[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]





                    A REVIEW OF INNOVATIVE FINANCING
                     APPROACHES FOR COMMUNITY WATER
                    INFRASTRUCTURE PROJECTS--PART II

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

                                (112-76)

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                    WATER RESOURCES AND ENVIRONMENT

                                 OF THE

                              COMMITTEE ON
                   TRANSPORTATION AND INFRASTRUCTURE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 21, 2012

                               __________

                       Printed for the use of the
             Committee on Transportation and Infrastructure








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        committee.action?chamber=house&committee=transportation

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             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                    JOHN L. MICA, Florida, Chairman

DON YOUNG, Alaska                    NICK J. RAHALL II, West Virginia
THOMAS E. PETRI, Wisconsin           PETER A. DeFAZIO, Oregon
HOWARD COBLE, North Carolina         JERRY F. COSTELLO, Illinois
JOHN J. DUNCAN, Jr., Tennessee       ELEANOR HOLMES NORTON, District of 
FRANK A. LoBIONDO, New Jersey        Columbia
GARY G. MILLER, California           JERROLD NADLER, New York
TIMOTHY V. JOHNSON, Illinois         CORRINE BROWN, Florida
SAM GRAVES, Missouri                 BOB FILNER, California
BILL SHUSTER, Pennsylvania           EDDIE BERNICE JOHNSON, Texas
SHELLEY MOORE CAPITO, West Virginia  ELIJAH E. CUMMINGS, Maryland
JEAN SCHMIDT, Ohio                   LEONARD L. BOSWELL, Iowa
CANDICE S. MILLER, Michigan          TIM HOLDEN, Pennsylvania
DUNCAN HUNTER, California            RICK LARSEN, Washington
ANDY HARRIS, Maryland                MICHAEL E. CAPUANO, Massachusetts
ERIC A. ``RICK'' CRAWFORD, Arkansas  TIMOTHY H. BISHOP, New York
JAIME HERRERA BEUTLER, Washington    MICHAEL H. MICHAUD, Maine
FRANK C. GUINTA, New Hampshire       RUSS CARNAHAN, Missouri
RANDY HULTGREN, Illinois             GRACE F. NAPOLITANO, California
LOU BARLETTA, Pennsylvania           DANIEL LIPINSKI, Illinois
CHIP CRAVAACK, Minnesota             MAZIE K. HIRONO, Hawaii
BLAKE FARENTHOLD, Texas              JASON ALTMIRE, Pennsylvania
LARRY BUCSHON, Indiana               TIMOTHY J. WALZ, Minnesota
BILLY LONG, Missouri                 HEATH SHULER, North Carolina
BOB GIBBS, Ohio                      STEVE COHEN, Tennessee
PATRICK MEEHAN, Pennsylvania         LAURA RICHARDSON, California
RICHARD L. HANNA, New York           ALBIO SIRES, New Jersey
JEFFREY M. LANDRY, Louisiana         DONNA F. EDWARDS, Maryland
STEVE SOUTHERLAND II, Florida
JEFF DENHAM, California
JAMES LANKFORD, Oklahoma
REID J. RIBBLE, Wisconsin
CHARLES J. ``CHUCK'' FLEISCHMANN, 
Tennessee

                                  (ii)









            Subcommittee on Water Resources and Environment

                       BOB GIBBS, Ohio, Chairman

DON YOUNG, Alaska                    TIMOTHY H. BISHOP, New York
JOHN J. DUNCAN, Jr., Tennessee       JERRY F. COSTELLO, Illinois
GARY G. MILLER, California           ELEANOR HOLMES NORTON, District of 
TIMOTHY V. JOHNSON, Illinois         Columbia
BILL SHUSTER, Pennsylvania           RUSS CARNAHAN, Missouri
SHELLEY MOORE CAPITO, West Virginia  DONNA F. EDWARDS, Maryland
CANDICE S. MILLER, Michigan          CORRINE BROWN, Florida
DUNCAN HUNTER, California            BOB FILNER, California
ANDY HARRIS, Maryland                EDDIE BERNICE JOHNSON, Texas
ERIC A. ``RICK'' CRAWFORD, Arkansas  MICHAEL E. CAPUANO, Massachusetts
JAIME HERRERA BEUTLER, Washington,   GRACE F. NAPOLITANO, California
Vice Chair                           JASON ALTMIRE, Pennsylvania
CHIP CRAVAACK, Minnesota             STEVE COHEN, Tennessee
LARRY BUCSHON, Indiana               LAURA RICHARDSON, California
JEFFREY M. LANDRY, Louisiana         MAZIE K. HIRONO, Hawaii
JEFF DENHAM, California              NICK J. RAHALL II, West Virginia
JAMES LANKFORD, Oklahoma               (Ex Officio)
REID J. RIBBLE, Wisconsin
JOHN L. MICA, Florida (Ex Officio)

                                 (iii)








                                CONTENTS

                                                                   Page

Summary of Subject Matter and attachment: Discussion draft, H.R. 
  ___, a Bill to provide financing assistance for qualified water 
  infrastructure projects, and for other purposes, 112th Cong., 
  2012...........................................................   vii

                               TESTIMONY

Mayor Ronald A. Behm, City of Napoleon, Ohio.....................    14
Karen Massey, Director, Missouri Environmental Improvement and 
  Energy Resources Authority, testifying on behalf of the Council 
  of Infrastructure Financing Authorities........................    14
David Weihrauch, Water Treatment Plant Manager, city of Oxford, 
  Ohio...........................................................    14
Stephen E. Howard, Director, Infrastructure Project Finance, 
  Barclays Capital...............................................    14
David Dornbirer, Vice President, Energy and Water Services 
  Division, CoBank...............................................    14
Benjamin H. Grumbles, President, Clean Water America Alliance....    14
Ryan Schmitt, President, Petticoat-Schmitt Civil Contractors, 
  Inc., and Chairman of the Board, NUCA, representing utility and 
  excavation contractors, testifying on behalf of NUCA...........    14
Lynn Broaddus, Director, Environment Program, The Johnson 
  Foundation at Wingspread.......................................    14
Richard Abelson, Executive Director of District Council 48, 
  American Federation of State, County, and Municipal Employees 
  (AFSCME).......................................................    14

          PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS

Hon. Russ Carnahan, of Missouri..................................    73
Hon. Dennis J. Kucinich, of Ohio.................................    74
Hon. Thomas E. Petri, of Wisconsin, and Hon. Gwen Moore, of 
  Wisconsin, joint statement.....................................    75

               PREPARED STATEMENTS SUBMITTED BY WITNESSES

Mayor Ronald A. Behm.............................................    77
Karen Massey.....................................................    80
David Weihrauch..................................................    87
Stephen E. Howard................................................    91
David Dornbirer..................................................   106
Benjamin H. Grumbles.............................................   128
Ryan Schmitt.....................................................   134
Lynn Broaddus....................................................   139
Richard Abelson..................................................   147

                       SUBMISSIONS FOR THE RECORD

Hon. Timothy H. Bishop, a Representative in Congress from the 
  State of New York, request to submit the following:

        Katherine Baer, Senior Director, Clean Water Program, 
          American Rivers, letter to Hon. Bob Gibbs, a 
          Representative in Congress from the State of Ohio, and 
          to Hon. Timothy H. Bishop, a Representative in Congress 
          from the State of New York, March 19, 2012.............     5
        Diane VanDe Hei, Executive Director, Association of 
          Metropolitan Water Agencies, letter to Hon. Bob Gibbs, 
          a Representative in Congress from the State of Ohio, 
          and to Hon. Timothy H. Bishop, a Representative in 
          Congress from the State of New York, March 21, 2012....     9
        Hon. Timothy H. Bishop, a Representative in Congress from 
          the State of New York; Hon. Steven C. LaTourette, a 
          Representative in Congress from the State of Ohio; and 
          Hon. Earl Blumenauer, a Representative in Congress from 
          the State of Oregon, letter to Doug Elmendorf, 
          Director, Congressional Budget Office, March 16, 2012..    12
Lynn Broaddus, Director, Environment Program, The Johnson 
  Foundation at Wingspread, request to submit the following 
  reports \1\:

        The participants of The Johnson Foundation Freshwater 
          Summit, ``Charting New Waters: A Call to Action to 
          Address U.S. Freshwater Challenges,'' September 2010...    35
        The Johnson Foundation at Wingspread, ``Charting New 
          Waters: Financing Sustainable Water Infrastructure,'' 
          convening report, January 2012.........................    43
Richard Abelson, Executive Director of District Council 48, 
  American Federation of State, County, and Municipal Employees 
  (AFSCME), request to submit the following report: Food & Water 
  Watch, ``Mortgaging Milwaukee's Future: Why Leasing the Water 
  System is a Bad Deal for Consumers,'' November 2009............   151
Hon. Bob Gibbs, a Representative in Congress from the State of 
  Ohio, request to submit the following: Richard G. Little, AICP, 
  NAC, `` `Mortgaging Milwaukee's Future: Why Leasing the Water 
  System is a Bad Deal for Consumers'--A Critical Review''.......    52
David Weihrauch, Water Treatment Plant Manager, city of Oxford, 
  Ohio, insert for the record....................................    59
Hon. Grace F. Napolitano, a Representative in Congress from the 
  State of California, reference to the following article: 
  Michael Hiltzik, Los Angeles Times, ``Metropolitan Water 
  District Wages Costly War with Nature and Age,'' http://
  www.latimes.com/business/la-fi-hiltzik-20120318,0,1163346.col- 
  umn, March 18, 2012............................................   175
Hon. Thomas E. Petri, of Wisconsin, and Hon. Gwen Moore, of 
  Wisconsin, request in their joint statement to submit the 
  following for the record:

    Kevin L. Shafer, P.E., Executive Director, Milwaukee 
      Metropolitan Sewerage District, written statement..........   178
        Attachments:

        United States Government Accountability Office, ``Clean 
          Water Infrastructure: A Variety of Issues Need to Be 
          Considered When Designing a Clean Water Trust Fund,'' 
          Report to congressional requesters, GAO-09-657, May 
          2009 \2\...............................................   181
        ``National Investments in American Clean Water 
          Infrastructure: An American Clean Water Trust Fund to 
          Support National Clean Water Goals,'' March 2012.......   183
        Water Environment Federation, ``Financial Sustainability 
          for Water Infrastructure,'' adopted by WEF Board of 
          Trustees, February 5, 2010.............................   189

                        ADDITIONS TO THE RECORD

Gretchen W. McClain, President and Chief Executive Officer, 
  Xylem, Inc., letter and enclosure to Hon Bob Gibbs, a 
  Representative in Congress from the State of Ohio, and to Hon. 
  Timothy H. Bishop, a Representative in Congress from the State 
  of New York, March 29, 2012....................................   192
Robert Stewart, Executive Director, and Ari Neumann, Policy 
  Director, Rural Community Assistance Partnership, joint written 
  statement......................................................   200
American Society of Civil Engineers, written statement...........   204

----------
\1\ These reports have been excerpted for this publication. They 
  can be found in their entirety online at the Government 
  Printing Office's Federal Digital System (FDsys) at http://
  www.gpo.gov/fdsys/pkg/CPRT-112HPRT74562/pdf/CPRT-
  112HPRT74562.pdf. Click on ``Bookmarks'' in the left-hand 
  navigation panel to select either report.
\2\ This report has been excerpted for this publication. It can 
  be found in its entirety online at http://www.gao.gov/assets/
  300/291771.pdf.






