    [Senate Hearing 112-958]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 112-958

                         LOCAL GOVERNMENT PERSPECTIVES
                            ON WATER INFRASTRUCTURE

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

                                    HEARING

                                   before the

                       SUBCOMMITTEE ON WATER AND WILDLIFE

                                     of the

                                  COMMITTEE ON
                          ENVIRONMENT AND PUBLIC WORKS
                              UNITED STATES SENATE

                          ONE HUNDRED TWELFTH CONGRESS

                                 SECOND SESSION

                                   __________

                               FEBRUARY 28, 2012

                                   __________

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                   COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

                          ONE HUNDRED TWELFTH CONGRESS
                                 SECOND SESSION

                      BARBARA BOXER, California, Chairman
    MAX BAUCUS, Montana                  JAMES M. INHOFE, Oklahoma
    THOMAS R. CARPER, Delaware           DAVID VITTER, Louisiana
    FRANK R. LAUTENBERG, New Jersey      JOHN BARRASSO, Wyoming
    BENJAMIN L. CARDIN, Maryland         JEFF SESSIONS, Alabama
    BERNARD SANDERS, Vermont             MIKE CRAPO, Idaho
    SHELDON WHITEHOUSE, Rhode Island     LAMAR ALEXANDER, Tennessee
    TOM UDALL, New Mexico                MIKE JOHANNS, Nebraska
    JEFF MERKLEY, Oregon                 JOHN BOOZMAN, Arkansas
    KIRSTEN GILLIBRAND, New York

                        Bettina Poirier, Staff Director
                     Ruth Van Mark, Minority Staff Director
                                  ----------

                       Subcommittee on Water and Wildlife

                     BENJAMIN L. CARDIN, Maryland, Chairman
    MAX BAUCUS, Montana                  JEFF SESSIONS, Alabama
    FRANK R. LAUTENBERG, New Jersey      JOHN BARRASSO, Wyoming
    SHELDON WHITEHOUSE, Rhode Island     DAVID VITTER, Louisiana
    TOM UDALL, New Mexico                MIKE CRAPO, Idaho
    KIRSTEN GILLIBRAND, New York         LAMAR ALEXANDER, Tennessee
    BARBARA BOXER, California (ex        JAMES M. INHOFE, Oklahoma (ex
        officio)                             officio)

                                C O N T E N T S

                                  ----------
                                                                       Page

                               FEBRUARY 28, 2012
                               OPENING STATEMENTS

    Cardin, Hon. Benjamin L., U.S. Senator from the State of Maryland     1
    Sessions, Hon. Jeff, U.S. Senator from the State of Alabama......     3
    Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma,
      prepared statement.............................................    81

                                   WITNESSES

    Rawlings-Blake, Hon. Stephanie, Mayor, City of Baltimore,
      Maryland.......................................................     6
        Prepared statement...........................................    10
        Responses to additional questions from:
            Senator Cardin...........................................    21
            Senator Inhofe...........................................    22
            Senator Sessions.........................................    24
    Johnson, Jerry N., General Manager/CEO, Washington Suburban
      Sanitary Commission............................................    27
        Prepared statement...........................................    30
    Horne, Kathy, Executive Director, Alabama Rural Water Association    41
        Prepared statement...........................................    43
        Responses to additional questions from:
            Senator Cardin...........................................    62
            Senator Inhofe...........................................    63
            Senator Sessions.........................................    66

                              ADDITIONAL MATERIAL

    Photo of an un-lined cast iron pipe..............................    83
    Photo of a galvanized steel pipe.................................    84

             LOCAL GOVERNMENT PERSPECTIVES ON WATER INFRASTRUCTURE

                                  ----------

                           TUESDAY, FEBRUARY 28, 2012

                                   U.S. Senate,
             Committee on Environment and Public Works,
                            Subcommittee on Water and Wildlife,
                                                        Washington, DC.
        The Subcommittee met, pursuant to notice, at 10 a.m. in
    room 406, Dirksen Senate Office Building, Hon. Benjamin L.
    Cardin (Chairman of the Subcommittee), presiding.
        Present: Senators Cardin and Sessions.

