. The change will continue well into the next
decade if all economic and demographic indicators prevail. Other growth
areas include Kootenai County, Idaho Falls, Twin Falls and Pocatello.
As structures age, cost for replacement, enhancements and upgrade could
be a major impediment.
Question 7. Is there an aggregate impact of regulations on
communities for which the current statutory provisions for
affordability do not account?
Response. One way to focus on an aggregate impact of the cost of
implementing regulations for affordability is to do a basic calculation
factoring a one-to-two percent cost for implementing each existing or
new regulatory requirement. If there were 35 requirements, it would not
be unreasonable to assume that a minimum of one percent of the total
operations and maintenance budget at a facility must be targeted to
implement each. A small community, trying to assure effective service
delivery to consumers would have to factor in about 35-40 percent of
its operating budget would be targeted for the necessary monitoring,
laboratory analysis, data collection, and implementation of the
regulatory requirements. Is it affordable? Could be if there is an
adequate user fee to cover basic operating costs, but is there a more
affordable alternative? Affordability is not a factor in the current
regimen of statutory provisions, however, during implementation of the
regulations it is an enormous consideration for small rural,
communities.
Question 8. How large do you estimate the needs of small
communities are for developing technical and financial expertise?
Response. The need for technical and financial expertise is
enormous. We estimate that approximately 95 percent of the drinking
water systems in Idaho, serving under 1,000 people, lack the technical
and financial expertise to prepare basic planning documents. There
needs to be a new definition of ``small community.'' The current
definition of 2,500 population or less does not address the unique
situations of small rural communities of 1,000 or less. If a new
definition were in place, the needs of small communities of 1,000 or
less would be better served and States would then have an increased
capacity to provide the specific and necessary expertise to serve the
technical and financial needs of these communities.
Question 9. How do you think a change in the community size
definition will change needs assessment?
Response. While I advocate for changing the community size
definition for reasons cited above, it also needs to be pointed out
that in Idaho we try to assess the needs of all systems regardless of
size. This will not change the needs assessment process. A change in
the community size definition would allow States to focus on the
special and unique needs of small rural communities in a manner
consistent with capacity building and responsiveness to particular
small community need.
__________
Statement of the Water Environment Federation
Mr. Chairman and members of the subcommittee, the Water Environment
Federation (``WEF'' or ``Federation'') appreciates the opportunity to
provide this statement for the record on the crucial national issue of
clean and safe water infrastructure needs as reflected in the
chairman's opening statement.\1\
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\1\ The Water Environment Federation is a not-for-profit technical
and educational organization with members from varied disciplines who
work toward the WEF vision of preservation and enhancement of the
global water environment. The WEF network includes more than 100,000
water quality professionals from 77 Member Associations in 31
countries.
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Four years ago WEF President Billy Turner appeared before the House
Water Resources and Environment Subcommittee to describe the vast needs
our nation faces regarding new commitments and requirements while
maintaining and upgrading our wastewater treatment and transport
infrastructure. During his testimony, which provided the first
comprehensive discussion of the national water and wastewater
infrastructure crisis, Mr. Turner called for a national goal of
building--and maintaining--a wastewater and water supply infrastructure
that adequately protects public health and the environment. WEF
believed then and continues to believe today, that the enormous gains
our nation has made in meeting our clean and safe water goals will soon
be jeopardy if the Federal Government fails to strengthen its
commitment to clean and safe water infrastructure.\2\
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\2\ See, generally, EPA Progress in Water Quality, June 2000.
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The challenges that local communities face in meeting ever
increasing clean water needs continue to grow and are well documented
by the WINow Report and the EPA gap study. We as a nation can no longer
wait to address these water infrastructure challenges. It is vital that
the Federal Government play a stronger role in assisting communities to
meet new requirements as well as rehabilitation of aging systems. This
Federal role must include increased funding, including grants and
loans, at a level that is reflective of the national commitment to
clean and safe water. Many issues arise as a result of a significantly
enhanced Federal role for water and wastewater infrastructure and this
statement will address some of the more frequently asked questions.
Question 1. Are Reported Needs the Result of New Regulatory
Requirements or the Need to Replace Aging Infrastructure?
Response. The needs reported by the draft EPA gap study and the
Water Infrastructure Network (``WIN'') in the 2000 and 2001 WIN reports
result from new requirements and the need to replace and rehabilitate
infrastructure which were not quantified when Congress last
reauthorized the Clean Water Act in 1987.\3\
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\3\ WEF has been active over the years in urging a renewed Federal
commitment to meet future wastewater and water infrastructure
challenges. In 1999 the Association of Metropolitan Sewerage Agencies
and WEF released the ``Cost of Clean'' identifying major total capital
unmet needs over the next 20 years. In 2000, WEF, as part of the WIN
coalition of drinking water, wastewater, municipal and State
government, engineering and environmental groups called the Water
Infrastructure Network (WIN), released the ``Clean and Safe Water for
the 21st Century'' report which estimates a $23 billion a year funding
gap between current investments in infrastructure and the investments
needed over the next 20 years to meet Clean Water and Safe Drinking
Water Act requirements. In February 2001, WIN released ``Water
Infrastructure Now'', a series of detailed recommendations to Congress
on how to close the infrastructure gap.
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New requirements in this case mean new regulations or policies such
as for combined sewer overflows, biosolids, and such water quality
initiatives as the Great Lakes. Additionally, it means new or revised
water quality standards and treatment requirements adopted by States
and approved by EPA under the Act or new treatment facilities needed to
comply with water quality standards exceeding secondary wastewater
treatment. It also reflects compliance actions by NPDES permitting
authorities which have preceded the issuance of emerging regulations or
policies for discharges from separate systems during wet weather
events. Additionally, EPA is issuing new guidance on nutrients and
other constituents and is proceeding to comply with court orders
requiring total maximum daily load (TMDL) allocation which will have
major fiscal impacts as they are implemented.
Drinking water costs from regulatory developments are also dramatic
owing to the need for reliable facilities to protect public health,
continuing additions of maximum contaminant levels for drinking water
pollutants, and the costs associated with the protection of drinking
water sources.
Aging water and wastewater infrastructure is occurring in three
waves: infrastructure constructed (1) at the end of the 19th Century
with a useful life of approximately 100 years, (2) following World War
I with a useful life of approximately 70 years, and (3) after World War
II with a useful life of approximately 50 years. Additionally,
facilities constructed during the 1970's and 1980's will need some
updating as the decade proceeds.
The cost impact of these regulatory developments and aging were
not, and probably could not have been known in 1985 and 1986, when
municipalities were completing basic secondary treatment facilities.
Question 2. Why Aren't These Needs Being Met by Existing Financing
Mechanisms? Are Water and Wastewater Utilities Unable to Raise Rates or
Incur More Debt? Is There an Affordability Problem Everywhere?
Response. The magnitude of regulatory driven needs converging with
the magnitude aging infrastructure is a principal basis for why a
strengthened Federal commitment is needed. Local governments generally
are unable to meet the entire cost of these converging needs for two
basic reasons. Primarily, local governments have been paying the
overwhelming share--over 90 percent--of construction costs since the
beginning of loans under the clean water State revolving funding
program. Second, costs of other local government infrastructure and
essential program priorities, some resulting from Federal law, have
increased.
Because of these wide ranging and converging needs, it can be said
that affordability is a national problem. The true local impact of this
problem is manifested on a site-by-site basis given the mix of water
and wastewater system types, pollutants to be removed, ability to
absorb rate increases, other infrastructure needs, and fiscal
condition. All ratepayers regardless of location should benefit from
Federal funding. No community should be left behind. Local governments
are doing their share and have made and will continue to make enormous
efforts to address the affordability issue. Here are two examples.
A. Strengthening Local Utility Competitiveness.--What is clear, and
what is already accounted for in the WIN cost reporting is that local
governments have been, and can be expected to continue, reegineering
their utility management to bring significant operational cost savings
to provide cost-effectively serve customers and meet competitive
challenges. Since the middle of the last decade, WEF and the Water
Environment Research Foundation (WERF) have implemented major programs
to assist continuous improvement in water and wastewater utility
management.
Improvements in local utility management including mergers and
consolidations continue to be driven by overall costs, the need to
better serve customers, and economies of scale and other market forces.
Public utilities have an inherent customer advantage in that the are
exempt from Federal income taxes and enjoy financing advantages
precisely because they have the inherent stability and the public
interest to provide for public health and environmental protection.
These public programs and market forces will continue. The Federal
Government should strongly resist regulatory mandates favoring private
for profit entities and should recognize those utilities which are
excelling in providing cost-effective customer service through
incentives.
B. Technology Advancements.--The 2001 WIN report also takes account
of improvements in technology for more cost-effective treatment,
conveyance and management. During the past decade, the Congress through
the Agency's annual appropriation bill has supported grant funding of
some projects developing or demonstrating better science and technology
recognizing the nationwide benefits of such projects. Primarily,
however, national technology advancements have not benefited from the
level of Federal funding provided under the Clean Water Act in the
1970's and 1980's. WINow includes suggestions for renewing that level
of effort in cooperation with water and wastewater utilities.
Question 3. Why Aren't Existing Sources of Federal and State
Assistance Helping Utilities Close the Gap?
Response. Existing sources of Federal assistance under the Clean
Water and Safe Drinking Water Acts are provided in the form of State
revolving loans (SRF) which must be repaid by ratepayers. Reduced
interest rates are not sufficient to meet the magnitude of regulatory
and aging infrastructure needs. Because they are loans with attendant
Federal administrative requirements, some local governments find it
more advantageous to rely on traditional sources of municipal finance.
Additionally, States are reluctant to provide deeply reduced, zero
or negative interest rates because such ``grant equivalents'' reduce
the ability of State revolving funds to obtain adequate repayments to
assure that SRFs actually revolve. It is critical here to note that
infrastructure grants are contracts between the Federal Government and
local government recipients. The Congress provides funding and the
local and State governments are obligated to use that funding to
achieve national goals and commitments such as for adequate highway and
transit systems, and safe and adequate airports. These goals and
benefits signify that grants are not a gift because gifts create no
obligation on the part of the person or entity receiving the gift. The
Federal grant share represents the value of the improved infrastructure
to national goals and commitments.
In addition, grants leverage greater State and local commitments.
Federal grant funding is appropriate and reflects national purposes
determined by Congress, in this case--achievement of clean and safe
water. Construction grants provide the financial, and policy, incentive
to local governments to achieve this national goal. In other words,
grants leverage the expenditure of local utility rate revenues by
demonstrating that if the local matching share is not provided, the
community will lose the Federal grant amount provided in furtherance of
the national goal. The national policy basis or benefits fundamentally
underlying grant funding include:
To assure that major levels of water and wastewater
infrastructure construction move forward more quickly in response to a
national goal;
Increases in local fees are more likely to be accepted by
ratepayers and the public if the failure to raise local funds would
mean the loss of Federal grant funds;
The size of the clean and safe water infrastructure gap
exceeds local resources to repay traditional bond financing or
federally funded loans;
To provide flexibility to State administration of a
comprehensive funding program and to avoid reduction in the corpus of
revolving loan fund programs through grant equivalents through reduced,
zero or negative interest;
To increase knowledge of the effectiveness and value of
water and wastewater systems investments;
To support innovation, stability and predictability of
funding;
To maximize the benefits of clean and safe water to
localities, regions, States and the Nation as a whole; and
To provide fairness and equity of cost allocation and
revenue generation across the national economy.
Finally, because grants are ultimately provided by the Congress
they are a much stronger demonstration of national leadership.
Question 4. Why Are EPA's Estimates of Infrastructure Needs
Different From Estimates Advanced by the Water Infrastructure Network
and Other Groups that Represent Water and Wastewater Utilities?
Response. The various estimates indicate that the overall magnitude
of clean and safe water needs for regulatory requirements and to
rehabilitate aging infrastructure is significant and to a level which
supports a stronger Federal funding commitment to this national goal.
The traditional EPA Needs Surveys for wastewater and drinking water
include actual documented costs eligible for Federal loans which are
known to States and EPA, plus some modeled costs for wet weather
purposes. The EPA clean water Needs Survey does not include the full
level of stormwater management costs.
In addition, we understand that EPA is preparing an estimate of
rural nonpoint source needs to install best management practices that
is exceeded by clean and safe water infrastructure estimates by up to a
factor of ten. This information is not included in the WIN report on
core infrastructure needs and more information on nonpoint source is
needed.
The WIN report and the draft EPA gap study include cost estimates
that are very similar in level. WEF will to continue to work with WIN,
the Congress, the Congressional Budget Office, and other stakeholders
to determine a more precise number for the water and wastewater
infrastructure need. However, time is of the essence, and all
stakeholders agree the gap is large and is growing and needs to be
addressed as a priority. WEF believes the WINow report is the best data
available on the gap between what is being spent on water and
wastewater needs and what needs to be spent over the next 20 years to
protect public health and the environment. The report answers three
basic questions regarding how Congress can provide a long term,
sustainable, and reliable source of funding for clean and safe water.
WEF strongly endorses the WINow recommendations and we briefly
summarize these recommendations below.
A. How Much Should Be Funded by Congress? $57 Billion in new
authorizations over the next 5 years is needed to jumpstart the safe
drinking water and safe drinking water programs which have seen a
drastic reduction in Federal commitment over the past 20 years. After
the initial 5 year infusion of Federal financial assistance, WIN
recommends Congress establish a commission to evaluate alternatives and
recommend funding beyond 2007.
B. What Should Be Funded? Core water and wastewater needs should be
funded including drinking water and wastewater treatment facilities,
and wet weather collection and treatment. In addition water and
wastewater systems should be eligible for assistance whether they are
publicly- or privately-owned and/or operated as long as they provide
water or wastewater services that are generally available to the
public.
C. How Will the Program Be Administered? States should maintain
their primary role in administering the next generation of water and
wastewater financing programs. Building on the current SRFs, States
would establish new programs of State water and wastewater
infrastructure financing authorities (WWIFA's) to offer grants, loans,
loan subsidies, and other financial assistance to public or private
system operators.
Thank you for the opportunity to provide this statement to the
committee. WEF and its members are prepared to further assist the
Congress in addressing the water and wastewater infrastructure gap. We
look forward to building on the successful local, State, and Federal
partnership that has achieved significant gains in public health and
the environment.
__________
Testimony of David B. Struhs, Secretary, Florida Department of
Environmental Protection
Mr. Chairman, Senator Graham, members of the Committee: Thank you
for the invitation to share some thoughts as you deliberate future
Federal action to meet America's water resource needs.
While there will always be disagreement over how to estimate our
water infrastructure needs and who should pay the bills, there is
little disagreement over two things: (1) that water resources are
critical to economic development, national security, public health and
quality of life; and, (2) the 50 States play a central role in making
sure the resources are protected and the infrastructure gets built.
You deserve much credit for reaching out to states and other
interests as you formulate the federal government's role.
Florida, like every other jurisdiction, is eager to ensure that if
additional Federal resources become available in the future, that we
get a fair share.
But at this early stage of discussion, we are also eager to reflect
on the larger questions of exactly what is the appropriate role of
government in building water infrastructure.
Florida, at this moment in history, provides an important object
lesson for the nation. We are in the worst drought in our state's
history: a 1-in-200 year experience that is drying up rivers, pushing
family-owned businesses to the edge of bankruptcy, burning nearly
100,000 acres, and mobilizing an unprecedented strategy to secure
emergency water supplies. If ever there was a political imperative for
expanded government investments in new water supply infrastructure,
this is it. Yet wise men and women are counseling caution.
Ironically, at this same moment, with the tremendous leadership of
the Congress and particularly this Committee, we have launched the
restoration of America's Everglades: an environmentally sustainable
water resource plan that will help save 60 endangered species and will
quench the thirst of 12 million Americans who are expected to call
South Florida home.
The lesson to be drawn from these two experiences is plain:
Government must take the long view, not the short view, or risk the
fate of unintended consequences. In the area of water, this means
understanding the difference between water resources and water supply.
It is appropriate and necessary for government to continue
identifying, securing, protecting and conserving the public's water
resources. They are a classic example of public commons demanding
governmental stewardship. Government must care for our water
resources--aquifers, rivers and lakes--because, among other reasons,
they are our current and future public water supplies. The Everglades
are an example of this on a grand scale. There are many reasons to
restore the Everglades. The fact that the project will provide a long
term, sustainable future water supply is among them. But the federal
government is not, as part of the plan, paying for the pumps and pipes
that will provide water supply service made available as a result of
Everglades restoration.
As we move from the stewardship of the public's common water
resources and towards the development of water supplies and the
provision of water service for individual citizens, government's role
becomes less clear and eventually counterproductive.
Witness the drought.
Drought drives home the value of a robust water supply
infrastructure. So too does it drive home the value of accurate price
signals that lead to adjustments in demand. It is difficult to find any
drought situation that has not been made worse by a failure on both
counts.
The danger is that if government uses revenues from its general
taxing authority to subsidize the expansion of a more robust water
supply infrastructure, it risks making the next drought even more
profound because price signals are further distorted while consumption
has grown. This is truly unfortunate, because as critical as water is
to life, demand for water is demonstrably elastic. There are a
multitude of cost-effective opportunities for increased efficiency and
substitution.
Government should be a good steward of the public's water commons.
Everyone benefits from and everyone should share in the cost of this
stewardship. Protecting watersheds for current and future public water
supplies is an appropriate use of generally collected tax revenues.
The investments that are necessary to collect, store, treat and
distribute a water supply are best made by the actual water users, and
how much they pay should be determined, at least in part, on how much
they use.
Sound public policy would lower taxes collected for subsidizing
water supply development and rationalize utility bills to more
accurately reflect the cost of water service. I do not know anyone who,
if given a choice, would rather pay a tax than a fee that he or she
could control by adjusting his or her own behavior. This is also
clearly the environmentally preferable choice, because in the end
environmentalism is about the efficient use of natural resources.
If you accept the basic premise of this analysis, there are some
simple steps that would help ensure that any new federal commitments to
water move us closer to the pro-environment and pro-market vision many
of us share.
First, focus on protecting and restoring basic water resources, not
on supply system infrastructure.
Second, if there is a decision to apply some resources to subsidize
supply system infrastructure, the money should be loaned not granted.
Loans are more likely to be made transparent to the water consumer.
Third, reward entities that have conservation-based water rate
schedules.
Fourth, reward entities that close the loop and recycle water
resources. The re-use of advance-treated domestic effluent for
irrigation and other nonpotable uses must become a bigger part of our
water future.
Fifth, recognize and support unconventional techniques for water
resource management (e.g., aquifer storage recovery, engineered
wetlands) as appropriate in certain circumstances.
These steps are all aimed at creating sound public water policies
that are fair and transparent to the taxpayer and water consumer and
are good for the environment.
I genuinely appreciate the invitation to share these thoughts with
this important committee today and hope you will find it helpful. I
would be happy to answer any questions you may have.
__________
Responses by David B. Struhs to Additional Questions from Senator
Chafee
Question 1. You testified that taxpayer dollars should be spent on
the protection and restoration of water resources instead of supply
system infrastructure. Additionally, any subsidies that do exist for
infrastructure should be in the form of loans. Do you believe that
there are any instances when grants may be preferable to loans, such as
for small, rural community water systems?
Response. It is always possible to identify a circumstance where an
argument for grants can be made. However that determination, from an
economic point of view, should be based solely on the individual
consumer's inability to pay for water service. It should not be based
on the type of community in which the consumer resides. Recognizing
that different members of a community have different abilities to pay,
if a grant is provided, its subsidy effect should be targeted through
the billing system. Factors such as the size of the community or the
relative urban or rural character of that community are not appropriate
screens.
Once a decision is made to offer grants as opposed to loans, the
political challenge lies in determining where government draws the
line. The pressure becomes great to make more, not fewer, communities
eligible. You are then left with the dilemma of either increasing the
grant pool or worse, providing smaller grants to community projects
which results in water infrastructure projects started but not
completed. This last scenario represents perhaps the least desirable
allocation of capitol resources.
Responses by David B. Struhs to Additional Questions from Senator
Graham
Question 1. You mentioned water supply in your testimony. Can you
describe your view of the Federal Government's role in water supply as
a part of addressing the nation's infrastructure needs?
Response. Government must take the long view, not the short view,
or risk the fate of unintended consequences. In the area of water, this
means understanding the difference between water resources and water
supply.
It is appropriate and necessary for government to continue
identifying, securing, protecting and conserving the public's water
resources. These resources are an example of public commons demanding
governmental stewardship. Everyone benefits from and everyone should
share in the cost of this stewardship. Protecting watersheds for
current and future public water supplies is an appropriate use of
generally collected tax revenues because, among other reasons, they are
our current and future public water supplies. Ecosystem restoration
projects, for example, may provide long term, sustainable future water
supply.
Government's role becomes less clear, and possibly
counterproductive, when you move from the stewardship of the public's
common water resources and into the arena of development of water
supplies and the provision of water service for individual citizens.
Government subsidization of water supply can lead to inaccurate price
signals, distorting the true cost of water for consumers. This is basic
economics. If people do not pay the true cost of a good or service,
they are not likely to adjust their demand for that good or service. We
cannot expect consumers to conserve water when the cost gives the
impression it is an inexhaustible resource.
__________
Statement of Paul D. Schwartz, National Policy Coordintor,
Clean Water Action
Good morning Chairman Crapo, Ranking Member Graham and other
distinguished members of the Subcommittee on Fisheries, Wildlife, and
Water. My name is Paul Schwartz and it is my pleasure to be testifying
before you today on the topic of ``Water Infrastructure Needs.'' I am
the National Policy Coordinator of Clean Water Action, a national
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 organizes strong grassroots groups, coalitions and
campaigns to protect our environment, health, economic well-being and
community quality of life. Additionally, I serve as the Chair of the
Clean Water Network's Funding Workgroup and on the Steering Committee
of the Campaign for Safe and Affordable Drinking Water.
Chairman Crapo, thank you for holding this oversight hearing today.
The subcommittee's early focus in this 107th session of Congress on
water infrastructure needs is timely and of vital importance to the
nation's environment, economy and public health. This hearing along
with tomorrow's focus on this topic in the U.S. House signals the
importance Congress places in moving the discussion forward. This
hearing is a crucial first step toward securing more dollars for
critical drinking water and wastewater infrastructure needs.
three decades of federal water investments have made a difference
Almost twenty-nine years ago Congress put a down payment on
cleaning up America's water resources with the passage of the Clean
Water Act's sewage construction grants program. Staunching the flow of
direct discharges of untreated sewage into our nation's rivers, lakes
and streams has been one of the best investments the American people
ever made. The Federal grants program, and now the Clean Water State
Revolving Fund (CWSRF), have been integral to making the Clean Water
Act one of the most successful laws on the books. Almost thirty years
of investment, have been at the center of a remarkable water quality
turn around. In 1972, it was estimated that American's could safely
swim or fish in only 1/3 of our nation's waters. By the twenty-fifth
anniversary of the Clean Water Act, the Environmental Protection Agency
estimated that the simple act of swimming or fishing could be done with
a threat to our health in sixty percent of our waters.
Twenty-seven years ago Congress recognized that the nation's lakes,
rivers and underground waters served a critical use not adequately
addressed in the Clean Water Act--as a source of potable drinking
water. In passing the Safe Drinking Water Act in 1974, Congress set up
a framework which began to address key public health issues related to
polluted drinking water sources. Five years ago, in 1996, Congress made
a great stride forward in protecting drinking water by establishing for
the first time a Federal pool of money to help our States and local
communities meet the burden of delivering clean, safe, and affordable
drinking water. With the establishment of the Drinking Water State
Revolving Fund (DWSRF), Congress recognized a Federal responsibility to
partner with ratepayers and local and State governments to meet the
increasing challenges and needs in the drinking water arena. Millions
of citizens have been touched by this act of Federal support and are
now drinking cleaner more health protective, and affordable water as a
result of this new program.
the funding gap is large; new federal investments are needed
We as a nation are proud of the progress that has been made in
protecting America's water resources and public health. In the main we
are going in the right direction. But there are some bumps on the road
and there is more work to be done. Clean Water Action joined with the
Water Infrastructure Network (WIN) this February in endorsing the call
for Congress to set aside an additional $57 billion dollars over the
next 5 years. Our alliance with Association of Metropolitan Sewerage
Agencies (AMSA), the National Rural Water Association (NRWA) and the
Western Coalition of Arid States (WestCAS) is not one that we entered
into easily. Over the years Clean Water Action, AMSA and NRWA have
found ourselves on opposite sides of critical Clean Water Act and Safe
Drinking Water Act issues. This year we find ourselves in disagreeing
with WestCAS over how health protective the arsenic standard will be.