 
                    A REVIEW OF INNOVATIVE FINANCING
                     APPROACHES FOR COMMUNITY WATER
                    INFRASTRUCTURE PROJECTS--PART II

                              ----------                              


                       WEDNESDAY, MARCH 21, 2012

                  House of Representatives,
                    Subcommittee on Water Resources
                                   and Environment,
            Committee on Transportation and Infrastructure,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:05 a.m., in 
Room 2165, Rayburn House Office Building, Hon. Bob Gibbs 
(Chairman of the subcommittee) presiding.
    Mr. Gibbs. Welcome to the second hearing of the Water 
Resources and Environment Subcommittee on a review of 
innovative financing approaches for water infrastructure 
projects. I will start with an opening statement here, and then 
we will turn it over to my ranking member, and then we will 
turn it over to the panel.
    But first, welcome. As I said, this is the second panel on 
this subject. The first hearing we had was on February 28th. At 
that hearing, we heard that there is a tremendous amount of 
capital from the private sector and other sources potentially 
available for investment in our wastewater and drinking water 
infrastructure.
    We also heard that in recent years, the financial markers 
have been ``discovering'' water and wastewater infrastructure 
and how this is becoming a popular asset class that is 
increasingly attracting billions of dollars of private 
investment capital. This is important because we need to take a 
variety of financing tools available to the infrastructure 
financing in the toolbox, so to say. This includes both public 
and private funding and investment mechanisms.
    There are a number of past and current legislative 
proposals that could provide additional means for increasing 
investment in infrastructure. For example, there is legislation 
to remove the volume cap that restricts the amount of private 
activity bonds that States and localities may issue in any 
given year for water and wastewater facilities. This would 
remove a barrier that has long inhibited bringing private 
sector capital to municipal water and wastewater markets.
    In addition, the subcommittee is looking at a potential 
financing tool that would provide Federal credit assistance in 
the form of direct loans and loan guarantees to finance 
significant water and wastewater infrastructure projects. This 
draft legislative proposal would be entitled the Water 
Infrastructure Finance Innovation Act, otherwise known as 
WIFIA. This WIFIA proposal is part of a model after the TIFIA 
program for surface transportation projects and other credit 
programs governed by the Federal Credit Reform Act.
    WIFIA is designed to complement, not to compete, with the 
Clean Water and Drinking Water State Revolving Fund programs, 
but being another variety of financing tool in the toolbox for 
infrastructure financing. There is plenty of room for SRF, 
WIFIA, and private activity bonds and other approaches to 
coexist and serve communities in infrastructure financing 
needs.
    Lastly, there are other proposals, including clean water 
SRF reauthorization legislation, that this subcommittee has 
advanced in past Congresses, and is included in a bill that the 
subcommittee ranking member, Mr. Bishop, has introduced in this 
Congress.
    Today we will build on the information we obtained in part 
one of this hearing and receive testimony from an excellent 
panel of witnesses about these proposals and other potential 
ways to encourage increased investment in water and wastewater 
infrastructure, including from private sources.
    Before I recognize the ranking member, I want to welcome 
two witnesses from Ohio, Ronald Behm, who is mayor of the city 
of Napoleon, and congratulations to the recently elected mayor 
of the city of Napoleon of northwestern Ohio, in Congressman 
Bob Latta's district; and also David Weihrauch, who is the 
treatment plant manager for the drinking water utility serving 
the city of Oxford down in southwestern Ohio, which is part of 
Speaker Boehner's district.
    So welcome, and at this time I will turn it over to Ranking 
Member Bishop for any comments you may have.
    Mr. Bishop. Thank you very much, Mr. Chairman, and thank 
you for holding today's hearing. This is the second part in a 
two-part series on the importance of investing in our Nation's 
crumbling wastewater infrastructure.
    As I noted at our last hearing, this subcommittee has a 
long history of working across the aisle to renew the Federal 
commitment to wastewater infrastructure. Over the past decades, 
under both Republican and Democratic majorities, we have taken 
significant steps to address the long-term infrastructure 
challenges facing our States and communities, including passage 
of several bipartisan water infrastructure financing measures.
    These past measures highlight the best of what this 
subcommittee and this full committee is capable of doing, 
bridging any potential disagreements between the sides and 
moving forward on joint proposals that garner overwhelming 
support in committee and on the House floor, most recently, in 
the 111th Congress, by an almost 3 to 1 vote of support.
    Since our February 27th hearing, we have had failures of 
water pipes here in the Washington, DC, metro area, creating 
sinkholes in roads and disrupting traffic. In San Antonio, 
Texas, two sewage pipelines broke, spilling more than 200,000 
gallons of untreated sewage into local water bodies. And in 
Delray Beach, Florida, tens of thousands of gallons of raw 
sewage poured from a ruptured pipe. Upon inspection, the water 
department found that sewer gases had disintegrated one-third 
of the 30-year-old pipe.
    I draw reference to these three events as examples of the 
systemic problem that now faces our Nation. With aging 
infrastructure and increasing demand, we have to find 
solutions, not excuses. The traditional financing tools that we 
have used historically need revising and adjustment in the face 
of the public demands and expectations and the reality of our 
fiscal situations.
    Mr. Chairman, at last month's hearing, you encouraged the 
witnesses to evaluate the two proposals that are currently 
before this subcommittee, your discussion draft entitled the 
Water Infrastructure Finance and Innovation Act of 2012, as 
well as a copy of the bipartisan bill that I have introduced 
with the ranking member of the full committee, Mr. Rahall, and 
Congressmen LaTourette and Petri, H.R. 3145, the Water Quality 
Improvement and Job Creation Act of 2011. I am happy to 
announce that since our last meeting, nearly a dozen additional 
House Members have cosponsored H.R. 3145.
    Both bills include mechanisms modeled after the successful 
Transportation Infrastructure Finance and Innovation Act, or 
the TIFIA program, authorized in TEA-21 to leverage additional 
capital for wastewater infrastructure investment. Although 
there are some differences in approach, my first impression is 
that there are more similarities than differences between these 
two drafts on this point, and that should give us all reason to 
work more closely together.
    Last month's hearing also gave us the opportunity to 
discuss several critical policy questions integral to our 
consideration of water infrastructure financing legislation, 
namely, who is better suited to decide which projects are 
funded and how a new water infrastructure financing authority 
would complement or potentially compete with the existing Clean 
Water State Revolving Fund.
    During the question-and-answer period, I want to further 
pursue these questions with our witnesses as well as questions 
on the potential impact of differing financing approaches, 
including private capital, on local communities and workforces. 
Similarly, in considering the economic challenges facing all 
levels of Government, I want to explore how we can target 
Federal resources to those who will benefit from it most, our 
local communities.
    I also do not want to lose sight of the fact that investing 
in our water infrastructure not only improves the pipes and 
pumps, the investment creates much-needed construction and 
engineering jobs and creates opportunities for America's 
economy to step forward and build for the future.
    Mr. Chairman, as I noted earlier, the existing Clean Water 
Act has served this Nation well in meeting its water quality 
and water infrastructure concerns, and needs to be part of the 
long-term solution to addressing future challenges. The 
question of how some of these alternative financing approaches 
we will discuss today complement, duplicate, or conflict with 
existing law in meeting these challenges will still need to be 
addressed.
    Again, I welcome today's hearing as an opportunity to 
further this conversation. I am hopeful that on this issue of 
meeting our long-term water infrastructure challenges, we can 
find agreement and move forward with one voice on an issue that 
greatly benefits our communities, our economy, and our overall 
public health and the environment.
    And before I yield back, Mr. Chairman, I have three 
statements that I would like to submit for the record, with 
unanimous consent. The first is a statement from American 
Rivers endorsing--pardon me--that speaks to both the bill that 
I have filed and the draft bill that you are working on; also, 
a statement from the Association of Metropolitan Water 
Agencies; and finally, a copy of a letter that I, along with 
Congressman LaTourette and Congressman Blumenauer, sent to Doug 
Elmendorf, the director of the CBO, requesting that he begin to 
provide us with suggestions for how we would fund a clean water 
trust fund.
    Mr. Gibbs. So ordered.
    Mr. Bishop. Thank you very much. I yield back the balance 
of my time.
    [The material referenced by Mr. Bishop follows:]





    Mr. Gibbs. Thank you.
    At this time I want to introduce the rest of the panel, and 
then we will turn it over to our first panel witness. And what 
we will do, we will go through the whole lineup with your 
opening statements, and then we will do question and answers.
    As you can see, there are just the two of us here. Others 
might stroll in. There are a lot of other committees happening, 
a lot of conflicts, but I know there is a lot of interest in 
this subject area.
    But I already introduced the mayor. But then next to the 
mayor, we have Ms. Massey. She is the director of the Missouri 
Environmental Improvement and Energy Resources Authority; she 
is testifying on behalf of the Council of Infrastructure 
Financing Authorities. And I believe she really represents the 
State SRFs.
    Of course, Mr. Weihrauch from Ohio. Then we have Mr. 
Stephen Howard, Infrastructure Project Finance, Barclays 
Capital; I am really looking forward to the testimony on 
financing opportunities. We also have Mr. David Dornbirer, vice 
president of Energy and Water Services Division of the 
Cooperative Bank out in Colorado.
    Next to him is Mr. Benjamin Grumbles. He is president of 
the Clean Water America Alliance. And then Mr. Ryan Schmitt is 
president of Petticoat-Schmitt Civil Contractors. He is 
chairman of the board of NUCA, which is representing the 
utility and excavation contractors, testifying on behalf of 
NUCA today.
    Then we have Ms. Lynn Broaddus, director, Environment 
Program, The Johnson Foundation at Wingspread, Racine, 
Wisconsin--Racine, I guess. Racine. Mr. Richard Abelson; he is 
executive director of AFSCME, Council 48, Milwaukee, Wisconsin, 
testifying on behalf of the American Federation of State, 
County, and Municipal Employees.
    Welcome today, and we will start down here with the mayor 
from Napoleon, Ohio. The floor is yours.

  TESTIMONY OF MAYOR RONALD A. BEHM, CITY OF NAPOLEON, OHIO; 
KAREN MASSEY, DIRECTOR, MISSOURI ENVIRONMENTAL IMPROVEMENT AND 
ENERGY RESOURCES AUTHORITY, TESTIFYING ON BEHALF OF THE COUNCIL 
OF INFRASTRUCTURE FINANCING AUTHORITIES; DAVID WEIHRAUCH, WATER 
   TREATMENT PLANT MANAGER, CITY OF OXFORD, OHIO; STEPHEN E. 
  HOWARD, DIRECTOR, INFRASTRUCTURE PROJECT FINANCE, BARCLAYS 
  CAPITAL; DAVID DORNBIRER, VICE PRESIDENT, ENERGY AND WATER 
  SERVICES DIVISION, COBANK; BENJAMIN H. GRUMBLES, PRESIDENT, 
    CLEAN WATER AMERICA ALLIANCE; RYAN SCHMITT, PRESIDENT, 
PETTICOAT-SCHMITT CIVIL CONTRACTORS, INC., AND CHAIRMAN OF THE 
 BOARD, NUCA, REPRESENTING UTILITY AND EXCAVATION CONTRACTORS, 
    TESTIFYING ON BEHALF OF NUCA; LYNN BROADDUS, DIRECTOR, 
ENVIRONMENT PROGRAM, THE JOHNSON FOUNDATION AT WINGSPREAD; AND 
  RICHARD ABELSON, EXECUTIVE DIRECTOR OF DISTRICT COUNCIL 48, 
 AMERICAN FEDERATION OF STATE, COUNTY, AND MUNICIPAL EMPLOYEES 
                            (AFSCME)