             OPENING STATEMENT OF HON. BENJAMIN L. CARDIN,
                U.S. SENATOR FROM THE STATE OF MARYLAND

        Senator Cardin. Good morning, everyone. Let me welcome you
    to the Subcommittee on Water and Wildlife of the Environment
    and Public Works Committee.
        Senator Sessions will be joining us shortly. He is
    balancing two committees; he is the ranking Republican member
    of the Budget Committee, which is also meeting at this time
    with Secretary Panetta on the Department of Defense budget. So
    he will be joining us and will most likely not be able to stay
    for the entire hearing, but I thank him for his cooperation in
    arranging this morning's Subcommittee hearing.
        I also want to thank Chairman Boxer and Ranking Member
    Inhofe of the full Committee for authorizing us to have a
    series of hearings dealing with our water needs. And I want to
    thank our witnesses for being here.
        There is a public expectation that when they turn their
    faucets on and when they drink the water that we have in front
    of us that it is safe and that it is clean. There is also an
    expectation that our wastewater will be treated in a way that
    will not cause us harm from public health. The realities are
    that we have an aged system and that it is very vulnerable and
    that we need to pay attention to make sure that in fact the
    public expectations are realized.
        Every year we have 54,000 episodes of our septic systems
    overflowing, causing a concern as to whether we have a public
    health risk. Excuse me, I gave you the wrong number, there's
    actually 75,000 sanitation sewage overflows every year, causing
    as many as 5,500 illnesses due to storage contamination of our
    beaches, our streams, and our lakes. There are 54,000 community
    drinking water systems in America that serve 250 million
    Americans.
        Every year the wastewater treatment plans treat billions of
    tons of pollutants from reaching our rivers, our lakes, and our
    coastlines. And we are at risk, as I said, as a result of the
    aged system. The needs are great.
        I could give you many examples of breaches in our water
    mains in our country. But let me just talk a little bit about
    my own State of Maryland. Mayor Stephanie Rawlings-Blake is
    here, and she recalls that we have--it seems like too
    frequently--water main compromises in our city and in our
    State. Every day we hear of more examples of water mains that
    have broken and caused problems. We had a major break in
    Baltimore that caused the flooding of our downtown community.
    Our Mayor responded to that. But when you are dealing with
    pipes that are over 100 years old, it is challenging. And the
    amount of maintenance and replacement is beyond the capacity of
    any municipality.
        In Prince Georges County we had a major break recently that
    caused us to close the Beltway around Washington. And we all
    recall when River Road in Montgomery County, Maryland, became a
    river and required actually an air rescue in order to deal with
    stranded motorists. Those types of episodes are occurring all
    too frequently in our communities.
        One of the challenges that we have with our water
    infrastructure that, unlike the roads and the bridges and the
    transit systems that people see every day, and they can tell
    when there is a need for a change, they see the congestion on
    the roads, or they see the failure of a bridge, they can
    visually see and demand that we deal with our transportation
    infrastructure. The same is not true for the underground pipes
    that supply us with the drinking water and treat our
    wastewater.
        We need to do a more effective job so the public
    understands just how critically important it is that we
    maintain our water infrastructure. Our water infrastructure is
    equally important to our transportation infrastructure for
    America's growth.
        The needs are rather immense. The Mayor's Water Council
    reported that in 2008, in order to meet mandates of Clean
    Water, the annual cost was about $93 billion. That is estimated
    to increase. That is estimated to increase by 2028 to somewhere
    between $189 billion to $421 billion. Now, again, the major
    responsibility for this rests with local governments.
        In the best of times, they would have a challenge meeting
    these needs. But in these economically challenging times it is
    just impossible to expect our municipalities to be able to
    handle this without the partnership from the Federal
    Government. The partnership from the Federal Government has
    taken on many forms. The State Revolving Funds are, of course,
    one of the principal areas. And we are pleased--if you look at
    the last 3 years, there has been some significant increase in
    funding in the State Revolving Funds, in the operational
    budgets as well as in the recovery funds. But as we look at the
    current budget year there is an inadequate amount of money
    being made available to deal with the State Revolving Fund, and
    we need to deal with this.
        The issues here are not just health-related issues, and
    there are health-related issues. There are also energy issues
    that are involved. We have a very inefficient system for
    delivering our water, causing us to use more energy than we
    should.
        It is an environmental issue. We waste a lot of water.
    Water is a precious resource. A significant amount of our water
    is wasted every day because of leakages from the pipes that
    transport that water.
        And we also have an economic issue here. The United States
    Conference of Mayors said for every dollar we spend on water
    infrastructure, we get back over six times in our economy in
    the GDP. The National Association of Utility Contractors
    estimates for every billion dollars that is spent on water
    infrastructure, it will create 26,000 jobs.
        Today we have witnesses that really understand these
    issues, and I want to thank our three witnesses for being here.
    I am going to introduce two, Senator Sessions is going to
    introduce the witness from the State of Alabama.
        But before I do that, let me turn to Senator Sessions for
    any introductory comments that he would like to make.

