[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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             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

                              ----------                              


                        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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