    Mr. Behm. Good morning, Chairman Gibbs, Ranking Member 
Bishop, and members of the subcommittee. My name is Ronald 
Behm, and I am the mayor of the city of Napoleon, Ohio.
    The city of Napoleon is located in northwest Ohio in 
Congressman Latta's district along the Maumee River. It is your 
typical small town USA. We are facing challenges similar to 
others who live in the Midwest with high unemployment, lower 
salaries, decreasing property values, and rising costs.
    Using a 10-year comparison of the U.S. Census data, the 
city of Napoleon has lost nearly 600 residents over the past 
decade, and the median household income is roughly $2,000 lower 
than 10 years ago. The median household income for a resident 
of our community is $35,762. This is significantly lower than 
the Ohio average of $47,318.
    Our city is facing other challenges in that we are under 
findings and orders for our SSOs and CSOs. In 2004, the city 
came to an agreement with the EPA for a 20-year plan, which 
requires the city to remove all SSOs from our system and reduce 
the CSOs to one. The plan was estimated to cost our city $35 
million to complete, and contains 62 individual projects.
    As of 2012, the city of Napoleon is on schedule and we have 
completed 22 of the 62 projects. So far we have spent more than 
$19\1/2\ million. Our city engineer estimates that the total 
cost of all 62 projects for the 20-year period will cost closer 
to $100 million. In addition, we now have to spend another $15 
million to upgrade our water treatment plant to meet current 
and near-future EPA standards. So the total bill our community 
of 8,749 residents will receive due to the EPA is approximately 
$115 million.
    The city of Napoleon has made efforts to pay for the 
projects by raising the sewer and water rates. These increases 
have been added every year but one since 2003. This has doubled 
the water and sewer rates for our residents and businesses. Of 
the $19\1/2\ million spent on this project so far, the city of 
Napoleon has issued debt for $19.4 million. Even though we have 
doubled our water rates, we are still only able to service the 
debt and pay for the normal water and sewer operations.
    Over the next 2 years, our city council has authorized two 
additional rate increases totaling 20 percent, as suggested by 
an independent consultant. In 3 years, when it is time to 
upgrade the water plant, it has been recommended that the city 
must raise the water rates by an additional 50 to 60 percent.
    The concern with increasing taxes and raising rates is that 
at some point in time you reach a breaking point, a point where 
the residents and businesses cannot afford to pay the rates but 
instead are forced to leave our city. I fear that our community 
is at that breaking point. The bottom line is that we simply 
cannot continue to proceed down this road, a road we have been 
forced to go down rather than pay fines imposed by the EPA.
    The Water Infrastructure Finance and Innovation Act, as I 
understand it, attempts to help communities receive funding. 
However, the city of Napoleon has not had a problem with 
receiving funds and issuing debt. Our problem is with raising 
money to pay the debt and the amount of time in which we have 
to pay.
    I am familiar with another bill, H.R. 1189, the Clean Water 
Affordability Act 2011, sponsored by Congressman Latta, which 
helps address the problems that the city of Napoleon and so 
many communities of similar size are facing. H.R. 1189 would 
help assist municipalities in funding projects for wastewater 
treatment and extent repayment periods to 30 years of the 
design life of the project. This would have been helpful with 
our equalization basin, which cost the city $8.85 million to 
build, has an estimated life of 30 to 40 years, but we could 
only receive funding for 20 years.
    H.R. 1189 also requires States to put aside 15 percent of 
funds for assistance to municipalities of fewer than 10,000 
residents that meet specified affordability criteria. It also 
requires States to establish affordability criteria to help 
identify those in greatest need.
    The city of Napoleon needs assistance if we are expected to 
continue to meet the mandates we have been saddled with. This 
is an issue that is shared by all residents, regardless of 
their political positions and beliefs. That is why I am hoping 
Congress will come to an agreement which will help cities in 
similar situations to that of the city of Napoleon.
    I appreciate the opportunity to provide the subcommittee 
with a local government perspective on this important issue, 
and thank you for your time today.
    Mr. Gibbs. Thank you.
    Ms. Massey, the floor is yours. Welcome.
    Ms. Massey. Thank you. My name is Karen Massey, and I am 
the director of the Missouri Environmental Improvement and 
Energy Resources Authority. Today I am here in my capacity as 
the president for the Council of Infrastructure Financing 
Authorities, representing State programs that run the State 
Revolving Funds. Thank you so much for allowing us to express 
our views here today.
    Sustained Federal funding is essential to realizing our 
Nation's water quality needs. Clearly, the current level of 
funding provided is not enough to meet the escalating needs, 
and we welcome new approaches and tools to generate additional 
resources. We do believe, however, that the SRF partnership 
between Federal and State governments should continue as the 
primary means to assistance for communities in addressing their 
water quality problems.
    Few federally authorized programs have proven as effective 
in realizing their intended goals. State SRFs have provided a 
sustainable source of funding to protect and restore our 
Nation's streams and rivers for over two decades. By using 
State match, loan repayments, interest earnings, and issuing 
bonds, the assistance made available to our communities is 
significantly greater than the initial Federal investment.
    The clean water SRF alone has committed over $90 billion 
for projects for local wastewater infrastructure. As the 
subcommittee weighs the future of the State SRF program as well 
as new initiatives, we hope you will keep in mind this record 
of success.
    As the State programs look forward, we have two primary 
areas of concern, funding and program flexibility. Our ability 
to meet water infrastructure needs is predicated on the 
continued funding of the SRF. We understand the need for budget 
restraint. We simply hope that not too great a share of that 
restraint is at the expense of the SRF programs.
    The success of this program also derives from flexibility. 
We are concerned about the imposition of new requirements and 
obligations that are not at the core of the SRF program goals. 
The SRF provides loans, not grants. If an SRF loan becomes too 
weighed down with extraneous requirements, it will cease to be 
an attractive option for many communities, and clean water 
goals will suffer.
    We must be fully accountable. But excessive oversight or 
administrative control by EPA stifles innovation and our 
ability to respond to local needs. Efforts to mandate that a 
set percentage of funding be set aside for certain types of 
projects, or that require States to dedicate a set percentage 
for additional subsidization, fail to recognize that States are 
in the best position to decide their priority water quality 
needs.
    So what tools or innovations may help achieve clean water 
goals? As we learned from the Recovery Act, when communities 
can have access to free or very affordable money, water 
infrastructure gets built. Ideally, new approaches should 
provide additional funding at an attractive rate. With those 
traits, projects that are not being built due to funding 
constraints may be able to move forward.
    One such approach is WIFIA. It seeks to facilitate Federal 
credit assistance in the form of direct loans and loan 
guarantees for larger scale water and wastewater projects.
    The assistance made available through WIFIA would not 
approach the very low interest rates of a subsidized SRF loan 
and in many market conditions borrowing at the Treasury rate, 
the key benefit of WIFIA, will not provide any advantage over 
traditional tax-exempt financing which will remain attractive, 
both from the standpoint of competitive rates and the absence 
of Federal requirements and conditions likely to be imposed on 
a Federal loan guarantee.
    But there are circumstances in which WIFIA will be very 
useful. It offers an alternative for projects that are beyond 
the scope of available SRF funding and for which a Federal 
guarantee represents the optimal credit option. Viewed as a 
supplementary program to address specific situations and unique 
funding challenges, WIFIA should provide a valuable addition to 
the financing toolbox. The needs of most communities, however, 
will still be served most effectively by the State Revolving 
Fund programs.
    As the subcommittee explores legislative options, the 
States hope there will be a focus on a number of 
noncontroversial issues which will impact the future strength 
and development of the SRF programs, and those are listed in my 
written testimony for your consideration.
    We also encourage the subcommittee to consider whether 
proposals seeking to incorporate new goals within the SRF may 
undermine that core mission of maximizing sustainable financial 
assistance to communities to develop water infrastructure.
    For 25 years, States have successfully worked with their 
citizens to determine the best approaches to meet unique water 
quality needs. The recent trend toward additional requirements 
seems to signal a Federalization of this program. SRFs are 
being targeted to advance policy goals ranging from green 
infrastructure and smart growth to better asset management, 
full cross-pricing, and buy American.
    States are beginning to experience resistance from 
municipalities, especially our smaller communities, which now 
view an SRF loan as too complex and too burdensome. A host of 
new requirements, however well-intentioned, will impede the 
effort to get communities with the most significant water 
quality issues moving forward to address those challenges.
    Another area of concern involves the corpus of the clean 
water SRF. Following the first use of capitalization grant 
funds, all repayments, interest earning, fee revenues, and bond 
proceeds have been treated as State, not Federal funds. After 
25 years of this practice by all 51 clean water SRFs, now the 
issue is whether Federal controls should be placed upon that 
corpus. The implications really are significant.
    Will this new Federal control extend to and threaten our 
existing assistance agreements? Investments? And what about the 
use of State bond proceeds? Will it increase the cost of 
borrowing for our communities?
    These and many more important questions are raised by the 
expanded Federal control of the State SRF programs. The 
tremendous success of the clean water SRFs as State-run 
programs argues for a careful assessment of where this 
Federalization of the program will lead. We are fearful that 
the result may be an SRF program that is less productive and a 
less attractive source of financing in a time of escalating 
water infrastructure needs.
    Thank you for the opportunity to provide the views of the 
State SRF programs. We do look forward to working with the 
subcommittee as it continues its work to support water 
infrastructure development.
    Mr. Gibbs. Thank you.
    And Mr. Weihrauch, try to speak into the microphone as 
close as you can because I know it is hard to hear up here. And 
I do not know if people in the audience can hear or not. So do 
not hesitate to speak loudly.
    The floor is yours. Go ahead.
    Mr. Weihrauch. Good morning, Chairman Gibbs and members of 
the subcommittee. My name is David Weihrauch, and I am the 
water treatment plant manager for the drinking water utility 
serving the city of Oxford, Ohio. I very much appreciate this 
opportunity to offer input on a draft bill the subcommittee is 
considering, the Water Infrastructure Finance and Innovation 
Act, commonly called WIFIA.
    I am here representing the American Water Works 
Association, which has done groundbreaking work to define the 
water infrastructure needs facing towns like Oxford, as well as 
helping to describe innovative financing tools like WIFIA.
    I want to reiterate that the American Water Works 
Association strongly supports the approach to WIFIA reflected 
in the draft bill which Chairman Gibbs circulated before the 
first hearing. We are very excited about such an innovative 
financing tool, and we urge the subcommittee to see this bill 
introduced and move through the legislative process as soon as 
possible on a bipartisan basis without changes that would 
dilute its value to the Nation's water and wastewater systems.
    Recent reports, including AWWA's ``Buried No Longer: 
Confronting America's Water Infrastructure Challenge,'' provide 
detailed analysis of our Nation's water, wastewater, and 
stormwater-related needs, which total in excess of $2 trillion 
over the next 25 years.
    I do not believe that any serious person disputes that the 
Nation faces immense water-related investment needs. Nor should 
anyone believe that simply putting off this investment offers a 
solution. In fact, as the recent AWWA analysis shows, any 
temptation to delay needed investment presents a stark choice: 
Make the investments on time or accept deteriorating levels of 
water service, along with sharply higher investments when the 
time comes at which the replacement of deteriorated assets 
simply cannot be put off any longer.
    I would be remiss if I did not take this opportunity to 
address a number of key questions raised in the first hearing.
    First, there was a question about whether WIFIA should be 
directed to or through the State Revolving Funds. The American 
Water Works Association believes that would be a very bad idea, 
for a number of reasons. Most importantly, WIFIA is designed to 
complement the SRF and to address the needs of very large 
projects that the SRFs simply cannot address. Running WIFIA 
through the SRFs defeats WIFIA's whole purpose, in a very real 
sense.
    In addition, many States have either legislation or policy 
that prevents them from offering SRF support to very large 
projects, and about half the States have constitutional or 
legal restrictions against supporting investor-owned utilities 
through the SRFs. Large systems need a source of low-interest 
financing, and the customers of investor-owned utilities 
deserve to benefit from low-cost financing, just as other 
Americans do. Many SRFs cannot provide that.
    Equally important, tying WIFIA to the SRFs would reduce the 
amount of support available for these larger water projects. 
That is because each State would have to be guaranteed a share 
of the funding, causing the resources available to WIFIA to be 
systemically divided among the States.
    Rather than lending to large projects of national or 
regional significance, funds would be allocated based on 
criteria selected by the States, and without a doubt, States 
would need to take money off the top of WIFIA, as they do the 
SRFs, for administration and other purposes.
    The bottom line is that every hand that touches the WIFIA 
program will add a layer of administrative complexity and cost. 
All of that would reduce the amount of low-interest loans that 
could be delivered to water projects, and we cannot support it.
    Fortunately, the draft bill does provide for States and 
smaller water systems to directly benefit from the WIFIA 
program. States may aggregate a number of smaller projects into 
a WIFIA application. This has at least three noteworthy 
advantages.
    First, it essentially allows States to leverage their SRF 
capital base. Second, it allows smaller projects to benefit 
from low Treasury rates in the same way that larger projects 
do. And third, it allows States to move larger projects and 
pools of smaller projects out of the SRF applicant pool and 
into the WIFIA pool, thereby reducing competition for SRF 
funds.
    A related question that arose at the last hearing concerned 
whether WIFIA would have the effect of taking money away from 
the established State Revolving Fund programs. The answer to 
that question is ultimately in your hands, but we think the 
answer should be a resounding no. WIFIA neither needs to be nor 
should be funded at the expense of the SRFs.
    As I noted a moment ago, WIFIA was explicitly designed to 
operate as a complement to the SRFs programs, which are highly 
effective and should be fully funded. WIFIA is designed to 
address a problem that the SRFs cannot effectively address, 
namely, the need for lower cost financing for larger projects 
of national or regional significance. What we need is a toolbox 
that includes both the SRF programs and WIFIA. Both need to be 
adequately funded.
    In summary, Mr. Chairman and members of the committee, the 
American Water Works Association strongly supports the draft 
bill as written. AWWA stands ready to help you in any way it 
can in securing the earliest possible passage of this 
legislation.
    Thank you for addressing this important issue.
    Mr. Gibbs. Thank you.
    Mr. Howard, welcome. The floor is yours.
    Mr. Howard. Good afternoon, Chairman Gibbs. I am going to 
be quickly going through the first part of my written 
testimony, and then walking through very quickly a presentation 
that I have brought with me.
    Good afternoon, Chairman Gibbs, Ranking Member Bishop, and 
members of the subcommittee. I thank you for the opportunity to 
testify today. My name is Steve Howard, and I am a director at 
Barclays Bank PLC, based in New York. I have more than 25 years 
of experience financing a broad range of infrastructure 
projects for public and private sector clients across the 
country. My project finance experience spans all sectors, 
including water, wastewater, solid waste, environmental 
transportation, and social infrastructure.
    Today we have been invited by the Chairman of the 
Subcommittee on Water Resources and Environment to testify on 
innovative financing approaches to community water 
infrastructure approaches. Our testimony today will focus on 
accommodation of public and private funding investment 
solutions, coupled together will foster local communities to 
provide ongoing financing for water projects.
    If we can go to the second slide in my presentation. You 
will note that we basically have three approaches to financing 
water infrastructure projects. At the top of the chart is tax-
exempt bonds, and there are two subcategories there, 
governmental purpose bonds, which limit private participation, 
and tax-exempt private activity bonds, which allow private 
participation in equity investment alongside the issuance of 
tax-exempt bonds.
    Second major category is taxable bonds, which is unlimited 
for this infrastructure but tend to be higher cost. Then last 
but not least is private equity, which can be used in 
conjunction with tax-exempt private activity bonds as well as 
taxable bonds.
    If we can then go to slide 5 in my presentation--keep 
going--so this slide, this shows just a high-level view of how 
a private project financing can be structured in conjunction 
with a water purchase agreement with a public regional water 
authority.
    You see in the middle of the chart the private project 
company, and that is the basket into which all of the private 
contracts flow through. Lower left-hand corner is the private 
investors' infrastructure funds; development companies, private 
equity investors, would fund equity into the private project 
company that would in turn enter into a water purchase 
agreement with the regional water authority you see in the 
left-hand box in the middle of the page.
    The key point here is that the regional water authority 
still maintains the interface with the ratepayers and controls 
the rates that the ratepayers pay. That regional water 
authority in turn negotiates the level of compensation that 
goes to the private company for operation and debt service on 
the project.
    If you go over to the right-hand side of the page where it 
says ``Issuer,'' that is typically a governmental conduit 
issuer which serves as the issuer of the tax-exempt bonds 
through the trustee to the bondholders in the upper right-hand 
box in the middle of the page.
    The key thing here is that the tax-exempt private activity 
bonds flow through the trustee, a governmental conduit issuer; 
are loaned to the private company, who in turn provides a 
wholesale water delivery service to the governmental regional 
water authority that in turn controls the rates for the 
ratepayers.
    If we can go to the next slide, what I like to do is draw 
an analogy with the solid waste sector, municipal solid waste 
sector, that many of you know back in the 1980s faced a serious 
infrastructure investment deficit, where we were coming off of 
an era of smoke-belching incinerators and leaking, open-burning 
dumps.
    The U.S. Congress in the late 1970s and early 1980s 
responded in part by providing for the availability of tax-
exempt private activity bonds to help finance the new 
investment in state-of-the-art infrastructure across the 
country. As a consequence, about $20 billion of private 
activity bonds were issued, which represents about 40 percent 
of the total debt that was issued for municipal solid waste 
infrastructure by both public and private entities over about a 
30-year period.
    If you go to the next slide, you can see in this slide the 
blue bars represent tax-exempt governmental purpose bonds that 
were issued by cities, States, and local governments for 
publicly owned waste facilities. The red bars represent the 
issuance of tax-exempt private activity bonds. That is about 40 
percent, as I said, of the total debt invested in the solid 
waste infrastructure over that period of time.
    And the red bars really represent the partnership between 
the public and the private sector through a variety of 
different contracting methods, ranging from design/build 
agreements to design/build/operate, and design/build/operate 
and finance.
    I personally was involved in about $10 billion of public-
private partnership investments through that era, and the good 
news is you do not hear about any of those projects today 
because they are all functioning properly and serving the 
purpose that they were originally intended to.
    Can we go to, then, several slides back? It will be slide 
10, which shows what has happened in the water infrastructure. 
Keep going. Keep going. No, you are going the wrong direction. 
And we will take a look compared to what is--keep going, 
several more--OK.
    This is what has gone on in the municipal water and 
wastewater sectors since the late 1980s. You see the blue, 
again, is governmental purpose bonds, and the red, which you 
can barely see at the bottom, is private activity bonds. And in 
this case, private activity bonds represent only 1 percent of 
the debt issued for municipal water and wastewater.
    Now, this is a much larger sector than solid waste, by 
multiples. It is like a 10 times larger investment in water and 
wastewater than in municipal solid waste. But the key thing is 
that the restriction on the use of private activity bonds in 
water and wastewater has represented a significant limitation 
to the ability of the private sector to partner with the public 
sector through a variety of different contracting arrangements 
to invest in water and wastewater projects.
    And it is our expectation that, over time, were the limit 
on private activity bonds to be reduced or eliminated entirely, 
that we would see the portion of this chart with the red bars 
would gradually increase.
    I think it is important for the committee to understand 
that currently there is an excess of private activity bond cap 
available across the country because the housing sector has 
basically shut down, where the bulk of private activity bonds 
cap has traditionally been allocated. We expect that this is a 
temporary phenomenon and will gradually, over time, revert to 
the situation that existed before 2008, where the availability 
of private activity bond cap for water projects will become 
severely limited.
    All of these projects, as you I am sure can appreciate, 
take a very long time to develop and implement. So there needs 
to be certainty over time with respect to the availability of 
these financing mechanisms. We do not expect that there will be 
any significant effort to pursue public-private partnerships in 
this sector until there is clarity about the availability of 
private activity cap in the future.
    Thank you very much.
    Mr. Gibbs. Quickly, before we go on, I just--that last 
chart up, can you bring that last chart back up?
    Mr. Howard. Sure.
    Mr. Gibbs. I just noticed on the--can you just comment 
where it says, ``Taxable Build America Bonds''?
    Mr. Howard. Yes.
    Mr. Gibbs. And it looks like there must have been a change 
made in 2009 or 2010.
    Mr. Howard. Yes. That is a good question. As you may know, 
in 2009 and 2010 there was a program set up under the Recovery 
Act to allow municipalities to issue taxable Build America 
Bonds. These were effectively taxable governmental purpose 
bonds with a direct Federal subsidy of 35 percent of the 
interest. They were not private activity bonds and did not 
allow for private investment or partnering.
    Mr. Gibbs. OK. So I am assuming that was temporary because 
it was stimulus funds?
    Mr. Howard. That was temporary. That program has shut down. 
You will notice in--the chart is not clear, but none of those 
have been issued since 2011.
    Mr. Gibbs. Yes. I see. OK. Thank you.
    Mr. Dornbirer--did I say that right?
    Mr. Dornbirer. Dornbirer.
    Mr. Gibbs. Dornbirer. OK. Welcome.
    Mr. Dornbirer. Thank you. Good morning, Mr. Chairman, 
Ranking Member Bishop, members of the committee. As sector vice 
president of CoBank's Energy and Water Services Division, I 
manage a portfolio of over $1 billion of water and solid waste 
loans. For simplicity, the terms ``water'' and ``wastewater'' 
are used interchangeably in my testimony.
    CoBank is a national cooperative bank serving vital 
industries across rural America, and it is the largest U.S. 
bank lender to the water utility industry. CoBank has over 23 
years' experience providing a variety of financing structures 
for water systems, including lending alongside State and 
Federal agencies and using Federal guarantees from the USDA. I 
was asked to testify this morning to provide a project finance 
101 overview for the committee.
    To begin with, project finance is not the same thing as 
financing projects. When I talk about project finance, I am 
referring to the long-term financing of discrete assets of a 
water infrastructure owned by a single-purpose project company. 
This alternative takes into account the entire life cycle cost 
of the project, not just the short-term focus of its financing.
    If a water utility needs to update its system to achieve a 
compliance mandate or improve its infrastructure, project 
finance is an innovative way for water systems to access 
dependable funding to achieve its goals. The benefit of project 
finance lies in its flexibility in the proper allocation of the 
risks of that project among the project parties best suited to 
manage them. Project finance is used extensively in the 
international water sector, and in this country for energy, 
power, and transportation projects.
    Here I have a chart depicting a generic project finance 
structure. At the beginning stages of the deal, the 
municipality and the private equity sponsor form a public-
private partnership. The project company then is formed to 
develop, build, and own the project.
    The project company can be wholly owned by one or more 
private equity sponsors, or the municipality could join in the 
direct ownership of the project. By forming a standalone 
project company, all the contract parties can look only to the 
project company for the enforcement of contracts. This limits 
the liability of the project sponsor as well as the 
municipality.
    From the point of formation of the project company, all the 
work begins with negotiating and executing the contracts that 
give the project life. Think of each contract or subset of the 
boxes in the chart as a piece of the puzzle, each one being 
integral to a complete project.
    The heart of a project finance deal is the DBOF agreement, 
which stands for design, build, operate, and finance, between 
the project company and the municipality. The DBOF lays out who 
is responsible for what, such as specifications of the plan, 
the delivery schedule, revenues, permits, dispute process, 
design changes, feature expansion, and transfer of ownership.
    The project company's revenues come from the user fees 
determined by the municipality's rate-making process. In 
addition to rate-setting, the municipality may also agree to be 
responsible for those operating costs of the plant that it can 
control.
    If the DBOF is the heart of the project, rate-setting is 
the lifeblood. The source of project revenue should be 
transparent and easily modeled in order to obtain the most 
attractive financing terms benefitting the project, and 
subsequently, the ratepayers.
    The other major components of the project finance structure 
include the engineering construction contract, the operation 
and maintenance agreement, and the credit agreement, which is 
between the lenders and the project company. The lending group 
can include banks, bondholders, either taxable or tax-exempt, 
and/or Government agencies.
    The lender's role is to underwrite the loan which, together 
with the sponsor's equity dollars, fund the total costs of 
constructing and starting up the project. The lenders rely 
solely on the contracts executed by the project company and the 
cash flows generated by it.
    The various project contracts are designed to provide and 
protect those cash flows. The flexibility the project finance 
provides allows a water utility to accomplish its goal of 
upgrading the system in a timely fashion while ceding most of 
the risks of that undertaking to third parties.
    I hope my brief overview, combined with my written 
testimony, provides the committee with an understanding of how 
project finance works. CoBank recognizes the need for a variety 
of financing tools to update our Nation's infrastructure. 
Project finance is just one viable tool that can tap private 
capital, and thereby leverage Government resources to 
accelerate the achievement of that important goal.
    I look forward to any questions you may have. Thank you.
    [The charts from Mr. Dornbirer's overview follow:]





