[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
THE NEED FOR RENEWED INVESTMENT IN CLEAN WATER INFRASTRUCTURE
=======================================================================
(110-1)
HEARING
BEFORE THE
SUBCOMMITTEE ON
WATER RESOURCES AND ENVIRONMENT
OF THE
COMMITTEE ON
TRANSPORTATION AND INFRASTRUCTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
__________
JANUARY 19, 2007
__________
Printed for the use of the
Committee on Transportation and Infrastructure
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34-773 PDF WASHINGTON DC: 2007
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COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
JAMES L. OBERSTAR, Minnesota, Chairman
NICK J. RAHALL, II, West Virginia JOHN L. MICA, Florida
PETER A. DeFAZIO, Oregon DON YOUNG, Alaska
JERRY F. COSTELLO, Illinois THOMAS E. PETRI, Wisconsin
ELEANOR HOLMES NORTON, District of HOWARD COBLE, North Carolina
Columbia JOHN J. DUNCAN, Jr., Tennessee
JERROLD NADLER, New York WAYNE T. GILCHREST, Maryland
CORRINE BROWN, Florida VERNON J. EHLERS, Michigan
BOB FILNER, California STEVEN C. LaTOURETTE, Ohio
EDDIE BERNICE JOHNSON, Texas RICHARD H. BAKER, Louisiana
GENE TAYLOR, Mississippi FRANK A. LoBIONDO, New Jersey
JUANITA MILLENDER-McDONALD, JERRY MORAN, Kansas
California GARY G. MILLER, California
ELIJAH E. CUMMINGS, Maryland ROBIN HAYES, North Carolina
ELLEN O. TAUSCHER, California HENRY E. BROWN, Jr., South
LEONARD L. BOSWELL, Iowa Carolina
TIM HOLDEN, Pennsylvania TIMOTHY V. JOHNSON, Illinois
BRIAN BAIRD, Washington TODD RUSSELL PLATTS, Pennsylvania
RICK LARSEN, Washington SAM GRAVES, Missouri
MICHAEL E. CAPUANO, Massachusetts BILL SHUSTER, Pennsylvania
JULIA CARSON, Indiana JOHN BOOZMAN, Arkansas
TIMOTHY H. BISHOP, New York SHELLEY MOORE CAPITO, West
MICHAEL H. MICHAUD, Maine Virginia
BRIAN HIGGINS, New York JIM GERLACH, Pennsylvania
RUSS CARNAHAN, Missouri MARIO DIAZ-BALART, Florida
JOHN T. SALAZAR, Colorado CHARLES W. DENT, Pennsylvania
GRACE F. NAPOLITANO, California TED POE, Texas
DANIEL LIPINSKI, Illinois DAVID G. REICHERT, Washington
DORIS O. MATSUI, California CONNIE MACK, Florida
NICK LAMPSON, Texas JOHN R. `RANDY' KUHL, Jr., New
ZACHARY T. SPACE, Ohio York
MAZIE K. HIRONO, Hawaii LYNN A WESTMORELAND, Georgia
BRUCE L. BRALEY, Iowa CHARLES W. BOUSTANY, Jr.,
JASON ALTMIRE, Pennsylvania Louisiana
TIMOTHY J. WALZ, Minnesota JEAN SCHMIDT, Ohio
HEATH SHULER, North Carolina CANDICE S. MILLER, Michigan
MICHAEL A. ACURI, New York THELMA D. DRAKE, Virginia
HARRY E. MITCHELL, Arizona MARY FALLIN, Oklahoma
CHRISTOPHER P. CARNEY, Pennsylvania VERN BUCHANAN, Florida
JOHN J. HALL, New York
STEVE KAGEN, Wisconsin
STEVE COHEN, Tennessee
JERRY McNERNEY, California
(ii)
Subcommittee on Water Resources and Environment
EDDIE BERNICE JOHNSON, Texas, Chairwoman
GENE TAYLOR, Mississippi RICHARD H. BAKER, Louisiana
BRIAN BAIRD, Washington JOHN J. DUNCAN, Jr., Tennessee
DORIS O. MATSUI, California WAYNE T. GILCHREST, Maryland
JERRY F. COSTELLO, Illinois VERNON J. EHLERS, Michigan
TIMOTHY H. BISHOP, New York FRANK A. LoBIONDO, New Jersey
BRIAN HIGGINS, New York GARY G. MILLER, California
RUSS CARNAHAN, Missouri ROBIN HAYES, North Carolina
JOHN T. SALAZAR, Colorado HENRY E. BROWN, Jr., South
MAZIE K. HIRONO, Hawaii Carolina
HEATH SHULER, North Carolina TODD RUSSELL PLATTS, Pennsylvania
HARRY E. MITCHELL, Arizaon BILL SHUSTER, Pennsylvania
JOHN J. HALL, New York JOHN BOOZMAN, Arkansas
STEVE KAGEN, Wisconsin CONNIE MACK, Florida
JERRY MCNERNEY, California JOHN R. `RANDY' KUHL, Jr., New
ELEANOR HOLMES NORTON, District of York
Columbia CHARLES W. BOUSTANY, Jr.,
BOB FILNER, California Louisiana
ELLEN O. TAUSCHER, California JEAN SCHMIDT, Ohio
MICHAEL E. CAPUANO, Massachusetts CANDICE S. MILLER, Michigan
GRACE F. NAPOLITANO, California THELMA D. DRAKE, Virginia
MICHAEL A ARCURI, New York JOHN L. MICA, Florida
JAMES L. OBERSTAR, Minnesota (Ex Officio)
(Ex Officio)
(iii)
CONTENTS
Summary of Subject Matter........................................ vii
TESTIMONY
Page
Ambs, Todd, Administrator, Division of Water, Wisconsin
Department of Natural Resources................................ 11
Chavez, Hon. Martin J., Co-Chair, Mayors Water Council, U.S.
Conference of Mayors........................................... 11
Coy, Debra G., Director/Research Analyst - Water, Janney
Montgomery Scott, L.L.C, Washington, D.C....................... 35
Gilinsky, Dr. Ellen, Director, Division of Water Quality
Programs, Association of State and Interstate Water Pollution
Control........................................................ 11
Grumbles, Hon. Benjamin H., Assistant Asministrator for Office
of Water, U.S. Environmental Protection Agency................. 11
Soderberg, Kurt, Executive Director, Western Lake Superior
Sanitary District, Duluth, Minnesota, on behalf of National
Association of Clean Water Agencies............................ 35
Stoner, Nancy, Director, Clean Water Project, Washington, D.C.,
on behalf of Natural Resources Defense Council................. 35
Stutler, Jim, President, Tierdael Construction Company, Denver,
Colorado, on behalf of National Utility Contractors Association 35
Ward, J. Kevin, Executive Administrator, Texas Water Development
Board, Dallas, Texas, on behalf of Council of Infrastructure
Financing Authorities.......................................... 35
PREPARED STATEMENT SUBMITTED BY MEMBERS OF CONGRESS
Arcuri, Hon. Michael A., of New York............................. 60
Brown, Hon. Henry E., Jr., of South Carolina..................... 61
Costello, Hon. Jerry F., of Illinois............................. 110
Hall, Hon. John, of New York..................................... 143
Johnson, Hon. Eddie Bernice, of Texas............................ 146
Matsui, Hon. Doris, of California................................ 150
Mitchell, Hon. Harry, of Arizona................................. 151
Salazar, Hon. John T., of Colorado............................... 155
PREPARED STATEMENTS SUBMITTED BY WITNESSES
Ambs, Todd...................................................... 53
Chavez, Hon. Martin J........................................... 63
Coy, Debra G.................................................... 113
Gilinsky, Dr. Ellen............................................. 122
Grumbles, Hon. Benjamin H....................................... 131
Soderberg, Kurt................................................. 157
Stoner, Nancy................................................... 165
Stutler, Jim.................................................... 178
Ward, J. Kevin.................................................. 184
SUBMISSIONS FOR THE RECORD
Chavez, Hon. Martin J., Co-Chair, Mayors Water Council, U.S.
Conference of Mayors, National City Water Survey 2005, report.. 75
Grumbles, Hon. Benjamin H., Assistant Asministrator for Office
of Water, U.S. Environmental Protection Agency, responses to
questions from Rep. Mitchell................................... 140
ADDITIONS TO THE RECORD
American Society of Civil Engineers, statement................... 191
American Supply Association, Joe Becker, President, statement.... 195
CIFA Priorities for the Reauthorization of the Clean Watwer Act.. 197
Clean Water Construction Coalition, Robert A. Briant, Chairman,
statement...................................................... 201
Food and Water Watch, Wenonah Hauter, Executive Director,
statement...................................................... 206
National Association of Water Companies, statement............... 210
Rural Community Assistance Partnership, statement................ 214
Water Environment Federation, statement.......................... 218
Western Coalition of Arid States, Charlie Nylander, Chairman,
Water Infrastructure Financing Subcommittee, Legislative
Committee, statement........................................... 221
(vi)
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
THE NEED FOR RENEWED INVESTMENT IN CLEAN WATER INFRASTRUCTURE
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Friday, January 19, 2007
House of Representatives,
Committee on Transportation and Infrastructure,
Subcommittee on Water Resources and Environment,
Washington, DC.
The subcommittee met, pursuant to call, at 9:34 a.m., in
room 2167, Rayburn House Office Building, Eddie Bernice Johnson
[Chairwoman of the subcommittee] presiding.
Ms. Johnson. Good morning.
I call the subcommittee to order, and I welcome everyone to
the first meeting of the Subcommittee on Water Resources and
Environment for the 110th Congress. Today, the subcommittee
meets to discuss the Nation's wastewater infrastructure needs
and the importance of a renewed commitment to addressing these
needs. As this is the first meeting of the subcommittee of this
Congress, I believe it is a good opportunity to outline the
near-term agenda for this subcommittee and our efforts to
address many of the water resources challenges in the country.
First, let me say how pleased I am to serve as the
chairwoman of the Subcommittee on Water Resources and
Environment, and I look forward to meeting with each of my
colleagues, learning of their own individual water resource
needs and working together to address many of their concerns. I
am also pleased with the opportunity to work with my Republican
colleague, Congressman Richard Baker of Louisiana. He has not
arrived yet, but I am sure he will be here shortly. He has been
a long-time active member of this subcommittee, and I look
forward to working with him in his new role as ranking
Republican.
I am also going to miss Mr. Duncan, who was the Chair of
this subcommittee, my good friend. Mr. Duncan often comments
that this subcommittee has the broadest agenda of any of the
Transportation subcommittees, covering the Corps of Engineers,
projects and authorities, the EPA's Clean Water and Super Fund
Programs, Brownfield, the Tennessee Valley Authority, the St.
Lawrence Seaway, and programs carried out by the National
Oceanic and Atmospheric Administration and the National
Resources Conservation Service.
The subcommittee will have an active agenda in the coming
weeks. Starting with today's hearing, the subcommittee will
return to some of the unfinished work of the previous Congress,
beginning with an examination of the wastewater infrastructure
needs of the Nation and the importance of a renewed Federal
commitment to meeting these needs. The subcommittee hopes to
move expeditiously toward the reauthorization of the Clean
Water State Revolving Fund. It is my hope that we can build
upon the prior bipartisan efforts of this subcommittee and move
this legislation through the committee to the floor of the
House before the President's Day District Work Period.
In addition, the subcommittee hopes to take up other
bipartisan legislative proposals considered by this committee
in the previous Congress that were not enacted into law. Two
examples are legislation to reauthorize appropriations for
EPA's combined Sewage Overflow Grant Program and the pilot
program for alternative sources of water. An equally important
priority of the subcommittee is to complete work on the Water
Resources Development Act of 2006.
Late in the 109th Congress, the staffs of the House and
Senate authorizing committees were close to completing what we
have waited for 6 years to accomplish, moving a joint House-
Senate recommendation for the Army Corps of Engineers to the
President. It is my hope that we can quickly pick up where
these negotiations left off so that vital water resources
development legislation can be enacted and the backlog of
essential flood control, navigation and ecosystem restoration
projects can finally be authorized.
Finally, in February, the committee and the subcommittee
will hold hearings on the administration's budget request for
fiscal year 2008. While I do not have high expectations for
full funding of those programs and policies that fall within
the jurisdiction of this subcommittee, I look forward to
beginning the dialogue on funding this committee's priorities
in the coming fiscal year.
Returning to the topic of today's hearing, it is fitting
that the subcommittee's first hearing is on the need for
renewed investment in clean water infrastructure. To a great
extent, the improvements in water quality achieved since the
enactment of the Clean Water Act have resulted from significant
investments by Congress towards wastewater infrastructure
improvements throughout the country. Since 1972, the Federal
Government has provided more than $82 billion for wastewater
infrastructure and other assistance, which has dramatically
increased the number of Americans enjoying better water quality
and has improved the health of the economy and the environment.
During the same period, overall investment in wastewater
infrastructure from Federal, State and local sources has been
over $250 billion. Investment in wastewater infrastructure has
been one of the greatest investments made by the Federal
Government and has provided significant environmental, public
health and economic benefits to our Nation. First through the
Construction Grants Program and now through the Clean Water
State Revolving Funds, these investments have been integral to
improving the Nation's waters as well as ensuring the well-
being of our Nation's citizens.
In addition, as noted in the testimony for today's hearing,
investment in wastewater infrastructure directly benefits our
Nation's economy, not only through the creation of well-paying
jobs here in the United States but also through ensuring that
our Nation's infrastructure stands ready to address the
challenges of the 21st century.
However, these achievements are now at risk, as noted in a
2000 report of the Environmental Protection Agency. Without
continued improvements in wastewater treatment infrastructure,
future population growth will erode away many of the clean
water achievements. Without a renewed commitment toward
investment from all parties, in less than a generation the
United States could lose much of the gains made in improving
water quality.
This subcommittee stands ready to renew the Federal
commitment to our Nation's wastewater infrastructure. While
reauthorization of the Clean Water State Revolving Fund alone
cannot entirely close the gap between current needs and
expenditure, it does send a strong message on the importance of
achieving the goals of fishable and swimmable waters
established over 30 years ago.
Before I recognize Mr. Baker for his statement, I will also
mention that we have a few members returning to the
subcommittee and a fair number of new members joining us this
year. Congressmen Filner and Capuano have both served on the
subcommittee in the past, and we welcome them back in the 110th
Congress. The new members of the Democratic Caucus are
Congresswoman Doris Matsui, who represents the Fifth District
of California, Congresswoman Mazie Hirono, who represents
Hawaii's Second Congressional District, Congressman Heath
Shuler, who represents North Carolina's 11th Congressional
District, Congressman Harry Mitchell of Arizona, the Fifth
Congressional District, Congressman John Hall of New York's
19th Congressional District, Congressman Steve Kagen of
Wisconsin's Eighth Congressional District, Congressman Jerry
McNerney of California's 11th Congressional District,
Congresswoman Grace Napolitano of California's 38th
Congressional District, and Congressman Michael Arcuri from the
24th District of New York.
I welcome all of these new members and our returning
members from both sides of the aisle to this subcommittee.
I now recognize ranking member, Mr. Mica, I guess, who is
not the ranking member, but he is going to represent our
Republican members of the subcommittee, for any statements you
might make.
Mr. Mica. Well, thank you, Ms. Johnson.
I am the ranking member of the full committee, and I do
serve as an ex officio member on each of the subcommittees.
That honor and responsibility that Mr. Oberstar had when he had
the ranking position is extended to me. Mr. Baker, who we are
very pleased will be the leading Republican on the Water
Resources and Environment Subcommittee, will be here shortly,
but I am pleased to join you this morning, and I welcome you to
your new leadership position. We have worked closely together
on a number of issues, particularly transportation in Texas,
and I look forward to doing that now in my new position. From
time to time, I intend to stick my head and my business into
the subcommittee business of each of our subcommittees.
Today, I want to just start with a few comments as ranking
Republican leader, a member, and hopefully set some of our
priorities forward. As we know today, the Subcommittee on Water
Resources and Environment takes up an issue that impacts every
American, and that is the availability of clean water. I come
from the State of Florida, and I am keenly aware of the
importance of clean water, not only directly to the homes and
businesses of my constituents but also to the tourists who come
to enjoy Florida's beaches. One of our primary assets is the
natural aquatic areas, including our Everglades, a national
treasure.
Today, the goal of cleaning up the natural waters in
America is being threatened by the inability of aging
wastewater infrastructure to keep up with the population growth
and also the economic development. While I believe that
wastewater infrastructure is primarily a local responsibility,
there is, in fact, a national public interest in having clean
water, and so I believe that it is an appropriate Federal role.
Over the years, this subcommittee has held hearings that
have documented the fact that investments in wastewater
infrastructure at all levels--public and private, Federal,
State, and local--have unfortunately not been sufficient to
meet the needs for clean water. The gap is huge, perhaps as
much as some $400 billion over the next 20 years. We know we
have a problem. The issue is really how we are going to address
the problem and where the responsibility and resolution of the
problem lie. In other words, to be quite frank, where are we
going to get the funds and the money to do and complete this
important job?
I believe part of the answer should be the reauthorization
and more funding for the State Revolving Loan Fund administered
by the EPA, but the Federal Government is not going to be able
to solve this problem by itself. Greater investments at all
levels of government and also from the private sector are
absolutely necessary. I am delighted that we have one witness
today--and that one, I believe, was provided by our side--Ms.