               OPENING STATEMENT OF HON. JEFF SESSIONS,
                 U.S. SENATOR FROM THE STATE OF ALABAMA

        Senator Sessions. Thank you very much, Mr. Chairman.
        As you know, I am Ranking on the Budget Committee, and we
    have the Secretary of Defense in today talking about his
    budget, how much it is going to be cut and where else we can
    find the savings in our Government to put us on a path of
    sustainability. And we are not on a sustainable path right now,
    we are just not, and it is not going to be pleasant. And
    sometimes you just have to not spend what you don't have, the
    money you don't have. The Governor of Alabama, Governor
    Bentley, said the other day we are going to spend the money we
    have.
        Well, we are not doing that here. We are spending 40
    percent more than we take in. So this is our difficulty, and it
    impacts the good goals that we have for each of you.
        So I want to thank Senator Cardin for having this hearing,
    to receive this testimony. Importantly, more than 90 percent of
    the Nation's community water systems serve populations under
    10,000 people, in mostly rural areas. Where I grew up, that is
    so. They have a water system now. We had an artesian well
    across the road, a pipe ran and served two or three houses. But
    now people there who have been struggling for water can have it
    at a reasonable price. And it pays for itself through the
    payments.
        America's water infrastructure is vast, 800,000 miles of
    pipes and 600,000 miles of sewer lines, much of which is at a
    point that it needs to be replaced. In fact many rural systems
    lose a quarter--as you said, Mr. Chairman--to one-third of
    their water through leaks. That is an energy cost; that is an
    environmental difficulty.
        It is also true that America is on an unsustainable debt
    path. And we are running the fourth consecutive deficit of over
    $1 trillion. Debt like that will lead to the most predictable
    economic crisis in our Nation's history, as the Debt Committee
    Chairmen Bowles and Simpson told us.
        So we need to look for ways to improve. Unfortunately the
    $800 billion stimulus that the President pushed through in
    2009, which was sold on the idea of fixing crumbling
    infrastructure, spent only a tiny fraction on water
    infrastructure, a really small amount on roads, about 4 percent
    on crumbling bridges and highways. In the wake of the largest
    single borrow and spend in our history, we still have not
    invested the money we need in infrastructure programs.
        And the reason I tend to favor infrastructure spending is
    it creates American jobs, it creates an infrastructure
    improvement that is not here today and gone tomorrow, but will
    be here for decades to come.
        So Mr. Chairman, thank you for having the hearing. I will
    need to go back and forth to a hearing. I would say how pleased
    I am to have Kathy Horne here. Kathy, nice to see you. Thank
    you for the leadership you have given to our State for many
    years.
        And just to give a bit of a bio, if I could at this time, a
    little bit out of order, she has had more than 25 years of
    experience on rural water issues. Currently she serves as
    Executive Director of the Alabama Rural Water Association, a
    position she has held for more than 9 years. As Executive
    Director, she directs several programs in Alabama through the
    USDA Rural Development Agency and the U.S. Environmental
    Protection Agency as well as numerous State-funded programs.
        She is a member of the American Water Works Association,
    the Alabama Water Pollution Control Association, the Society of
    Water Professionals, the National Rural Water Association, and
    serves on various boards and committees. In 2001 Kathy was
    elected by her peers to receive the Executive Director of the
    Year award for the National Rural Water Association, and in
    2004 she received the USDA Rural Development Leadership Award.
        She is the mother of four children and active in local
    school, church, and community activities, an outstanding
    citizen of Alabama. I am proud that she will be able to provide
    important testimony today.
        I also would note that she has with her Mr. Randolph Hall,
    General Manager of South Bullock County Water Authority, and
    William Snyder, Manager of the Monroeville Water Works Board.
    Monroeville is my home county, the county of Harper Lee and To
    Kill a Mockingbird and a lot of other wonderful folks there. So
    we are glad to have them here.
        Mr. Chairman, we are dealing with a very important issue.
    Anything we can do to use our money more effectively, help
    these people accomplish their goal more effectively is a good
    challenge for us all.
        Thank you.
        [The prepared statement of Senator Sessions follows:]

