[Senate Hearing 110-1135]
[From the U.S. Government Publishing Office]



                                                       S. Hrg. 110-1135
 
 MEETING AMERICA'S WASTEWATER INFRASTRUCTURE NEEDS IN THE 21ST CENTURY

=======================================================================

                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON TRANSPORTATION SAFETY,
               INFRUSTRUCTURE SECURITY, AND WATER QUALITY

                                 of the

                              COMMITTEE ON
                      ENVIRONMENT AND PUBLIC WORKS
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                           September 19, 2007

                               __________

  Printed for the use of the Committee on Environment and Public Works


         Available via the World Wide Web: http://www.fdsys.gov

                               __________


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               COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

                       ONE HUNDRED TENTH CONGRESS
                             FIRST SESSION

                  BARBARA BOXER, California, Chairman
MAX BAUCUS, Montana                  JAMES M. INHOFE, Oklahoma
JOSEPH I. LIEBERMAN, Connecticut     JOHN W. WARNER, Virginia
THOMAS R. CARPER, Delaware           GEORGE V. VOINOVICH, Ohio
HILLARY RODHAM CLINTON, New York     JOHNNY ISAKSON, Georgia
FRANK R. LAUTENBERG, New Jersey      DAVID VITTER, Louisiana
BENJAMIN L. CARDIN, Maryland         JOHN BARRASSO, Wyoming1
BERNARD SANDERS, Vermont             LARRY E. CRAIG, Idaho
AMY KLOBUCHAR, Minnesota             LAMAR ALEXANDER, Tennessee
SHELDON WHITEHOUSE, Rhode Island     CHRISTOPHER S. BOND, Missouri

       Bettina Poirier, Majority Staff Director and Chief Counsel
                Andrew Wheeler, Minority Staff Director
                              ----------                              

  Subcommittee on Transportation Safety, Infrastructure Security, and 
                             Water Quality

               FRANK R. LAUTENBERG, New Jersey, Chairman

BENJAMIN L. CARDIN, Maryland         DAVID VITTER, Louisiana
AMY KLOBUCHAR, Minnesota             CHRISTOPHER S. BOND, Missouri
SHELDON WHITEHOUSE, Rhode Island     GEORGE V. VOINOVICH, Ohio
BARBARA BOXER, California, (ex       JAMES M. INHOFE, Oklahoma, (ex 
officio)                             officio)

                                 ______

1Note: During the 110th Congress, Senator Craig 
    Thomas, of Wyoming, passed away on June 4, 2007. Senator John 
    Barrasso, of Wyoming, joined the committee on July 10, 2007.


                            C O N T E N T S

                              ----------                              
                                                                   Page

                          SEEPTEMBER 19, 2007
                           OPENING STATEMENTS

Lautenberg, Hon. Frank R., U.S. Senator from the State of New 
  Jersey.........................................................     5
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma...     7
Voinovich, Hon. George, V., U.S. Senator from the State of Ohio..    10
Vitter, Hon. David, U.S. Senator from the State of Louisiana.....    12
Cardin, Hon. Benjamin L., U.S. Senator from the State of Maryland   102

                               WITNESSES

Grumbles, Hon. Benjamin H., Assistant Administrator for Water, 
  U.S. Environmental Protection Agency...........................    13
    Prepared statement...........................................    15
    Responses to additional questions from:
        Senator Lautenberg.......................................    21
        Senator Cardin...........................................    21
Palmer, Hon. Douglas H., Mayor of Trenton, NJ, President of the 
  U.S. Conference of Mayors......................................    30
    Prepared statement...........................................    32
Brasseaux, Hon. Glenn, Mayor of Carencro, LA, Board Member, 
  Louisiana Rural Water Association..............................    36
    Prepared statement...........................................    38
Freeman, Joe S., Chief, Financial Assistance Division, Oklahoma 
  Water Resources Board, Vice President, Council of 
  Infrastructure Financing Authorities...........................    41
    Prepared statement...........................................    43
    Responses to additional questions from:
        Senator Lautenberg.......................................    45
        Senator Inhofe...........................................    46
Westhoff, Christopher M., Assistant City Attorney, Public Works 
  General Counsel for the City of Los Angeles, President of the 
  National Association of Clean Water Agencies...................    49
    Prepared statement...........................................    51
    Responses to additional questions from:
        Senator Inhofe...........................................    54
        Senator Cardin...........................................    54
Stoner, Nancy, K., Director of the Clean Water Project at the 
  Natural Resources Defense Council..............................    55
    Prepared statement...........................................    57
    Responses to additional questions from:
        Senator Boxer............................................    73
        Senator Lautenberg.......................................    74
        Senator Cardin...........................................    75

                          ADDITIONAL MATERIAL

Statements:
    Briant, Robert A., Chairman, Clean Water Construction 
      Coalition..................................................    83
    The American Society of Civil Engineers......................    88
    National Association of Water Companies......................    95
    Ullrich, David A., Executive Director, Great Lakes and St. 
      Lawraence Cities Initiative................................   100
    The Associated General Contractors of America................   104
    Navarrete, Judy, Executive Director, Water Infrastructure 
      Finance Authority of Arizona (WIFA)........................   107
    National League of Cities....................................   109
    American Council of Engineering Companies (ACEC).............   117
    Bonner, Linda Hanifin, Ph.D., Executive Director, National 
      Onsite Wastewater Recycling Association....................   120
    Frevert, Larry W., P.E. President, American Public Works 
      Association................................................   123
    Association of State and Interstate Water Pollution Control 
      Administrators (ASIWPCA)...................................   127


 MEETING AMERICA'S WASTEWATER INFRASTRUCTURE NEEDS IN THE 21ST CENTURY

                              ----------                              


                     WEDNESDAY, SEPTEMBER 19, 2007

                               U.S. Senate,
         Committee on Environment and Public Works,
     Subcommittee on Transportation Safety, Infrastructure 
                               Security, and Water Quality,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10 a.m. in 
room 406, Dirksen Senate Building, Hon. Frank Lautenberg 
(chairman of the subcommittee) presiding.
    Present: Senators Lautenberg, Inhofe, Warner, Voinovich, 
Vitter, Cardin.

  OPENING STATEMENT OF HON. FRANK R. LAUTENBERG, U.S. SENATOR 
                  FROM THE STATE OF NEW JERSEY

    Senator Lautenberg. Good morning. We call this subcommittee 
hearing to order. As I took the chair here, I went for this 
pitcher into the glass in an area where it is recommended, 
often, that you don't drink the water, and I wonder whether 
this is just a reality check to see whether or not I will 
survive the hearing. But the fact of the matter is that there 
are signs in this great city of ours that we see periodically 
because of failures of the system that the water production 
system and other problems involved with inability for the 
wastewater treatment plants to turn out water that doesn't 
pollute the Potomac and other major water sources.
    I want to welcome everybody to today's hearing on the need 
to modernize our sewage treatment systems, stormwater systems 
to keep wastewater out of our rivers, streams, and oceans.
    In 1972, we established the Clean Water Act that would help 
us keep our waterways safe and clean. Now, part of the Clean 
Water Act helps us to build new sewage treatment plants. The 
first thing that we did, the first means of funding them was 
through grants. But since 1987, we use loans through the State 
Revolving Fund or SRF. The SRF funds have provided $25 billion 
for States to improve their infrastructure, clean their water 
so that people can use it recreationally and for other purposes 
as well.
    The current funding levels, however, for the State 
Revolving Fund falls far short of what we need. Much of the 
infrastructure, including pipes and treatment plants, is simply 
worn out or inadequate in its size, overwhelmed often by too 
much water.
    I am pleased to see the Ranking Member on this committee, 
our friend from Oklahoma, Senator Inhofe. As I think about the 
things that we are going to consider today, Senator, am I 
correct in remembering that Oklahoma has had unusually heavy 
rainfalls?
    Senator Inhofe. Yes, that is correct.
    Senator Lautenberg. Because part of the problem is the 
deluge that we see frequently in different parts of the 
country. That too overwhelms our system, in addition to the 
normal growth that we have through development.
    EPA estimates that there is somewhere between 23,000 and 
75,000 sanitary sewer overflows each year. Those spills dump 
billions of gallons of untreated sewage into our rivers, our 
lakes, and coastal waters. In addition, combined sewer overflow 
spill is 850 billion gallons of contaminated stormwater into 
our waterways each year, and EPA estimates that it will take 
$170 billion over the next 20 years to fix these sewer systems. 
But instead of making this important investment, the 
Administration has proposed a nearly $400 million cut in the 
SRF for 2008.
    Now, without more investment, more people will be exposed 
to sickness and disease, beaches will close and marine life 
certainly will suffer. President Bush needs to fully fund the 
SRF and we have to reauthorize it so that money is available to 
cities and towns to keep their water clean. In addition to 
increased funding our subcommittee will examine how best to 
spend those funds, including what role green infrastructure can 
play in reducing the burdens on our sewer systems.
    I would also note that in addition to our mission to 
reauthorize the SRF, Senator Voinovich and I have introduced 
the Water Quality Investment Act. This bill would authorize 
$1.8 billion in Federal grants to local communities to clean up 
combined sewer and sanitary sewer overflows.
    We look forward to the testimony from our witnesses, but 
now we ask our colleague, Senator Inhofe, for his statement.
    [The prepared statement of Senator Lautenberg follows:]

     Statement of Hon. Frank R. Lautenberg, U.S. Senator from the 
                          State of New Jersey

    Let me welcome everyone to today's hearing on the need to modernize 
our pipes and sewer systems to keep waste out of our rivers, streams 
and oceans.
    Since 1972, we have relied on the Clean Water Act to keep our 
waterways safe and clean. Part of the Clean Water Act helps us build 
new sewage treatment plants. First we used grants to pay for them. 
Since 1987, we have used loans through the State Revolving Fund, or 
``SRF.''
    The SRF has provided $25 billion for States to improve their 
infrastructure and clean their water so people can swim, fish and boat 
in it. But the current funding level for the SRF falls far short of 
what we need. Much of the infrastructure, such as pipes and treatment 
plants, is simply worn out--or overwhelmed by too much water.
    EPA estimates that there are between 23,000 and 75,000 sanitary 
sewer overflows each year. Those spills dump between 3 and 10 billion 
gallons of untreated sewage into our rivers, lakes and coastal waters. 
In addition, Combined Sewer Overflows spill 850 billion gallons of 
contaminated stormwater into our waterways each year. EPA estimates it 
will take $170 billion over the next 20 years to fix these sewer 
systems. But instead of making this important investment, the 
Administration proposed a nearly four hundred million dollar cut to the 
SRF for 2008. This is irresponsible. Without more investment, people 
will get sick, beaches will close, and our marine-life will suffer. 
President Bush needs to fully fund the SRF, and we must reauthorize it 
so that money is available to cities and towns to keep their water 
clean. The federal government's role in repairing our aging pipes, 
pumps and treatment plants must grow.
    In addition to increased funding, our Subcommittee will examine how 
best to spend those funds, including what role ``green infrastructure'' 
can play in reducing the burdens on our sewer systems. I would also 
note that in addition to our mission to reauthorize the SRF, Senator 
Voinovich and I have introduced the Water Quality Investment Act. This 
bill would authorize $1.8 billion in federal grants to local 
communities to clean up Combined Sewer and Sanitary Sewer Overflows. I 
welcome any testimony from our witnesses on that legislation as well.
    There is nothing partisan about keeping our waterways safe and 
clean, and I hope our Subcommittee will act soon to strengthen our 
clean water programs.

 OPENING STATEMENT OF HON. JAMES M. INHOFE, U.S. SENATOR FROM 
                     THE STATE OF OKLAHOMA

    Senator Inhofe. Thank you, Senator Lautenberg, Mr. 
Chairman. First of all, I would like to thank you for having 
this long-overdue hearing. As Chairman of this committee during 
the past two Congresses, I have twice moved comprehensive 
legislation to reauthorize both the Clean Water and the 
Drinking Water State Revolving Loan Funds. I am pleased to see 
that this issue remains a committee priority.
    This will come as a shock to many of you out there, but 
Senator Lautenberg and I don't always see eye to eye on issues. 
On this one I think we do. We recognize----
    Senator Lautenberg. I remember one 16 years ago.
    Senator Inhofe. That is right. That is right.
    [Laughter.]
    Senator Inhofe. It is back.
    But I am glad also to welcome Mr. Joe Freeman. He is chief 
of the Financial Assistance Division from the State of 
Oklahoma. I welcome you to being here for this important 
hearing. Mr. Freeman has been a great resource to my staff, and 
I welcome his insights into how the program is currently 
working and what we may do to make it work better.
    I am also pleased that the National Rural Water 
Association, based in Oklahoma, is represented today by the 
Louisiana chapter. I welcome you here. The majority of the 
Nation's wastewater systems are small systems, and theirs is a 
perspective from which we can all benefit hearing.
    The Clean Water SRF is the cornerstone of Federal clean 
water systems to the Nation's cities and towns. Since its 
creation in 1987, the Clean Water SRF has saved its borrowers 
over $3.7 billion in interest, costs, and also provide $8.2 
billion in funding to improve the Nation's water quality. 
Importantly, the Federal Government has provided $24 billion in 
State capitalization grants. In 2006, there was more than $60 
million available for loans to communities.
    Today's hearing is limited to wastewater or clean water 
needs. Oklahoma has projected $586 million in clean water 
related needs over the next 20 years. As one of today's 
witnesses mentions, this figure does not include any future 
costs due to new regulations. Further, in the last drinking 
water survey, Oklahoma's reported needs were $4.8 billion over 
the next 20 years. Importantly, $107 million of that need is 
known to be a direct result of Federal drinking water 
requirements. Without providing sufficient Federal funds to 
help cities to meet those requirements, they become not just 
requirements, but Federal unfunded mandates.
    I have to say this, with the arrival of Senator Voinovich. 
He and I were both, Mr. Chairman, mayors of major cities. 
People talk about problems facing the cities. It is not 
prostitution and crime, the greatest problem, I think he would 
agree with me, are unfunded Federal mandates. This is what we 
are committed to correcting, and a lot of it comes from the 
legislation that we are talking about right now.
    My staff has received assurances that the absence of 
drinking water from this hearing will not preclude us from 
reauthorizing the drinking water SRF program. I look forward to 
working with my colleagues to develop a clean, comprehensive 
funding proposal.
    The effort that we are about to undertake will be the 
fourth time in four Congresses that we have attempted to move a 
water infrastructure bill. Only one of our previous three 
attempts at passing a water infrastructure bill was bipartisan. 
I hope that this year we can again have a bipartisan bill, as 
we did last Congress under my leadership, and that we can work 
together to move it to the Senate floor. To do that, we must 
avoid many of the mistakes of previous efforts.
    The bill must be clean of too many additional requirements 
on applicants. We are not providing grants through the current 
SRF; these are loans to be repaid by municipalities, and they 
are. In order to truly provide them with Federal assistance in 
meeting their regulatory obligations under the Federal 
environmental statutes, we have to provide loans with as few 
strings attached as possible. There are legislative proposals 
pending that include additional requirements for States and 
localities to meet, and while I am sure someone can find value 
in almost all of these requirements, I am concerned their 
cumulative impact may be to create a program far too burdensome 
for anyone to use.
    Additionally, in previous attempts, even last year, we 
failed to come to a unified committee resolution to the issue 
of Davis-Bacon. Failing to do so again will likely result in 
yet another stalemate. I must again, as I have in the past, 
encourage all parties to come to the table to find a path 
forward that keeps the committee united behind a single bill.
    This is an important issue. While some may disagree over 
the exact amount of the funding gap, there can be no denying 
that it exists. The question before the committee is what, if 
any, changes do we need to make to the Federal clean water 
program to ensure it is best meeting the needs of our local 
communities and lessening that gap.
    As the single-most conservative member of the U.S. Senate, 
as voted by the American Conservative Union, I have 
consistently voted for developing and improving the Nation's 
infrastructure and providing for our Nation's defense. I think 
that is what Government is supposed to be doing, Mr. Chairman. 
I look forward to this hearing and to working with my 
colleagues to develop a comprehensive funding program, and I 
thank you again, Senator Lautenberg, for calling this hearing.
    [The prepared statement of Senator Inhofe follows:]

       Statement of Hon. James M. Inhofe, U.S. Senator from the 
                           State of Oklahoma

    I would like to thank Senator Lautenberg for having this long 
overdue hearing. As Chairman of this Committee during the past two 
Congresses, I twice moved comprehensive legislation that reauthorized 
both the clean water and drinking water state revolving loan funds. I 
am pleased to see this issue remains a Committee priority.
    I am glad to welcome Mr. Joe Freeman, Chief of the Financial 
Assistance Division for the State of Oklahoma. Mr. Freeman has been a 
great resource to my staff and I welcome his insights into how the 
program is currently working and what we may do to make it better. I am 
also pleased that the National Rural Water Association, based in 
Oklahoma, is represented today by the Louisiana chapter. The majority 
of the Nation's wastewater systems are small systems and theirs is a 
perspective from which we can all benefit hearing.
    The Clean Water SRF is the cornerstone of Federal clean water 
assistance to the Nation's cities and towns. Since its creation in 
1987, the Clean Water SRF has saved its borrowers over $3.7 billion in 
interest costs and also provided $8.2 billion in funding to improve the 
Nation's water quality. Importantly, the Federal Government has 
provided $24 billion in state capitalization grants. In 2006, there was 
more than $60 billion available for loans to communities.
    Today's hearing is limited to wastewater or clean water needs. 
Oklahoma has projected $586 million in clean water related needs over 
the next 20 years. As one of today's witnesses mentions, this figure 
does not include any future costs due to new regulations. Further, in 
the last drinking water needs survey, Oklahoma's reported needs were 
$4.8 billion over the next 20 years. Importantly $107 million of that 
need is known to be a direct result of Federal drinking water 
requirements. Without providing sufficient Federal funds to help cities 
to meet those requirements, they become not just requirements, but 
Federal unfunded mandates. My staff has received assurances that the 
absence of drinking water from this hearing will not preclude us from 
reauthorizing the drinking water SRF program. I look forward to working 
with my colleagues to develop a clean, comprehensive funding proposal.
    The effort that we are about to undertake will be the fourth time 
in four Congresses that we have attempted to move a water 
infrastructure bill. Only one of our previous three attempts at passing 
a water infrastructure bill was bipartisan. I hope that this year we 
can again have a bipartisan bill as we did last Congress under my 
leadership and that we can work together to move it to the Senate 
floor. To do so, we must avoid many of the mistakes of previous 
efforts.
    The bill must be clean of too many additional requirements on the 
applicants. We are not providing grants through the current SRF. These 
are loans to be repaid by municipalities. In order to truly provide 
them with Federal assistance in meeting their regulatory obligations 
under the Federal environmental statutes, we must provide loans with as 
few strings attached as possible. There are legislative proposals 
pending that include additional requirements for states and localities 
to meet. While I am sure someone can find value in almost all of these 
requirements, I am concerned their cumulative impact may be to create a 
program far too burdensome for anyone to use.
    Additionally, in previous attempts, even last year, we failed to 
come to a unified committee resolution to the issue of Davis-Bacon. 
Failing to do so again will likely result in yet another stalemate. I 
must again, as I have in the past, encourage all parties to come to the 
table to find a path forward that keeps the Committee united behind a 
single bill.
    This is an important issue. While some may disagree over the exact 
amount of the funding gap, there can be no denying that it exists. The 
question before the Committee is, what if any changes do we need to 
make to the Federal clean water program to ensure it is best meeting 
the needs of our local communities and lessening that gap? As the 
single most conservative member of the Senate, as voted by the American 
Conservative Union, I have consistently advocated for developing and 
improving the Nation's infrastructure and providing for our Nation's 
defense. I look forward to this hearing and to working with my 
colleagues to develop a comprehensive funding proposal. Thank you again 
to Senator Lautenberg for holding this hearing.

    Senator Lautenberg. Thank you.
    Senator Voinovich, we welcome you and ask you for your 
statement at this time.

  OPENING STATEMENT OF HON. GEORGE V. VOINOVICH, U.S. SENATOR 
                     FROM THE STATE OF OHIO

    Senator Voinovich. Thank you, Senator Lautenberg and 
Senator Vitter. Thank you for holding this hearing on 
wastewater infrastructure.
    Water infrastructure has been a longstanding concern of 
mine. In fact, my first bill that I introduced as a young 
legislator in the 1960's was a $375 million State bond issue to 
get the State involved with wastewater treatment. I think it is 
clear that we are facing an environmental and public health 
crisis in this country when it comes to water infrastructure, 
and I am very pleased that this subcommittee has made it a 
priority by holding this hearing.
    In addition, I would like to thank the witnesses for being 
here today. As a former Governor and mayor, I respect and know 
firsthand the enormous challenges you have in addressing the 
issues in your cities and States.
    As many of my colleagues know, the Clean Water SRF program 
is an effective and immensely popular source of funding for 
wastewater collection and treatment projects. Billions of 
dollars have already been spent and billions more are needed to 
upgrade this Nation's aging wastewater infrastructure. I firmly 
believe the Federal Government is responsible for paying its 
fair share. That is why I was very disappointed that the EPA's 
2008 budget proposed severe spending cuts for the Clean Water 
SRF program. I hope the increased funding levels in both the 
Senate, $1.1 billion, and the House, $887 million, Fiscal Year 
2008 interior appropriation bills for the program will remedy 
that situation.
    As in many States, Ohio's needs for public wastewater 
system improvements greatly exceed the typical Clean Water SRF 
funding levels.
    Mr. Chairman, when we really did something about wastewater 
was back when the Feds picked up 75 and the locals picked up 
25. That is when we really moved from primary down to tertiary 
treatment.
    According to the Ohio EPA, Ohio's capital investment needs 
for publicly owned wastewater treatment facilities are $12.9 
billion. Of that amount, almost $6.3 billion of improvements 
have been identified as necessary to address combined sewer 
overflow problems in over 100 communities. The city of Akron, 
for example, has proposed to spend $426 million over 30 years 
to fix the city's CSO problems. Of course, they can't do it 
over 30 years because the EPA tells them they have to do it in 
15 years.
    That is why I am an original cosponsor of Senator 
Lautenberg's bill, the Water Quality Investment Act, which 
would authorize nearly $2 billion in Federal grants to fund the 
repair and replacement of combined sewer overflows and sanitary 
sewer overflows. In 2002 and 2004, the EPW Committee adopted my 
amendments to authorize funding for this program as part of the 
Clean Water and Safe Drinking Water reauthorization 
legislation. I look forward to working on this issue once again 
with you, Senator Lautenberg, to see if we can make something 
happen.
    I am also concerned about the impacts of the funding needs 
for water infrastructure in our rural communities. In Ohio, 
many of these communities are in Appalachia. Data from the EPA 
survey shows that 47 percent of our Appalachian households 
nationwide are not served by public sewers. For many 
communities, this lack of service is forcing residents to haul 
water from springs or rain barrels. A 2003 Appalachian Regional 
Commission water and wastewater needs study reported that 
counties with higher densities of septic tanks received less 
public funding than counties with lower densities of septic 
systems.
    I am concerned that these communities are not receiving 
funding because the SRF process is too cumbersome. I am anxious 
to hear from our witnesses today on how Congress can address 
this problem for our rural communities as we consider 
reauthorization for the Clean Water SRF.
    It expired at the end of Fiscal Year 1994 think of that, 
1994 and the failure of Congress to reauthorize the program 
sends an implicit message that wastewater collection and 
treatment is not a national priority. The longer we wait to 
reauthorize this program, the longer it creates uncertainty 
about the program's future in the eyes of borrowers. It could 
delay or, in some cases, prevent project financing. In order to 
allow any kind of substantial increase in spending, 
reauthorization of the Clean Water SRF program is necessary.
    I am particularly interested in hearing all of the thoughts 
of our witnesses on the Clean Water SRF program's benefits and 
limitations as it currently stands. I would also like to know 
what you believe we in Congress can do to change the 
reauthorization to make the program more beneficial to our 
Nation's cities and States, and, again, I thank you for being 
here.
    [The prepared statement of Senator Voinovich follows:]

     Statement of Hon. George V. Voinovich, U.S. Senator from the 
                             State of Ohio

    Senator Lautenberg and Senator Vitter, thank you for holding this 
hearing on the wastewater infrastructure. Water infrastructure has been 
a long-standing concern of mine. In fact, my first bill that I 
introduced as a young state legislator in the 1960s was a $375 million 
state bond issue to get the state involved with wastewater treatment. I 
think it is clear that we are facing an environmental and public health 
crisis in this country when it comes to water infrastructure, and I am 
very pleased that this subcommittee has made it a priority by holding 
this hearing.
    In addition, I would like to thank the witnesses for being here 
today. As a former Governor and Mayor, I respect and know firsthand the 
enormous challenges you have in addressing this issue in your cities 
and states.
    As many of my colleagues know, the Clean Water SRF Program is an 
effective and immensely popular source of funding for wastewater 
collection and treatment projects. Billions of dollars have already 
been spent and billions more are needed to upgrade the nation's aging 
wastewater infrastructure. I firmly believe the federal government is 
responsible for paying its fair share.
    That is why I was very disappointed that EPA's 2008 budget proposed 
severe spending cuts for the Clean Water SRF Program. I hope the 
increased funding levels in both the Senate ($1.1 billion) and House 
($887 million) Fiscal Year 2008 Interior Appropriations bills for the 
SRF program subsist.
    As in many states, Ohio has needs for public wastewater system 
improvements which greatly exceed the typical Clean Water SRF funding 
levels. According to Ohio EPA, Ohio's capital investment needs for 
publicly owned wastewater treatment facilities are $12.9 billion. Of 
that amount, almost $6.3 billion of improvements have been identified 
as necessary to address combined sewer overflow (CSO) problems in over 
100 communities. The City of Akron, for example, has proposed to spend 
$426 million over 30 years to fix the City's CSO problems.
    That is why I'm an original co-sponsor of Senator Lautenberg's 
bill--the Water Quality Investment Act, which would authorize nearly $2 
billion in federal grants to fund the repair and replacement of 
combined sewer overflows and sanitary sewer overflows. In 2002 and 
2004, the EPW Committee adopted my amendments to authorize funding for 
this program as part of the Clean Water and Safe Drinking Water SRF 
reauthorization legislation. I look forward to working on this issue 
once again with Senator Lautenberg to help communities tackle sewer 
overflows.
    I am also concerned about the impacts of the funding needs for 
water infrastructure in our rural communities. In Ohio, many of these 
communities are in the Appalachia. Data from EPA surveys show that 47 
percent of Appalachian households nationwide are not served by a public 
sewer. For many communities, this lack of service is forcing residents 
to haul water from springs or rain barrels. A 2003 Appalachian Regional 
Commission (ARC) water and wastewater needs study reported that 
counties with higher densities of septic systems received less public 
funding than counties with lower densities of septic systems.
    I am concerned that these communities are not receiving funding 
because the SRF process is too cumbersome. I am anxious to hear from 
our witnesses today on how Congress can address this problem for our 
rural communities as we consider reauthorization for the Clean Water 
SRF.
    Authorization for the Clean Water SRF expired at the end of fiscal 
year 1994, and the failure of Congress to reauthorize the program sends 
an implicit message that wastewater collection and treatment is not a 
national priority. The longer we wait to reauthorize this program, the 
longer it creates uncertainty about the program's future in the eyes of 
borrowers, which could delay or in some cases prevent project 
financing. In order to allow any kind of substantial increase in 
spending, reauthorization of the Clean Water SRF program is necessary.
    I am particularly interested in hearing all of your thoughts on the 
Clean Water SRF program's benefits and limitations as it currently 
stands. I would also like to know what you believe we in Congress can 
change during reauthorization to make the program more beneficial to 
our nation's cities and states. Again, I want to thank you all for 
attending this hearing.