But despite these differences, what brings us together today is that,
we all agree that there is a huge gap between the total dollars being
raised and spent, and the investments that are needed.
Congress has heard and will continue to hear a steady, almost
unremitting drumbeat of information about the funding gap between
drinking water and wastewater investment needs and available resources.
The specific overall dollar figure may vary somewhat depending on the
specific frame, model or method used to generate the numbers, but all
agree that without significant new investment, we face some sobering
environmental, public health and economic issues. Clean Water Action
has taken a careful look at the WIN assumptions, the new 1999 USEPA
``Drinking Water Infrastructure Survey,'' various other EPA white
papers, and has concluded that however the number is sliced up, there
exists a yawning chasm, a palpable gap between all funding sources and
the serious commitment of resources that will be needed to deal with
core water infrastructure needs.
It is Clean Water Action's position that the yearly $3 billion
currently in the Drinking Water SRF and Clean Water SRF accounts for
the States each year (combined with State matches, leveraging, mounting
built State SRF reserves, and other sources of Federal water
infrastructure funding), is significant--but is unfortunately an order
of magnitude too low. For a variety of reasons there has been an under
investment in water infrastructure at all levels of government and by
our private markets as well. All stakeholders stipulate to this simple
fact. We need Congress to approach its investment in water
infrastructure and protecting public health with as much enthusiasm and
commitment as Congress has provided for our other important
infrastructure, our bridges and highways and airports. Clean Water
Action calls on Congress to fully fund the additional $57 billion
dollar proposal for the next 5 years and to begin the process of
looking into solutions for the long-term.
Its worth noting that important organizations in addition to those
backing the WIN report (the H2O Coalition, ASWIPCA, ASDWA and others)
agree with its fundamental premise--the need for more investment in
critical infrastructure funding. One way or another, ratepayers,
taxpayers, and large users of water resources and water infrastructure
will have to pay more, a lot more over time. Investing now will save
money and yield immediate economic and health benefits.
The key question is how do we act in a way that invokes, to the
maximum extent possible, equity, affordability, and sustainability
while meeting the triune goals of preserving the environment, enhancing
the public's health and laying 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 in the attached statement of Principles.
Clean Water Action along with its partners in the Campaign for Safe
and Affordable Drinking Water and the Clean Water Network has worked
out a set of common sense principles and criteria for water
infrastructure funding. It is our belief that if these principles and
criteria are judiciously applied to any approach that we will have set
in motion a process that will bring our water infrastructure from its
mostly pre-WWI technology and state of general decay into the 21st
century. We have a lot of catching up to do.
give states flexibility to invest in green infrastructure as well as
traditional infrastructure needs
We strongly urge a focus by Congress on funding pressing current
core needs. Heretofore, 98 percent of water infrastructure funding has
gone to brick and mortar projects. But we also need to support those
pollution prevention that enhance the performance and cost
effectiveness of needed traditional infrastructure investments. We need
to give the States the flexibility to invest in pollution prevention as
well as basic infrastructure needs. These core infrastructure needs can
be mitigated by putting an emphasis on funding a combination of cost-
effective, 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.
dollars for cleanup, not sprawl development or environmentally
destructive projects
While Clean Water Action generally supports funding to address
existing wastewater and drinking water needs we oppose using scarce
Federal dollars to subsidize systems which support new sprawl
development. Core water infrastructure, 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).
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.
ratepayer and taxpayer protections supported by fiscally conservative
approaches and utilizing market-based incentives
Clean Water Action supports five fiscally conservative spending
parameters which will in the end constrain the Federal dollars to flow
most efficiently to solutions, instead of creating additional and more
costly problems. We support:
1. Providing flexibility and incentives to States/communities to
invest in green infrastructure solutions that achieve the compatible
ends (e.g. source water protections such as land acquisitions, source
control water methods of water treatment, such as using rain gardens,
stream buffers and water conservation and reuse) and make core
``hardware'' investments more cost-effective;
2. Fiscal accountability through the integration of meaningful
public comment into priority setting, and clear publicly disseminated
national tracking priorities, project purposes and expenditures;
3. Limiting 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;
4. Requiring a local match for any grant program that is layered on
top of the existing SRF accounts. There is no need to encourage ``gold
plating'' of projects when money is so scarce. ``Free'' money without a
buy in from the local community is a prescription for throwing money
away. The percentage of the required local match would be tied to an
affordability index;
5. Protecting taxpayers and ratepayers by ensuring that costs are
fairly apportioned between all users of water resources, not just
residential consumers. There is already a powerful mechanism in place
for making market forces part of the equation for getting cleaner and
safer water: fees charged for Federal permits that allow discharges
into treatment plants and waterways; but, the potential is barely
tapped. Permits are free or almost free in many cases, but a simple
switch to volume/toxicity based fees could yield billions in revenue
(that could be used to reduce the amounts taxpayers must pay) and
provided a market incentives for effluent reductions.
One concern which makes Clean Water Action and WIN's call for
increased water infrastructure funding very urgent and clearly marked
as a Federal concern, is the growing permanence of a two tier water
infrastructure picture across the country. Big cities which have lost
much of their rate base while their infrastructure grows beyond its
useful life 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.
fund safe and affordable water for small communities
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 the
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. 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.
One of the WIN proposals that Clean Water Action is especially
delighted by is the call for Congress to authorize $250 million a year
to support an Institute of Technology and Management Excellence. The
Institute would bring to bear the best thinking regarding cost-
effective green infrastructure and promote the development and use of
best management practices, innovative technologies to meet drinking
water, wet weather, and wastewater goals. Clean Water Action would
further recommend that the Institute nurture broad public participation
in the development of its research, science and technology and best
management practices agenda. Stakeholders beyond the utility community
should have an integral role in helping to move this exciting project
forward.
As you consider 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 supports the WIN approach,
and is open to addressing your concerns. We are heartened by Senator
Voinovich's Clean Water SRF funding bill and by the analogous approach
by Reps. Kelly and Tauscher in the House. The emergence of the Water
Infrastructure Caucus and the hearings today and tomorrow are most
encouraging. Let's keep the bipartisan and interest group comity and
pursue water infrastructure solutions that lay the foundation for the
next century to come.
Thank you for the opportunity to comment. I would be happy to
entertain any question or concern.
______
ATTACHMENT
Campaign for Safe and Affordable Drinking Water & Clean Water Network's
Principles and Criteria for Water Infrastructure Funding Bill
principles
1. Safe and Affordable Drinking Water. The public has a right to
safe, affordable drinking water, treated and delivered with reliable
and safe collection, treatment, and distribution systems.
2. Safe Water for Swimming, Drinking, and Fishing. The public has
the right at all times to streams, lakes, and beaches that are safe for
fishing, swimming, and protected as drinking water sources.
3. Stop Sewage Pollution. Raw and inadequately treated sewage
should not be dumped into our rivers, lakes, beaches, buildings, or
streets. Only sewage that has been safely treated to secondary
treatment standards--and to tertiary treatment standards where needed--
should be released.
4. Right to Know About Water Pollution. In order to honor our right
to know, and to ensure public support for infrastructure improvements,
the public should be promptly advised about the nature, location, and
extent of every raw sewage discharge into surface or ground water,
streets, or buildings, and about contaminants in and threats to our
drinking water.
5. Innovative, Effective Solutions. Stormwater and sewer control
needs can and should be reduced through water conservation, efficiency,
and re-use; source control; pollution prevention; low impact
development; use of natural systems; and open space preservation.
6. Control Pollution Sources. Source control should be the primary
means to reduce sewer overflows and contaminated stormwater discharges,
but can be complemented, where necessary, by treatment options.
7. Community Solutions. The public should be given an opportunity
for effective participation in selecting and making funding decisions
for local clean and safe water strategies.
8. Taxpayer and Ratepayer Protection. The funding for water
infrastructure improvements should come from all users of these
systems, and from those who cause significant pollution necessitating
such infrastructure, not just the taxpayer.
criteria
1. Improve, Protect, Innovate. Funding should be only for: (i)
improvements in existing drinking water and wastewater infrastructure
(treatment, collection, distribution systems); (ii) non-structural
protection of source and surface water (buffer zones, easements, water
conservation, water reuse, land acquisition for water quality
protection, other innovative/alternative source/surface water
protection projects that will obviate the need for structural
solutions); or, (iii) innovative or alternative drinking water
treatment or protection, sewage treatment, and stormwater management
projects.
2. Dollars for Cleanup, not Sprawl Development or Environmentally
Destructive Projects. Funding should be used to solve existing water
problems, not to subsidize new sprawl or cause new environmental harm.
This funding should not subsidize new systems (unless it is shown that
the new system would simply serve existing populations--new capacity
should not be subsidized). In addition, environmentally sound
principles for project design and siting should be observed.
3. Accountability. The program should assure accountability through
the integration of meaningful public comment into priority setting, and
clear, publicly disseminated national tracking priorities, project
purposes, and expenditures. No funding should be available for
facilities that (a) do not have the financial, technical, and
managerial capacity to ensure compliance; or (b) are in significant
noncompliance, except as noted in #4 below. Existing protections in
current law (e.g. SDWA restrictions on funding to states lacking
approved programs for operator certification and to assure systems have
the financial, technical, and managerial capacity to ensure compliance)
should be preserved.
4. Improvement. Facilities in significant noncompliance may be
funded: (a) to restructure and consolidate the facility to achieve
compliance; or (b) where consolidation or restructuring is impossible,
if the facility has made a good faith effort to comply, is adhering to
an enforceable compliance schedule, and funding is necessary to avoid
making water or sewer service unaffordable to a significant portion of
the facility's retail customers.
5. Protect Health, Meet Community Needs, Help Small Systems.
Prioritize funding for projects that: (i) address the most serious
risks to health and aquatic environment; (ii) help systems with the
greatest need, based on affordability criteria; (iii) help consolidate
or restructure small systems with current or anticipated compliance or
health/aquatic environmental problems.
For more information please call:
Paul Schwartz, National Policy Coordinator, Clean Water Action
(202) 895-0420 ex 105
Nancy Stoner, Clean Water Program, Natural Resources Defense
Council (202) 289-2394
Erik Olson, Public Health Program, Natural Resources Defense
Council (202) 289-6868
Lynn Thorp, Coordinator, Campaign for Safe and Affordable Drinking
Water (202) 895-0420 ex 109
Ed Hopkins, Environmenental Quality Program, Sierra Club (202) 675-
7908
Statement of Harry T. Stewart, Director, New Hampshire Department of
Environmental Services
Good morning, Mr. Chairman, members of the committee. I am Harry T.
Stewart, Director of the Water Division of the New Hampshire Department
of Environmental Services. I am here today to present the State of New
Hampshire's views on the continuing significant need for Federal
support for water supply and wastewater infrastructure funding, with a
particular focus on New Hampshire. Thank you for this opportunity.
background and context
Like the rest of the United States, New Hampshire has made great
progress over the last thirty years in improving the quality of our
surface water, groundwater and drinking water supplies. The cleanup of
New Hampshire's rivers is an environmental success story, as we have
gone from having one of the nation's ten most polluted rivers to having
over 90 percent of the State's waters meeting or exceeding water
quality standards. In addition, New Hampshire has achieved full
compliance with the Surface Water Treatment Rule of the Safe Drinking
Water Act for over 70 municipalities that originally had unfiltered
surface water supplies. Unlined landfills, which are a significant
source of groundwater and surface water contamination, are being closed
systematically on a priority basis. These accomplishments by New
Hampshire's municipalities would not have been possible without Federal
and State financial assistance. These grants and loans to communities
in New Hampshire have included:
$837 million in wastewater treatment grants. In fact, long
after the Federal construction grant program has evolved to the
revolving loan program, New Hampshire still provides municipalities
with $10 to $12 million per year in grants of 20 to 30 percent for
qualifying communities.
$250 million in State and Federal revolving fund loans
have been issued for wastewater system improvements, drinking water
supply upgrades and landfill closures.
$14.7 million in State grants for drinking water supply
upgrades for surface water treatment rule compliance.
$21 million in State grants for landfill closures.
$1.5 million in 25 percent State matching grants were
provided to municipalities for land acquisition to protect current- and
future-drinking water sources. This is a new program which was
established in 2000.
New Hampshire is the only State with grants and loan programs for
improvements to wastewater and drinking water supply systems, source
water protection by land acquisition, and landfill closures. We have
long recognized that municipal environmental infrastructure upgrades
need to be given high priority and considered in an integrated fashion
to ensure environmental and public health protection in an affordable
manner for our citizens.
We work not only with the U.S. Environmental Protection Agency but
also with the U.S. Department of Agriculture's (USDA) Rural Development
Program and the Department of Housing and Urban Development's (HUD)
Community Block Grant Program, which is administered in New Hampshire
by the Office of State Planning, to optimize funding for drinking water
and wastewater projects for New Hampshire's communities.
major challenges
In spite of all that has been accomplished, New Hampshire still has
major challenges that will require State and Federal funding well into
the future to upgrade and improve our core infrastructure and improve
water quality. These include:
Aging infrastructure, in two broad categories:
LFirst, most of our 85 publicly owned wastewater
treatment plants were constructed or upgraded over 20 years ago
during the ``Federal construction grants'' era. The end of the
useful life of original equipment is being approached and
substantial new investment will be required within the next 10
years.
LAlso, water and wastewater piping systems (portions
of which are over 100 years old) are deteriorating in some
systems. The limited available local moneys from user fees and
taxes invested in water and wastewater infrastructure are used
primarily to meet regulatory requirements such as drinking
water and water quality standards.
When the core infrastructure is inadequate, new development will
move to undeveloped land, remote from urban centers, where onsite water
and wastewater disposal is feasible, contributing to ``urban sprawl''
and increasing potential for water quality degradation in undeveloped
areas. ``Smart growth'' requires water and wastewater piping systems
with adequate capacity and integrity for reasonable growth.
Increasingly more stringent permit limits for wastewater
treatment, particularly for organic loading, nutrients, and metals.
These improvements are much needed to improve water quality but the
cost is a concern for our communities. In New Hampshire, this is a
particular concern for small, rural low-income communities located on
water quality limited streams (such as in the headwaters of our rivers)
that can least afford costly upgrades to advanced wastewater treatment
levels.
Stormwater pollution caused by combined sewer overflows
(CSOs), sanitary sewer overflows (SSOs), and stormwater systems. This
is a significant, ongoing water quality and compliance concern,
principally for New Hampshire's older industrial cities. These projects
are large and costly over an extended time period, stressing available
local and State resources.
More stringent drinking water standards. New Hampshire
strongly supports drinking water standards which are protective of
public health. However, more stringent standards, particularly for
naturally occurring contaminants such as arsenic and radon,
disproportionately affect very small community public water systems
where costs for one or more sophisticated treatment systems must be
paid by a small user base, resulting in very high water rates.
Completing the job of closing New Hampshire's unlined
landfills which are a significant source of nonpoint source pollution.
Of New Hampshire's 160 unlined municipal landfills, 80 have been
properly closed and the other 80 are scheduled for closure over the
next 10 years.
Protection of land areas that contribute to current- and
future-drinking water sources from contamination associated with
development. Only about 12 percent of these critical areas are now
protected. Beginning in 2000, New Hampshire has made this a priority
for investment, with a budget of $1.5 million in State grant moneys as
a 25 percent match to local contributions to preserve valuable water
supplies for future generations.
estimated needs
In order to meet these challenges and improve our environment and
drinking water supplies, well-focused investment of Federal, State, and
local resources, targeted at priority needs, is required. New
Hampshire's needs are generally described below. In addition, in the
addendum to this testimony, five tables are provided that contain
detailed information on these needs.
Drinking Water Supply Needs: New Hampshire has identified
approximately $500 million in water supply infrastructure needs across
categories that include transmission, treatment, storage, and source
development. Our most recent water supply needs survey was completed in
2000. About $45 million (9 percent) of this need has been identified as
necessary to comply with Safe Drinking Water Act requirements with
established deadlines. In addition to the $500 million, estimated costs
for compliance with the proposed radon and arsenic rules are $5 to $55
million and $2 to 4 million, respectively, depending on the final rule.
The majority (63.5 percent) of the $500 million in water supply needs
are for small community water systems serving fewer than 3,300 people
where the user base is smaller and user rate impacts tend to be higher
for major projects.
Wastewater Needs: Wastewater needs are estimated to be
approximately $750 million for treatment, sewers, combined sewer
overflows (CSOs), sanitary sewer overflows and landfill closures. Over
60 percent ($460 million) of these needs are to address CSOs in six
municipalities whose sewerage systems were constructed over 100 years
ago. Wastewater treatment needs are estimated at $98 million and are
principally for upgrades to small municipal wastewater treatment plants
for NPDES permit compliance.
Total Annual Needs: New Hampshire's annual need is estimated to
range from $77.5 million to $155 million per year for a period of
investment bracketed between 10 and 20 years. New Hampshire's total
long-term public drinking water and wastewater infrastructure needs are
estimated at $1.55 billion. Assuming 20 years of uniform investment (to
be consistent with the timeframe in the USEPA's 2000 drinking water
needs survey), the total need is estimated to be about $77.5 million
annually. However, this is probably low because most of the identified
needs either exist now, or will exist shortly based on predictable
events. Also, as noted above, the costs for compliance with proposed
new arsenic and radon standards are not included so the total needs may
also be low. To account for the potential for more rapid
implementation, a 10-year construction period has also been included,
resulting in an upper range for annual investment of $155 million per
year.
available funding sources
Collectively, in 2001, State and Federal sources will provide about
$35 million in grants and $40 million in low interest loans to New
Hampshire's municipalities for wastewater and drinking water projects.
These State and Federal funding sources include:
Both Wastewater and Drinking Water Supply Grants and Loans
from the USEPA and NHDES. These programs are managed by NHDES.
Rural Development Grants and Loans from the USDA's Rural
Development Program.
HUD Community Development Block Grants. This program is
managed by the New Hampshire Office of State Planning. These State and
Federal agencies work in close partnership to optimize funding packages
for municipalities as projects are identified that require assistance.
In particular, special attention is given to communities where drinking
water supply and wastewater projects will have significant financial
impact on low income households.
municipal funding burden
New Hampshire's estimated annual needs and available funding can be
summarized as follows:
Infrastructure needs: $77.5 to $155 million per year.
Available grants and loan subsidies: $53.6 million per year.
Required local funding (including SRF loans), $23.9 to $101.4
million per year.
In a typical year, the available State and Federal grants are all
used. Additional local funding is provided by either increasing user
rates or through property taxes (or both in some cases). In communities
with stressed water and sewer rates, upgrades to address noncompliance
with drinking water or water quality standards will generally be funded
while pipe replacement or upgrade projects will not. Thus,
affordability becomes the dominant issue, particularly for small rural
communities and water supplies.
In New Hampshire, both median household incomes (MHIs) and water
and sewer rates vary widely. The table below serves to illustrate this
issue.
------------------------------------------------------------------------
Median Water &
household Average sewer rates
Municipality income annual user (as percent
(MHI) fees of MHI)
------------------------------------------------------------------------
Berlin........................... $25,040 $1,083 4.3
Ashland.......................... 25,495 1,295 5.1
Jaffrey.......................... 32,540 1,012 3.1
Hanover.......................... 51,899 454 0.9
Merrimack........................ 52,798 296 0.6
------------------------------------------------------------------------
Without Federal and State funding, infrastructure projects in
communities such as Ashland, Berlin, and Jaffrey will either further
financially stress low income households or discretionary projects will
be delayed. As a result of a recent drinking water system upgrade,
Ashland has the highest water and sewer rates as a percent of MHI in
New Hampshire. Jaffrey is under administrative order to develop and
implement a multi-million dollar wastewater treatment plant upgrade to
meet stringent water quality limits. Likewise, Berlin also has
multimillion dollar drinking water supply infrastructure needs that the
city is attempting to address. For both Jaffrey and Berlin, the result
will be increased water and sewer rates within a few years, even with
20 to 30 percent State-aid grants and, for Berlin, additional Federal
grants that have been received, further stressing the resources of
these low income communities.
As illustrated by Ashland, Jaffrey, and Berlin, many New Hampshire
communities have a significant problem with high water and sewer rates.
In fact, of 80 municipal utilities for which DES has current data on
both water and sewer rates, 33 (40 percent) currently have combined
water and sewer rates that exceed 2 percent of the MHI. Two percent of
MHI is the commonly accepted threshold by State and Federal agencies,
including the USDA's Rural Development Program and HUD's Community
Development Block Grant Program, at which water and sewer rates are
considered excessive.
conclusions and recommendations
New Hampshire has significant need for additional Federal
investment to fund drinking water and wastewater infrastructure
improvements. This is important to meet already well-defined needs,
both for regulatory compliance and to maintain and improve core
infrastructure elements, like aging piping and treatment equipment.
As alternatives are considered at the national level, we strongly
recommend that the existing State Revolving Loan Fund program be
maintained as the cornerstone of these programs. We recommend that
additional funding be provided through the existing SRF program.
Construction grants distributed to communities through existing State
processes to augment the SRF could also be used effectively if targeted
based on State priorities to augment SRF loans for communities with
high water and sewer rates.
As we have for years, the New Hampshire Department of Environmental
Services is well prepared to establish statewide priorities and needs
with input from our communities, and to manage and distribute funds on
a priority basis. In New Hampshire, the integration of grant and loan
functions with the technical programs has resulted in outstanding
performance for decades and will continue to do so into the future. The
SRF, coupled with the State-aid grant programs, have worked very well
and any additional Federal resources provided would be used effectively
to leverage these existing resources. This approach needs to be
preserved.
State environmental agencies should also be provided with greater
flexibility to establish State-specific criteria for, and address,
financial hardship caused by excessively high water and sewer rates.
This would help us to develop funding packages that make these
improvements more affordable for communities with low income levels and
accelerate environmental improvements by facilitating local approvals
for funding. This is particularly crucial for communities that are, in
a short timeframe, confronted with the need for major upgrades to meet
regulatory and core infrastructure requirements for some combination of
water supply, wastewater and solid waste facilities, considering that
any of these demands alone could stress a low income community.
Finally, there is also a significant gap in the resources for New
Hampshire and other States required to manage existing mandates to
clean up our water. We continue to face extraordinary demands to manage
water quality and water supply programs. As is also expressed in the
Environmental Council of States Resolution on the Water Quality GAP
Analysis, as the subcommittee considers its options for addressing the
water supply and wastewater infrastructure needs, we also urge you to
support State program management capacity to meet those needs.
Tables With Detailed Cost Estimates on New Hampshire's Drinking Water
Supply and Wastewater Infrastructure Needs
Table 1.--New Hampshire's Public Water Supply Program: Total Need by
Category
[in millions]
------------------------------------------------------------------------
Total Percent
Type of Need Need Total
------------------------------------------------------------------------
Transmission and distribution....................... $233,2 46.7
Treatment........................................... 105.5 21.1
Storage............................................. 108.0 21.6
Source.............................................. 49.4 9.9
Other............................................... 3.3 0.7
-------------------
Total Need...................................... $499.4 100.0
------------------------------------------------------------------------
Table 2.--New Hampshire's Public Water Supply Program: Total Need by
System Size and Type
[in millions]
------------------------------------------------------------------------
Percent
System Size Need Total
------------------------------------------------------------------------
Large community water supplies (CWSs) (serving over $44.9 9.0
50,000 people).....................................