    
    Mr. Gibbs. Thank you.
    Mr. Grumbles, welcome. The floor is yours.
    Mr. Grumbles. Thank you, Mr. Chairman.
    Like the NCAA Sweet Sixteen, this panel seems to be 
dominated by Ohio interests, and that is not necessarily a bad 
thing because I am hearing testimony that is insightful----
    Mr. Gibbs. I think there are three teams from Ohio still in 
it. Right?
    Mr. Grumbles. Yes. That is right. And the perspectives I am 
hearing so far are all national perspectives, and this is a 
national issue. It is a national crisis and an opportunity. I 
want to thank the members, Mr. Chairman, Ranking Member Bishop, 
Congresswoman Napolitano, for your leadership in water over the 
years. This really is an important opportunity. It is great to 
be before you again.
    I am Ben Grumbles, president of Clean Water America 
Alliance. It is a 501(c)(3), an educational nonprofit, that was 
created 3 years ago that is unique in its membership and 
structure. It embodies drinking water, wastewater, stormwater, 
groundwater, source water protection, agriculture, energy 
interests, and everyone shares the bond of working together 
towards a more integrated and sustainable approach to national 
water policy.
    I cannot tell you a more pressing and urgent issue than the 
one you are focusing on today, and that is financing 
infrastructure to sustain America's most precious liquid asset. 
Clean Water America Alliance does not have official positions 
on the bills before you. We have endorsed a green 
infrastructure principles statement. We also believe strongly 
in some key points and principles that are important to your 
deliberations.
    As you approach the financing issue, which is such an 
urgent one, Mr. Chairman, I would emphasize valuing water. I 
would emphasize partnering for water. I would emphasize 
greening, and meshing green with gray infrastructure. And 
finally, I would emphasize connecting all the dots.
    On the valuing of water, as was indicated in the extensive 
survey over a year ago by ITT Water (now Xylem), the Nation, 
the ratepayers, the citizens of the Nation, see water as an 
emerging national crisis. There are, every day in America, 650 
water main breaks, as AWWA would tell you, 240,000 every year.
    You know the problem. The solutions have to start with 
helping America understand and using your congressional tools 
to launch this campaign on the value of water. And we think 
that is a critically important one. Moving towards full-cost 
pricing, which is a local issue, but also building the tools 
and the public sentiment to really move forward--the country 
deserves clean and safe water for the future.
    The second point I want to emphasize is the partnering. Mr. 
Chairman, water is not just simply a commodity. It is a 
lifeblood asset that all of us should have. It is very 
important that this public asset be maintained and sustained.
    And what I like to call as the public rust doctrine is my 
concern that these public assets, these public infrastructure 
systems, will fall into rust and decay if we do not use 
innovation and allow communities to bring in, when the 
communities want to do so, the private sector through 
financing, through operating, through managing--it is not 
always all or nothing about privatization and selling off of 
assets.
    And our organization believes strongly that private sector 
entrepreneurs and private sector involvement is important, that 
there be a partnership. The private activity bond legislation 
is a good example of progress. Your efforts in the WIFIA 
legislation to integrate more private sector perspectives is 
also an important one.
    The other aspect I want to emphasize is greening. Our 
organization, Clean Water America Alliance, truly believes that 
one of the ways to save money, beautify communities, save 
energy costs, is to look for greening infrastructure, greening 
using trees, parks, connecting with the land and water 
conservation fund, parks and recreation districts, and managing 
watersheds. As you know and as New York City just recently 
demonstrated this week, billions of dollars invested in green 
infrastructure will save even more money and help the 
community.
    The other point I want to emphasize, Mr. Chairman, is that 
WIFIA has very good elements to it. It is important to be part 
of the toolbox on the table. It is also very important to work 
through the logistics, the specifics, so as not to undermine a 
program that this committee was very instrumental in in 1986 
and 1987, the State Revolving Fund. So that is a key part of 
it.
    Regarding Congressman Bishop's legislation, which has broad 
support from many other Members, it is a very important step 
forward. It includes needed elements of the debate in financing 
legislation.
    On the infrastructure trust fund approach, our organization 
believes that dedicated, sustainable funding is absolutely 
necessary. I personally would say that we need a national 
strategy on dedicated funding. We recognize that it is a recipe 
for disaster if some type of new fund is set up that leads to a 
Federal tax and decisions are made about local spending in 
Washington, DC. But it really is important, as your bill does, 
to keep that debate going about funding dedicated towards local 
water and wastewater infrastructure.
    Mr. Chairman, thank you for bringing together so many 
experts and tackling this issue like you are.
    Mr. Gibbs. Thank you.
    Mr. Schmitt, welcome, and the floor is yours.
    Mr. Schmitt. Chairman Gibbs, Ranking Member Bishop, and 
members of the subcommittee, my name is Ryan Schmitt. I am the 
owner and president of Petticoat-Schmitt Civil Contractors in 
Jacksonville, Florida, and I am the current chairman of the 
board at NUCA. We are the Nation's largest association 
representing utility and excavation contractors. We are the men 
and women that fix those water breaks and prevent those water 
failures that Mr. Grumbles spoke about.
    According to the EPA, hundreds of billions of dollars are 
needed to repair America's underground infrastructure, yet the 
lack of available public dollars has obstructed significant 
progress to address these needs. I can tell you that in my 
State of Florida, our company struggles for work, while many 
water systems are clogged with tuberculation and desperately 
need replacement.
    The water infrastructure market and companies working in it 
are also in serious trouble. In addition to the cuts in Federal 
funding, State budgets have been hit hard due to lowered 
revenue from property taxes. The lack of public dollars has 
kept the construction industry on the sidelines. In my State, 
almost half the construction workforce continues to be out of 
work.
    Although water and wastewater projects are generally 
recognized for their effectiveness in enhancing public health 
and environmental protection, the economic benefits that result 
from this work are often overlooked. In a 2009 Clean Water 
Council study, it showed that a billion-dollar investment in 
water and wastewater infrastructure resulted in the creation of 
up to 27,000 jobs, $3.46 billion in demand for products and 
services in other industries, and $1 billion in generation of 
household income. Importantly, each billion invested also 
generates approximately $82.4 million in local and State tax 
revenue.
    When our company does land a project, I see the ripple 
effect firsthand. The positive economic impact affects the 
financial health of our company, our employees, our vendors, 
and all related companies all the way down to the burger stand 
next to the job site.
    NUCA supports a wide range of legislative solutions to 
address America's infrastructure challenges. But because of the 
reduced Federal dollars available over the past several years, 
our association has recently focused on opportunities for more 
private investment and public-private partnerships. The 
Sustainable Water Infrastructure Investment Act would lift 
water and wastewater projects from the State volume cap on 
private activity bonds, thereby encouraging us each of more 
public-private partnerships in this market.
    Private activity bonds use private capital in lieu of 
public debt, and shift the risk and long-term debt from the 
municipality to the private owner. The tax-exempt status of the 
bond provides lower cost financing for investors, which 
translates to lower costs for local governments. Lifting the 
cap that fund these projects would generate an estimated $5 
billion in annual private investment at a very low cost to the 
Federal Government.
    NUCA has also been a long supporter of the EPA's State 
Revolving Fund, or SRF programs. Therefore, we appreciate the 
introduction of the Water Quality Protection and Job Creation 
Act of 2011. The bill, authored by Congressman Bishop, would 
authorize $13.8 billion over the next 5 years for EPA's Clean 
Water State Revolving Fund, and $2.5 billion for combined sewer 
overflows.
    NUCA also supports the introduction of other legislation 
pending in this subcommittee, known as WIFIA, that will offer 
credit assistance through the use of loans and loan guarantees 
to complement traditional financing programs for water and 
wastewater projects.
    Establishing a national infrastructure bank to finance 
wastewater projects should also be evaluated. Levels of 
Government oversight, structure of the bank, revenue sources, 
and opportunities for private sector participation are all 
issues that must be addressed while considering establishment 
for such an entity.
    While there continues to be a growing national conversation 
about the establishment of a dedicated source of revenue 
through a new clean water trust fund, NUCA is supportive of the 
concept in the long term after many issues are fully vetted and 
addressed.
    To sum up, there are several alternatives that, if crafted 
appropriately, could put the underground utility and excavation 
industry back to work, create scores of jobs in countless 
American industries, and expand local tax, bases while 
repairing and rebuilding the Nation's crumbling infrastructure.
    NUCA believes the congressional agenda should specifically 
address removing the State volume cap on private activity 
bonds, reauthorizing the SRF program, and establishing new 
options for loans and loan guarantees through WIFIA.
    Thank you for the opportunity to testify before the 
subcommittee today, and I look forward to answering any 
questions you might have.
    Mr. Gibbs. Thank you.
    Ms. Broaddus, you are welcome, and the floor is yours.
    Ms. Broaddus. Good morning, Chairman Gibbs, Ranking Member 
Bishop, and distinguished members of the Water Resources and 
Environment Subcommittee. Thank you for inviting me to testify 
today.
    I am Lynn Broaddus, and I direct the environment program at 
the Johnson Foundation at Wingspread in Racine, Wisconsin. The 
Johnson Foundation's mission is to be a catalyst for positive 
and lasting change through leading edge convening to create 
healthier environments and communities.
    I am here today to testify about a report released by the 
Johnson Foundation titled, ``Financing Sustainable Water 
Infrastructure.'' This report lays out a road map for 
innovative ways to finance our Nation's water infrastructure 
for the 21st century and beyond.
    It brought together a group of experts from water utility 
managers, the investment community, NGOs, and other 
stakeholders. This effort was conducted in collaboration with 
American Rivers and Ceres as part of the Johnson Foundation's 
ongoing freshwater initiative known as ``Charting New Waters.''
    The ``Financing Sustainable Water Infrastructure'' report 
examines the operational, institutional, and market-related 
challenges that our water and wastewater utilities need to 
overcome if they are going to continue to support our people 
and industries into the next century. I would like to highlight 
three points from the report.
    First, the water utility business model is changing. 
Historically, water and wastewater utilities have functioned as 
monopolies. Now there are innovative technologies that give 
customers more options. For example, Google is recycling gray 
water to cool its data center outside of Atlanta, eliminating 
the demand for millions of gallons of treated drinking water.
    The second point I would like to make is that we are likely 
to see more consolidation in the industry. In the future, we 
will see wastewater, water supply, stormwater, and flood waters 
managed as one system rather than as separate systems that 
often have conflicting goals.
    And my third point is that these changes will drive the 
need to consider a number of innovative financing strategies, 
including: expanding the pool of water service funding to 
include nontraditional revenue sources, such as energy capture 
and nutrient recycling; avoiding future costs by incorporating 
water sustainability into other forms of infrastructure, such 
as our roads and buildings; and accounting and paying for 
ecosystem services to expand utilities' debt capacity, and link 
payments to watersheds as lower cost alternatives.
    Many of these recommendations are encapsulated in the bills 
put forward by both Chairman Gibbs' WIFIA legislation and 
Ranking Member Bishop's H.R. 3145. While the Johnson Foundation 
cannot offer any specific positions on legislation, I can tell 
you generally about how these proposals fit into our report's 
recommendations.
    Generally, I think the two bills, while certainly 
different, share a lot of common and important ground. Both the 
chairman's and the ranking member's bills cover many of the 
necessary recommendations contained in the ``Financing 
Sustainable Water Infrastructure'' report.
    However, our report also emphasizes the importance of 
flexibility, recognition of new technologies, and changing 
conditions in the water business in order to maximize the 
impact and effectiveness of new financing mechanisms.
    With regard to WIFIA, we need to make sure that any program 
allows for the ability to finance smaller, more incremental 
projects, especially for smaller communities. If financing 
mechanisms are available only for mega-projects, then that is 
what we will get, even when a smaller solution may have been 
the more cost-efficient one.
    Regarding Congressman Bishop's bill, we are pleased to see 
that it recognizes the inherent benefits of smaller projects 
and new technologies. Developing smaller solutions that are 
tightly focused can avoid some of the problems we currently 
see, where communities can no longer afford to maintain larger 
facilities because of population shifts, reductions in per 
capita water use, and other factors.
    I would like to note, however, that the experts we convened 
felt that if there is grant funding for water infrastructure, 
it should be done in a way that does not hide the true costs of 
water and wastewater services.
    In closing, I believe that we can bring about a more cost-
efficient and effective system for the long term if we tackle 
not only how to maintain the existing system, but how to 
improve it so we can more effectively meet the needs of our 
shifting population and water resources relative to the 
environmental, technological, social, and demographic changes 
we are expecting.
    I would also like to ask unanimous consent to enter the 
``Charting New Waters'' report and the ``Financing Sustainable 
Water Infrastructure'' report into the record.
    Mr. Gibbs. So ordered.
    [The preamble to ``Charting New Waters'' and the executive 
summary to ``Financing Sustainable Water Infrastructure'' 
follow. These reports can be found in their entirety online at 
the Government Printing Office's Federal Digital System (FDsys) 
at http://www.gpo.gov/fdsys/pkg/CPRT-112HPRT74562/pdf/CPRT-
112HPRT74562.pdf. Click on ``Bookmarks'' in the left-hand 
navigation panel to select either report.]