    Senator Lautenberg. Thank you very much.

 OPENING STATEMENT OF HON. DAVID VITTER, U.S. SENATOR FROM THE 
                       STATE OF LOUISIANA

    Senator Vitter. Thank you, Mr. Chairman, for calling this 
hearing. It is really important.
    As everyone has said, our Nation's wastewater 
infrastructure is aging. Most of the system's infrastructure 
has been around for 50 to 100 years. It is deteriorating, in 
need of replacement, rehabilitation, so it is very important 
that we set this as a priority to bring that infrastructure in 
to the 21st century.
    Representing Louisiana, I certainly know this. In large 
parts of our State, our infrastructure is over double that age. 
A city like New Orleans, the infrastructure is way older than 
50 to 100 years. We have clay pipes and the deterioration is 
even more significant. That is not just in New Orleans, it is 
around the State.
    Then, on top of that, with our experience 2 years ago of 
Hurricanes Katrina and Rita, that destroyed a lot of the 
infrastructure and further aged, in 1 day, a lot of the 
infrastructure. So folks living in those areas really know the 
strain of this decaying infrastructure.
    I want to welcome all of our witnesses today, certainly Ben 
Grumbles with EPA. Thank you for being here, Ben. The entire 
second panel.
    Of particular note for me, we have Mayor Glenn Brasseaux of 
the city of Carencro. Mayor, welcome to you. Thank you for 
being here and taking time to come to be part of this important 
hearing. Of course, he will talk about wastewater 
infrastructure, but in particular from the perspective of small 
communities and also as a board member of the Louisiana Rural 
Water Association.
    Again, I agree with my colleagues, the State Revolving Fund 
is very important in this, and we need to figure out how we can 
make it even more effective. So I will be very interested in 
hearing all of the witnesses' testimony about that.
    To oversimplify, it seems to me we need to focus on two big 
categories. One is there is enormous demand, so I think we need 
to have more funding to meet that demand. In addition, I think, 
over the last 20 years in particular, we have created so much 
complexity in the system that a dollar goes not nearly as long 
as it used to go, and we need to step back and figure out how 
we reduce that burden and that complexity so that as we 
hopefully increase the dollars, they are able to go a lot 
further, which they certainly did 20 years ago, to help bridge 
that gap. I look forward to everyone's ideas with regard to 
both of those categories.
    Thank you again, Mr. Chairman.
    Senator Lautenberg. Thank you, Senator Vitter. Senator 
Vitter is the Ranking Member on this subcommittee and we look 
forward to working together to get many things moving that have 
been too long delayed.
    I want to now welcome to the witness table Ben Grumbles, 
Assistant Administrator of Water from EPA. We look forward to 
hearing the Agency's views on this important issue, and I thank 
you for joining us, Mr. Grumbles.

STATEMENT OF HON. BENJAMIN H. GRUMBLES, ASSISTANT ADMINISTRATOR 
        FOR WATER, U.S. ENVIRONMENTAL PROTECTION AGENCY

    Mr. Grumbles. Thank you, Mr. Chairman and members of the 
committee. It is a real honor to be before you representing the 
U.S. EPA.
    I hope you will listen to my words, but I trust that you 
will be looking behind me, because what you see are the faces 
of the clean water campaign across America, the local elected 
officials, the advocates of various organizations who are all 
rallying behind something that we all share and I think we all 
hold in common, and that is working together to change the way 
America views and values water and the water infrastructure 
system that supports it. The 1.5 million miles of sewer lines, 
the 16,000 treatment plants are all part of the lifelines to 
the communities' environmental and economic health of America, 
so I am very proud to be here.
    EPA is very proud of the role we have played with our 
partners to develop innovative, sustainable approaches to 
meeting the very large array of needs for clean and safe water 
across the country. October 18 marks the 35th anniversary of 
the Clean Water Act, so it is particularly timely and 
appropriate to have this hearing focusing on one of the 
greatest challenges.
    Administrator Stephen Johnson has articulated to everyone 
in the Agency and, just as importantly, to the many partners at 
the State, tribal, and local level, and in the private sector 
that one of his top priorities is to develop innovative and 
sustainable and market-based solutions for water infrastructure 
financing and management.
    What I am going to say in the brief amount of time I have 
is I want to focus in on the three waves of water 
infrastructure financing over the years and what EPA is doing 
to usher in that third wave of innovative, sustainable, and 
market-based approaches.
    The first wave, as you know better than anyone, was the 
construction grants era, where there were direct grants to 
cities. As Senator Voinovich mentioned, it is undisputable that 
has led to tremendous, enormous progress in cleaning up the 
Nation's waterways.
    The Nation evolved into a State Revolving Fund model in the 
1987 amendments, and that is the second wave. Greater 
sustainability. We embraced the original intent of Congress at 
the time, and that was to move toward true sustainability, 
after Federal capitalization grants, to get all of those funds 
up and running. It is a tremendous, remarkable success story of 
the State Revolving Fund model. It is one that we share with 
countries around the world. It is one that we are fully 
committed to in the sense of providing capitalization grants as 
we have, living up to the President's commitment to provide 
$6.8 billion in continued capitalization grants through 2011 
and working hard and working in a collaborative way to help 
States and local fund managers see those funds truly evolve and 
be sustainable.
    The third wave is the more innovative and sustainable 
approach, and it is represented by several things. One is the 
four pillars of sustainability that the Agency has been 
advocating and acting on over the last several years, which I 
will describe, and another one is in the President's budget 
request these new Water Enterprise Bonds. We need congressional 
help to amend the tax code to remove the State volume caps on 
water and wastewater Private Activity Bonds. But we are also 
pursuing other aspects of true sustainability.
    So this third wave, the first part of it is focusing on the 
demand side, as Senator Vitter mentioned, and that is the four 
pillars of sustainability, and the first and most important, in 
many respects, is asset management. In May of this year, EPA 
signed a watershed agreement, a national agreement with water 
and wastewater agencies, national organizations, to all work to 
improve management of water infrastructure systems to know 
those critical assets, these buried assets, if you will, for 
many of them that are underground pipes, to inventory them and 
to have a more sustainable management approach to reduce the 
leaks and the overflows and to increase the productivity of 
those systems.
    The second is full cost pricing. It is so hard to explain 
how cheap water is in so many respects compared to the value of 
the service that is being provided. EPA is not going to set the 
prices and we are very sensitive to the needs of local 
communities and, in particular, local elected officials about 
the rate shock that Senator Voinovich is mentioning when we see 
big price tags for sewer overflow projects over the years. But 
we are fully committed, as one of our pillars of 
sustainability, to providing tools and information about 
helping communities get the prices right to better reflect the 
needs, the investments in their community systems. When 
communities invest in wastewater infrastructure, they are 
investing in their communities.
    Mr. Chairman, I would love to make available to the 
committee a video that the Local Government Advisory Committee 
produced. This is part of FACA for the Administrator of EPA, 
and it is called Water Infrastructure: Successful Strategies 
for Local Leadership, and it focuses on in particular on 
elected local leaders. So, without objection, I would like to 
provide that to the committee.
    Senator Lautenberg. Great. Thank you. We will have it 
available for distribution for the members who would be 
interested in seeing it.
    Mr. Grumbles. Thank you, Mr. Chairman.
    The other two pillars of sustainability that are really 
part of this third wave to help reduce demand on our Nation's 
wastewater infrastructure systems, which is a tremendous demand 
based on our gap report and the need surveys, is to focus on 
water efficiency like never before. That is why I would 
encourage the committee and others in Congress to embrace the 
WaterSense program, this voluntary public-private partnership 
of labeling of water-efficient products and appliances to help 
reduce the demand on infrastructure needs.
    The fourth pillar is a watershed approach, and that is 
where we see----
    Senator Lautenberg. Can I ask you?
    [inaudible]----
    Mr. Grumbles. Mr. Chairman, green infrastructure is a very 
important part of that. That, coupled with the Water Enterprise 
Bonds, which we believe will bring in $5 billion to $6 billion 
in new funds in partnership with the private sector, is an 
important way to proceed for meeting America's wastewater 
infrastructure needs.
    Thank you.
    [The prepared statement of Mr. Grumbles follows:]

 Statement of Benjamin H. Grumbles, Assistant Administrator for Water, 
                  U.S. Environmental Protection Agency

    Mr. Chairman and Members of the Committee, I am Benjamin H. 
Grumbles, Assistant Administrator for Water at United States 
Environmental Protection Agency (EPA), and I am grateful for the 
opportunity to testify before you today on the nation's water 
infrastructure needs and the innovative and sustainable solutions the 
Environmental Protection Agency and its partners are pursuing.
    On October 18, America celebrates the 35th Anniversary of the Clean 
Water Act (CWA), one of the world's most successful and enduring 
environmental laws. The CWA has dramatically improved water quality 
through scientific standards, discharge permits, pre-treatment 
requirements, state and local funding, watershed planning and a 
wastewater infrastructure system unparalleled in the world.
    I am proud of the work EPA is doing and the progress we are making 
with our Regions, the States, Tribal communities and other partners to 
implement the vital objectives of this milestone legislation. Today, of 
the 222.8 million people served by wastewater treatment facilities, 
more than 98.5 percent (219.5 million people) are served by ``secondary 
treatment'' (or better), a technical but important term of art that 
refers to a biological treatment process designed to remove dissolved 
organic matter from wastewater. Secondary treatment may remove up to 90 
percent of remaining biological matter such as human waste, food waste, 
soaps and detergent.
    More than 281 million people receive drinking water on a daily 
basis from more than 52,000 community water systems throughout the 
nation. Advances in wastewater and drinking water treatment constitute 
major achievements in modern American public health.
    Administrator Stephen Johnson identifies the development of 
innovative, market-based, and sustainable solutions for water 
infrastructure financing and management as a top priority in his action 
plan for the Agency.
    Over the past 20 years, communities have spent more than $1 
trillion (in 2001 dollars) on infrastructure, operations and 
maintenance for wastewater treatment and disposal and drinking water 
treatment and supply. But, it may not be enough to keep pace with 
America's aging infrastructure systems. Many municipal water 
distribution pipelines and sewer systems were constructed in the period 
following World War II with an expected design life of 20-50 years. 
Deteriorating pipelines can cause releases of water or wastewater that 
result in environmental contamination and a net loss of water with 
major economic consequences. In addition, numerous treatment facilities 
that process water and wastewater are in need of upgrading to meet 
capacity and water quality requirements associated with protection of 
public health and the environment. There is critical need for 
replacing, upgrading, and modernizing these infrastructure systems.

                          INFRASTRUCTURE NEEDS

    With the aging of the nation's infrastructure and the growing 
investment need, the wastewater industry faces a significant challenge 
to sustain and advance its achievements in protecting public health and 
the environment.
    In October of 2002, EPA released the Clean Water and Drinking Water 
Gap Analysis Report. The report estimated that if capital investments 
remained at current levels, the potential gap between spending and 
needs between 2000 and 2019 would be approximately $122 billion (in 
2001 dollars) for wastewater infrastructure and $102 billion (in 2001 
dollars) for drinking water infrastructure. If revenue grows at 3 
percent per year, a projection that is consistent with long-term growth 
estimates of the economy, the gap is approximately $21 billion (in 2001 
dollars) for wastewater infrastructure and $45 billion (in 2001 
dollars) for drinking water infrastructure.
    The general causes of the infrastructure funding ``gap'' are not 
difficult to identify. Much of the projected gap is the product of 
deferred maintenance, inadequate capital replacement, and a generally 
aging infrastructure. In addition, populations are increasing and 
shifting geographically, thus requiring investment in existing or new 
infrastructure. The Census Bureau projects the population to grow to 
325 million by the year 2020 (an increase of more than 15 percent over 
the 2000 population). Lastly, unlike utilities subject to state 
regulation such as electric and natural gas service and privately owned 
water systems, many public utilities in the United States have not 
historically charged their users the full cost of service.

               FEDERAL FINANCING FOR WATER INFRASTRUCTURE

    At EPA, we think of water infrastructure financing in waves of 
progress. If we look back at the innovations of the last generation, 
the first wave ushered in the historic Clean Water and Safe Drinking 
Water Acts in the early 1970s in response to the degradation of our 
waters.
    The second wave was another historic moment in transitioning to the 
State Revolving Funds used to stretch the federal investment. On 
February 4, 2007 we marked the 20th anniversary of the passage of the 
Clean Water Act amendments that authorized the Clean Water State 
Revolving Fund (CWSRF) program. The creation of the CWSRF in 1987 and 
the Drinking Water State Revolving Fund (DWSRF) in 1996 were major 
milestones on the path to financial sustainability for our water 
infrastructure.
    With the help of federal capitalization grants, the States provide 
low interest loans for water infrastructure projects through their 
individual CWSRFs and DWSRFs. Since loan repayments allow the funds to 
``revolve'' over the long-term, the SRFs provide sustainable sources of 
financing into the future.
    Over the past 19 years, The CWSRF program has played a significant 
role in helping to finance water infrastructure, a role that will 
continue over the long-term. Over this time period, EPA has provided 
approximately $25 billion to help capitalize the state-run programs. In 
combination with state monies, bond proceeds, and recycled loan 
repayments, the CWSRFs have been able to ``leverage'' the Federal 
investment into $61 billion to fund worthy water infrastructure 
projects. The newer DWSRF program has accumulated close to $13 billion 
in its first 10 years of operation. The year 2006 marked an important 
and notable milestone in the CWSRF: it was the first time that over $5 
billion in assistance was provided in any one year.
    The success of the SRFs can be attributed in large part to the 
broad flexibility of the funds and the elimination of overlapping 
federal and state requirements. The broad flexibility has allowed 
states to implement the SRFs to fuller advantage. An example of this 
flexibility is evident in California which, on average, provides over 
$250 million in water quantity funding annually. In California, the 
CWSRF's flexibility has allowed the state to undertake its most 
pressing water quality needs, whether through traditional wastewater 
treatment projects, or by reducing nonpoint source pollution from 
agricultural runoff. The choice of achieving nutrient reduction through 
less-expensive Best Management Practices on farm lands rather than 
installing highly advanced nutrient removal at publicly owned treatment 
works can be a win-win for the environment and for the sustainability 
of our water infrastructure.
    At the same time, elimination of overlapping federal and state 
requirements has reduced both delay in funding and cost-inefficiencies 
we see when direct grants are made, as was the case with construction 
grants and remains the case with Special Appropriations Act projects 
(earmarks).
    EPA is committed to helping our partners sustain progress and 
increase opportunities for SRFs through financial stewardship, 
innovation, and collaboration. With a focus on promoting investment in 
sustainable infrastructure and encouraging greater creativity in 
project planning and development, we look forward to working with our 
state and local partners to make the program even more effective. The 
SRF programs demonstrate the power of partnerships to leverage, 
innovate, and excel to meet water infrastructure, watershed protection, 
and community health needs.
    The SRFs are now and will continue to be a critical tool for 
capital financing of our Nation's wastewater infrastructure. But, they 
are not the only tool. Other aggressive and innovative actions and 
technologies are crucial to solving the Nation's water infrastructure 
needs.

                         WATER ENTERPRISE BONDS

    In addition to the successful SRF programs, we believe that other 
aggressive and innovative financing and management tools are crucial to 
solving the Nation's water infrastructure needs. These innovations are 
the upsurge of a third wave--which is bringing in new ideas about 
sustainability and encouraging greater private sector participation. 
EPA is helping lead this third wave of water infrastructure financing 
and investment by proposing an important new tool--Water Enterprise 
Bonds--to accelerate and increase investment in the nation's water 
infrastructure. Water Enterprise Bonds will enhance access and 
flexibility for utilities to issue private activity bonds for public-
purpose drinking water and wastewater facilities.
    The objectives of this proposal, contained in the President's FY'08 
Budget Request, are to accelerate and increase investment in the 
Nation's water infrastructure and to facilitate development of more 
sustainable infrastructure projects through innovative market-based 
approaches. Specifically, the proposal is to amend the Internal Revenue 
Code to remove the State volume cap on the use of private activity 
bonds for water and wastewater infrastructure. Providing expanded 
access to private activity bonds for communities will allow them to 
finance, build, and manage water facilities using public-private 
partnerships that deliver the best mix of technology, construction, and 
operations with the appropriate transfer of risk to their private 
sector partners. To ensure the long-term financial health and solvency 
of these drinking water and wastewater systems, communities using these 
bonds must have demonstrated a process that will move towards full-cost 
pricing for services within 5 years of issuing the Private Activity 
Bonds. This will help water systems become self-financing and minimize 
the need for future subsidies. This proposal, if enacted, would lead to 
a more robust market offering of new solutions to our water 
infrastructure investment challenges.
    We are also looking aggressively for innovative ways to reduce 
costs and increase incentives to foster sustainable water 
infrastructure investment and management. This Nation is increasingly 
understanding that our goal needs to be not simply spending more on 
infrastructure, but investing wisely in efficient utilities that focus 
on life-cycle costs, plan for and find asset management and 
replacement, and consistently think and act like the enterprises they 
should be, for example, seeking to create revenue streams out of waste 
streams.
    As part of that effort, we held a milestone conference in March 
2007, ``Paying for Sustainable Water Infrastructure: Innovations for 
the 21st Century.'' This unprecedented forum for idea and actions 
underscored the urgency of sustaining our water infrastructure. It 
brought together more than 600 of our nation's best and brightest water 
experts to discuss, debate, and brainstorm innovative approaches to 
reducing costs and increasing investment in drinking water and 
wastewater systems and programs.
    We are continuing to expand upon this constructive dialogue with 
several follow-up meetings with our conference co-sponsors and other 
stakeholders. In addition, we have converted the conference website 
into an Innovative Financing Forum'' that includes online discussion 
boards to share ideas, relevant articles, and other information.

              EPA'S APPROACH TO SUSTAINING WATER RESOURCES

    The Agency has approached the challenge of keeping pace with 
infrastructure needs of the future by developing a comprehensive 
strategy built upon what we call the ``Four Pillars of Sustainable 
Infrastructure''--better management, full cost pricing, water 
efficiency, and the watershed approach. It is an effort to help ensure 
that our Nation's water infrastructure is sustained into the future by 
fundamentally changing the way America views, values, and manages its 
water Infrastructure. It is a collaborative effort involving drinking 
water and wastewater utility managers, professional and trade 
associations, local watershed protection organizations, private sector 
experts in technology, engineering, and finance, and federal, state, 
and local officials.

                           BETTER MANAGEMENT

    The Better Management ``pillar'' involves changing the paradigm for 
utility management from managing for compliance to managing for 
sustainability. We are concentrating our efforts on improved 
performance through state-of-the-art management approaches focused on 
the entire utility, working with smaller utilities to improve their 
capacity to comply with regulatory requirements, and providing 
utilities with information on cost-effective technologies.
    On May 8, 2007, EPA signed a groundbreaking utility management 
partnership agreement with six leading water and wastewater utility 
organizations to ensure the long-term viability of our Nation's water 
systems through effective utility management. Through this partnership, 
we agreed to promote key attributes of effectively managed utilities, 
encourage broader use of performance measures by utilities to gauge 
their performance, and identity resources to help utilities manage all 
of their operations more effectively.
    This partnership provides utilities with a common management 
framework to help them ensure that their operations and infrastructure 
are sustainable in the future. We are now working in partnership with 
the signatory organizations to encourage the widespread adoption of the 
utility attributes and performance measures, along with other 
sustainable management practices like environmental management systems 
and asset management across the water sector.

                           FULL COST PRICING

    In many cases, water and wastewater services in this country do not 
consistently recover (or even calculate) the full cost of service. Over 
the past year, the Agency has been working with drinking water and 
wastewater utilities, public utility commissions, academia, and 
consultants to discuss issues associated with achieving full cost 
pricing. The challenge is significant, because we must work to help 
utilities correct market signals that have been distorted by years of 
subsidies. This past July, the National Association of Regulatory 
Utility Commissioners responded to our efforts by issuing a resolution 
calling for economic regulators and public health and environmental 
regulators to work together to advance attainment of sustainable public 
health and environmental protection.
    Full cost pricing will only be possible and successful in an 
efficiently structured and managed water and wastewater sector. 
Activities carried out under the other pillars will help to address 
inefficiencies in management and operations. We are also working with 
our industry partners to develop tools and techniques to assist 
utilities interested in recognizing and recovering the long-term, full 
cost of providing service. To this end, we will be working to convene 
training and workshops in 2008 that will help communities find 
appropriate options for cost allocation and rate design.

                            WATER EFFICIENCY

    Managing water is a growing concern in the United States. Due to 
increases in both population and per capita water usage, communities 
across the county are starting to face challenges regarding water 
supply and water infrastructure. Improved water efficiency reduces the 
strain on aging water and wastewater systems, makes better use of 
existing resources, and can delay or even eliminate the need for costly 
new infrastructure investments. It also diverts less water from rivers, 
bays, and estuaries, which helps keep the environment healthy. Improved 
water efficiency also translates into cost and energy savings by 
reducing the amount of energy used to treat, pump, and heat water.
    Under the Water Efficiency ``pillar'' we are working to foster a 
national ethic of water efficiency, so that water is valued as a 
limited resource that should be used wisely. In June 2006, EPA 
announced WaterSense, an innovative partnership program that helps 
American consumers and businesses make smart water choices that save 
money and maintain high environmental standards without compromising 
performance.
    WaterSense features a label that will make it easy to find products 
and services that save water. In order to ensure product quality and 
performance, WaterSense labeled products must be third-party certified 
to meet strict efficiency and performance criteria. To date, WaterSense 
has signed agreements with over 160 promotional, manufacturer, 
retailer, and certifying organization partners.
    In October 2006, WaterSense began labeling programs that certify 
irrigation design and installation professionals. Nationwide, landscape 
water use is estimated to account for nearly one-third of all 
residential water use, totaling more than 7 billion gallons per day and 
up to 50 percent of that goes to waste due to factors such as 
evaporation and runoff caused due to improper system design; these 
certified professionals can make a big impact. Four irrigation programs 
qualified for the WaterSense label and over 250 certified irrigation 
professionals have partnered with the program.
    In January 2007, WaterSense issued a final specification for a new 
generation of high efficiency toilets that use only 1.28 gallons per 
flush but still perform as well as, or better than, conventional models 
that use as much as 5.0 gallons per flush. If only 10 percent of the 
existing 222 million toilets in the United States were replaced with 
WaterSense labeled toilets the total savings potential is approximately 
246 million gallons per day. This equates to more than 89.7 billion 
gallons each year. Already, seven manufacturers have labeled 64 
different HET models. In the coming weeks, WaterSense expects to 
finalize a specification for high-efficiency bathroom sink faucets and 
faucet accessories that could potentially save 61 billion gallons 
annually.
    WaterSense is also developing voluntary specifications for water-
efficient new homes and is working with building rating systems such as 
the U.S. Green Buildings Council Leadership in Energy and Environmental 
Design (LEED) Green Building Rating System to adopt water-efficiency 
components to their rating systems. Looking ahead, WaterSense will 
focus on other commercial and residential plumbing products, as well as 
irrigation system technologies, such as soil moisture sensors and 
weather-based controllers.
    Other important activities under this pillar include implementing a 
Water Efficiency Leader program to inspire, motivate, and recognize 
organizations and individuals who are working to improve water 
efficiency beyond the labeling of products. We are also supporting the 
formation of a national organization called the Alliance for Water 
Efficiency (AWE), which initially will establish a water-efficiency 
information clearinghouse and website. In the future, AWE's activities 
will expand to work with and complement WaterSense's activities 
including monitoring national plumbing and appliance standards and 
codes. One of EPA's newest and most impressive facilities, the Region 8 
Headquarters, will save water through the use of high efficiency 
plumbing fixtures such as waterless urinals and dual-flush toilets. It 
also has a green roof.
    We are also beginning to collaborate with public officials and 
utility managers to identify strategies and tools for reducing water 
loss from systems. Making water distribution more efficient will not 
only save water and reduce costs, but it will save energy and 
significantly improve sustainability and increase capital available for 
infrastructure investment.

                           WATERSHED APPROACH

    The goal of this ``pillar'' is to integrate watershed-based 
approaches into decision making at the local level so that communities 
can make the most informed and cost-effective infrastructure decisions 
that also help to ensure the overall health of the watershed. In many 
cases, adoption of watershed-based approaches, such as source water 
protection, ``green infrastructure,'' water quality trading, and 
watershed permitting, in conjunction with traditional ``hard 
infrastructure'' approaches, can help reduce overall infrastructure 
costs.
    EPA will continue to advance the President's vision of 
``Cooperative Conservation'' through grassroots, community-driven 
efforts to protect local watersheds and waterbodies of natural 
significance. Last December, we convened a group of drinking water, 
wastewater, and stormwater utility managers to discuss watershed 
approaches to utility management. Building off the success of that 
effort, we asked The National Advisory Council on Environmental Policy 
and Technology to provide EPA with recommendations on how to advance 
our efforts in this area. We received initial recommendations from the 
group in July and they are currently engaged in the second phase of 
their project.

                          GREEN INFRASTRUCTURE

    The Agent's approach to sustainable infrastructure does not rely 
solely on the four pillars strategy. In April 2007, EPA Administrator 
Stephen Johnson signed onto a partnership with four national 
organizations to promote the use of ``green infrastructure'' to lessen 
sewer overflows and runoff after storms. A primary goal of this new 
partnership is to reduce stormwater runoff volumes.
    Green infrastructure represents a new approach to stormwater 
management that is cost-effective, sustainable, and environmentally 
friendly. Green infrastructure techniques utilize natural systems, or 
engineered systems that mimic natural landscapes, to capture, cleanse 
and reduce stormwater runoff using plants, soils and microbes.
    On the regional scale, green infrastructure consists of the 
interconnected network of open spaces and natural areas (such as 
forested areas, floodplains and wetlands) that improve water quality 
while providing recreational opportunities and wildlife habitat. On the 
local scale, green infrastructure consists of site-specific management 
practices (such as rain gardens, porous pavements, and green roofs) 
that are designed to maintain natural hydrologic functions by absorbing 
and infiltrating precipitation where it falls.
    EPA and the Federal Highway Administration have teamed up to engage 
a variety of public and private partners in creating a national model 
for green infrastructure and sustainable transportation--the Green 
Highways Partnership. The Partnership, with its growing network of 
diverse partners, is a model for promoting sustainable infrastructure 
and environmental protection through low-cost and low-impact solutions 
such as: permeable materials and state of the art technologies that 
cost-effectively reduce or eliminate stormwater flows and pollutants; 
construction with recycled materials; and integration of planning, 
practices and incentives to protect critical habitats, waterways, and 
ecosystems.
    The Green Highways Partnership is actively benchmarking, developing 
and demonstrating these approaches and actions throughout the Mid-
Atlantic. We are planning to share the lessons learned and innovative 
technologies from these studies and projects. The outcome of these 
efforts is sustainable transportation infrastructure that is ``beyond 
compliance'' and leaves the environment and communities ``better than 
before.''

                                RESEARCH

    The Agency's Office of Research and Development received nearly $7 
million this year for a new research program to generate the science 
and engineering to improve and evaluate promising innovative 
technologies and techniques to reduce the cost and improve the 
effectiveness of operation, maintenance, and replacement of aging and 
failing drinking water and wastewater treatment and conveyance systems.
    The initial focus of the program will be on ``underground'' 
infrastructure--America's ``buried assets'' that provide a foundation 
for environmental protection and economic growth. The initial plan 
primarily identifies research, demonstration and technology transfer 
activities for wastewater collection systems and drinking water 
distribution systems. Products will be provided to drinking water and 
wastewater utilities to help them adopt and implement new and 
innovative technologies and methods for cost-effectively operating, 
managing, rehabilitating and extending the life of their systems.