Medium CWSs (serving 3,301 to 50,000 people)........ 90.3 18.1
Small CWSs (serving 3,300 and fewer people)......... 317.1 63.5
Not-for-profit non-community water supplies......... 47.1 9.4
-------------------
Total Need...................................... $499.4 100.0
------------------------------------------------------------------------
Table 3.--New Hampshire's Wastewater Programs: Total Need by Category
[$millions]
------------------------------------------------------------------------
Total Percent
Type of Need Need Total
------------------------------------------------------------------------
Treatment........................................... $98 9.3
Sewers.............................................. 150 14.3
Combined sewer overflows............................ 460 43.8
Sanitary sewer overflows............................ 17 1.6
Landfill closures................................... 300 28.6
Other............................................... 25 2.4
-------------------
Total Need...................................... $1,050 100.0
------------------------------------------------------------------------
Table 4.--Summary of New Hampshire's Estimated Total Needs and Annual
Needs If Distributed over 10 and 20 years
------------------------------------------------------------------------
Annual needs
if distributed
Total over:
Program Need ---------------
10 20
years years
------------------------------------------------------------------------
Wastewater.................................... $1,050.0 $105 52.5
Water supply.................................. 499.4 50 25
-------------------------
Total..................................... $1,549.4 $155 $77.5
------------------------------------------------------------------------
Table 5.--Estimated Annual State and Federal Funding for Drinking Water
and Wastewater Infrastructure Projects in New Hampshire for Fiscal Year
2001
[in millions]
------------------------------------------------------------------------
Funding Source Grants Loans
------------------------------------------------------------------------
USEPA/NHDES Wastewater Funding:
EPA State Revolving Fund Capitalization Grant....... $13.3
State Match to Capitalization Grant................. 2.7
Revolving Loan Repayment Fund....................... 10.5
Wastewater State-Aid Grant (20%-30% Loan Subsidy)1.. 21
Landfill State-Aid Grants (20%-30% Loan Subsidy)1... 20
-------------------
Subtotal, Wastewater Funding...................... $41.0 $26.5
USEPA/NHDES Drinking Water Supply Funding:..........
EPA State Revolving Fund Capitalization Grant SRF 1.9 4.3
Loans (with administrative costs deducted) need-
based loan relief (up to 30% year).................
State Match to Capitalization Grant................. 1.5
Revolving Loan Repayment Fund....................... 1.8
State-Aid Grant (20%-30% Loan Subsidy)--(for Surface 2.0
Water Treatment Rule compliance only)1.............
Source Water Protection Land Grants................. 1.5
-------------------
Subtotal, Drinking Water Funding.................. 5.4 7.6
USDA Rural Development Administration............... 2.8 5.3
USHUD/NHOSP Community Development Block Grants...... 1.7 1 The values of ``State-Aid Grants'' for wastewater and water supply
infrastructure improvements and landfill closures are the estimated
present values of these loan subsidies. Loan periods vary from 5 to 20
years and the interest rates vary with the loan period. Consequently,
the values presented here are an estimate of the present value of
future loan subsidies for an assumed portfolio of loans of different
maturation periods developed based on the history of these programs.
__________
Responses by Harry Stewart to Additional Questions from Senator Chafee
Question 1. What are the primary benefits in maintaining a grant
program after the revolving loan programs have reached a full-revolving
status.
Response. Excessively high user rates and tax increases for
infrastructure projects are a major problem for small low income
communities that grants, or equivalent loan discounts, address better
than loans. Affordability is a major issue when water and wastewater
improvement projects are considered at the local level. For example,
loans from the clean water revolving loan funds result in discounts
relative to market rates for loans but still require loan principal
repayment in full. Grants, or the equivalent in loan subsidies such as
discounts on loan principal, result in lower user rates and make these
projects more affordable than loans.
Many New Hampshire communities already have a significant problem
with high water and sewer rates so new projects are unaffordable.
Grants address the needs of these communities better than loans. As
noted in my original testimony, in New Hampshire, 40 percent of
municipal utilities with water and sewer systems have combined water
and sewer rates that exceed 2 percent of the MHI. Two percent of MHI is
the commonly accepted threshold by State and Federal agencies,
including the USDA's Rural Development Program and HUD's Community
Development Block Grant Program, at which water and sewer rates are
considered excessive. Grants or discounted loans are one way to
diminish these impacts in the long term. The table below provides of
New Hampshire communities with high water and sewer user rates:
------------------------------------------------------------------------
Median Water &
household Average sewer rates
Municipality income annual user (as percent
(MHI) fees of MHI)
------------------------------------------------------------------------
Berlin........................... $25,040 $1,083 4.3
Ashland.......................... 25,495 1,295 5.1
Jaffrey.......................... 32,540 1,012 3.1
------------------------------------------------------------------------
Without Federal and State funding such as grants or discounted
loans, infrastructure projects in these communities financially stress
low income households to extraordinary levels.
By making projects more affordable, grants provide encouragement
for communities to adequately invest in the core water and wastewater
infrastructure beyond the minimum to meet regulatory requirements.
Long-term infrastructure investment for nonregulatory purposes is
frequently deferred in small low-income communities because of the
inability to afford today and in light of other pressing competing
priorities for limited resources. Water and wastewater infrastructure
projects are driven by two distinct forces: (1) State or Federal
regulatory actions and (2) local recognition of the need for improved
infrastructure like upgraded piping and water supply storage.
Improvements driven by enforcement take priority and virtually always
occur. However, nonregulatory core infrastructure improvements
frequently don't occur until a near crisis stage, particularly if user
rates are already too high. Grants or loan discounts that dampen user
rate impacts better improve the chances that these investments will be
made before crises occur.
__________
Statement of Allen Biaggi, Nevada Division of Environmental Protection
Members of the Subcommittee on Fisheries, Wildlife and Water, my
name is Allen Biaggi, and I am the Administrator of the Nevada Division
of Environmental Protection. I would like to thank you for allowing me
to appear before you this morning to discuss the water and wastewater
infrastructure needs of Nevada. I greatly appreciate your interest in
bridging the gap that exists between need and fiscal resources in the
water programs.
At the outset, I would like to recognize Senator Reid and Senator
Ensign for their leadership in addressing these serious public health
and economic concerns and thank them for advancing the dialog on the
national level.
As the fastest growing and one of the most urbanized States in the
country, infrastructure development and maintenance are critical to the
health and well being of our citizens and visitors. Obviously, the need
is great in Nevada's major urban centers where the majority of this
growth is occurring. Paradoxically however, the need is no less
important in our rural communities where mining and agriculture are
struggling and where funding is often not available for even the most
basic wastewater collection and treatment systems or for providing
adequate and safe supplies of drinking water.
Nevada has long supported its communities with State supported
grant and loan programs for water and wastewater. Like all States,
however, we have been asked to undertake significant new
responsibilities under the Clean Water and Safe Drinking Water Acts
without the resources necessary to carry out those responsibilities. As
a result, Federal assistance is vitally important and, frankly, the
only way communities can achieve and maintain regulatory compliance to
protect public health and maintain and improve environmental quality.
Without increased funding at the Federal level, State drinking water
and wastewater programs are facing crisis conditions.
Let me give you some examples of the needs within our small State.
On the clean water side of the equation, the State of Nevada has
operated a construction grants program or a revolving loan program for
over twenty years and has provided greatly needed financial assistance
to rural and urban communities alike. For example, the rapidly growing
communities of Henderson, Reno and Sparks have taken advantage of these
programs and constructed some of the most sophisticated wastewater
treatment systems in the country. This has allowed these communities to
meet the requirements of the Clean Water Act and maintain and enhance
water quality in the Colorado and Truckee Rivers. This provides high
quality water for downstream users, wildlife habitat and the
sustainability of endangered species. Similarly, small communities in
Nevada, such as Silver Springs, have used these funds to meet waste
collection and treatment needs and, for the first time, provide this
basic service to their citizens while protecting vital groundwater
resources.
The problem is that demand for these funds greatly exceeds
availability. For the year 2000, we had $152 million dollars in
proposed projects submitted to the Clean Water SRF for funding; for
2001, $166 million, and we anticipate similar increases throughout the
next decade. Compare this demand with the average available program
funding which is a mere $14 million.
In an attempt to overcome this funding gap, we work closely with
other entities such as economic development agencies and the U.S.
Department of Agriculture's Rural Assistance Program to leverage
available funds and meet community needs. Yet dramatic shortfalls still
occur. This means that facilities must be funded using alternative
sources, or, as most often occurs, projects simply do not happen.
What does this mean for a community?
Sometimes it means that collection lines cannot be built to serve a
residential development historically on septic systems where ground
water contamination is occurring. Perhaps new treatment units cannot be
constructed at a wastewater treatment plant resulting in environmental
impairment and the potential for fines and litigation. In some
communities it means they cannot meet the needs of growth and must
initiate moratoriums or limits on residential and industrial
development.
On the drinking water side of the equation, the prospects are not
any brighter.
In Nevada, as in the rest of the country, there is a need to
refurbish and, in many cases, replace the pipes, lines and treatment
facilities that supply our drinking water. Systems age and without the
proper care and maintenance reliability is reduced, costs increase and
in extreme cases public health impacted. The year 2000 priority list
for Nevada through the Drinking Water Revolving Loan program showed
that over three quarters of a million dollars was needed to address
acute health concerns associated with community water systems. An
additional $35.8 million is needed to address chronic concerns and
$94.8 million for system rehabilitation.
Add to this the ever-increasing demands of the regulatory
environment. In the next few years we can expect new Federal rules
dealing with ground water disinfection, enhanced surface water
treatment, and modified contaminant monitoring and screening. All with
good intentions with the goal of public health in mind, but costly to
implement and maintain. Nationally, it has been estimated that for the
drinking water program alone, an $83 million dollar gap exists for
States to implement the program and billions per year for system
upgrades and repairs.
In closing, we in Nevada intend to do our part to continue to fund
programs, to provide grants and loans to our communities large and
small, and to advocate for increased support for water and wastewater
infrastructure. We will continue to participate in a dialog along with
our fellow State representatives and through national associations such
as the Environmental Council of the States, Association of State Water
Pollution Control Administrators and Association of State Drinking
Water Administrators. The challenges are great, the resources limited,
and the stakes of public health and environmental quality high. I ask
for your careful consideration in making water and drinking water
infrastructure funding a national priority.
__________
Responses by Allen Biaggi to Additional Questions from Senator Chafee
Question. What do you see as a potential solution for the Clean
Water and Safe Drinking Water Revolving Fund (SRF) funding gaps? Would
you advocate for an expansion of the SRF program?
Response. As outlined in my testimony, a serious funding gap exists
between need and resources in both the Drinking Water and Clean Water
SRFs.
As federally mandated requirements such as ground water treatment
requirements, the arsenic rule and increased monitoring are implemented
state and local communities bear the majority of the financial burden.
States and local governments simply do not have the resources to meet
these mandates. As such, the State of Nevada does advocate for and
supports the expansion and increased funding for the SRF programs. By
providing additional capitalization, funds, the States can leverage
these dollars to assist local communities in meeting their commitments
under the Clean Water Act and the Safe Drinking Water Act.
__________
Statement of Hon. Bruce Tobey, Mayor, Gloucester, MA, on Behalf of the
National League of Cities and the Water Infrastructure Network
Mr. Chairman, members of the subcommittee: I am Bruce Tobey, Mayor
of Gloucester, MA, and a member of the National League of Cities Board
of Directors. I am here today to testify on behalf of the 16,000
cities, towns and villages that NLC represents, as well as on behalf of
the Water Infrastructure Network \1\ (WIN).
---------------------------------------------------------------------------
\1\The Water Infrastructure Network is a coalition of State, local,
environmental, professional, and labor organizations comprised of 29
diverse groups including: American Coal Ash Association; American
Concrete Pressure Pipe Association; American Consulting Engineers
Council; American Public Works Association; American Society of Civil
Engineers; American Water Works Association; Associated General
Contractors; Association of California Water Agencies; Association of
Metropolitan Sewerage Agencies; Association of Metropolitan Water
Agencies; California Rebuild America Coalition; Clean Water Action;
Environmental and Energy Study Institute; Environmental Business Action
Coalition; International Union of Operating Engineers, AFL-CIO;
National Association of Counties; National Association of Flood and
Stormwater Management Agencies; National Association of Towns and
Townships; National League of Cities; National Rural Water Association;
National Society of Professional Engineers; National Urban Agriculture
Council; Prestressed/Precast Concrete Institute; Rural Community
Assistance Program, Inc.; Water Environment Federation; WateReuse
Association; and Western Coalition of Arid States.
---------------------------------------------------------------------------
I am pleased to be here this morning to discuss the coalition's
report--Water Infrastructure NOW--which recommends a major new and
revitalized Federal commitment to the nation's drinking water and
wastewater infrastructure. It outlines the parameters of a potential
Federal response to the $1 trillion gap between investments cities are
making in our local infrastructure and the $1 trillion additional
needed to assure protection of public health, the environment and our
economy over the next generation.
Before outlining for you the parameters of the Report's
recommendations, it would seem appropriate to address some fundamental
questions: First, why do we have a funding gap of such enormous
magnitude; Second, what have local governments been doing to address
the issue; and, Finally, why and how should the Federal Government
help?
1. why is there a water infrastructure funding gap?
A number of factors:
the simultaneous expiration of the useful life of water
infrastructure installed at different times;
population growth;
implementation of new, more costly, and more complex
Federal mandates which, in effect, substitute Federal priorities for
local priorities; and,
a substantial decline in Federal financial participation
in meeting wastewater mandates.
The Nation's water infrastructure represents more than a century of
investment, substantially funded by local ratepayers. A significant
part of the nation's water infrastructure dates from the late 19th
century. More recent expansions of these systems took place following
the two world wars. All of which means the newest systems are over 50
years old. What is more, the newer the infrastructure, the more likely
it is to be deteriorating. Different materials, with increasingly
shorter useful lives leave us in the position where 100 year's worth of
infrastructure is being exhausted all at once. As a consequence,
municipalities now face a confluence of deterioration of the
underground pipes, and, in some cases, the treatment facilities, that
process the nation's drinking water and sewerage.
Under no circumstances does this denigrate the substantial $96
billion investment and commitment to wastewater made by Federal and
State governments in the 1970's and 1980's. Without this assistance we
would never have made such incredible progress in cleaning up the
nation's waterways. But, EPA cautions that unless we renew our joint
commitment to maintaining and upgrading our wastewater facilities,
within 15 years our rivers, lakes and streams will again resemble their
condition 30 years ago.
Until passage of the 1996 Safe Drinking Water Amendments, local
governments have not had a Federal financial commitment to the nation's
drinking water systems. The fact that drinking water in the United
States is among the safest in the world is a significant tribute to the
local ratepayers that have financed these treatment facilities.
Another factor contributing to the current funding gap is that
simultaneous with the aging of local water and wastewater
infrastructure, has come a significant increase in population.
According to the Association of Metropolitan Sewerage Agencies (AMSA),
municipal wastewater plants served 68.5 million people in 1990. By
1999, the number had increased to 79 million people. That 10 million
person increase occurred in less than one decade. Systems designed and
built for the population at the time of their construction are now
serving two to three times as many people as their design capacity. In
fact, the Clean Water Act of 1972 precluded local governments from
anticipating population growth in designing wastewater treatment plants
built with Federal financial assistance. The fact that local systems
serve significantly more people than their design anticipated
contributes to some of their problems--combined sewer overflows,
sanitary sewer overflows--all of which need immediate and costly
attention if we are to protect public health and the environment.
Congress recognized this problem in passing the wet weather provisions
in a fiscal 2001 appropriations measure last year, but, we do not yet
have any appropriations from this authorization and, in all honesty,
the $1.5 billion, 2 year authorization, is only a down payment on
problems that alone are expected to cost well over $120 billion.
A third contributing factor is the significant decline in Federal
financial assistance for wastewater needs. While once the Federal
Government appropriated $2.4 billion for grants cover 75 percent of
wastewater needs, we now see instead $1.35 billion annually for
repayable loans. Without even considering aging and deteriorating water
infrastructure, $1 billion is what one city alone is spending on
remediating its sanitary sewer overflows. While Congress recognized, in
passing the Safe Drinking Water Act Amendments of 1996, the need to
provide similar assistance to municipal drinking water suppliers, this
funding is limited in its use for infrastructure repair and, for the
most part, is available largely as loans.
Finally, Federal drinking water and wastewater mandates have also
played a role in diverting local resources away from local needs and
priorities and retargeting them to Federal priorities. When cities do
manage to set aside funds to address a critical local water
infrastructure need, along comes a new unfunded--and usually costly--
Federal mandate that is almost always accompanied by fines and
penalties for non-compliance. As you well know, we are not talking
about an occasional new Federal requirement. At the local level there
seem to be almost daily--or at least weekly--new burdens.
2. what have local governments been doing to help themselves?
Local governments--or rather local tax and ratepayers--
invest $60 billion annually in our drinking water and wastewater
systems. Since the Clean Water Act was adopted in 1972, local
governments have invested over $117 billion in their wastewater
infrastructure. We have no similar figures for drinking water
investments, but the 20 cities that have been involved in recent asset
management studies estimate the average per capita replacement value of
their systems at $2,400 per person.
Local water and sewer utility rates have been increasing
to accommodate EPA's estimated annual 6 percent increases in the costs
of system operations and maintenance;
New Federal requirements developed by the Government
Accounting Standards Board--on which local government bond ratings are
based--are moving local governments toward managing their
infrastructure assets in a more businesslike manner; and
Local governments are applying new management tools to
assess and operate their systems more effectively and efficiently.
While the funding allocated to local governments under the Clean
Water Act has been of invaluable assistance in helping municipalities
meet Federal requirements, Congress should not lose sight of the fact
that local governments have invested over $117 billion in our
wastewater infrastructure since the early 1970's. Until recently, our
drinking water infrastructure was entirely funded by local ratepayers.
The deteriorating water infrastructure that needs to be replaced
because it has maximized its useful life over the past 50 to 100 years
was entirely completed at local expense.
In addition, municipal local rate structures generate the $60
billion annually we invest in maintaining and operating these systems
and cover 90 percent of our costs including those for construction. In
facing the enormous needs of the future, cities also expect to
finance--again through local ratepayers--$1 trillion of the needs for
repair, rehabilitation and replacement of the aging and crumbling water
infrastructure over the next 20 years.
Municipalities have also been raising their water and sewer rates
to accommodate increases in their operating and maintenance costs,
which, according to EPA, are rising at 6 percent above inflation
annually. Many cities require developers, and subsequently homeowners,
to finance the cost of new connections to municipal systems. My city is
directly billing homeowners who are newly connected to our wastewater
system $20,000 per home--to be paid over the next twenty years--to
finance conversion from septic to sewered systems.
In addition, cities are improving their management practices. Local
governments will soon be required to comply with new rules promulgated
by the Governmental Accounting Standards Board in Statement 34 (GASB
34). These rules will require reporting of a municipality's long-term
financial position, quantifying resources and obligations more
comprehensively. The information cities will be required to provide
will include an evaluation of the condition of our municipal
infrastructure. Bond rating services and others will be able to
evaluate whether we are ``acquiring assets to benefit future fiscal
years or if these assets are being used but not replaced.'' \2\ The
GASB 34 rule will, at a minimum, encourage local governments to
evaluate their infrastructure in a more systematic manner.
---------------------------------------------------------------------------
\2\ ``GASB 34: What Implementation Means to the Rating Process,''
Hyman C. Grossman and LaVerne Thomas, Public Finance, p. 2, Sept. 20,
1999, Standard and Poor's.
---------------------------------------------------------------------------
Other asset management tools, such as the ``Nessie Study'' are also
being implemented by cities to help identify when pipes and treatment
plants were built, how long they can be expected to last, when they
will need to be replaced, and what the cost is likely to be for such
replacement. More efficient operations are also among the tools used to
provide more cost effective operations at the municipal level. As an
example, a 1999 AMSA survey \3\ documents the reduction in personnel
from 6.8 employees per 10,000 population in 1990 to 4.7 in 1999. Some
local governments are subjecting their system operations to competitive
bidding to affect cost savings and generate new and better
efficiencies.
---------------------------------------------------------------------------
\3\ AMSA 1999 Financial Survey of Municipal Wastewater Management
Financing and Trends, Association of Metropolitan Sewerage Agencies.
---------------------------------------------------------------------------
3. why should the federal government help?
A sound infrastructure is the foundation of a sound
economy;
A sound infrastructure is essential to the protection of
public health;
Federal assistance, as demonstrated by the success of the
Clean Water Act, is the catalyst that ensures environmental progress;
Water bodies, like air sheds, do not respect political
boundaries;
Infrastructure assistance will benefit the people whose
money created the Federal surplus--another way of giving them the
refund they deserve;
At 6 percent, the interest on $2 trillion in debt is $120
billion; the Water Infrastructure Network seeks less than half of the
interest avoided in a single year, spread over 5 years.
The Water Infrastructure NOW report made an eloquent case for a
renewed Federal financial partnership in water infrastructure. It says:
The case for Federal investment is compelling. Needs are
large and unprecedented; in many locations, local sources
cannot be expected to meet this challenge alone; and because
waters are shared across local and State boundaries, the
benefits of Federal help will accrue to the entire nation.
Clean and safe water is no less a national priority than are
national defense, an adequate system of interstate highways, or
a safe and efficient aviation system. These latter
infrastructure programs enjoy sustainable, long-term Federal
grant programs; under current policy, water and wastewater
infrastructure do not.
In light of the staggering costs of maintaining, operating,
rehabilitating, and replacing our water and wastewater system
infrastructure to serve our citizens and the environment effectively,
the Clean Water Act partnership of the 1970-80's needs to be re-
established. It is in our interest as a nation, since virtually all of
us live downstream from someone else, for all levels of government to
participate in assuring that our drinking water and wastewater
infrastructure is sound, reliable, protective of human health and the
environment, and affordable.
4. how can the federal government help?
Re-establish the partnership in the Clean Water Act of
1972 for wastewater infrastructure and establish one for drinking water
infrastructure;
Provide more flexibility in the types of assistance
available to municipalities to include grants as well as loans;
Restore earlier investments in research and technology
development;
Establish a mechanism to develop a long-term and secure
financial partnership for water infrastructure needs.
The Water Infrastructure Network has developed and agreed on the
outlines of a legislative proposal to revitalize (in the case of
wastewater) or enhance (for drinking water) the Federal financial
commitment to water infrastructure needs. The proposal recommends a 5-
year, $57 billion authorization beginning in fiscal 2003 for loans,
grants, loan subsidies and credit assistance for basic water
infrastructure needs. These funds would be allocated to States to
capitalize State-administered grant and loan programs.
The WIN recommendations propose the creation of Water and
Wastewater Infrastructure Financing Authorities (WWIFAs) in each State
to replace the two current State Revolving Loan Funds (SRF) for
drinking water and clean water. As with the SRFs, States would be
required to provide a 20 percent match for any Federal revenues.
While half the funds would be targeted to wastewater and half to
drinking water needs, States would have the flexibility to shift up to
an additional 15 percent from one purpose to the other. This
flexibility would be available so long as such a transfer did not
adversely affect any project on the State's priority list that was
``ready to go.''
WIN recommends that Congress require the new State funding
authorities to provide 25 to 50 percent of each year's allocation as
grants that would fund up to 55 percent of project costs. Up to 75
percent of project costs would be eligible for grant funding in
economically distressed communities. Loans and loan subsidies would
include interest rate discounts, zero interest rate loans, principal
forgiveness and negative interest rate loans.
The report proposes an additional $4 billion in resources for State
governments to help them meet their drinking water and wastewater
responsibilities. WIN also recommends funding for development of
innovative technology and management techniques to assist local
governments in providing clean and safe water more effectively and
efficiently in the future.