Debra Coy, from the investment banking sector, who can tell us
about the large amounts of private sector capital that is
ready, willing and able to invest in our water infrastructure.
In addition, I hope other witnesses today will suggest ways
in which we can address this problem beyond just seeking more
money from the taxpayer. Perhaps some better technologies, more
conservation and innovative financing techniques, including
public-private partnerships, can, in fact, put more resources
into providing clean water for all Americans.
So those are some of my goals and my priorities. I
appreciate the time being yielded to me to state them, and I
wish all of the members on both sides of the aisle well, and I
see Mr. Baker is back. I am not sure if you want to yield to
him now. I see Mr. Oberstar is here. Maybe you can get to Mr.
Oberstar and then get back to Mr. Baker, and thank you again
for the courtesy extended to me this morning.
Ms. Johnson. Thank you very much.
We now recognize the chairman of the full committee, Mr.
Oberstar.
Mr. Oberstar. Thank you, Madam Chair, and congratulations
on your new role as Chair of the Subcommittee, a very important
subcommittee, on Water Resources. You have laid out a broad
agenda that lies before the subcommittee this year, and I know
that from your years of service on the committee you are
prepared and ready for the challenge ahead.
I welcome our full committee ranking member, Mr. Mica. He
and I have worked together on aviation issues and a wide range
of surface transportation matters during the time that he has
served in Congress, beginning in 1992, and I appreciate the
partnership that we have developed over the years and look
forward to a very productive time ahead.
To Mr. Baker, the ranking member on the subcommittee, from
Louisiana, I was particularly impressed by Mr. Baker's
leadership during Hurricane Katrina when the Subcommittees on
Water Resources and FEMA and Economic Development, under the
direction of Mr. Shuster, made an inspection tour starting in
Baton Rouge and New Orleans and then through into Mississippi
and Alabama. Mr. Baker led the briefing at Baton Rouge,
demonstrating a full grasp of the subject matter at hand, the
issues confronting the Federal Government, the State
governments, the local governments, and conducted himself in an
extraordinarily competent and diligent manner, and I welcome
his participation as ranking member of this subcommittee.
And our former Chair of the subcommittee, Mr. Duncan, who
all through his chairmanship of the Aviation Subcommittee and
the Water Resources Subcommittee displayed that judicial
temperament that characterized his service before he ran for
Congress as a judge, and again is a mastery of the subject
matter at hand.
We are very blessed on the committee to have members on the
Republican side who have served in leadership positions, as
with Mr. Young, who is now the ranking member on the Resources
Committee but who was our chairman for 6 years, and Mr. Mica
chaired the Aviation Subcommittee, and Mr. Duncan chaired the
Water Resources Subcommittee, and others, and Mr. Shuster I
mentioned earlier, all bring a valuable experience that they
gained in chairing subcommittees during the years of Republican
majority. Those skills, the knowledge, the experience gained by
our colleagues on the Republican side will be of great benefit
as we move together in this committee in a bipartisan spirit to
carry on the important work of rebuilding America, and I
welcome those skills and talents.
As I look on the Republican side, I see from the Great
Lakes Candice Miller--I want to thank you for choosing to serve
on this committee--representing the Port Huron area that I know
very well. My uncle lived there for 25 years or so. I visited
many times in Port Huron, and Thelma Drake, representing
Tidewater, Virginia.
As I look at the Republican side just as on the Democratic
side, we have got all of the coasts covered--Mr. Boustany on
the Louisiana Gulf area, Mr. Gilchrest representing the Eastern
Shore--the world's greatest estuary, the Chesapeake Bay--who
has developed his own special reputation and skill in
environmental protection, Mr. LoBiondo on the Atlantic Seaboard
in New Jersey, and Henry Brown further down on the Atlantic
Seacoast, who is a one-man tourism promoter for South
Carolina--he is famously known for that--and so many others who
bring special skills to this subcommittee and to the full
committee. We welcome your partnership.
We have a big responsibility ahead of us. It was not too
many years ago--about 4 years, 5 years after I began service on
the committee as Clerk of the Subcommittee on Rivers and
Harbors, the antecedent of this subcommittee--that the Cuyahoga
River caught on fire. Lake Erie was pronounced dead. People
thought it would never come back. Fish had died. The fish kills
in Lake Erie were astonishing. The Walleye Head Fishery had
just totally disappeared, and soapsuds were coming out of the
faucets of citizens living along the Ohio, Illinois,
Mississippi River systems because of the soap being discharged
without treatment into our waterways. It galvanized the public
into action. My predecessor John Blatnik, whose portrait is
over there in the corner, who was not only Chair of the full
committee but Chair of the Rivers and Harbors Subcommittee,
authored the first Federal Water Pollution Control Act in 1956
and all of its subsequent improvements, including the Clean
Water Act of 1972, the result of which was a massive
investment, a Federal-State partnership, a Federal-private
sector partnership to clean up the Nation's waterways. On the
Great Lakes alone, industry invested some $10.5 billion to
clean up industrial discharges into the Great Lakes, one-fifth
of the freshwater in all of the world. Municipalities invested
another $10 billion, the Federal Government about $15 billion,
and Lake Erie miraculously came back. The Walleye Head Fishery
has returned, Lake Erie similarly, but there are still problems
with the toxic hotspots in the Great Lakes, 43 toxic hotspots,
26 of which are wholly in the United States, 5 shared between
the United States and Canada, the other 12 in Canada. We need
to address resources of our government and the Canadian
government to clean up those toxic hotspots because they
continue to return pollutants into the water column and into
the vegetative and aquatic life of the Great Lakes.
Most of America lives along the water. Seventy-five percent
of the population of this country lives either on the saltwater
coasts or on the Great Lakes freshwater coasts. In the Great
Lakes area, we have one-third of the Nation's industry, one-
fifth of the Nation's industrial jobs, one-third of the
Nation's exports, but our most precious resource is that of
freshwater, and we still have a huge job of protecting it.
While a great deal of progress has been made in dealing
with point sources, we have still a long way to go to meet the
goal of the Clean Water Act of 1972 of fishable, swimmable
waters, and maintaining the physical, biological and chemical
integrity of the Nation's waters. That must continue to be our
goal. The new frontier, if you will, of clean water is non-
point source runoff from development lands, housing
developments, shopping center developments, and agricultural
runoff.
We have to work with all of the those sectors and
strengthen their resolve and with local efforts supported by
the Federal Government to stem discharges and runoff from non-
point sources which continue to deteriorate the Nation's
freshwater reserves. We are going to attack those issues this
year. We started in bipartisan fashion 6 years ago with the
State Revolving Loan Fund reauthorization for various reasons.
Even though Chairman Young and I and nearly every member of the
full committee were cosponsors of the bill, we could not get it
to the House floor. That obstacle has been resolved. We are
going to bring that bill to the floor. We are going to
replenish the States' reserves of funding to attack the unmet
needs of building sewage treatment plants and water resources
and of water and sewer needs and combined sewer overflow needs.
So the hearing today has, as its purpose, to give an
overview of the Nation's aging water infrastructure needs. Some
areas in the Northeast are still delivering water with wooden
pipes. That is not right. We need to help cities fix that
problem. We are going to do that. That is what the State
Revolving Loan Fund will accomplish. So I think we will achieve
a great record in this committee and in this subcommittee in
the course of this Congress. As Ms. Johnson said, it has wide-
ranging responsibility, and I look forward to working with each
and every one of the members on both sides of the aisle toward
the goals of restoring the Nation's clean water, and that
includes massive rebuilding in the gulf and restoration of the
gulf wetlands as the buffer against hurricanes that may and
likely will attack in the future.
Thank you very much, Madam Chair.
Mr. Baker, welcome to the subcommittee as ranking member.
You represent a very vital ecosystem area of the country. I
look forward to your comments.
Ms. Johnson. Mr. Baker.
Mr. Baker. Chairman Oberstar, Chairwoman Johnson, Ranking
Member Mica, I am particularly appreciative to be participating
in this capacity today. I would note for the record a
particular irony in my late arrival.
In speaking of the wooden pipe delivery system of which Mr.
Oberstar made reference, apparently they still survive in the
condo building in which I live because, with an unannounced
maintenance action, they curtailed water service this morning,
requiring a particular set of ingenuity on my part to make it
here at all. So I thought interesting that I would be coming to
a water hearing on the morning of that event, but
notwithstanding that------
Mr. Oberstar. Would the gentleman yield?
Mr. Baker. I would be happy to.
Mr. Oberstar. Some years ago we were having a hearing of
the committee, and it was on Corps of Engineer projects, and
the Chief of Engineers was unable to make the hearing. He had
had a water main break in his home and his basement was
flooded. That was appropriate, too.
Mr. Baker. He probably lives in my building, I have a
suspicion. In any event, I am certainly pleased to be here and
wish to at this time welcome the new members on the Republican
side of the aisle to the subcommittee who are not, however, new
members to the Congress, all of whom have served in various
capacities but come to the Water Resources Subcommittee in this
Congress.
The gentleman from New Jersey, Mr. Frank LoBiondo, is new
to the subcommittee; the gentleman from North Carolina, Mr.
Robin Hayes, who is not yet here this morning; the gentleman
from Pennsylvania, Mr. Platts; the gentleman from New York, Mr.
John Kuhl; the gentlelady from Michigan, Candice Miller; and
the gentlelady from Virginia, Thelma Drake.
We are certainly pleased to have the availability of their
services and insight on this important matter, and let me
quickly add, from the review of the testimony this morning,
there is no doubt that there are clear, well-established, and
critical infrastructure needs across the Nation. No matter what
community one may live in, no matter what type of urbanization
or rural setting, we all have water problems of one sort or the
other.
The real issue before us, I believe, is how are we to
finance and provide the resources necessary going forward to
make sure delivery systems are modern, adequate and reliable
with particular emphasis in my case on reliability. I find that
there are alternative financing mechanisms available which have
been greatly underutilized.
As an example, the Federal Home Loan Bank, which is the
creation of this Congress, has a regional bank in Dallas, Texas
that we had gone to to establish a pilot program for the
funding of municipal water improvements. The bank system is
unique in the way in which it offers its financing product,
extending credit up to 30 years at a very low-interest cost.
The bank system set aside a $25 million fund which would have
been matched by localities to address certain rural water
community needs, and to my shock, there was not one applicant
for the available funding that was established. I believe it to
be a reality that many at the local and State levels were
merely not aware that these alternative funding sources were
available. The government-sponsored enterprises, Fannie Mae and
Freddie Mac, are today greatly constrained in the types of
water projects which they may finance in association with
multifamily or low-income housing developments. There is no
reason for that limitation, and it should be examined.
The issuance of private bonds or revenue bonds are sources
of financing which I believe should be explored by the
committee going forward, and as we renew and perhaps expand the
State Revolving Fund, we should find it incumbent to explore
all of these alternative financing mechanisms as I believe it
is very difficult to go through the appropriations process,
given the Nation's difficult financial circumstance, and to
expect a great amount of resources to be plowed into this
particular need.
And for those reasons, Chairwoman Johnson, I am excited
about the potential the committee provides. I am confident in
working together going forward that we can achieve the needed
steps to provide critical water services to communities, and I
am pleased that Ranking Member Mica has given me this
opportunity and also pleased that Chairman Oberstar has
expressed such deep and abiding interest in this matter and am
particularly grateful for his personal time and visit to the
State of Louisiana when we were having a most difficult time
and where we are continuing to struggle with a recovery effort.
I look forward to working with all members, and for those
who are new to the committee, let me again say what has been, I
think, said repeatedly. This is an extraordinarily bipartisan
committee, one of the few in the Congress that has been
historically, and I certainly believe it will remain so as we
go forward.
I yield back the balance of my time.
Ms. Johnson. Thank you very much.
I am going to recognize Mrs. Tauscher, the gentlewoman from
California.
Mrs. Tauscher. Thank you, Madam Chairman. It is wonderful
to say that, and congratulations to you and to my colleagues. I
really want to thank you for having this hearing, really, on
this dire need for critical investments in our Nation's clean
water infrastructure. I would also like to thank you for
allowing me the opportunity to make a brief statement today.
We all know the need to ensure clean water and to protect
our Nation's waterways should be of paramount importance to all
of us, and as stewards of the Clean Water Act, we have the
responsibility to provide for the infrastructure necessary to
ensure the act's proper implementation. The need is not
unknown, but in fact the EPA's own survey shows a needed
investment over the next 20 years of between $300 billion and
$400 billion. One would assume that such a sobering assessment
would spur the current administration to action, but
unfortunately this administration has treated the EPA a lot
like a red-headed stepchild, cutting its budget and tying its
hands on several common-sense initiatives.
Instead of ignoring his own agency's assessments, the
President should get behind immediate reauthorization of the
State Revolving Fund Program. Such action would require the
President to reverse the course he has taken over the last few
budget cycles, though. In fiscal year 2007 alone, the
administration's budget proposed cutting the Clean Water SRF by
22 percent. That request was on the back of a similar proposed
cut in fiscal year 2006 of $370 million. Remember the
President's own EPA has identified billions of dollars of need.
I have long been a supporter of reauthorizing the Clean
Water SRF and infusing much needed funding into our Nation's
clean water infrastructure. In fact, in the 106th, 107th,
108th, and 109th Congresses, I joined my colleague Sue Kelly in
authoring legislation to reauthorize the SRF Program.
Unfortunately, the Republican-controlled Congress never acted
on this important legislation. That is why I am so pleased that
Chairman Oberstar and Chairman Johnson have pledged their
support to the passage of the State Revolving Fund's
reauthorization in this 110th Congress. I look forward to
working with them closely on this issue which we have all
pushed for the last 8 years.
Additionally, Madam Chairman, it is my hope that our
committee's attention to this matter will make it clear to the
administration that the President's fiscal year 2008 budget
request should reflect a strong investment in clean water
infrastructure.
Again, Madam Chairman, congratulations on your new role,
and I thank you for holding this important hearing, and I yield
back the balance of my time.
Ms. Johnson. Thank you very much.
The Chair now will recognize Mr. Duncan, my friend.
Mr. Duncan. Well, thank you, Madam Chair.
In my 18 years in the Congress, I very seldom give an
opening statement except in the subcommittees which I have had
the privilege to chair, and as Chairman Oberstar mentioned, I
had the privilege of chairing this subcommittee for the past 6
years and, before that, chairing the Aviation Subcommittee for
6 years and, before that, serving for 2 years as ranking
Republican on the Public Building Subcommittee. I have always
really enjoyed the work of this committee. I think it is the
greatest committee in the Congress, and I did want to take just
a moment to congratulate our new leadership of this committee.
First of all, I do not think there is anybody in the
Congress that respects and admires Chairman Oberstar more than
I do. I saw him have a dream come true by becoming chairman of
this committee, and I want to congratulate him. I want to
congratulate the ranking member and my friend, John Mica, who
has given me the privilege of serving as ranking on the Highway
Subcommittee, and I look forward to that new challenge and
opportunity. I want to congratulate my friend Richard Baker,
who has been a good friend for a long time, and like Chairman
Oberstar, I certainly admired his presentation in Baton Rouge,
and I have admired him for many other reasons, but I especially
want to say congratulations to my buddy, Eddie Bernice Johnson.
We have worked together for the past 6 years. She is now moving
into the seat that I held, and she will do a great job.
We had an active subcommittee here. We passed the Water
Resources and Development Act twice. The Senate fell down in
their responsibilities, but we did a lot of good work on that
legislation that I hope will lay the basis for that bill early
in this Congress. We passed many other bills like the
Brownfield Redevelopment Act, legislation to clean up and help
assist in the Long Island Sound and the Chesapeake Bay and many
other things.
There is a lot of work that needs to be done. Everybody has
pretty well covered that, so I will not go into that. I will
say, in regard to this hearing today, I think the need for this
hearing was summed up best by one of the witnesses on the
second panel, Mr. Stutlet, who is with the National Association
of Utility Contractors, and he says this. He says, "Utility
contractors build and repair America's unglamorous but vital
water and wastewater infrastructure. What is out of sight and
out of mind to most people is clearly visible to NUCA members
every day. We routinely uncover rotting pipes with gaping holes
that spill raw sewage into the surrounding ground of
residential neighborhoods," and he tells us about an incident
in Denver that just was within inches and seconds of collapsing
that would have led to spills of 2,000 gallons of raw sewage
per minute down the street, through a public park and
neighborhood and so forth, and the reason I particularly like
his testimony is I have said for years that in this country
there is nothing that we take for granted like our clean water
and wastewater systems in this country.
This is a very important subcommittee, and I can tell you
this. I love to come to the hearings because I have never been
to a hearing yet where I did not learn at least a little
something, so I just wanted to say that and congratulate you
and say that I look forward to working with you in this
Congress. Thank you very much.
Ms. Johnson. Thank you very much, Mr. Duncan.
I know that many of our members may have statements this
morning. However, we are going to ask you to submit your
statements for the record. We are going to have votes soon, and
I would suggest that we get on with the witnesses, but you will
have time to make statements at a later meeting.
