By Rich Anderson
January 22, 2007

Albuquerque (NM) Mayor Martin J. Chávez testified before the House Transportation and Infrastructure Committee’s Subcommittee on Water Resources and Environment January 19 in Washington (DC). This was the Subcommittee’s first Hearing of the new 110th Congress, and it focused on reauthorization of the Clean Water Act. The Hearing was well attended with 22 Representatives on the Subcommittee and the Full Committee, including Committee Chairman James Oberstar (MN). Eddie Bernice Johnson (TX) chaired the Subcommittee meeting.

The first panel of witnesses, in addition to Chavez, also included: Benjamin Grumbles, Assistant Administrator for EPA’s Office of Water and Dr. Ellen Gilinski, speaking on behalf of the Virginia Department of Environmental Quality and the Association of State and Interstates Water Pollution Control Administrators.

Chávez, a Trustee of The U.S. Conference of Mayors and Co-Chair of the Mayors Water Council testified on behalf of the Conference. He cited information from the Conference of Mayors Report “National City Water Survey 2005.” The Report found that the three most important water resources priorities facing the nation’s cities are: 1) Rehabilitating aging water and wastewater infrastructure, (60.6 percent); 2) Security/Protection of Water Resources Infrastructure, (54.6 percent); and, 3) Water Supply Availability (46.5 percent).

He testified that cities surveyed indicated that they were making robust levels of major capital investments in: water supplies; wastewater treatment facilities; wastewater collection systems; drinking water treatment facilities; and, water distribution systems. He testified that cities are making sustained major capital investments in these water and wastewater infrastructure categories over the period 2000 to 2009. In many cases, cities are making simultaneous major capital investments in all five of these infrastructure categories.

Chávez testified that local financing of water and wastewater infrastructure varies by city, but is limited to a few general approaches. The single most frequent form of financing is “pay-as-you-go”, including raising user fees and rates to finance new construction, replacement construction and rehabilitation of existing water infrastructure. Other important approaches include revenue bonds (second most frequent), CWSRF loan program (third most frequent), general obligation bonds (fourth most frequent), and Private Activity Bonds (least frequently used because of the state volume caps limiting such use). He reiterated that for nearly 40 percent of the nation’s cities the CWSRF plays a vital role in decisions to invest in wastewater infrastructure.

Chávez pointed out the water resources infrastructure priorities adopted by Conference of Mayors over the last decade.

• federal grants to municipalities, either directly or through states, for water and wastewater infrastructure where there is an affordability issue or when a community faces severe environmental problems;

• 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, under the State Revolving Fund loan program for water and wastewater infrastructure investment; and

• modifying current tax law by removing Private Activity Bonds (PABs) used for water and wastewater infrastructure from state volume caps. The increased use of private activity bonds for public water infrastructure can boost aggregate spending on water infrastructure and help cities make progress in closing the “Needs Gap.”

Additionally, Chávez pointed out that the Conference of Mayors adopted policy in 2005 and 2006 to fully recapitalize the CWSRF at $1.355 billion or more for each fiscal year in the future. The Conference of Mayors also adopted policy urging Congress to establish a direct funding to cities program involving $850 million or more for the Drinking Water SRF loan program; $50.6 billion for combined sewer overflows; and $88.5 billion for sanitary sewer overflows and stormwater management. This level of investment, he stated, would help reverse the continuing decline in federal assistance for water and wastewater infrastructure improvement to protect public health and help cities comply with unfunded federal mandates.

EPA’s Grumbles stated that EPA Administrator Steve Johnson has set a high priority on working with all stakeholders on water infrastructure issues. Grumbles described three waves of water infrastructure involvement by EPA. The first wave started when Congress passed the 1972 Clean Water Act and committed significant investment in wastewater infrastructure improvements throughout the nation with wastewater treatment works construction grants and subsidy programs.

The second wave began when Congress supplanted the construction grant programs with the current CWSRF loan program. The revolving nature of the loan program was designed to provide a dedicated funding source over time.

Together, the first and second wave of federal financial assistance for wastewater infrastructure has had a significant impact. The federal government provided more than $82 billion for wastewater infrastructure and other assistance since passage of the 1972 Act. Overall investment in this time frame, including federal, state and local government has exceeded $250 billion. The nation has a current wastewater infrastructure inventory includes 16,000 publicly owned wastewater treatment plants (POTWs), 100,000 major pumping stations, 600,000 miles of sanitary sewers, and 200,000 miles of storm sewers. This infrastructure has yielded many public benefits including public health protection, supporting economic development and protecting water quality and related ecosystems.

Grumbles described what EPA is characterizing as a third wave of involvement. This wave includes a focus on achieving sustainability for long-term success of the infrastructure, and opening up wastewater infrastructure investment to private sources of capital. He stated that the EPA currently estimates there is a $21 to $22 billion shortfall in needed capital investment and what is currently being invested. This “Needs Gap” can be addressed through EPA’s four pillars approach: 1) asset management that can extend the productive life of treatment works and identify appropriate replacement of technology; 2) full-cost pricing, (currently many wastewater systems under-price the true cost of providing clean water services to consumers); 3) water efficiencies, including innovative financing and involving private parties, loan guarantees and Private Activity Bonds, and Public-Private Partnerships; and, 4) adopting comprehensive watershed approaches to better manage and protect water resources.

Grumbles stated that the Administration wants to devote $6.8 billion to clean water efforts between 2004 and 2011. These federal funds are intended to address water quality impacts from non-point sources in programs administered by a number of federal agencies; targeting federal financial assistance to areas experiencing population pressures; and providing information to wastewater systems to help avoid under-pricing wastewater services.

Grumbles stated that EPA and the Administration anticipate a bigger role for Public-Private Partnerships in wastewater capitalization and services in the future because they can achieve efficiencies and cost'savings. Private equity investment has the potential, he stated, to help reduce the wastewater investment Needs Gap.

Gilinski agreed with much of the testimony provided by previous witnesses. She pointed to a number of communities that were using the over $2 billion in CWSRF loans made by the Commonwealth of Virginia to communities to construct or improve their wastewater infrastructure. She stated that the CWSRF also provided necessary money to rural and economically disadvantaged communities to hire licensed engineers to help plan, design and construct wastewater infrastructure. She also discussed the need for the states to have independent engineering staff to provide inspections and oversight on the use of the loan money at the community level.

The Subcommittee has jurisdiction over water quality and wastewater infrastructure programs administered by the U.S. Environmental Protection Agency (EPA) under the Federal Water Pollution Control Act, (also known as the Clean Water Act). The Clean Water Act established the Clean Water State Revolving Fund loan program (CWSRF) that provides federal financial assistance through the states to municipalities to aid in funding the construction of wastewater treatment plants, collection systems and other wastewater infrastructure. The Clean Water Act legislation is also the Congressional vehicle that authorizes recapitalization of the CWSRF.

The tone of the Subcommittee member’s discourse was civil and cooperative. There was strong bipartisan support for moving reauthorization of clean water legislation. The Chairwoman indicated that it is the intention of the Subcommittee to file authorizing legislation in the very near future; and that a bill is near release that builds on similar legislative language considered by the 108th and 109th Congress.