                       Statement of Hon. Jeff Sessions,
                     U.S. Senator from the State of Alabama

        At this Subcommittee's last hearing we heard testimony
    about the condition of America's water infrastructure from a
    variety of perspectives--States, pipe makers, civil engineers,
    and others. I want to thank Senator Cardin for calling today's
    follow up hearing to receive testimony specifically from
    municipalities and rural communities. Importantly, most of the
    Nation's community water systems serve populations under 10,000
    people in primarily rural areas. So I am really pleased that
    Alabamian Kathy Horne is here. She is the Executive Director of
    the Alabama Rural Water Association. I know we will benefit
    greatly from Kathy's testimony about the challenges facing
    rural water utilities.
        America's water infrastructure is vast, with at least
    800,000 miles of water pipes and 600,000 miles of sewer lines--
    much of which needs to be replaced. In fact many rural systems
    lose one-quarter to one-third of their water through leaks.
    There are billions of dollars in needed investment to upgrade
    these systems. It's also true America is on an unsustainable
    fiscal path. This year, we will run the fourth consecutive
    deficit over $1 trillion. Debt like that will lead to the most
    predictable economic crisis in our Nation's history. So, in
    this era of tight Federal budgets we need to look for ways to
    leverage additional investment in water infrastructure without
    adding more debt.
        Unfortunately, President Obama's $800 billion stimulus in
    2009, which was sold on the idea of fixing our crumbling
    infrastructure, spent only a tiny fraction on water
    infrastructure. Ironically, in the wake of the single largest
    borrow and spend program in the Nation's history, we are now
    struggling to find the money to keep existing infrastructure
    programs at near current levels. For instance the President's
    budget proposes to cut the State Revolving Loan Fund program by
    more than $350 million. We cannot just dismiss cuts like that
    out of hand, but I know those cuts are troubling to rural
    utilities. The stimulus was touted as the way to fix our
    Nation's infrastructure, but in the end it was one of the
    biggest bait and switch schemes of all time. It left us with
    even more debt but little new infrastructure to show for it.
        So, how can the Federal Government alleviate this situation
    without adding to the debt? First, we must keep in mind that
    energy costs are the single greatest expense for rural water
    utilities. We need to keep electricity rates as low as
    possible. Regrettably, this Administration has issued a wave of
    new rules--like the Utility MACT issued in December--that will
    add billions in energy costs to the U.S. economy.
        Second, we need to reduce regulatory burdens and ensure
    that rural communities have the flexibility to resolve water
    quality issues in a cost-effective manner.
        Third, when cities and counties are sued for water or sewer
    problems, we need to be sure that only reasonable, cost-
    effective, and achievable obligations and timelines are
    imposed.
        Fourth, while water infrastructure is primarily a State and
    local obligation, we need to reauthorize and improve Federal
    programs, like the State Revolving Loan Fund Program, that help
    rural and municipal utilities.
        Fifth, we should lift the volume caps on private activity
    bonds issued for water infrastructure projects. This is one way
    to facilitate more investment in water infrastructure. As long
    as the costs associated with this proposal are appropriately
    offset and do not grow the national debt, I would vote for it.
        There are certainly other ways we can address these
    challenges. I look forward to hearing from our panel today.
        Thank you.