    Ms. Broaddus. Thank you for your attention to these issues, 
and I would be very happy to take any questions.
    Mr. Gibbs. Thank you.
    Mr. Abelson, welcome. The floor is yours.
    Mr. Abelson. Thank you, Chairman Gibbs, Ranking Member 
Bishop, and members of the subcommittee. My name is Richard 
Abelson. I am the Executive Director of the American Federation 
of State, County and Municipal Employees, AFSCME, District 
Council 48 in Wisconsin.
    It is an honor to be here today to share with you AFSCME's 
experience with the privatization of water and wastewater 
systems, particularly in Milwaukee, Wisconsin.
    AFSCME's 1.6 million members are primarily public employees 
who work in areas such as health care, education, social 
services, transportation, law enforcement, and of course, water 
and wastewater treatment across the country.
    We have a broad range of experience and knowledge of the 
impact that privatization of public services had on communities 
and the public at large.
    Faced with rising financial challenges, the controller for 
the city of Milwaukee in 2008 proposed the long-term lease of 
the city's water works.
    The Controller proposed a lease of 75 to 99 years, 
something that was unheard of in a city the size of Milwaukee. 
This proposal initiated a period of intense debate that lasted 
for about a year.
    A major coalition of community groups and individual 
citizens came together to examine the impact this proposal 
would have on the city of Milwaukee.
    We found several negative consequences for the residents of 
other Wisconsin cities that we desperately wanted to avoid.
    We discovered that customers of privatized water systems in 
Wisconsin pay 59 percent more for service than those who 
receive water from a publicly run system.
    We also discovered the customers in Wisconsin whose 
drinking water systems are privatized encounter more water 
quality issues and poor service problems.
    In the end, the plan to turn over the city's water drinking 
system to a private company in return for an upfront payment 
was abandoned.
    I would like to submit for the record an extensive report 
that was done by Food & Water Watch entitled ``Mortgaging 
Milwaukee's Future: Why Leasing the Water System is a Bad Deal 
for Consumers.''
    [Please see page 151 for ``Mortgaging Milwaukee's Future: 
Why Leasing the Water System is a Bad Deal for Consumers,'' 
which Mr. Abelson attached to the end of his written 
statement.]
    In this extensive report, Food & Water Watch took a close 
look at the Milwaukee water utility's financial statements and 
proved how a long-term lease would actually cost the city 
millions of dollars a year, and customers would see a huge jump 
in their bills, suggesting that a lease of the water utility 
was not in the best economic interest of the city or its 
residents.
    The report concluded that the city would undoubtedly 
experience higher rates and poor service, leaving citizens with 
little recourse.
    The report is attached to my written statement.
    Unfortunately, unlike our water works, our wastewater 
system has been privatized, and it has been a less than 
successful effort, to say the least.
    Our environmental concerns have in fact become a reality.
    We believe that the private sector does have a role to play 
in the provision of certain public services, but it is not in 
operating or managing public drinking and wastewater 
facilities. That should be the responsibility of local 
governments.
    The private sector can use its vast resources to find 
innovative solutions to the water crisis and create innovative 
technologies for more efficient treatment plants.
    We have to ask ourselves, is water a basic public resource 
or a product that is sold for profit.
    What we found in Milwaukee is not unique. Private investors 
or public-private partnerships, whether in water and 
wastewater, highways or other capital assets, typically demand 
a high rate of return, and such provisions as lengthy contract 
terms, anti-compete clauses, or guaranteed payments, which are 
not in the public interest.
    We believe that infrastructure is more appropriately 
financed through vehicles with fixed income instruments than to 
private equity with long-term stable returns.
    Given that interest rates are at historic lows and many 
public entities have latitude to issue debt, bond financing is 
the best way to achieve this goal.
    Renewal of the Build America Bonds Program could save the 
Federal Government money, help put Americans back to work, and 
revitalize the infrastructure that is critical to the United 
States' economic competitiveness.
    By providing access to tax exempt investors, such as 
pension funds, solvent wealth funds, and life insurance 
companies, Build America Bonds bring new sources of capital to 
State and local governments.
    We should work together beyond considering these options. 
AFSCME and other labor unions are collaborating to explore 
financing structures in which a public pension fund or group of 
public pension funds hold majority control in an infrastructure 
asset providing stable returns to the retirement system, as 
well as providing an influx of badly needed investment in 
public infrastructure.
    I appreciate the opportunity to appear before the 
Subcommittee today, and I would be pleased to answer any 
questions which you may have.
    Mr. Gibbs. Thank you. Before we move on to questions, I 
have a draft report from Richard Little dealing with the Food & 
Water Watch analysis of the Milwaukee situation.
    I would ask for unanimous consent it be added to the 
record. So ordered.
    [The information follows:]