We are pleased to have a very distinguished panel of
witnesses on our first panel here this morning. We have the
Honorable Benjamin Grumbles, who should have a special seat on
this subcommittee, who is the Assistant Administrator for the
Environmental Protection Agency's Office of Water, and next we
have the Honorable Martin Chavez, Mayor of Albuquerque, New
Mexico, who serves as Cochair of the U.S. Conference of Mayors
and Mayors Water Council, and finally, we have Dr. Ellen
Gilinsky, the Director of Virginia's Department of
Environmental Quality, Division of Water Quality Programs, who
is testifying on behalf of the Association of State and
Interstate Water Pollution Control Administrators, and the
agenda for the hearing also mentions Mr. Todd Ambs, who is the
Administrator of the Wisconsin Department of National
Resources, Division of Water. He was to testify on behalf of
the Council of Great Lakes Governors. However, he is
experiencing traveling difficulties this morning and will not
be able to attend the hearing. If you listen to the weather
reports, I am sure that you understand that. So I ask for
unanimous consent that his testimony be made a part of the
record.
Ms. Johnson. Without objection, we are pleased to have our
other witnesses here with us this morning. Your full statements
will be placed in the record. We ask that witnesses try to
limit their testimony to 5 minutes, an oral summary of their
written statements, as a courtesy to other witnesses. We will
continue to proceed in the order in which the witnesses are
listed in the call of the hearing.
So I now acknowledge and recognize Mr. Grumbles.
TESTIMONY OF HON. BENJAMIN H. GRUMBLES, ASSISTANT ADMINISTRATOR
FOR OFFICE OF WATER, U.S. ENVIRONMENTAL PROTECTION AGENCY; HON.
MARTIN J. CHAVEZ, CO-CHAIR, MAYORS WATER COUNCIL, U.S.
CONFERENCE OF MAYORS; TODD AMBS, ADMINISTRATOR, DIVISION OF
WATER, WISCONSIN DEPARTMENT OF NATURAL RESOURCES; AND DR. ELLEN
GILINSKY, DIRECTOR, DIVISION OF WATER QUALITY PROGRAMS,
ASSOCIATION OF STATE AND INTERSTATE WATER POLLUTION CONTROL
Mr. Grumbles. Thank you, Madam Chair, and thank you, Mr.
Chairman, Chairman Oberstar, and Congressman Baker, for the
opportunity to appear before you. It was always an honor to
work on the other side of the table on the committee staff. It
is even a greater honor to appear before you on behalf of the
EPA and the administration and to discuss innovative,
sustainable, market-based solutions for infrastructure
financing and management.
Congressman Baker, I would like to state for the record
that, to my knowledge, I had nothing to do with the water
shortage you experienced this morning.
I would also like to say to former subcommittee chairman,
Mr. Duncan, how much we appreciate your efforts over the years
to draw attention to the importance of infrastructure.
And, Madam Chair, I cannot tell you how important it is and
how much we appreciate the fact that your first action is to
draw attention to the importance of infrastructure.
So often, we all focus in this town on areas where we
disagree. Where we do agree is the importance of infrastructure
to ensuring that water is clean, safe and secure. We look
forward very much so to having a constructive dialogue with the
committee on appropriate Federal roles and ways to accelerate
environmental progress while maintaining our country's economic
competitiveness.
Administrator Steve Johnson has emphasized that one of his
highest priorities is to work with partners, work with
Congress, work with Governors, all involved in this great
debate, on developing innovative, sustainable and market-based
solutions for water infrastructure financing and management.
I have learned a lot over the years working on this
committee, and I would say that we are focused right now in the
agency on helping to usher in the third wave of water
infrastructure financing and investment in water
infrastructure. The first wave was really with the historic
Clean Water Act, in the early 1970's, focused on that first
wave of Federal grants and subsidies. The second wave was
really another historic moment in transitioning to the State
Revolving Fund process to bring in more leveraging to stretch
that dollar further, and I would say that the third wave right
now is really to focus on sustainability, long-term success
and, as Congressman Baker emphasized, bringing in private
equity. Providing for the Nation's water infrastructure needs
is obviously a public responsibility, a public trust. Involving
private sector dollars is an important component to that.
So what we are focused on is identifying the needs and
developing sustainable solutions. Your hearing is describing
the importance of the needs, and I would say that EPA is
focused on identifying and documenting the needs across the
country. The 2000 Needs Survey identified over 150 billion in
needs for wastewater infrastructure meeting Clean Water Act
mandates. We focus even more on the gap. In 2004, the agency
released a gap that identified a gap of $122 billion in the
difference between the needs over a 20-year period, the capital
needs, and the expected revenues. That number is actually $21
billion if you factor in a 3 percent increase in revenues above
inflation. Our focus is on four pillars of sustainability and
on innovative financing to help narrow that gap. In the
remaining amount of time I have I want to focus on a couple of
those pillars.
Asset management, improved management of the utilities,
working as partners with the utilities is key, and we are
committed to developing attributes of successful asset
management to reduce the demand on infrastructure.
A second pillar of sustainability is full-cost pricing.
This country underprices the value of water that is delivered
in systems, and so we are committed to working with utilities
to help identify the right rates, local rates, so that
investment is adequate and sustainable.
Water efficiency is the other key pillar of sustainability
for us to help reduce the demand on water infrastructure.
And the fourth is having an overall watershed-based
approach that helps improve water quality so it is fishable and
swimmable and also reduces the demands on utilities.
I would just say in conclusion, Madam Chair, that the other
key component to part of the third wave that we are focused on
and committed to working with you on is the innovative
financing--private activity bonds, loan guarantees,
leveraging--trying to reduce some of the barriers to including
the private sector in the funding of public works.
And so we look forward to working with you, and I would be
happy to respond to questions or comments that you have
throughout the hearing. Thank you.
Ms. Johnson. Thank you very much.
We will go directly to the Honorable Martin Chavez.
Mr. Chavez. Good morning, Madam chairwoman and members of
the committee. I am delighted to be here.
I am Martin Chavez, Mayor of the City of Albuquerque. I am
Trustee of the U.S. Conference of Mayors and Cochair of the
Mayors Water Council. I have representation from New Mexico
here. I am very pleased that Congressman Salazar is here. For
those of you who do not know, New Mexico still claims southern
Colorado as part of our own. In saying that, I am not unmindful
of the fact that some from Texas claim parts of New Mexico
still to this day.
I do appreciate being invited to testify today. The
National Conference of Mayors represents approximately 1,200
cities, over 30,000 across the country. We are very much aware
that providing wastewater and water services does not get
anybody elected, but not providing them guarantees no
reelection, and it is one of the critical things that we do,
particularly at the urban level, day in and day out.
In the year 2005, the National Conference of Mayors did one
of the first ever surveys of America's cities, asking mayors
and their senior staff what their water needs were. It was
really the first time we had simply asked "What are your
needs?" we had 414 cities that responded. The three most
important water resource priorities facing America's cities
are, first, rehabilitating aging water and wastewater
infrastructure, second, the security and protection of water
resources infrastructure and, third, frankly, water supply
availability, and while there is a substantial investment needs
gap of which the committee is very much aware, local investment
in wastewater and water infrastructure is very, very robust.
Half of the cities have made major capital investments between
2000 and 2004. Another half have major capital investments
planned between 2005 and 2009, and this is a sustained, ongoing
type of investment. As the committee is probably aware, the
cities pay approximately 90 percent of the dollar when it comes
to these.
The different financing modalities--the "pay as you go"
course is still the most popular among cities; revenue bonds is
the second most common approach; State Revolving Funds,
obviously, are very important and are third, general
obligations fourth; private activity bonds are last, and we are
hopeful that there will be continued flexibility from the
Congress, and enhanced flexibility in these activity bonds so
that we can use them as well is an important tool.
The State Revolving Fund is used by approximately 60
percent of the cities across the country, and--I am sorry--
approximately 40 percent, and we are looking for, certainly,
increased funding because that, again, is a very important tool
for America's cities, and that funding and the flexibility in
those programs is essential in reducing the needs gap.
The Conference of Mayors' policy priorities are as follows:
One, grants to municipalities either directly or through the
States for water and wastewater infrastructure, certainly where
there are affordability issues for communities or when we have
severe environmental problems that we are confronted with.
Second, expanding some portion of the current 20-year loan
category to include a 30-year, no-interest loan category or a
30-year low-interest loan payback period on the State Revolving
Fund Program for water and wastewater infrastructure
investment. Third, modifying current tax law by removing State
volume caps in private activity bonds, to which I alluded
earlier, used for public purpose water and wastewater
infrastructure projects. Again, the increased use of the
activity bonds for public purpose water infrastructure will
help us boost the aggregate spending on water infrastructure
and then narrow the needs gap, which is critical.
We need your help, and we advocate increasing the SRF for
clean water to $1.355 billion or more, drinking water to $850
million or more, and I believe that this will reverse the trend
with which we are confronted in the needs gap, particularly
when it comes to confronting the Federal mandate, which we are
happy to comply with, but as always, we prefer to have it come
funded up front.
We support, again, extending the eligible SRF activities to
include the replacement of major rehabilitation of wastewater
infrastructure, and also we support extending SRF eligibility
projects involving direct Federal resources to help our
communities deal with water infrastructure-related issues,
including $50.6 billion for combined sewer overflows, $88.5
billion for sanitary sewer overflows of stormwater management.
We are supportive of asset management provisions, but we would
ask for flexibility so that it does not put us into a situation
where we end up spending more money in compliance than we
actually save.
With that, I would be happy to take questions as the
committee deems appropriate, and thank you very much for
allowing me to testify today.
Ms. Johnson. Thank you very much.
Dr. Gilinsky.
Ms. Gilinsky. Madam Chair and committee members, thank you
for the honor of appearing before this distinguished committee
and for the opportunity provided for considering
reauthorization of the State Revolving Loan Fund so early in
this session of Congress.
As I was introduced earlier, I am Ellen Gilinsky. I am the
Water Division Director in Virginia, and I am also a board
member of the Association of State and Interstate Water
Pollution Control Administrators, composed of many of my fellow
water directors throughout the country.
You have our written testimony. I am here to spend my time
sharing the Virginia experience with the Clean Water Revolving
Loan Fund. The Fund has been instrumental in the achievement of
water quality improvement and protection in Virginia. Moreover,
with the enormous needs Virginia faces in the immediate future,
maintaining this important Federal-State Partnership Program is
more critical now than ever before.
To date, the program has funded over $1.5 billion in clean
water projects in Virginia. These projects include wastewater
treatment upgrades, combined and sanitary sewer overflow
elimination projects, decentralized sewer system replacements,
agricultural best management practices, land conservation
priorities, and Brownfields development.
With escalating construction costs, increased regulatory
requirements, the importance of restoration of the Chesapeake
Bay, and the aging of our infrastructure, demand for loan funds
has grown astronomically. Just this year we approved funding
for a State record $302 million in loan funds, but we also had
to deny funding to an additional $464 million in requests due
to a lack of resources. We fully expect this level of demand to
continue or to actually increase in the foreseeable future.
Through aggressive use of fund leveraging in Virginia, we
have been able to provide over a 225 percent Federal return on
investment to the program to date, and we are expecting this
figure to exceed a 300 percent return on investment by 2009.
Our administrative costs are low, less than 2 percent of the
total funds distributed to date. The expenditure and use of
resources is very timely. Well over 90 percent of the program's
funds have already been provided to recipients, and the
remaining funds are fully committed to projects under design.
Projects funded through the SRF make a real difference in
water quality improvements and our quality of life. I would
like to take a moment to share some real examples with you.
The City of Lynchburg has used over $70 million in SRF Loan
Funds to finance their Combined Sewer Overflow Program. This
has resulted in the elimination of over 100 of the 132 overflow
points, taking raw sewage discharges out of neighborhood
streams as well as out of the James River.
A small, low-income community of Dawn in Caroline County
used $2.85 million from the Revolving Loan Fund in conjunction
with the housing and community development assistance to
install alternative sewage collection and an on-site treatment
facility, eliminating a health hazard from failing septic
systems.
In our coalfield region of Southwest Virginia, many small
towns have been able to replace their old primary sewage
treatment facilities with upgraded secondary systems using the
Fund. Hundreds of our farmers have been able to install non-
point source pollution controls such as animal waste
facilities, stream fencing and off-stream watering facilities
or purchase no-till planters to protect water quality as a
result of these low-interest loans.
In Congresswoman Drake's district, we fund a lot of
projects. I am sure she is well aware of those. A few notable
ones are in the City of Norfolk. Over $64 million has been
borrowed for corrections to their deteriorating sewage
collection system, and for the town of Onantock on the Eastern
Shore, they have been getting a $6.2 million loan to upgrade
their new treatment removal in their sewage treatment plant.
That leads me to our single greatest water quality
challenge in Virginia and our surrounding bay States, and that,
of course, is the restoration of the Chesapeake Bay. The
estimates for wastewater treatment upgrade costs in Virginia
alone exceed $2 billion. Virginia has stepped up with a strong
commitment to provide substantial grant funding for a
significant portion of the costs by allocating over $400
million in grant money from our own Water Quality Improvement
Fund.
To continue the commonwealth commitment, Governor Kaine has
recently proposed a Bay Bond bill, which, if passed by the
General Assembly, will provide another $250 million over the
next 4 to 5 years, supplying enough funding to achieve our
point source commitments in the bay restoration.
Virginia is also committed to aggressively leveraging the
State Revolving Loan Funds to provide loan funding for the
remaining local share to realize these improvements. This
combination of funding is essential to making the Chesapeake
Bay restoration efforts achievable and affordable for our
citizens.
In summary, Virginia's strategy to improve our water
quality, while funded in substantial part by our own State
funds, relies on the State Revolving Loan Fund to provide the
difference on low-interest loans and to allow us to leverage
our financial resources. Our story is not unique. It is
essential that Congress continue to support clean water through
increased appropriations to the Clean Water State Revolving
Loan Fund.
Thank you again for allowing me this opportunity to speak
before you.
Ms. Johnson. Thank you very much.
In beginning the first round of questions, I am going to
recognize the Chair of the full committee, Mr. Oberstar.
Mr. Oberstar. Thank you, Madam Chair, and I want to thank
our witnesses for their splendid presentations, very well-
documented, thorough presentations. I read the material last
night, and I was very pleased with the documentation. We have
colleagues--the Governors who are represented and who form the
State of Virginia, Dr. Gilinsky speaking for the Governor, and
Mayor Chavez who are on the front line of clean water. That is
really where it begins, and there is a Federal, State and local
partnership, long established in our committee and in the Clean
Water Act, so we are grateful for your participation.
Mr. Grumbles, Ben, welcome back to the committee again. As
you said, it is a little different being on that side of the
table than on this side, but I appreciate your service here,
beginning with service for my former colleague from the State
of Minnesota when you served in the House. I particularly
appreciated your comment that water is a public trust. I have
two questions after some observations.
I liked your reference to a water efficiency pillar, the
watershed approach to cleanup. I think that is vitally
important. I have emphasized that time and time again, and that
is tied in with the non-point source approach to cleanup. We
have to do it on a watershed-by-watershed basis. I look forward
to your March national conference on paying for sustainable
water infrastructure. That should be very interesting. We will
have committee staff attend, and if possible, I would like to
be there myself, but there is a question of sort of the
philosophy about cleanup and responsibilities.
President Eisenhower signed the first Clean Water Act in
1956. He vetoed the second with a veto message that read
"Pollution is a uniquely local blight. Federal involvement will
only impede local efforts at cleanup." I remember it very
well--it was his veto message of the bill advanced by my
predecessor, John Blatnik, who also authored the 1956 act and
then--that was on the table, and then President Kennedy
augmented the act, and legislation was passed in the Kennedy
and Johnson years, and then President Reagan came along, and in
1987, he vetoed a bill with a message that said this, meaning
funding for pollution abatement is a matter that historically
and properly was the responsibility of State and local
governments, and then President Nixon vetoed the 1972 Clean
Water Act with a veto statement saying that dramatic increases
in Federal spending to address inherently local issues would
bankrupt the U.S. Treasury. Well, it did not bankrupt the U.S.
Treasury. It did lead to cleanup. The Nixon veto was overridden
by 10 to 1, meaning overwhelming support on both sides of the
aisle.
I just want to know what is the thought process of this
administration on responsibilities for cleanup. Secondly, we
are going to move a bill, as I said and Ms. Johnson said, in
this committee, that has been crafted over the last 6 years on
both sides of the aisle, by Ms. Kelly, who is no longer in the
Congress, and Mrs. Tauscher, but it is a bipartisan effort. We
have fashioned this bill to bring it to the House floor, but we
were not able to in the past. We are going to do it in this
session of Congress, and I have already had a conversation with
the Chair of the Senate committee. We have harmonized our
approach to this and other issues so that we can move bills
that in the past were matters of bipartisan support but for one
reason or another got stuck. We are not going to let them get
stuck anymore, so the administration will face a State
Revolving Loan Fund bill. What will be its response?
Mr. Grumbles. Thank you, Mr. Chairman.
The first thing I would say is that the EPA is very proud
of its role and the importance of the Federal Government in the
Clean Water Act, setting national standards and encouraging
local solutions, and of course local solutions sometimes
require regional solutions when you are talking about the
Chesapeake Bay or other areas of great importance and that have
interstate implications. So we think it is extremely important,
and even EPA is proud of the role that Congress has given us in
the Clean Water Act.