Finally, the WIN report recommends that Congress ``establish a
formal process to evaluate alternatives for, and recommend the
structure of, a longer-term and sustainable financing approach to meet
America's water and wastewater infrastructure needs.''
Statement of Janice A. Beecher, Ph.D.,\1\ Beecher Policy Research,
Inc., on Behalf of the H2O Coalition \2\
---------------------------------------------------------------------------
\1\ Janice Beecher is an independent policy research consultant
specializing in the structure and regulation of the water industry. Dr.
Beecher has a Ph.D. in Political Science from Northwestern University
and more than fifteen years experience in the field of utility policy,
including research positions at Ohio State University and Indiana
University. Dr. Beecher works on contract for clients that include the
U.S. Environmental Protection Agency, the National Association of Water
Companies, the American Water Works Association Research Foundation,
and individual public agencies and private companies. Dr. Beecher is a
nationally recognized researcher, author, and lecturer in her field and
has participated in projects for the World Bank and the National
Academy of Sciences.
This testimony is based on an annotated graphic presentation, which
is available to interested parties. This presentation was originally
presented at the Infrastructure Conference of the American Water Works
Association (Orlando, March 2001). The presentation has been expanded,
revised, and annotated for distribution.
This testimony is based on Dr. Beecher's independent analysis of
the issues. Her participation in this hearing is sponsored by the H2O
coalition. The opinions expressed in this presentation are those of the
author and do not necessarily represent the views of research clients
and sponsors.
\2\ The H2O Coalition is made up of the National Association of
Water Companies, the National Council for Public-Private Partnerships,
and the Water and Wastewater Equipment Manufacturers Association.
---------------------------------------------------------------------------
purpose
Water and wastewater services are vital to the quality of life for
citizens across this country. Although estimates of the industries'
total infrastructure needs lack precision, there is actually a
considerable amount of consensus that the water sector faces its most
formidable challenge in terms of replacing and upgrading the aged
delivery infrastructure.
The purpose of this testimony is to provide some general ``reality
checks'' in relation to the current national debate over infrastructure
funding. The purpose of the analysis is not to critique any particular
perspective, but rather to help inform the dialog on these most
important issues.
the infrastructure funding issue
Why is water infrastructure funding on the Policy agenda? The
infrastructure needs of the water and wastewater industries have
recently taken a prominent place on the policy agenda, even though this
issue is not entirely new. The industries are experiencing
extraordinary increases in costs and investment needs that are closely
related to ``people and pipe'' demographics--that is, historical
patterns of urban development and the age and condition of the physical
plant in place. Today, new data, models, and other tools have improved
our understanding of this issue. The various stakeholders that
recognize these needs have reached a critical mass.
estimating needs
General agreement exists on the physical condition of the nation's
many local water and wastewater systems. A recent report card issued by
the American Society of Civil Engineers (ASCE) assigned low grades to
most of the nation's various infrastructure sectors, including ``Ds''
for water and wastewater.
In 1995, studies by the U.S. EPA estimated that water industry
assets totaled about $144 billion (Community Water System Survey,
inflation-adjusted to 1999), while the estimated 20-year infrastructure
need totaled about $151 billion (Needs Survey, inflation-adjusted to
1999). USEPA has recently issued an updated 20-year needs estimate that
also is in the range of $151 billion. EPA's estimates focus on needs
directly and indirectly associated with Safe Drinking Water Act (SDWA)
compliance.
USEPA found that more than half of the total infrastructure need is
for transmission and distribution system needs. About 25 percent of the
total need is for water treatment facilities. USEPA has also estimated
the impact of infrastructure costs on households served by systems of
different sizes. These findings demonstrate how scale economies are a
key determinant of cost impacts. Smaller water systems are
disadvantaged in this regard, although the service populations of small
systems vary in their ability to support the cost of service.
In 1998, the American Water Works Association (AWWA) escalated
total 20-year water needs to $366, billion (inflation-adjusted to
1999), focusing in particular on distribution system needs. Today,
various groups have coalesced around a total 20-year needs estimate in
the realm of $1 trillion for the water and wastewater industries.
The $1 trillion 20-year needs estimate for water and wastewater
systems has become a focal point for discussion. The $1 trillion
estimate is imprecise. Comprehensive, valid, and reliable technical and
financial data on the nation's water and wastewater systems are not
readily available. A precise needs estimate is not as important as
recognizing the general need. Indeed, devoting scarce analytical
resources to estimating the need may not be beneficial. The gap is the
projected cumulative shortfall that will result if--and only if--(1)
the infrastructure need estimate is accurate and (2) expenditures on
infrastructure are not increased. In other words, the gap will
materialize only if no action is taken to close it.
understanding the infrastructure monster
Understanding the ``infrastructure monster'' is a challenge. It is
instructive to look back to earlier research on water utility costs.
Evidence from earlier studies suggests an awareness of rising costs and
the role of infrastructure replacement in the cost profile:
The Nation's Public Works: Report on Water Supply (Wade
Miller Associates, 1987) forecast annual needs for the water industry
in the range of $4.8 to 7.1 billion as follows: 37-49 percent for
deferred infrastructure maintenance/replacement; 39-55 percent for
meeting demand growth; and 8-13 percent for Safe Drinking Water Act
(SDWA) regulatory compliance
Meeting Water Utility Revenue Requirements (NRRI, 1993)
found that ``In reality, SDWA compliance costs may pale in comparison
to costs associated with infrastructure and demand growth needs.''
Some of the larger utility systems also have been aware of the need
to step-up the pace of infrastructure replacement. Some of the
investor-owned (private) water utilities have been particularly active
in this area. As an example, St. Louis County Water prepared detailed
assessment of its distribution system in 1994. According to the
company:
``An accelerated replacement program is needed now if we
are to avoid excessive customer reaction and a `crisis' response plan .
. .
The Company's infrastructure replacement program is unique
because it does not involve the construction of one extraordinary asset
over a long construction cycle (e.g., a nuclear plant), but a multitude
of short-cycle construction projects which, taken as a whole, are
extraordinary in nature . . .
The Company believes it is critical and in the public
interest . . . [to] synchronize rate recovery with plant completion.
(St. Louis County Water Company, 1994).
capital intensity, age, and deferral
The water industry is very capital intensive, that is, physical
plant or infrastructure is a substantial core cost. Water investments
also have very long service lives that benefit generations of
customers. Measured as a ratio of utility plant to revenues generated,
water utilities are more capital intensive than the natural gas,
electric, and telecommunications industries. Water utilities must
invest more than $3.50 for every dollar of annual revenues received
from customers. Trend data (and projected investments) indicate that
the water industry is becoming even more capital intensive.
Industry experts have estimated that pipes were installed in the
early part of the century at a cost of about $5 per foot (or less). It
is not unusual for replacement costs to total $100 per foot--which is
more than double the overall rate of inflation for the same period. The
rate of replacement reflects the anticipated life expectancy for a
physical investment. A replacement rate of 1 percent implies a life
expectancy of 100 years. Lower rates imply a much longer--and
unrealistic--life expectancy. Today's pipe materials today are expected
to last about 75 years, serving generations of customers.
The rate of pipe breakage increases as infrastructure ages.
Breakages lose water, disrupt service, and pose public health risks.
Emergency repairs typically are much more costly than planned repairs.
The rate of breakage varies with pipe material, which also correlates
with the period of installation. Also, as facilities age, the overall
percentage of ``accounted-for'' water declines; that is, more water is
lost. The value of water losses has increased with the increased cost
of water supplies, treatment, and pumping.
Following its assessment, St. Louis County proposed to pick up the
pace of replacement from 5 (.13 percent) to 30 (.8 percent) miles of
pipe per year (total pipe miles equal 3,882). But even the accelerated
pace of replacement now used by some systems is probably inadequate
based on current knowledge about the life expectancy of materials. But
making the case for replacement needs to rate regulators and other
oversight bodies (mayors and city councils) has been a significant
challenge. Recently, some private utilities have won approval for
surcharge mechanisms to help fund a continuous program of replacement,
while also mitigating rate shock (the leading example is the
Distribution System Improvement Charge, implemented in Pennsylvania).
Although much of the infrastructure challenge is simply age-
related, at least part of the current need can be attributed to capital
deferrals, or the postponement of infrastructure investments. Because
their profit is based on the value of their rate base, investor-owned
utilities have less incentive to defer capital investments. Deferrals
exacerbate the ``gap'' problem by increasing the level of need and
thereby widening the gap between future expenditure levels and current
revenue levels.
A model developed by Australian researchers suggests that the
compound effect of infrastructure replacement needs over several
decades suggests a ``Nessie curve,'' named after the mythical Loch Ness
monster. These cost curves can provide a useful model to help utilities
and other stakeholders understand needs at the system level.
In reality, the challenges of prudent capital replacement and
``lumpy capacity'' are not new to utility economics. Other utility
sectors have faced--and are facing--infrastructure needs. However,
today's water and wastewater infrastructures were cheap to begin with,
were well-subsidized (particularly for wastewater), and have long been
depreciated. These factors combine to create an extraordinary pressure
on costs. Emerging information systems, planning and management tools,
and alternative technologies can help manage the monster--and close the
funding gap.
The real risk today may be in the potential for a ``responsiveness
gap,'' that is, the gap between awareness and knowledge about an issue
or problem and taking the actions necessary to address the problem and
avoid or mitigate deleterious effects. However, debate is open as to
how to respond to the challenges now faced by the water industry,
particularly with respect to private versus public responsibilities.
the emerging myths
The infrastructure funding debate is contributing to a number of
emerging myths that may or may not be grounded in reality. The myths
suggest:
That a national crisis is looming.
That the cost of water services cannot be supported
through rates.
That a funding gap is inevitable.
That public (that is, Federal) funding solutions are
essential.
Some reality checks may help inform the infrastructure funding
debate by challenging some of the emerging myths. These reality checks
are offered not as criticism of any given perspective, but rather to
bring an empirical perspective to the dialog about these important
issues.
reality check: municipal finances
The water and wastewater industries are dominated by municipal
ownership. Care should be taken to not over-generalize about municipal
finances. However, some of the available data (from the U.S. Census of
Governments and elsewhere) may be relevant to the funding debate.
The data indicate that in general, when municipalities provide
electricity and natural gas services, revenues exceed total capital and
operating expenditures. For water and sewer services (as well as solid
waste and transit services), total expenditures exceed revenues. The
findings generally suggest that municipal water customers do not cover
expenditures through rates and other user charges. The implications of
this ``gap'' are worse if the reported expenditures understate the cost
of water service (as is the case with deferrals). Of course, individual
water and wastewater systems may have very different financial
profiles. The deficit between expenditures and associated revenues is
detectable for different types of publicly-owned water systems:
municipalities, special districts, counties, and townships. In 1997,
for all local governments, the shortfall between revenues and
expenditures amounted to $4.18 billion for water services and $2.57
billion for sewer services (Census of Governments).
The deficit between expenditures and user charge revenues is
detectable for different types of publicly-owned water systems:
municipalities, special districts, counties, and townships. Trend data
indicate that the expenditure-revenue gap has been persistent over
time, although it has closed somewhat. The difference between
expenditures and revenues must be made up through tax revenues and
subsidies (grants). The trend data are comparable when displayed on a
per-capita basis. Data for individual cities show that aggregate
expenditures on water, energy, and transit utilities exceed user-fee
revenues in some cases, but not in others. Similar results can be seen
for municipal wastewater systems.
For investor-owned water utilities, operating revenues are provided
primarily through cost-based rates charged to customers, and revenues
exceed expenditures. An investor-owned water utility must support the
full cost of service through rates in order to survive. The difference
between revenues and expenditures is used to pay for taxes,
depreciation, and the cost of capital. Rates charged by private water
utilities are strictly regulated by State public utility commissions,
which adhere to accepted systems of accounts and cost-of-service
standards of ratemaking. USEPA data (Community Water Systems Survey,
1995) also revealed that privately owned water systems collect more
revenues per gallon than publicly owned systems.
Municipal debt can be used for long-term capital investments, such
as water treatment facilities. Debt instruments that can be used by the
water sector include traditional issuances, as well as private-activity
bonds. Debt instruments should not be used for routine maintenance
(considered an annual expense). However, debt (short-term and long-
term) can be used for major capital replacements to amortize costs over
time. Ideally, costs are recovered over the useful life of the capital
investment (although in practice shorter time periods are used).
Several interrelated financing issues have contributed to or
complicated the infrastructure funding problem. These factors include:
unrealistic service-life expectations, extraordinary cost inflation,
inadequate accounting and accounting standards, investment deferrals,
inadequate user charges, profits and financial reserves for a few
systems, and concerns about rates and equity. Accounting standards are
the domain of the Governmental Accounting Standards Board (GASB) for
governmental utilities and the State public utility commissions for
investor-owned utilities.
reality check: household expenditures
Household expenditures for utility services and other goods and
services provide another relevant perspective. Consumer expenditure
data are available from the Consumer Expenditure Survey (Bureau of
Labor Statistics). Although the data have limitations, they are useful
for general purposes.
Water and public services (sewer and solid waste) account for a
relatively small share of the average household utility budget (less
than .8 percent of total expenditures), particularly in comparison to
electricity (2.4 percent) and telecommunications (2.1 percent). In many
respects, water services are a ``bargain'' to average households. Of
course, averages mask relevant variations and actual expenditures are
affected by many factors. Over time, average household expenditures for
utilities have climbed, but expenditures for water and other public
services have retained their relative position. The percentage of
household income and expenditures devoted to utilities has actually
declined somewhat with time (during the period between 1984 and 1999),
although the share for water and other public services has increased
slightly.
On average, a four-person household spends about the same amount
each year on cable television and tobacco products as on water
services. Americans have shown a tremendous willingness to pay for
advanced communications and entertainment technologies, including
cellular phones ($41.24 per month), cable television ($28.92 per
month), and internet services ($21.95 per month). For many U.S.
households, the expenditures for these more discretionary services are
greater than for water services. It is noteworthy that the nation's $80
billion cellular telephony infrastructure has been entirely supported
by private providers who collect fees from users.
reality check: global comparison
Another reality check can be made using comparative international
data. Americans use more water per capita overall than most nations of
the world. Yet water prices in the United States are comparatively
lower than prices charged by water service providers in many other
developed countries. These findings also are supported by a study
conducted by researchers in the Great Britain who controlled for
international difference in the gross domestic product.
reality check: rate shock
Large rate increases have the potential to cause rate shock among
customers. Technically, rate shock applies when a rate increase is
associated with a significant drop in usage, which reflects the
willingness (and ability) to pay for service. For essential services
(with relatively price-inelastic demand), these drops may be
transitory. The term ``rate shock'' is also used to describe the pubic
outcry associated with rate increases--which may have no basis in
affordability. However, the extent of rate shock and affordability
concerns depends in part on the level of the current water bill and the
magnitude of the rate increase. Techniques are available to mitigate
rate shock and address genuine affordability problems.
Consumer Price Index data (BLS) reveal that real (inflation-
adjusted) water rates are rising faster than the overall rate of
inflation--along with prices for garbage collection, cable television,
and local telephone service. Data for individual communities suggest
that real (inflation-adjusted) rates have risen for some but declined
for others.
Any given rate increase may or may not trigger rate shock or cause
hardship. A higher percentage increase on a low base may not be
problematic for most households. The magnitude of the increase relative
to household income levels should be considered. Public involvement and
communications (including informative bills) can help customers
understand the reasons for the rate increase.
As suggested in the review of municipal finances, underpricing of
water services may be an important factor in the projected funding gap.
Underpricing sends inappropriate signals to customers about the value
of water, leading to inefficient useage. According to basic economic
theory, underpricing also leads to over-consumption and inefficient
supply decisions to meet inflated demand. Privately owned utilities are
more likely to adhere to cost-based ratemaking that recovers total
revenue requirements (capital and operating costs).
Some communities deliberately maintain ``low'' prices for water and
wastewater services for reasons that include community values, economic
development, and political expedience. In some cases, rate increases
have been avoided for very long time periods. Taking inflation into
effect, a ``stable'' rate is actually a rate that has decreased over
time. The ``loss'' of revenue presents an opportunity cost to the
community in terms of its ability to make appropriate infrastructure
investments.
Rate shock in the water sector is possible because rising costs
must be recovered over flat per-capita demand. Affordability concerns
are real but manageable. Financing, ratemaking, and conservation
strategies can mitigate rate shock to a degree. Surcharge adjustments
can be used to achieve gradualism in rate increases. Larger systems can
use consolidated rates, progressive rate structures, and conservation
targeted to low-income households. Needs-based subsidies can be used to
help eligible customers by providing direct payment assistance or
funding a lifeline rate.
From a theoretical standpoint, willingness to pay is represented by
the demand curve, which incorporates the consumer's ability to pay.
From a practical standpoint, ability to pay is a function of price and
income and can be addressed through rate design and subsidies
(respectively). For many publicly-owned systems, the real problem is
not the willingness nor the ability to pay--but the ``willingness to
charge'' customers at rates closer to the true value of water service.
reality check: consumer preferences
Another ``gap'' seems to persist between customer preferences and
their willingness to pay for safe and reliable water service. According
to opinion polls (Gallup), Americans consistently express a high degree
of concern about drinking water and related issues. Paradoxically,
consumers do not necessarily appreciate the value of water services.
Consumers often appear unwilling to support rate increases necessary to
ensure drinking water quality and reliability. Indeed, low prices
reinforce the view that water services are an entitlement. Public
education is needed to close the gap between opinion and willingness to
pay the cost for arguably the most essential utility services.
Water itself has no substitutes, but alternative methods of
delivery are available. For many U.S. households, the price of one
gallon of centrally supplied water--conveniently delivered to the tap--
is less than one-third of one penny (see Raftelis Environmental
Consulting Rate Survey). In general, every other water alternative is
no more safe, much less convenient, and astronomically more expensive.
At $1.15 per gallon, the price of ``designer water'' is 347 times the
price of tap water.
Despite the high costs, Americans continue to buy bottled water in
increasing amounts. In 1999, bottled water sales had increased by 12
percent. In 1999, the nation's water utilities collected revenues
totaling about $29.4 billion. Wastewater treatment works collected
revenues totaling about $26.3 billion. The bottled water industry
collected revenues totaling $5.2 billion.
Rough estimates can be used to compare the profit margin for
bottled water versus tap water. For larger bottlers, total production
costs (including source costs) amount to about 10 cents for each bottle
that can be sold for 70 cents or more (a 600 percent markup). The
``markup'' for tap water, even for private companies, is closer to 10
percent.
reality check: federal funding
The reality of the broader context of Federal funding also is
relevant to any particular constituency, including the water and
wastewater industries. It is important for the water industries to have
realistic expectations about future Federal funding for water programs
in order to plan sufficiently to meet infrastructure needs.
Water services have always been and always will be subsidized to a
degree. Some subsidies are in the public interest because of equity
considerations, as well as health, safety, and environmental protection
concerns. All subsidies have distributional consequences (that is, they
result in both winners and losers). Subsidies can also perpetuate
dependence, inefficiency, and stagnation on the part of recipients.
Whether a water system or a customer, subsidies can mute incentives for
cost control. Subsidies require tax revenues and taxpayers are also
ratepayers (the same households pay one way or another). The social
benefits of subsidies should outweigh the total costs.
Programs have been established to assist low-income customers in
other utility sectors. The LIHEAP programs provide payment assistance
for energy services. Under the 1996 Telecommunications Act, the
Lifeline and Linkup programs provide assistance to telephone customers.
In reality, water and wastewater infrastructure funding already
exceeds Federal funding provided to the LIHEAP and Lifeline/Linkup
programs. Levels of funding under the WIN (Water Infrastructure NOW)
proposal would vastly exceed current levels for water infrastructure,
as well as other utility programs. The WIN proposal expands grant
subsidies, which effectively can both reward and perpetuate
inefficiency. If a subsidy rewards past inefficiency, continued
inefficiency on the part of the system is assured because underpricing
will persist.
Infrastructure funding for water is provided through the Clean
Water and Safe Drinking Water State Revolving Funds (SRF). The
principles underlying the DWSRF are sound: demonstration of capacity by
systems; priority on pubic health and affordability; emphasis on loans
(v. grants); and ineligibility of maintenance and growth-related costs.
The SRF should not reward cost avoidance and inefficiency. The SRF
should not advantage publicly-owned systems (and their customers) over
privately-owned systems (and their customers) and further widen the
rate disparity (another ``gap'').
Some programmatic reforms could enhance the existing Clean Water
and Drinking Water funding programs. Potential measures include:
improving efficiency and lowering administrative costs to States and
systems; addressing barriers to access and funding equity for different
types of systems (large and small systems; publicly- and privately-
owned systems); establishing fair criteria for funding infrastructure
costs; and promoting sound cost accounting and rate design
The long-term Federal funding environment for all utility services
is not without uncertainty. Concerns have emerged about maintaining
funding for telecommunications assistance programs under the Bush
administration. Base-level funding for LIHEAP (excluding supplemental
appropriations) has declined over the life of the program. The budget
of the USEPA also has been targeted for budget cuts under the Bush
administration.
reality check: state and local priorities
At the local level, water and wastewater services--although vital
to communities--are not always assigned high priority. In many larger
cities, funding needs for the water sector are comparable to funding
provided for professional sports stadiums.
Given their primacy for water and wastewater policies, the State
also must play a role in addressing the infrastructure issues. Several
States have taken steps in this area, including: Pennsylvania (cost
recovery), Kentucky (regional consolidation), Rhode Island (capital
planning), Oregon (program integration), and Texas (regulatory reform).
reality check: the gap
The concept of a funding gap merits further consideration and
debate. The need to invest in the nation's water and wastewater
infrastructure is real, but the ``funding gap'' is essentially a
construct. The magnitude of the gap is uncertain and may be inflated.
The potential to lower costs through restructuring, innovation,
operational efficiency, and integrated resource management (including
conservation achieved by water-efficient fixtures and practices) may
not be fully considered. The need is largely attributable to system
demographics (age and condition), although some deferrals have probably
exacerbated the problem (the ``willingness to spend''). Many water
utilities (and most other utilities) can and do support the cost of
service through rates. A funding gap will materialize if deferrals and
underpricing persist; that is, if the responsiveness gap widens. The
water industries must provide leadership and effectively manage their
current and future assets on the public's behalf.
Aggressive action is needed to close the projected gap from the top
(infrastructure needs) and from the bottom (expenditure levels). Cost-
reduction strategies for closing the gap from the top include:
efficiency and optimization (least-cost) approaches directed at both
water production and usage; leadership and continued technological
innovation; and industry restructuring to achieve scale economies and
improve operational performance. Some gap estimates have attempted to
incorporate efficiency improvements--but a gap is still anticipated.
Technical and managerial innovation can substantially reduce operating
costs; capital costs can be reduced, but probably to a lesser degree
given the basic capital intensity of water services. Industry
restructuring includes consolidation and fundamental changes in system
ownership and management (including regionalization and privatization).
The gap can be closed from the bottom by increasing revenues to
support infrastructure expenditures. Revenue-enhancement strategies
include: cost-based (marginal-cost) rates to send better price signals
to customers, along with other ratemaking strategies (such as
surcharges); private-sector investment; and public-sector funding
(local, State, and Federal). With the magnitude of the infrastructure
need and the complexity of the water sector, multiple revenue-
enhancement solutions are necessary and appropriate. However, cost-
based rates should be emphasized and public subsidies should be used
judiciously.
The public sector will continue to play a central role in
addressing water and wastewater infrastructure needs. The public sector
can: leverage other public and private funding sources; provide
incentives for optimal investment, operational efficiency, and cost-
effective restructuring; support research and development, data
collection and information dissemination; address at-risk systems and
households based on demonstrable needs; and promote sustainable water
systems, not sustainable subsidies.