        Senator Cardin. Senator Sessions, thank you for your
    opening comments and thank you for your leadership on the
    Budget Committee. I know that you are busy on that committee
    today.
        We need a game plan for our budget. And Senator Sessions is
    one of our key players in trying to bring us together to
    develop a responsible, credible plan to get our deficit under
    control. It will require sacrifices at all levels of government
    and a more efficient government at all levels of government.
    Clearly, the Department of Defense, our largest single agency,
    needs to be in the forefront of those efforts. So I know how
    important today's hearing is up in the Budget Committee, and I
    thank you for taking time to come down and visit with us on
    this subject, which is extremely important also. We appreciate
    that.
        Let me invite our witnesses to the table. First I am going
    to introduce my good friend and colleague, Mayor Stephanie
    Rawlings-Blake, who currently serves as the 49th Mayor of
    Baltimore. She has dedicated many years of work to
    strengthening Baltimore's neighborhoods, which includes
    ensuring that her constituents have access to clean, safe
    water.
        Prior to being elected Mayor of Baltimore she was President
    of the City Council of Baltimore. Mayor Rawlings also serves in
    a leadership position on the U.S. Conference of Mayors. She is
    Co-Chair of the Mayors' Water Council where she assists local
    government in providing high quality water resources in a cost-
    effective manner.
        Mayor Rawlings-Blake has been an innovator for us in
    Baltimore. Being a mayor of a major city is a very difficult
    task. The Federal Government pushes some of its problems off on
    the counties. The counties push some of their problems off on
    our municipalities. There is no place for a mayor to turn to
    push off issues. She has to confront them directly, and our
    Mayor of Baltimore City does exactly that.
        So we are looking forward to your testimony and to your
    suggestions as to how we can find creative ways in order to
    help you in your task of helping the people of Baltimore.
        We are also joined by Mr. Jerry Johnson, who currently
    serves as the General Manager of the Washington Suburban
    Sanitary Commission. The Commission provides water and
    wastewater services to 1.8 million residents in Prince Georges
    County and Montgomery County in my home State of Maryland. As
    General Manager, Mr. Johnson is employing cutting edge
    technologies in an effort to find cost-effective solutions to
    his customers' water infrastructure needs.
        I am very impressed with what you have been able to do in
    innovation and creativity, trying to do more with the limited
    amount of funds that are available.
        And Ms. Kathy Horne, your Senator has already introduced
    you. But I thank you for what you do for the people of Alabama,
    but also to bring to this panel the perspective from the rural
    communities. Maryland is a State that has two major urban
    centers, but we do have rural communities that depend upon the
    water facilities that are different in its nature. I was at
    Smith Island not too long ago, which is a pretty isolated
    community in Maryland. Their water needs were of paramount
    concern, and we have to work a different type of solution for
    rural American than we do for our urban centers.
        So I thank all three of you for being here today.
        We will start with Mayor Stephanie Rawlings-Blake.