When it comes to infrastructure investment, the President's
plan is to provide $6.8 billion through 2011 for capitalization
of the State Revolving Funds. That is a continued commitment in
an effort to help in that transitioning to a third wave, which
is true sustainability, and also breaking down barriers so that
private equity and investment can help towards public works and
advancing infrastructure.
So we think it is extremely important to work towards
ensuring that the Clean Water SRF Program continues to be a
great success, and as it revolves, it also evolves, and our
focus is working with the Congress on ensuring flexibility so
that it can be an important tool but certainly not the only
tool to meet water infrastructure financing needs, and we truly
do look forward to working with Congress in a constructive
dialogue on the appropriate Federal role, the role of local
government and of the private sector in funding problems and
the solutions to the problems that definitely confront this
country, and you pointed out yourself--and other members have
as well--the importance of having flexibility to get at the
real problems that the localities and the States determine are
the key problems for a particular cherished water body, and
oftentimes that is non-point source pollution or stormwater or
wet weather flows.
With so many of the problems, the reason that there is a
gap is due to the aging, the natural aging of the
infrastructure, and population pressures in some areas and also
the underpricing of the value of water.
And we look forward--that is one of the beauties of the
water efficiency effort of the agency right now, is the
watershed program. It instills an ethic of water efficiency and
conservation that can help reduce the demand, the energy costs
and the overall costs for utilities in running their wastewater
systems, and we look forward to working with you and other
members.
Mr. Oberstar. Thank you.
If I can summarize your response, the administration does
embrace Federal, State and local partnership approach to
cleanup.
Mr. Grumbles. We definitely embrace the partnerships with
State and local government and also the private sector. The
public-private partnership, Mr. Chairman, is--some say it is a
code for privatization. We say we think it is code for
progress.
Mr. Oberstar. That is a matter that we will address later.
The second question I asked was about the clean water
revolving loan fund bill. What will be the administration's
response to that?
Mr. Grumbles. We look forward to working with Congress and
developing positions and also providing technical assistance as
you have questions or want our views on clean water SRF
matters.
Mr. Oberstar. To be continued. Thank you.
Ms. Johnson. Thank you, very much.
Mr. Baker.
Mr. Baker. Mr. Grumbles, in the Mayor's testimony, he made
reference to concern of Federal mandates to a municipality to
take certain corrective actions to ensure water quality or
enhance levels of water treatment requirements and that often
those are not accompanied by the funds necessary to implement
the new standard. That clearly is a concern.
I wish to take it one step further, however, in identifying
that much of the operative concern in water quality goes to
that of private enterprise. In my own case, industries located
along the southern reach of the Mississippi River take water
out, are required to process, utilize it in their manufacturing
circumstance, and when the water goes back into the River, it
is cleaner than when they took it out.
Now we are at the end of a very long tube, and there are a
lot of other people washing their hands upstream that don't
have similar requirements. That may all still be fine in the
scope of keeping water quality as the number one goal here, but
it would seem to me that there should be in the construction of
these programs something on the incentive side, rather than
just on the penalty box side.
If you don't do it, you go to jail; if you do it, you just
lose money. Neither seems to be a really good kind of
construct.
What about, in looking at programs as we go forward, the
concept of if you are doing it timely, you are doing it at the
standard or better--because we have a lot of creative people
who probably could figure out a better way of doing some of
these things in private industry--if you got tax credits of
some sort or the other that would yield a benefit of some
consequence to the complying business enterprise, the
consequence of this today is that we are no longer just
competing with industry in Mississippi and California. We are
competing globally. The folks around the world are not
complying with EPA standards. They are taking water where they
get it, using it as they see fit and contributing to the world
problem.
The end consequence is the local industry becomes less and
less competitive in all measures because of government
regulation that inhibits their own creativity and thinking. Why
can't we get to an incentive-based program that will enable
industry to use its own resources in the most effective manner
possible?
Mr. Grumbles. Congressman, thank you.
Our charge that the Administrator received from the
President is to accelerate environmental progress while
maintaining the country's economic competitiveness and the
point about making sure that Clean Water Act standards and
programs are effective but also efficient and equitable.
I can tell you that one of the Agency's priorities as we
focus on implementing and enforcing Clean Water Act
requirements is to also accelerate performance track, which is
a program that is looking to provide incentives for those who
are going above and beyond, rather than penalties, providing
some types of incentives for the regulated community, whether
it is industry or municipalities.
So the notion you are making is a very attractive one, and
it is one that we want to work with you and other colleagues on
so that we can be sure that we are maintaining performance and
high standards under the Clean Water Act but also increasing
the efficiencies so that more will choose to be good stewards
or will be rewarded for reducing their water consumption or the
input of pollutants.
Mr. Baker. Thank you.
Mr. Mayor, you may want to follow-up just quickly on the
subject of EPA requirements and municipal compliance and
whether there are any tangible benefits to some of these
requirements that are really downstream consequences. They are
not really necessarily going to affect the people from your
community because it is a discharge from your community going
somewhere else.
And, secondly, when these mandates are required of you, how
often are accompanying funds made available?
Mr. Chavez. Madam Chairwoman, Congressman, the City of
Albuquerque is ringed by sovereign Indian nations. We are on
the Rio Grande, Spanish for great river. If you see it, you
wouldn't be impressed, but if you live in the high desert, it
is a great river.
Pueblos have State stats for purposes of setting EPA water
standards. When I was first elected 12 years ago, the Pueblo
downriver enhanced the status of the State level. I had to put
out $65 million to improve our discharge, and that is back when
$65 million was real money. And in the point of fact, the water
discharge for the City of Albuquerque was cleaner than the
water receiving from the Pueblos and the communities to the
north. We had to foot the bill entirely for that; and my sense
would be that everybody should just clean up their own mess and
that would be very, very helpful.
Very rarely in my experience have we had any meaningful
Federal dollars------
Mr. Baker. If I may interrupt on that specific point--sorry
to interrupt, merely to observe that appropriate professional
conduct, in fact, was not rewarded. It was penalized. Because
you had to spend $65 million and perhaps you didn't necessarily
have it in a sock drawer for a benefit downstream that was not
brought on by the actions of your own community.
Mr. Chavez. Absolutely.
Mr. Baker. Thank you. I yield back.
Ms. Johnson. Thank you very much.
Ms. Hirono from Hawaii.
We will be calling on members as we have done in the past
as you enter the room, as we alternate.
Mr. Baird, does he have any questions?
Mr. Baird. I would like to thank the witnesses here and ask
a question of Mr. Grumbles.
You mentioned that the administration--I think you said
$6.4 billion------
Mr. Grumbles. 6.8.
Mr. Baird. 6.8. How does that compare to the projected
need?
Mr. Grumbles. The gap report that we developed after
intensive analysis identified a gap of $21 billion over a 20-
year period with respect to capitalization needs--not O&M but
capitalization--with the added assumption that revenues would
increase by 3 percent. So we made that assumption, that
economic assumption.
We then looked at that number and said, if we are
successful in implementing our four pillars of sustainability,
which also includes full cost pricing, we believe that we will
make significant progress in reducing that gap if we provide
that funding into the State Revolving Fund to the tune of $6.8
billion over a period of 2004 to 2011. The calculation was made
that what that would do was that would then lead to a revolving
fund on an annual basis, approximately from 2018 to 2040, of
about $3.4 billion that would be going out in the way of loans
and providing financial assistance for local infrastructure
needs.
We have always said that that isn't the single solution,
but that is an important part to capitalize on and make
continued progress through the SRFs, because that is the
explanation of that $6.8 billion.
Mr. Baird. I so appreciate the need for a more
comprehensive approach, but the bottom line question I am
trying to get at is, I would warrant that every member on this
dais has some communities out there knocking on our doors,
saying we are being required to meet improved sanitation and
sewage treatment, and we don't have the money to do it and the
available money to borrow is vastly oversubscribed. And I want
to get just a simple number from you, is what is the
oversubscription number? Give me a time frame and tell me how
much more money do we need than the administration is prepared
to make available?
Mr. Grumbles. Tell me more about--by overprescription
number------
Mr. Baird. Overprescribe, my point being, give me an
estimate of demand, simple estimate of demand over a fixed time
period and how much the administration plans to put towards
meeting that demand so that we know what the shortfall is.
Mr. Grumbles. Well, first point, I know you are asking for
a single number, and I am not going to be able to give you a
single number. I certainly will want to get back to you and
talk more about.
Mr. Baird. I don't understand that. If I may, if I were
trying to estimate--if I were a businessman trying to estimate
the need of something, I would say, what is the cost of the
need? What are our available resources? What is the shortfall?
And that would be a pretty basic number from which to work.
And I understand these are complex matters, but I am just
trying to get it so that I can talk to my constituents and say,
here is how short we are, or here is how long we are, if we
have a surplus. Can you give me that number?
Mr. Grumbles. I can tell you, from a national standpoint,
if you look at the gap report that we have, we estimated a $21
billion gap between those years of around from 2 000 to 2020.
Mr. Baird. So that we will be short $21 billion of
infrastructure investment for clean water?
Mr. Grumbles. If you don't factor into account the four
pillars of sustainability and the increase, an increase beyond
the 3 percent estimate for rate increases, revenue increases
over the years.
Mr. Baird. If you don't?
Mr. Grumbles. So, basically, what we are saying is that it
is more important than ever to embrace this concept of full
cost pricing. And the point I want to emphasize as well,
Congressman, is there are other agencies that provide funding,
grants and loans for water infrastructure, USDA and HUD, but
from an EPA Clean Water Act standpoint, we think that $6.8 will
make substantial progress towards the $21 billion gap and that
what we really need in addition to that is innovative
financing.
See, that gap doesn't take into account that potential. We
would say while the needs are growing, the solutions are
growing, too, and that if we can really think about approaches
above and beyond just the SRF, as a country, we will see
progress.
Mr. Baird. I would just observe that the need seems to be
growing faster than the funding, the solution.
And, secondly, I would observe that while this
administration repeatedly and very recently continues to talk
about not wanting to have to raise taxes, they do not seem to
have a problem with raising fees on people. At the end of the
day, if you are a person trying to make ends meet, if your
water costs more, you are still paying an increase out of your
pocket somewhere. So it is a little bit of sleight of hand I
would just suggest------
Ms. Johnson. Time has expired.
Mr. Baird. If I may, we are leaving these communities with
a mandate to meet certain requirements but without the
resources to do that.
Ms. Johnson. Thank you.
Mr. Duncan.
Mr. Duncan. Thank you, Madam Chairwoman.
Mr. Grumbles, you said in your testimony that the public is
greatly underpaying for their clean water and wastewater
services and getting a real bargain in that way; and I would
agree with that. But the staff did a rough calculation for me
that people pay anywhere from 30 to 50 times or perhaps even
more for the bottled water, as opposed to the public water; and
I remember seeing on 60 Minutes a few years ago where some of
these bottled water companies were getting their water from the
public water sources.
And I know that we have had a lot of the public water
people in here saying their water is really just as clean. But
can you give us a rough estimate of how the water is--our water
infrastructure and services are being paid for today? What
percentage is being paid for by Federal sources of all types?
Are the State governments, are the local governments and how
much is being paid for by the ratepayers, percentagewise? Do
you have information like that?
Mr. Grumbles. I am going to get back to you with some more
specific information. I will underscore that clean water SRF,
which is about to celebrate its 20th birthday on February 4th,
over the course of that program, EPA has provided $24 billion.
I have agreed with the Mayor's comments that a good rough
estimate rule of thumb has been over the years that 90 percent
of local infrastructure projects come from local or State
sources.
The Federal commitment continues to be strong in the sense
of the clean water SRF, the drinking water SRF, but the whole
plan for the administration is that those funds were
established by this committee and other committees to--at some
point in time to revolve without that initial Federal
capitalization or capital subsidy, and so we are laying out a
transition to the third wave of water investment.
But, in the meantime, the plan includes $10.2 billion for
drinking water infrastructure programs through 2018 and 6.8
billion for clean water SRF capitalization moneys through the
Federal Government through 2011.
Mr. Duncan. Let me ask you this, has the EPA done any
studies and analysis to determine is the problem greater or the
needs more in older cities in the Northeast or where, you know,
they are losing population but their infrastructure is older,
or in the newer areas where the growth is just exploding?
Mr. Grumbles. I know the Mayor may have some views on that,
too, based on the surveys that his organization has done, but I
would say, yes, Congressman, EPA has been doing a study. We are
currently working on a 2004--well, it is a needs survey that we
hope to release. It is going through interagency review. And an
important part of that analysis is not just identifying what
types of needs are the greatest such as for wastewater
overflows or nonpoint source pollution but also getting a sense
of which States, which areas of the country are seeing needs
grow more rapidly.
And you are absolutely right. The basic instinct of in
certainly some areas that the infrastructure as the older and
has aged, those may be facing some of the biggest price tags.
Also, areas where the population growth is occurring are
experiencing greater needs.
Mr. Duncan. Let me just ask the other two witnesses very
quickly, do you see more use of much public-private
partnerships in the future? And, Mayor, are you doing that in
Albuquerque in some ways?
Also, I will ask both witnesses, have your associations
seen the need for a Federal clean water trust fund as we have
for highways and aviation and so forth?
Mr. Chavez. Congressman, at this time, the Council of
Mayors is opposed to a trust fund. It seems like it is going to
be a new tax, and if not a new tax we are actually worried
about where the money might come from. But we certainly would
urge as much flexibility in financing modalities as possible,
whether it be public or private SRF. Just give us as many
options as possible and let us solve them as it meets the needs
of our particular communities.
Mr. Duncan. Do you have any type of public-private
partnership in Albuquerque?
Mr. Chavez. We don't. We are primarily financed with IRGs.
Mr. Duncan. Dr. Gilinsky.
Ms. Gilinsky. Thank you. I would say the trust fund could
be one option. Again, we need more options the better for the
financing, and we are certainly not adverse to public
partnership. But we found that the partnership between the
State and the Federal dollars has really worked very well in
Virginia, and Virginia citizens have stepped forward to bear
their fair share of the bill along with the Federal dollars.
Mr. Duncan. Thank you very much.
My time is up. I thank the Chairwoman.
Ms. Johnson. Thank you.
Unfortunately, we will recess for long enough to have one
vote and return. So we won't be away too long.
[Recess.]
Ms. Johnson. The Chair recognizes Mr. Boustany.
Mr. Boustany. Thank you, Madam Chair.
By looking at the testimony, Mr. Grumbles, I note on page 3
you mentioned down toward the bottom, as of January, 2007,
States have provided water body information on $11.1 billion of
their Revolving Loan Funds, and information indicates these
loans support the goals of the Clean Water Act.
I know that Ms. Gilinsky has also stated in her testimony
that this has been one of the most successful Federal programs
in terms of leveraging funds and so forth, and yet we have
heard a lot of testimony not only here today but in prior
episodes where the needs versus revenue gap is a significant
problem.
We know that State Revolving Loan Funds have been disbursed
generously and leveraged, gaps persist and generally we seem to
be losing ground. I would like to know what oversight is being
carried out not so much on a Federal level, because you have
outlined that fairly well in your respective testimony, what is
being done at the State level? What is being done at the local
level to make sure that money is being spent in a very cost-
effective way to build the necessary infrastructure and to take
care of this gap? And what are we going to do to minimize
administrative costs?
Mr. Grumbles. I would like to take a shot at trying to
respond to your questions and then turn to others if they------
Mr. Boustany. Sure.
Mr. Grumbles. --and Dr. Gilinsky, if she would like to talk
about State efforts.
A couple of things, Congressman. One is that, as we oversee
implementation of the Clean Water Act, it is a unique
partnership. The Clean Water Act is--the interesting thing
about the Clean Water Act is, more than other Federal
environmental statutes, there is a very prominent role, a
primary role for the States to carry out the Clean Water Act,
to establish the standards which we approve and to--basically,
45 of those States carry out the permitting programs where the
rubber meets the road to really get the projects going and
complying with the law.
We meet with the States on a very frequent basis to see how
implementation of the SRF--how that is going. One of the
things, messages that resonates very well with this
administration is the need to continuously improve the
streamlining of and operation of the State Revolving Funds,
that those are very successful but there should continue to be
a focus on red tape and cross cutters and to see where we can
work together to reduce potential administrative barriers.
I think it is also important, as Congress recognizes, to
ensure that some of the funds, Federal funds that go into the
State--the seed money into the State SRFs is also for
administrative costs. A key point for us, too, is to--which we
think of every time we come up with where we are required
either because of the terms of the Clean Water Act or we think
it is the right thing to do--to come up with new regulations.
We have to take into account there are already existing needs
and communities have non-Clean-Water-Act-related needs as well,
and that should be taken into account.
Mr. Boustany. Because I know, as we look at the funding gap
and all the discussion we have had on this, I want to make sure
we are covering all bases and doing all the necessary oversight
to be sure these dollars are spent in a very cost-effective way
and we do minimize our administrative costs.
Mr. Grumbles. We think another very important concept of
sustainability is to explore--not to mandate but to explore the
notion of incentives for States to have permit fees where those
who are actually discharging pollution under Clean Water Act
permits would pay for some of the costs associated with that to
help free up State budgets to focus on other Clean-Water-Act-
related needs. So we are working on that, exploring incentives
so that States can help meet their the clean water needs.
Mr. Boustany. Dr. Galinsky, do you care to comment?