The private sector can play an expanded role in addressing water
and wastewater infrastructure needs. The private sector can: provide
leadership, technical innovation, and research; promote efficiency and
sustainability through market-based solutions as appropriate; develop a
range of asset ownership and management options to address capital and
operating needs; secure and utilize available public funding; and
maintain accountability through regulation.
the real challenges
Moving forward, the real challenges to all stakeholders in the
water and wastewater sectors may be to:
Establish a new science of prudent asset management for
the water sector.
Engage the public on water issues through open and
participatory processes.
Demonstrate a willingness to charge for the true cost of
water service.
Use public funding strategically to make lasting
improvements to operations.
Do not postpone the inevitable and perpetuate the
responsiveness gap.
Promote equity and sustainability over a long-term
planning horizon.
Be receptive to technical and institutional innovation.
Although formidable, these challenges can be met.
I look forward to working with this committee, the H2O Coalition,
and all other stake holders on this issue. Thank you for your
attention.
______
Responses by Janice A. Beecher to Additional Questions from
Senator Crapo
Question 1. Your testimony makes the case that the actual size of
the problem for infrastructure needs may not be as important as
recognizing the relative importance of the issue. Without a carefully
established needs assessment, do you believe the Federal Government
will fully understand the scope of the infrastructure problem?
Response. It is important for the Federal Government to have a
reasonably valid and reliable estimate of water and wastewater
infrastructure needs. But the estimation of national need is
complicated by (1) the fragmented nature of the water and wastewater
industries, (2) the long-term planning horizon under consideration, (3)
the dynamics of the industries' structure and regulation, (4)
differences among systems in accounting, financing, and ratemaking
practices, and (5) the potential incentive to introduce bias to
estimates of current spending, future needs, and the ``gap.'' It may be
impractical to spend a disproportionate amount of resources on
achieving a precise national needs estimate, given the limited benefits
that greater precision might provide.
Establishing some reasonable ranges and benchmarks may be
sufficient for policy development purposes. Some of the existing
methods for collecting data (such as the EPA's needs assessment
surveys) can and will be sharpened to improve the estimation process.
Obviously, an objective analysis of needs is needed. As emphasized
in my testimony, however, any methodology for estimating need, must
give fair and equal attention to the forces that might drive the total
need upward and forces than might drive the need downward. The longer
the time horizon, the greater the uncertainty about these dynamics, as
must be recognized in any analysis. It might also be useful to develop
scenarios that represent different sets of assumptions and strategies.
Question 2. Does your information indicate a difference in needs if
there is a preference for replacement instead of rehabilitation of
older systems? Does an acceleration of replacement projects change the
overall needs for utilities?
Response. These questions cannot be easily answered at the national
level and require technical knowledge beyond my scope of expertise. The
mix of rehabilitation and replacement will affect the needs estimate in
the short term and in the long term (possibly in different ways). For
individual systems, the choice is meaningful. Life-extending
maintenance may be cost-effective in some circumstances and not in
others. Materials, maintenance practices, usage patterns, and
topography are relevant factors.
As I understand it, renovation (pipe lining) may cost about two-
thirds of the cost of replacement and provide only limited service
life. For very old facilities, replacement may be preferred because it
is the only cost-effective choice for meeting service standards
(including regulatory compliance) over time. Fortunately, decision
models are emerging to help individual systems weigh the costs and
benefits of the repair/replace choice, taking a comprehensive look at
relevant conditions, risks, and tradeoffs. For example, some systems
are using advanced monitoring and geographic information systems to
evaluate infrastructure integrity, including patterns of breakage and
water losses, and make appropriate repair/replace decisions.
In general, an excessive amount of cost-ineffective rehabilitation
will add to total long-term needs, as would an excessive amount of
uneconomic replacement.
Question 3. What portion of needs do you believe are actually
attributable to inefficient operation and management of systems?
Response. Although the anticipated need attributable to inefficient
operation and management cannot be estimated with precision it is
reasonable to assume that this proportion is not zero. The WIN estimate
of need appears to be static and seems to have a much greater upward
bias than estimates prepared by EPA. Any estimate of potential savings
on a percentage basis depends on the assumptions that underlie the
needs estimate.
In my opinion, the cost profiles of the water and wastewater
industries suggest the potential for cost reductions in the range of
five percent or more in each of the following areas: efficiency
practices (planning, management, and operations), integrated resource
management (supply side and demand side), technological innovation
(capital and operating), and industry restructuring (consolidation,
privatization, and market-based approaches).
These estimates of potential savings are relatively conservative;
some individual systems have demonstrated dramatic cost savings in
these areas. Of course, individual water and wastewater systems vary in
terms of efficiency and the potential for improvement; the least
efficient systems have the most to gain. Efficiency gains and other
improvements in performance can enhance the quality of service and help
offset some of the cost impact associated with infrastructure
replacement. Variable operating costs may present more opportunities
for efficiency savings than fixed capital costs, although all costs are
variable in the long run.
The long-term assessment of infrastructure needs should recognize
the dynamic nature of the water sector, particularly as the sector
responds to this challenge. As pipes are replaced, water losses and
associated operating costs will be significantly reduced. Based on
research in this area, the value of water lost through leakage could
exceed $1 billion annually (extrapolated from an American Water Works
Association Research Foundation study). Loss-reduction, conservation,
and other resource management programs are helping some individual
systems reduce operating costs and postpone or avoid significant
capital costs (EPA case studies are available on this issue). New
analytical tools are emerging to improve operations and the deployment
of primary inputs (water, energy, and chemicals). Given the long-term
horizon for which needs are estimated, the potential for technological
advances in treatment and other processes also seems great. Management
efficiency is as important as operating efficiency. Numerous case
studies in performance improvement, privatization arrangements, and
market-based practices (such as competitive bidding) have shown that
substantial savings are achievable for some systems. The markets for
new technologies and services will continue to evolve and play a role
in broader industry restructuring. Finally, more efficient (cost-based)
price signals will promote more efficient water usage and help reduce
some types of system costs for both water and wastewater utilities.
Question 4. How can utilities establish more ``realistic'' service-
life expectations of systems to improve confidence in the needs
assessments?
Response. The estimation of service life should be informed by
general and system-specific knowledge about materials, maintenance
practices, usage patterns, and topography. For many water systems,
detailed records on distribution facilities are not readily available.
However, the water industry has conducted numerous research studies and
advanced various tools for assessing infrastructure conditions and
anticipated useful life. Larger systems probably have greater capacity
to make these assessments than smaller systems.
Clearer standards and defined best practices in the water and
wastewater industries could service the purpose of service-life and
needs estimation.
Question 5. Does the EPA's use of improved accounting methods
result in more reliable needs assessments?
Response. Yes. The water industry is unlike the energy and
telecommunications industries in terms of Federal economic regulation
and associated accounting. The lack of uniform of accounting in the
water sector and the different practices used by different systems
(especially publicly versus privately owned systems) presents a
challenge for any survey effort. Gradually, however, EPA has moved
toward better methods for surveying needs. Continued use of peer review
can help EPA continue to refine its data-collection efforts.
Question 6. What portion of needs do you believe can be addressed
through rate changes and the associated alteration in usage patterns?
Response. In practice, a significant segment of the water industry
meets all needs (that is, total revenue requirements) through rates and
other charges for service. Some private water systems use revolving
fund loans, but loans are repaid from rate revenue. The investor-owned
industry has met historic needs through rates and intends to meet
future needs primarily through rates. Rates charged by investor-owned
utilities are subject to regulatory review by the State public utility
commissions. Many publicly owned water and wastewater systems also
cover the cost of service through rates.
In theory, then, a substantial portion of the anticipated
infrastructure need can be met through rates, assuming that cities are
willing to charge customers the cost of service. For some systems,
depending on current rate levels, substantial rate increases would be
required. Whether or not a rate increase is considered affordable
depends on both the demographics of the system and the rate design used
to recover costs. A larger system has the advantages associated with
scale economies, as well as a more diverse customer base over which to
spread costs.
Cost-based rates have the potential to suppress some water usage
and help utilities avoid operating costs (water, energy, and
chemicals), as well as some capital costs. Usage by large-volume
customers is more sensitive to price changes. Indoor water usage is
generally less discretionary and not very price responsive (price-
inelastic); outdoor water usage is more discretionary and more price
responsive (price-elastic). More discretionary usage (such as seasonal
usage) tends to peak demand and associated costs. At higher prices,
water usage may fall somewhat depending on income levels and other
water usage determinants. Efficiency strategies can help reduce both
indoor and outdoor water use. Better estimates of the potential for
efficiency conservation to avoid costs are needed.
The movement to cost-based rates for water and wastewater services
will raise genuine concern for low-income households. Some smaller
systems serve impoverished areas. Some larger systems have significant
pockets of poverty. As stated in my testimony, Federal assistance
should target water systems and water customers that are facing genuine
and significant public-health risks and affordability challenges.
Targeted assistance and a well-designed water rate can help keep basic
water service affordable to low-income households.
Question 7. What role can technology innovation play in reducing
utility needs?
Response. As noted above, technological advances conservatively
should help reduce costs by 5 to 10 percent. Technological advances
beyond a few years are nearly impossible to predict. Rising costs,
regulations and standards, and the marketplace will drive technological
development--if the incentives are appropriately maintained.
In many respects, the physical properties of water and wastewater
limit technological innovation (particularly in transmission and
distribution). Nonetheless, the industries have seen substantial
innovation in terms of emerging technologies in such areas as
monitoring, maintenance, and treatment. For smaller water systems,
technology (such as point-of-use treatment) may be especially important
in terms of providing cost-effective methods of compliance with
drinking water regulations. For larger systems, technology (such as
reuse and desalination) may greatly reduce source-of-supply costs.
The infrastructure funding debate has stimulated considerable
attention to the need for innovation. Because the potential need is so
great, private equipment manufacturers and suppliers are beginning to
compete for market opportunities. Continued competition will stimulate
innovation and help lower costs. The Federal Government can also
encourage innovation by providing funding for innovative research, as
well as demonstration projects. Care should be taken to ensure that
Federal policies, including funding, help advance innovation rather
than stifle innovation.
Obviously, the water and wastewater industries should continue to
provide leadership and promote an integrated science of asset
management, in which technological and management innovation should
play a central role.
__________
Responses by Janice A. Beecher to Additional Questions from
Senator Chafee
Question 1. In your testimony, you mentioned that some private
utilities have implemented surcharge mechanisms to fund continuous
programs for infrastructure replacement. Would this surcharge mechanism
be appropriate for all systems, regardless of size or public-private
ownership?
Response. Yes. Different types of water and wastewater utilities,
regardless of size or ownership structure, can use a surcharge
mechanism. However, oversight capacity with regard to the use of
surcharges, as well as other rate structures and adjustment mechanisms,
will vary by type of system. The regulatory process holds investor-
owned utilities to a high level of accountability and the public
utility commissions have substantial financing and ratemaking
expertise. Many local public officials and agencies may not have
adequate capacity in these regards.
The Distribution System Improvement Charge (DSIC) is used by
investor-owned utilities in Pennsylvania, and the mechanism has been
approved for use in Illinois and Indiana. The DSIC is not a panacea,
but can be a very useful tool for addressing the ``ramp function''
associated with infrastructure costs, and it can also help lower rate
case expenses. Adequate depreciation rates and a forward-looking
ratemaking process (future test year) also are useful in terms of
providing internal cash flow for making improvements.
Use of the surcharge, however, depends on the consent of the
oversight body to which the water system is accountable (state public
utility commissions in the case of investor-owned utilities and local
governing bodies, such as city councils, in the case of publicly-owned
utilities). Regulators or other reviewers must be comfortable with the
workings of the mechanism. The utility's need for revenues must be
balanced against vital protections for ratepayers (including a cap on
the allowed rate adjustment). Care must be taken to ensure that the
utility--public or private--continues to have appropriate incentives
for cost control.
Question 2. In your opinion, what has caused the discrepancy
between expenditures and user charge revenues for publicly-owned
systems.
Response. It is my opinion that many publicly owned water systems
have used internal and external subsidies to support the cost of
service. An internal subsidy may come from intragovernmental transfers
made possible by general revenues collected from property or other tax
revenues. An indirect form of internal subsidy also occurs when a
municipality provides certain technical or administrative functions but
does not ``charge'' the associated costs to the utility's accounts. For
example, a city clerk or attorney paid from general revenues may
provide services that benefit the utility. Subsidies sometimes flow
between water and wastewater operations (overcharging for one service
and undercharging for the other). Occasionally, internal subsidies flow
from water and wastewater operations to other city functions, although
this does not necessarily mean that adequate investments are being made
in the water and wastewater facilities.
External subsidies in the form of Federal and State grants also
make it possible to support the cost of water and wastewater services.
The subsidization of water services is sometimes rationalized on the
basis of economic development and affordability grounds. In some
instances, however, rates may be artificially suppressed for political
reasons (that is, to avoid electoral consequences)
The H2O Coalition and I both concur with the stated position of the
American Water Works Association (revised and adopted January 26, 1992)
on the central role of rates in sustaining water utilities:
1. Every water utility should receive sufficient revenues from
water service and user charges to enable it to finance all operating
and maintenance expenses and all capital costs.
2. Water utilities should maintain their funds in separate
accounts. Such funds should not be diverted to uses unrelated to water
utilities . . .
3. Every water utility should adopt a uniform system of accounts .
. .
4. Water rate schedules should distribute the cost of water service
equitably . .
This position is also reflected in the association's published
guidance manuals on financing and ratemaking for water utilities.
__________
Clean Water Action Calls On Congress to Create New $57 Billion Water
Infrastructure Fund
environmentalist press case to fund pollution clean up and prevention,
not lower public health protections arsenic issue is highlighted
``Instead of gutting the new more health protective arsenic
standard,'' said Clean Water Action's Paul Schwartz, ``Congress should
follow Senators Reid and Ensign's lead and get our communities the
necessary resources to do the right thing.''
Washington, DC. (March 27, 2001). Clean Water Action (CWA) called
today for Federal legislation to renew the nation's commitment to clean
and safe water by creating a new $57 billion dollar water
infrastructure fund. Testifying before the U.S. Senate's Subcommittee
on Fisheries, Wildlife and Water, Clean Water Action's National Policy
Coordinator, Paul Schwartz said, ``Now is the time for the Federal
Government to recommit to protecting public health and the
environment.''
``Public health and the environment are endangered by out-of-date
and declining sewer and drinking water infrastructure. Not only do we
have old plumbing and treatment in place, but public health threats
such as arsenic, cryptosporidium and MTBE are putting an increasing
strain on financially strapped communities across rural and inner-city
America,'' said Schwartz. ``Instead of gutting the new more health
protective arsenic standard, Congress should follow Senators Reid and
Ensign's lead and get our hard pressed communities the necessary
resources to do the right thing.''
``Over the last few years Congress has found the will to provide
billions of dollars to make our highways and airports safer,'' said
Schwartz, ``Congress must use its clout and Federal resources to bridge
the clean, safe and affordable water funding gap.''
Clean Water Action made the case that Congress must:
1. Invest money now to save money in the long-term and yield
immediate economic and health benefits.
2. Give States flexibility to invest in green infrastructure as
well as traditional infrastructure needs.
3. Channel the dollars for cleanup, not sprawl development or
environmentally destructive projects.
4. Protect ratepayer and taxpayer by supporting fiscally
conservative approaches and utilizing market--based incentives.
5. Fund safe and affordable water for small communities.
6. Give States and communities flexibility but demand
accountability and encourage broader public participation in helping to
determine which projects were ultimately funded.
Clean Water Action is a national organization working to ensure
clean, safe and affordable water, prevention of health-threatening
pollution and creation of environmentally-safe jobs and businesses. CWA
has more than 700,000 members nationwide.
Statement of the American Society of Civil Engineers
Mr. Chairman and members of the subcommittee: 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.
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.
a. the issue
Earlier this month, 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.
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.
b. 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
2001, the appropriated amount is $825 million, 82.5 percent of the
authorized total, representing 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.
c. 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.
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 y ear 2001, Congress appropriated $1.35 billion
for wastewater infrastructure, which 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.
d. policy options
New solutions are needed to what amounts to a nearly trillion
dollars in critical drinking-water and wastewater infrastructure
investments over the next two decades. Not meeting the investment needs
of the next 20 years risks reversing the public health, environmental,
and economic gains of the last three decades.
The case for Federal investment is compelling. Needs are large and
unprecedented; in many locations, local sources cannot be expected to
meet this challenge alone; and because waters are shared across local
and State boundaries, the benefits of Federal help will accrue to the
entire nation.
Clean and safe water is no less a national priority than are
national defense, an adequate system of interstate highways, and a safe
and efficient aviation system. These latter infrastructure programs
enjoy sustainable, long-term Federal financial aid; under current
policy, water and wastewater infrastructure do not.
Equally compelling is the case for flexibility in the forms of
Federal investment including grants, loans, and other forms of
assistance. Grants will be needed for many communities that simply
cannot afford to meet public health, environmental, and/or service-
level requirements. Loans and credit enhancements may be sufficient for
other types of communities with greater economies of scale, wealthier
populations, or fewer assets per capita to replace.
ASCE recommends that funding for water infrastructure system
improvements and associated operations be provided through a
comprehensive program that addresses the infrastructure needs of
drinking-water and wastewater systems. Congress must 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.
Finally, some have argued that Federal regulatory programs under
the Clean Water Act and 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, 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.
__________
Associated Builders and Contractors, Inc.,
March 27, 2001.
Hon. Michael D. Crapo, Chairman,
Environment and Public Works Committee,
Dirksen Senate Office Building, Washington, DC.
Dear Chairman Crapo: On behalf of Associated Builders and
Contractors (ABC) and its more than 23,000 construction and
construction-related firms in a network of 83 Chapters across the
United States, I would like to respectfully submit the following
comments for the record regarding the March 27 hearing on water
infrastructure needs.
ABC recognizes the importance of Federal support for clean water
infrastructure funding. The cost of insufficient attention to clean
water issues is indisputable. Non point source pollution, leaking
toxins, stormwater runoff, and coastal pollution pose grave risks to
our nation's water quality. Our Nation's water quality and
environmental infrastructure could not be more vital to our health,
safety and overall quality of life. Congress passed the first Clean
Water Act in 1972, which linked the Federal Government with States and
cities to clean up the country's water by funding projects relating to
water supply and wastewater treatment.
ABC strongly supports funding that maximizes State flexibility in
addressing each State's water infrastructure needs. A primary goal of
the Clean Water State Revolving Fund program is to provide States with
increased flexibility in running their program, including prioritizing
and choosing the best projects to improve water quality. Expanding loan
eligibility further enhances State flexibility beyond providing loans
to wastewater infrastructure, non-point source and estuary projects.
Enhancing State flexibility would help States better address their
changing infrastructure needs.
However, ABC would like to note that the Federal Davis-Bacon Act
limits State flexibility and adds between 5-39 percent to the costs of
construction. The impact of this is felt most severely in rural areas,
which often have the greatest need for improved water infrastructure.
We strongly urge Congress to refrain from imposing this burden on SRF
construction projects.
Congressional intent was to sunset Davis-Bacon with FY 1995, and it
has since then not applied. Adding Davis-Bacon is an inappropriate and
unnecessary, Federal mandate that hurts much-needed construction
efforts. Nineteen States recognize the waste associated with Federal
restrictions like Davis-Bacon and have chosen not to have similar State
restrictions. Moreover 12 States, including Colorado, Idaho, Iowa,
Louisiana, Michigan, Montana, Nebraska, North Carolina, Oklahoma,
Oregon, Texas and Utah, have formally expressed their opposition to the
re-application of Federal Davis-Bacon requirements to SRF loans. As the
State of Colorado noted in a letter to the EPA dated July 18, 2000,
Our past experience indicates that for small rural
construction projects, the total project costs increase between
20-30 percent when Davis-Bacon requirements are imposed. In
addition, there is no evidence in Colorado to substantiate your
claim that the use of prevailing wage rates lead to higher
quality construction.
Any new extensions of Davis-Bacon on SRF will act as a type of
``unfunded mandate'' on those States by forcing them to spend money
toward complying with an outdated Federal labor law that results in
inflated costs. If the Federal Government were to appropriate $3
billion over 4 years, assuming an average increase of 15 percent, the
Davis-Bacon Act could divert $450 million a year, or $1.8 billion over
4 years, from the money appropriated for clean water infrastructure
projects.
Furthermore, local residents should have the flexibility to work on
local construction projects to meet neighborhood needs. Yet projects
under Federal Davis-Bacon requirements cannot hire local ``helpers'' to
work on infrastructure projects. These are valuable entry-level jobs
for low-skilled workers who want job access and experience by working
under the direct supervision of higher-skilled journey-level workers.
In today's changing welfare-to-work environment, and with the
importance of revitalizing disadvantaged communities, it is critical
that the Federal Government not hinder State and local efforts to
provide entry-level jobs. lnserting the Federal Government bureaucracy
into the local construction process will limit job opportunities for
many low-skilled minorities, at-risk youth, and displaced workers who
would otherwise have a chance to gain experience as a helper on a
project in their own neighborhood.
Any application of Davis-Bacon requirements to State Revolving
Funds is unnecessary and would be an expansion of Davis-Bacon to
projects where it currently does not apply. ABC is strongly opposed to
this effort and any similar expansion of Davis-Bacon to local
construction activity.
Respectfully submitted,
Anne Bradbury,
Washington Representative.
__________
State of Oklahoma Water Resources Board,
August 1, 2000.
Geoff Cooper,
Finance and Operations Law Office,
Office of General Counsel,
Environmental Protection Agency,
Washington, DC.
Re: Proposed Settlement Agreement, Application of Labor Standards
Provision in the Clean Water Act State Revolving Fund Program
Dear Mr. Cooper: The following comments are in response to the
referenced notice published in the Federal Register on June 22, 2000.
The Oklahoma Water Resources' Board objects to the proposal to
reinstate the prevailing wage rate requirements of the Davis-Bacon Act
for federally assisted projects in the Clean Water State Revolving Fund
(CWSRF) Program. Title 33, Section 1382 of the United States Code sets
forth requirements for a State to receive a capitalization grant. Among
other items, Sec. 1382(b)(6) describes several provisions that must be
applied to projects that receive assistance from funds directly made
available by capitalization grants. However, Sec. 1382(b)(6) further
stipulates that these requirements will apply to projects ``constructed
in whole or in part before fiscal year 1995''. The provision that EPA
proposes to apply, Sec. 1372, is among the requirements specifically
designated in Sec. 1382(b)(6) that no longer apply. Congress, in
enacting the Federal Water Quality Act of 1987 (``the Act''), chose
language that limited the application of these requirements to projects
``constructed in whole or in part before fiscal year 1995.'' Congress
drew a distinction between direct construction grants made under
subchapter VI of the Act. Prior to fiscal year 1995, Congress intended
capitalization grants to be treated the same as direct construction
grants. However, Congress by its own statutory construction would have
capitalization grants treated differently than direct construction
grants beginning in fiscal year 1995. If Congress had intended these
specific requirements of Sec. 1382(b)(6) to continue to apply beyond
the statutorily enacted date, then either: (i) Congress would not have
included a specific expiration dates; thus allowing the provision to
apply in perpetuity, as other requirements of Sec. 1382 continue to
apply; or (ii) Congress would have reauthorized the specific
requirements of Sec. 1382(b)(6) when making subsequent appropriations
to fund the Act. As such, Congress has continued to appropriate funds
for the Act both for direct construction grants and for capitalization
grants. Congress has not directed that the requirements of
Sec. 1382(b)(6), including reference to Sec. 1372, be renewed. The mere
appropriation of money does not reauthorize expired statutory
provisions. In fact, the expired provisions of Sec. 1382(b)(6) are
completely unnecessary to the continued successful operation of the
CWSRF Program. They are merely bygone provisions that Congress duly
allowed to expire.