                             WATER SECURITY

    The security of our water and wastewater infrastructure continues 
to be an important priority for the EPA and the National Water Program. 
EPA has worked hard to ensure that drinking water systems fulfill their 
obligations under the Bioterrorism Act. We have also provided voluntary 
guidance and training to wastewater utilities on how to conduct 
vulnerability assessments, prepare emergency response plans, and 
address threats from terrorist attacks. To be sustainable, water and 
wastewater systems must be secure. We are working with the Department 
of Homeland Security to advance efforts on a variety of fronts.

                             CLIMATE CHANGE

    EPA and its partners are learning more and doing more to confront 
another serious challenge for our water resources--climate change. 
Increasingly, we understand climate change may have impacts on water 
infrastructure and watersheds that will affect our actions under the 
Clean Water Act, Safe Drinking Water Act, and various ocean and coastal 
laws.
    While there remains some uncertainty on the scope, timing and 
potential regional impacts of climate change related effects, EPA and 
its partners are taking prudent steps now to assess emerging 
information, evaluate potential impacts of climate change on water 
programs, and identify appropriate response actions. The National Water 
Program recently established an intra-agency Climate Change Workgroup, 
made up of senior managers from EPA headquarters and regional water 
offices. The Water Program Climate Change Workgroup is working to 
improve understanding of climate change impacts on water resources and 
is finalizing a Climate Change Strategy for the National Water Program.

                               CONCLUSION

    Taken together, all of these initiatives, innovative tools, and 
funding resources will help EPA and its partners continue to build on 
the gains in water quality that we have worked so hard for and enjoyed 
over the past 35 years.
    As the Committee continues to study water infrastructure needs, the 
Administration would like to encourage a constructive dialogue on the 
appropriate role of the federal government in addressing these needs 
and on innovative new tools such as Water Enterprise Bonds. Mr. 
Chairman, I look forward to working with you and your colleagues and 
answering any questions you may have.
                                 ______
                                 
    Responses by Benjamin H. Grumbles to Additional Questions from 
                           Senator Lautenberg

     Question 1. When will the 2004 Clean Watersheds Needs Survey be 
released? What is the current status of the Needs Survey? Is it under 
review at the Office of Management and Budget? If so, how long has it 
been under review? If it is not under review, please describe where it 
is in the process, and EPA believes remains to be done before it can be 
released.
    Response. We anticipate that the 2004 Clean Watersheds Needs Survey 
will be released shortly. It is currently undergoing final review at 
the Office of Management and Budget (OMB).

    Question 2. I understand the National Water Quality Inventory 
report was cleared for release by the Office of Management and Budget 
(OMB) last spring. Why has this report not been released? When will it 
be released? Please provide the Committee with all versions of the 
report that EPA submitted to OMB and any changes to the report 
recommended by OMB.
    Response. The National Water Quality Inventory Report to Congress 
for the 2002 Reporting Cycle was released by EPA on October 11, 2007. 
It was undergoing EPA's final clearance and approval process during the 
interval between its approval by OMB and its final release to Congress. 
The final draft is available on-line at http://www.epa.gov/305b/
2002report.

    Responses by Benjamin H. Grumbles to Additional Questions from 
                             Senator Cardin

    Question 1. EPA's ENERGY STAR Program has proven effective as a 
tool in reducing energy usage in America. Do you envision a similar 
program for WaterSense? If so, can you give us examples of the savings 
that can be realized as well as the marketing plans EPA has to realize 
the full potential of this effort?
    Response. Launched in June 2006, EPA's WaterSense program was 
designed to reduce water use across the country by creating an easy-to-
identify label for water-efficient products that is backed by strict 
criteria and independent certification. Generally speaking, WaterSense 
labels products that use 20 percent less water and perform as well as--
or better than--conventional models. To earn the WaterSense label, 
products must be independently tested and certified to meet EPA's 
criteria for efficiency and performance.
    In less than 2 years, WaterSense has already become a national 
symbol for water efficiency among utilities, plumbing manufacturers, 
and consumers. Awareness of the WaterSense label is growing every day. 
More than 80 different models of high-efficiency toilets have earned 
the label, and WaterSense labeled faucets should be available by next 
year. In addition to manufacturers, EPA is working with utilities. 
retailers, distributors, and the media to educate consumers on the 
benefits of switching to water-efficient products.
    For example, toilets account for about 30 percent of the water used 
in the home and Americans waste 900 billion gallons per year by 
flushing old, inefficient toilets. A family of four can realize a net 
savings of $1,200 from retrofitting their home with WaterSense labeled 
toilets over the product's lifetime or a net annual savings of $60 per 
year after accounting for the cost of purchasing the new WaterSense 
labeled toilets. Furthermore, WaterSense labeled toilets save nearly 
$300 over the product's lifetime when compared to other widely 
available toilets today with little to no significant difference in 
cost compared to a standard model.
    If every home replaced just one old toilet with a WaterSense 
labeled toilet, the water savings would be enough to supply nearly 10 
million U.S. households with water for a year. Savings at the tap also 
result in energy savings. If just 1 in every 10 homes in the United 
States were to install WaterSense labeled faucets or aerators in their 
bathrooms, in aggregate they could save 6 billion gallons of water, and 
more than $50 million in the energy costs to supply, heat, and treat 
that water.
    The potential for preserving our water supply for future 
generations through this voluntary program is great, and WaterSense 
will continue working on new product areas in the future. The average 
home, retrofitted with water-efficient fixtures, could reduce water 
waste by 30,000 gallons per year. If one out of every 10 homes in the 
U.S. upgraded to water-efficient fixtures (including ENERGY STAR 
labeled clothes washers), it could reduce water use by more than 300 
billion gallons and save nearly $2 billion annually on utility bills 
alone (not including the cost of the new fixtures.)
    EPA realizes that water-efficient products are just the start of a 
new wave of water conservation. We are working with utilities to 
incorporate WaterSense promotion as part of their broader conservation 
efforts, which include behavioral changes as well. We are asking our 
retail and distributor partners to stock WaterSense labeled products 
and make it easy for their customers to find water-saving options. We 
have also employed public service announcements, articles, promotional 
materials, and other cost-effective marketing tactics to educate 
consumers about the availability of WaterSense labeled products. By 
promoting this easily recognizable, consistent national brand, EPA 
hopes WaterSense will make water-efficient products the clear and 
preferred choice among consumers.

    Question 2. What is the relationship between the WaterSense program 
the Green Buildings' LEED program?
    Response. WaterSense is very supportive of the work the U.S. Green 
Building Council is doing through its LEED rating systems. WaterSense 
is actively engaged in improving the water-efficiency components of 
those systems. At this time we work with LEED in two ways. First, a 
staff member is a member of the Water Efficiency: Technical Advisory 
Group (WETAG). The WETAG advises LEED on water efficiency in general, 
reviews credit interpretation requests and helps integrate water 
efficiency into new and revised rating systems. Second, EPA has a Green 
Buildings Working group that provides a conduit for EPA review of LEED 
rating systems and other green marketplace activities. A WaterSense 
staff member is an active participant on this EPA workgroup and 
coordinates with them when appropriate.

    Senator Lautenberg. Thank you very much. Mr. Grumbles, in 
the year 2000, EPA estimated States needed $181 billion for 
wastewater infrastructure, but the Administration has proposed 
cutting the annual funding for the State Revolving Fund in 
half, from its longstanding funding level of $1.35 billion to 
$6.87 million. Now, is it possible that we can fulfill our 
wastewater needs for infrastructure while cutting the level of 
funding that much?
    Mr. Grumbles. When the Agency developed the needs survey 
and is working on the ongoing needs survey, and when we also 
issued the 2002 gap report, we made it clear that the overall 
gap or the needs are not the Federal role. Some of those needs 
are operation and maintenance. So the answer is that we believe 
that we can narrow that gap, over time even close the gap, if 
we ensure that the State Revolving Funds are more sustainable, 
not relying on continued or increased levels of Federal seed 
money, but that we reduce red tape through the SRF program, 
that we embrace Water Enterprise Bonds----
    Senator Lautenberg. Mr. Grumbles, forgive me, but let's not 
look back to what we thought might happen. Can we do the job 
that we have to do while we cut the funding for the State 
Revolving Fund in half? Do you really think that is adequate to 
deal with the problems that we have now?
    Mr. Grumbles. I think we can make progress on that front. 
When you look----
    Senator Lautenberg. That is not making progress. The 
progress can be made an inch at a time and never getting to a 
point when we have done the work that we have to.
    Mr. Grumbles. Mr. Chairman, I think the President's budget 
request moves us in the continued direction where we will make 
progress. EPA's budget request for the Clean Water SRF is a 
very important part of the overall picture, but it is not the 
only part of the picture, and the SRF is not the only tool----
    Senator Lautenberg. The answer is no. Thank you. Mr. 
Grumbles, I know you are very capable, professional, and we 
respect the work that you do, but how we can find ways to 
justify reducing the funding available in half in this program, 
there are other things that also can be done, but we are deep 
in trouble with contaminated, polluted water.
    Senator Voinovich, who comes with a unique experience of 
having been a mayor and a Governor, and I have a bill to 
substantially add to the wastewater improvement problem, the 
cleanliness problem, and we are looking for far more funding. 
On the other hand, I hear you justifying this cut and, frankly, 
it is disappointing.
    When will the 2004 Clean Watershed Needs Survey be 
released?
    Mr. Grumbles. Mr. Chairman, we are working on the final 
stages of interagency review, and I am estimating that it would 
be in the next couple of months, before the end of the year.
    Senator Lautenberg. What has taken so long?
    Mr. Grumbles. It has taken quite a bit of time, and I think 
one of the reasons is looking at the various numbers, 
documenting, verifying the State data. Also----
    Senator Lautenberg. Isn't that the normal routine that you 
would go through when you have a program like this, you take 
the steps necessary to evaluate and conclude?
    Mr. Grumbles. It has taken longer than I would like, and I 
think part of the reason is not just the size of the numbers 
and the complexity of the different categories, but it is also 
the assumptions in analyzing what aspects of the Clean 
Watershed Needs Survey we need to focus in on. So I recognize 
it is an extremely important document, and we are working to 
get it to you as soon as we can.
    Senator Lautenberg. Would it be your guess that the report 
will show that State needs have grown or fallen?
    Mr. Grumbles. I think it is a mixed bag, and I don't feel 
comfortable going into great detail, but I would agree with 
every member who has spoken so far, that the needs continue to 
grow in many respects due to the nature of the aging of the 
systems and the----
    Senator Lautenberg. How about the growth in the population?
    Mr. Grumbles. The growth in the populations.
    Senator Lautenberg. How about the severity of storms that 
dump far----
    Mr. Grumbles. I think that will have great impacts in some 
areas of the country, but that is something that is----
    Senator Lautenberg. Will that be considered in the final 
report?
    Mr. Grumbles. Well, we will certainly make sure that the 
Clean Watershed Needs Survey reflects the needs due to wet 
weather flows, storm, combined or sanitary sewers and 
stormwater needs to the Stormwater Permitting program. Mr. 
Chairman, it is a priority for me to be gathering the best 
information we have to look to see what adaptation should be 
made in managing the Clean Water Act and Safe Drinking Water 
Act programs in light of climate change. So we have an intra-
agency task force on that specifically focused on water-related 
implications. It is a very good question and it is an area that 
we want to get all the information we can and adjust 
accordingly.
    Senator Lautenberg. We will come back.
    I now would ask the former Chairman of the committee, the 
Ranking Member on the full committee, for his questions, 
please, Senator Inhofe.
    Senator Inhofe. Thank you, Mr. Chairman.
    You had said, Ben, that there are other things, or the 
Chairman said, that also can be done, and I would ask you the 
question how is the Administration using the flexibility of the 
SRF to promote new financing mechanisms.
    Mr. Grumbles. The SRF has been so successful because of the 
ability to leverage the Federal funds and other State funds. 
The flexibility that States have to use innovative and creative 
approaches that are consistent with our overall guidelines. 
There are several items that we are very interested in pursing 
further and have gotten advice from our Environmental Financial 
Advisory Board. One is increased use of loan guarantees. 
Another one is link deposit loans, in particular in areas where 
the septic systems or other types of non-point sources, where 
the recipient of the loan wouldn't be necessarily a community, 
but an individual using local banks with the SRFs. That is an 
important one. We are committed to keeping the SRFs flexible 
and sustainable because we view that as one of the major tools 
for meeting clean water needs.
    Senator Inhofe. I know you are doing a lot of things, and 
that is why I wanted to get into this discussion. The one thing 
we all agree on here is that more money is needed to get into 
the SRF. The SRF is a program that since 1987 has been working 
very well, certainly in my State of Oklahoma it has been 
working well, and there are many creative things that are being 
done in terms of bond issues to try to accommodate the match, 
but it is a difficult thing. It is kind of like the problem 
that you and I have talked about before on the transportation 
reauthorization bill. Two years ago, when we passed our 
reauthorization, I think it went down as the largest non-
defense spending bill in history, and yet all it did is just 
sustain what we have now. So in that bill we are looking for 
new ways to finance roads, instead of doing it the same way we 
have done it since the Eisenhower administration.
    Now, I would challenge you to be as creative as possible. 
Maybe I am the only one up here who feels this way, but 
sometimes you just can't pour more money in; there are other 
more creative ways, and I ask you to use the flexibility that 
you have been studying to come up with something that will 
resolve a program that has been very successful.
    Now, you mentioned the four pillars. You got through asset 
management and the full cost pricing and sustainability and 
then the watershed approach. You were cut a little bit short on 
points three and four, the third and fourth pillar, and I want 
to give you the opportunity to elaborate a little bit more on 
those because I know you have more to say about that.
    Mr. Grumbles. Thank you, Senator. Water efficiency is one 
of the other pillars. In that one, all of us, particularly now, 
when the Nation and the country and the world are focused on 
climate change or on energy security, the Administrator is 
focused on clean energy and energy efficiency, and the 
connection to water and wastewater is undeniable and is 
inextricable. So we see that one of the great opportunities to 
reduce the demand, to save money and save energy for wastewater 
utilities in communities across the country is to encourage and 
provide information on water efficiency.
    We see connecting the dots or, frankly, connecting the 
drops and the watts, people will be able to save money and also 
mitigate greenhouse gas emissions, and the WaterSense program 
is a very exciting one. We are modeling it on the Energy Star 
program; we work very closely with the Energy Star program. 
This one is focused solely on water and WaterSense is committed 
to the principle of providing information so that consumers can 
choose water-efficient products such as high-efficiency toilets 
or faucets or outside residential irrigation systems to reduce 
the waste and to save money. That is one.
    The other pillar is a watershed approach, which really 
means, Senator, helping to fund the most cost-effective ways to 
deal with stormwater or wet weather flows in a watershed 
context so that there is not an unnecessary expenditure by a 
utility, if they can work with other partners, voluntary 
partners in the agricultural community or others. That, to us, 
is the key to sustainability and reducing costs downstream to 
the wastewater treatment plant.
    Senator Inhofe. That is good. Well, thank you very much, 
Mr. Grumbles.
    Thank you, Mr. Chairman.
    Senator Lautenberg. Senator Vitter.
    Senator Vitter. Thank you, Mr. Chairman. Ben, in the 
ongoing needs survey process--I know that is being finalized--
folks from Louisiana identified about $4.7 billion of needs, 
and the word back from EPA was, well, we only agree or 
recognize $2.7 billion of that. Now, that is a pretty big 
delta, that is a big gap. I wouldn't expect there to be 
complete agreement immediately, but that is an awfully big gap. 
How do you explain that size discrepancy?
    Mr. Grumbles. Senator, I would welcome the opportunity to 
learn more about the details of that discrepancy. As Chairman 
Lautenberg was asking me about the amount of time it has taken 
to complete this needs survey, one of the obvious reasons for 
that is understanding and making decisions about eligibilities. 
There are some new areas that are under discussion. So I would 
very much like to get more of the details about what Louisiana 
is saying the difference is between the two numbers.
    I would say we recognize that sometimes States have a 
different view of what is the Federal role or what is 
appropriate to submit in terms of their needs, clean water 
needs, over a 20-year period, so that is probably at the heart 
of it, Senator. I look forward to working with you and 
understanding what the difference of opinion is.
    Senator Vitter. OK. We will make sure the Agency has that 
input from the State. But in terms of Federal role, I mean, I 
think we are talking about need, before we get to the issue of 
Federal role, so that is not part of the discrepancy in the 
sense that the State was asked to identify the need. It is a 
later discussion about who pays for it and what ratio, and the 
EPA was similarly responding to identification of the need, not 
just the Federal role. But we will make sure the Agency has all 
that information.
    Ben, I am very concerned that in almost all phases of 
government up here, in the last 20, 30 years, we have increased 
complexity and paperwork and regulation so much that a dollar 
goes a whole lot less far than it used to. That is true whether 
it is building highways or whether it is building Corps of 
Engineers projects, certainly important to Louisiana, or 
whether it is doing this wastewater infrastructure work. What 
can EPA propose specifically to reverse that trend so that 
whatever dollars we come up with gets more done?
    Mr. Grumbles. Your question is a very good opportunity to 
talk about streamlining and reducing red tape and process, and 
making sure we focus on the environmental priorities. The key 
is having a results-oriented approach. A couple things. One is 
continued vigilance and commitment to reducing red tape and 
trying the best we can to streamline the process in getting 
assistance or getting approval for clean water projects. I 
think that is very important as the committee considers 
reauthorization of the SRF and other programs to do the best to 
provide flexibility to States and also keep at a minimum the 
cost-cutting requirements. They are important concepts in many 
respects, but sometimes that can increase the cost of the 
project.
    Environmental results is the key, and that is why we 
embrace a watershed approach: water quality trading, 
encouraging innovative partnerships so that that little bit of 
money goes a lot further and tackles the greatest environmental 
priorities. That is one of the reasons why the Administration 
is enthused, why the mayors and why utility rate commissioners 
are enthused about the new proposal to bring in $5 billion to 
$6 billion in new money over time through amendments to the tax 
code and remove the Private Activity Bond, annualize State 
volume cap on Private Activity Bonds.
    We feel that that will encourage local choice and also 
public-private partnerships where the private sector--it 
doesn't mean privatization, Senator. What it means is 
partnerships for progress. If a community is comfortable with 
new funding through partnerships with the private sector in 
combination with the public, with public accountability, we 
think removing barriers that are in the tax code, that is a 
very important step to take to get more out of our limited 
dollars and also to get environmental results.
    Senator Vitter. Well, I look forward to those specific 
proposals and any others, because I think that is a huge part 
of the problem.
    Mr. Chairman, I hope we can partner. I agree we need more 
Federal resources, but I hope we can combine that with, at the 
same time, less Federal burden or paperwork, because I think we 
need to attack the gap from both of those directions to ever be 
able to close it.
    In closing, let me just say I think it is a problem 
overall. I think it is a particularly onerous problem for 
smaller communities. We are going to hear from Mayor Brasseaux, 
the mayor of Carencro, who can give some unique perspective on 
that.
    Thank you, Mr. Chairman.
    Senator Lautenberg. Thank you.
    Senator Voinovich.
    Senator Voinovich. Mr. Chairman, I apologize that I had to 
skip out.
    Senator Lautenberg. Well, we are anxious to hear your 
comments.
    Senator Voinovich. Thank you.
    If I were you right now, I would sit down with the National 
League of Cities, U.S. Conference of Mayors, the National 
Association of County Officials to talk about a way of 
streamlining the paperwork that is involved in making 
application for these loans. I really believe a lot of smaller 
jurisdictions just can't do it. From what I understand from my 
people as I travel in Ohio, we have 100 communities that are up 
in arms right now about the demands coming out of EPA, but to 
put salt into the wound is the stack of papers that they have 
to fill out in order to do this. If part of it is because you 
have been loaded up with stuff that we have put on your 
shoulders because we think we are going to micro manage your 
operation, then I think you ought to come back to this 
committee and say, look, the reason why we are doing a lot of 
this ridiculous stuff is because you pass these ridiculous laws 
that make us do it. OK? That is No. 1.
    No. 2, you have to face up to the fact that we don't have 
enough money. I mean, you go up to the Office of Management and 
Budget, and what do they tell you? What do they tell you? The 
bottom line is we have the 2000 survey, right?
    Mr. Grumbles. Yes, sir.
    Senator Voinovich. We don't have the 2004 survey. I 
understand the reason why is because OMB doesn't want us to 
have the information about the needs that we have out in the 
country because it would embarrass them. Thank God the Senate 
passed legislation that is going to study the complete 
infrastructure needs of this country it will take us a couple 
years and we will convey to the American public just how we 
have ignored infrastructure needs in America today, whether it 
is in sewer and water, highways, Army Corps of Engineer 
projects, you name it. We just haven't done the job. Our heads 
have been in the sand.
    So what do you say to them when you go up there to OMB? 
What does Administrator Johnson say to them when they say to 
you that we are going to cut the budget? How ridiculous is it 
if we have this problem that we are talking about now while you 
are cutting the budget for the funds?
    Mr. Grumbles. Well, Senator, there are budgetary 
constraints across the board in various programs. When it comes 
to water infrastructure----
    Senator Voinovich. Almost $600 billion for the Iraq war. 
OK? No request to pay for the war. So, as a result of that, a 
lot of stuff that we should be doing here in the United States 
of America isn't getting done. So what do you tell them?
    Mr. Grumbles. Well, what we focus on is meeting the needs 
under the Clean Water Act, the domestic needs, and coming up 
with innovative approaches, and what that means, it means 
advancing full cost pricing and encouraging providing 
communities with the leeway and the opportunity to do that, to 
set rates that better reflect the true value of the services of 
those infrastructure systems, because we prefer not to be in a 
Department of Justice enforcement action consent decree 
situation. We think the better approach is to set the rates, to 
get the support from--and Mayor Shirley Franklin of Atlanta 
really focused in on infrastructure as a priority for her and 
got rate increases to reflect the needs in the community----
    Senator Voinovich. Yes, but can I tell you something? I was 
there, OK? I did it as mayor of Cleveland. Our water rates were 
way down. We increased them 130 percent, OK? We have realistic 
water and sewer rates in Cleveland and the Northeastern Ohio 
Regional Sewer District. But the demands that you have made in 
order to take care of the overflow problem, it is impossible 
for them to do it. You are saying you have to do it in 15 
years, so now they are with the Justice Department. Why can't 
you allow them to do it in 30 years? If you are going to say to 
the local communities we ain't gonna give you any money and, by 
the way, when you try to do it on your own, we're not going to 
give you enough time to get it done, that is ridiculous.
    Mr. Grumbles. Well, we recognize the need, and I know the 
Administrator does and I do. We recognize the need for 
flexibility, not have a cookie cutter approach to what is the 
proper number of years for a long-time compliance strategy or 
plan when it comes to the CSOs and catching up on neglected 
infrastructure over the years, but we are very sensitive to the 
public health and environmental needs.
    I think that America demands clean water, not clean water 
eventually, so we get into the situation where we have to do a 
better job, Senator, of removing the red tape; providing 
increased funding opportunities; if we stand in the way as a 
barrier, removing those barriers through tax code amendments, 
which is what the Water Enterprise Bonds proposal does; but 
also providing greater freedom for innovative State fund 
managers to use leveraging, to use the linked deposit loans 
approach or other approaches to try to meet the needs, and the 
needs grow.
    Senator Voinovich. Well, what you are basically saying is 
you want to use some Rube Goldberg ideas in order to take care 
of the problems that the local communities have and patch this 
together with this over here, and, you know, in our State, 
frankly, we will do that. We will go to the Appalachian 
Regional Commission or we will go to Rural Development. We will 
go to anything else besides going to the EPA and going through 
the imaginable line, the paperwork that is involved. A lot of 
times people say I am not going to do it because, you know 
what, there is no money there, why bother with it, Senator? I 
am not going to do it.
    I am just saying I don't think you are being realistic. I 
think that third initiative, I don't believe it; it is not 
realistic. Somebody has to look at this thing forthrightly and 
say, you know, it isn't working. We do need more money. We need 
to look at the amount of time we are going to give these folks 
to pay back their bonds and to start to work with the 
communities, and just not say, well, I am sorry, you are not 
doing what you are supposed to do and, bam, it is in the 
Justice Department. You know what? They are all spending money 
now on paying for lawyers to take care of the situation.
    So I am saying to you that I think you ought to go back to 
the Department and tell them this Senator thinks their 
proposals don't make sense and that they ought to go to the 
Administration and tell them that they ought to put some money 
where their mouth is, instead of this third initiative that 
they have that really isn't making a heck of a lot of 
difference.
    Mr. Grumbles. Well----
    Senator Lautenberg. Thank you, Senator Voinovich. Thank you 
very much for your not unusual candor.
    [Laughter.]
    Senator Lautenberg. Since my name is Frank and I am, we are 
quite a twosome up here.
    What I am going to do is have a 10-minute recess while we 
go to vote, and I would ask the patience of the second panel, 
please, to excuse us, but that we have to do.
    But I would ask you a question. Are there real threats 
posed to public health, to the environment, parts of our 
economy from sewage spills and combined sewer overflow? Are 
there serious threats there?
    Mr. Grumbles. There are serious threats, Mr. Chairman----
    Senator Lautenberg. There are. Well, I just wanted to be 
sure, because to follow on to what my colleague from Ohio said, 
you know, the war represents a terrible threat; we want to take 
care of our troops and we want to reduce not only the anguish 
and the danger to our----
    Mr. Grumbles. Senator, it is an enforcement priority for 
the Agency, specifically the sewer overflows; it is a 
compliance assistance priority for us as well. I----
    Senator Lautenberg. Mr. Grumbles, I respect you, I really 
do, but the fact of the matter is there isn't enough money to 
do this. We have been through this and several times you have 
explained how well off we are because the funds being 
replenished and so forth. But you also suggested that cost 
pricing ought to be----
    Mr. Grumbles. Full cost pricing.
    Senator Lautenberg. Full cost pricing. So you are 
advocating an increase in the cost to all the communities and 
all the people that they ought to pay more.
    Mr. Grumbles. Not all. It is a community decision, and some 
communities are showing great leadership.
    Senator Lautenberg. OK. But the word goes out. It is pretty 
simple. The word goes out, hey, pay more. Don't call it a tax, 
whatever you do, maybe call it a fee or something else, but 
that we want to pass along more of the cost to the communities.
    You know, this is not a hearing on clean water, but when 
you look at the cost of what people pay to get water in bottles 
or jugs or whatever, something like $50 billion to $100 billion 
a year. Here you are trying to make excuses for the inadequacy 
of the funding by the Federal Government for the State 
Revolving Fund, and you are glib with your language, Mr. 
Grumbles, and I don't want to be too tough, but I would tell 
you that is really--Senator Voinovich described it as Rube 
Goldberg, but I would say smoke and mirrors. We get to the same 
thing.
    Thank you very much. The record will be kept open; you will 
get further questions.
    Once again, we will take a 10-minute recess. I want 
everybody to note the clock while we run down, vote, and come 
back. We look forward to hearing from the next panel.
    [Recess.]
    Senator Lautenberg. As the committee returns, please, to 
order, I invite the second panel to take their places, please. 
Welcome, all of you, and my apologies for leaving. We took a 
couple more minutes than 10. We welcome the testimony that each 
of you brings, the knowledge that you bring. I can't greet this 
panel without saying that the mayor of my capital city, our 
capital city, also president of the U.S. Conference of Mayors, 
Mayor Palmer, is here. He and I have worked together arduously 
on all kinds of things, including gun violence, et cetera. So 
we are glad to see you here, Mayor Palmer, and invite your 
testimony.
    We will introduce the other witnesses at this time: Mr. 
Glenn Brasseaux, mayor of Carencro, LA, Board Member of the 
Louisiana Rural Water Association; Joe Freeman, chief of the 
Financial Assistance Division from the Oklahoma Water Resources 
Board, also vice president of the Council of Infrastructure 
Financing Authorities; Mr. Chris Westhoff, president of the 
National Association of Clean Water Agencies; and Nancy Stoner, 
director of the Clean Water Programs at the National Resources 
Defense Council. Thank all of you for joining us.
    Now I would call on Mayor Palmer. You have 5 minutes, 
Mayor, each one of you, by the way, and we would hope that you 
could complete your testimony in that time. We are fairly loose 
for about 20 or 30 seconds, but beyond that it gets tough.
    Mayor Palmer.