Ms. Gilinsky. Yes, if I may let you know about the
oversight that is done at the local level. Once we give out
these loan funds, we go out, we inspect the construction, we
have an Office of Wastewater Engineering that is separate from
the loan program. It is paid for by State funds. But we have
our engineers review the plans and specs, make sure everything
is done in the most efficient manner; and there is grants
requirements about what can be used for administrative costs.
So it is very tightly controlled and very efficient.
Mr. Boustany. Are we looking at best practices, comparing
one State to the next to find out what really works?
I know my time is up, but I was hoping to get a little more
information on this.
Ms. Gilinsky. If I may, yes, we are. And, again, through
our Wastewater Engineering Department, we are up on the latest
technologies and make sure that these localities use them.
Mr. Boustany. I thank you.
Ms. Johnson. Ms. Hirono.
Ms. Hirono. I would like to ask Mayor Chavez to clarify
something for me.
In your testimony, you noted that, while these SRF programs
exist, that many of the cities do not take advantage of them
because of various kinds of limitations; and you note in your
testimony that we should have clarifying language to make the
term of repayment longer and also to provide for no interest
and low interest provisions.
Is that something that is currently not in the authorizing
bills that you would like to have clearly in these bills?
Mr. Chavez. Congresswoman, some parts are in there, some
parts aren't. Some parts are discretionary at the State level;
and if there is not language at least encouraging, then they
ought not to do it. For example, going from a 20- to a 30-year
period.
The defensible reason why municipalities choose not to go
through the SRFs is because they can, frankly, get better rates
on their own investment with industrial revenue bonds and some
of the other modalities that are available.
Ms. Hirono. So, clearly, if we were to encourage them
through no interest loans that would facilitate their
utilization of these funds?
Mr. Chavez. Absolutely. Free money has always been the best
money.
Ms. Hirono. I think that to the extent that the need is
great we should encourage the municipalities to use whatever
array of methods to finance this infrastructure. And I also
note that in your resolutions that were passed that you do not
make those points that you would like to have language for no
interest loans. I really don't know how much--what the impact
of that would be, but since where I am coming from is I want to
encourage the municipalities to utilize these loans as long as
we are authorizing this legislation, would you--it is not in
your resolutions that you attached.
Mr. Chavez. Congresswoman, it is very much a part of the
overall platform of the National Council of Mayors. If you have
a no interest loan, at least some point you get at least 60
percent of it that turns out to be grant, frankly.
Ms. Hirono. Thank you very much.
Ms. Johnson. Mr. Gilchrest of Maryland.
Mr. Gilchrest. Thank you, Madam Chairwoman.
I would like each of you to respond to this inquiry. Now
Ben talked about three stages: Federal grants, State Revolving
Loan Funds and now the sustainability aspect of this. And under
sustainability, Ben, you described asset management, full cost
pricing, water efficiency, and overall watershed approach.
Hence my question.
If the emphasis is on clean water and then we look at the
overall watershed approach and then we look at swimmable,
drinkable, fishable and all those things, we are then, I
suppose, looking at, in the watershed approach, the hydrologic
cycle which determines the sustainability and the endless flow
through that natural physical hydrologic cycle and the
hydrologic cycle then has its own infrastructure in the
biosphere. It is a natural--nature's designed infrastructure in
which we have tapped into because we depend upon it.
Now when we look at nature's infrastructure and we are
looking at watershed approach and we are looking at human
infrastructure, wastewater treatment plants, do we have in mind
the engineering design of making human infrastructure
compatible with nature's infrastructure so we don't
unnecessarily disrupt the hydrologic cycle which is there to
produce clean water so it is fishable, drinkable and swimmable
and so on?
So as we approach that perspective, when we look at State
Revolving Loan Funds, Federal funds, all those things, in part
do we look at the difference between upgrades which produces
toxins, nitrogen, phosphorus that we saw in the Potomac River
this past year or so, endocrine disrupters as a result of
toxins flowing into the Potomac River--and it has happened in a
number of other places including the Susquehanna, which flows
into the Chesapeake Bay. So do we look at the difference at
least as far as our role for keeping water clean in upgrades,
as compared to expanding capacity?
Because when you expand capacity that means you offer
indirect opportunities for more problems, more impervious
surfaces, more storm water problems, more volume of nitrogen
and phosphorus, more air degradation and all those things.
So I guess I am looking at the emphasis on, Ben, your four
aspects of sustainability, overall watershed approach. Is that
really emphasized? And do we look at, when we are getting these
dollars, to expand the infrastructure, making it compatible
with nature's infrastructure? But is there a significant
difference in your approach when you look at upgrades when
compared with expansion of capacity?
Mr. Grumbles. Thank you.
You are emphasizing the importance of things such as low
impact development and green infrastructure, looking at a
broader watershed context beyond the pipe, beyond the property
lines and the fences of the utility itself to try to come up
with ways to reduce the demand and the costs of perhaps
unnecessary, perhaps avoidable expansion. That is the idea, you
know, trying to recognize the hydrologic cycle but also the
terms and definitions under the Clean Water Act and how broad
our regulatory authority is.
So what we want to do on a voluntary basis as much as we
can with States and localities and utilities is to be thinking
about ways to reduce the costs of operating infrastructure or
meeting infrastructure needs by rediscovering and advancing
green infrastructure, low impact development. It can help. It
is a significant component, a pillar of the sustainable
approach to infrastructure.
Mr. Gilchrest. Thank you.
Mr. Baird. [Presiding.] Mr. Chavez.
Mr. Chavez. Congresswoman, Albuquerque last month won the
world leadership award in London for our utility project called
San Juan-Chama. It is a project for bringing water out of the
Rio Grande and treating it for drinking purposes.
Prior to that, we were using aquifer for our entire water
source; and it was engineered in an entirely different type of
way, with fish passageways, with ability to change the flow, so
that we didn't dramatically impact the natural ecosystem
because we found that that had costs--unintended often--down
the road that we couldn't pay for, problematic in how do you
budget for those things and how do you really cost something
out 40, 50 years down the road. If you build in a certain way,
it has an unintended impact on the natural ecosystem you have
to pay for later; and I don't have an answer for that one. But,
clearly, smart engineers today are doing a better job.
Ms. Gilinsky. Congressman, if I may, our Chesapeake Bay
program, the Federal-State local partnership that Virginia and
Maryland are in, along with Pennsylvania, is a perfect example
of what you were speaking about and our tributary strategy,
which basically we are holding the line on the nutrients and
the chemicals that are coming into the tributaries and we are
using innovative solutions such as nutrient trading between
discharges to address that, but we are allowing growth within
those caps. To me, that is a perfect example of what you are
speaking of.
Mr. Gilchrest. Thank you very much.
Thank you, Madam Chairwoman.
Ms. Johnson. [presiding.] Mr. Bishop.
Mr. Bishop. Thank you, Madam Chairwoman. Thank you for
indulging my schedule.
To the panel, thank you very much for coming this morning;
and, Mr. Grumbles, it is nice to see you again.
I wanted to follow up on some of the questions that
Congressman Baird was asking. You several times this morning
have used the term, a $6.8 billion commitment through 2011,
correct? What is the starting point of the commitment? Is it
2008 through 2011; 2004 through 2011?
Mr. Grumbles. 2004--through the history of the Clean Water
Act, the SRF, the Federal Government, EPA through congressional
appropriations has provided $24 billion. But the plan, the
administration to help transition towards this third wave of
greater sustainability is to say, continue to provide Federal
seed money for the Clean Water Act, the SRF between 2004 and
'11.
Mr. Bishop. That is the point I wanted to focus in on.
Because I appreciate the issue of greater sustainability
associated with the third wave, and I was interested to hear
your four pillars. But it seems to me that there should be a
fifth pillar, and that is a maintenance of Federal effort.
In 2004, the Federal commitment to the SRF was $1.34
billion. The 2007 budget request from the administration was
$680 million. So over a 3-year period a decline of a third. And
so my question is, aren't we raising the bar on all of the
other areas associated with sustainability by diminishing the
Federal commitment to maintaining the revolving funds?
Mr. Grumbles. I think that there is a greater Federal
commitment in other aspects of the equation. It is not just the
Federal seed money. But I understand your point about
maintenance of effort, and I would respectfully disagree when
it comes to the level of funding for the Federal seed money
into the SRF.
The view, the vision that we still hold to that was in the
original legislation authorizing the clean water SRF would be
that there would be a phase-down of the Federal seed money over
time and that would further the leveraging and the
sustainability of the State funds. That is not------
Mr. Bishop. But you do acknowledge that the need is
growing? We have at least a $21 billion gap by your numbers if
not a $120 billion gap?
Mr. Grumbles. In various respects, the need is growing. As
we discover more about and keep more focus on nonpoint source
pollution, the documented needs for nonpoint source pollution
grows, but I also believe, Congressman, that the just as
certain needs are growing, the overall solutions are growing,
too, and they are--there are more innovative approaches that
are really budding and that are being carried out in various
cities and communities across the country.
Mr. Bishop. And I am not suggesting that we abandon any of
those. I guess all I am saying is it seems to me that we are
raising the bar or placing a greater burden on all of the other
elements that contribute to the solution here when the Federal
Government is sort of systematically diminishing its piece of
the solution.
Mr. Grumbles. Well, I would say we are focused on
accelerating progress in other respects such as utility
management, environmental management systems, reducing the
footprint of utilities, looking at red tape, potential for
problems in accelerating the assistance through the SRF------
Mr. Bishop. Let me just ask one last question. I know we
are about to get the administration's budget request for
Congress for fiscal '08. Do you anticipate that the Federal
Government's participation in the revolving fund will continue
on a downward trend as it has for the last several years, or
will you be asking for the same amount that you requested in
'07, or will we see an increase?
Mr. Grumbles. I anticipate being able to talk about the
President's budget when it comes out in February and really
seriously working as best I can to answer your questions and in
levels of detail. I know Long Island Sound and other areas that
you yourself are so committed to. We look forward to engaging
with you on the '08 budget.
Mr. Bishop. I will look forward to that opportunity. Thank
you very much.
Thank you, Madam Chairwoman.
Ms. Johnson. Mrs. Drake.
Mrs. Drake. Thank you, Madam Chairwoman; and I certainly
would like to welcome all of you here. This is my first meeting
on this committee so I am delighted to be a part of it.
As you know, in the portion of Virginia that I represent,
there are very tremendous needs, from the very old city of
Norfolk to the very economically depressed cities on the
Eastern Shore, very, very small communities. But I have
listened a lot this morning to the President's budget and what
he is going to propose. Is there something different about this
type of funding, that Congress doesn't have the ability to
change it if they chose to?
We keep talking about the President's budget, but my
understanding was Congress has the ability to hold the purse
strings; and if Congress made the choice to increase the
funding, wouldn't that be possible?
Mr. Grumbles. The administration fully recognizes it is
Congress that actually enacts the budget and when the budget is
released in February, I know from an EPA perspective we really
look forward to working with you and others in the committees
and the Appropriations Committee. Part of the message that we
are sending in the context of this hearing on needs for water
infrastructure is the overall need not only to sustain the
State Revolving Fund, because that is a model, and to have
continued involvement at the Federal level and the State and
local level, but also to be thinking about this third wave of
greater sustainability, including private sector. We are very
interested in continuing to review innovative financing
proposals that may involve other committees and congressional--
----
Mrs. Drake. That is what I heard a lot from you, is that we
undervalue water. We heard yesterday on the floor that bottled
water--we pay $400 a barrel for what we use in bottled water.
So I have heard you say that.
I have heard you talk about permitting, and I think this
committee is very interested in how do we address this problem?
How do we increase funding to deal with this particular
problem?
So it is like in other committees I have served on. I think
we all have the same end goal. It is just how do we get there.
But nothing would prevent Congress, if they chose to, to
increase the funding for the revolving funds.
Mr. Grumbles. Right, and we are hoping that Congress will
also increase opportunities for good Samaritans to clean up
abandoned mine sites. We think that is a great role for
Congress to add another tool to the toolbox, which will also
help free up public moneys for other types of Clean Water Act
needs.
Mrs. Drake. I also join Congressman Boustany in being
concerned about what are the requirements in here and how are
we requiring people to spend money and are we doing things that
we could do differently and spend the money more effectively?
But I would also like to ask you, in doing these revolving
funds grants and helping localities meet this need, is there
any requirement in there for them to have a planning process
for down the road? Because it seems to me 50 years from now the
Members of Congress are going to have that same discussion as
that infrastructure begins to deteriorate.
Mr. Grumbles. That is an excellent question; and the answer
is, yes, there are some planning requirements. One of the
principles that we have when it comes to Congress reviewing the
clean water SRF is to look at ways to incorporate asset
management, up-front planning even more so than it currently
is. But there are some States and communities that are doing a
great job. But we think that is an area that is definitely
worthy of congressional input.
Mrs. Drake. I would just like to ask Dr. Galinsky quickly
because you know the rural communities that I represent on the
Eastern Shore. Is there something with the Commonwealth that
helps them--because small communities don't have the access to
have the same staff that, say, Norfolk or Virginia Beach would
have, is there help for them or are they on their own planning
and what needs to be done?
Ms. Gilinsky. Congresswoman Drake, we do have different
rules for how we give out the loans to more rural communities.
They get lower interest loans. They get more grant money than
loan money from the Water Quality Improvement Fund in Virginia
and that helps them hire the contractors. We don't actually do
the work for them at the State level, but they do get more help
financially. They get a better loan.
Mrs. Drake. Do they get help in expertise from a staff
level as well?
Ms. Gilinsky. Lower interest loans. They would hire the
consultant.
Mrs. Drake. Instead of having someone that would be
available?
Ms. Gilinsky. We don't have the staff that would actually
design it.
Ms. Johnson. Thank you.
Mr. Mitchell.
Mr. Mitchell. Thank you, Madam Chair.
I would like to ask Mr. Grumble a couple questions.
Essentially, with the allocation of the SRF funds, does EPA
review these, the formula for this at all?
Mr. Grumbles. Well, we implement the formula that Congress
provided us on a clean water SRF funds, so we review it in the
context of making sure we are following the statute in--the
allotment formula in the statute.
Mr. Mitchell. You mentioned, Mr. Grumbles, earlier that it
was--one of your concerns is to look at the needs; and I would
say that, looking at this formula, the needs have not been
taken into effect or into account. Do you think that the
current distribution is equitable?
Mr. Grumbles. Well, our basic approach is that, ultimately,
it is really a congressional decision when it comes to the
allotment formula that involves equities and policies.
Certainly on needs we feel duty bound to report on what we find
and what the States provide us in terms of their needs, and we
do have information on growing needs in certain States or areas
of the country. But, ultimately, I think historically the view
of the agency, regardless of who the administration is, has
been the allotment formula itself is typically a role that
Congress focuses on.
Mr. Mitchell. I would like to just mention that I think
that this formula which was based on 1970 population figures.
Is that correct?
Mr. Grumbles. Yes.
Mr. Mitchell. And Arizona, as an example, has doubled in
size, in population. I notice by some of your own figures that
we are ranked 10th in needs, we are ranked 20th in population,
and 38th in funds received and, in fact, we are at 53rd in per
capita. And I would suggest that Arizona now is the fastest-
growing State. I would hope that there might be some input from
EPA to re-evaluate this and make some recommendation if you are
concerned about needs, because I think this formula is really
out of whack.
Mr. Grumbles. Congressman, we and our staff would be very
happy to work with you, particularly looking at the Safe
Drinking Water Act amendments of 1996 that Congress enacted
that specifically tie revisions of the allotment formula to EPA
needs surveys as they come up, to tie that to the revisions to
the allotment formula based on the needs survey.
Mr. Mitchell. Thank you.
Thank you, Madam Chair.
Ms. Johnson. Thank you.
Mr. Hall.
Mr. Hall. That you, Madam Chairwoman; and thank you all.
You are illustrious witnesses.
According to the ASCE 2005 infrastructure report card, New
York has over $20 billion in wastewater needs. My district in
New York's Hudson Valley is one of many in the country,
particularly in the Northeast, where a growing population and
higher usage is threatening to overwhelm an aging clean water
infrastructure.
The infrastructure in place is becoming overwhelmed. Old
septic systems are being overrun. In many instances, there are
new needs for infrastructure where none exists at all.
In a world of competing needs and limited dollars, what is
the decision-making process in place to try and assure that
growing non urban areas will be able to get adequate
assistance; and, in general, what priorities are considered in
the distribution of CWSRF funds?
Mr. Grumbles, I guess that would be to you first.
Mr. Grumbles. Well, I would say two things; and the second
one is going to be to commit to have--for me and staff to get
back to you for a longer discussion about the specific criteria
that are used in the congressionally directed allotment
formula.
In terms of the needs survey, as we are working on the next
needs survey, we can also describe to you in more specific
terms some of the criteria we look at. But we definitely
recognize, Congressman, that the country changes. It is
changing, and population shifts mean different needs, water
quality needs in other areas of the country and that growth in
some areas, whether it is suburbs or rural areas that are
growing, will have different infrastructure and water quality
needs than they did in the '70's.
One of the things that we are very interested in is
advancing a comprehensive strategy from the grass-roots level
but with EPA assistance on decentralized systems. Septic
systems provide a significant role for communities across the
country and, obviously, in rural areas but also in suburban and
some urban areas; and we think it is important to make better,
more effective use of funds and technologies to prevent
malfunctioning septic systems and provide information. Because
it can be a public health issue if septic systems are not
properly operated.