Furthermore, we object to the characterization that Sec. 1372
imposes an independent obligation on the EPA to apply the provision of
the Davis-Bacon Act. Given the distinction drawn by Congress as noted
above and the statutory expiration of the application of Sec. 1372 to
capitalization grants, we are of the opinion that Sec. 1372 is in fact
a separate obligation that does not apply to capitalization grant
monies. Section 1372 refers to treatment works for which grants are
made,'' and directs prevailing wages be paid according to the Davis-
Bacon Act at 40 U.S.C. Sec. 276a et seq. Section 276a(a) of the Davis-
Bacon Act States that the United States or the District of Columbia
must be a party to a contract for its provisions to apply. In the case
of a direct construction grant, it is clear that the United States is
directing (through appropriate legislative appropriation by Congress
and implementation by the authorized Federal agency) that a specific
project be built. However, in the case of a capitalization grant. The
United States is making a grant to a State revolving fund. The monies
are then expended in accordance with the terms of a State's authorizing
legislation and the Capitalization Grant Agreement to make loans to
eligible entities for wastewater treatment projects. As such, no grants
are being made to fund treatment projects directly, only a grant to
provide funding to a State revolving fund. The United States does not
enter into any agreement with the project entity, and does not
designate the projects for which the funds are to be used. Rather, the
individual State agency responsible for administering the State's CWSRF
Loan Program identifies eligible projects and enters into loan
agreements containing provisions stipulated in the Grant Agreement and
in Sec. Sec. 1381 et seq., for which the application of Sec. 1372 is no
longer required. Section 1381 clearly States the purpose of
capitalization grants are to establish a water pollution control
revolving fund for providing assistance in the form of loans, not to
make direct construction grants, and directs that capitalization grants
be made subject to the provision of subchapter VI. In each annual
Congressional appropriation bill (see, for example, Pub. L. 105-276 and
Pub. L. 106-74), a distinction is drawn between capitalization grant
appropriations for Clean Water State Revolving Funds and other grants
made directly for the construction of wastewater and water treatment
facilities. Section 1383(e) directs a loan recipient to promptly repay
any loan funds if a direct construction grant is later provided to the
loan recipient. Furthermore, Sec. 1386(f) directs that the provisions
of subchapter 11 (direct construction grants) will not apply to
capitalization grants.
The capitalization grant award is not a direct construction grant
for the construction of treatment works referred to in Sec. 1372. But
for the statutory language of Sec. 1382(b)(6), Sec. 1372 would not ever
have applied to the capitalization grant funds. As per Congressional
stipulation, beginning in fiscal year 1995, Sec. 1372 no longer does
apply.
The statutory language itself can only be interpreted one way.
Beginning fiscal year 1995, the applicability of the Davis-Bacon Act to
loans made from a CWSRF Loan Program funded by Capitalization Grants
expired. Congress, and only Congress, is the appropriate forum for
reapplying the Davis-Bacon Act to the CWSRF Program. A negotiated
settlement between the EPA and the Building and Construction Trades
Department, AFL-CIO, that revives a duly expired statutory provision is
inconsistent with the statutory requirements of the Clean Water Act and
an inappropriate extension of EPA authority.
We strongly urge the EPA to give consideration to these comments
and withdraw from the proposed settlement agreement. We appreciate the
opportunity to comment. If you should have any questions regarding our
comments, please feel free to contact me at (405) 530-8800.
Sincerely,
Duane A. Smith,
Executive Director.
__________
Oregon Department of Environmental Quality,
August 3, 2000.
Geoff Cooper,
Finance and Operations Law Office,
Environmental Protection Agency,
Washington, DC.
Re: Proposed Settlement Agreement, Application of Labor Standards
Provision in the Clean Water Act State Revolving Fund Program, FRL-
6720-5
Dear Mr. Cooper This letter is to comment on the Proposed
Settlement Agreement between EPA and the Building and Construction
Trades Department, AFL/CIO.
The Proposed Settlement Agreement will reinstate the Davis-Bacon
Act on projects funded through Oregon's Clean Water State Revolving
Fund. There will be no increase in protection to Oregon's workers as a
result of this settlement. They already have the same protection from
Oregon's prevailing wage law. However, the Proposed Settlement
Agreement will place an unnecessary burden on small Oregon
municipalities
Oregon's prevailing wage law (ORS 279.348 et seq.) requires that
prevailing wages be paid on public works projects. In many cases, the
prevailing wage determined by Oregon's Bureau of Labor and Industries
is slightly higher than the Federal determination.
Oregon's prevailing wage law is simpler, easier to understand, and
easier to comply with than Federal law.
For example, under Oregon's prevailing wage law, the public agency
soliciting bids must inform the contractor or subcontractor that
prevailing wages must be paid on the project. This Statement may be
made by the public agency in either the advertisement for bids,
contract specifications, or the accepted bid.
Under Davis-Bacon, the public agency must supply all bidders with
the applicable wage determinations (including any changes made up to 10
days in advance of the bid openings) and include those determinations
verbatim in the construction specifications and the contract.
Davis-Bacon wage rates are not readily available. One professional
in this field has referred to them as ``the Federal Governments best
kept secret.'' On the other hand, Oregon's prevailing wages may be
downloaded from the Bureau of Labor and Industries web site,
www.boli.State.or.us.
Under Davis-Bacon, once the project is underway, the public agency
must review weekly payroll reports from both the contractors and
subcontractors. These payroll reports must be retained by the public
agency for 3 years. The public agency must also conduct job site
interviews to verify payroll information.
Under Oregon's prevailing wage law, when the bid is awarded, the
public agency must notify the Bureau of Labor and Industries. The
contractor and subcontractors must then tender certified payroll
reports at 90-day intervals. The contractor and subcontractor must
retain these reports for 3 years.
The public agency need not conduct on the job interviews in Oregon.
Instead, the Bureau of Labor and Industries has the right to inspect
the job site and the contractors premises at any time.
Oregon's prevailing wage law is based on 3 assumptions: (1) that
small municipalities have neither the resources nor the expertise to
serve as wage police; (2) that the State's Bureau of Labor and
Industries does have the resources and the expertise; and (3) that the
payment of prevailing wages is fundamentally the responsibility of the
contractor.
Oregon's prevailing wage law is easier to understand and simpler to
comply with; hence, it is more efficient in operation. Moreover, it
does not place an administrative burden on small municipalities, the
primary beneficiaries of Oregon's Clean Water State Revolving Loan
Fund.
If you have any questions, I may be reached at 503-229-6412.
Sincerely,
Tom Meek,
Program Lead, Clean Water State Revolving Fund.
__________
Utah Department of Environmental Quality,
Division of Water Quality,
July 12, 2000.
Geoffery Cooper,
Finance and Operations Law Office,
Office of General Counsel,
Environmental Protection Agency,
Washington, DC.
Subject: Proposed Settlement Agreement, Application of Labor Standards
Provision (Davis-Bacon Act) in the Clean Water State Revolving Fund
Program
Dear Mr. Cooper: This is written in response to EPA's solicitation
for comment on the proposed settlement agreement between the Agency and
the AFL-CIO which would reinstate Davis-Bacon Act requirements into the
Clean Water State Revolving Fund (CWSRF) program.
This office, which administers the CWSRF, is opposed to the
reinclusion of Davis-Bacon wage rates into ``first round'' CWSRF loans
and believes EPA's reasoning in proposing that this be done is flawed.
Utah is a right-to-work State and does not have area-wide wage
agreements for the work force. Wages are driven by the local economy
and are historically lower in the rural areas of the State than in
metropolitan areas. Skills available in a local area depend on the
economic activity and population so generally fewer skilled
construction workers are available in rural Utah. These factors have
allowed CWSRF projects to be constructed more affordably in the rural
areas of the State utilizing mostly local contractors. Eighty-five (85)
percent of Utah communities currently have populations under 10,000.
Nearly three-fourths of loans made since the inception of the Utah's
CWSRF program in 1987 have been made to these smaller communities.
Thus, it will be the smaller Utah communities which will bear the
burden of increased project costs attributable to the imposition of
Davis-Bacon wage rates which are higher than the construction wages
that otherwise would be paid on CWSRF projects.
We have polled a number of contractors to determine their reaction
to reinstating the Davis-Bacon Wage Act and to determine the cost
impact of this proposal. Contractors were generally opposed to EPA's
proposal. They expressed concern about the additional administrative
burden attendant to complying with the Davis-Bacon Act. This includes
the preparation and submission of weekly payrolls, including the
identification of the appropriate worker classification, wage rate,
fringe benefits, and hours worked in a particular classification.
Contractors would be compelled to add a certification requiring; the
tedious and time consuming checking of payroll records to ensure the
correct wages and fringe benefits are paid. Contractors would need to
oversight their subcontractors on Davis-Bacon Act requirements.
Contractors would be responsible to keep abreast of the ever-changing
wage determinations and bear the risk and associated liability of
unknowingly being found in non-compliance with the Act. Further,
requiring a contractor to pay more to his employees working on a CWSRE
project than to those working on other projects where the local wages
paid for comparable classifications are less than the Department of
Labor wage determination would create a pay inequity within the
contractor's workforce. Contractors prefer to avoid all of these
burdens and the increased costs they will have on CWSRF projects.
In the past the published wage determinations for an area did not
include all of the job classifications required to staff a project. The
contractor would be required to determine the local prevailing wage for
the missing work classification and seek approval from the Department
of Labor to use the class and rate on the project. This is a costly and
time consuming process for the contractor. Without timely response from
the Department of Labor the contractor is at risk when paying the
proposed rate. If the wage rate the contractor is paying is found to be
lower than that the Department of Labor ultimately approves, back wages
may need to be paid. This is problematic when a project has already
been awarded and is under construction. The contractor has no means of
increasing his bid price to recoup these increased costs. The result is
that contractors tend to 'pad'' their bids to protect themselves in
this event, thus further increasing the cost of the project to the
community which receives a CWSRF loan.
How will these increased costs affect bids on CWSRF projects?
Opinions vary, but all the contractors we spoke with agreed that there
will be increased costs which will translate into higher bids on CWSRF
projects. Those polled estimated that bid prices would increase from
between 8 percent to 15 percent as a result of imposing Davis-Bacon Act
on CWSRF projects.
There would also be an administrative burden to the Division of
Water Quality if the Davis-Bacon Act were to be reimposed on CWSRF
projects. Staff would be required to perform on-site interviews with
the work force of contractors and subcontractors to assure that each
employee was informed of the job classifications wages and fringe
benefits to be paid. On-site employee interviews are a cause of
production disruption that increase the cost to the owner and
contractor. The appropriate wage determination and modifications would
need to be validated. Correspondence would be necessary with the
Department of Labor. At a time when only 4 percent of the CWSRE
capitalization grant can be used for program administration, which is
by all accounts insufficient, we are not looking to perform increased
administrative tasks which add nothing to the program.
We are unsure why EPA is persuaded that it has an ``independent
obligation'' to impose CWA Sec. 513 to any grant made under Title VI of
the CWA. It is clear that Congressional intent, as demonstrated by the
language in CWA Sec. 602(b)(6), was for the 16 Title It requirements
(including Davis-Bacon.
We are unsure why EPA is persuaded that it has an ``independent
obligation'' to impose CWA Sec. 513 to any grant made under Title VI of
the CWA. It is clear that Congressional intent, as demonstrated by the
language in CWA Sec. 602(b)(6), was for the 16 Title II requirements
(including Davis-Bacon wage provisions) to apply only to capitalization
grants made before fiscal year 1995. It behooves EPA to wait under such
time as the CWA is reauthorized to see if Congress wishes to reimpose
Davis-Bacon Act requirements on the CWSRF. Under 29 CFR 1.9, Davis-
Bacon Act requirements are incumbent upon not only the Federal Water
Pollution Control Act but also the Safe Drinking Water Act. If Congress
can exempt Davis-Bacon Act provisions from the latter by not including
these provisions in the legislation, Congress can also (and did) exempt
their application to the former by specifically stating when the
provisions would cease to apply.
The proposed settlement agreement States that EPA and the Building
Trades have determined that it is in the public interest to resolve
this matter expeditiously. We do not feel that it is in the public's
interest to impose a significantly higher cost and more administrative
burden on CWSRF loan recipients.
EPA's technical summary of the proposed settlement indicates that
EPA believes there are benefits to human health and the environment
through the imposition of Davis-Bacon requirements on CWSRF projects.
In 15 years of experience working in the Construction Grants and CWSRF
program, I have seen no evidence to support this contention. EPA
suggests that the use of prevailing wages on CWSRF projects will
promote a better-skilled workforce and presumably result in higher
quality construction. We do not agree with this position. In Utah we
believe that contractors will employ the same, only more highly-paid,
workforce which will result in higher project costs, not better
construction.
The only silver lining to the proposed settlement agreement is that
Davis-Bacon requirements would pertain only to ``funds directly made
available'' from capitalization grants rather than to the entire CWSRF.
This, however, is not sufficient reason for our office to support EPA's
recommendation on this matter. It is our feeling that the program would
be better served for EPA to take its chances in court rather than
simply acquiesce to pressure from the Building Trades.
Sincerely,
Don A. Ostler,
Director, Water Quality Board.
__________
Iowa Department of Natural Resources,
August 4, 2000.
Geoffery Cooper,
Finance and Operations Law Office,
Office of General Counsel,
Environmental Protection Agency,
Washington, DC.
Subject: Proposed Settlement Agreement, Application of Labor Standards
Provision in the Clean Water Act State Revolving Fund
Dear Mr. Cooper: The Iowa Department of Natural Resources has
reviewed the Proposed Settlement Agreement, Application of Labor
Standards Provision in the Clean Water Act State Revolving Fund
Program, published in the Federal Register on June 22, 2000, with a 45-
day comment period. This transmittal will constitute comments from the
Iowa Department of Natural Resources.
The proposed agreement is between the United States Environmental
Protection Agency and the Building and Construction Trades Department,
AFL-CIO, American Federation of Labor/Congress of Industrial
Organizations. The proposed agreement is for the new requirement for
application of Davis-Bacon provisions in all EPA Clean Water State
Revolving Fund loan capitalization grants made to States after January
1, 2001. The Iowa Department of Natural Resources wishes to advise EPA
that the proposed agreement exceeds the authority of EPA in the Clean
Water Act. EPA should reconsider its negotiated position for the
following reasons.
1. Section 602(b)(6) of the Clean Water Act dearly applied the
specific Title II requirements and Section 513 of Title V to projects
constructed in whole or in part before FY1995 with funds directly made
available by capitalization grants. The lack of Congress'
reauthorization does not change this provision. In fact, the lack of
reauthorization reinforces it. There has been every opportunity to
extend these specific requirements. Congress has not taken it. The
appropriations Congress has made for national allotments for State
capitalization grants also could have been conditioned. They have not.
The clear wording of 602(b)(6) makes the decision a Congressional one,
not an agency one.
2. All the provisions in Section 602(bX6) expired in FY 1995. EPA
selectively choosing one to be reinstated out of a long list clearly
goes beyond the authority of the statute. We see no reason that one
provision in Section 602(b)(6) would be legally applicable and not the
others listed in the same sentence. EPA's 1995 memorandum on the
section was correct. The June 22, 2000, publication does not present
any basis for a conclusion that Section 513 imposes a continuing
independent obligation on the agency to apply or reinstate Davis-Bacon
requirements. If it did, EPA has violated the statute since FY1994 and
waiting to reinstate it in January, 2001 would be inappropriate. EPA
has subrogated its authority by its new ``persuasion.'' It should
remain with its admitted ``reasonable legal interpretation.'' If
Section 513 created an independent authority, it would not have been
necessary for the statute to list 513 as an equivalency requirement in
Title VI. The interests of the building trades do not override the
wording of the statute.
3. For several years after FY 1994, EPA staff questioned why Iowa
rules continued to apply equivalency requirements. The State's response
was that the Clean Water Act was subject to reauthorization and the
equivalency requirements could be readily reinstated with
reauthorization. Rulemaking procedure in Iowa is a lengthy process and
reinstatement of Federal requirements would confuse and complicate. So
it was several years before Iowa rules removed the equivalency
requirements from the Iowa program. It finally became obvious that
either Congress was not about to reauthorize in the near future, or if
they did, extending the equivalency requirements was not likely. If
congressional intent is a concern at all, we merely have to observe
what happened in the Drinking Water SRF statute, where Davis-Bacon is
specifically not required.
4. There are practical reasons for not reinstating Davis-Bacon
provisions. There would be confusion and controversy in States'
administration of SRF programs. Section 513 would clearly only apply to
project funds directly made available by capitalization grants. As
State SRF programs mature, a significant amount of the projects funded
are with other funds. The differentiation of requirements for projects
based on their source of funds is arbitrary and will cause unnecessary
confusion and competition for ``non-cap grant funds.'' EPA policy for
the SRF program for many years has been ``maximum State discretion.''
EPA's current persuasion will create undue burden on the State and loan
recipients. EPA Statements that projects receive more competent
construction when Davis-Bacon requirements are applied are unsupported.
There is, however, little controversy that they do cost more, therefore
limiting the use of available funds in the program to fewer projects.
There are also reports that the increased costs do not go for increased
wages in the trades. States have tried hard to make SRF programs
attractive. The elimination of equivalency requirements according to
Section 602(b)(6) greatly assisted in making SRF financing attractive
and competitive with conventional municipal financing.
EPA's original interpretation of the applicability of Section 602
requirements was done by memorandum. The interpretation seemed clear
and logical. We appreciate EPA's openness allowing comments on a
proposed settlement agreement and the obvious uncertainty existing in
EPA's current position by requesting comments. It is unfortunate that
the input of State as major stakeholders with EPA was not sought in
negotiations that have apparently occurred.
We consider the Proposed Settlement Agreement to be an
inappropriate EPA decision for the above reasons. Please consider the
comments received from States carefully in your final decision.
You may follow up with questions by response to this e-mail or by
contacting me at 515/281-8877.
Sincerely,
Wayne Farrand,
Supervisor, Wastewater Section.
__________
Montana Department of Environmental Quality,
July 17, 2000.
Geoff Cooper,
Finance and Operations Law Office,
Office of General Counsel,
Environmental Protection Agency,
Washington, DC.
Re: State of Montana WPCSRF Public Comment Federal Davis-Bacon Wage
Issue
Dear Mr. Cooper: As program manager of the State of Montana's Water
Pollution Control State Revolving Fund (WPCSRF) Loan Program I would
like to provide public comment on the draft settlement agreement
between EPA and the Department of Labor regarding the Federal Davis-
Bacon Wage issue. Currently both of Montana's SRF loan programs (WPCSRF
and Drinking Water SRF) use the Montana Statewide Prevailing Davis-
Bacon Wage Rates. The State Davis-Bacon wage rates are very similar to
the Federal Davis-Bacon rates. However, the State rates are much easier
to administer. The State rates do not change very often while the
Federal rates change quite frequently. The process for implementing and
using the State's rates is very streamlined. Also, when projects have
other State or local funding, the SRF programs are using the same rates
as these other programs for work procured under State of Montana law.
In summary, there is very little difference in substance between the
Federal and State Davis-Bacon wage rates, but procedurally the State
rates are much easier to implement.
Another concern we have is that the draft settlement applies only
to the Clean Water SRF program and not the Drinking Water SRF programs.
We have worked hard to maintain consistencies between the two programs
and actually use the same specification insert for both funding
programs. We would prefer that State Davis-Bacon Wage rates be allowed
for the CWSRF programs.
In summary, Montana's WPCSRF Loan Program would prefer the
flexibility to continue to use Statewide Prevailing Davis-Bacon Wage
Rates. This will allow for a more streamlined program and provide
consistency between SRF programs.
If you have any questions please give me a call at 444-5324.
Sincerely,
Todd Teegarden,
WPCSRF Program Manager, Technical and
Financial Assistance Bureau.
__________
State of Louisiana, Department of Environmental Quality,
July 31, 2000.
Geof Cooper,
Finance and Operations Law Office,
Office of General Counsel,
Environmental Protection Agency,
Washington, DC.
Re: Proposed Settlement Agreement, Application of Labor Standards
Provision in the Clean Water Act State Revolving Fund Program (CWSRF)
Dear Mr. Cooper: My staff in the Clean Water State Revolving Fund
program and I have carefully reviewed the proposed Settlement Agreement
and the accompanying documents. I must convey my complete opposition to
any action by EPA that would re-impose the Davis-Bacon Act provisions
on the CWSRF program.
Louisiana is one of the nineteen States that do not have State
prevailing wage laws. We experienced great difficulty in getting the
loan program started because of the extra expense on borrowers caused
by the Davis-Bacon Act requirements. A number of potential borrowers
simply walked away from the SRF program because they could sell bonds
on their own and build their project without Davis-Bacon more cheaply
than they could if they borrowed from us, even though we offered a
substantially lower interest rate. We even held up making binding
commitments on some loans until FY 1995 to avoid the Davis-Bacon Act
requirements.
Re-imposition of the Davis-Bacon Act on new capitalization grants
would again make it difficult to market the program in Louisiana. We
would be forced to lower interest rates even below their present low
rates in an effort to keep some of the potential borrowers that are now
interested in the program. This would certainly jeopardize our ability
to ``maintain the fund in perpetuity' which the law requires us to do.
We can find no language in either section 513 or section 602(b)(6)
of the Act that would allow EPA to impose the Davis-Bacon Act
requirements as a condition of future capitalization grants. Section
513 is very clear that the Davis-Bacon Act is applicable to ``. . .
treatment works for which grants are made under this Act . . .'' EPA's
view that section 513 applies to any grants made under the CWA for
treatment works, including capitalization grants made under title VI is
not correct.
A capitalization grant made by EPA to a State is a grant to
capitalize the State's CWSRF and is not a grant to construct a
treatment works. States make loans, not grants, to local governments,
and a loan made by a State to a local government for construction of a
treatment works is not a grant made under the Act.
Likewise, the language in section 602(b)(6) is also very clear. The
sixteen requirements listed there all expired on October 1, 1994
including the requirement to comply with section 513. Congress was
aware that some loans resulting from funds directly made available by
FY 1994 (and in some cases earlier) capitalization grants would be
exempted since States do not enter into binding commitments immediately
after the capitalization grant is awarded. Had it been the intent of
Congress to apply Davis-Bacon to all capitalization grants, it would
not have included Section 513 in the sunset provision of section
602(b)(6).
Furthermore, the Davis-Bacon Act does not apply to the Drinking
Water Revolving Loan Fund (DWRLF), which was authorized by the Safe
Drinking Water Act Amendments of 1996. We believe that Congress never
intended to apply this requirement to one funding program and not the
other; but knew that it had already expired in the CWSRF and
deliberately left it out of the DWRLF so it would then not apply to
either program.
Re-imposition of the Davis-Bacon Act on new capitalization grants
would not only make it difficult to market the program in Louisiana; it
would also impose an undue burden on local governments, many of which
are struggling to find the necessary funds to make improvements to
their treatment works and stay in compliance with the enforceable
requirements of the Act. We do not accept EPA's argument that the use
of prevailing wage may result in fewer accidents, mistakes, and cost
overruns during construction, reduced O&M costs, and a longer
operational life for the treatment works. We have seen over two hundred
projects constructed with construction grants and early SRF loans that
were subject to prevailing wage requirements; and at least as many
projects undertaken by local governments on their own without
prevailing wage requirements. We can see no significant difference in
the quality of construction between the two. What we have seen, in many
cases, is a merit shop contractor forced to pay higher wages to the
same workers that would have constructed the project in any case. The
local government must pay this increased cost but gets nothing in
return for it.
We predict that re-imposition of Davis-Bacon Act requirements to
the CWSRF would be counter-productive to our efforts to assist local
governments achieve and maintain compliance. Forcing local governments
to pay higher costs than necessary to construct improvements or new
treatment works will result in more communities downsizing projects,
deferring construction, and/or requiring their consultants to skimp on
quality to reduce costs. The end result will likely be a lower level of
compliance in those States that do not have State prevailing wage laws.
We would like to leave you with one last thought. Michael J.