  STATEMENT OF HON. DOUGLAS H. PALMER, MAYOR OF TRENTON, NJ, 
           PRESIDENT OF THE U.S. CONFERENCE OF MAYORS

    Mr. Palmer. Thank you, Mr. Chairman. It is indeed a 
pleasure to see you again. Just 48 hours ago we were together 
at the site of the Brooklyn Bridge with myself, you, and Mayor 
Bloomberg and other mayors related to guns and terrorism, and 
now we are here talking about water and wastewater. So, suffice 
it to say we have to keep meeting like this.
    Senator Lautenberg. Yes, indeed. Protecting the public is 
our mission.
    Mr. Palmer. Absolutely.
    Mr. Chairman and members of the committee, my name, as was 
stated, is Douglas H. Palmer. I am the mayor of Trenton, NJ and 
president of the U.S. Conference of Mayors. I also would like 
to thank the members of the subcommittee for inviting me to 
testify and ask that my full testimony be submitted for the 
record.
    As president of the Conference of Mayors, my responsibility 
is to represent the Nation's mayors on national and local 
priorities. In January, we developed a 10-point plan entitled 
``Strong Cities . . . Strong Families . . . for a Strong 
America.'' One of our 10 points re-emphasized a point that 
mayors have been focusing on for years, and that is improving 
our Nation's infrastructure, which includes our water and 
wastewater systems. In our plan, we call for tax incentives, 
bonds, and other measures to support local and State efforts 
and stimulate private sector participation to improve our 
Nation's infrastructure. These incentives and bonds would help 
create thousands of jobs and revitalize critical infrastructure 
that is necessary to keep the United States competitive.
    In my past role at the Conference, I also served as chair 
of the Mayors Water Council, which was created to focus on 
water resource issues. The Mayors Water Council has conducted 
numerous surveys and reports regarding water issues that face 
our cities, and I would like to outline some of our findings.
    The Mayors Water Council conducted a survey that identified 
the three most important water resource priorities facing the 
Nation's cities: No. 1, rehabilitating aging water and 
wastewater infrastructure; No. 2, security and protection of 
water resources infrastructure; and No. 3, water supply 
availability.
    A 2007 report summarized how much money is being spent by 
local governments on water and sewers. In Fiscal Year 2005, 
local government spent $82 billion to provide sewer and water 
services and infrastructure, which is up from $45 billion in 
Fiscal Year 1992. Total spending on sewer and water from 1991 
to 2005 was $841 billion. We estimate increased spending by 
local government at $110 billion annually by the year 2010.
    Local financing of water and wastewater infrastructure 
varies, but is limited to a few general approaches: cities 
typically use more than one financing source for major capital 
investments; the pay-as-you-go approach stands out as the most 
common financing tool; revenue bonds are the second most 
frequently used; slightly more than a third of cities use the 
SRF; and Private Activity Bonds, which was mentioned earlier, 
are seldom used due to a Federal tax code impediment imposing 
State volume caps.
    Cities generally prefer to use municipal bonds and pay-as-
you-go cash rather than the SRF loans. Cities find rate 
increases in government bonds are often more cost-efficient due 
to better finance terms and because of the greater time 
certainty in the finance process. About a third of the larger 
cities rely on the CWSRF because they may not have the access 
to favorable borrowing terms.
    Also, when we talk about Federal financial assistance and 
municipal water infrastructure investments, you would think if 
two-thirds of the Nation's principal cities are not attempting 
to use the SRF loan program, in favor of other financing 
mechanisms, then why is the water infrastructure needs gap 
growing. As municipal spending on water infrastructure has 
increased over the last two decades,--and I know Senator 
Voinovich and Mayor Voinovich, as I like to refer to him--so 
have the number of unfunded Federal mandates. Local government 
cannot completely satisfy spending requirements because of the 
growing costs in this area and for other competing and worthy 
public services.
    Unlike the Federal Government that plans on deficit 
spending, cities are required to balance our budget every year. 
Our priorities are the cost for water infrastructure has been 
squarely on the shoulders of local government and rate payers. 
Local government pays for 99 percent of drinking water and 95 
percent of clean water services and infrastructure. At present, 
States play a minor but important role in helping local 
government provide these services and infrastructure. The 
Federal-State Revolving Fund Loan program plays a minor but a 
very important part in financing clean water infrastructure. As 
local government costs increase to keep pace with additional 
Federal and State mandates, and to adapt the climate change 
impacts, it is clear that increasing rates and the full use of 
the SRF will fail to satisfy our water needs.
    Unless Congress modifies the tax code to make access to 
private capital and expertise for public purpose water and 
sewer services and infrastructure, the outlook is indeed 
gloomy. The Mayors Water Council has identified some basic 
approaches, including grants, 30-year no-interest loans, and 
greater use of the private activity bonds; providing grants to 
municipalities either directly or through States for water and 
wastewater infrastructure where there is an affordability issue 
or when a community faces severe environmental problems, 
including communities that have combined sewer overflow 
problems; expanding some portion of the current 20-year loan 
category to include a 30-year no-interest category or a 30-year 
low-interest loan payback period under the State Revolving Fund 
loan program for water and wastewater investment; and modifying 
current tax law by removing the Private Activity Bonds used for 
water and wastewater infrastructure from State buy-in caps.
    We call on Congress to annually appropriate the Clean Water 
SRF at $1.355 billion or more and the Drinking Water SRF at 
$850 million or more to extend eligible SRF activities to 
include more competitive.
    I know my time is up, but I would be glad to answer 
questions later.
    [The prepared statement of Mr. Palmer follows:]

Statement of Hon. Douglas H. Palmer, Mayor of Trenton, NJ and President 
                    of the U.S. Conference of Mayors

    Mr. Chairman and Members of the Committee, my name is Douglas H. 
Palmer. I am the Mayor of Trenton, NJ and President of the U.S. 
Conference of Mayors.
    I would like to thank the members of the Committee for inviting me 
to testify here today.
    The Conference of Mayors is a national nonpartisan organization 
that represents cities with populations of 30,000 or more of which 
there are over 1,200 in the United States.
    As President of the Conference of Mayors, my responsibility is to 
represent the mayors of the United States on priorities for our cities 
and our nation. In January we gathered together to outline our 
priorities for the new Congress. We created a 10--Point Plan entitled 
``Strong Cities . . . Strong Families . . . for a Strong America.''
    One of our 10 points reemphasized a point that Mayors have been 
focusing on for years--improving our nation's infrastructure which 
includes our water and wastewater systems. In our plan we call for tax 
incentives, bonds, and other measures to support local and state 
efforts and stimulate private sector participation to improve our 
nation's infrastructure. These incentives and bonds would help create 
hundreds of thousands of jobs and revitalize critical infrastructure 
that is necessary to keep the United States competitive.
    In my past role at the Conference, I also served as a Chair of the 
Mayors Water Council (MWC) which was created to focus on water 
resources issues, particularly on water and wastewater infrastructure 
development, financing, and most recently on water supply, conservation 
issues, and climate change adaptation.
    The Mayors Water Council has also conducted numerous surveys and 
reports regarding water issues that face our cities. We have asked 
cities what are their most critical water issues, the financing tools 
they use to pay for water and wastewater infrastructure, and research 
on how much money is being spent.
    I would like to outline some of the highlights of these findings 
and recommendations and submit the rest of my testimony into the 
official record.

                       NATIONAL CITY WATER SURVEY

    The MWC conducted a survey of the nation's largest cities in 2005 
that, for the first time ever, asked cities to identify the most 
important water resources issues they face. The three most important 
water priorities facing the Nation's cities are:
    (1) Rehabilitating aging water and wastewater infrastructure (60.6 
percent);
    (2) Security/Protection of Water Resources Infrastructure (54.6 
percent); and
    (3) Water Supply Availability (46.5 percent)
    In 2007 we did follow research and determined how much money is 
being spent by local governments on water and sewers.
    In Fiscal Year 2005 alone, local government spent $82 billion to 
provide sewer and water services along with infrastructure, up from $45 
billion in FY 1992. This translates that local government share of 
spending on sewer is over 95 percent and the state share is just under 
5 percent. The local government share on spending on water supply is 
over 99 percent. Total spending on sewer and water from 1991-2005 was 
$841 billion.
    The trend is for even greater spending levels. Factors contributing 
to the increased need for investment include: population growth and 
land use development; an aging water infrastructure that needs constant 
maintenance; changing environmental mandates; and climate change 
impacts that threaten water supplies from drought; reduced snow-pack; 
salt water intrusion on coastal aquifers; and increased storms, 
hurricanes and flooding that will require infrastructure hardening.
    Local financing of water and wastewater infrastructure varies, but 
is limited to a few general approaches, (see Table 1). The columns in 
this Table do not add to 100 percent because cities typically use more 
than one financing source for major capital investments. The ``Other'' 
category, however, stands out because it is comprised of ``pay-as-you-
go'' finance approaches. It is commonplace for cities identifying this 
approach to raise user fees and rates to finance new construction, 
replacement construction and rehabilitation of existing water 
infrastructure.
    Other important findings from the survey indicate that:
     Revenue bonds are the second most frequently used form of 
financing after ``pay-as-you-go''
     Private Activity Bonds are seldom used (primarily due to 
the state volume caps limiting such use)
     Slightly more than a third of cities use the CWSRF as a 
financing tool

      Table 1.--Frequency of Multiple-Source Financing of Major Capital Investments in Water Infrastructure
----------------------------------------------------------------------------------------------------------------
                      Type of Financing                        2000-2004 (% of Cities)  2005-2009 (% of Cities)*
----------------------------------------------------------------------------------------------------------------
General Obligation Bonds....................................                     28.8                      28.0
Revenue Bonds...............................................                     46.1                      50.8
Private Activity Bonds......................................                      0.8                       1.4
State Revolving Fund........................................                     38.3                      38.6
Other.......................................................                     51.7                      53.5
----------------------------------------------------------------------------------------------------------------
*Planned major capital investments in water infrastructure.

    The 38 percent of cities that use the SRF do so because they have 
no other means of financing needed water infrastructure improvements, 
or would have to delay investments until financing capabilities match 
demand for investment.

      CITY PRACTICES AND ATTITUDES CONCERNING THE STATE REVOLVING 
                           FUND LOAN PROGRAM

    The MWC prepared a report in July 2006 on city attitudes about the 
Clean Water State Revolving Fund loan Program (CWSRF) and the Safe 
Drinking Water State Revolving Fund loan Program (DWSRF). This Report 
sheds light on why cities do or do not prefer to use the SRF financing 
approach. The summary findings indicate:
     Cities generally prefer to use municipal bonds--revenue 
and general obligation bonds (35.2 percent of cities); and, Pay-As-You-
Go--cash (26.0 percent of cities) rather than SRF loans. The primary 
reason for this is because it is more cost-efficient due to better 
finance terms and the greater time-certainty in the finance process. 
This preference also reveals that cities with healthy bond ratings and 
user fees and charges that anticipate the need for reinvestment in 
water infrastructure play a strong role in finance decisions.
     Red Tape, burdensome paperwork and SRF loan conditions and 
strings were identified by 15.1 percent of the survey cities as the 
critical reason why they did not turn to the SRF program for water 
projects.
     Another 11 percent of survey cities indicated that they 
applied for an SRF loan but were either rejected or did not receive a 
response to their application; or, they did not apply because they had 
knowledge that they would not qualify either because of the type of 
water project involved or because the state priorities would not favor 
their applications.
     A small percentage of survey cities (5 percent) stated 
that they prefer to seek grants over the use of SRF loans.
     A small percentage of cities (6.8 percent) indicated that 
they had used the SRF loan program in the past, and they ``might'' or 
``will'' consider using it for water projects scheduled between 2005 
and 2009.
     About 10 percent of the survey cities stated that they did 
not investigate the use of the SRF loan program for water projects; or 
that they did not need to use the SRF; or that they were not 
responsible for capital investments in water infrastructure (3.2 
percent for this latter group).

           FEDERAL FINANCIAL ASSISTANCE AND MUNICIPAL WATER 
                       INFRASTRUCTURE INVESTMENTS

    If two-thirds of the nation's principal cities are not attempting 
to use the SRF loan program because they have other viable financial 
resources for water projects, why is the water infrastructure ``Needs 
Gap'' growing instead of closing?
    The transfer of financial responsibility for water infrastructure 
investments from federal and state governments to local government is 
firmly entrenched. Simultaneously, major capital investments have 
shifted from federal and state grants to local lending by way of 
municipal bonds, user charges and low interest SRF loans. The U.S. 
Bureau of the Census reports that combined municipal expenditures for 
water and wastewater infrastructure are second only to educational 
expenditures. We are experiencing enormous investment, but a growing 
or, at best, stable water infrastructure investment ``Needs Gap''.
    As municipal spending on water infrastructure has increased over 
the last two decades so has the number of unfunded federal mandates. 
The ``Needs Gap'' itself is measured in terms of what it will take to 
comply over a 20-year term with existing law. As new environmental 
requirements are set for water quality the cost to reach or maintain 
the compliance point is adjusted upward.
    Local government also cannot completely satisfy spending 
requirements in this area because the costs will continue to grow along 
with competing needs for public capital. Mayors face the daily 
challenge of balancing the multitude of needs in the community for 
worthy public-purpose spending with limited financial resources. And 
we, unlike the federal government, are required to balance our budgets 
every year.

  THE U.S. CONFERENCE OF MAYORS WATER INFRASTRUCTURE POLICY PRIORITIES

    The Conference of Mayors and the Water Council has passed numerous 
policies, recommendations, and encouraged best practices that will 
enhance city efforts to provide and pay for clean and safe water for 
our citizens while protecting our water supplies.
    In the area of financing, we continue to encourage cities to 
conduct full cost accounting and utilize asset management techniques to 
determine the true cost of providing and maintaining water systems as 
well as educating the public on the true cost of water. But as I 
mentioned before, with the ever growing needs, cities can not do it 
alone and therefore we need additional financing tools to assist us 
with our efforts.
    The Mayors Water Council has identified some basic approaches 
including: grants; 30-year no-interest loans; and, greater use of 
Private Activity Bonds (PABs).
     Providing grants to municipalities, either directly or 
through states, for water and wastewater infrastructure where there is 
an affordability issue or when a community faces severe environmental 
problems including communities that have combined sewer overflow 
problems;
     Expanding some portion of the current 20-year loan 
category to include a 30-year no-interest loan category, or a 30-year 
low-interest loan payback period, under the State Revolving Fund loan 
program for water and wastewater infrastructure investment; and
     Modifying current tax law by removing Private Activity 
Bonds (PABs) used for water and wastewater infrastructure from state 
volume caps. The increased use of private activity bonds for public 
water infrastructure can boost aggregate spending on water 
infrastructure and help cities make progress in closing the ``Needs 
Gap''.
    In our opinion, these approaches are necessary to help us meet our 
water infrastructure needs.
Increased Funding and Flexibility of the SRF
    Regarding the traditional SRF programs, the Conference of Mayors 
resolution adopted in June 2006 calls for Congress to annually approve 
recapitalization authorization to the CWSRF at $1.355 billion or more, 
and the DWSRF at $850 million or more. The resolution ``. . . strongly 
urges the Congress to approve legislation to substantially increase the 
authorized levels for both Funds to help reverse the continuing decline 
of the federal share of financing these federally mandated 
improvements.''
    The Conference of Mayors water resources policy supports 
reauthorization and recapitalization of the CWSRF. While the CWSRF is 
not perfect, it has proven to be a valuable financing resource to the 
nation's cities. The state SRF programs and the U.S. EPA have much 
experience with this program, and the Conference of Mayors would rather 
improve on the current program than implement a new initiative.
    Some additional improvements that we would recommend based on the 
results of our 2005 National City Water Survey results would be to 
extend eligible SRF activities to include replacement or major 
rehabilitation would be a step in the right direction. Similarly, the 
Conference of Mayors adopted policy in June of 2005 calling on Congress 
``. . . to approve legislation that would complement the Drinking Water 
State Revolving Fund and the Clean Water State Revolving Fund by 
providing more targeted and direct federal resources to help the 
nation's communities deal with other water infrastructure-related 
issues, including $50.6 billion for combined sewer overflows, and $88.5 
billion for sanitary sewer overflows and stormwater management;''.
    Other eligible activities that could be funded under the SRF 
include: development of a conservation and management plan, 
implementation of lake protection programs, programs to reduce 
municipal stormwater runoff, and watershed protection including the 
encouragement of green infrastructure programs. We would like to see 
even greater encouragement to fund such comprehensive efforts to 
improve water quality.
    The Conference of Mayors is supportive of legislation that includes 
a program, even if it began as demonstration program, for water quality 
enhancement and management. One of the most difficult problems cities 
face involves achieving state water quality objectives and total 
maximum daily loads (TMDLs) in the face of the virtually unregulated 
nonpoint pollution sources that are usually outside our jurisdictions.
    The U.S. Environmental Protection Agency (EPA) has recognized that 
agricultural and livestock land uses contribute a major portion of 
nonpoint source pollution in many areas. Many of our cities are engaged 
in watershed management efforts to deal with nonpoint sources 
(including urban runoff). Yet there is a critical lack of regulatory 
drivers forcing the agricultural and livestock land users to contribute 
to the solution. In some cases, the timing of pending TMDL requirements 
will force cities to pay for water treatment caused in large part by 
the upstream, non-urban land users. EPA's Water Quality Trading Policy 
requires the non-urban polluter to voluntarily participate in a trading 
scheme.
    The Conference of Mayors adopted an action plan for sustainable 
watershed management nearly 10 years ago. One of the five principles of 
that plan is to focus on non-urban, nonpoint source water pollution, 
and pursue public policy that would assign responsibility to pay for 
the treatment of polluted water commensurate with the contribution of 
the pollutant loadings. The action plan also clearly calls for allowing 
the agricultural and livestock land users to employ best practices and 
least cost approaches that are effective in lieu of stringent and 
costly regulations. Mayors fully recognize that these land users, 
although they may or may not be part of our cities, are important 
contributors to our regional economies. While we prefer to use the 
powers of persuasion to convince them to participate in the water 
pollution solutions, such as the Water Quality Trading Policy approach, 
we have begun to experience failure in cooperative efforts.
    The Conference of Mayors also adopted a comprehensive watershed 
organics management policy in 2002. This policy calls for Mayors to 
take an active, and leading, role in watershed planning to control 
organics and their nutrients which pollute streams and lakes, that 
subsequently require more costly treatment at water facilities.
    Demonstration project could provide some of the appropriate 
financial incentives necessary to bring voluntary cooperative efforts 
to bear to solve the water quality designation/TMDL problems that we 
are facing. The Conference of Mayors supports this type of innovative 
approach and we would encourage this subcommittee to consider this 
approach.

Analyzing and encouraging the cost and effectiveness of alternative 
        management and financing approaches
    The Conference of Mayors supports encouraging but not mandating SRF 
applicants to explore cost-effective measures in their wastewater 
infrastructure solutions. Congress should encourage communities to 
consider regional alternatives, consolidation and public-private 
partnerships. It has been our experience that alternative approaches to 
planning, financing and operating wastewater facilities can yield 
significant public benefits for the amount of money invested. While 
choosing a public-private partnership approach should not be 
prescriptive, but it should be made possible for those cities that want 
to take advantage of such an approach.
    A number of case studies were prepared by the Mayors Water Council 
on long-term Operations & Maintenance agreements between cities and 
private water companies. These projects have been able to produce cost-
savings of 10 to 30 percent, as well as provide additional public 
benefits.
    The ability of private water companies to competitively bid for 
``design, build and operate'' (DBO) projects in wastewater is another 
important dimension to explore. The Conference of Mayors adopted policy 
encourages competition in the design-build-operate phases of new and 
refurbished water and wastewater infrastructure. This policy was 
adopted once it was determined that competition can lead to less costly 
projects than the traditional design-build methods employed in the 
past.

                               CONCLUSION

    On behalf of the Conference of Mayors and the Mayors Water Council 
I wish to thank you again for this opportunity to speak before this 
subcommittee. We look forward to working with you as you move forward 
on important water resources legislation.

    Senator Lautenberg. Thank you very much.
    Mr. Brasseaux.

STATEMENT OF HON. GLENN BRASSEAUX, MAYOR OF CARENCRO, LA, BOARD 
           MEMBER, LOUISIANA RURAL WATER ASSOCIATION

    Mr. Brasseaux. Good morning, Mr. Chairman and members of 
the committee, and a special greeting to my Senator, Mr. 
Vitter, who is personally familiar with my small town in 
Carencro.
    I am the mayor of the city of Carencro, just outside of 
Lafayette, LA. We have about 2,100 homes and businesses that we 
provide water and sewer service. We are a typical small city 
struggling to comply with Federal mandates, take care of our 
infrastructure, finance the cost of running water and sewer 
systems, and at the same time keeping water rates from 
overwhelming our citizens, especially our low income 
populations.
    In Carencro and thousands of similar cities, we are barely 
getting by. Two years ago, the city self-financed with tax 
exempt municipal bonds a $1.5 million upgrade to the wastewater 
treatment system to comply with our sewer permit and handle new 
growth, which has been dramatic since the hurricanes have 
pushed numerous families into our community.
    Recently, we were grateful to receive a $500,000 grant from 
the CDBG program to buy a new lift station, which was needed 
because, whenever we had more than a 2-inch rainfall, we had 
sewage overwhelming the distribution system and flowing out of 
our manholes into the ditches, an unacceptable situation. Keep 
in mind we have 13 more lift stations that need replacing or 
upgrading, some that are currently overwhelmed in significant 
rain events and release sewage in the streets.
    In addition to the pumping and treatment issues, we have 
hundreds of feet of old truss pipe that is failing, which means 
it collapses without warning. Also, these old sewer lines 
result in too much water getting into the system and 
overwhelming the new treatment plant. This is the treatment 
plant that we just upgraded for $1.5 million. The engineers 
tell us in order to stop overwhelming the treatment plant, we 
need to spend another $300,000 to $400,000 to build a storage 
reservoir to hold excess water until it can treat it. The same 
engineers estimate that it would take about $7 million to fix 
old pipes, lift stations, crumbling manholes, and treatment 
plants.
    It gets worse, Mr. Chairman. On the drinking water side of 
our city's operation, we just sold an estimated $3 million in 
city bonds to finance a new drinking water treatment plant and 
rebuild one of our five wells that was pumping sand. As I 
stated, we have recently self-financed the two largest upgrades 
for $4.5 million. We had attempted to finance these projects 
through the State Revolving Loan Funds, however, there was too 
much red tape involved with going through the State programs. I 
keep asking the city auditor if we can sell more bonds, and 
they tell me, with our existing debt, that we are maxed out on 
additional loans. No one thinks that rates can rise on low 
income households without causing economic hardship on these 
families. The city has reduced our emergency reserve account by 
more than 40 percent over the last few years.
    My situation is common in all the States because small 
communities make up the overwhelming percentage of water and 
wastewater utilities, over 90 percent of regulated communities. 
Small town consumers often pay high water and sewer rates. 
Simultaneously, the rural areas have a greater percentage of 
low income families and a lower median household income. This 
results in a very high compliance cost-per-household in rural 
systems coupled with a lesser ability to pay.
    As the committee looks at new policy and legislation for 
assisting small and rural communities, please know that on the 
onsite rural water technical assistance is what the Nation's 
small communities depend on for compliance and expertise in 
maintaining our water and sewer supplies. In Carencro, when our 
manhole covers were overflowing with sewage, Louisiana Rural 
Water had a fuel technician onsite to provide us help, 
direction, and a plan within 3 hours. We called the State to 
report the problem; however, the State is not in a position to 
tell us how to fix the problem, and advised us to call 
Louisiana Rural Water.
    Another key principle we would like for you to consider is 
to target Federal subsidies to communities exhibiting the 
greatest need, both economically and environmentally. They 
should receive funding first. A significant portion of the 
funding should flow toward small systems because, generally, 
they need it more.
    Our last point is that we believe State Revolving Funding 
should not be limited to making loans because, in many 
situations, small communities will not have the ability to pay 
back a loan.
    In closing, Mr. Chairman, I would like to thank the 
committee for this opportunity. All of rural and small town 
America is grateful for your assistance and interest in 
helping.
    I am happy to answer any other questions.
    [The prepared statement of Mr. Brasseaux follows:]

 Statement of Hon. Glenn Brasseaux, Mayor, Carencro, LA, Board Member, 
                   Louisiana Rural Water Association