              STATEMENT OF HON. STEPHANIE RAWLINGS-BLAKE,
                   MAYOR, CITY OF BALTIMORE, MARYLAND

        Ms. Rawlings-Blake. Thank you very much, Mr. Chairman, and
    thank you for your leadership on this issue. I certainly
    appreciate the partnerships that we have had over the years.
        My name is Stephanie Rawlings-Blake, and I am the Mayor of
    the city of Baltimore, Maryland. I want to thank you for the
    opportunity to speak to you about the challenges that cities
    such as Baltimore face in operating and managing water and
    wastewater systems. These challenges are especially difficult
    in today's climate of unfunded Federal mandates, as well as a
    struggling economy.
        In Baltimore we have a regional water and wastewater system
    that serves almost 2 million people living and working in the
    city and surrounding counties. Baltimore's water and wastewater
    utilities are about a $400 million business, with more than
    1,700 employees and a $1.8 billion 6-year capital improvement
    program. So when it comes to financial pressures of running a
    water, wastewater, and stormwater system, Baltimore is not
    alone. But as you mentioned, we are on our own.
        Over the next 20 years an estimated $4 trillion will be
    spent nationally for water and wastewater projects. Ninety
    percent--90 percent--will be funded locally. Even with our
    large capital program Baltimore has about a $4 billion gap in
    funding over the next 6 years. And that figure does not include
    the $2 billion needed to replace existing stormwater pipes.
        Having to direct our investment toward meeting our Federal
    mandates has had dire consequences on the condition of our
    water infrastructure. Deferred maintenance and capital
    investment have resulted in the loss of finished water of over
    20 percent every day. So if you are a Baltimorean, Mr.
    Chairman, it would be just about the equivalent of turning our
    World Trade Center upside down and filling it up with water
    every day. That is about the amount that we are losing.
        Major water breaks and emergencies create lengthy service
    disruptions, damage and loss to property, increase sediment
    loads to streams and the harbor. It is hard to convince your
    citizens and your ratepayers to accept an annual increase in
    water and sewer rates to comply with Federal mandates when
    basic infrastructure needs continue to crumble.
        To meet these challenges we employ a multitude of
    strategies to finance our water needs. With an enterprise fund,
    we are able to sell water and wastewater revenue bonds to fund
    our capital programs. While revenue bonds are an excellent
    source of funds, the capital demands of our system have doubled
    our water and wastewater debt from fiscal year 2004 to fiscal
    year 2011. To leverage our capital dollars, we have competed
    for and received State Revolving Loan Funds. These low and no-
    interest funds have helped us with our financing.
        But the size of our system makes for very large and costly
    projects. Declining Federal funding for the State Revolving
    Loan Fund has only increased the competition for these limited
    dollars. We hope that Congress will continue to recognize the
    importance of this program by ensuring that it continues the
    funding at a meaningful level.
        Baltimore may also need to introduce a fee on all
    impervious areas within the city to fund our stormwater
    program, in order to comply with our MS4 permit. As you can
    imagine, a new fee will be difficult for our citizens and
    businesses to absorb in this economy. But without a stable
    source of funding we will not be able to meet our environmental
    obligations.
        We are not just looking to our ratepayers to fill in the
    gap of our funding needs. We are also looking for ways to
    reduce our costs as well as our energy. And it is certainly one
    area where we have been successful. We have reduced energy
    costs with methane harvesting as well as solar installations.
        Cities like Baltimore are looking for new and innovative
    funding options to help expand the opportunities to assist with
    our fiscal challenges. For example, the creation of a loan
    guarantee program that provides low-cost capital for water
    infrastructure modeled after the TIFIA program. A WIFIA program
    could provide secured direct loans and loan guarantees, a
    standby line of credit for infrastructure and an annual Federal
    funding to budget for credit defaults.
        Federal credit can make a project more attractive for
    private capital and lower interest rates on private lending.
    And credit available on Treasury borrowing rates can reduce
    borrowing costs by up to 20 percent.
        Since water utilities have existing revenue streams which
    they can use to repay Federal credit assistance an investment
    of this nature is even more financially sound than a widely
    supported TIFIA program. Another example is the creation of a
    clean water trust fund. The fund could be supported by national
    dedicated user fees that are low rate and broadly based on a
    range of products sold in interstate commerce. This trust fund
    could provide a long-term and sustainable national funding
    source for water and wastewater investment. It could fund
    research and development of advanced treatment technology. It
    could support expansion of State Revolving Funds as well as
    provide grant assistance for watershed, urban, stormwater, and
    rural non-point source management.
        A source of sustainable national funding is essential to
    the recovery of our Nation's water infrastructure and our
    environment. Local governments cannot carry the financial
    burdens by themselves. Increased funding is only one side,
    however, of the coin, in improving our water infrastructure.
    Cities need more flexibility in meeting the requirements of the
    Clean Water Act and the Safe Drinking Water Act. We must meet
    our responsibilities, our environmental responsibilities. I
    don't think you will find one mayor in this country that thinks
    our environmental obligations are not serious. We want to meet
    those responsibilities. It is important to the health and the
    welfare of all our communities. But our resources are finite.
        I am happy to report to the distinguished members of this
    Subcommittee that the EPA has heard our message, and they have
    acknowledged the strain that municipalities are under. They are
    willing to work with us to develop a more flexible and tailored
    program to achieve a cleaner environment without bankrupting
    cities in the process. EPA headquarters has been working hard
    to develop these ideas into a concept called integrated
    planning. Integrated planning is a big change in the way EPA
    approaches enforcement, and it could not have come at a better
    time for cities across the country. In the past EPA enforced
    compliance with Federal environmental laws through a series of
    unfunded mandates. Each mandate was pursued individually and
    with the same sense of urgency.
        Through integrated planning, we will be able to look at all
    of our environmental projects holistically to determine the
    environmental, social, and health benefits of each one of them
    so we can place projects with the greatest benefits to the top
    of our capital plan and address the less effective projects
    later.
        In January EPA released a draft framework for integrated
    planning which outlines the overarching principles that should
    guide the development of an integrated plan. My city is already
    developing its own integrated plan. We are in the process of
    looking at all of our responsibilities under the Clean Water
    Act and the Safe Drinking Water Act, our operations and
    maintenance requirements, as well as our future capital
    investment needs and ranking each project based on its overall
    benefit. After extensive stakeholder consultation and outreach
    we will develop a long-term plan for effective management of
    our utilities.
        You will notice that I mentioned Baltimore's Safe Drinking
    Water Act responsibilities as an element of our integrated
    plan. Right now EPA only wants Clean Water Act mandates
    included in the integrated plan. But Baltimore, like many other
    cities, is responsible for metropolitan drinking water and
    wastewater systems as well as stormwater controls and treatment
    within our borders. Our citizens and ratepayers pay for these
    systems, and all three utilities run under the same streets. An
    integrated plan for Baltimore must address all three systems.
        While EPA has not agreed to including drinking water, they
    have left the door open for further negotiation on this issue.
    And I am confident that we will reach a solution that protects
    human health as well as the environment.
        One challenge to implementing integrated planning will be
    to establish a legal framework for the resulting plans. In my
    opinion there can be no one size fits all approach to this
    challenge. Each municipality will have to reach an agreement
    with EPA and its State regulators that is unique to its
    resources and its unique challenges.
        I am very proud that my city is at the forefront of the
    integrated planning effort. I believe that this program
    presents an excellent opportunity for each city and utility to
    comprehensively assess their water, wastewater, and stormwater
    programs and to plan in a way that produces the best results
    for both people and the environment.
        I am pleased that the EPA agrees and is willing to partner
    with us in developing a new and more productive approach to
    meeting our environmental obligations.
        Again, Mr. Chairman, I thank you for your kind attention
    and will be happy to answer any questions, either now or at the
    end of the panel.
        [The prepared statement of Ms. Rawlings-Blake follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Cardin. Thank you very much.
        We will hear from the panelists, then we will have some
    questions.
        Mr. Johnson.