Quigley, Director of the Municipal Support Division, EPA Headquarters,
Stated in a June 8, 1994 memorandum to Myron Knudsen, Director of the
Water Management Division, EPA Region 6, that ``Under the accepted
rules of statutory construction, where the language of the law is
clear, there is no need to consult the legislative history. Indeed,
legislative intent cannot be used to `reinterpret' the plain meaning of
statutory language.'' This is a case where the language in the law is
clear and any attempt to ``reinterpret'' its meaning would not only be
inappropriate, it would be plain wrong.
We would like to thank you for the opportunity to comment on the
proposed Settlement Agreement and sincerely hope that you understand
our concerns and will not pursue it further. If that is not the case,
we will request assistance from our Congressional delegation to support
our position.
Sincerely,
J. Dale Givens,
Secretary, Louisiana Department of Environmental
Quality.
__________
Texas Water Development Board,
July 7, 2000.
Geoff Cooper,
Finance and Operations Law Office,
Office of General Counsel,
Environmental Protection Agency,
Washington, DC.
Re: Proposed Settlement Agreement Application of Labor Standards
Provisions in the Clean Water Act State Revolving Fund Program
Dear Mr. Cooper: The following comments are in response to the
referenced notice published in the Federal Register on June 22, 2000.
We object to the proposal to reinstate the prevailing wage rate
requirements of the Davis-Bacon Act for federally assisted projects in
the Clean Water Act State Revolving Fund (CWSRF) Program. These
requirements will impose new requirements on CWSRF borrowers in some
States, and different or changed requirements for loan recipients in
those States with requirements similar to the Davis-Bacon requirements.
The requirements will require additional effort on the part of
borrowers, and may delay needed construction start dates in instances
where project specific wage rates are required. Project delays will
have the most pronounced impact on the more urban areas, where project
specific rates are the norm. Overall, the new requirements will have
the greatest adverse impact on the smaller community borrowers. These
borrowers already bear the burden of higher per-capita project cost, so
additional efforts, costs and delays may inhibit such communities from
accessing the CWSRF.
In addition to the impact on CWSRF borrowers, the new requirements
will create additional burdens on the States administering the CWSRF
program. States will have to create the infrastructure necessary to
educate borrowers, assist in acquiring wage rates, and track and report
compliance. For some States, rule making will be required. These new
activities will take time to implement and utilize administrative funds
which could otherwise be better used to fund projects to further the
goals of the Clean Water Act. Implementation, itself will require the
expenditure of significant funds and amounts of effort. .
Finally, if the proposed agreement is adopted, we find the January
1, 2001 implementation date completely unacceptable. As EPA is aware,
States must prepare seek public input on and adopt an Intended Use Plan
each year, prior to being able to submit a capitalization grant
application. The Intended Use Plan process alone may require 6 to 12
months to complete, and is already in progress, in most States, in
anticipation of receiving capitalization grants after January 1, 2001.
As a result, the potential borrowers of funds made available from these
capitalization grants may have already been identified and subjected to
a public participation process. Imposition of the January 1, 2001
implementation date has the effect of changing the rules of the game
for these players, while the game is in progress. For some States, this
may require re-notice and repeating much or all of the fiscal year (FY)
2001 Intended Use Plan process. For States like Texas, which are
already well into the FY 2001 Intended Use Plan process, a requirement
to re-notice applicants could create a 6-month or more delay which
would suspend the CWSRF program until the Intended Use Plan process
were completed. This issue, coupled with the implementation time that
will be required of the States, makes the January 1, 2001 date totally
unrealistic. We suggest that implementation be delayed until after
January 1, 2002.
We strongly urge that EPA give consideration to these comments. We
appreciate having the opportunity to offer comment. If you have any
questions regarding our comments, please feel free to call me at (512)
463-7848.
Sincerely,
Craig D. Pederson,
Executive Administrator.
__________
June 22, 2000.
To: Geoff Cooper
cc: Angela Cracchiolo; Dorothy Rayfield; Conny Chandler
Subject: Proposed Settlement Agreement
Mr. Cooper, I am responsible for administering the Clean Water SRF
program in North Carolina and would like to comment on the proposed
settlement agreement between the EPA and the AFL-CIO.
While I am not a lawyer, it is quite clear to me that Title VI of
the CWA specifically states that the Davis-Bacon requirements apply
only to projects constructed before fiscal year 1995. It would follow
then that any requirement to extend the Davis-Bacon requirements beyond
that date would require action by the Congress and not through the
interpretation of the EPA.
It has not been my experience that the Davis-Bacon requirements
have resulted in higher project costs in NC, but ensuring compliance by
loan recipients and contractors does place an unnecessary burden upon
the- State at a time when we are finding that the 4 percent limitation
on administrative funding is insufficient. I ask that you reconsider
your intentions to reinstate these requirements in the absence of a
clear requirement by Congress to do so.
Thank you for the opportunity to comment.
Bobby Blowe.
__________
Department of Environmental Quality,
Lincoln, NE.
Geoff Cooper,
Finance and Operations Law Office,
Office of General Counsel,
Environmental Protection Agency,
Washington, DC.
Re: Reinstatement of Davis-Bacon Requirements Clean Water State
Revolving Loan Program
Dear Mr. Cooper: The Nebraska Department of Environmental Quality
has reviewed the Proposed Settlement Agreement, ``Application of Labor
Standards Provision in the Clean Water Act State Revolving Fund
program'' between the United States Environmental Protection Agency and
the Building and Construction Trades Department, AFL-CIO, American
Federation of Labor/Congress of Industrial Organizations.
The proposed agreement is for the reinstatement of Davis-Bacon
requirements as a Federal requirement on all EPA Clean Water State
Revolving Loan capitalization grants made to States after January 1,
2001. The Nebraska Department of Environmental Quality opposes this
agreement due to the following reasons:
1. Davis-Bacon requirements are a carry over of the construction
grant requirements and are a part of the Title II Equivalency
Requirements of the Clean Water Act. All of these requirements expired
on October 1, 1994 by law. Congress has not modified this, therefore
EPA does not have the authority to reinstate the Davis-Bacon
requirements. Also, if Sec. 513 created an independent obligation of
EPA, it would not have been listed in Title VI as an equivalency
requirement.
2. We were given to understand from the discussions we have had
with EPA that when the Clean Water Act got reauthorized that
equivalency requirements would not be part of the reauthorization
process. This has been demonstrated in the recent reauthorization of
the Drinking Water Act on August 6, 1996 which authorized the
implementation of the Drinking Water State Revolving (DWSRF) Loan
Program. Congress chose not to impose the equivalency requirements on
the DWSRF program which we also administer.
3. As the name suggests, the revolving loan programs are called the
State Revolving Loan Programs. These programs belong to the States
unlike the EPA Construction Grants Program which had EPA ownership. The
State of Nebraska has no intention of applying equivalency requirements
to recycled SRF funds proceeds. The reinstatement of Davis-Bacon will
create undue burden to the State in implementing two programs longer
than necessary and will also complicate the implementation of the
program in future years. Administration of the Davis-Bacon requirements
for the State is tedious and time consuming. In several cases in the
past, projects have experienced delays because certain trades were not
included in wage decisions which meant that the loan and/or grant
recipient, had to wait for the Department of Labor in Washington to
recognize that trade and provide a wage for that trade.
4. The SRF program is supposed to be a simplified program. It has
taken program staff several years to convince the small communities in
our State that the SRF program is not as cumbersome as the construction
grants program. Also, the State has strived to reduce or simplify as
many requirements as possible in order to provide a user friendly
program. We are in competition with the commercial bond market which
does not have as many requirements. Communities are very conscious of
how much it costs to undertake wastewater treatment projects. Budgets
are tight and user rates are escalating rapidly. In the State of
Nebraska we have only a handful of communities i.e., 11 out of over 500
that have a population of over 10,000 (by EPA definition population of
less than 10,000 are considered small). Most small communities do not
have the managerial capability to administer the Davis-Bacon
requirements. The CDBG program in our State requires that the
communities hire a grants administrator to oversee the administration
of requirements such as Davis-Bacon. Several thousand dollars are spent
to ensure that these Federal requirements are satisfied. The
reinstatement of Davis-Bacon will create an undue burden on the small
communities in our State.
5. A survey of construction contractors which we conducted several
years ago suggested that Davis-Bacon added anywhere from 10-30 percent
to project costs in this State. Davis-Bacon in this State was perceived
to add to the costs due to the additional record keeping requirements
and not because of additional costs due to wages. In order to hire
qualified personnel, our survey of contractors had indicated that most
contractors paid their employees wages higher than Davis-Bacon. Also,
unemployment in general in our State has been very low for the past
several years and therefore Davis-Bacon is unlikely to improve wages.
6. This agreement was drafted without the State's input. We
consider ourselves to be a major stakeholder and this agreement
certainly seems to be a deal which the EPA has negotiated with the AFL-
CIO without stakeholder input.
We consider the Proposed Settlement Agreement to be inappropriate
for the reasons stated above. Please consider our comments carefully as
EPA moves forward on the settlement.
If you have any questions, please contact Gautam ``Buddy''
Bhadbhade P.E. of my staff at (402) 471-4207.
Sincerely,
Mike Linder,
Director.
__________
Department of Environmental Quality,
Lansing, MI, July 14, 2000.
Mr. Geoff Cooper,
Finance and Operations Law Office,
Office of General Counsel,
Environmental Protection Agency,
Washington, DC.
Dear Mr. Cooper: This letter is to enter Michigan's strong
objection to the proposed settlement agreement with the Building and
Construction Trades Department, AFL/CIO reimposing Davis-Bacon Act
requirements on the State Revolving Fund (SRF) Program.
This proposed settlement is contradictory to the requirements of
Title VI of the Clean Water Act. This is born out by the explicit
language in section 602(b)(6) that imposes certain requirements
including Davis-Bacon, only through Fiscal Year 1994. The proposed
settlement is an inappropriate, unilateral attempt to circumvent that
language and the on-going legislative process to reauthorize the Clean
Water Act.
The SRF program is administered by States, yet this major
settlement proposal, having far-reaching impacts on the SRF program,
was developed by the EPA with no State input. Further, this proposed
action will impose added mandates on local governments increasing both
administrative costs, as well as financial demand on an already under
funded SRF program, with no environmental benefit.
Michigan opposes imposition of this mandate and urges the EPA to
withdraw the proposed settlement agreement as it is inappropriate,
improper, and most importantly, contrary to Federal law and the
legislative process.
Sincerely,
Russell J. Harding,
Director.
__________
Colorado Department of Public Health and Environment,
July 18, 2000.
Geoff Cooper,
Finance and Operations Law Office,
Office of General Counsel,
Environmental Protection Agency,
Washington, DC.
Subject: Proposed Re-imposition of Davis-Bacon Act Wage Rates on Clean
Water SRF
Dear Mr. Cooper: The Colorado Department of Public Health and
Environment, Water Quality Control Division, administers the technical
aspects of the Clean Water State Revolving Fund (CWSRF) program. Based
on our previous experience with the Davis-Bacon Act requirements, prior
to October 1, 1994, we are opposed to the re-imposition of this onerous
requirement at this time due to the following concerns:
Our past experience indicates that for small rural
construction projects the total project costs increase between 20
percent to 30 percent when Davis-Bacon requirements are imposed. In
addition there is no evidence in Colorado to substantiate your claim
that the use of prevailing wage rates lead to higher quality
construction, best functioning treatment works, long-term cost
advantages, reduced O&M costs or longer operational life of treatment
works.
The re-imposition of the Davis-Bacon requirements on
January 1, 2001, does not allow sufficient time to notify future loan
recipients of this burden and to re-train personnel for implementation.
At least a 1-year notice is necessary to properly notify future
borrowers and to re-train State and EPA personnel. I would recommend
that, if this proposal is implemented, that the regulation not be made
final until after January 1, 2001, and that the requirement not be
imposed until January 1, 2002.
The Act applying to all construction, alteration and/or
repair in excess of $2,000 appears outdated. At a minimum, the amount
should coincide with the value of the single audit act requirement
which is currently $300,000.
In conclusion, I believe the Davis-Bacon requirements if re-
imposed, will be a costly burden-to rural Colorado borrowers
endeavoring to improve water quality in their area and to the State in
administering these requirements.
I trust you will give serious consideration to our comments and
drop the re-imposition of these requirements, but at the very least,
delay the adoption of this regulation until the next year.
Sincerely,
Douglas Benevento,
Director, Environmental Programs,
Colorado Department of Public
Health and Environment.
__________
Colorado Water Resources & Power Development Authority,
July 21, 2000.
Geoff Cooper,
Finance and Operations Law Office,
Office of General Counsel,
Environmental Protection Agency,
Washington, DC.
Re: Proposed Re-imposition of Davis-Bacon Act Wage Rates on Clean Water
Act SRP's
Dear Mr. Cooper: The Colorado Water Resources and Power Development
Authority administers the financial aspects of Colorado's Clean Water
State Revolving Fund. We oppose the re-imposition of Davis-Bacon Act
wage requirements. First, we do not agree that Section 513 of the Clean
Water Act imposes a continuing obligation to include Davis-Bacon Act
wage requirements on grants awarded after 1994. It is clearly a policy
decision by EPA which will increase the cost of improving water quality
in Colorado. Second, Section 319 and 320 projects do not fall under the
definition of ``publicly-owned treatment works'' as defined in the Act
and should be excluded from the regulation and the settlement
agreement.
We also believe that there imposition of Davis-Bacon requirements
as proposed will impair the functioning of the Revolving Funds in
improving water quality. Our past experience with Davis-Bacon wage
requirements, as applied to the Revolving Funds before FY 1995,
indicates that for small rural construction projects, often those most
in need of financial assistance, and of great importance in protecting
water quality, Davis-Bacon wage requirements increase costs between 15
percent and 30 percent. Such increases may be enough to discourage some
communities from undertaking important pollution control projects in a
timely manner. At the same time, we have seen no evidence in Colorado
to suggest that the imposition of prevailing wage rates leads to higher
quality construction, better functioning treatment works, long-term
cost advantages, reduced O&M costs, or longer operational life for
treatment works.
Moreover, the time-frame proposed for re-imposition of Davis-Bacon
requirements is unrealistic. It does not allow sufficient time to
notify future loan recipients of this burden, or to retrain personnel
for implementation. At least 1 year of advance notice will be needed to
notify borrowers and the public through the Intended Use Plan process.
Re-training State and EPA personnel will also require 3 to 6 months.
Therefore, the regulation should not be made final--before January 1,
2001, and the requirement should not be effective until at least
January 1, 2002.
Finally, the trigger for application of Davis-Bacon wage rates to
construction work ($2,000) is outmoded. The trigger should be no lower
than that for Single Audit Act requirements, currently $300,000, but
preferably at least $1,000,000. Such an adjustment would at least
lessen the burden of the proposal on some communities and projects,
especially small financially distressed communities.
In conclusion, I believe that the imposition of the Davis-Bacon
requirements are not justified by a fair reading of the Clean Water
Act, and will impose a costly burden on Colorado borrowers (especially
normal borrowers already under financial strain) and on the State in
administering the requirements, without any commensurate water quality
benefits. I hope you will give serious consideration to our comments
and drop the re-imposition of these requirements. At the very least, I
would urge you to hold public hearings on the proposal around the
country, so EPA policymakers can understand fully the burdensome
implications.
Sincerely,
David L. Law,
Executive Director, Colorado Water
Resources & Power Development
Authority.
__________
City of Cape Coral,
Cape Coral, FL, August 4, 2000.
Geoff Cooper,
Finance and Operations Law Office,
Office of General Counsel,
Environmental Protection Agency,
Washington, DC.
Subject: Comment on proposed settlement agreement: EPA--AFL/CIO
Reference: LFederal Register-June 22, 2000 (Volume 65 No. 121) Notice
of proposed Settlement Agreement between the Agency and AFL/CIO
(Building Trades)
Dear Mr. Cooper: The City of Cape Coral, a city of 100,000,
celebrating our thirtieth anniversary and located in the southwestern
part of Florida, is currently in the process of constructing our second
phase of the city's utility expansion project. It is the city's
intention to apply to the State of Florida for State Revolving Fund
financing to accomplish this expansion, which when complete, will
provide water, sewer and reuse irrigation water to the majority of our
citizens and reduce their dependency on individual wells and on-site
septic systems.
Due to the rapid growth being experienced in this region,
contractors' and subcontractors' construction tradespeople are
receiving wages that often exceed those published as Davis-Bacon
Prevailing Rates. By the imposition of the Davis-Bacon Act, and the
significant documentation required to comply with the Act, the
contractors, the city, and eventually our taxpayers would incur added
project performance costs with no added benefit to either the
individual taxpayer or the construction trades person.
The city is quite concerned about this added administrative burden,
and therefore the cost, to be placed upon the citizens of Cape Coral
should this proposed settlement agreement become effective. The city of
Cape Coral urges the EPA to carefully evaluate the perceived benefits
that the Davis-Bacon Act is purported to provide against the added
burden placed on small municipalities using SRF funding, such as Cape
Coral, and decide to withdraw from this proposed settlement.
Very truly,
S.W. Daignault, P.E.,
City Manager, City of Cape Coral,
FL.
__________
Statement of Association of Metropolitan Sewerage Agencies
introduction
The Association of Metropolitan Sewerage Agencies (AMSA) represents
the interests of more than 250 publicly-owned treatment works (POTWs).
AMSA's members treat 18 billion gallons of wastewater every day and
provide service to the majority of the United States' sewered
population.
Last week, over a million consumers were plunged into darkness in
California as the Nation's energy crisis deepened. As rolling blackouts
crippled homes and businesses, officials begged citizens to reduce
their demands. Imagine what will happen when the Nation's water and
wastewater systems begin to fail. Like California's electric utilities,
the Nation's wastewater systems are facing an infrastructure crisis.
Unlike power providers, the failure of wastewater systems could create
a public health emergency, cause widespread environmental degradation,
and lead to an erosion of our local economies.
America needs to spend an additional $23 billion a year for the
next 20 years to repair and replace aging pipes and to meet current and
future water quality regulations. Is that an outrageous amount? No--not
if you consider the investment we already have made in our water and
wastewater systems and the fact this is the first big replacement cycle
our country has had to face in the water and wastewater utility sector.
America's water and wastewater infrastructure systems are national
assets that yield dividends to all citizens in the form of healthy
natural ecosystems, healthy people free from waterborne disease, and a
healthy and growing economy. The public trust in clean and safe water
is unwavering. Every day, Americans rely on clean water for recreation,
commercial fishing, and a wide range of industrial activity. These
activities generate billions of dollars in income every year, none of
which would be possible without clean water. Inadequate capacity to
treat wastewater or supply clean water can cripple a local economy,
drive manufacturing out of communities, and wipe out tourism.
We face financial challenges in the water sectors today that far
exceed historical investment patterns. While national resolve to
improve the economy, public health, and environmental integrity are at
an all-time high, one of our most successful strategies to accomplish
these goals--adequate and efficient wastewater systems for all
Americans--is at risk of failure because of inadequate investment.
Water and wastewater systems are the heart and soul of every American
community. Would we have built roads, bridges, and airports in
communities that could not provide clean and safe water? The answer is
simply . . . no. The documented needs of the water and wastewater
community cannot--and should not--be disputed.
Studies performed and released by the U.S. Environmental Protection
Agency (EPA) and the private sector have reached the same conclusion:
the needs of our cities, counties, and towns exceed the financial
capacity of our local governments and ratepayers. They simply cannot
bear the financial burden alone. Today, we're asking Congress once
again to make water infrastructure funding a national priority.
public investment needs and achievements
As documented in Clean and Safe Water for the 21st Century: A
Renewed National Commitment to Water and Wastewater Infrastructure,
published in April 2000 by the Water Infrastructure Network (WIN),
America's water and wastewater systems face an estimated funding gap of
$23 billion a year between current investments in infrastructure and
the investments that will be needed annually over the next 20 years to
replace aging and failing pipes and to meet the mandates of the Clean
Water Act (CWA) and Safe Drinking Water Act. This unprecedented level
of investment will face significant competition within local budgets
from operating and maintenance costs that are escalating by 6 percent a
year above the rate of inflation. Current Federal contributions cannot
help since they have declined by 75 percent in real terms since 1980
and today represent only about 10 percent of total outlays for water
and wastewater infrastructure and less than 5 percent of total water
and wastewater outlays.
Our needs are great because our systems are at a critical juncture
in their life cycles. A combination of reduced Federal spending and
increased Federal mandates to meet treatment requirements is taking its
toll. The collective aging of our pipes and systems further compounds
our ability to meet the objectives of the Clean Water Act. Seventy-five
percent of the Nation's capital investment in wastewater and drinking
water infrastructure is buried underground. The useful life of these
pipes is coming to an end. Any additional deferral of the needed
investments to repair and renew these systems will lead to greater
increases in the costs associated with providing clean and safe water
services.
About a trillion dollars of the public's money was spent on capital
expenditures and on the operation and maintenance of the Nation's
drinking water and wastewater systems during the period between 1956
and 1992. The gains in water quality realized by this investment have
been significant. Effluent discharges have fallen by half since 1970,
despite the fact that waste loads grew by more than a third due to
population growth and an expanding economy. However, these
environmental achievements are now at risk. According to a U.S. EPA
report entitled Progress in Water Quality (June 2000), ``without
continued improvements in wastewater treatment infrastructure, future
population growth will erode away many of the CWA achievements in
effluent loading reduction.'' By the year 2016, the report projects
that biological oxygen demand loading rates could rise to the same
levels that existed in the mid-1970s, only a few years after the CWA
was passed.
cincinnati and hamilton county, ohio needs
ln 1987, the Metropolitan Sewer District of Greater Cincinnati
(MSD) of Greater Cincinnati initiated county-wide studies to identify
solutions to combined sewer overflow (CSO) problems. The studies
resulted in system capacity increases and constructed solutions, and
have been expanded to include sanitary sewer overflows (SSO). Last
year, MSD performed an in-house estimate of the costs involved in
addressing its current collection system needs. The figures so alarmed
District management that MSD officials elected to engage a consulting
engineering firm to perform an independent analysis of the needs.
Remarkably, the two studies arrived at very similar conclusions and
provided municipal officials with a high degree of confidence in their
accuracy.
Exclusive of normal operations and maintenance costs and the
routine/planned rehabilitation efforts of an aging system, which the
community now supports, the new design/construction necessary to
alleviate the CSO and SSO problems amount to somewhere between $1 and
$3 billion.
Currently, the user charges in affect for MSD are in the middle of
the pricing range when compared to those of the surrounding 67
utilities. However, in order to meet the obligations currently imposed
upon it by the Federal Government, MSD will be forced to increase its
user charge rate by approximately 7 percent per year for each of the
next 15 years, assuming the problem can be solved with one billion
dollars worth of design and construction. This would multiply the
existing rate by nearly three fold (276 percent).
Taking a more conservative view of how the pending SSO regulations
might impact the utility, costs may rise to $3 billion for design and
construction. That would result in rate increases of 21 percent per
year for 15 years. This would multiply the current rates seventeen
times (1,750 percent).
It is important to note that MSD's ratepayers have been paying the
full cost of service since 1968. Like nearly all major wastewater
utilities, MSD is a stand-alone enterprise that does not receive
subsidies from other governmental units via property tax contributions
or payments whose source is a different taxing authority. Hamilton
County ratepayers pay the true cost of wastewater collection and
treatment in their quarterly bills.
In 2000, MSD of Greater Cincinnati's rates were increased by 9.5
percent. In 2001, Hamilton county enacted another MSD rate increase of
seven percent. Hamilton County Commissioners are preparing to consider
yet another 7 percent rate hike for the coming year.