    Mr. Gibbs. I want to go back to this end of the panel to 
start. This is a large panel. A lot of information was covered 
here. I think we will have some good discussion here.
    Ms. Massey, you raised some concerns, I think, about 
funding of SRFs and WIFIA. We heard from other panelists that--
in my opinion, we want to make sure that we do fund the SRF 
programs, and it is a complementary program and not compete 
with it.
    You did talk a little bit about some things in the SRF that 
may need to be fixed or adjusted. I do not know if you want to 
expound a little bit, maybe something we should try to address 
in the legislation to actually strengthen the SRF program, and 
hopefully with a WIFIA type and other financing mechanisms, so 
they all interact together and accomplish what we need to get 
done.
    Ms. Massey. I think the base where the Council of 
Infrastructure Financing Authorities will come down, it does 
come down to flexibility.
    Just a few things. I will give you a couple of examples. As 
I give you these examples, I do not want to lead you to believe 
that the States are opposed to the base concept on some of 
these because we are not.
    Let's talk about green infrastructure. That is one that 
comes to mind.
    States are supportive of green infrastructure. There is no 
question about that. What we do have an issue with is having a 
dedicated set percentage of funds or projects that have to be 
green infrastructure projects.
    What we are finding is that not all States can meet the 
percentages that are being set. Sometimes they just simply do 
not get the projects in to meet the percentage.
    Other times, what they are finding is the projects they are 
getting in do not touch water quality to any significant 
degree, so they are having to give up the higher water quality 
benefit projects. That does become a problem.
    I think it is when we lose flexibility by having--
``arbitrary'' might be the right word--arbitrary percentages of 
certain types of things we have to do, then that becomes a 
problem.
    The same thing, I discussed additional subsidization. That 
is a great tool, having the ability to either provide zero 
interest or negative interest loans to disadvantaged 
communities. That is a wonderful tool to have on behalf of the 
States.
    Requiring a certain percentage again does become 
problematic, when your applications that come through the 
process simply do not get you to that percentage level. It does 
become a problem.
    Those would be two off the top of my head.
    Mr. Gibbs. OK. Thank you. To the whole panel, is there 
anything that we should be looking at, impediments, either at 
the Federal, State or local levels, to successfully implement a 
different array of financing?
    Does anybody have an opinion on things that are out there 
that really need to be addressed to make WIFIA work or get the 
cap off the volume? Is there something at any level of 
Government that is an impediment that you can envision that 
maybe we should try to address?
    Anyone want to respond?
    Mr. Dornbirer. Mr. Chairman, your memorandum actually did a 
good job, I think, listing out some of the impediments to 
considering other alternatives.
    I think the largest thing, given that we have tens of 
thousands of public utilities in the country, it is just a 
painstaking process to educate each group of civil leaders that 
there are alternatives.
    I do not know how you would tie that in to a program other 
than some sort of mandatory education process, that when you 
are considering a loan, you are considering SRF funding or 
something under WIFIA, that you are educated on all your 
alternatives in case you do not qualify for one of those 
programs.
    Mr. Gibbs. OK. Yes, Ms. Broaddus?
    Ms. Broaddus. I do not know that this is something that 
would necessarily be addressed within WIFIA, but one of the 
issues that was identified in our gathering and in our report 
are GASB rules. The Government Accountability Standards Board 
does not allow for accounting of natural assets or natural 
capital. A lot of utilities around the country are using 
watersheds to filter their water and protect their water 
supply, but the accounting rules do not allow them to include 
that in their assets.
    I presume that would in some ways enter into some of the 
bond activities and that sort of thing, and maybe something to 
address outside of WIFIA.
    Mr. Gibbs. Would that also include other programs like some 
new programs that have taken off that I have been involved in, 
the nutrient trading programs?
    Ms. Broaddus. Most probably so; yes.
    Mr. Gibbs. OK. Back to Mr. Weihrauch. Can you talk a little 
bit as to WIFIA and the SRF, expound a little bit about how you 
think it complements it and not conflict, and how you see it 
playing out?
    Mr. Weihrauch. The strength of WIFIA is it revolves around 
the largest of projects. Projects that may be multistate.
    For example, in Ohio, the Greater Cincinnati Water Works 
serves the Cincinnati area, many counties, and portions of 
Northern Kentucky.
    Because of a posture, well thought out, of regionalization 
and efficiencies inherent with regionalization, this practice 
is going to tend to continue to grow.
    To find synergy between the State of Kentucky's SRF program 
and the State of Ohio's for funding improvements to those water 
systems would tend to be quite difficult.
    [Insert for the record from witness David Weihrauch 
follows:]

        The realities in both Kentucky and Ohio make it 
        extremely unlikely that either State would fund a 
        project in the other State, even if that project would 
        benefit its own citizens. For example, it is extremely 
        unlikely that Kentucky would fund upgrades to the 
        treatment plant in Ohio, even if Cincinnati Water 
        Works' customers in Kentucky would directly benefit. 
        And it is extremely unlikely that Ohio would fund 
        infrastructure replacement in Kentucky even if that was 
        improtant to the overall integrity of the regional 
        system, including the customers in Ohio.

        I want to be clear that I'm not picking on Ohio and 
        Kentucky. The same conditions hold true in most States 
        if not all of them. And many if not most States have 
        political issues surrounding ``upstate vs. downstate'' 
        or ``big systems vs. small systems'' that act to deny 
        SRF funding to their largest cities and to projects 
        that are truly regional or national in scope. WIFIA is 
        designed to address those compelling needs, to 
        ultimately benefit the customers served by large 
        projects.

        That's why the American Water Works Association 
        strongly supports running WIFIA through EPA and not 
        through the States.