Mr. Hall. Thank you.
Director Gilinsky, do you have anything to add from your
experience?
Ms. Gilinsky. Yes, only that I am sure, as in your State of
New York, we have at the State level--once we have funds
available, we prioritize based on what communities need the
money, where they have other sources of funds, how quickly they
can get ready, and we try to stage different projects so that
you can spread the money out as much as possible. Because,
obviously, the urban projects take a lot more money than some
of the more rural projects. But that doesn't mean they are more
important. So we try and spread the dollars, and I am sure your
State does that as well.
Mr. Hall. Yes. Thank you very much.
One more question which concerns the whole watershed
approach. My district is also home to the Indian Point Nuclear
Plant, which is currently leaking strontium and tritium into
the groundwater and into the Hudson River, which is the source
of drinking water for Peekskill, Poughkeepsie and many smaller
communities on the River, whose processing plants I don't
believe are cable of separating radionuclides from the River
water.
Understandably, water concerns are rising partly because of
groundwater contamination, also dumping of trichloroethylene
from manufacturing plants into the ground, which has
contaminated wells in Hopewell Junction in Dutchess County. So
part of this, I guess, would be asking for other branches of
EPA to do their job better so that we don't look--we are not
faced with a drinking water consumption problem that is either
well related or municipal system related because they are
taking drinking water out of contaminated water out of the
River.
But I was wondering if you had a comment on what EPA's
suggestions would be for these kinds of problems and do you
have any new--since you mentioned technological assistance, do
you have any ideas as to how to remove strontium-90 from river
water so we can drink it?
Mr. Grumbles. Two things, Congressman. One is source water
protection and then the other one is that--your technology
question or point about that.
On source water protection, it is a term which is really in
the Safe Drinking Water Act that EPA administers with our
partners in the States. Focus is recognizing we all live
downstream, so there ought to be efforts to prevent pollution
upstream that get into your drinking water supplies. And
oftentimes the tools to protect that source water is not under
the Safe Water Drinking Act, it is under the Clean Water Act,
or it could be under Superfund or RCRA. I think the point that
you are getting at--or other statutes, depending on the types
of activities involved. So that is what the watershed approach
is encouraging.
From an EPA perspective, I know there are various offices
beyond my office involved in some of the environmental
challenges in your district; and I will certainly share that
information with the Superfund office and other offices,
enforcement office, so we can use tools that are available and
work with the State and with the community.
On the technology front, technology is definitely part of
the solution to meeting infrastructure needs and watershed
protection needs across the country.
EPA, the President's budget request for '07 included
significant initiative for funding for research and development
for innovative technologies, primarily for underground
wastewater systems and drinking water systems, too, but dealing
with the pipes and distribution systems to try to repair and
upgrade those in the most cost-effective way possible.
But the point is, I don't have an answer--specifically one
to your technology questions about removing that type of
contaminant. We think technology is an important part of it,
and I will share with our research office and also Superfund
office your questions, and we commit to get back to you.
Mr. Hall. Thank you very much; and thank you, Madam
Chairwoman.
Mr. Baird. [Presiding.] Mr. Arcuri will be next.
Mr. Arcuri. I thank the Chair. I realize no one wants to
hear from the last person asking questions after a 2-hour plus
hearing, so I will be very brief, but I would like to thank the
panel.
Mayor, just a couple of very quick questions for you. I
believe you indicated earlier that private activity bonds are
the least used--utilized vehicle for financing these type of
projects. Is that a correct characterization of your testimony?
Mr. Chavez. That is correct, Congressman.
Mr. Arcuri. Do you know the reason why they are used the
least?
Mr. Chavez. My sense is that it is because of the volume
caps on those, and if those were--had more flexibility, were
removed, they would be more widely used.
Mr. Arcuri. I realize it is not the jurisdiction of this
committee, but, if they were removed, would that be a vehicle
that would assist municipalities in funding these type of
projects?
Mr. Chavez. Congressman, it would be one more tool that we
would have at our disposable, absolutely, yes.
Mr. Arcuri. Thank you.
Mr. Baird. Mr. Kagen.
Mr. Kagen. Thank you all for being here, and I apologize
for really being the last person to ask a question this
morning.
Mr. Chavez, what are the three things that we can do to
help you? And the next question, what are the three things that
your counterpart to your right at the EPA could be doing, three
things to help you do your job better?
Mr. Chavez. Congressman, thank you.
The priorities for the mayors are threefold. One, expanded
grants to municipalities, either directly or through the
States, preferably directly, for these water and wastewater
projects, particularly where there is affordability issues or
when you have a serious environmental issue with which we are
confronted; expanding the current 20-year loan category to a
30-year no interest loan category or 30-year low interest loan
payback period through the SRF; and then modifying the current
tax law to remove the State volume caps on the private activity
bonds.
Underlying all this is just more flexibility, more tools
and then we can see which tool best meets the needs of an
individual city.
And in terms of Mr. Grumbles, just as long as he keeps his
wonderful, marvelous disposition and then make him give us more
money.
Ms. Johnson. [Presiding.] Mr. Boustany.
Mr. Boustany. Thank you, Madam Chair.
Dr. Gilinsky, do smaller communities have adequate staff
and expertise to properly evaluate and manage their assets,
water assets?
Ms. Gilinsky. Yes. Some--I am sure it varies. I don't have
direct information, Mr. Congressman, but that is part of the
grant, is that they hire consultants who do work with them to
get that expertise. We try to hook them up with consultants,
and we probably go out and spend a little more time with those
smaller communities to let them know what is out there.
Mr. Boustany. Thank you.
One final question for the panel. What is the effect of
applying Davis-Bacon prevailing wage laws to the State
Revolving Fund and does this mean that fewer projects could be
constructed? Do we have any data on this?
Mr. Grumbles. Congressman, I appreciate the question, and I
feel that the best answer would benefit from some more time and
comparing the notes that we have and to get back to you on
that, the impacts of that.
Mr. Boustany. I would appreciate some information on that.
Thank you. That is all I have.
Ms. Johnson. Thank you very much.
Mr. Baird.
Mr. Baird. Mr. Grumbles, earlier you spoke about
administration commitment of $6.8 billion over 6 years, do you
remember?
Mr. Grumbles. 2004 through 2011.
Mr. Baird. OK, so 7 years. To the best of your knowledge,
how much do we spend in Iraq in 1 week?
Mr. Grumbles. I don't know, Congressman.
Mr. Baird. It is roughly $2 billion, and I just point that
out because it seems to me that our commitment nationwide from
this administration to SRF is roughly the equivalent of about 3
and a half weeks in Iraq compared to 7 years in the United
States of America to provide clean water for our own citizens,
and it is worth keeping that in context.
I yield back.
Ms. Johnson. Thanks to all of the panel members. I will
probably submit some questions later, but we have kept the
second panel waiting a long time. So thank you very much for
coming.
The second panel of witnesses consists of Mr. Kurt
Soderberg, the Executive Director of the Western Lake Superior
Sanitary District, Duluth, Minnesota, testifying on behalf of
the National Association of Clean Water Agencies; Mr. J. Kevin
Ward, Executive Administrator of the Texas Water Development
Board, and testifying on behalf of the Council of
Infrastructure Finance Authorities; Ms. Nancy Stoner, Director
of the Natural Resources Clean Water Project; Mr. Jim Stutler,
President of the Tierdael Construction Company, located in
Denver, Colorado, and current President of the National Utility
Contractors Association; and Ms. Debra Coy, Director and
Research Analyst of water-related issues for Janney Montgomery
Scott.
As I noted to the first panel, your full statements will be
placed in the record, and we ask that you try to limit your
testimony to 5 minutes as a courtesy to other witnesses.
STATEMENTS OF KURT SODERBERG, EXECUTIVE DIRECTOR, WESTERN LAKE
SUPERIOR SANITARY DISTRICT, DULUTH, MINNESOTA, ON BEHALF OF
NATIONAL ASSOCIATION OF CLEAN WATER AGENCIES; J. KEVIN WARD,
EXECUTIVE ADMINISTRATOR, TEXAS WATER DEVELOPMENT BOARD, DALLAS,
TEXAS, ON BEHALF OF COUNCIL OF INFRASTRUCTURE FINANCING
AUTHORITIES; NANCY STONER, DIRECTOR, CLEAN WATER PROJECT,
WASHINGTON, D.C., ON BEHALF OF NATURAL RESOURCES DEFENSE
COUNCIL; JIM STUTLER, PRESIDENT, TIERDAEL CONSTRUCTION COMPANY,
DENVER, COLORADO, ON BEHALF OF NATIONAL UTILITY CONTRACTORS
ASSOCIATION; AND DEBRA G. COY, DIRECTOR/RESEARCH ANALYST -
WATER, JANNEY MONTGOMERY SCOTT, L.L.C, WASHINGTON, DC.
Ms. Johnson. Again, we will proceed in the order in which
the witnesses are listed on the call, so, Mr. Soderberg, please
proceed.
OK, Mr. Ward is next.
Mr. Ward. As I understand, Mr. Soderberg is having a
discussion with someone right now, so I will, if you allow me.
Madam Chair, Members of the Committee, I greatly appreciate
being here. I am the Executive Administrator of the Texas Water
Development Board, but I am also here today because I am
testifying on behalf of the Council of Infrastructure Financing
Agencies. That is an organization that represents virtually
every State and the territories and both the State revolving
fund that is a clean water revolving fund as well as the
drinking water State revolving fund--should I continue or
should I yield to the member?
Ms. Johnson. Go ahead and continue.
Mr. Ward. Thank you.
I want to say what a great honor it is to be the first
witness from Texas to testify before your committee, Madam
Chair. There are an awful lot of needs in the State of Texas,
and I believe that we represent a broad base of needs that
would reflect most of the States in the United States who don't
really have the CSO issues that you might see and some that you
brought up as one of your priorities. But, nonetheless, we can
relate to that because of issues we have had in some of our
major cities.
First off, I would like to express on behalf of CIFA our
gratitude and, of course, how pleased we are on the fact that
this committee is taking up as a priority reauthorization of
clean water State Revolving Funds. As I have heard already from
many of the members here, they know that you have been working
on this issue for quite some time, and it would be very nice
for it to bear fruit this time.
Certainly nonsource point problems throughout the United
States as well as in Texas are ones that have not been
addressed yet with the program.
But with any program, you have to look at what the
partnership has been and what the success has been, and over
time, I think that this program demonstrates that partnership
is really the key. You have to have the ability to afford
flexibility to the States. The beauty of the Clean Water
Revolving Fund has been that it was delegated from the old EPA
grants program fully to the States; and the States became
owners, if you will, of those programs and began bringing
forward those priorities through intended-use plans and a
formal structure that you glean data from and you are able to
get information from. Because of that, you can see that there
has been a lot of momentum in this program. It has waned in
recent years.
We have a gap survey that we prepared. I heard some
comments earlier. I think Congressman Baird asked the question,
"What is the 'gap'?" we have not done a formal estimate of
that, but I would say that we estimate about 2,000 projects are
seeking loans right now for over $9 billion, and historically,
with the higher level of funding the States have been
leveraging, the Federal grants produce about $3 billion to $5
billion a year in loans. So, if you met the low end of that,
the $3 billion from the $9 billion, then you have got about a
$6 billion gap of need that has been expressed for this fund.
Now, regardless of whether you think in the future there
are alternative sources for some of that, if through
sustainability you are able to get the entities to take
responsibility and fund it themselves on full-cost pricing and
all of those issues, it is still the stated needs of your
constituents that those are what they say they need.
So we have watched the same thing you have. Over the past 4
years, recent appropriations have been dwindling; it has been
cut in half. We see this as a trend that really is counter to
what the trends are from our customer base right now. We are
seeing a lot more disadvantaged community need. We are seeing
an awful lot more need for innovative financing. Certainly, we
look at this issue of trying to bring more capital into the
program as vital.
One of the issues that there has been for Texas, as well as
for our membership, has been for expanded flexibility and the
cap allocation under private activity bonds. Right now, you
know, it is debatable as to whether that will cause
privatization to an extent where actually the services are not
being provided by a public entity anymore. I think the real key
is, it provides a mechanism, a conduit, to bring private
capital into the system in a way that we have not been able to
in the past because we compete against other interests in the
private activity cap.
In Texas, we did take an innovative approach. The governor
several years ago asked the legislature to pass a bill under
"Get Passed" to give an allocation to the Water Development
Board each year for small communities, for rural communities,
if you will. It also gave us the ability to ask for large water
projects up to $100 million of the cap. So we have seen that
already acted on by our legislature, and certainly, it is an
issue that I think that many States have brought to you.
Arbitrage rebate relief, that is another issue that we see
as something that could also bring more capital into the
program. It is just an easy mechanism. This committee has
talked about it before. Obviously, your jurisdictional issues
need to be worked out, but certainly, we are here to provide
whatever information you need on that.
In 2005, we see about 900 projects that were finished. That
is 21 billion gallons of water collected and treated every day,
193,000 construction and 77,000 permanent jobs created, and
over $1.1 billion in savings over the next 20 years for those
entities. Those incentives are why those people came to the
program.
I think it also accentuates the fact that it is an
investment program. It is not just a drain on Federal capital.
This is an investment program that creates jobs. It provides a
capital base out there in both the State infrastructure and
human infrastructure that was mentioned earlier as well as the
capital infrastructure in a permanent way. It revolves. It will
always revolve. Any investment that goes in here is required by
law to revolve. It has administrative oversight on a continuing
basis.
Examples in the State of Texas vary from an infiltration
and inflow reduction and correction problem in the city of
Houston that could affect up to 5,300 miles of sewer pipes,
that are as old as 50 years, to innovative and very
environmentally sensitive projects like in High Island
Independent School District in Galveston County, where it was
cited by EPA for the environmental and economic benefits that
it produced.
Finally, additional water supplies have been created for
the city of San Antonio. We have had 35,000 acre-feet of water
replaced all because of a reuse project that used 64 miles of
transmission line to reuse that wastewater in a beneficial way.
We have a lot of recommendations that are specific that we
could provide to the committee. Rather than go over any more of
my testimony, I have highlighted, I think, the points that are
pertinent for you, and I will be here at the end for questions.
Ms. Johnson. Thank you very much.
Mr. Soderberg.
Mr. Soderberg. Thank you, Madame Chairman, and members of
the committee. I was unavoidably detained. I did get the
opportunity to speak with Mr. Chair, so I took advantage of
that.
My name is Kurt Soderberg. I am the Executive Director for
the Western Lake Superior Sanitary District in Duluth,
Minnesota. I would represent the small sewer district.
Although, I am here speaking on behalf of the National
Association of Clean Water Agencies, NACWA. We represent some
of the largest entities around the country, 300 or more
agencies, the largest often in each State. We do reclaim more
than 18 billions of gallons of wastewater every day, which is
the majority of the wastewater reclaimed around the U.S.
Much of what was in our testimony you have already heard
from other speakers, and often, it was more eloquent than I, so
I will try to give you more of the local perspective.
We have seen tremendous progress in 35 years, but we have
also seen the fact that this is not the time to pat ourselves
on the back. There clearly are unmet needs. You heard the
statistics already in some of the members' comments at the
beginning. Our point, though, that we made in the testimony is
that the Federal Government's abandonment of the States and
municipalities as these full-fledged partners in funding clean
water will have unacceptable consequences, and we are urging
you to move forward again with a partnership.
There are some specific areas that NACWA has comments. We
are asking you to fully fund the Clean Water Act, to
reauthorize the State Revolving Loan Fund, to provide loans,
loan subsidies and grants. The needs out there, you have
already heard, clearly outstrip the supply; $20 billion to $30
billion is the number that has been used in other contexts, but
there is also a need for a dedicated revenue source.
We ask you to work with us in finding a dedicated revenue
source for the State Revolving Loan Fund, provide funding for
sewer overflow control projects. H.R. 624, already enacted,
provided $250 million per year over a 5-year period. This would
help us, our district, as well as many others around the
country in trying to eliminate the problem of combined and
sanitary sewer overflows. Work with us on a National Institute
for Utility Management. Help us to help utility managers work
more effectively and efficiently.
We are also looking at the Federal Government for greater
investment in research, wastewater treatment technologies,
greater research on emerging chemicals of concern, and
technologies to treat these chemicals and green technologies
for our industries, and also work at comprehensive management--
not storm water, not clean drinking water, not wastewater; look
at water as being water, and try to manage away from some of
the silos.
In the remaining time, I would just like to bring it down
to our level. We did a master planning process. Our facilities
are worth about $550 million. If we were to replace them, we
have got a capital program of about $100 million over the next
10 years. The State of Minnesota takes maximum advantage of the
State Revolving Loan Fund. They fund about $100 million in
loans annually. Yet, there is another $200 million that goes
unmet every year, and Minnesota is one of those States that
does take advantage of those. So we are looking at the fact
that there is not enough State Revolving Loan Fund money out
there.
We are also seeing at the local level this increased cost
of compliance and escalating operating and capital costs. This
is a perfect storm right now in looking at greater costs and
how the global economy is also impacting us. We will be talking
about this at our national conference coming up here just later
in the month.
We really need more money on the table. That is the bottom
line. With the State Revolving Loan Fund, we look at the
possibility, and we have asked about the possibility of a
reemergence of some additional funding that would be long-term
funding.