When the Commissioners find that they can no longer raise fees at
this alarming rate, the U.S. EPA will begin imposing fines on Hamilton
County for water quality rule violations. The monies which might have
been spent improving environmental quality and protecting public health
will go, instead, to the Treasury Department. We then can expect the
U.S. Justice Department to intervene and initiate civil and criminal
proceedings against local jurisdictions and officials for violations of
the Clean Water Act. Without additional assistance, the enormous rate
increases cited earlier will be imposed on city and county users. The
magnitude of the increases is expected to cause economic distress in
all sectors of the County. Especially hard hit will be lower income
households. We also anticipate a loss of jobs and revenue as businesses
flee to localities with lower rates. As the population shrinks, MSD
will lose revenue, forcing rates even higher.
It is a fact that the use of traditional user fees to fund capital
improvements to replace aging infrastructure and meet additional
treatment requirements will be severely constrained. MSD is just one of
tens of thousands of cities, counties and towns that are facing a
financial need of crisis-proportion. Every older Northeast and Midwest
city has aging infrastructure and faces the challenge of eliminating
CSOs and SSOs. Every major U.S. city, including those without combined
sewers, are quantifying the size and costs of their rehabilitation
needs.
new efficiencies through competitiveness
Public water and wastewater utilities have provided Americans with
some of the best water service in the world. There is little
disagreement that public investments in water and wastewater systems
pay substantial dividends to the environment, public health, and the
economy. However, the provision of water supply and wastewater
treatment services is highly capital intensive, significantly outpacing
telephone, gas and electric services. Local control of such an
essential service as wastewater treatment is of great value to the
Nation's consumers. So city and town mayors and councils have empowered
water and wastewater managers to innovate and modernize utilities in
order to deliver more efficient service. By reinventing ourselves
through efficiency initiatives such as improved maintenance, better
technology, and new labor-management partnerships, we have achieved
efficiency gains at least as dramatic as anything offered by the
private sector.
Public utilities must be able to plan and optimize the maintenance
and replacement cost cycles for their infrastructure assets in order to
minimize costs and maximize performance. Added incentive for a shift to
a more measured planning approach can be found in the June 1999 changes
to financial accounting and reporting standards issued by the
Governmental Accounting Standards Board for State and local governments
(known as GASB 34). These sweeping changes require governments to soon
begin reporting depreciation of their assets or to implement an asset
management system. Under the standards, any asset management system
utilized by a government must result in an up-to-date inventory of
infrastructure assets, the undertaking of condition assessments of
assets, the development of annual estimates of the funds necessary to
maintain the assets and provide documentation that assets are being
preserved.
Implementation of asset management practices and programs at public
water and wastewater utilities carries with it numerous benefits. The
initiation of such a program serves to highlight the economic
importance of infrastructure, to increase the recognition of the costs
of infrastructure and enables a community to control and potentially
reduce the costs of assets required to meet service objectives. Some
estimates suggest that the potential exists for a 20 percent savings
when the current capital investment approach is abandoned and an asset
management approach is implemented. This 20 percent savings has been
factored into WIN's estimates in both the Clean and Safe Water report
and the new Water Infrastructure Now: Recommendations for Clean and
Safe Water in the 21st Century (WINow) report.
solving the problem through a fiscal partnership
Elected officials, businesses, and residents of our nation's
communities agree that local revenues are insufficient to address
current and future problems. The financial impact of replacing the
underground system of collection pipes and updating treatment systems
with 100-year old components dating back to the early 1800s is
staggering. Even though our wastewater infrastructure is ``out of
sight,'' it no longer can stay ``out of mind.''
Local utility managers have faced the growing pressure to plan for
future needs for years. But only now is the water infrastructure crisis
creeping into national consciousness. Why the delay? The size of the
problem was not quantified earlier. We, and our predecessors, knew the
cost would be large. As we began to individually quantify our needs,
they were so enormous that very few of us were willing to discuss them
in public, much less engage a national debate on how to fund such
enormous needs.
The challenge of closing the water infrastructure financing gap can
be met, but not without a substantial and concerted effort by the
Federal Government to join with local communities and consumers in a
fiscal partnership. To bridge the investment gap, the Federal
Government should meet localities halfway by authorizing an average of
$11.5 billion per year in capitalization funds over the next 5 years.
States would receive the funds and, in turn, offer grants and loans to
local agencies. The WINow report, released last month, and endorsed by
over 30 nationally-recognized organizations recommends that Congress
pass and the President budget for and sign legislation that would:
Create a long-term, sustainable, and reliable source of
Federal funding for clean and safe water;
Authorize capitalization of the next generation of State
financing authorities to distribute funds in fiscally responsible and
flexible ways, including grants, loans, loan subsidies, and credit
assistance;
Focus on critical ``core'' water and wastewater
infrastructure needs and non-point source pollution;
Streamline Federal administration of the funding program
and encourage continuous improvement in program administration at both
the Federal and State levels;
Adequately finance strong State programs to implement the
Clean Water Act and the Safe Drinking Water Act;
Establish a new program for 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; and
Provide expanded, targeted technical assistance to
communities most in need.
AMSA and other stakeholders recognize that no single solution
addresses the full range of water and wastewater infrastructure funding
needs. All levels of government and the private sector must share
responsibility for effective, efficient, and fair solutions.
conclusion
Although significant progress has been made in cleaning up the
Nation's polluted waters over the past 30 years, much remains to be
done. This debate is about preserving public health, environmental
progress and the economic viability of our Nation's communities.
This debate is also a financial one . . . about how to fund a new,
comprehensive financing program for the 21st century that will allow
State and local governments to address water and wastewater problems on
a watershed basis. In an era of unprecedented Federal surpluses, we
can't think of a better investment than the health of our citizens, the
integrity of our environment and the economic well-being of our
communities. We agree with President Bush . . . our citizens deserve a
refund. It's time that some of our hard-earned Federal tax dollars--
just a small portion of the Federal surplus--be reinvested in the water
and wastewater systems in our local communities.
As part of AMSA's testimony, attached please find a list of
commonly-asked questions and answers. Among other things, it provides
the source of the needs figures presented in the WIN report, explains
the differences between EPA's needs survey and the WIN report,
addresses rates, grants and O&M costs. A copy of the WINow report also
have been provided to you.
We look forward to working with the subcommittee in finding
solutions to our national water infrastructure crisis. Please call Ken
Kirk at (202) 833-4653 if you have any questions.
__________
Responses of Association of Metropolitan Sewerage Agencies
Question 1. What is the source of the needs figures presented in
the WIN report, Water Infrastructure Now: Recommendations for Clean and
Safe Water in the 21st Century?
Response. Water and wastewater funding needs figures in this report
come from WIN's previous report, Clean and Safe Water for the 21st
Century. Those figures came from the U.S. EPA, the U.S. Bureau of the
Census, the American Water Works Association, the Association of
Metropolitan Sewerage Agencies, and the Water Environment Federation.
More detail is presented below:
Historical capital and O&M Spending: U.S. Bureau of the Census\1\
---------------------------------------------------------------------------
\1\ U.S. Department of Commerce, Bureau of the Census, Government
Finances data series.
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Projected O&M Needs: trend-line projections of recent O&M spending
patterns from the U.S. Bureau of the Census, reduced to assume that
operating efficiencies of 20 percent are captured over a 10-year
period.
Projected Capital Needs: U.S. Environmental Protection Agency
(water and wastewater needs surveys; Office of Water revised estimate
of SSO needs), WIN's estimate of wastewater asset replacement, and
AWWA's estimate of water asset replacement.
For water supply, replacement costs are taken from a recent
analysis undertaken by the American Water Works Association.\2\ This
method uses a simulation model to project the future costs of replacing
distribution systems at then-current costs.
---------------------------------------------------------------------------
\2\ American Water Works Association, Infrastructure Needs for the
Public Water Supply Sector, prepared by Stratus Consulting, December
22, 1998.
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Wastewater assets were assumed to be replaced once they exceeded
their useful lives. Historical data on municipal expenditures for
wastewater capital facilities like treatment plants, collection
systems, and pumping stations and other fixed assets like vehicles,
machinery, and equipment were accumulated into annual values of total
capital stock--essentially the value of the Nation's wastewater
infrastructure. These estimates of capital stocks or capital ``assets''
were then depreciated by asset class, according to average lives within
each class--50 years for sewers and collection systems, 25 years for
treatment facilities, and 10 years for other assets (one 27-year
depreciation period averaged across the mix of assets ``in the ground''
over the past several decades). Annual costs of replacement, then, is
equal to annual values of depreciation. This method was originally
developed by the U.S. Department of Commerce for a congressionally-
mandated infrastructure council in the 1980's.\3\
---------------------------------------------------------------------------
\3\ U.S. Department of Commerce, Office of Economic Affairs,
``Effects of Structural Change in the U.S. Economy on the Use of Public
Works Services,'' September 1987, prepared for the National Council on
Public Works Infrastructure.
---------------------------------------------------------------------------
U.S. EPA Needs Survey estimates were reduced to avoid double
counting associated with the cost of replacing water and wastewater
assets as derived above.
Question 2. Why are these numbers different than EPA's Needs
Surveys?
Response. EPA estimates needs pursuant to both the Clean Water Act
and Safe Drinking Water Acts as the costs to local governments of
meeting the objectives of the acts. Accordingly, EPA's needs estimates
cover only the costs to comply with statutory and regulatory
requirements, which principally derive from investments needed to
comply with individual regulations governing the quality of effluent
and biosolids under the Clean Water Act and drinking water purity under
the Safe Drinking Water Act. Regulations pursuant to each act and
administrative procedures governing the collection of needs estimates
further restrict the definition of a ``need'' under the EPA Needs
Surveys.
WIN, on the other hand, took the perspective of the local providers
of water and wastewater services, who have to make the investments
captured under the EPA Needs Surveys plus other investments to deliver
reliable and adequate quantities of services consistent with demands of
people living within the areas they serve. From the local perspective,
total capital outlays needed to stay in business and deliver expected
levels of service exceed--sometimes dramatically--needs to remove X mg/
l of a single contaminant from a wastewater discharge. So, in addition
to investments needed to meet eligible categories under the Clean Water
Act and Safe Drinking Water Act, WIN's needs estimates included
investments to replace aging and failing infrastructure. Local capital
investment budgets must meet both types of investments.
Question 3. Is there any evidence at the utility level that needs
are higher than projected by EPA and that rates will, indeed double or
more in the future?
Response. Yes. Based on recent analyses of 18 water and two
wastewater utilities, the American Water Works Association has
demonstrated that asset replacement needs at these utilities tracks
closely the order of magnitude differences between WIN's national
estimate of total needs and EPA's estimates of needs to comply with the
Clean Water and Safe Drinking Water Acts. To accommodate these future
investments in infrastructure replacement, on average, these 20 water
and wastewater systems will have to increase real investment by a
factor of 2.5 between 2000 and 2020.
Question 4. What purpose will these future infrastructure
replacement investments serve?
Response. Future replacement of water and wastewater infrastructure
will serve these purposes: maintenance of service levels, protection of
public health, and environmental improvement.
Question 5. Why are future replacement costs for water and
wastewater infrastructure so much higher than current costs?
Response. By its nature, infrastructure wears out. In the water and
sewer sectors, the major investments in infrastructure (pipes, plant,
pumping stations, etc.) took place around the turn of the century,
around World War I, and around World War II. In the 1970's and 1980's,
the Nation invested heavily in new wastewater treatment plants and
water supply treatment facilities. In many locations, the original
investments in infrastructure are only now beginning to wear out and in
some locations, infrastructure put in pace in each of these successive
periods is all wearing out more or less, at the same time over the next
10-30 years. As a nation, we have never faced the replacement of these
infrastructure assets since the oldest pipes lasted 100-120 years.
Question 6. Why will local water and wastewater rates double or
more if all needs are met through local rates alone?
Response. Much of the WIN report focuses on capital needs and the
financing implications of meeting those needs, but trends indicate that
over the next 20 years, all local water and wastewater costs will go
up. These trends were documented in two recent reports, the first
published by the Association of Metropolitan Sewerage Agencies (AMSA)
and the Water Environment Federation (WEF)\4\, and the second by the
U.S. EPA.\5\
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\4\ Association of Metropolitan Sewerage Agencies and the Water
Environment Federation, The Cost of Clean: Meeting Water Quality
Challenges in the New Millenium, 1999.
\5\ U.S. Environmental Protection Agency, Office of Water, ``Gaps
Analysis,'' 2001.
---------------------------------------------------------------------------
If over the next 20 years, local water and wastewater rates
increased sufficiently to cover projected increases in the cost of
operations and maintenance, which historically has increased at about 6
percent a year more than inflation, plus the cost of meeting projected
capital needs over the same period, local water and wastewater rates
would more than double (123 percent real increase over 20 years), on
average nationwide.
This estimate does not consider several trends that could increase
local costs, and rates, even further, including new capital needs
associated with meeting new Federal and/or State regulatory
requirements, and increased O&M costs either from aging capital stock
or increased levels of treatment.
Question 7. What sort of rate increases will cities experience if
WIN's proposed $57 billion Federal funding package is implemented?
Response. Annual household water and wastewater bills would
increase by an estimated 81 percent (in real dollars) between 2000 and
2019 if half the future unmet capital needs were funded with Federal
grants as opposed to local sources. If only half the Federal
contribution to unmet needs is provided as grants and half as market-
rate loans, average annual household rates (in real dollars) will just
double over the period. Since WIN recommends Federal funding as both
grants and loans, with the final proportions of each to be determined
by the states, the final effect on average household rates will be
somewhere between these two figures, but closer to a 100 percent
increase.
Question 8. What is the Federal contribution to total local
spending for water and wastewater today?
Response. WIN calculates that the combination of Federal earmarked
grants for water and wastewater plus the subsidy in below-market rate
loans offered by federally capitalized water and wastewater SRFs
accounts for roughly 10 percent of the total local spending on water
and wastewater operations, maintenance, direct capital investment, and
capital servicing (payments on local water and wastewater bonds and
loans).
Local O&M in 1996:\6\ $15.3 billion
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\6\ All figures from the U.S. Bureau of the Census and expressed in
1997 dollars.
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Local Capital in 1996 (from own sources): $7.9 billion
Federal Capital in 1996 (estimated): $2.5 billion
Total Investment in 1996 (from all sources): $25.7
Question 9. The WIN report assumed that local water and wastewater
utilities currently finance capital improvements using a combination of
25 percent cash and 75 percent bonds. Is this expected to change if the
Federal program as recommended in the WIN report is implemented?
Response. Yes. Assuming that the current mix of sources of local
capital investment is indeed, 25 percent cash and 75 percent debt (this
is an estimate in and of itself), the local share of total capital
investment would shift marginally toward more debt if the WIN program
goes forward. This is because the Federal contribution under the WIN
recommendation would come in the form of additional capitalization of
State water and wastewater infrastructure banks, which in turn, will
make a large portion of these Federal capitalization grants available
to local water and wastewater utilities as loans. On balance, this will
increase total borrowing and increase the proportion of debt to cash
used in local water and wastewater capital financing.
Question 10. What would be the impact of no new Federal investment
in water and wastewater infrastructure as WIN has recommended?
Response. Without any additional Federal funding, it is unlikely
that investment will be sufficient to meet projected capital needs in
all water and wastewater systems across the nation. In relatively new
systems, those that are large and growing, and those that serve
relatively wealthy populations, rate revenue may well prove to be
sufficient to meet all investment needs. Under those circumstances,
rates will increase substantially, but in all likelihood, remain
affordable.
In small cities, rural areas, and cities with shrinking populations
and/or local economies, real water and sewer rates would have to
double, triple, or more to meet all needs. This seems unlikely,
especially in low-income communities and in older urban core cities
where populations have migrated to the suburbs, leaving fewer users to
finance replacement of a fixed infrastructure base. Under these
circumstances, it would be logical to expect declining service levels
resulting in violations of State and Federal clean and safe water
requirements and threats to public health, safety, and the environment.
In turn, these effects will discourage commerce and community well-
being, leading to further population loss, reductions in economic
output, and a general worsening of the physical and financial health of
water and sewer systems. There would be little to reverse this downward
spiral. Inevitably, pressure will be brought to bear on the Federal
and/or State Governments for fiscal relief.
In systems facing high regulatory requirements or replacement of
the oldest water and sewer infrastructure, these types of effects would
be felt within the next 5 to 10 years. Facing a revenue shortfall,
water systems will defer maintenance, cut costs (if they can), and
deplete reserve funds. These strategies can work only in the short
term, since deferred maintenance results in earlier capital replacement
needs, only so much operational cost-cutting is possible, and reserve
funds typically cannot cover revenue shortfalls for more than a few
years.
Question 11. WIN recommends consolidation of existing water and
wastewater SRFs into a single State Water and Wastewater Infrastructure
Financing Authority, or WWIFA? What is the rationale behind this
recommendation?
Response. Currently, about 30 states manage their clean water and
safe drinking water SRFs more or less as a single entity. The other 20
states manage two separate SRFs. The concept of a single WWIFA follows
the model of consolidated management of both types of investments--
those in clean water and those in safe drinking water. Consolidation of
management offers two types of benefits: reduced overhead costs per
dollar of infrastructure funded and increased public health and
environmental protection per dollar of investment funded.
With regard to reduced overhead, the Clean Water Act and Safe
Drinking Water Act enable states to set aside 4 percent each of their
Federal allocations to their clean water and safe drinking water SRFs.
While there is little empirical evidence available, it is clear that a
certain portion of any organization's cost base is fixed and the
remainder is variable. If, say only 25 percent of the cost of
administering an SRF is fixed, then consolidated management of a single
WWIFA compared to two separate SRFs would free up 1 percent of total
State clean and drinking water allocations for investment in
infrastructure as opposed to administration. Under the WIN
recommendation, the Nation would enjoy some $570 million in additional
infrastructure through consolidated management of a single entity
compared to two separate entities.
In support of the latter observation, it is not difficult to
imagine that upgrading an upstream wastewater treatment plant to
produce higher quality effluent would result in reduced treatment needs
in a downstream drinking water facility. Similarly, an investment in
watershed protection upstream could improve ambient water quality
conditions to the point of obviating a downstream investment in
nutrient removal at a wastewater treatment plant. Coordinating these
investments in the future becomes increasingly important to the extent
that WWIFAS finance investments in non-point source controls.
Question 12. WIN recommends that WWIFAs be given broad authorities
drawn from those of both the current water and wastewater SRFs. Which
authorities in particular are needed for WWIFAs?
Response. The current drinking water SRF is generally considered to
be more flexible than the clean water SRF. WWIFAs should have at least
the provisions of the drinking water SRFs plus others, as outlined in
the WIN report, to enable them to act as broadly enabled banks to the
water and wastewater sector. Examples of such flexibility include:
ability to provide financing to both public and private owners of water
and wastewater utilities, ability to offer financing packages comprised
of grants, loans, and loan subsidies to meet the financial capabilities
of recipients and address critical public health and environmental
concerns, and ability to extend loan terms to 30 years for both water
and wastewater investments.
In its report, WIN recommends specifically, that WWIFAs be required
to provide between 25-50 percent of each years' Federal capitalization
allotment as grants and 10-25 percent of each year's allotment as
subsidized loans. These provisions will help ensure that the Nation
meets its clean and safe water goals even in economically disadvantaged
communities and in communities that face critical public health and/or
environmental threats.
Question 13. Doesn't WIN's recommendation for more grants undermine
the revolving and leveraging attributes of today's Federal financing
program?
Response. Absolutely not. In fact, WIN's recommendations will
accelerate the pool of funds available in perpetuity for additional
revolving loans. Even if Congress required WWIFAs to set aside the
maximum amount of WIN's recommended $57 billion financing package as
grants, the amount going into revolving loans would nearly triple
compared to today's program. This, in effect, will greatly increase the
long-run capacity of WWIFAs to sustain their revolving loan programs
compared to today's SRF programs.
Currently the leveraging of Federal capitalization grants is a
matter of State policy. WIN has made no recommendations as to the
merits of leveraging in the future. Assuming, however, that the current
rates of leveraging continue without change, WIN's recommended funding
levels will result in nearly $18 billion in additional leveraged
investment over the period 2003-2007, even if WWIFAs make the maximum
recommended amount of assistance available to local utilities in the
form of grants.
Question 14. The WIN report incorporates a 20 percent reduction in
operations and maintenance costs for both water and wastewater
utilities over the next 10 years. What is the source of this estimate?
Response. Several WIN members--specifically, the Association of
Metropolitan Sewerage Agencies, the Association of Metropolitan Water
Agencies, the Water Environment Federation, and the American Water
Works Association--have been studying the competitiveness of public
water and wastewater utilities in the United States since the mid-
1990s.\7\ Based on this work, WIN members have delivered more than 25
workshops to more than 2,500 utility managers, representing more than
150 public water and wastewater utilities across the U.S. Findings from
these workshops indicate that between 20 and 25 percent of current O&M
costs could be cut from existing public utility budgets by applying
best management practices, reforming work processes, reorganizing
management structures, and using technology.
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\7\ See, for example: Association of Metropolitan Sewerage Agencies
and Association of Metropolitan Water Agencies, Thinking, Getting, and
Staying Competitive: A Public Sector Handbook, 1998.
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Many public water and wastewater utilities have already cut
operating costs by this much or more. In a recent publication, AMSA and
AMWA document four such cases: Ft. Wayne, Indiana; Orange County Public
Utilities, Florida; Colorado Springs, Colorado; and Houston Public
Utilities, Texas.\8\
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\8\ See Thinking, Getting, and Staying Competitive: A Public Sector
Handbook.
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In recent presentations to the Environmental Financial Advisory
Board to the U.S. EPA, several consultants actively working in the
field corroborated this estimate.\9\
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\9\ See presentations of Garret Westerhoff, Malcolm Pirnie, Inc.,
Alan Manning, EMA Services, Inc. and Kenneth Rubin, PA Consulting Inc.,
to EFAB, March 5, 2001, the National Press Club, Washington, D.C.
(available through EFAB staff, George Ames, U.S. EPA).
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Tucson Water Department,
Tucson, AZ, March 24, 2001.
Members,
Committee on Environment and Public Works,
Subcommittee on Fisheries, Wildlife and Water,
U.S. Senate
Re: Water and Wastewater Infrastructure Needs
Honorable Subcommittee Members: I am writing to express the city of
Tucson's support for a substantial increase in Federal funding of water
and wastewater infrastructure, as recommended by the Water
Infrastructure Network's (WIN) recent report Recommendations for Clean
and Safe Water in the 21st Century.
The underlying research for the WIN report documents the national
costs to replace aging and failing infrastructure and to meet mandates
of the Clean Water Act and the Safe Drinking Water Act. The aging
pipelines and systems throughout the United States present a burden
that cannot reasonably be accommodated by local water and wastewater
systems. Typically, utilities would pass infrastructure costs on to
water and wastewater customers via increased rates. While this pay as
you go funding has allowed utilities to get by, the level of
reinvestment required now to replace aging infrastructure is so great
that customers, alone, simply can't afford to pick up the entire tab.
The Federal Government is uniquely qualified to address this issue.
As indicated in the WIN report, increased Federal participation is
justified and produces numerous benefits:
Size of challenge warrants national attention.
Local revenue-raising capacity is enhanced with Federal
funding.
Federal involvement increases public awareness of needs.
Federal support is less influenced by regional economic
swings.
Innovative project financing mechanisms are available.
Would result in a fair and equitable allocation of costs
and revenues.
Effective water and wastewater systems are crucial to the health
and economic viability of every city and town, every state, and the
Nation as a whole. The replacement of water and wastewater
infrastructure should be as important to this country as the interstate
highway, mass transportation, and airport systems that receive
substantial Federal funding today.
Tucson, AZ, while a relatively young sunbelt city that experienced
most of its growth after World War II, will soon face the same
infrastructure replacement issues as now faced by older communities.
The figure below illustrates that Tucson's cost to replace existing
water pipelines and facilities will soon double and triple over current
expenditures, and will stay at that higher level into the foreseeable
future.
I urge you to expand the Federal role as proposed by the WIN
report. If you have any questions about the infrastructure needs of
cities such as Tucson, Arizona, please do not hesitate to contact me.
Sincerely,
David Modeer,
Director, Tucson Water.
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