    Good Morning Mr. Chairman and Members of the Committee--and a 
special greeting to my Senator; Mr. Vitter who is personally familiar 
with my little town of Carencro.
    Thank you for allowing me to testify today on behalf of the over 
50,000 small and rural communities with federally regulated public 
water and wastewater supplies. I am also testifying on behalf of my 
small city in Louisiana--the City of Carencro, the Louisiana Rural 
Water Association and the National Rural Water Association.
    In order to focus my remarks, I would like to tell you about the 
water and funding challenges my community is facing--and then relate my 
situation to our key policy points that we would like the Committee to 
consider in any new state revolving funding legislation and in 
Congressional water appropriations.
    I am the mayor of the city of Carencro, just outside of Lafayette 
Louisiana. We have a population of about 7,500 people--which means we 
have about 2,100 homes and businesses that we provide water and sewer 
service. We are a typical small city struggling to comply with federal 
mandates, take care of our infrastructure, finance the cost of running 
water and sewer systems, and at the same time keep water rates from 
overwhelming our citizens--especially our low income populations.
    In Carencro, and thousands of similar small cities--we are just 
making it. Two years ago, the city self-financed, with tax-exempt 
municipal bonds, a $1.5 million upgrade of a portion of the wastewater 
treatment system to comply with our permit and handle new growth, which 
has been dramatic since the hurricanes pushed numerous families north 
in Louisiana. We have been spending thousands of dollars, from our 
operating budget, to retrofit another part of the wastewater system--
our old lagoon that is about 50 years old, to meet our permit. Recently 
we were grateful to receive a half million-dollar grant from the CDBG 
program to buy a new lift station, which was needed because whenever we 
had more than a 2-inch rainfall, we had sewage overwhelming the 
distribution system and flowing out of manholes into the ditches--an 
unacceptable situation. Keep in mind we have 13 more lift stations that 
need replacing or upgrading--some that are currently overwhelmed in 
signification rain events and release sewage in the streets. In 
addition to the pumping and treatment issues, we have hundreds of feet 
of old truss/cast-iron pipe that is failing--which means it collapses 
without warning. We have to call in a contractor to repair collapsed 
lines at typical $5,000-$10,000 an incident. Also, these older sewer 
lines result in too much water getting into the system--and 
overwhelming the new treatment plant--this is the treatment that we 
just upgraded for $1.5 million. The engineers tell us, in order to stop 
overwhelming the treatment plant, we need to spend another $300,000-
$400,000 to build a temporary storage reservoir to hold excess water 
until we can treat it. The same engineers estimate it would take about 
$7 million to fix all the old pipes, lift stations, crumbling manholes, 
and treatment plants--however that would take a long-time, so we would 
still need the temporary reservoir. It gets worse Mr. Chairman. On the 
drinking water side of the city's operation --we just sold an 
additional $3 million in city bonds to finance a new drinking water 
filtration treatment works and rebuild one of our five wells that was 
pumping sand. Our old drinking water treatment works was over 50 years 
old and was literally rusting away. We had to backwash our filters 
every four hours, where a new plant would only have to backwash once a 
day. Our energy and chemical costs have risen precipitously to comply 
with standards and meet the water demand of the community. And at 
times, our local courts will force small communities, like mine, to 
takeover very small failing sewer systems in our proximity to ensure 
public health protection, however, we often have to pay for the line 
extensions.
    As I stated Mr. Chairman, we self-financed the two largest, and 
most recent funding proposals to finance the $1.5 million for the 
wastewater upgrade and $3 million for the water upgrade. We had looked 
at attempting to finance their project through the state revolving loan 
funds, however, the experts and engineers assisting us on these 
projects thought there was too much red tape involved with going 
through the state programs--and that it would be most effective and 
economical for the city to sell bonds to move these projects forward.
    As mayor, I recently supported a city sales tax increase just to 
pay for the increases in the cost of running the water and sewer. This 
initiative failed on a ballot measure by a 60 percent-40 percent vote 
of the citizens. I don't think our current rates are unreasonable, 
however my view is not shared by a large percentage of the city--and no 
one thinks that rates can rise on the low-income households without 
causing economic hardship on these families. We are constantly looking 
for new sources of financing and grants. The city has reduced our 
emergency reserve account by about 40 percent over the last few years 
to funding water projects. I keep asking the city auditor if we can 
sell more bonds--and they tell me with our existing debt that we are 
getting on shaky ground. I am primarily here to talk about water, 
however, we are other challenges to the city has to deal with 
including: roads, social spending, police, schools, competitive city 
salaries, etc. And I just learned last month that we could become a 
non-attainment area for ozone under the Clean Air Act.
    My situation is common in all the states because small communities 
make up the overwhelming percentage of water and wastewater utilities--
over ninety percent of regulated communities. Due to a lack of 
economies of scale, small town consumers often pay high water and sewer 
rates. Water bills of $50-$100 for water are not uncommon in rural 
areas. This dynamic often results in very high compliance costs per 
household in rural systems. Simultaneously, the rural areas have a 
greater percentage of the nation's poor and a lower median household 
income. This results in very high compliance cost-per-household in 
rural systems coupled with a lesser ability to pay. Small communities 
often have limited technical and administrative resources to deal with 
compliance and navigate through funding programs. In the smallest 
systems, one person may run both the water and sewer system and in some 
cases communities can only afford a part-time or volunteer operator. 
This lack of resources makes small systems a challenge for state 
agencies--the more complicated we make funding programs the more likely 
the small communities, which need the funds most, will not be able to 
participate.
    As the Committee looks at new policies and legislation for 
assisting small and rural communities with water quality, financing, 
and compliance, please consider the following priorities of small 
communities that we believe need to be recognized in federal 
legislation. Most of these provisions were included in some manner in 
the drinking water SRF--balancing the federal priorities with the 
state's flexibility to tailor individual programs and discretion on 
implementation of each these programs.
    1. On-site rural water technical assistance is what the nation's 
small communities depend on for compliance with the Clean Water Act and 
expertise in maintaining our water and sewer supplies. Carencro, and 
all the other small towns across the state and the Nation depend on the 
technical assistance provided by their state association for most all 
water issues. Whenever we have a problem in Carencro we call Louisiana 
Rural Water and they send someone immediately. When our manhole covers 
were overflowing with sewage--rural water had a field technician on-
site to provide us help, direction, and a plan within 3 hours. We 
called the state to report the problem, however, the state is not in a 
position to tell us how to fix the problem. Regulators can tell us that 
we must fix the problem, but only the rural water technicians will tell 
us how to fix it, and in the most economical manner. For that 
particular crisis, our engineers told us what we needed to do three 
weeks later with a consulting fee. There is nothing wrong with that, 
however, with all the complexity and constant pressure to comply with 
new and changing federal rules, we need access to rural water 
associations' free and common-sense technical assistance. When Congress 
passed the mandate for all small communities to conduct a vulnerability 
assessment (under the 2002 Bio-Terrorism Act), the rural water 
association staff showed us how to complete this assessment without 
charge. Some consultants were charging thousands of dollars to assist 
communities in the same manner. Every community wants to provide the 
best possible water quality to their consumers. Rural Water provides 
the resources and training to achieve this objective in a common sense, 
hands-on manner systems can use. Please make funding for rural water 
technical assistance the key component of federal assistance under the 
Clean Water Act.
    2. Communities exhibiting the greatest need should receive funding 
first. A significant portion of the funding should flow toward small 
systems because, generally, they need it more. Rates are often much 
higher per household in small communities--often from compliance 
requirements. EPA rules on the horizon will significantly increase 
water rates in rural systems. Also, rural communities often have lower 
median household incomes. The CWA and SDWA axiom in rural areas is: 
much higher cost per household with much lower income. No large system 
is facing cost increases on a per household basis comparable to what is 
facing small systems. It only makes sense that federally subsidized 
funding would flow toward the communities with the greatest need--that 
is to small systems.
    3. Programs should not be limited to making loans because in many 
situations, small communities will not have the ability to pay back a 
loan--even with very low interest rates.
    4. A minimum portion of the funds should be set-aside for small 
systems. This ensures that a state must set up a process for dealing 
with small communities. Once established, local pressures and 
priorities will determine the actual portion directed to small systems, 
which we expect will often be greater than the minimum prescribed. We 
urge the Committee to include, at least, the same set-aside amounts for 
the wastewater and drinking water programs; 15 percent minimum for 
small systems as like the drinking water program and 30 percent 
disadvantaged community subsidy like in the drinking water programs. 
This parity will ensure states have the tools to help the systems most 
in need and will be especially important if the two funds have transfer 
authority between them.
    5. Corporate water systems should not be eligible for state 
revolving funding. Taxpayer subsidies should be prohibited from profit 
generating companies or companies paying profits for shareholders/
investors. Private companies argue that they have to comply with the 
same regulations. However, they voluntarily chose to get into this 
``business'' and compliance is not the over-riding principle that 
should be considered in this discussion. We believe that the 
distinction in mission between public and private is the core principal 
that should be considered. Private systems are in the business to 
maximize profit. Public water utilities were and are created to provide 
for public welfare (the reason why public water continues to expand to 
underserved and non-profitable populations). This is a significant 
difference. And while we believe that maximizing profit is a noble 
virtue and as American as safe water, we do not think that taxpayers 
should help the cause of privately owned systems. In addition, the 
needs of less affluent public water systems and families with no piped 
water dwarf the current SRF allocations. The state of Florida has a 
novel compromise to this issue. Florida limits SRF funds to private 
water systems less than 1,500 people--ensuring funds are limited to the 
class of private water systems that did not get into the business as a 
corporate enterprise.
    6. Consolidation and privatization are limited solutions for small 
systems. Consolidation can work in some situations, but only for a 
small portion of small systems and only when the systems are in dose 
proximity and the economics make sense. Rural water associations are 
the lead proponents of consolidation when it makes sense--when it 
results in better service for the consumer, and we have consolidated 
numerous communities in all the states. Consolidation and 
regionalization that is in the consumers' best interest will happen 
naturally at the local level regardless of federal policy on issue. 
Privatization is rarely a less costly solution for very small 
communities. In the very small communities it is, perhaps, more common 
to see private systems being transferred to public bodies so they can 
obtain better financing and local governmental control. The missions of 
private water and rural water systems are fundamentally different, the 
reason being the lack of profitability in sparse rural populations.
    7. The 1996 Safe Drinking Water Act State Revolving Fund made a 
significant policy change in the Safe Drinking Water Act funding by 
including as much flexibility as possible. Nowhere is this more 
apparent than in the state revolving fund section. Under this approach, 
states were given all sorts of discretion on how to spend the money to 
meet their local priorities. For example, a state can make grants, can 
fund set-asides, expand technical assistance efforts, create new 
prevention programs, increase state staff, or choose to do none of 
these and retain the traditional low interest loan focus. Small 
communities' message here today is that this was a monumental step in 
the right direction. This flexibility has made state SRFs better and 
more responsive to nearly every stakeholder. Small systems have seen a 
level of inclusion and benefits from the drinking water SRF that we 
could not imagine based on our experience with the wastewater SRF that 
does not include these flexible provisions.
    8. Local Responsibility and Growth.--The amount of the 
``appropriate'' federal contribution to local water supplies depends on 
what one considers the local responsibility to provide and pay for that 
service. The more you place responsibility on the locals for paying for 
service, the lower the federal obligation and cost. Rural water 
associations believe that local governments have the primary 
responsibility for providing water and sewer service. We believe that 
the federal government should subsidize the local community when there 
is a clear federal welfare interest to increase public health, assist 
low-income communities, protect the environment, or create economic 
development. Public health and environmental protection interests are 
often tied to a federal unfunded mandate, which should also be a 
priority of federal funding. However, we do not believe that the 
federal government is responsible for all water funding--and this is 
why we believe it is critical to target federal funding towards well-
defined federal priorities. Due to the unique realities and 
characteristics of small communities, they arc often in greater need of 
federal subsidies to accomplish federal objectives.
    9. Small communities are experiencing water problems due to aging 
infrastructure. We commonly see pipes that are decades old that contain 
outdated asbestos and cement materials that are failing and resulting 
in public health and environmental threats. Ruptures in wastewater 
pipes can lead to sanitary sewer overflows in varying degrees of 
environmental risk and possibly contaminating water supplies. Inflow 
and infiltration (I&I) of sanitary sewer systems is a widespread 
problem in rural and small communities. This can result in communities 
violating their NPDES permits, especially in wet weather, and cause 
mechanical facilities to need replacing more often. Aging water 
distribution lines can leak and cause significant loss of water and 
energy. In 2006, rural water associations assisted over 6,000 
communities with problems of aging infrastructure directly resulting in 
water loss or I&I problems.
    10. Complexity of the Application Processes.--In the smallest 
systems, one person may run both the water and sewer system and in some 
cases communities can only afford a part-time or volunteer operator. 
This lack of resources makes small systems a challenge for state 
agencies--the more complicated we make funding programs the more likely 
the small communities, which need the funds most, will not be able to 
participate. We urge you to exercise caution for increasing demands on 
applicants as each new demand makes the process tow complicated for 
small systems and therefore less attractive. We believe that the 
current review process is fully adequate to ensure repayment of loans, 
progressive environmental planning, and long-term capacity of 
applicants.

    Senator Lautenberg. Thank you very much.
    Mr. Freeman.

   STATEMENT OF JOE S. FREEMAN, CHIEF, FINANCIAL ASSISTANCE 
   DIVISION, OKLAHOMA WATER RESOURCES BOARD, VICE PRESIDENT, 
        COUNCIL OF INFRASTRUCTURE FINANCING AUTHORITIES

    Mr. Freeman. Good morning. I am Joe Freeman. I am chief of 
the Financial Assistance Division of the Oklahoma Water 
Resources Board, and I serve as vice president of the Council 
of Infrastructure Financing Authorities.
    We welcome today's focus on the issue of financing water 
quality improvements. Hopefully, this hearing will signal a 
renewed effort to move forward in cleaning up our Nation's 
water bodies and protecting drinking water sources.
    While the progress made by States and the Federal 
Government, working in partnership, address water quality 
challenges has been considerable, it is hardly sufficient to 
meet the overwhelming need. All evidence points to a gap that 
is large and growing. A survey of State Clean Water SRF 
programs undertaken by my organization in 2005 identified over 
2,000 projects seeking loans requiring almost $9 billion in 
funding. In my State, the city of Tulsa alone has needs of an 
estimated $194 million over the next 5 years. It is clear that 
at current funding levels a great many needed projects are not 
going to move forward anytime soon.
    The State Revolving Fund programs are at a crucial 
juncture. The Congress has an important choice to make in the 
future. We believe the State Revolving Fund model remains the 
most effective and efficient means to provide assistance to 
communities to provide safe drinking water and achieve water 
quality goals. In order for this very successful State-Federal 
partnership to continue to succeed, the Federal commitment must 
be clear and sustained.
    Since its inception, the Clean Water SRF has achieved an 
impressive record of success in restoring this country's lakes, 
rivers, and streams, and protecting the health of citizens. 
Since 1990, in Oklahoma, the Clean Water SRF has loaned over 
$665 million for projects, and I am proud to say provides over 
65 percent of Oklahoma's wastewater financing. Nationally, over 
$60 billion in low interest loans have been awarded to finance 
the construction of thousands of projects across the country. 
These projects serve millions of people and treat billions of 
gallons of wastewater every day, wastewater that would 
otherwise destroy precious water resources and threaten the 
health of millions of people.
    Let me turn to a few specific examples of what is being 
accomplished in my State of Oklahoma.
    Since 1999, Oklahoma has made over $324 million in Drinking 
Water SRF loans. Our $45 million loan to the city of 
Bartlesville was used to construct a 26 million gallon per day 
water treatment plant, which allowed the city to realize cost 
savings of almost $14 million, or a third of the cost of the 
total project.
    Our largest borrower is the city of Tulsa, which is using 
the Clean Water SRF program to implement a comprehensive 
wastewater plan to rehabilitate aging infrastructure, meet 
capacity needs, and comply with discharge permit requirements. 
By using the Clean Water State Revolving Fund loan program, it 
is estimated Tulsa will save about $59 million in just 5 years.
    As these projects illustrate, the State Revolving Funds are 
playing a vital role in helping Oklahoma communities improve 
water quality.
    As the committee develops SRF reauthorization legislation, 
we hope you will be mindful of the perspectives of State 
program managers. We are very concerned that reauthorization 
could end up adding more burdens to the SRF program than 
improvements.
    State SRF managers who participate in the State-EPA 
Workgroup that oversees the program wrote the Chair and Ranking 
Member of this committee this summer to express exactly that 
concern. Making a reference to the House-passed reauthorization 
bill, H.R. 720, they warned, ``This bill contains provisions 
that will make the program considerably less effective and 
efficient for potential applicants. The large number of 
additional program and project requirements proposed by H.R. 
720 will result in additional work, time and expense, making it 
less likely that municipalities, especially small communities, 
will be able to afford to seek financing through the Clean 
Water SRF. We ask that you carefully avoid provisions that 
would impose restrictions on State program flexibility or will 
add new burdensome requirements on potential applicants.'' CIFA 
echoes these concerns.
    We have long sought reauthorization legislation. We feel 
funding levels and program operations have suffered from the 
failure to reauthorize the Clean Water SRF and Drinking Water 
SRF, and believe that reauthorization will deliver a strong 
message that Congress remains committed to the State Revolving 
Funds. However, we see little benefit from the legislation that 
would hamper our flexibility and burden communities we serve 
with barriers to their participation.
    The success of this program derives from the flexibility of 
the SRF model, allowing each State to determine the most 
effective means to address individual local water quality 
issues. Efforts to mandate certain approaches or restrict the 
use of funds to particular types of projects fail to recognize 
that water quality needs vary and each State is in the best 
position to decide how best to meet those needs.
    Mr. Chairman, we appreciate the opportunity to share our 
views and we look forward to working with the committee. Thank 
you very much.
    [The prepared statement of Mr. Freeman follows:]

  Statement of Joe S. Freeman, Chief, Financial Assistance Division, 
      Oklahoma Water Resources Board, Vice President, Council of 
                  Infrastructure Financing Authorities

    I am Joe Freeman, Chief of the Financial Assistance Division of the 
Oklahoma Water Resources Board. I am testifying today on behalf of the 
Council of Infrastructure Financing Authorities in my capacity as Vice 
President. CIFA is the national organization of state officials 
involved in the financing of water and wastewater pollution control 
projects. CIFA members are responsible for management of the Clean 
Water and Drinking Water State Revolving Funds.
    We welcome today's focus on the issue of financing water quality 
improvements. Hopefully, this hearing will signal a renewed effort to 
move forward in cleaning up our nation's water bodies and protecting 
drinking water sources.
    While the progress made by States and the Federal government 
working in partnership to address water quality challenges has been 
considerable, it is hardly sufficient to meet the overwhelming need. 
All evidence points to a ``Gap'' that is large and growing. A survey of 
state CWSRF programs undertaken by CIFA in 2005 identified over 2,000 
projects seeking loans requiring almost $9 billion in funding. In my 
state the city of Tulsa alone has needs of an estimated $194 million 
over the next 5 years. It is clear that at current funding levels a 
great many needed projects are not going to move forward anytime soon.
    The past 5 years have not provided much encouragement in terms of 
the federal commitment to preserving and improving our water resources. 
Both House and Senate committees developed comprehensive legislation to 
reauthorize the State Revolving Funds, providing significant funding 
increases and program enhancements, only to see these efforts end in 
stalemate. Appropriations levels, at least with respect to the CWSRF, 
have been in a steady decline until that trend was reversed somewhat in 
the current fiscal year.
    The State Revolving Fund programs are at a crucial juncture. The 
Congress has important choices to make as to their future. We believe 
the State Revolving Fund model remains the most effective and efficient 
means to provide assistance to communities to provide safe drinking 
water and achieve their water quality goals. In order for this very 
successful State-Federal partnership to continue to succeed, the 
federal commitment must be clear and sustained.
    Since its inception, the CWSRF has achieved an impressive record of 
success in restoring this country's lakes, rivers and streams and 
protecting the health of its citizens. Since 1990 in Oklahoma, the 
CWSRF has loaned over $665 million for projects, providing over 65 
percent of Oklahoma's wastewater financing. Nationally, over $60 
billion in low interest loans has been awarded to finance the 
construction of thousands of projects across the country. These 
projects serve millions of people and treat billions of gallons of 
wastewater every day--wastewater that would otherwise destroy precious 
water resources and threaten the health of millions of people.
    The CWSRF produces these environmental and economic benefits in an 
affordable way for the customers who use these projects. The low 
interest loans offered by the CWSRF significantly reduce the user rates 
customers have to pay and bring these rates in line with their ability 
to pay. The low interest rates offered by CWSRF loans funded over the 
life of the program translate into $18 billion in savings, compared 
with what they would be paying had these projects been funded with 
market rate borrowing. For a typical $10 million project with a CWSRF 
loan, the saving is $3.2 million. Since these interest savings are 
typically targeted at the most financially distressed borrowers, they 
represent a vital mechanism for bringing public health, environmental 
and economic development benefits to needy communities.
    The Drinking Water State Revolving Fund, while a less mature 
program, has been a critical factor in bringing improved public health 
protection to close to 100 million Americans. Over $11 billion in loans 
and other assistance has been allocated to nearly 5,000 projects. 
Almost three-fourths of these loans have been to communities serving 
10,000 or fewer people and over one-fourth have been to disadvantaged 
communities.
    Let me turn to a few specific examples of what is being 
accomplished in my State of Oklahoma:
    Since 1999, Oklahoma has made over $324 million available in DWSRF 
funding. Our DWSRF loan to Bartlesville, used to construct a 26 million 
gallon per day treatment plant, allowed the city to realize cost 
savings of almost $14 million, nearly a third of the total project 
cost. The Lawton Water Authority will experience similar savings as it 
constructs a water treatment plant with a capacity of 40 million 
gallons per day.
    Our largest borrower is the City of Tulsa which is using the CWSRF 
program to implement a Comprehensive Wastewater Plan to rehabilitate 
aging infrastructure, meet capacity needs and comply with discharge 
permit requirements. By using the CWSRF, it is estimated Tulsa will 
save $59 million over 5 years.
    As these projects illustrate, the State Revolving Funds are playing 
a vital role in helping Oklahoma communities improve water quality.
    CIFA strongly supports maintaining the State Revolving Loan Funds 
as the foundation for future progress in meeting water infrastructure 
needs. Innovation, new approaches and new priorities can be addressed 
in the context of the SRF. We also believe restoring funding to at 
least pre-2004 levels is essential if we are to continue forward 
progress in meeting our nation's water quality goals. Hopefully, 
passage of SRF reauthorization will lay the groundwork for more 
realistic SRF funding levels.
    As the Committee develops SRF reauthorization legislation, we hope 
you will be mindful of the perspectives of State program managers. 
Ultimately, it is up to each State to deliver on the goals of the Clean 
Water Act and it is vital that federal legislation help us do our job. 
We are very concerned that reauthorization could end up adding more 
burdens to the SRF programs than improvements.
    State SRF managers, who participate in the State/EPA Workgroup that 
oversees the program, wrote the Chair and Ranking Member of this 
Committee this summer to express exactly that concern. Making reference 
to the House-passed reauthorization bill, H.R. 720, they warned,
          This bill contains provisions that will make the program 
        considerably less effective and efficient for potential 
        applicants. The large number of additional program and project 
        requirements proposed by H.R 720 will result in additional 
        work, time and expense, making it less likely that 
        municipalities, especially small communities, will be able to 
        afford to seek financing through the CWSRF. . . We ask that you 
        carefully avoid provisions that would impose restrictions on 
        state program flexibility or will add new burdensome 
        requirements on potential applicants.
    CIFA would certainly echo those concerns. We recognize the 
obligations and responsibilities of states in the SRF partnership. We 
must manage the funds in a fiscally responsible manner and be 
accountable. We must give priority in our loan decisions to the water 
quality benefits that will result and the urgency of environmental 
problems needing resolution. We need to give particular attention to 
the challenges faced by small, rural and disadvantaged communities. 
And, we must be creative financial stewards looking for innovative 
solutions to solve water quality problems.
    We have long sought SRF reauthorization legislation. We feel 
funding levels and program operations have suffered from the failure to 
reauthorize the CWSRF and that reauthorization will deliver a strong 
message that Congress remains committed to the State Revolving Funds. 
However, we see little benefit from legislation that will hamper our 
flexibility and burden the communities we serve with barriers to their 
participation.
    Certainly States must be fully accountable for their use of federal 
dollars but an excessive statutory overlay of mandates and set aides 
and operational requirements will only serve to stifle innovation and 
interfere with the ability of States to best respond to local needs. 
The success of this program derives from the flexibility of the SRF 
model allowing each State to determine the most effective means to 
address individual local water quality issues. Efforts to mandate 
certain approaches or restrict the use of funds to particular types of 
projects fail to recognize that water quality needs vary and each State 
is in the best position to decide how best to meet those needs.
    I also want to note legislation recently introduced, S 1910, to 
provide for a change in arbitrage rebate rules that will make available 
significant additional funds for States that operate leveraged SRF 
programs. These States are currently forced by the arbitrage rules to 
limit and pay rebate on their earnings on those portions of the SRF 
funds which are considered under these rules to be bond proceeds. This 
reduces the resources available to provide financial assistance to 
communities. Applying the arbitrage rules in the case of SRFs does not 
make sense since by law these funds can only be used for the purpose of 
financing water and wastewater facilities and prompt lending is ensured 
by oversight and program audits by the EPA. Fixing this could mean a 
good deal more money for water infrastructure without additional 
appropriations and I hope members of this Committee will support that 
effort.
    We very much appreciate the opportunity to share our views and look 
forward to working with the Committee.

                                 ______
                                 
       Response by Joe S. Freeman to an Additional Question from 
                           Senator Lautenberg

    Question. Your testimony expressed concern about excessive 
mandates, set-asides, and operational requirements in reauthorization 
legislation. Please specify which mandates, requirements and set-asides 
in the House bill CIFA opposes.
    Response. At the outset I want to make clear that CIFA supports the 
effort to reauthorize the Clean Water State Revolving Fund and increase 
the authorized level of funding for the CWSRF. The House bill. H.R. 
720, contains many elements that we support including the continued 
reliance on the CWSRF as the primary funding mechanism for water 
infrastructure; expanded eligibilites for SRF funding; extended loan 
repayment periods; increased support to cover State administrative 
costs and more flexible financing to address affordability issues.
    H.R. 720, however, has a number of provisions that would in our 
view work an unnecessary burden on State SRF programs and pose 
significant barriers to potential borrowers, especially smaller 
communities. They are as follows:
    Section 302 (b) includes several ``additional requirements'' that 
are burdensome:
          Innovative and alternative processes.--States are directed to 
        require loan applicants to evaluate innovative and alternative 
        processes, materials, techniques and technologies as well as 
        alternative ways to finance and manage water infrastructure 
        projects. This set of requirements will increase the cost of 
        projects and is likely to drive potential borrowers away from 
        using the CWSRF. It would be a particular burden for small 
        communities who lack professional staff and would need to hire 
        engineering/consulting services to do such evaluations.
          CWSRF funded treatment works must comply with Clean Water Act 
        Title II grant requirements.--A number of requirements in place 
        prior to 1995 would again be imposed on the States. There is no 
        evidence of adverse effects resulting from the absence of these 
        requirements which would argue that they are not necessary. 
        They would be costly, significantly encumber the efficient 
        management of the SRFs and for the most part duplicate State 
        standards already in place to accomplish the aims of Title II.
          Procurement of engineering services by SRF borrowers to 
        follow federal procurement rules.--States already have laws in 
        place governing procurement of professional services. Since 
        engineering services are usually obtained before financing, 
        this requirement would likely only serve as an impediment for 
        potential SRF borrowers.
          Fees.--States would be inquired to use any fees charged 
        either for the cost of administering or for the eligible 
        purposes. This would place a new restriction on the use of 
        fees, removing a key flexibility of the program. Presently, 
        fees can be used for a range of water quality activities such 
        as technical assistance to small communities, preplanning and 
        application assistance, small grants for remediation of septic 
        systems and pollution control. EPA guidance makes clear the use 
        of fees is limited to activities furthering the goals of the 
        Clean Water Act.
    Section 303(c) As a loan condition require recipients to develop 
and implement a fiscal sustainability plan:
        Fiscal Sustainability Plan.--While such plans can be useful 
        tools for improving efficiency and reducing costs, CIFA is 
        concerned as to what EPA may require of States to demonstrate 
        compliance and whether this will significantly increase costs 
        for borrowers. The provision fails to address the type or size 
        of projects and whether such a plan would be appropriate for 
        some projects.

Responses by Joe S. Freeman to Additional Questions from Senator Inhofe
    Question 1. How would the application of Davis Bacon to projects in 
Oklahoma affect the cost of administering the SRF as well as the cost 
of completing infrastructure projects?
    Response. The application of Davis Bacon would significantly 
increase costs of administering the program and the costs of completing 
infrastructure construction projects as well as place the SRF program 
on non-competitive footing with other funding sources.
    The implementation of Davis Bacon would greatly impact the OWRB 
administrative process and Oklahoma communities. When Davis Bacon was 
previously a part of the Construction Grants Program and the CWSRF, the 
wage rate was updated on a monthly basis. It was necessary to purchase 
a subscription to this monthly publication. Davis Bacon implementation 
would require that every plan and specification for a construction 
project have a continuously updated wage rate. If a project had gone 
out into the bid phase and the wage rate changed before bids were 
opened, an amended bid would be required to be sent to replace the 
previous wage rate. If a bid was accepted with non-current wage rates 
then the bid would be voided and a new bid process would be required. 
Both of these delays in construction are very costly to the community 
and to the OWRB. With the current trends in construction prices 
nationwide, delays of any kind greatly increase the total project cost.
    According to past experience with Davis Bacon, the OWRB would be 
required to have a full time employee spend 50 percent of their time 
just on Davis Bacon administration including complaints, compliance, 
and contesting records.
    The inclusion of the labor wage rate in the construction bids would 
also impact which contractors bid on CWSRF projects. Small contractors 
would realize a significant negative impact from the implementation of 
Davis Bacon in terms of employee payroll costs. Small contractors and 
large contractors would realize negative effects in terms of projects 
that were delayed due to compliance issues with Davis Bacon.