    On the other hand, Section 105, subsection 8 of the 
proposed WIFIA bill, allows SRF managers to bundle projects, 
come into WIFIA, pick them up, and as long as the interest 
climate is good, there is some real potential there.
    For example, in the latest round of SRF projects in the 
State of Ohio, among the 258 which were not funded, 49 were 
scored at standard long-term interest rates. They are not going 
to receive a great benefit in their interest or principal 
forgiveness.
    Those types of projects could be bundled, and all 49 of 
them could be taken care of, and the net interest rate to the 
project would be about the same as it would be through the 
typical SRF structure, and the OEPA and the Ohio Water 
Development Authority would each get their fees on top of that, 
and still maintain a reasonable interest rate structure at 
today's terms.
    These are benefits, and part of the innovation of WIFIA.
    Mr. Gibbs. Thank you. We are going to move on to Ranking 
Member Bishop. Go ahead.
    Mr. Bishop. Thank you very much, Mr. Chairman. I want to 
stay on this issue of the two approaches, funding through the 
SRF versus having the EPA make the decisions and sort of bypass 
the SRF.
    In the conversations that I and others have had about this 
bill, it appears as if the clean water people want to continue 
the process of working through the SRF, and the drinking water 
people want to work around the SRF, as I say, at the risk of 
over generalizing.
    Let me frame the issue for you in this way. Mr. Weihrauch, 
I think you said it best. You said it is up to us as to whether 
or not this process might possibly undermine the SRF.
    Here is my concern. My background is higher education. I 
was a college administrator for 29 years before I came here.
    In the late 1950s, in the wake of the Sputnik, the Federal 
Government created something called the ``National Defense 
Student Loan.'' Some of you may have borrowed a National 
Defense Student Loan or something called the ``National Direct 
Student Loan.''
    It was a revolving loan fund where the Federal Government 
provided money to participating colleges. Colleges loaned that 
money. Students paid the money back to the colleges. The 
colleges would re-loan the money. In other words, the higher 
education version of the SRF.
    It has not received a Federal capital contribution now 
since 2000 or 2001, I think, and under current law, it is now 
called the ``Perkins Loan Program,'' it is the same program, 
and will go away.
    In 2014, current law requires whatever balances exist in 
the loan fund to be returned to the Federal Government and the 
loan program will go away.
    That is my concern. My concern is if we have a work around, 
in a climate in which appropriators are going to have to make 
really, really tough choices, and I think it is reasonable to 
assume that climate is going to continue for a while, this is 
an easy one.
    Hey, we got this WIFIA. Let's do WIFIA. We do not have to 
fund the SRF any more.
    That is my concern about a structure that would create what 
appears to be a complement but could result in a conflict.
    Mr. Grumbles, first off, welcome back to this committee 
room where I am sure you have spent more hours than you care to 
count. It is good to have you back.
    I thought you said it very well in your testimony. You 
said, and I am quoting, ``It is critical to ensure that what is 
intended as a supplemental tool does not become the one and 
only tool or in some way, undermine the success of the SRFs.''
    I think you have said it very well. Would you care to 
comment on the concern that I just raised, and Mr. Schmitt, you 
have raised similar concerns, if I could hear from each of you, 
I would appreciate it. Thank you.
    Mr. Grumbles. In 1986, when there was a massive agreement 
between the Executive Branch, the President and the Congress to 
move away from the construction grants' era of the Clean Water 
Act, which led to enormous success, but based on fiscal and 
philosophical perspectives, the decision then was to move away 
clearly to a new model, the SRF model.
    It was structured after much, much debate that it would be 
a phased transition, and that transition has never fully 
occurred. There are still some specific grants, although far 
fewer, but the SRF capitalization grants did not end as was 
envisioned by Congress in 1987 and by the Executive Branch.
    Here, I think the situation is different where there seems 
to be a willingness--the WIFIA legislation that I have read, 
the draft, it is clearly the intent of the drafters to keep the 
SRF going.
    It is a political and budgetary decision on the 
implementation of that. I would say as a former State 
infrastructure finance authority official, it is realistic to 
see that the big decisions made on Capitol Hill will lead to 
far less or much earlier total phase out of the State Revolving 
Fund.
    There have to be safeguards built into that. For me, it 
really does make sense, while some are concerned about the use 
of the word ``flexibility,'' when Federal dollars are scarcer 
and scarcer, and when State programs are showing how mature 
they have developed over the last several decades, both under 
the Clean Water Act and the drinking water program, it does 
mean there needs to be greater flexibility given to the State 
and local fund managers and the officials, who can then do 
innovative things with integrating source water and clean 
water.
    I think there has to be real clear safeguards and a 
mechanism to enforce that philosophy that it is not meant to 
undermine the SRF.
    I think your hearings are just going to lead to more and 
more ideas about how to do that.
    Mr. Bishop. Mr. Chairman, if you would indulge me, if we 
could let Mr. Schmitt answer as well. Thank you, Mr. Grumbles.
    Mr. Schmitt. NUCA has been a long time supporter of the 
SRF, not only as a financing mechanism but the fact that the 
States can utilize their project priority lists and their 
intended use plans to determine where those funds can best be 
used.
    In our industry, the needs of water and wastewater spending 
can be pretty specific and pretty critical, and can shift 
pretty abruptly.
    In my home town of Jacksonville, we are doing a project now 
where we are pulling out the water mains where 8-inch mains 
have about 2 inches of flow because of excessive tuberculation.
    While that is addressed by a priority, there also might be 
another instance where you have excessive overflows due to high 
water tables that are in need of some immediate attention.
    I know our utility struggles to try to prioritize what 
projects need to get funded and what projects need to be put in 
a place at what time.
    The State is much closer than the Federal level, with all 
due respect, on addressing those needs, and putting our 
industry to work in evaluating and fixing those needs.
    Mr. Bishop. Thank you very much. I yield back, Mr. 
Chairman.
    Mr. Gibbs. Representative Napolitano?
    Mrs. Napolitano. Thank you, Mr. Chair. Yes, it is good to 
see you, Mr. Grumbles. Long time, no see.
    Having come from local government and taking a look at how 
they have to deal with all the emergencies and having sat on a 
sanitation board for years, I have a little understanding of 
some of the trials and tribulations.
    As I served at the State level, I heard from other cities 
about their inability to be able to fund innovative and new 
research and expansion of their wastewater treatment, and how 
that affects them.
    California has such a long shore line that you have 
releases of wastewater into the beaches that prevents people 
from getting into the ocean.
    There are all kinds of things that have happened. One of 
the things that you have not touched upon, and I would like to 
find out from any and all witnesses who can answer this, how 
and to what extent is green energy technology being 
incorporated into long-term infrastructure planning, and are 
you actively pursuing ways to reduce energy usage while 
planning for future wastewater infrastructure needs?
    I tell you that because we are working with IBW and NETECH 
to green buildings and being able to recycle the methane gas 
from the landfills, et cetera.
    There is a lot of new technology. How is that playing a 
role in what you are doing or going to be doing? Anybody?
    Mr. Grumbles. I will just go first very briefly, 
Congresswoman, to say that you have really touched on one of 
the key paradigm shifts that this country, this committee and 
others must usher in, and that is viewing in particular 
wastewater treatment facilities not as treat and discharge 
plants, but as centers of regeneration.
    I can tell you just from our organization's perspective the 
leading green city utilities who are members of Clean Water 
America Alliance are all integrating more green energy, biogas 
recovery, methane management issues, to put that to work, 
recognizing that there is no such thing as wastewater, just 
wasted water.
    There is a tremendous amount of energy from it and money, 
profit.
    The research agenda still needs a lot more investment, but 
I think the will is growing. Utilities really want to put that 
to use.
    Mrs. Napolitano. Coming from not only the ranking member of 
the Subcommittee on Water and Power, I am very concerned about 
recycled water and the stigma attached to wastewater. We need 
to start calling it something else so that the general public 
can accept the recycled tertiary treated water that is included 
in your aquifers, et cetera.
    Yes, ma'am?
    Ms. Broaddus. I wanted to also address your question about 
green energy. Of course, all water is recycled at one level or 
another. We may have a hard time accepting that.
    In terms of green energy and the ability to reduce the 
energy impacts of water and wastewater treatment and movement, 
the Water Environment Federation, who I believe was present at 
the last panel, the February panel, had issued a statement, I 
think back in the fall, that they believe that all wastewater 
treatment can become energy neutral if not energy generating.
    I think one of the things we want to be sure is 
incorporated into the legislation, is the recognition that is 
where we need to go. That is where we can go. The technology is 
in the works, and in some cases, already there.
    So any financing mechanism needs to not only have the 
flexibility to allow that but also to encourage that.
    Mrs. Napolitano. Mr. Howard, do you have a comment on that? 
How is the business end of it looking?
    Mr. Howard. I think that is one of the experiences that we 
have had in the municipal solid waste sector, where we had a 
fair amount of innovative technology that has been developed in 
that sector, in partnership with the private sector.
    We would expect that same experience would apply in water 
and wastewater.
    Mrs. Napolitano. Are you taking that in consideration as 
you are looking at the funding mechanisms?
    Mr. Howard. Yes, definitely. It has to be commercially 
proven technology, I might add, to be acceptable to the 
financing markets.
    As long as it is commercially proven technology and viable, 
it is a very active part of our financing programs.
    Mrs. Napolitano. Anybody else?
    Mr. Weihrauch. Yes. The American Water Works Association is 
a strong supporter of innovation and forward looking 
technologies.
    I would submit there is no greener action that can be taken 
than reducing the infiltration problem on our clean water side 
and resolving the water loss statistics for our community water 
systems, which can be greater than 40 percent for some 
communities.
    These are easily identifiable, and the only thing standing 
between taking care of them and not taking care of them are 
adequate and responsible funding sources.
    Mrs. Napolitano. Ms. Massey?
    Ms. Massey. From the States' perspectives, I believe what 
we are seeing now is energy efficiency has just become part of 
our standard dialogue.
    We, some States, hardly consider that green infrastructure 
any longer, because now I think everybody pretty much has 
bought into it. It makes great operational sense, and it really 
should be included in the designs, which is now giving us the 
opportunity to look even further out into those new innovative 
technologies.
    Mrs. Napolitano. Thank you, Mr. Chair. I look forward to 
the second round.
    Mr. Gibbs. Thank you. I just want to make a quick comment. 
I am very supportive of this concept of innovative 
technologies. I appreciate Mr. Howard's comments and Ms. 
Broaddus', because for energy generation and nutrient 
recapture, there has to be a revenue source.
    We do have the innovative part in the WIFIA draft. We are 
very supportive to make that work, and we will try to look at 
that and maybe make it stronger.
    Ms. Johnson?
    Ms. Johnson. Thank you very much. Let me also welcome Mr. 
Grumbles back here. He is a staple around here. I should have 
known you would never give up water as a career.
    My question does not have to do so much with the funding 
right now. I know that will be ongoing for a while.
    I had a constituent who approached me on an interstate 
water redistribution system, which seems almost impossible to 
think about right now, but the concept being that where there 
are floods, there could be some type of piping that would shift 
that water to another area where it is needed. It would be 
shifted by technology, whether the little flap is open or not.
    I would like to hear some of you that are water experts on 
the idea of something of that sort.
    Ms. Broaddus. Without knowing the specifics of it, I guess 
I will take a first crack. I think one should approach anything 
like that with caution.
    Based on what we have heard from the people we have met 
with, one of the sort of long-term goals is not only to look at 
the long-term impacts and life cycle costs of something like 
that, including the energy costs associated, but there is a 
concept of keeping water local and trying to mimic the natural 
systems as best as possible.
    Again, without knowing the specifics of that situation, 
before looking to that kind of a technological solution, go 
back and look at the underlying problem with why the flooding 
is occurring.
    It may be there is actually--it is part of a bigger 
systemic problem, and there may be by restoration of natural 
ecosystems a way to kind of stem the flooding and restore the 
hydrological cycle locally.
    Ms. Johnson. Yes. It came right after we had a great deal 
of flooding in the east last year or year before. At the other 
end of the spectrum, there was a lot of drought.
    The idea came up as why cannot we not move this water 
through some system to another area for agriculture or 
whatever. I just thought that since many of you were water 
experts, maybe you thought about something like that.
    Mr. Grumbles. Congresswoman, I know this committee has for 
decades looked at some of these regional and interstate water 
quality, water quantity issues.
    I think it is complex because of the laws that overlay the 
management of water, particularly when you have water quantity 
and water quality issues involved.
    I know the goal for our organization is a ``one water'' 
management perspective that creates the forums to bring 
together the flood and stormwater managers with the water 
quality permitting agencies, and also the water rights, 
particularly in our western water States, that definitely has 
an impact.
    Many people would say the future may be more interstate 
compacts, blessed by Congress through the Constitution, but 
more interstate compact arrangements involving multistates, but 
as Lynn Broaddus said, when you think beyond local terms and 
move water across watersheds, it can become complex, even 
though it may well be the cheapest engineering solution.
    It may prove very costly due to the laws and the political 
debates surrounding it, and the long-term ecosystem damage, if 
you are moving water, putting it where it would not normally 
be.
    Ms. Johnson. Thank you. Thank you very much, Mr. Chairman.
    Mr. Gibbs. Ms. Norton?
    Ms. Norton. Thank you, Mr. Chairman. I do want to thank you 
and commend you and the ranking member for your concentration 
on these series of hearings on ways to get financing for our 
water structure through innovations perhaps.
    I want only to mention that there are a large group of 
Members of the House who are very, very concerned, so much so 
that we are circulating a letter that is addressed both to the 
leadership of the Senate and the House.
    I am in the process of circulating this letter now. It is 
going to be signed, among others, by Ranking Member Rahall, 
Ranking Member Bishop, Ms. Johnson, and I am sure many other 
members of this committee.
    We are very concerned, but I have to be candid, that in 
light of the difficulty we are having in getting a bill through 
here, which is generally the most popular bill to come through 
the House because of its visible benefits to every district in 
the United States, the Service Transportation Bill, it is hard 
for me to be optimistic about a water infrastructure bill which 
the public is not nearly as aware of as they need to be, and I 
think these hearings may help to encourage.
    We are really dealing with a structural change here that I 
am not sure how to grapple.
    If we look at only 35 years ago, the Federal Government 
covered almost 80 percent of water system funding for capital 
projects.
    That should not be surprising. That is about what we cover 
for transportation projects with some funding, of course, the 
rest of the funding by States and localities.
    Today, the Federal Government has gone from almost 80 
percent to 3 percent. That is not just a reduction. That is a 
change that structurally transfers the capital costs to States 
and cities in my own jurisdiction.
    I represent the District of Columbia. We are in the process 
of replacing one of the oldest stormwater overflow systems in 
the country. It was built by the Corps of Engineers before the 
District of Columbia even had home rule.
    We are replacing it not by replacing the system, but by 
using huge tunnels which will store the water as it overflows, 
and then send it to be treated.
    This is being paid for almost entirely by ratepayers. We do 
get some funding in the appropriation bill from the Federal 
Government. I think this year it was $11 million.
    The reason we get that is the Federal Government is a 
ratepayer. The Federal Government built the system. Or else we 
would get nothing and it would be entirely on the ratepayers.
    This is a very aggressive green jurisdiction, so the 
authorities here in the District of Columbia have written the 
EPA for permission to do a pilot project to see how much of 
this could be--recognizing it would not be anywhere near--most 
of it could be absorbed through green infrastructure because 
the city itself is a very green city. I think it may be number 
one in the United States.
    We are having to seek permission to do that, and to do a 
pilot project, of course, I do not think anyone knows through 
data or through actual experience how much green infrastructure 
can be done.
    One would think we would want to be launching a matter of 