When Mr. Grumbles talked about the four pillars, he talked
about the fact that part of it is that municipalities are not
charging sufficient rates. That is not what our data shows. Our
data would show that average service charges have increased
over the past years that double the rate of inflation. In
Region 5, where we come from, rates increased over 13 percent
in 2005 alone. In our case, our rates went up by 4.9 percent
this 2006 to 2007. Our industrial customers are saying that
they cannot stand those sorts of increases. They are dealing in
a global economy with the pulp and paper industry, and they are
not believing the full-cost pricing.
So, Madame Chair, we thank you for this opportunity. I will
be available to answer questions, and we really are
appreciative that you are drawing attention to this very
important issue of clean water funding in this new Congress.
Thank you very much.
Ms. Johnson. Thank you very much.
Ms. Nancy Stoner.
Ms. Stoner. Good morning, Madame Chair, and members of the
subcommittee. I am Nancy Stoner, Director of the Clean Water
Project of the National Resources Defense Council.
Thank you for holding this hearing today on the
reauthorization of the Clean Water State Revolving Fund. This
is a tremendous opportunity for the Congress to step up our
investment and to spend smarter so that the U.S. continues to
make progress in ensuring that there is clean, safe, usable
water for the next generation.
The Federal Government's investment in wastewater treatment
over the past 35 years has brought tremendous progress in
cleaning up our waterways. Yet, the issue of whether there is a
Federal role in water infrastructure investment is a recurring
question. To my mind, that issue was resolved appropriately by
Congress in 1972.
Water pollution knows no State bounds. As Mr. Grumbles said
earlier today, we all live downstream. Failure to protect water
resources in one State pollutes downstream surface and
groundwater resources. That is why Congress passed the Clean
Water Act in the first place and why the Federal role is so
important today.
But the Clean Water SRF is also a good investment. It
provides water quality and community benefits such as reduced
discharges of raw sewage into rivers and lakes, less waterborne
illness, enhanced wildlife habitat, biodiversity, and safe
drinking water sources. It also protects businesses that are
dependent upon clean water--tourism, fishing, beverages, and
even development.
It creates hundreds of thousands of jobs for skilled
workers every year, and because it is matched at the State and
local levels, it leverages non-Federal investment at a rate of
2.23 times the Federal dollar. I call your attention to the
photo there, which is a picture of a green roof in Milwaukee,
which is part of its system for controlling raw sewage
discharges.
But it is clear that our level of investment is inadequate.
There is an upward trend for beach closings, red tides, dead
zones, waterborne illness, water shortages, coral reef damage,
nutrient pollution, and as the chart shows, sewage pollution.
At our current rate of investment, sewage pollution is expected
to be as high in 2025 as it was in 1968, that is, before the
passage of the Clean Water Act and when, as Mr. Chairman noted
earlier, Lake Erie had been declared dead.
Even while the problems are growing, Federal contributions
to the SRF are shrinking, which is what the chart shows. The
funding gap is large and increasing, and investment in research
and development that could save us money in the long run has
been cut in half.
The picture is bleak. The sewer systems are getting older,
more antiquated, more likely to fail, and they have more work
to do due to increasing population, land development that
occurs at a rate more than twice the rate of population growth,
global warming, and an increasing population of Americans
vulnerable to illness. The pie graphs there are showing the
decaying of the pipes in the systems, indicating an increased
likelihood that they will fail and break and cause sewer
overflows.
We recommend that you address the situation by
substantially increasing funding over at least the next 10
years, identifying a dedicated source of funding and better
targeting resources to achieve Clean Water Act goals.
I will focus on the last of these three recommendations for
the rest of my time.
The photo here is actually from a restored wetland in
Houston, Texas, profiled in a recent Sierra Club publication
that just came out, Building Better II. It filters runoff from
a 30-acre urban residential watershed and reduces the
likelihood of flooding.
To increase the efficiency of SRF funding, we need to fund
existing needs, not sprawl; fund green infrastructure, which I
will be talking more about; fund the highest priorities looking
at water resources in an integrated way; provide more funding
for R&D to identify better, cheaper approaches; and enhance
public involvement and transparency to get better results.
The photograph is a rain garden used to treat parking lot
runoff at the Washington Naval Yard. It comes from a
publication that NRDC did with a low-impact development center
called Rooftops to Rivers.
We need to fund existing needs, not sprawl. Development
significantly increases water pollution, and sprawl development
increases it the most. The more pavement the more pollution,
that is extremely well-documented by now, yet, the SRF still
funds new collection systems, new treatment plants at excess
capacity, all of which just fuel development. According to
EPA's 2005 report, 20 percent of the SRF was used to fund new
sewers. Sprawl should pay for itself; it should not be
subsidized by the American taxpayers.
Instead, we urge you to increase funding for green
infrastructure, an emerging technology that uses soil and
vegetation to restore urban and suburban waterways. Green
infrastructure approaches include both engineered approaches
that mimic natural functions, such as rain roofs and rain
gardens, and the protection of natural areas--wetlands, stream
buffers and forests--to provide water capture and purification
functions naturally.
The photo is a green infrastructure approach used by
Seattle to treat runoff.
Green infrastructure has so many benefits that it is hard
to fit them on one side, and I do not have time to tell you
about them all right now, but they include improved water
quality, hydrology, wetland/wildlife habitat, beautifying an
area, increasing property values, and often saving money.
The photograph is from Portland.
In addition, we would like to see other program
improvements in place to spend smarter--integrated water
resource management planning, research and development enhance
public involvement and a commitment by Congress to fund those
projects that provide the greatest value first or address
immediate public health threats.
This photo is of a restored marsh in Toronto that used to
be a landfill.
The last slide is on additional resources available------
Ms. Johnson. Which you will submit.
Ms. Stoner. --which I will submit, and I appreciate the
opportunity to speak with you this morning.
Ms. Johnson. Thank you very much.
The Chair recognizes Mr. Baird.
Mr. Baird. Madame Chair, I thank you.
I want to thank all of the panelists for their
observations. We will have questions in a moment, but I want to
take this moment to extend a special welcome to a long-time
friend. Jim Stutler is here. He is the President of Tierdael
Construction in Denver, Colorado, also of the National Utility
Contractors Association.
I am especially glad to see Jim. We were in a Scout troop
together back in La Fruto, Colorado. Even though our fathers
are not able to see us here today, I would like to think our
Scout master, John Barkus, would have some pride that a couple
of his young charges managed to make it fairly well in the
world.
Jim, thanks for your testimony, and thanks for being here.
I also want to apologize to the witnesses. I have to do
duty in the chair on the floor, so if I depart, it is not for
lack of interest; it is for mixed responsibilities.
Thank you, Jim, and I look forward to your comments as of
all of the witnesses.
Mr. Stutler. Thank you, Congressman.
Madame Chairman and honorable members of the committee, as
Brian said, I am Jim Stutler, and I am the President of
Tierdael Construction. We are a utility contracting company in
Denver of about 108 employees. I am very grateful for the
opportunity to participate in this hearing on behalf of the
National Utility Contractors Association.
You may not know that NUCA also serves as Chair of the
Clean Water Council, which is a coalition of 26 national
organizations committed to ensuring sound environmental
infrastructure; and for your reference, a list of the CWC
members is attached to my written testimony.
NUCA and the CWC have taken the lead for years in the
legislative efforts to reauthorize the Clean Water State
Revolving Loan Fund, or the SRF Program, that we have talked so
much about here today. We are extremely pleased that this
committee and the 110th Congress will again attempt to pass SRF
reauthorization legislation to begin to address these
overwhelming wastewater infrastructure needs that we have been
talking about here today, and we look forward to doing our best
part in helping make that happen.
Because utility contractors build and repair these systems,
what is out of sight and out of mind to most people is clearly
visible to us as NUCA members every day. I have referred to
them and heard them referred to as the underground potholes
that nobody else sees; and Congressman Duncan earlier referred
to a story that I had told in the written testimony, and I
would like to share that with you. And while my crews deal with
dilapidated sewer and water systems routinely, I do want to
recall this particular situation that was pretty intense that
happened to us a few years ago in southwest Denver.
We were under contract with a local district there to
replace a 24-inch-diameter interceptor sewer line. A 24-inch
interceptor is not the biggest in the world, but it is a pretty
good chunk of sewer coming at you, and during one of the
earlier shifts in the project, we were upstream a couple of
blocks, checking the alignment, and our superintendent popped a
manhole lid, and he discovered a surging, live sewer flow
coming up to the top of that manhole, and it was literally
within inches of blowing that manhole lid off and coming out
into the street, and you must remember that a live gravity
sewer line does not have a shut-off valve. In acting quickly,
our crews were able to immediately set up some temporary
pumping to kind of take the head off of the line, and then we
set about excavating there where we thought the blockage was.
To make a long story short, we discovered that the entire
crown, or the top part, of this 24-inch sewer line was gone; it
was completely deteriorated, and what was left of the pipe and
the earth and backfill that was overburdened had collapsed into
the line very nearly blocking it. Had the collapse occurred at
any other time than in approximately the half-hour or so that
we had prior to discovering it, the block flows of this 2.8
million gallon per day capacity line would have surcharged that
manhole and sent 2,000 gallons of raw sewage per minute down
the street, through a park, into a tributary, and eventually
into the Platte River. Even an hour of inaction, if we had been
off shift, would have put approximately 120,000 gallons of
untreated sewage into the streets and waterways. We considered
ourselves and, indeed, the district considered themselves very
fortunate.
The need to increase Federal funding is clear. The numbers
have been presented previously. It is not worth going back over
that plowed ground, but we firmly believe that Federal
investment needs to be stepped up.
The American Society of Civil Engineers, an active member
of the Clean Water Council, evaluates the Nation's
infrastructure and reports on the status of it every few years,
as you well know. Only 4 years after receiving a "D" in 2001,
America's wastewater infrastructure fell to a "D minus" in
their 2005 report card for America's infrastructure.
Meanwhile, as previously testified to, these cuts to the
SRF funding occur at a time when the Nation simply cannot
afford it. The SRF Program plays a key role to enhance public
health and safety, to protect the environment and to maintain a
strong economic base. It creates scores of jobs, and do not
forget these are quality, high-paying jobs right here in
America, and these are not jobs that can be shipped overseas.
Again, the time for SRF reauthorization is now. Many
organizations are advocating the establishment of a clean water
trust fund or some other vehicle to provide a dedicated source
of revenue for improvements to America's water and wastewater
infrastructure. NUCA supports the concept of a dedicated
funding source even though we recognize it will take
significant time to pass legislation such as this and allow
that to happen. In the meantime, SRF legislation will take
immediate steps to begin to address this problem by authorizing
higher funding levels for this existing and successful program,
which has done so much for our environment already.
Although there are several policy issues that will be
debated throughout this legislative process, NUCA encourages
the committee to focus on the big picture. The impasse over
Davis-Bacon provisions has stymied this legislation for too
long, and it is our understanding that Davis-Bacon provisions
will be included in the coming legislation. And we want to be
clear that NUCA represents both union and nonunion contractors,
and Davis-Bacon is not an issue of contention for our members.
We will fully support the bill as introduced until it is
passed.
I do want to briefly mention in closing that the CWC's and
Americans for Pure Water Media Awareness Campaign, which will
generate local media attention, is a campaign that is targeted
in areas to raise awareness about this issue and to motivate
everyday people, if you will, to engage in the debate; and I
would encourage you to visit the APW Resource Center at
Americansforpurewater.com.
Thank you very much for the opportunity to speak with you
this morning, and I am happy to answer any questions you may
have.
Ms. Johnson. Thank you very much.
Ms. Debra Coy.
Ms. Coy. Yes. Thank you, Madame Chair, and members of the
committee. I appreciate the opportunity to be here today, and I
represent a little different point of view coming from a
brokerage firm.
My name is Debra Coy. I work with Janney Montgomery Scott,
and have worked with a number of brokerage firms based in
Washington for my entire career, and have observed the water
industry for investors. So, looking from a capital market's
perspective, I am really here today to point out an irony, an
irony because I sit in Washington and listen to the debate on
funding for water and wastewater infrastructure, and obviously,
we are hearing again today about the inadequate funding for
infrastructure, and yet--and yet--when I look at the vast
amounts of money that are being made available in the capital
markets for infrastructure, it creates, I think, a huge irony
that is interesting for us in Washington to begin to address in
terms of capital markets' interest.
"infrastructure" has become a buzz word of sorts on Wall
Street, particularly in the last couple of years, and investors
all over the world have realized that infrastructure is a
critical part of economic development, and they are putting
vast, vast amounts of money into infrastructure funds to be
able to participate in the growth and spending that is likely
to be needed. A recent survey that came out from Standard &
Poor's said that approximately $100 billion was raised in 2006
alone for infrastructure funds. These are global funds that are
looking to put money to work in infrastructure investment, and
Goldman Sachs, for instance, obviously a leading U.S.
investment bank, closed a fund at the end of December that has
$6.5 billion that is going to be invested in infrastructure.
The fund ended up being a little more than twice what they had
planned because of huge investor demand, and I think that
creates an interesting question in terms of how we can put
these two pieces together.
This huge amount of money is looking for places to go to
work. It has caused water stocks, which I follow, water
investment equities, to go up dramatically as investors are
looking for ways to play in the water infrastructure arena.
They are investing in water stocks. They are investing in
companies that make pipes and pumps, but they are not able to
put money directly into municipal infrastructure. Why is that?
I think that what we need to look at are the structural
barriers to investing in water infrastructure in this country.
Obviously, as most of us know, most water and wastewater
infrastructure in the U.S. is, of course, municipally owned and
operated and, as CIFA and others have referred to, is funded by
municipal bond financing, which, of course, is usually sold to
private investors as well.
On the other hand, all of the new infrastructure funds are
being put directly into assets that are owned; typically,
whether it is airports or ports or utilities--electric or gas
or water utilities--but typically, they are not able to put the
money directly to work in municipal water and wastewater
infrastructure because of the funding mechanisms that do not
allow private capital to be put to work.
So certainly what I would encourage the committee to do is
look at ways that, number one, the awareness of this issue can
continue to be raised. We have talked about how this is a
pending crisis, but I believe that still, even at this point,
the American public is not aware of the number of illnesses
that are caused by waterborne disease, is not aware of the
billions of gallons of sewage that are spilled into our
waterways, is not really aware of the leakage of water from
faulty pipes; and raising awareness, I think, is something that
Congress can help to do and, secondly, to begin to provide some
umbrella where both municipal and private operators and
utilities could work together to look at how water
infrastructure is funded, how rates are set, some more uniform
approach to rate structures so people understand the cost of
water infrastructure and, finally, to support innovative
financing mechanisms.
There is a tremendous amount of expertise in the project
finance and energy finance arenas that know how to put
structures in place that can bring in private capital, not
private ownership of the asset, but private capital in a
project finance vehicle and put it together with leverage that
could then allow some of these huge amounts of money that are
out there, looking for a place to go to work, to go into
municipalities where it is so greatly needed.
So I would like to thank you for the opportunity to speak
to you today, and I will be happy to take questions.
Thanks.
Ms. Johnson. Thank you very much.
We will start the first round of questioning.
Mr. Ward, you heard the testimony of Ms. Coy, and we are
very interested in the rising availability of private capital
to meet some of today's wastewater infrastructure needs, and
her testimony seems to suggest that the private financial
market is looking to expand its opportunities for investment
and to obtain a good return for private investors.
In your experience, is this the solution to address to a
growing infrastructure gap? Are we looking for ways to find
additional capital?
Mr. Ward. Yes, Madame Chair, it is a way, but it is just,
as has been stated by other panel members, one way amongst many
that need to be brought to bear on this issue.
We do believe that if these roadblocks are taken down and
we are allowed now then to access that capital that you will
see use of that capital, and it will begin to develop in
innovative ways. It is not about an ownership issue when you
are talking about providing a conduit to bring that capital
into a water system. It is about a choice of what kind of
shared risk the investment community is willing to take on with
the municipality or even with a private utility for that
matter. Lowering the cost of that capital is instrumental, so
that is really what the issue is.
When you talk about private activity bonds and what we see
as a needed change there, it is not to state that you do not
want to have these be subject to those constraints that are
applied to all private activity bonds. It is simply a matter of
expanding the ability to use private activity bonds in that
arena. So you are not talking about making suddenly these
private activities and for-profit entities be able to access
tax exempt bonds. You are talking about the ability to have
them access a capital mechanism subject to alternative minimum
tax so that there is a freer flow of capital into these public
entities.
And it is a growing need. The population is expanding.
We have talked about--I keep thinking of the Nessie Curve
that was presented here several years ago where you talk about
the growing underneath-the-ground unknown amount of
infrastructure that needs to be replaced.
Shared risk is really the way things are going right now.
Capital markets are all ready. I know they keep telling us. I
think the municipalities are more ready now than they have been
in the past.
We have used this mechanism in the State of Texas more than
once now. We actually have set up a program that mirrors the
rural development program with 40-year loan terms, with near
tax-exempt rates that we go to to private activity bonds every
year to fund to the tune of about $25 million a year for
projects in Texas, and it has supplemented the cuts that have
come down the pike for those programs.
That is just a step. We are seeing it for investment in
desalinization projects. I do not see why it would not work
with wastewater projects.