    Question 2. Can you describe for the Committee Oklahoma's 
application process, including any state requirements with which an 
applicant must comply? Does this bundling of funds in any way add to 
the applicant's paperwork requirements?
    Response. The bundling of funds does not increase the applicant's 
paperwork for an OWRB loan. The applicant will have to submit the 
correct documents for other Oklahoma funding agencies such as Community 
Development Block Grants, USDA Rural Development Grants, and other 
funding sources. However, we are very cognizant of this and try to use 
similar language and process in order to ease the application process. 
Enclosed is ore checklist and review of documents required for a loan 
application.
    The only added state requirements for an applicant would be 
compliance with the Oklahoma Completive Bidding Act and Open Meeting 
Act.

[GRAPHIC] [TIFF OMITTED] T3569.001

[GRAPHIC] [TIFF OMITTED] T3569.002

    Senator Lautenberg. Thank you very much.
    Mr. Westhoff.

STATEMENT OF CHRISTOPHER M. WESTHOFF, ASSISTANT CITY ATTORNEY, 
   PUBLIC WORKS GENERAL COUNSEL FOR THE CITY OF LOS ANGELES, 
 PRESIDENT OF THE NATIONAL ASSOCIATION OF CLEAN WATER AGENCIES

    Mr. Westhoff. Thank you. Good morning, Chairman Lautenberg 
and members of the subcommittee. My name is Christopher 
Westhoff. I am an assistant city attorney and public works 
general counsel for the city of Los Angeles. I am president of 
the National Association of Clean Water Agencies and a member 
of the Water Infrastructure Network. NACWA represents the 
Nation's public wastewater treatment agencies, environmental 
stewards who treat and reclaim more than 18 billion gallons of 
wastewater each day.
    Thank you for holding this important hearing. With the 35th 
anniversary of the Clean Water Act just around the corner, this 
hearing and your leadership on environmental issues are both 
timely and fitting as we face some serious challenges moving 
into the 21st century. In order to meet these challenges, all 
levels of government--Federal, State, and local--must develop a 
lasting partnership that recognizes the need for more 
investment in our Nation's clean water infrastructure.
    While the Clean Water Act has been hugely successful in 
helping us meet our clean water objectives, we must not stop 
and pat ourselves on the back for a job well done. The job is 
far from finished. In 1972, Lake Erie was declared dead by 
``Time'' magazine, and the burning Cuyahoga River became a 
poster child for Federal action in the form of a tougher 
Federal law and unprecedented infusion of Federal money which 
helped cities begin to meet the Nation's water quality 
challenges. Today, our rivers, lakes, and estuaries are much 
cleaner as a direct result.
    In the formative years of the Clean Water Act, the Federal 
Government invested more than $72 billion to help cities treat 
their wastewater. Federal assistance for wastewater 
infrastructure has declined more than 70 percent since 1980. 
This has contributed to a funding gap of between $300 billion 
and $500 billion over the next 20 years. Local communities now 
pay more than 95 percent of the cost of meeting their Clean 
Water Act obligations and, in effect, are on their own to 
address the ever-increasing challenges of aging infrastructure, 
population growth, demands for better service, and more 
expensive Federal regulations. Clean Water ranks second only to 
education in terms of how local governments spend their money.
    In the 1990s alone, the city of Los Angeles spent over $1.6 
billion on the upgrade of the Hyperion Treatment Plant to full 
secondary treatment. This is only one plant, and only a small 
portion of this expenditure was funded through the Federal 
Clean Water Grant Program. In this decade, Los Angeles will 
spend more than $4 billion to address the physical needs of its 
aging 6,500 mile long sewage collection system and other 
wastewater infrastructure, and there is no Clean Water Grant 
Program to help. To cover these costs, rates have been raised 7 
percent per year for each of the past 5 years, and in 2008 we 
will ask our city council for a nearly 9 percent increase for 
each of the succeeding 5 years.
    This financial situation is untenable. EPA has stated that 
if the infrastructure funding gap is not addressed soon, the 
water quality gains we have seen over the past 35 years could 
be erased by 2016.
    To address this funding crisis--and this is a crisis--NACWA 
and WIN believe the Federal Government should recommit itself 
to clean water and the ideals that led to the passage of the 
Clean Water Act in 1972. We believe this involves a viable, 
long-term dedicated source of revenue to bridge the ever-
growing funding gap. The best way to accomplish this is through 
a Federal Clean Water Trust Fund. Clean and safe water is no 
less a national priority than a safe and efficient system of 
highways and airports, both of which enjoy sustainable, long-
term sources of Federal investments.
    As a first step, NACWA and WIN strongly recommend that the 
Senate introduce and pass legislation similar to the Water 
Quality Financing Act of 2007. This bill passed the House in a 
vote of 303 to 108, and would provide $14 billion over 4 years 
for the Clean Water State Revolving Fund and would require the 
GAO to study revenue sources for Clean Water Trust Fund. NACWA 
and WIN also support the inclusion of funding for pilot 
projects that incorporate green infrastructure as a cost-
effective way to address the challenges of wet weather. We 
would hope that Congress would pass such legislation by October 
18 to commemorate the passage of the original Clean Water Act 
35 years ago.
    Cities cannot meet these financial challenges alone. 
Municipalities have already raised fees on average by more than 
twice the rate of inflation for the past 5 years.
    Mr. Chairman, if you ask some of our members, they will 
tell you they have to increase their rates by more than 15 
percent per year to meet the growing demand for wastewater 
infrastructure funding.
    The world around us has changed significantly since 1972, 
from growing and shifting populations to the emergence of new 
pollutants. NACWA and WIN encourage the committee to seek 
innovative approaches and appropriate funding to help achieve 
water quality goals in the face of these new challenges. 
``Water is water'' is what we hear from many of our 
stakeholders. The result of this very real concept certainly 
signals the need for a new watershed based approach to dealing 
with this invaluable resource that better equips us to meet 
head-on new complicated and expensive challenges in the water 
quality arena.
    During deliberations of the original Clean Water Act, 
Congress decided that water infrastructure was a national asset 
that demanded Federal investment. Without this investment, we 
seek a perfect storm brewing at the local level. We must not 
allow this storm to push gains made in water quality back to 
pre-1970 levels.
    The image of the Cuyahoga River on fire is forever etched 
in our collective memory. We must not allow the Nation's great 
waterways to again become the poster children for a Nation's 
water quality in crisis. Whether it is the Potomac, the 
Chesapeake Bay, the Mississippi River, the Great Lakes, or my 
own California coastal waters, the point is simple: the Federal 
Government must join States and municipalities as full-fledged 
long-term partners in funding the Nation's clean water 
infrastructure. Your leadership, Mr. Chairman, and the 
foresight of this committee's members can make such a 
partnership a reality again.
    Thank you for your time and allowing NACWA and WIN to share 
their views on clean water funding, and I would be happy to 
answer any questions.
    [The prepared statement of Mr. Westhoff follows:]

 Statement of Christopher M. Westhoff, President, National Association 
                    of Clean Water Agencies (NACWA)

                              INTRODUCTION

    Good morning, Chairman Lautenberg and Members of the Subcommittee. 
My name is Christopher Westhoff and I am an Assistant City Attorney and 
public works general counsel for the City of Los Angeles. I am 
testifying today on behalf of and as the President of the National 
Association of Clean Water Agencies (NACWA) and as a member of the 
Water Infrastructure Network (WIN). NACWA is the only organization 
dedicated solely to the interests of the Nation's public wastewater 
treatment agencies. Our members are dedicated environmental stewards 
who work to carry out the goals of the Clean Water Act and to treat and 
reclaim more than 18 billion gallons of wastewater each day. WIN is a 
broad-based coalition of local elected officials, drinking water and 
wastewater service providers, state environmental and health 
administrators, engineers, environmentalists, and labor advocates 
dedicated to preserving and protecting the health, environmental and 
economic gains that America's drinking water and wastewater 
infrastructure provides.
    I am pleased to be here and thank you for holding this important 
hearing examining the state of our nation's critical water 
infrastructure, which protects our vital water resources, improves 
public health, and provides recreational enjoyment for all Americans. 
With the 35th anniversary of the Clean Water Act just around the 
corner, this hearing and your record of leadership on environmental 
issues are both timely and fitting as we face some serious challenges 
moving into the 21st century. In order to meet these challenges and 
ensure continued water quality improvements, all levels of government--
federal, state, and local--must develop a lasting partnership that 
recognizes the need for more investment in our nation's clean water 
infrastructure.

     AS FEDERAL FUNDS DECLINE, THE LOCAL COST OF CLEAN WATER RISES

    While the Clean Water Act has been hugely successful in helping us 
meet our clean water objectives, we must not stop and pat ourselves on 
the back for a job well done. Unfortunately, the job is far from 
finished. There is no doubt about the record of environmental 
achievement in the 35 years since the Clean Water Act became law. In 
1972, Lake Erie had been declared dead by ``Time'' magazine, and the 
burning Cuyahoga River became the poster child for federal action--
action in the form of a tough federal law and an unprecedented infusion 
of federal money which, together with state and local contributions, 
helped POTW's across America begin to meet the Nation's water quality 
challenges. Today our rivers, lakes, and estuaries are much cleaner as 
a result.
    The federal government has invested more than $72 billion since 
1972 to help cities build publicly owned treatment works (POTWs). This 
investment in clean water has not come at the expense of economic 
growth. Quite the contrary. Economic growth has gone hand in hand and, 
indeed, has been enhanced by this investment. However, despite the huge 
sums spent to meet our clean water goals, our Nation now faces serious 
long-term funding shortfalls to meet its vital water and wastewater 
infrastructure needs.
    Federal assistance simply has not kept pace with needs, declining 
more than 70 percent since 1980. The Nation now faces a funding gap of 
$300 billion to $500 billion over 20 years between current levels of 
spending for wastewater infrastructure and total funding needs, 
according to the U.S. Environmental Protection Agency (EPA),\1\ the 
Congressional Budget Office,\2\ and WIN\3\. Little has been done since 
these estimates were released, and the picture has not improved with 
the passage of time.
---------------------------------------------------------------------------
    \1\ U.S. Environmental Protection Agency, The Clean Water and 
Drinking Water Infrastructure Gap Analysis (2002) http://www.epa.gov/
safewater/gapreport.pdf.
    \2\ Congressional Budget Office, Future Investment in Drinking 
Water and Wastewater Infrastructure (November 2002); http://
www.cbo.gov/ftpdoc.cfm?index=3983&type=0&sequence=0
    \3\ Water Infrastructure Network, Clean and Safe Water for the 21st 
Century (2000); http://www.win-water.org/reports/winreport2000.pdf.
---------------------------------------------------------------------------
    Local communities now pay more than 95 percent of the cost of 
meeting their Clean Water Act obligations, according to a recent report 
by the U.S. Conference of Mayors\4\. In effect, these communities are 
on their own to address the ever increasing challenges of aging 
infrastructure, a growing population, expectations of higher quality 
service, and more expensive federal regulations to address wet weather, 
emerging contaminants, nutrient removal, total maximum daily loads 
(TMDLs), and other demands for limited resources. Clean water ranks 
second only to education in terms of how local governments are spending 
their money.
---------------------------------------------------------------------------
    \4\ U.S. Conference of Mayors, Who Pays for the Water Pipes, Pumps 
and Treatment Works?--Local Government Expenditures on Sewer and 
Water--1991-2005 (http://www.usmayors.org/urbanwater/
07expenditures.pdf)
---------------------------------------------------------------------------
    In the 1990's alone, Los Angeles spent over $1.6 billion on the 
upgrade of the Hyperion Wastewater Treatment Plant to full secondary 
treatment. This was only ONE plant, and only a small portion of this 
expenditure was funded through the Federal Clean Water Grant Program. 
In this decade, Los Angeles will spend more than $4 billion dollars to 
address the physical needs of its aging 6,500 mile long wastewater 
collection system and other wastewater infrastructure. To meet this 
aggressive expenditure program, rates have already been raised 7 
percent per year for each of the past 5 years, and in 2008, our 
infrastructure team will ask our City Council for a nearly 9 percent 
rate increase for each of the succeeding 5 years.
    This financial situation is untenable. With local governments 
shouldering so much of the financial burden and having limited options 
for further financing, we risk losing ground in the battle for clean 
water. In fact, EPA has stated that if the infrastructure funding gap 
is not addressed soon, the water quality gains we have seen over the 
past 35 years could be erased by 2016. Already, the physical condition 
of our treatment plants, equipment, and other capital improvements in 
many of the nation's 16,000 wastewater treatment systems has suffered 
because of the lack of resources to pay for upgrades and the 
replacement of pipes and treatment systems.
    The EPA also reports that more than 40 percent of the Nation's 
assessed waters remain impaired, with the majority of this impairment 
caused by nonpoint sources of pollution. Furthermore, our growing 
population, which is expected to add another 100 million people over 
the next three decades, coupled with increasing industrial output 
further stresses our aging clean water infrastructure.

                      FUNDING THE CLEAN WATER ACT

    To address this funding crisis--and this is a crisis--NACWA and WIN 
believe the federal government should recommit itself to clean water 
and the ideals that led to the passage of the 1972 Clean Water Act. We 
believe such a recommitment should involve a viable long-term, 
dedicated source of revenue to bridge the clean water infrastructure 
funding gap. In short, we think the best way to accomplish this is 
through the establishment of a federal clean water infrastructure trust 
fund that would provide a reliable source of financial assistance for 
the construction and repair of water and wastewater infrastructure. 
Clean and safe water is no less a national priority than an adequate 
system of interstate highways and a safe and efficient aviation system. 
If these other highly important infrastructure programs enjoy 
sustainable, long-term sources of federal investment, water and 
wastewater infrastructure should as well.
    As a first step toward a long-term funding solution, however, NACWA 
and WIN strongly recommend that the Senate introduce and pass 
legislation that mirrors the Water Quality Financing Act of 2007. This 
bill, which passed the House in an overwhelming 303-108 vote, would 
provide $14 billion over 4 years for the Clean Water State Revolving 
Fund (CWSRF) and would require a GAO study of revenue sources for a 
clean water trust fund. We would hope Congress would pass such 
legislation by October 18 to commemorate the passage of the original 
Clean Water Act 35 years ago.
    The need for additional, viable revenue streams is even more 
important when considered in the context of the Administration's 
approach for overcoming the funding gap. This approach, referred to as 
the ``Four Pillars,'' includes better utility management, water 
conservation, full-cost pricing, and the reliance on watershed 
planning. While NACWA believes these practices are beneficial, they 
ultimately boil down to the federal government washing its hands of the 
matter and putting the burden entirely on the shoulders of local 
governments. In essence, the Administration's approach assumes the 
federal government has no role, and if local governments charge more 
and implement the other elements of the Four Pillars, the funding gap 
vanishes. This is simply not the case.
    According to NACWA's annual Rate Index, municipalities have already 
been forced to raise the average residential user service charge at 
twice the rate of inflation for the past 5 years, and many utilities 
are raising their rates by double-digits. Mr. Chairman, if you ask some 
of our members, they will tell you that they are having to increase 
their rates by more than 15 percent per year to meet the growing 
demand.
    NACWA, through its Clean Water Funding Task Force, has done 
extensive research regarding public perception on clean water funding 
and how best to overcome the gap. More than 91 percent of Americans, 
when made aware of this gap, overwhelmingly support federal legislative 
action to guarantee the water quality of the Nation's rivers, lakes, 
streams, and bays. Polling data also show that the vast majority of 
Americans would support a dedicated revenue source for clean water 
infrastructure structured similarly to those that exist for highways 
and airports and that Americans are willing to pay out of their own 
pockets to do so.

                   NEW CHALLENGES IN THE 21ST CENTURY

    The world around us has changed significantly since 1972, from 
swelling and shifting populations to the emergence of new pollutants 
that have the power to change the course of nature. NACWA and WIN 
encourage the Committee to seek innovative approaches, with appropriate 
funding, to achieving water quality goals in the face of these emerging 
challenges. The federal government currently supports technology 
research and development through EPA programs and Congressional 
appropriations to non-profit research foundations. Yet, none of these 
programs focuses specifically on infrastructure and non-traditional 
solutions. Innovative and alternative approaches are needed to reduce 
nutrient pollution, improve methods for conserving and reusing water, 
improve monitoring and data analysis, reduce nonpoint sources of water 
pollution, reduce municipal stormwater pollution, reduce sanitary sewer 
and combined sewer overflows, address new water resource management 
issues presented by climate change, and develop more effective methods 
for treating wastewater--including ``green technology,'' conservation 
easements, stream buffers and wetlands.
    Integrated strategies to managing drinking water, wastewater and 
stormwater issues such as water reuse, water conservation, and energy 
efficiency through a meaningful watershed management approach are 
critical to achieving sustainability. Green technologies too are 
becoming increasingly accessible and commonplace. ``Water is water'' is 
what we hear from many of our stakeholders. The ramifications of such 
thinking are many and broad, signalling the need for a new approach to 
water quality that better equips us to deal with new, complicated, and 
expensive challenges.

                               CONCLUSION

    During deliberations of the original Clean Water Act, Congress 
decided that water infrastructure was a national good that demanded 
federal investment. The American people agreed as more than 20 million 
participated in the original Earth Day activities in 1970. Although 
consensus still exists in the form of broad public support for federal 
action, the federal commitment to clean water investment continues to 
wane. This trend is inexplicable in light of the ever-increasing costs 
to comply with new federal requirements and enforcement actions. On top 
of it all, the escalating cost and unanticipated price increases for 
materials, experienced consultants, engineers, and utility staff are 
creating the ``perfect storm'' for wastewater utility managers at the 
local level. We must not allow this storm to push gains made in water 
quality back to pre-1970 levels.
    The image of the Cuyahoga River on fire is forever seared in our 
collective memory. It helped illuminate the plight facing our precious 
waterways and inspired our Nation to act and act decisively. We must 
not allow the nation's great waterways to again become the poster-
children for a Nation's water quality in crisis. Whether it is the 
Potomac, the Chesapeake Bay, the Mississippi River, the Great Lakes or 
California's coastal waters, the point is simple: the federal 
government's failure to join states and municipalities as a full-
fledged, long-term partner in funding the Nation's clean water 
infrastructure will have unacceptable consequences. Your leadership, 
Mr. Chairman, and the foresight of this Committee's members can make 
such a partnership a reality again. Thank you for your time and for 
allowing NACWA and WIN to share their views on clean water funding for 
the 21st century. I would be happy to answer any questions.
                                 ______
                                 
  Response by Christopher M. Westhoff to an Additional Question from 
                             Senator Inhofe

    Question. In the 107th Congress, bipartisan legislation was 
introduced to reauthorize both SRFs. NACWA (NA-CWA), then the 
Association of Metropolitan Sewerage Agencies, testified about that 
bill stating ``They [the bill authors) suggest that . . . Congress does 
not have confidence in our management skills and believes we are not 
charging Americans enough for their water, and that the states and EPA 
need to micromanage our operations.'' Many of the provisions in H.R. 
720 said the same message and yet, NACWA has urged us to pass that 
legislation. Does your organization believe we should place additional 
requirements to be met by applicants for loans?
    Response. When NACWA, then the Association of Metropolitan Sewerage 
Agencies (AMSA), made the statement quoted in this question, the 
legislative language at issue in the 107th Congress's SRF funding bill, 
S. 1961, was much broader than in H.R. 720. Specifically, S. 1961 
required municipalities to prepare, as a condition to SRF funding, new 
asset management repair and replacement plans; new and potentially far-
reaching physical and operational analyses of systems; as well as an 
analysis of the cost-effectiveness of alternate financing approaches, 
including a plan to have rate structures reflect the actual ``cost of 
service''--a term that S. 1961 did not define. The breadth and details 
of these plans were left largely up to EPA and State authorities and 
centered on decisions that by their nature should remain at the local 
level.
    H.R. 720 scales these requirements back significantly, clarifying 
that municipalities need to certify that they have ``studied and 
evaluated innovative and alternative processes, materials, techniques, 
and technologies for carrying out the proposed project.'' This 
provision seeks to ensure that new 21st century approaches, such as 
green infrastructure and energy saving techniques, are considered in 
the SRF funding process--a goal NACWA supports. H.R. 720 also contains 
a certification requirement that municipalities must have ``considered 
the cost and effectiveness of alternative management and financing 
approaches for which assistance is sought.'' Unlike S. 1961, this 
provision does not specifically call on utilities to perform costly 
analyses or open municipal decisions up to a time-consuming and 
unnecessary State and/or EPA review process, which could significantly 
hamper the very purpose of the SRF program--to get money to 
municipalities as quickly as possible to perform much-needed wastewater 
infrastructure projects.
    NACWA's public agency members are the leaders in implementing 
competitive asset management techniques and strongly believe asset 
management involves site-specific considerations that ought not to be 
the subject of federal legislation. The approach taken in H.R. 720, 
however, takes a sensible approach. It balances the needs to get funds 
as swiftly as possible to municipalities to perform much-needed 
infrastructure projects with the understandable objective of ensuring 
that these funds are going to go, as H.R. 720 states, to projects that 
``result in greater environmental benefit.''

  Response by Christopher M. Westhoff to an Additional Question from 
                             Senator Cardin

    Question. The EPA Inspector General recently released a report 
about the effects of sprawl development on the restoration efforts in 
the Chesapeake Bay. In summary, the report suggests that the increase 
in polluted stormwater runoff that accompanies the influx of new 
residents in the watershed is overwhelming the gains being make in 
other areas to improve water quality. What steps is Los Angeles taking 
to make sure that investments in wastewater infrastructure are actually 
resulting in a net gain in water quality? Do you direct development 
into areas already served by existing wastewater infrastructure, or do 
your give priority funding to such areas? Should EPA or the State 
require such a condition on the use of federal or state money?
    Response. NACWA believes that local governments are in the best 
position to determine their own development and balance that with 
environmental concerns. Usually, areas that are growing can pay for 
their own growth so federal funds are able to be delivered to those 
areas that need it to upgrade existing wastewater infrastructure. NACWA 
believes the delivery system for federal funds, namely through state 
priority lists, works well and is not in need of major changes at this 
time.
    Los Angeles, for better or worse, does not have a large amount of 
undeveloped land suitable for large developments within its borders. 
However, any development of multiple single family homes, muti-family 
residences or commercial property, whether constructed as an ``in-
fill'' development or built on previously undeveloped land, requires an 
analysis of existing wastewater infrastructure (sewer pipes) for 
available capacity to service the new construction. If deemed 
necessary, the developer is required to provide ``off-site'' mainline 
sewers to connect to other existing collection system pipes where 
sufficient capacity exists to take the sewage to the City's treatment 
plants. Where sufficient sewer capacity already exists, the developer 
still pays a fee for that capacity. When the development is finished 
and the individual properties are sold to new owners, those new owners 
will continue to pay fees on a monthly basis to cover their portion of 
the O and M and future capital costs of the City's entire wastewater 
collection and treatment system.
    Los Angeles as co-permittee under a County-wide Stormwater permit 
has a comprehensive Standard Urban Stormwater Mitigation Program 
(``SUSMP'') where each new development is reviewed and required to 
``mitigate'' any additional urban runoff contributed by the new 
development. The development must be designed to keep at least the 
first \3/4\ of an inch of rainfall onsite (``first flush'') and also 
mitigate potential pollutants exiting their site by the use of catch 
basin inserts or other filter type devices.

    Senator Lautenberg. Thank you very much.
    Ms. Stoner.

   STATEMENT OF NANCY K. STONER, DIRECTOR OF THE CLEAN WATER 
        PROJECT AT THE NATURAL RESOURCES DEFENSE COUNCIL

    Ms. Stoner. Good morning, Mr. Chairman and members of the 
subcommittee. My name is Nancy Stoner, and I am the director of 
the Clean Water Project at the National Resources Defense 
Council. I am delighted to be invited to testify here today and 
to hear the broad bipartisan support we have among the 
committee and subcommittee members who have been here today for 
clean water funding.
    I would like to ask to have my full statement be put in the 
record, but I did bring a few photos that I wanted to share 
with you today, and hope you would appreciate the informal 
approach.
    Senator Lautenberg. Without objection, they will be 
included.
    Ms. Stoner. Thank you.
    The first point has been made already and well recognized 
by the members of the committee and subcommittee here today, 
that there is a Federal role for clean water funding. Water 
pollution, of course, knows no political bounds, and it is not 
fair to downstream communities to have to pay for upstream 
pollution that those communities choose not to address. 
Americans need to be able to go across the country and know 
that the tap water is safe to drink everywhere, the waters are 
safe to swim in everywhere, and the fish is safe to eat. 
Congress has looked at this question many times and viewed it 
the same way every time. There is a Federal role complimentary 
to those of State and local entities in funding wastewater 
infrastructure.
    Of course, it is an excellent investment. Again, several 
speakers have spoken on this already today. The investments we 
have had over the past 20 years in the State Revolving Fund 
have improved the environment, have protected public health, 
and added to local economies. The photograph there is the 
installation of permeable pavement by construction workers in 
Portland. I put that up to emphasize the fact that green 
infrastructure, like the more traditional ways of controlling 
wastewater that have been used, provide jobs for small 
businesses, for entrepreneurs, for architects, for maintenance 
workers, for construction workers, landscape architects. It is 
part of the fabric of our economy that we need to support.
    Despite the investments that we have made and the progress 
that we have made, water pollution problems are growing. There 
are a number of indicators that are showing negative trends, 
including beach closings, red tides, dead zones, and the like 
here. As several witnesses have also mentioned, global warming 
is projected to exacerbate those negative trends. The chart 
here shows EPA's predictions of what would happen in terms of 
sewage pollution. If we stay on the current path, it shows that 
those levels of oxygen-depleting substances from sewage would 
reach the same levels in 2025 that they were in 1968, before 
the passage of the Clean Water Act, which is obviously very 
disturbing.
    Even though the problems are growing the Federal funding is 
shrinking. The two lines there, the blue one is one that we 
discussed earlier today, about the Presidential budget for 
green infrastructure. The red line is the funding that has been 
provided by Congress. Am very pleased to see earlier this year 
that Congress did increase the funding for the SRF for Fiscal 
Year 2007, and there is a choice pending now before the Senate 
whether to continue that increase or to adopt a number closer 
to the President's budget. We, of course, would urge you to 
speak with your appropriations colleagues and other colleagues 
to fund at the $1.125 billion that is the House number for this 
year.
    So the solution that we see is basically more money better 
spent. The photo there is of a restored wetland in Houston, TX. 
This is one form of green infrastructure. We would like to see 
substantially increased funding in general for the SRF over the 
next 10 years and better targeting of the resources to achieve 
water resource protection goals, as well as an increase in 
research and develop funding to move us to the new plane where 
we will have the technologies that can best address the 
Nation's problems.
    To increase efficiency of SRF spending, there are several 
different things that we suggest: funding existing needs, not 
sprawl; funding green infrastructure that achieves more for 
each dollar spent; funding the highest priorities, looking at 
those from an integrated water resource perspective; as I 
mentioned, increased R&D funding; and increased public 
involvement and transparency to get better results.
    The photo there is from the Navy Yard here in D.C., and it 
shows what can be done even with a very small amount of space 
to capture and treat the stormwater runoff from parking lots.
    One of the pieces of this is increasing the funding for 
green infrastructure. What it does is use soil and vegetation 
to manage urban and suburban runoff. It is essentially 
mimicking the functions that are provided by mother nature in a 
natural environment for free, and it is a compliment to the 
pipes and pumps and treatment plants that are, of course, also 
essential and part of the hard infrastructure. The photo is of 
a street edge alternative in Seattle. This is not just 
beautiful, it captures 99 percent of the stormwater runoff. It 
actually has not discharged from this area since December 2002. 
It is very popular. The people in the neighboring neighborhoods 
want this in their neighborhood as well. It increases property 
values and beautifies the neighborhood.
    One of the things about green infrastructure is that the 
benefits are multimedia, which makes it a little difficult to 
fit within the regulatory system that we have, but there are a 
wide range of benefits, including the economic benefits that I 
mentioned earlier. This is a picture of a rain garden in 
Maplewood, MN.
    As I mentioned, another priority is not just funding things 
that need to be funded, but not funding things that do not make 
water pollution better. It is very well documented at this 
point that development and the payment associated with it 
increases runoff, decreases water quality, and reduces 
groundwater recharge. So it actually adds to the long-term 
pollution burden to fuel greenfield development. Yet, we spent, 
last year it was 19 percent of the SRF, on new sewers. We are 
not saying that development won't happen, but we are saying it 
should not be a priority in terms of Federal funding and should 
not be subsidized by the Federal Government through the SRF.
    In summary, our recommendations are substantially increased 
funding for the next 10 years; clarify the eligibilities to 
ensure that we can fund everything we want to fund at the 
highest priorities; provide incentives for the most beneficial 
approaches, including green infrastructure in subsidies for 
sprawl; increase public involvement; increase funding for 
research and development.
    The last photo there is a green roof in Irvine, CA.
    I thank you.
    [The prepared statement of Ms. Stoner follows:]