experiments to find out what that means.
    I am sorry I was not here to hear most of your questions. I 
was in another hearing. I did want to say the Subcommittee is 
doing exactly the right thing, to keep attention focused on 
this issue. It is not going to go away. The Federal Government 
has decided it simply is not in the game any more.
    Unless the consciousness is raised of people who drink the 
water, who increasingly buy the water, and now we see do not 
buy that water, you do not need to buy that water, you should 
not buy that water.
    In our city, we are trying to say to people do not buy the 
water. You are only making things worse.
    Unless you see raising of consciousness in your own 
jurisdictions, you are going to see what has been the collapse 
of Federal participation, just going to zero. That is where it 
almost is now.
    I thank you very much, Mr. Chairman, for all of your hard 
work and hearings that I think are putting a spotlight on this 
very important issue.
    Mr. Gibbs. Thank you. Mr. Weihrauch, I have a question. We 
have heard testimony from some of the panelists and I think the 
ranking member's concern about WIFIA should be ran through the 
States, administered by the States.
    In your testimony, you strongly recommend against that. Can 
you give us maybe an example of why you think that is not good 
to run it through the States?
    Mr. Weihrauch. The pure and simple answer is that States do 
not have the authority that the U.S. Treasury has, WIFIA being 
modeled after TIFIA, would be a direct conduit of funds from 
the Treasury, and extremely efficient, as it is outlined in the 
bill.
    Everybody that handles funding must cover their overhead, 
and the temptation, of course, is always there to take a little 
bit more for a noble program, and there are many good projects 
underway within environmental management programs throughout 
the States.
    The efficiency is the hallmark of the WIFIA concept.
    Mr. Gibbs. Also, to reiterate, the American Water Works 
Association and the Water Environment Federation, the two 
primary professional membership organizations of the water and 
clean water industry, are of one mind on the thought of 
efficiency through the WIFIA program for these large projects.
    Neither organization wants to see additional layers of 
management built into that funding structure. Of course, that 
is large projects, but also in our proposed legislation, 
smaller projects can aggregate, and actually the State would 
administer that part. Is that correct?
    Mr. Weihrauch. That is correct. The draft bill is 
structured in SRFs can utilize it for bundles, $20 million and 
up, and there is no ceiling there.
    Mr. Gibbs. Thank you. Mr. Howard and Mr. Dornbirer, what 
advantages would municipalities have by using private activity 
bonds versus governmental bonds?
    Mr. Howard. I think the point I made earlier about the 
partnership with the private sector and the flexibility that 
would provide under a variety of different contracting 
structures, ranging from just a design/build approach with 
public operation with innovative technology, all the way to 
design/build, operate, finance, and owned by the private sector 
under some sort of contractual, wholesale contractual 
arrangement with the public sector.
    I think our experience again in the solid waste industry, 
and to a certain extent in the water industry, but to a much 
more limited degree, is that what happens is you attract large 
international private companies domestically based or 
internationally based that have extensive capability and 
knowledge around innovative technologies that have been applied 
elsewhere that can be brought to bear to local jurisdictions.
    We are involved in a number of public-private sector 
arrangements across the country right now, and in a couple of 
cases, dealing with very small municipalities that are under a 
tremendous amount of strain budget wise, and just simply do not 
have the local expertise to manage their systems.
    They are reaching out to the private sector to help them. 
Right now, we have plenty of tax exempt bonds to tap into, but 
we do not expect that to last very long.
    Mr. Gibbs. I think that is a very interesting point. You 
are saying with that private investment capital coming in, you 
also are going to get the expertise and the consultants.
    Mr. Howard. That is the real benefit of the public-private 
partnership model. What it forces the parties to do is to sit 
down at the table and plan for a 30- or 40-year contract that 
shifts a fair amount of risk to the private sector to manage 
the system efficiently.
    It is something that small jurisdictions very much benefits 
from.
    Mr. Gibbs. Thanks. I appreciate that.
    Mr. Dornbirer. I would just like to add that we finance the 
water recycling plant in Santa Paula, California, along with DZ 
Bank.
    There, the private equity sponsor brought in an engineering 
design firm and operating firm all in one. They designed the 
plant and built the plant, knowing they were going to have to 
operate the plant for the next 30 years. You have a much more 
holistic approach to incorporating the new technologies.
    Like Steve said before, we want commercially proven 
technologies, but also technologies to actually provide an 
asset from these plants. The effluent coming out of the plant 
is now available for irrigating golf courses, and you can 
directly inject it back into the aquifer because it is cleaned 
to such a standard.
    Mr. Gibbs. I do want to ask the Mayor from Napoleon, Mayor 
Behm, since you are the only local elected official here, 
administrator, can you comment on what you see as a medium 
sized to small municipality, the challenges you have to access 
capital and what hoops you have to go through, working with the 
EPA or whoever?
    Can you maybe elaborate on what you see some of your 
challenges are, being a new Mayor?
    Mr. Behm. Sure. The challenges, as I stated earlier, we 
really have not had a problem necessarily getting funding. Some 
of the challenges is on the length of the funds, such as our 
equalization basin, which costs $8.85 million. We were able to 
receive a low-interest loan through the EPA.
    That, however, was only for 20 years, when actually the 
equalization basin is going to be a lifetime expectancy of 30 
to 40 years.
    Something in that regard would be much more beneficial for 
the city to pay over a longer time.
    As far as receiving any kind of funds, it has not 
necessarily been the problem. The problem again is generating 
the revenue to----
    Mr. Gibbs. Another thing this committee has been working on 
with the EPA, and we are going to ask them to come back later 
this Spring, because they are working on a pilot program to 
integrate and prioritize the permitting process to hopefully 
streamline things, so you can move forward and address 
immediate needs, which might be different than a need in 
another municipality, but give the ability through the 
permitting process of flexibility, and hopefully that is 
something you can see as a benefit.
    Mr. Behm. That would be definitely beneficial.
    Mr. Gibbs. I will yield to the ranking member.
    Mr. Bishop. Thank you very much, Mr. Chairman. I have three 
things which I will try to move through quickly.
    Mr. Howard, Chart 10, I think it is, I just want to revisit 
that. If I am reading it correctly, in 2010 and 2011, there 
were some $25 billion worth of taxable Build America Bonds. Am 
I reading that right?
    Mr. Howard. That is correct, approximately; yes.
    Mr. Bishop. Approximately. Those were used to construct 
and/or renovate/rehab water and wastewater systems?
    Mr. Howard. Yes, but under a traditional governmental 
purpose bond financing structure. In order to issue taxable 
Build America Bonds, the project that you finance had to 
qualify as a governmental purpose----
    Mr. Bishop. My question is a little different. I am 
assuming these are projects that employed one or two people. Is 
this correct?
    Mr. Howard. No. These were projects--all different types of 
projects.
    Mr. Bishop. My point is these are projects that this is 
funding that supported construction and/or rehab of water and 
wastewater projects?
    Mr. Howard. That is correct.
    Mr. Bishop. Some people actually worked on these projects?
    Mr. Howard. Yes.
    Mr. Bishop. The Recovery Act did in fact----
    Mr. Howard. Oh, definitely.
    Mr. Bishop. Put people to work?
    Mr. Howard. Definitely. Had a huge impact.
    Mr. Bishop. Thank you very much for that, sir. I appreciate 
that.
    On the issue of private activity bonds, let me say that 
this committee on a bipartisan basis four Congresses ago passed 
legislation that would lift the cap on private activity bonds.
    I think we are in full agreement. We also have another 
legislative mechanism before us today, the Senate Highway Bill, 
which passed last week. It is called ``MAP-21.'' It includes a 
provision that would lift the cap for 5 years on private 
activity bonds.
    I introduced that bill in the House this morning in an 
effort to jump start a process that seems to have ground to a 
halt, and I do not want to put words in any of your mouths, but 
it seems the consensus of the testimony that we have heard thus 
far is you would encourage us to get that provision passed.
    Am I right about that?
    Right now, the only legislative mechanism before us to do 
that is MAP-21, the Senate Highway Bill, which passed by a huge 
bipartisan majority that I have now introduced in the House, 
and hopefully, we can generate similar bipartisan support.
    Lastly, Ms. Massey, I do not wish to be argumentative, but 
I just want to make sure we have the same set of facts.
    You talked about the green infrastructure requirement, the 
set aside, as being a bit of an impediment.
    It is our understanding that at least as it relates to the 
clean water SRFs, all the States have reported to us they had 
more than sufficient number of projects to meet the set aside.
    By the way, the green infrastructure set aside was 
established in the Recovery Act. It has now been carried 
forward in the last couple of appropriation bills.
    The appropriation bills have each included language that 
eliminated the reserve or the set aside if the State did not 
have sufficient projects.
    My question is given the fact that we have States saying we 
have no problem, we have plenty of projects that meet, and we 
also have a provision that says if you do not have projects 
that meet the requirement, we will waive it, on what basis is 
it still viewed as an impediment?
    Ms. Massey. I believe we can certainly live with the 
current language the way it is. There are sufficient 
applications.
    What we are seeing is there are a dwindling number of 
applications coming in, so I think we are looking toward the 
future, and we have that concern, but we absolutely can live 
with the language the way it currently is.
    Mr. Bishop. If we were to continue to have language that 
provides an exemption, if there are insufficient projects, that 
would allow the administrators of the State SRFs to go forward 
in a fashion that is productive?
    Ms. Massey. Yes, we can live with that language.
    Mr. Bishop. Thank you very much. I thank you all for your 
testimony. Thank you, Mr. Chairman.
    Mr. Gibbs. Ms. Napolitano?
    Mrs. Napolitano. Thank you, Mr. Chair.
    I have a little bit of an introduction of a news release 
for the record, if you would. It has to do with one of my 
providers in Los Angeles.
    It is reflecting an increase of rates of 60 percent 
associated with the O&M, operations and maintenance. They also 
include in that this water distribution and treatment, an 
example of the increases we are seeing nationally.
    Costs are shifting from construction of projects to the 
O&M, to operations and maintenance.
    I would like to just quote part of the release. Of course, 
in 1990, this agency, Metropolitan, went from $30 million in 
maintenance to currently somewhere in the vicinity of $275 
million a year, costs.
    How do we then begin to look at cutting the O&M if we do 
not upgrade the maintenance, if we do not replace, if we do not 
take care of what ails our aging infrastructure?
    Two questions for the panel. At the last hearing, one of 
the witnesses suggested that private equity firms should have 
direct access to a new water infrastructure and financing 
authority to borrow at the same subsidized rates that would be 
available to municipalities and communities.
    The CRS, Congressional Research Service, told us that 
providing this access to private equity firms could result in a 
situation where they re-loan this federally subsidized funding 
to local communities, and arguably, make a profit off acting as 
a middle man of Federal financing.
    Does that make sense, that we should be using federally 
subsidized firms to increase profit margins of private equity 
firms, especially if this comes at the expense of local 
communities' ability to address their local infrastructure 
needs?
    Mr. Grumbles. I will just say, Congresswoman, that my firm 
belief is the era of cheap water is over. As AWWA said, years 
ago, we were entering the age of replacement, where all the 
aging infrastructure systems need to be replaced and upgraded.
    The most sustainable way to deal with that challenge and to 
manage your assets is through the local rate making process, 
which is a difficult one.
    I think that is the fundamental first step, making sure the 
rates reflect the true value of the service of the 
infrastructure, not just putting it in the ground, but 
maintaining it and upgrading it over time.
    In terms of additional infusions of dollars, whether it is 
State dollars or Federal dollars, the dollars beyond what is 
coming from the ratepayers themselves, that is where you need 
to look for opportunities to further engage the private sector, 
because there will be efficiencies, and that will help reduce 
that cost which has to be paid in order for the system to be 
maintained.
    The last point is the fundamental paradigm shift that is 
occurring in places across the country, re-looking at the 
systems and centralized water and wastewater treatment, and 
trying to find ways, deploying the right technologies to treat 
and reuse closer on-site, so you do not have the long miles of 
leaking pipes and that type of problem.
    I think the more you can structure a financing relationship 
where the private sector can come in without selling the assets 
to the private entity, I think that will help reduce the costs 
on the burdened ratepayers.
    Mrs. Napolitano. Anybody else?
    Ms. Broaddus. I would like to address, Congresswoman 
Napolitano, the first part of your question, and that is yes, 
we do have a growing burden of the cost of repairing and 
replacing this infrastructure that we have in place, both on 
the clean water and the drinking water side.
    Rates need to reflect that cost. They can be shaped in a 
way that still protects those who are least able to pay, but we 
want to make sure that in total, the full cost is recovered.
    There also needs to be the flexibility to examine. There 
may be times and it would be a case by case scenario, but there 
may be times where it makes more sense to put in place some 
kind of new technology.
    During our meetings, we definitely heard about times where 
it makes more sense to go ``off grid,'' if you will, a term 
that is used more in energy than it is in water, but there are 
opportunities to do that with water as well.
    One needs the flexibility to figure out what makes the most 
sense for that particular situation.
    Mrs. Napolitano. Yes, sir?
    Mr. Weihrauch. Yes, ma'am. I would just like to attempt to 
add some clarity to part of the WIFIA approach and about the P-
3s, the partnerships.
    The utility is sponsoring the loan, and this limits what 
happens to that money. It is going to the direct benefit 
developed within that contract, it is not creating a mechanism 
where someone could take advantage of the availability of 
Federal money by virtue of their access.
    It would be established prior to the project being 
underway, and would be limited within a very defined scope and 
controlled through that mechanism.
    Mrs. Napolitano. That could well be. Yes, sir? Go ahead.
    Mr. Howard. I was just going to comment that one of the 
many hats I wear in infrastructure is financing transportation 
projects. We have been involved in several projects that 
include the TIFIA program.
    To your point, the benefit of the TIFIA program and the 
flexibility and cost of funding for the TIFIA program passes 
through ultimately to the public ratepayers in the form of a 
lower cost of financing, and in some cases, whether the project 
can be financed at all.
    A lot of the projects that TIFIA supports in the 
transportation sector would not get funded were it not for the 
availability of the program.
    Mrs. Napolitano. It also begs the question, and I beg your 
indulgence, Mr. Chair, the length of the loan also. Will that 
run with the new maintenance and operation, the age of the 
loan?
    Which one comes first? Then what happens after that? Should 
we protect aging infrastructure public subsidy with private 
equity financing firms?
    Mr. Howard. I would say the contracts that are typically 
set up, the long-term contracts that are set up for 
infrastructure projects----
    Mrs. Napolitano. How long, normally?
    Mr. Howard. For new construction projects, typically 30 to 
40 years. There is what we call a hand back requirement, where 
the condition of the infrastructure has to meet certain minimum 
standards before the asset is transferred back to the public 
sector at the end of the agreement.
    Mrs. Napolitano. Thank you, Mr. Chair.
    Mr. Gibbs. I want to thank everybody for coming. I think 
during this and the last hearing on this issue, it has brought 
some more insight to some of the things, that we can make some 
tweaks to the proposed legislation.
    Also, I want to mention as you all know, this is really a 
jobs bill to put people to work on building infrastructure that 
we have to have.
    I just want to comment on the Build America, it is 
unfortunate that only 5 or 6 percent of the total Recovery Act 
money went for infrastructure, a very small percentage.
    Mrs. Napolitano. Mr. Chair, would you yield for a second?
    Mr. Gibbs. Yes, go ahead.
    Mrs. Napolitano. You touched on an important point that I 
did not get to ask, and that is if any of the agencies here 
have begun to estimate the impact on wastewater infrastructure 
improvements and projects on local job creation, and I yield 
back to you.
    Mr. Gibbs. OK. Obviously, there is some job creation. This 
is a jobs bill, as I say. Of course, I am always in favor, that 
the private sector creates more jobs than the public sector, 
but these are issues on infrastructure, and I think there is a 
role in the public sector.
    Thank you again for being here. We look forward to working 
with you as we hopefully move this legislation forward.
    That concludes this hearing. Thank you.
    [Whereupon, at 12:02 p.m., the Subcommittee was adjourned.]
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