Ms. Johnson. Thank you very much.
Does anyone else care to comment on that source of funding?
Thank you very much.
Mr. Boustany first.
Mr. Boustany. Thank you very much.
Mr. Soderberg, in your testimony, you proposed a short-term
study to be conducted to determine appropriate combinations of
revenue sources to pay for clean water infrastructure.
What organization or company should do this study?
Mr. Soderberg. Madame Chair and Mr. Boustany, when we
discussed it earlier, it was a wide range of organizations that
could bring their expertise. There would obviously need to be
Federal Government representatives, their representatives of
the various agencies that can look at this. So we are looking
at a wide-ranging effort with those that have expertise on it.
Mr. Boustany. Certainly, if you have any specific
recommendations, the committee would be interested in hearing
those.
Mr. Soderberg. Yes, we do, in fact, and we can provide
those to you.
Mr. Boustany. Thank you.
Ms. Coy, a lot of talk has occurred here on the fringes, of
innovative financing. How do municipalities access these
finance vehicles, and what barriers currently exist for
municipalities to access various innovative financing
mechanisms?
Ms. Coy. Well, I think it varies, certainly, from State to
State and project to project, so it is hard to say one specific
or even a handful of barriers, but typically, the structures
are focused on tax-exempt financing, and then there are
limitations on private sector participation where tax-exempt
financing is involved. So beginning to break down those
barriers so that you can put combinations of financing together
I think would be helpful.
Obviously, raising the cap on private activity bonds gets
you over that to a certain extent, but I also think that given
how water and wastewater infrastructure is structured--you
know, it is an entire system, and what the energy arena has
done has begun to break off generation assets versus
distribution assets, similar to looking at desalinization plans
versus transmission systems.
Much of what we are talking about here today is the fact
that our sewer pipes are deteriorating, and typically, you
cannot bring project finance approaches to an ongoing, you
know, what is considered to be maintenance cap X. So, if you
could begin to look at breaking that out from the system and
putting a project finance vehicle together for a maintenance
project like that, then I think you could start to access these
alternative sources of debt and equity to put it to work.
Mr. Boustany. Thank you.
I would suggest that perhaps we might make that the subject
of a future hearing to look at some of these areas, because, to
my knowledge, we have not really done that, and it might be
very beneficial.
Ms. Coy. And there is a lot of expertise out there.
Mr. Boustany. Ms. Stoner, I appreciate the information you
gave on green infrastructure. My younger brother actually does
research in that area, but what strikes me is that it is useful
in looking at new development.
How do you apply that to aging facilities--inner city and
so forth--and is that cost effective?
Ms. Stoner. Yes. I appreciate that question. That is a
great question.
A lot of the photographs that I showed actually involve
retrofits--parking lot retrofits, putting on green roofs and so
forth--and those are great techniques to use, particularly in
some of the older cities where we have combined storm water and
sewage systems; and what that does is, instead of having to
store the sewage and storm water after heavy rain events to
prevent sewer overflows, the storm water never goes into the
system in the first place. So the costs get to be very, very
high as the increasing amounts of that storm water have to be
stored. The pipe diameter has to be larger, and it is often
very cost effective, instead, to use a variety of approaches
that can be integrated into the urban landscape to offload the
storm water in the first place.
Mr. Boustany. Thank you. I see my time has expired.
Ms. Johnson. Thank you very much.
I want to say that we have had lots of discussion on the
various ways of financing water infrastructure. However lifting
the cap on private acting bonds is not in our jurisdiction. It
is the jurisdiction of the Ways and Means Committee.
Mr. Oberstar.
Mr. Oberstar. Thank you, Madame Chair.
The hearing has covered a wide range of issues and elicited
a wide variety of views on the subject matter before us.
In response to Mr. Boustany's question about future
financing, we have to review these matters consistently and
persistently, and we will do that even though, as Ms. Johnson
said, ultimately tax initiatives are in the jurisdiction of the
Ways and Means Committee. But we most certainly can hold the
hearings, make recommendations and do what is in our
jurisdiction and recommend to the Ways and Means that they
undertake what is in their jurisdiction. We have done that over
the years, and we will continue to do that.
Mr. Boustany. Thank you, Mr. Chairman.
Mr. Oberstar. Mr. Grumbles talked about public-private
partnerships, about a range of private financing mechanisms,
and Ms. Coy, your testimony was very interesting, but the
question I have is "Privatizing what?"
In the aviation arena, we held hearings several years ago,
and I was Chair on the privatization of airports. Well, that
does not mean selling the airport to private interests. It
means allowing airports, with the authority which they have, to
contract out certain activities within the airports; and as you
have seen in the post 9/11 era, airports have become shopping
malls--and they have become huge shopping malls, in fact,
generating great revenues--and the airlines are pushing
airports to generate ever more revenue from selling shoes and
socks and jackets and shirts and then using that revenue to
defray the costs of operating the airport, therefore, reducing
the airlines' charges and costs.
There may be a parallel in the sewage treatment plant
operation arena and the drinking water arena. Europe has, for
years--European governments, I should say, have allowed
initiatives for many years in the drinking water arena to
privatize their systems, that is, to be totally owned and
operated by private entities.
So I come to the question here of privatizing what: the
ownership of the sewage treatment facility? Privatizing its
operation, that is, contracting out to an entity to operate it?
Then, in that context, what are the responsibilities of the
private entities, and how do they differ from the public
entity?
Ms. Coy. Well, there are a lot of ways to look at
privatization or private sector involvement all the way from
ownership, as you say, and I do not think we will probably have
shopping malls at sewage treatment plants any time soon------
Mr. Oberstar. I doubt it.
Ms. Coy. --having been to a few.
I was not even referring in my testimony to "privatization"
as it is classically portrayed in terms of private sector
ownership or operation. I was more referring to making
available access to private sector capital to a system that
continues to be municipally owned and operated in another form
other than through tax-exempt finance, which is, in fact,
accessing private sector capital, but through limitations.
Mr. Oberstar. Has your organization managed or placed
private activity bond financing for jurisdictions?
Ms. Coy. We do at Janney Montgomery more muni bond debt.
The private activity bond market is pretty small, and that is
one of the issues that we are discussing here today, that there
is limited access because of the caps.
Mr. Oberstar. And the 1986 legislation put a cap on private
activity bonds, and that has not been touched since then.
Ms. Coy. Right. Exactly.
Mr. Oberstar. What would you recommend be done with that,
by the way?
Ms. Coy. I would certainly advocate a rise in the cap
because, as we said earlier, there is this limitation on
private participation in municipally financed projects. So, if
you raise the cap on private activity bonds, that would make it
easier in most jurisdictions for private money to also
participate on the equity side as well as on the debt side.
Mr. Oberstar. So private activity bonds are used by
municipalities for a wide range of public endeavors of
funding------
Ms. Coy. That is correct.
Mr. Oberstar. --a host of public activities.
Could we segregate out some of it or designate some of that
for the water infrastructure needs, both drinking water and
sewage treatment facilities?
Ms. Coy. I would think that would be certainly helpful as
well. Absolutely.
Mr. Oberstar. What is the difference in interest rate--this
is your area of specialty, specialization.
What is the difference in interest rate between municipal
bonds and private activity bonds?
Ms. Coy. It is actually, unfortunately, not my area of
specialization.
Mr. Oberstar. Oh.
Ms. Coy. I am an equity analyst, and so I focus more on the
equity side than on the debt side. So I would not be a good one
to answer that.
Mr. Oberstar. Well, there is an difference.
Ms. Coy. Yes, there is.
Mr. Oberstar. Yes.
Other members of the panel? Kurt. Thank you by the way,
Kurt, for your coming here and participating in the hearings.
Mr. Soderberg and I go back a long way. He has been a
superb manager of the Western Lake Superior Sanitary District,
which is saving Lake Superior; and through the efforts and the
vigilance of the Western Lake Superior Sanitary District, we
are now catching walleyes. Fisherman are catching walleyes in
the St. Louis River, which was dead for a very long time, and
they are good-sized walleyes, by the way, and very edible.
There is no buildup of toxics in them.
Mr. Soderberg. Thank you very much, Mr. Chair.
Madame Chair, if I may just talk about the privatization
issue, NACWA has clearly looked at the options. Some of our
member agencies do have operating contracts. I think there have
been maybe a couple of outright transactions to sell a utility
around the country, but it really has not gone that far. But
one of the initiatives------
Mr. Oberstar. Hold the mike up closer to you so we can hear
you better.
Mr. Soderberg. One of the initiatives of our organization
was to see whether we are pricing our services competitively.
We did that over a series of years, and we believe that we are
providing competitive pricing of our services run by the
municipal organizations. In the places where they believe they
can get a better deal, they have gone down the road to the
privatizers.
When the EPA, though, talks about the various sorts of
public-private partnerships, it is difficult to understand what
they are talking about because it is rather vague. I have read
the gap report. I bet some of the folks in this room have read
that report. We have looked at the sorts of things that they
are talking about that we need to do; and the bottom line is,
we are doing all of those things, and we are still seeing these
terrific increases in prices.
So we are really hopeful that EPA will have some more
specific guidance of what they mean by public-private
partnerships, the four pillars of management, because at least
right now it seems as if the big need is for additional
funding. We are operating far better than we were in the past,
but when you look at permit compliance, when you look at
struggling local economies, operating costs, capital costs,
there really is a need for more and better information from
EPA.
Mr. Oberstar. Well, given EPA's own estimate of over the
next 20 years $300 billion to $400 billion of construction
needs in expanding or upgrading existing wastewater treatment
facilities, waterlines, sewer lines, interceptor sewers,
separated and combined operations, there is plenty of room for
a whole range of financing, it seems to me, and we ought to
start with something we know that is in place and proven, and
that is the State Revolving Loan Fund.
And we have a bill that has been pending now for 6 years.
We ought to get that--that is the bird in hand. We have it. We
have a bipartisan consensus on it. If we move that without
ruling out or prejudicing any other forms of financing. Then we
can then come back to and review and include those as well in
future legislation.
Mr. Ward and Mr. Stutler, do you have comments?
Ms. Stoner?
Yes.
Ms. Johnson. We do have one more.
Mr. Oberstar. One more member, yes.
Mr. Ward. Chairman Oberstar, one issue maybe this committee
could take up within its own purview is the fact that when you
look at the financing in the SRFs, the Clean Water Act when it
was admitted in 1987 and Title VI was added to it, it limited
the funding to be for publicly owned treatment works, 212, the
definition, taken out of old Title II.
In the State of Texas, nonprofit water supply corporations,
which are quasi-governmental and at least under the
constitution of Texas considered to be a governmental entity
for the purposes of financing, are not eligible under the Clean
Water SRF. Meanwhile, down the hall on the other side of EPA's
building, in the Office of Water, we can do nonprofit water
supply corporations. We can even do private entities to fund
projects for water, for drinking water purposes.
It seems like it is at odds because you could not argue
administratively that the Agency could not handle it, because
they are doing it on the other side of the building. So that is
an issue. We have it in one of our priorities that we have
listed that I can provide to the committee in detail. That
might open the door a little wider than even just looking at
the private activity bond cap. We have looked at not just
lifting the cap, but exempting water projects like you have
other exemptions under that.
Mr. Oberstar. Do you mean exempting them from the cap?
Mr. Ward. Yes, particularly if it is for the Clean Water
State Revolving Fund. I mean, to that extent, it makes a lot of
sense because Congress then is maximizing the effect of the
program on both sides of its ability to make changes.
Mr. Oberstar. I think I will desist at this point from
further questions, but you have given us the basis. No. This is
fine. Thank you very much. I appreciate your comments.
Ms. Johnson. Thank you.
Dr. Kagen. Congressman Kagen.
Mr. Kagen. Thank you, Madame Chairperson.
Sometimes, Mr. Oberstar, resistance is futile.
I would like the comments of Nancy Stoner about the effects
of global warming on our water resources and also the
implications for SRF funding, which I am learning is woefully
behind what we really require.
Ms. Stoner. Thank you for that question.
NRDC is actually doing a study on the effects of global
warming on water resources now, that I expect to come out
shortly, but some of the initial findings are already out, and
they indicate that we can expect to see a range of problems,
including less snow pack, so less water available, increased
flooding due to more and larger storm events, increased
temperature in cold water fisheries so that we will have fewer
streams that support trout and so forth.
What all of this suggests to me is an increased need, not
only to address global warming directly, which of course is
important, but in the water area, to do integrated water
resource management to look not only at what our current needs
are, but what they are 20 years and 50 years and even 100 years
out and to ensure that we are taking the steps now to ensure
that there will be safe, usable, clean water for our children
and grandchildren.
Mr. Kagen. On a related issue, in what way do you feel the
SRF can have an impact, or how will it affect how we maintain
the quality of the Great Lakes water?
As you know or may be aware, in Wisconsin, we have a great
deal of E. coli contamination on our beaches that may not be
point-sourced anywhere close to where the bacteria are showing
up.
Ms. Stoner. Yes. NRDC does a report every summer on beach
water pollution called Testing the Waters, and it covers Great
Lakes beaches; and what we see on Great Lakes beaches is an
increasing trend in beach closings and advisories. Great Lakes
beaches were closed 13 percent as opposed to 7 percent for
other coastal beaches in our last report, and that mostly comes
from storm water and sewage, which are two of the principal
areas of focus for the Clean Water State Revolving Fund. So,
again, more money better spent on those problems will help make
sure that Great Lakes beaches are open and safe for people to
use.
Mr. Kagen. Thank you.
Ms. Johnson. Thank you very much.
The one thing that we are all aware of is that the warmer
the water becomes, the more problems we have and the more
disease we have and the more we experience health being at risk
in this country.
Mr. Boustany has some questions.
Mr. Boustany. Thank you, Madame Chair.
Mr. Ward, a couple times you made specific reference to
some recommendations, specific recommendations, regarding how
we can improve wastewater treatment.
Can you provide the committee with those specific
recommendations? Do you have that?
Mr. Ward. Yes, sir. We have them in print, and I can leave
them with the committee before we leave.
Mr. Boustany. OK, and one final question for you as well.
In looking at the State Revolving Funds, are they
structured, in your opinion, to help small, rural and
disadvantaged communities; and what can the States do to help
reach small and rural communities?
I have got rural communities throughout my district, and
they do not seem to get the benefit of the funding needed to
fix aged water infrastructure.
Mr. Ward. My answer would be, no, they are not because it
does not reach quite deep enough.
The other program that was created almost 10 years later,
drinking water, Congress, you know, recognized that and
specifically put provisions in so that we could reach deeper
down to the communities that have the most hardship. Right now,
we do not have a corresponding mechanism on the wastewater side
through the Clean Water SRF.
The limitations of 20-year financing, one can say perhaps
you can find a legal way to get there underneath the structure,
but it is going through a complete maze of requirements right
now with EPA. It is no fault of theirs. It is just the way the
statute is written, and so you need to look at the 30-year
terms at the very least. I think rural communities would argue
40 in some cases.
Lower interest-rate terms, perhaps even the loan
forgiveness that you afforded in the drinking water program,
all of those mechanisms as an option to a State would then
allow the State administrations to work with EPA and reach
deeper into the small and rural communities to help those ones
that are more disadvantaged.
We just cannot get that far down into the population right
now. We just cannot.
Mr. Boustany. It gets back to the question I asked the
first panel about oversight and making sure that the money,
once it leaves Federal hands and gets to the State and then
subsequently down to the local level, that it is actually being
spent in a very cost-effective way.
We have very good data about the disbursement of funds and
so forth, but are we really spending that money in a very cost-
effective way on infrastructure, and I think we need to
probably have an improvement in the oversight mechanism by
which we review that.
Mr. Ward. I would believe that, yes, we are doing it in a
very cost-effective way because we have limited resources that
we have to apply across a wide array of projects of very
different natures. I mean, you are seeing States do nonpoint
source. We are cleaning up septic areas. We are doing source
water protection, and virtually every aspect of water pollution
control is now being taken care of through these Clean Water
SRFs, even given the constraints. So my answer would be, yes,
it has been cost effective.
If you are concerned about whether more of it is going
towards expansion of systems for future growth, if you do not
look at what the trend is for growth in a community when you
are building capacity in a treatment plant, then you are going
to have the same cycle repeat itself. So those statistics are
somewhat misleading.
You know, our group would say that the restrictions that
are in there now are on a horizon that is reasonable. I think,
in the old grants program, it was close to a 10-year horizon. I
think it may have gone up as much as to 20 for the SRFs for
some projects, but on a wholesale basis, it is to solve
pollution control problems because the priority system is
handed down for you, the Congress, just like it is in drinking
water, and those priorities then have to be effected through
EPA to the States.
We are given flexibility, but we still have to have a
priority system. We still have to have an intended use plan. We
still have to look at funding in a priority order.
The oversight from EPA is very deliberate with regard to
those matters, and so for our organization, we are going to
say, yes, it is cost effective.
Mr. Boustany. Thank you.
Ms. Johnson. Let me say thank you to all of the panelists
who have come today.
We recognize the seriousness and the importance of the
issue, and we will be in touch. We hope that this time, after
our seventh try of getting the bill passed, we will succeed.
Let me thank all of the Members of Congress who have come,
and the committee is adjourned.
[Whereupon, at 12:52 p.m., the subcommittee was adjourned.]
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