 Statement of Nancy K. Stoner, Director, Clean Water Project, Natural 
                       Resources Defense Council

    Good morning, Mr. Chairman, and members of the Subcommittee. I am 
Nancy Stoner, Director of the Clean Water Project at the Natural 
Resources Defense Council (NRDC). Thank you for holding this hearing 
today on meeting America's wastewater infrastructure needs. This is a 
tremendous opportunity for the Congress to step up federal investment 
in wastewater infrastructure and to spend smarter so that the U.S. will 
ensure that there is clean, safe, usable water for the next generation.
    The federal government's investment in wastewater treatment and 
water resource protection over the 35 years since the Clean Water Act 
was passed in 1972 has brought tremendous progress in cleaning up our 
waterways. Yet, the issue of whether there is a federal role in 
wastewater infrastructure investment is a recurring question. I believe 
that issue was resolved appropriately by Congress in 1972. Water 
pollution knows no political bounds. Failure to protect water resources 
in one state pollutes downsteam surface and groundwater resources in 
neighboring states. That's why Congress passed the Clean Water Act in 
the first place and why the federal role is so important. For example, 
for the past 17 years, NRDC has prepared a report analyzing beachwater 
quality in coastal states across the U.S., called Testing the Waters. 
In 2006, there were more than 25,000 beach closings and advisories in 
the U.S., and the largest known causes were contaminated stormwater and 
sewage, two of the pollution sources the remediation of which is 
eligible for funding by the Clean Water SRF.\1\ It would be unfair for 
coastal communities to have to shoulder the cost of cleaning upstream 
sources of beachwater contamination because there is no federal funding 
to assist upstream communities to make investments in controlling those 
sources.
---------------------------------------------------------------------------
    \1\ NRDC, Testing the Waters-A Guide to Water Quality at Vacation 
Beaches, p. 1 (August 2007), available at http://www.nrdc.org/water/
oceans/ttw/ttw2007.pdf.
---------------------------------------------------------------------------
    The Clean Water SRF has always been and continues to be a good 
investment. Projects funded by the Clean Water SRF provide water 
quality and community benefits, such as reduced discharges of raw 
sewage into rivers and lakes, less waterborne illness, enhanced 
wildlife habitat biodiversity, and more plentiful and safer drinking 
water sources.\2\ It also protects businesses that are dependent upon 
clean water, such as tourism, fish and shellfish harvesting, the 
beverage industry, and high tech manufacturing. SRF funded projects 
create more than 400,000 jobs each year throughout the Nation while 
providing other economic benefits for local communities.\3\ Very little 
current Clean Water SRF funding goes to green infrastructure, which 
applies natural systems or designed or engineered systems that use soil 
and vegetation to mimic natural processes to protect and enhance 
environmental quality and provide utility services. However, where it 
is being employed, green infrastructure creates jobs for architects, 
designers, engineers, construction workers, maintenance workers, and a 
variety of small businesses engaged in designing and building green 
roofs, rain gardens, tree boxes, and other types of green 
infrastructure.\4\ And both the clean waterways themselves and the 
green infrastructure that keeps them clean increase property values, 
revitalize blighted neighborhoods, enhance street life and community 
aesthetics, and provide free recreation.\5\ Because it is matched at 
the state and local levels, the Clean Water SRF leverages non-federal 
investment at a rate of 2.23 times the federal dollar.\6\
---------------------------------------------------------------------------
    \2\ http://www.epa.gov/owm/cwfinance/cwsrf/factsheets.htm; U.S. 
EPA, Financing America's Clean Water Since 1987: A Report of Progress 
and Innovation, EPA-832-R-00-011, pp. 9-10 (May 2001), available at 
http://www.epa.gov/ownitnet/cwfinance/cwsrf/progress.pdf.
    \3\ AFSCME, et al., All Dried Up: How Clean Water is Threatened by 
Budget Cuts, p. 1 (2004). Available at http://www.nrdc.org/media/docs/
040915.pdf.
    \4\ http://www.treepeople.org/trees/default.htm (projects creation 
of 50,000 new jobs from green infrastructure initiative)
    \5\ NRDC, Rooftops to Rivers: Green Strategies for Controlling 
Stormwater and Combined Sewer Overflows (June 2006).
    \6\ U.S. EPA, Clean Water State Revolving Fund Programs-2006 Annual 
Report, p.18, available at www.epa.gov/owm/cwfinance/cwsrf/2006-annual-
report.pdf.
---------------------------------------------------------------------------
    But it is clear that the level of U.S. investment in clean water is 
inadequate. There is an upward trend for beach closings, red tides, 
dead zones, droughts, flooding, coral reef damage, nutrient pollution, 
and sewage pollution.\7\ At our current rate of investment, U.S. EPA 
has projected that sewage pollution will be as high in 2025 as it was 
in 1968--before the passage of the Clean Water Act--that is, when Lake 
Erie was declared dead and the Cuyahoga River was on fire.\8\ In 
addition, global warming is anticipated to have adverse effects on 
available freshwater resources. For example, NRDC's recent report, In 
Hot Water, projects that global warming will decrease snowpack in the 
West, reduce water supplies, increase the magnitude and frequency of 
floods and droughts, and degrade aquatic habitat by reducing stream 
flows and increasing the temperature of waterways.\9\
---------------------------------------------------------------------------
    \7\ NRDC, Testing the Waters, pp. 1-2 (reporting annual percentage 
increase in beach closing and advisory days); Woods Hole Oceanographic 
Institute, Harmful Algal Research and Response: A National 
Environmental Science Strategy 2005-2015, available at www.esa.org/
HARRNESS/harrnessReport10032005.pdf (``Whereas 30 years ago the US 
harmful algal bloom problem was scattered and sporadic, today virtually 
every state is threatened by harmful or toxic algal species.''); 
Raloff, Dead Waters, Science News Online June 5, 2004 (the number of 
major dead zones has been roughly doubling every decade since the 
1960s); NRDC, In Hot Water: Water Management Strategies to Weather the 
Effects of Global Warming pp. 4-16, (July 2007), available at 
www.nrdc.org/globalWarming/hotwater/hotwater.pdf (experts predict that 
the frequency of damaging events such as droughts and flooding will 
increase in many areas due to climate change); An Ocean Blueprint for 
the 21st Century, Final Report of the U.S. Commission on Ocean Policy, 
p.22 (Sept. 2004) available at http://www.oceancommission.gov/documents 
(The world's coral reefs are increasingly showing signs of serious 
decline, with pristine reefs becoming rare and up to one-third of the 
world's reefs severely damaged according to some estimates); NOAA, 
National Estuarine Eutrophication Assessment: Effects of Nutrient 
Enrichment in the Nation's Estuaries, pp. vi-vii (Sept. 1999), 
available at http://ian.umces.edu/neea/pdfs/eutro--report.pdf (The 
severity and extent of nutrient pollution are expected to worsen in 
more than half of the nation's estuaries and coastal waters by 2020).
    \8\ U.S. EPA, The Clean Water and Drinking Water Infrastructure Gap 
Analysis, EPA-816-R-02-020 (Sept. 2002).
    \9\ In Hot Water, pp. 4-16.
---------------------------------------------------------------------------
    Even while the problems are growing, federal contributions to the 
SRF are shrinking, the funding gap is almost $20 billion annually, and 
both public and private investment in wastewater technology research 
and development that could save money in the long run is less than half 
of what it was in the 1970s.\10\ This year, after a promising start by 
restoring SRF funding to more than $1 billion for FY07, the Senate 
appears poised to adopt a funding cut of more than $200 million from 
last year's enacted level. We request that the Senate adopt the House 
funding level of $1.125 billion.
---------------------------------------------------------------------------
    \10\ U.S. EPA, A Retrospective Assessments of the Costs of the 
Clean Water Act, 1972 to 1997 (Oct. 2000).
---------------------------------------------------------------------------
    The picture is bleak. The sewer systems are getting older, more 
antiquated, more likely to fail,\11\ 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, and, as I mentioned, the 
projected impacts of global warming on water resources.
---------------------------------------------------------------------------
    \11\ U.S. EPA, The Clean Water and Drinking Water Infrastructure 
Gap Analysis, EPA-816-R-02-020 (Sept. 2002) (projects that 47 percent 
of sewer pipes will in poor, very poor, or life elapsed condition by 
2020, up from 10 percent in 1980 and 23 percent in 2000).
---------------------------------------------------------------------------
    NRDC's key recommendations are that you address this situation by 
(1) substantially increasing funding over at least the next 10 years, 
(2) expand the eligibilities and improve the targeting of water funding 
so that it can be used to address a broad range of threats to U.S. 
water resources and so it achieves more per dollar spent; and (3) 
accompany the SRF with long term investment in research and development 
in new technologies that will allow the U.S. to find even smarter, 
cheaper ways to protect and enhance our water resources in the future.

                              MIND THE GAP

    The funding gap between water infrastructure needs and available 
resources is very large and continues to grow. Yet, the current Clean 
Water SRF is grossly insufficient to meet our nation's water quality 
needs, which include repairing and replacing aging sewer plants and 
collection systems, controlling contaminated stormwater, minimizing 
polluted runoff, and ensuring adequate and clean flows in our nation's 
rivers, lakes, and estuaries. We need to authorize substantially more 
SRF funds to close the gap between our water needs and available 
federal funding. While there are differing estimates of the amount of 
additional funding needed,\12\ the need for greater investment in clean 
water infrastructure is clear and undisputed. Any reauthorization of 
the Clean Water SRF must substantially raise SRF funding levels for 
those programs, and EPA's own estimate of funding gaps should be a 
starting point. We should begin to plan now to meet future needs by 
authorizing funds to address them for at least the next 10 years.
---------------------------------------------------------------------------
    \12\ Estimates collected at http://waterislife.net/Documents/
FactSheet.pdf.
---------------------------------------------------------------------------
              FUND THE SMARTEST, MOST BENEFICIAL PROJECTS

    The growing funding gap suggests not just the need for more 
funding, but also the need to begin to spend that funding more wisely 
to obtain the greatest amount of environmental benefit per taxpayer 
dollar invested in water infrastructure. There are several components 
of this: (1) clarifying that all types of municipal water resource 
protection needs are eligible for funding, not just construction of 
hard infrastructure pipes and treatment works, (2) funding the highest 
priority projects first, (3) providing substantially increased funding 
for green infrastructure, and (4) ending subsidies for sprawl 
development.

                        ELIGIBILITY AND PRIORITY

    U.S. EPA has interpreted the Clean Water Act to allow the SRF to be 
used to fund a variety of types of water resource protection projects, 
including municipal drinking water source protection and municipal 
stormwater controls.\13\ NRDC urges you to clarify these eligibilities 
and to encourage the use of integrated water resource management, 
watershed management, and other integrated and multimedia tools to 
choose priorities for funding based on expected environmental results. 
Greater transparency and involvement of the public in the priority 
setting process would also increase the likelihood that the most 
environmentally beneficial projects would be selected for funding.
---------------------------------------------------------------------------
    \13\ U.S. EPA, SRF fact sheets, available at http://www.epa.gov/
owm/cwfinance/cwsrf/factsheets.htm.
---------------------------------------------------------------------------
            EXPAND FUNDING FOR GREEN INFRASTRUCTURE PROJECTS

    The U.S. should not merely rebuild our wastewater and stormwater 
systems using the hard infrastructure technologies of the past. We must 
become smarter about stretching our federal investment in water 
infrastructure by spending more on ``green infrastructure''--non-point 
and non-structural solutions that are more efficient and more 
environmentally effective than traditional concrete and pipe solutions. 
Green infrastructure includes a variety of emerging technologies that 
can be used to restore urban and suburban waterways. Green 
infrastructure approaches include both engineered approaches that mimic 
natural functions, such as green roofs and rain gardens, and protection 
of natural areas (wetlands, stream buffers, forests) to provide water 
capture and purification functions naturally. They are often 
accompanied by rain barrels, cisterns, and other approaches that 
``harvest stormwater'' for re-use. Green infrastructure benefits 
include improved water quality, expanded wildlife habitat, enhanced 
drinking water supplies, protected open space and parks, energy 
savings, smog reduction, decreased flooding, improved aesthetics, and 
higher property values. Green infrastructure often saves taxpayers 
money as well by not only reducing sewage and stormwater pollution, but 
also by reducing the amount of water that needs to be conveyed to 
centralized treatment facilities, thereby reducing the cost of 
operating those facilities. Use of green infrastructure approaches in 
addition to modernization of aging, decaying treatment plants, 
collection systems, and distribution systems can forestall the need for 
even more costly approaches and investments in the future.
    Earlier this year, 42 members of the Senate recognized that green 
infrastructure can be more cost effective than traditional pipe and 
mortar solutions to stormwater management.\14\ In April 2007, NRDC, 
U.S. EPA, the Low Impact Development Center, the National Association 
of Clean Water Agencies, and the Association of State and Interstate 
Water Pollution Control Administrators pledged to work together to 
promote use of green infrastructure in stormwater and sewer overflow 
control programs.\15\ NRDC's 2006 report, Rooftops to Rivers, reported 
on the green infrastructure strategies already employed by forward-
thinking communities across the U.S. that are already stretching 
wastewater infrastructure investments to achieve more by focusing on 
multi-benefit approaches, by leveraging private as well as public 
investment, and by weaving green infrastructure controls into a broad 
range of ongoing municipal activities, such as repair and 
rehabilitation of roads. Green infrastructure approaches can achieve 
cleaner bodies of water, a greener environment, and better quality of 
life.
---------------------------------------------------------------------------
    \14\ Letter from 42 Senators to the Honorable Dianne Feinstein 
(March 30, 2007).
    \15\ Green Infrastructure Statement of Intent (April 17, 2007), 
available at http://www.epa.gov/npdes/pubs/gi--intentstatement.pdf.
---------------------------------------------------------------------------
                    FUND EXISTING NEEDS, NOT SPRAWL

    Better targeting of SRF funds not only means funding new types of 
projects that provide enhanced results, it also means discontinuing 
funding for projects that cause environmental degradation. Despite the 
fact that subsidizing new sewer lines and excess capacity often fuels 
development that makes pollution worse in the long run, a substantial 
amount of SRF funding (and earmarks) goes to funding these projects 
every year. Development significantly increases runoff volume and 
velocity, decreases water quality, and reduces groundwater discharge. 
The more pavement, the more pollution--that is extremely well 
documented by now--included in multiple reports by U.S. EPA.\16\ Yet, 
the SRF still funds new collection systems, new treatment plants, and 
excess capacity--all of which can fuel greenfield development. 
According to EPA's 2006 report, about 19 percent of the SRF was used to 
fund ``new sewers.''\17\ Given its adverse water quality impacts, 
development must pay for itself--it should not be subsidized by the 
American taxpayer--and should particularly not be paid for out of the 
very limited federal funding available to protect water resources.
---------------------------------------------------------------------------
    \16\ U.S. EPA, Using Smart Growth Techniques as Stormwater Best 
Management Practices (Dec. 2005), U.S. EPA, Growing Toward More 
Efficient Water Use: Linking Development, Infrastructure, and Drinking 
Water Policies (Jan. 2006); U.S. EPA, Protecting Water Resources With 
Higher Density Development (Jan. 2006), available at http://
www.epa.gov/smartgrowth.; U.S.
    \17\ U.S. EPA, Clean Water State Revolving Fund Programs--2006 
Annual Report, p. 16, available at http://www.epa.gov/owm/cwfinance/
cwsrf/2006-annual-report.pdf.
---------------------------------------------------------------------------
      SUBSTANTIALLY INCREASE FUNDING FOR RESEARCH AND DEVELOPMENT

    While green infrastructure approaches already have demonstrated 
performance results in some cities, most of the data is site specific 
and needs to be scaled up in order to be used at the watershed or 
subwatershed scale to achieve regulatory objectives, such as combined 
sewer overflow reduction, total maximum daily load implementation, 
streambank stabilization, drinking water source protection, and 
municipal stormwater compliance. Clarifying that green infrastructure 
projects are eligible for SRF funding is not sufficient. NRDC supports 
creation of a dedicated fund for wastewater infrastructure research 
needs, including those for green infrastructure technology development 
and transfer. For green infrastructure, those needs include work to 
further develop green infrastructure models and integrate them into 
existing watershed models, sewer system models, and even global warming 
and air quality models. We also need to help those communities that are 
pioneering green infrastructure approaches to perform multi-media 
monitoring of the results that can then be compared with model 
projections and with results obtained from hard infrastructure 
investments. This is the kind of research expense that we cannot expect 
cities to fund solely on their own.
    Broader research and development funding is required as well. 
Public and private investment in research and development in wastewater 
technologies has shrunk significantly since the 1970s. The U.S. is 
falling behind in terms of its ability to compete with those overseas 
for developing and marketing innovative wastewater treatment 
technologies. The American taxpayer is also denied the environmental 
and financial benefits of employing improved technologies. Instead of 
developing and implementing new approaches that will ensure improved 
protection of resources for the future, we continue to argue about 
whether our waterways need to be safe for swimming, drinking, and 
aquatic habitat. Instead, we need to focus on developing the approaches 
that will ensure their safety, and we need to begin to look at those 
questions in a holistic way through integrated water resource planning. 
I look forward to working with you to ensure that Senate legislation 
not only improves funding for existing wastewater needs, but also puts 
in place funding for long range investments so that Americans will have 
enough clean, safe water for decades to come.
    Thank you for providing me with the opportunity to testify today. I 
look forward to working with you to address these issues in your 
reauthorization bill. I would be happy to answer any questions you may 
have.

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Responses by Nancy K. Stoner to Additional Questions from Senator Boxer
    Question 1. In your testimony, you discuss prioritizing projects 
eligible for funding under the SRF. Can you discuss who you would 
recommend do the prioritization and what criteria you would recommend 
for determining policy?
    Response. Prioritization should be done by the state through a very 
public process with multiple opportunities for outside stakeholder 
participation, not just a formal comment on the draft intended use 
plan. Priorities should include projects that provide the most 
environmental benefit for dollar spent, projects that would address 
needs of underserved and disadvantaged communities, and projects that 
would contribute significantly to water resource infrastructure 
research needs. Specific priority, and more favorable loan terms, 
should be given to projects that use green infrastructure to reduce 
sewer overflows or stormwater pollution and projects that implement 
integrated water resource management. The SRF should not be used to pay 
for construction of new sewage treatment plants or new collection 
systems.

    Question 2. One of this committee's top priorities is combating 
global warming. Indeed, the effects of global warming are profound and 
will impact snow pack melt, rivers and other waterways. This will put 
more of a strain on our nation's already strained wastewater 
infrastructure. How can the SRF program help communities plan for the 
upcoming effects of global warming on their infrastructure?
    Response. Global warming is anticipated to have adverse effects on 
available freshwater resources. For example, as NRDC recently reported, 
experts project that global warming will decrease snowpack in the West, 
reduce water supplies, increase the magnitude and frequency of floods 
and droughts, and degrade aquatic habitat by reducing stream flows and 
increasing the temperature of waterways.\1\ As stewards of one of the 
most valuable and scarce resources, water, Congress can lead the 
response to ongoing climate changes and help stave off further damage. 
The most important step that Congress can take, of course, is to 
address global warming directly by enacting the Climate Security Act; 
however, there are also a number of steps that Congress can take to 
mitigate the adverse effects of climate change on water resources. 
Below we include only those that we would encourage Congress to include 
in wastewater funding legislation:
---------------------------------------------------------------------------
    \1\ In Hot Water, pp. 4-16; see also id. at 12 (``The USGS modeled 
the effects of climate change on increased storm intensity and found 
that the risk of a 100-year flood event will grow larger in the 21st 
century. Instead of a 1 percent chance that in any year there will be a 
100-year flood event, the likelihood in a single year could become as 
high as one in seventeen.'').
---------------------------------------------------------------------------
     Provide funding for state and local water and wastewater 
agencies to work together to perform vulnerability analyses addressing 
the impacts of climate change on existing flood management and water 
storage facilities and systems. This analysis should include changes in 
surface runoff, riverine hydrology, changes in watershed 
characteristics, sea level rise, etc.
     Provide funding for state and local water and wastewater 
agencies to integrate climate issues into ongoing planning (e.g. flood 
management, levee construction, flood conveyance and surface storage 
projects), operations, funding and regulatory work (e.g. sewer 
overflows, stormwater controls, total maximum daily loads, wetlands 
protection).
     Provide funding for state and local water and wastewater 
agencies to evaluate the energy-related impacts of water management 
decisions and the water resource implications of energy choices, to 
save both water and energy and reduce their contribution to global 
warming.\2\
---------------------------------------------------------------------------
    \2\ For a report exploring the very significant linkage between 
water and energy, see http://www.nrdc.org/water/conservation/edrain/
contents.asp.
---------------------------------------------------------------------------
     Provide funding for state and local water and wastewater 
agencies to analyze the water quality impacts of climate change. Three 
of the primary mechanisms are increases in runoff and infiltration from 
higher peak rain events, lower summer surface and groundwater flows 
(thus concentrating pollutants and depleting available water supplies) 
and higher temperatures (reducing species diversity and increasing the 
need for trees, stream buffers, and other means of cooling waterways 
and the discharges into them).
     Provide funding for state and local water and wastewater 
agencies to evaluate surface storage re-operation opportunities--
combined with explorations of potential increases in downstream 
floodways.
     Provide funding for state and local water and wastewater 
agencies to encourage integrated water resource management--analysis of 
long-term trends in needs and uses of water resources for the next 50 
to 100 years in light of global warming and steps to maximize the 
availability of those resources for human and ecological needs.
     Provide funding for state and local water and wastewater 
agencies to analyze 100yr floodplain designations to provide for 
increases in the size, frequency, and timing of peak flows related to 
future climate change.
     Provide incentives in the SRF funding structure for 
protection of existing green infrastructure, such as for wetlands, 
headwaters, and forests, and for retrofitting the built environment 
with green roofs, rain gardens, tree boxes, vegetative planters, 
vegetated swales, and other green infrastructure because of the climate 
change protection and surface temperature reduction they provide along 
with their other benefits.

    Question 3. In addition to the direct impacts of untreated 
wastewater on human health, there are other considerable impacts on our 
nation's fish and wildlife. A part of America's natural heritage, fish 
and wildlife also contribute greatly to our nation's ``recreation 
economy.'' What are the impacts of untreated wastewater on wildlife and 
how do the SRF programs help address these problems?

    Response. Discharges of sewage into waterways have a number of 
adverse impacts on fish, shellfish, and other aquatic wildlife 
populations, including removing the oxygen they need to sustain life, 
smothering or blocking light to the plants that they eat, fueling algal 
blooms that contain toxins that cause disease, altering their hormonal 
balance, and changing the balance of species within a water body so as 
to be detrimental to some.
    Many of the pollutants found in sewage discharges are not 
adequately treated by the existing wastewater treatment system. For 
example, sewage effluent contains several dozen chemicals--both natural 
and man-made--that can alter animal hormones. Endocrine disruptors, 
which mimic hormones, are found in pharmaceuticals, industrial 
chemicals, pesticides, and a number of household compounds. Excessive 
amounts of estrogens or estrogen mimics can feminize fish or create so-
called intersex animals with both male and female genitals, such as a 
male fish with eggs. Scientists have shown that some fish with the 
altered organs are infertile. Sewage treatment plants are not designed 
to remove estrogen mimicking chemicals. http://
www.environmentalhealthnews.org/newscience/2007/2007-
1008labadieetal.html
    In addition, most sewage treatment plants fail to remove nutrient 
pollution even though technologies to do so are available. Secondary 
treatment standards, which have not been updated since 1984, were based 
on technology from the early 20th century and focus primarily on 
removal of sediments and oxygen-demanding substances. Dorfman, Swimming 
in Sewage, pp. 15-16 (NRDC, 2004).
    The SRF should provide additional funding for advanced wastewater 
treatment approaches to remove excessive nutrients from wastewater. It 
should also provide grant funding for research necessary to develop 
technologies for removal of endocrine disruptors and safer substitutes 
for endocrine disrupting chemicals that end up in our sewers.

       Responses by Nancy K. Stoner to Additional Questions from 
                           Senator Lautenberg
    Question 1. What incentives or other legislative approaches could 
be used by Congress to encourage the use of green infrastructure to 
meet wastewater and stormwater management needs, as well as improve 
water quality?
    Response. There should be both grant funding and incentives within 
the SRF funding for green infrastructure projects. Grant funding should 
apply to the research components of green infrastructure projects, such 
as development of models and monitoring for the multimedia 
environmental and community and economic benefits that they provide. 
There should be more favorable loan terms, funded through additional 
subsidization, and priority given to green infrastructure projects in 
the SRF program because of their broader environmental benefits.

    Question 2. Please elaborate on your testimony on the cost 
effective of green infrastructure.
    Response. There are several different ways in which green 
infrastructure projects are more cost effective than other means of 
controlling stormwater and combined sewer overflows. For new 
development and redevelopment, the cost of using green infrastructure 
or low impact development techniques often saves money directly for the 
developer because it is cheaper to install than the stormwater pipes 
and ponds that it replaces. It often also produces a premium in terms 
of sales price for homes and the speed at which they are sold. This is 
all quite well documented at this point in numerous publications, 
including U.S. EPA, Economic Benefits of Urban Runoff Controls (Sept. 
1995) (new development case studies), available at http://www.epa.gov/
OWOW/nps/runoff.html; U.S. HUD and Partnership for Advancing Technology 
in Housing, The Practice of Low Impact Development (July 2003), 
www.huduser.org (``[Use of LID has] resulted in rapid home sales, 
enhanced community marketability, and higher-than-average lot 
yields.''); Aponte-Clarke, et al, ``Stormwater Strategies: The Economic 
Advantage, Stormwater Magazine, available at https://www.forester.net/
sw_--0101stormwater.html.
    In already developed areas, green infrastructure retrofits are most 
likely to pay for themselves directly in terms of cost savings for the 
building owner when they are integrated into an existing need for 
rehabilitation. For example, while it may not be cost effective for a 
building owner merely to install a green roof on an existing building, 
if the roof needs replacement anyway, the cost differential is such 
that payback from the insulating value of the green roof, which reduces 
energy costs, and the reduction in stormwater utility fees often cover 
the additional cost. Great Lakes Wisconsin Aquatic Technology and 
Environmental Research Institute Green Roof Project website, http://
www.glwi.uwm.edu/research/genomics/ecoli/greenroof/roofinstall.php.
    Another perspective from which to evaluate costs is that of the 
city, county, or stormwater and wastewater utility. From this 
perspective, green infrastructure is often more cost effective for 
several reasons. First, per gallon of combined sewer overflow reduced 
or stormwater retained, it is often less expensive than surface 
reservoirs, tanks, or underground storage tunnels, which are not only 
very expensive, but also very difficult to fund because the public 
never sees them or knows that they are there. Second, the cost of 
construction and maintenance for those centralized, hard infrastructure 
approaches are borne almost entirely by the utility through the rates 
it charges its customers. On the other hand, green infrastructure is 
often installed and maintained by private entities, sometimes at no 
cost, but usually at least at a reduced cost, to the utility though the 
use of stormwater or wastewater fee rebates, credits, or offsets. In 
this way, communities can leverage private investment in tasks that 
would otherwise be borne entirely by the utility. Third, green 
infrastructure provides a whole host of non-water quality benefits that 
improve the cost/benefit ratio, such as improved air quality, peak 
temperature reduction, wildlife habitat, expanded green space, restored 
degraded urban lands, increased real estate values, capture of global 
warming pollution, reduced heat deaths, conserved water and energy, 
controlled floods, improved aesthetics, enhanced recreational 
opportunities, etc. Thus, per dollar spent, green infrastructure is a 
very good deal. Kloss, et al, Rooftops to Rivers (NRDC, 2006). The 
Center for Neighborhood Technology has developed a green infrastructure 
calculator that is available to the public free of charge on its 
website and can be used to estimate the costs and benefits of a variety 
of green infrastructure approaches. http://greenvalues.cnt.org/
calculator

   Responses by Nancy K. Stoner to Additional Questions from Senator 
                                 Cardin
    Question 1. In your view, what pilot projects or research efforts 
still need to take place to demonstrate the full range of effectiveness 
of these green infrastructure strategies?
    Response. There is a growing body of literature demonstrating the 
positive environmental results attainable through the use of green 
infrastructure for stormwater and sewer overflow controls, but there is 
a lot of work that still needs to be done, particularly to aggregate 
the environmental benefits over a neighborhood, sewershed, or 
subwatershed. EPA has organized a research forum for Jan. 17-18, 2008, 
to develop an action plan for:
     (1) evaluating water quality and water quantity 
performances of management practices, including standardizing protocols 
for those evaluations;
     (2) improving the capacity/ability of standard models and 
modeling approaches to provide reasonable estimates of management 
practices performance for predictive and design purposes;
     (3) evaluating economic costs of green infrastructure 
technologies, including comparisons to more traditional wet weather 
management approaches.
    NRDC agrees with those research needs, but would suggest a few 
others for research and demonstration projects on a neighborhood, 
subwatershed or sewershed, or other community-wide level including:
     reduction in peak summertime temperatures and associated 
anticipated reduction in energy savings, impacts on global warming, 
stream temperatures, etc.
      reduction in ground level air pollution and carbon 
capture from widespread use of green infrastructure in a community or 
specific neighborhood
     quantitative analysis of enhancement of groundwater and 
surface water resources, including base flow, and associated cost 
savings
     reduction in stream scouring and erosion and associated 
water quality benefits and habitat benefits
     reduction in flooding, basement backups, and sewer 
overflows and associated environmental and economic benefits
     increase in property values, including sales prices, 
marketability, rental value, and other location sensitive changes, such 
as hotel room rate, associated with use of green infrastructure on the 
property and within view
     number and value of jobs created through use of green 
infrastructure
     increase in various measures of community cohesiveness and 
empowerment, such as reduction in violence, reduction in crimes, 
reduced teen pregnancy rates, reduced dropout rate, etc.

    Question 2. Can you provide the Committee with some examples of 
successful, cost-effective projects that have demonstrated the benefits 
of green infrastructure projects?
    Response. NRDC's report, Rooftops to Rivers (July 2006) contains a 
number of case studies from the U.S. and Canada that may interest you. 
Subsequent to its publication, the Riverkeeper in New York City, issued 
a report, Sustainable Raindrops, based on a study that it commissioned 
that found that if instead of spending $2.1 billion on additional 
underground storage tunnels, NY city were instead to spend those funds 
on green infrastructure, it could capture 2.1 billion gallons more 
stormwater, save $1.4 million per year in avoided stormwater treatment 
costs, remove 60 tons of air pollution and 340 tons of carbon dioxide 
as opposed to adding 6,481 tons of carbon dioxide and 37.8 tons of 
other air pollutants associated with water treatment, save $67 million 
per year in energy savings, and increase property values between 3 
percent and 20 percent. Plumb, Mike, Sustainable Raindrops (2006), 
http://riverkeeper.org/special/Sustainable_Raindrops_FINAL_2007-03-
15.pdf.
    In addition, EPA has prepared a new report, Reducing Stormwater 
Costs through Low Impact Development (LID) Strategies and Practices, 
for which NRDC served as a peer reviewer. NRDC has prepared a chart 
outlining a number of the case studies from that report below.


 
----------------------------------------------------------------------------------------------------------------
                 No.                             Site                 Cost Savings                Notes
----------------------------------------------------------------------------------------------------------------
1....................................  2nd Avenue SEA Street,   $217, 255 (25%)........  Ninety-nine percent
                                        Seattle, WA1.                                     reduction in runoff.
                                                                                          No runoff since
                                                                                          December 2002.
2....................................  Auburn Hills,            $761,396 million (32%).  Forty percent of
                                        Southwestern WI.                                  development saved as
                                                                                          open space.
3....................................  Bellingham City Hall     $22,000 (80%)..........  Used rain gardens
                                        Retrofit, WA.                                     instead of underground
                                                                                          vault to capture
                                                                                          parking lot runoff
4....................................  Bellingham Bloedel       $40,000 (76%)..........  Used rain gardens
                                        Donovan Park Retrofit,                            instead of underground
                                        WA.                                               vault to capture
                                                                                          parking lot runoff
5....................................  Gap Creek, Sherwood, AR  $678,500 (15%).........  Over 20 acres preserved
                                                                                          as open space.
                                                                                          Developer saved $4,800
                                                                                          per lot to develop and
                                                                                          sold each lot for an
                                                                                          additional $3,000,
                                                                                          resulting in $2.2
                                                                                          million in additional
                                                                                          profit.
6....................................  Garden Valley, WA......  $63,700 (20%)..........  Reduced road width,
                                                                                          used some pervious
                                                                                          paving, and used
                                                                                          swales and
                                                                                          bioretention with soil
                                                                                          amendments
7....................................  Kensington Estates, WA.  $89,400 (12%)..........  Study projected use of
                                                                                          LID to eliminate need
                                                                                          for detention pond and
                                                                                          make more lots
                                                                                          available for
                                                                                          development
8....................................  Laurel Springs,          $504,469 (30%).........  Conservation design
                                        Jackson, WI.                                      with bioretention and
                                                                                          vegetated swales
9....................................  Mill Creek, Kane         $3,411 per lot (27%)...  Cluster development
                                        County, IL.                                       with about 40% of the
                                                                                          site saved as open
                                                                                          space. In addition to
                                                                                          cost savings, lots
                                                                                          adjacent to open space
                                                                                          sold at a premium.
10...................................  Poplar Street Apts, NC.  $175,000 (72%).........  Conventional storm
                                                                                          drains replaced with
                                                                                          bioretention,
                                                                                          depressions, grass
                                                                                          channels, swales, and
                                                                                          stormwater basins in
                                                                                          270-unit building
11...................................  Portland Downspout       $241.5 million.........  Downspout disconnection
                                        Disconnection Program,                            program costing $8.5
                                        OR.                                               million is expected to
                                                                                          save $250 million in
                                                                                          avoided costs for
                                                                                          underground pipe to
                                                                                          store CSOs
12...................................  Prairie Glen,            $405,312 (40%).........  Nearly 60% of the site
                                        Germantown, WI.                                   saved as open space.
13...................................  Somerset, MD...........  $785,382 (32%).........  In ground test found
                                                                                          LID to compare
                                                                                          favorably on both
                                                                                          costs and
                                                                                          environmental results
                                                                                          to conventional design
14...................................  Tellabs Corporate        $461,510 (15%).........  Open space design for
                                        Campus, IL.                                       office complex saves
                                                                                          not only initial
                                                                                          construction costs but
                                                                                          also maintenance costs
----------------------------------------------------------------------------------------------------------------
Source: U.S. EPA, Reducing Stormwater Costs through Low Impact Development (LID) Strategies and Practices (Sept.
  2007), soon to be available at www.epa.gov/nps/lid


    Senator Lautenberg. Thank you all very much for your 
testimony. I think each of you was here during the EPA 
testimony.
    By the way, for my fellow subcommittee members, the fact is 
that we went from a relatively tiny community in Louisiana to 
Los Angeles, so we covered the scope.
    I didn't hear either of you saying that things were hunky-
dory and not to worry about them.
    What can be the response to the acceptance by EPA of the 
President's budget as presented by Mr. Grumbles as being OK, 
cutting the funding approximately in half, that we manage to 
work our way through because of the other ways that we have of 
attending to the water quality problem? Anybody make sense of 
that? I shouldn't say that. Anybody understand that fully?
    Mr. Westhoff. Well, Senator, I can tell you that, on behalf 
of NACWA and certainly the city of Los Angeles, we think it is 
going in the wrong direction. The needs of all segments of 
infrastructure in this country need money, and we need money 
from the Federal Government, States, and local. So we think it 
is going in the wrong direction to be cutting, at this point in 
time, the money that would go into the State Revolving Fund.
    Senator Lautenberg. Mayor Palmer, what do you and your 
colleagues or mayors across the country think about a 50 
percent cut in the State Revolving Fund might do to them?
    Mr. Palmer. Not to be political, but Senator Voinovich said 
this, and it is a question of residents in my city of Trenton, 
NJ and residents all across this Nation are saying, you know, 
my mom always told me to take care of home first. If your house 
isn't clean, you can't go and try and clean somebody else's up. 
If we are spending billions of dollars in infrastructure over 
in Iraq--which I am not saying we shouldn't do; we should--we 
have to take care of our own infrastructure here, whether it is 
water, wastewater, whether it is bridges.
    We have seen what has happened in Minneapolis. We saw the 
water main break, steam pipe burst in New York City. Quite 
frankly, our infrastructure, whether it is water or whether it 
is bridges, is falling apart, and we recognize that. We are not 
just throwing money at a problem, but we are investing in 
America's future, because if we don't have roads that can take 
us back and forth, our businesses are going to be suffer, we 
are not going to be globally competitive. If we don't have 
clean water to drink, the same for us there as well.
    So I think that we have to look at this as investments. I 
think that cities have had you-go approaches and other things, 
while using the State Revolving Fund as well. But we don't have 
time to debate it or work on it; we have to get the job done, 
and we use whatever resources we have. But we are saying that 
we need to invest more so that America can be stronger and 
globally competitive.
    Senator Lautenberg. The idea that lies behind the State 
Revolving Fund is a pretty good one. The only thing is that it 
has to keep up to the volume of need that occurs as the country 
grows and as the systems that are in place show the wear and 
tear that one would expect. So is it possible that the 
communities, the cities can finance their own wastewater 
treatment, that the citizens in these cities can afford to do 
the price costing that is called for without an expansion of 
the State Revolving Fund? Anybody think that?
    Mr. Freeman. Senator, the full cost approach, as presented 
and things, such as in Oklahoma--first, let me say on behalf of 
Oklahoma and the Council of Infrastructure Financing 
Authorities, we are not hearing anyone who says the dollar 
amount should be cut. It should be increased. So I would like 
to State that.
    On the full cost pricing, such as in Oklahoma--and it is 
the same in many other States, and those who have been mayors 
know that--there is more than one way to finance a project. In 
Oklahoma, for instance, in most of the communities, most of the 
loans we make are not just totally secured by repayment from 
water and sewer rates; there are also other techniques that 
cities use to pay their loans, sales tax proceeds, things of 
that nature. So we think that EPA needs to look at those type 
of avenues for repayment.
    In Oklahoma we also see, because of the cuts and things, we 
have been fortunate enough to partner with other funding 
sources. Just this last week we worked on a very important 
project that was in the Illinois River Watershed, where we were 
using rural development funds with loans and grants, SRF 
funding, State funding. It really took a lot of work to get it 
done, but it was a push, and without the SRF, it couldn't have 
been done.
    Senator Lautenberg. So now that you've kind of squeezed 
much of the water out of the sponge, is there any room left for 
additional projects?
    Mr. Freeman. It is getting tighter and tighter, sir.
    Senator Lautenberg. Yes.
    Mr. Freeman. If I could, Senator, that is why it is 
important to know and I was glad to hear the Administration 
saying this, because the Conference of Mayors have bene pushing 
and the Mayors Water Council have been pushing to remove the 
volume cap for Private Activity Bonds for water and wastewater 
infrastructure as one tool in terms of helping our aging 
infrastructure, and that is one tool. There is no cookie-cutter 
approach, there are different mechanisms, but the more 
flexibility that we can have and the less mandates we can have, 
the better cities and our infrastructure will be.
    Senator Lautenberg. But I think it all boils down, doesn't 
it, Mayor, to the fact that you can't simply pass off these 
funds to the citizenry without, Mr. Freeman, with what you just 
said, calls for an increase in revenues from other sources. 
Well, that sounds like taxes to me. Call it what you will. The 
fact is in this place, where there is constant railing against 
asking the Nation to pay more for the things that it owes the 
population--and the war is one glaring example--but there is no 
free lunch and you can't get it done without asking for more 
money from the citizens. If the Federal Government can't find 
it in its revenue stream, then we have a serious problem. But 
the notion that we could cut in half the Revolving Fund is 
almost, if I might say, insulting.
    Mr. Brasseaux, I was thinking, as I listened to your 
testimony, it was very vivid. You talked about 7,100 residents, 
if I am not mistaken. Is that the right size?
    Mr. Brasseaux. It is 2,100.
    Senator Lautenberg. Twenty-one hundred.
    Mr. Brasseaux. You are correct, it's 2,100 homes.
    Senator Lautenberg. That's what I thought.
    Mr. Brasseaux. We have had a tremendous growth, but we 
continue to raise our utility rates. Our problem--and I am sure 
it is not only in South Louisiana, but across much of the 
South, at least--we have a large population of low income 
families, and every time you raise a utility rate by $1, it is 
really affecting a lot of people.
    Senator Lautenberg. I am sure it does. Well, it highlights 
the problem.
    Ms. Stoner, thanks for your presentation, it was excellent. 
You know, I had a meeting with my staff before the hearing, and 
we talked about the green approach to things, the green 
infrastructure, and was wondering what happens when you try to 
grow vegetation up on your roof; who takes care of that. Well, 
what we saw was wonderful examples in yours of cities that have 
done it and it is hard to believe, but nature will treat its 
own ills, given the chance to do it. But if you take away one 
part, one element of the total ecology, then the rest pays for 
it.
    So we thank you for the commentary that each of you 
offered. I am going to call on Senator Vitter, but would also 
remind everybody that the record will be kept open and 
questions will be submitted to you in writing and would ask 
that you respond as promptly as you can.
    Senator Vitter.
    Senator Vitter. Thank you, Mr. Chairman.
    Mayor Brasseaux, thank you again for your leadership and 
for being here. In your testimony, which was very compelling, 
you talked about how, in a significant project in Carencro, you 
basically abandoned trying to fool with the State and Federal 
Government in terms of the Revolving Loan Fund because of the 
bureaucratic obstacles and red tape and paperwork. Could you 
talk about that a little bit and what specific steps are 
necessary to change that situation so it is much less of a 
burden, particularly for smaller communities?
    Mr. Brasseaux. Well, Senator Vitter, it goes back about 3 
years ago, and at the time I was a part-time mayor and relied a 
lot on an engineering firm to kind of guide me. They looked at 
it, the Revolving Loan Fund, for a good while and I met with 
some State people, and when it was all said and done, the 
recommendation from our engineer and other consulting engineer 
was that we are not going to mess with it, it is just too much 
red tape. I didn't get into the details of that, I just went on 
their recommendation.
    But I am also a vice president with the Louisiana Municipal 
Association, and I hear that across the State, that, based on 
things that they have heard and some past experiences, they 
won't even go in there and really try anymore.
    Senator Vitter. Well, I would really welcome any very 
specific ideas about cutting through that red tape and making 
it much more attractive to local communities. Maybe you can 
work through the Rural Water Association, the Municipal 
Association, anything else like that to give us--and from my 
perspective, the more specific the better about how we change 
that application and of a process. I look forward to that.
    Also, you know, one pretty unique Louisiana experience you 
touched on in the last couple years because of the hurricanes 
is an enormous population growth overnight in some communities 
because of displacement from other areas for the hurricanes. 
Maybe you can touch on that a little bit, because I think--I 
don't think; I know in Louisiana that is a huge phenomenon that 
impacts all sorts of infrastructure in communities like yours, 
which is on the receiving end of that.
    Mr. Brasseaux. Well, Senator, I would say our community has 
grown by at least 1,000 to 1,500 residents since the 
hurricanes. One of the reasons they are coming toward us is we 
are north of InterState 10, and because of insurance problems, 
having trouble getting insurance, they want to move a little 
further inland, away from the coastline. I guess we are about 
not quite an hour from the coast; mainly, we get winds.
    But our infrastructure is suffering because of new 
subdivisions that are popping up. Right now we have, I would 
say, in the planning stages or have started construction, 800 
new residential lots, not counting probably, the last couple of 
years, 400 that have been actually homes built on it. Our 
problem is it is in our city limits and just running the lines, 
the infrastructure to try to meet those needs, it is a 
tremendous burden on us.
    Senator Vitter. I want to underscore something. That 1,000 
residents, virtually overnight, to a community your size is a 
huge percentage growth overnight. Again, that is pretty unique 
to the hurricane experience, and I hope that we can make sure 
that the Federal programs recognize that enormous overnight 
growth, because that is very unusual. They probably aren't set 
up to recognize that very quickly.
    Then, in closing on my time, Ms. Stoner, I was very 
interested in your presentation, including the green 
infrastructure. I know that carries a lot of different things, 
but if you could generalize in terms of where that technology 
sits today, how does that cost compare to handling the same 
amount of water through more conventional needs and, in terms 
of policy, how should we compare it? In other words, if it is 
more expensive, should we not move ahead with it? How should we 
compare it in terms of cost? I assume, over time, that cost 
will come down.
    Ms. Stoner. I appreciate that question. First of all, it is 
a lot of different types of approaches, some which can be used 
in urban areas, suburban areas, rural areas. There are actually 
different green infrastructure techniques that can be used all 
across the landscape.
    As far as the costs go, one of the benefits that you get 
from green infrastructure is the ability to leverage private 
investment, so you have to look at the costs in a little bit 
different way. Instead of having the utility own, construct, 
and maintain all of the infrastructure itself, one of the 
benefits of green infrastructure is that you set up incentives 
to get landowners, property owners to have really part of what 
turns out to be the wastewater infrastructure on their property 
itself.
    As Senator Lautenberg mentioned, one of these things is 
green roofs, so that the building owner gets, say, an 
incentive, a credit on water and sewer fee or on the stormwater 
fee every month. They are actually retaining the stormwater 
onsite. They do use very low maintenance types of plants, sedum 
and other kinds of desert plants that can bake in the sun every 
day and don't need to be watered. But the maintenance that is 
required is then done by the building owner. When you look at 
it altogether, in terms of what the costs are for the utility 
and what the benefits are, the multimedia benefits that include 
air pollution, global warming, the rate comes out very 
favorable comparison for most communities.
    I think that we are currently generating those numbers 
across the country, looking at widespread application of green 
infrastructure and what we can expect to see in terms of 
sewershed and watershed reductions, and what the costs are. But 
often they come out so that the green infrastructure is 
actually very affordable and often cost-effective for 
communities, which is one of the reasons why it is so widely 
supported by so many different groups.
    Senator Vitter. Thank you.
    Senator Lautenberg. I want to put a question to you, Mayor 
Palmer, Mr. Freeman and Mr. Westhoff, because each of you has 
significant organizational affiliations. Are you aware in your 
organizations, Mayor Palmer, in the Conference of Mayors, how 
many communities would reject use of the State Revolving Fund 
because there is red tape attached? Or, Mr. Freeman, do you 
know from your organization?
    Mr. Freeman. The actual statistic answer to that, no, sir. 
We can find the answer out to that. I can speak on behalf of 
Oklahoma. As I mentioned in my testimony, we have been very 
fortunate in that we have been able to provide approximately 65 
percent of the financing to communities for wastewater through 
Clean Water State Revolving Fund loan program.
    Senator Lautenberg. Sixty-five percent.
    Mr. Freeman. Yes, sir, State Revolving.
    Mr. Westhoff. Senator, I can honestly tell you, and to 
followup on actually the question that Senator Vitter placed, 
the problems with red tape are not limited to small agencies. I 
can tell you that the city of Los Angeles has, in the past, 
decided not to participate at various times because of the red 
tape.
    I think what happened when we transitioned from the 
Construction Grant program over to the SRF, they took all of 
the baggage, and I can tell you that the Clean Water Grant 
program was burdened with a lot of details and a lot of 
followup and a lot of post-construction audit problems that 
existed. Ten years, maybe, after the project was already built, 
they were coming in, asking you to provide justification. So 
that baggage sort of followed the SRF.
    Senator Lautenberg. Does it eliminate the value of the 
Fund?
    Mr. Westhoff. Senator, I don't think it eliminates it, 
because I can tell you there are many organizations or many 
members of our organization, of NACWA, who take advantage of 
the SRF. But for the city of Los Angeles, as a large agency, a 
decision was made that it was easier for us to go out into the 
private investment market because of a high bond rating and 
seek investment, rather than utilizing a large amount of the 
SRF. We have used some SRF money, but there is a lot of red 
tape and, in our minds, a lot of unnecessary red tape.
    So second to increasing the amount of money in the SRF, the 
next most important thing would be to reduce the amount of red 
tape and make it easier for municipalities.
    Senator Lautenberg. We can always agree that we ought to 
minimize red tape.
    When you have questions that involve transfers of huge sums 
of money, when the competition for those funds is so keen that 
everybody is trying to get their hands in the largesse, you are 
going to have some red tape. We have heard complaints over the 
years that the IRS forms too much red tape. Well, at some point 
living has its difficulties, and you have to obey the rules, 
whether it is as simple as red lights or red tape.
    Mayor, do you have----
    Mr. Palmer. Mr. Chairman, we just wanted to make sure. We 
did a survey of 440 cities, and 15 percent said they would not 
use the SRF program because of the red tape.
    Senator Lautenberg. And 85 percent were happy to take it, 
red tape and all?
    Mr. Palmer. Well, some of the larger cities don't have to, 
but some of the smaller cities need it as well, but it is a 
combination.
    Senator Lautenberg. Well, the public is paying a terrific 
price and, again, I use the reference to drinking water, 
running somewhere between $50 billion and $100 billion a year 
spent on buying water in a container. So we passed along that 
cost.
    When I was a kid--and I don't want to tell you about age 
because it is a sensitive subject with me, but the fact is we 
went to the tap and whatever you needed came from the tap.
    So we have abused the system either innocently by growth, 
by expansion, now by--Mr. Freeman, I was happy to listen to 
your recount of what the excessive rainfall, et cetera, does 
and the burdens it places on the communities to fight harder to 
be able to treat their wastewater easily. So things have 
changed and they will continue to change, but I haven't heard 
anybody solute the need to cut the funding in half for the 
State Revolving Fund.
    With that, I thank each of you. Your testimony today was 
especially significant because usually when we get the panels, 
there is a certain pandering to the committee and the Senate 
and so forth, but here, I would say, for the most part you said 
it like it was, and I am happy to hear that.
    Just as a formality here, I ask unanimous consent that the 
written statements from the following organizations be included 
in the record of today, and that is the Clean Water 
Construction Coalition, the American Society of Civil 
Engineers, National Association of Water Companies, Great Lakes 
and St. Lawrence Cities Initiative, National Utility 
Contractors Association.
    [The referenced information follows:]

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    Senator Lautenberg. With that, once again, my thanks. This 
hearing is adjourned.
    [Whereupon, at 12:14 p.m., the committee was adjourned.]
    [Additional statements submitted for the record follow.]

      Statement of Hon. Benjamin L. Cardin, U.S. Senator from the 
                           State of Maryland

    Mr. Chairman: Thank you for holding this hearing today.
    We have a number of important witnesses to hear from, so I will 
keep my opening statement brief.
    This hearing is especially timely. Earlier this week the Chesapeake 
Bay Foundation released its report entitled ``Bad Waters: Dead Zones, 
Algal Blooms, and Fish Kills in the Chesapeake Bay Region in 2007.'' 
This disturbing report details the many problems that are associated 
with excess nitrogen and phosphorus that finds its way into the 
Chesapeake Watershed annually. The report also takes note of the 
numerous beach closures that hit the Chesapeake region in 2007, most of 
which result from faulty treatment of sewage waste.
    Mr. Chairman, about 20 percent of the excess nitrogen and 
phosphorus that pollutes the Bay comes from wastewater treatment 
plants. And virtually 100 percent of the Maryland beach closures on the 
Bay are the result of failing sewage treatment facilities.
    These startling statistics about the Chesapeake Bay are not unique 
to our part of the country. Coastal `dead zones,' where too little 
dissolved oxygen exists for fish and other aquatic species to survive, 
are a tragic and all too common phenomenon from your own Barnegat Inlet 
in New Jersey to the Hood Canal in Washington State.
    We will hear testimony today about the major health effects that 
are associated with improperly treated sewage. Coupled with the 
ecological devastation that I have outlined, these problems will 
continue to grow until we take a much more aggressive approach to the 
aging and often failing wastewater treatment plants in America.
    The total cost associated with meeting wastewater infrastructure 
needs that the states have already inventoried amounts to hundreds of 
billions of dollars. When drinking water infrastructure is added to the 
calculation, the total approaches $1 trillion in water infrastructure 
needs over the next 20 years.
    In the Chesapeake region, the states have identified more than 450 
wastewater facilities that require state-of-the-art treatment to remove 
excess nutrients from their effluent. The total price tag for these 
upgrades is in the neighborhood of $6 billion.
    In Maryland alone the cost of this advanced level of treatment is 
estimated at $2.2 billion. And that does not include other pressing 
costs:
     $850 million for secondary treatment
     $164 million to correct Inflow and Infiltration problems,
     $868 million for sewer replacement and repairs,
     $960 million for new sewer interceptors and collectors,
     $430 million to repair Combined Sewer Overflows,
     $431 million for Stormwater controls, and
     $247 million for other non-point source pollution 
controls.
    Maryland's bill tops $6.1 billion in identified wastewater 
treatment needs.
    During today's hearing we will learn about some innovative efforts 
to address this funding shortfall. Clearly a major new investment of 
federal dollars will need to be part of this effort. Water efficiency 
programs will play a major role, and so will innovative financing 
tools. But I want to express my hope that we will also focus a 
considerable portion of our attention on the use of ``green 
infrastructure'' to reduce stormwater runoff.
    Green infrastructure takes advantage of the natural filtering and 
water capture capacity of natural landscapes to reduce the amount of 
stormwater that is such a huge part of the pollution problem facing 
America's waters.
    These efforts have multiple benefits beyond their amazing water 
quality benefits. Trees, for example, can be used to intercept 
stormwater before it enters collection systems. They also filter air 
pollutants from our skies, and lower the ``heat island'' effect that we 
see in major urban areas. And these Green Infrastructure investments 
are often dramatically less expensive than traditional concrete and 
mortar treatment facilities.
    Clearly, the Nation is facing a wastewater infrastructure crisis. 
The Clean Water Act promised America swimmable, fishable, drinkable 
water more than a generation ago. In spite of major investments and 
consistent efforts, that is a promise that has not been realized. An 
earlier generation of investments has now reached its engineered 
lifetime. We need a new investment in America's aging infrastructure. I 
trust that today's hearing will start us on that path.
    Thank you, Mr. Chairman.

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