    STATEMENT OF JERRY N. JOHNSON, GENERAL MANAGER/CEO, WASHINGTON
                      SUBURBAN SANITARY COMMISSION

        Mr. Johnson. Good morning, Mr. Chairman.
        I am Jerry Johnson, General Manager and CEO of the
    Washington Suburban Sanitary Commission. We provide water and
    wastewater services to 1.8 million residents of Prince Georges
    and Montgomery County, as you mentioned earlier, which border
    on the Nation's capital. WSSC has a combined operating capital
    budget for fiscal year 2012 of $1.2 billion.
        It is an honor to be here today, and I thank you for
    inviting me to join you on this relatively balmy morning. We
    are enjoying the warm weather. But it is particularly
    significant to our utility operators, for warm temperatures
    have meant fewer water main breaks to WSSC customers, employees
    and to our bottom line. Water main breaks in our service area
    also affect many Federal facilities that we serve and even the
    region's economy.
        We had only 336 breaks in the month of January, and in all
    of last year our customers only had 1,600 breaks. But it is
    counter to the long-term trend of upward numbers and upward
    count of water main breaks. Our yearly average is over 1,700,
    and our fear is that if we don't act quickly enough, one day in
    the not too distant future the number of breaks will reach a
    tipping point where we are unable to keep up with repairs.
        You may have heard about the study released yesterday by
    the American Water Works Association, which estimates that
    nationwide, to replace our aging underground water
    infrastructure as well as to add new pipes for the growing
    population, the cost will be well over $1 trillion over the
    next 25 years. Much of that is unplanned and currently not
    budgeted. Sitting in the national capital area, WSSC represents
    a microcosm of the conditions described in that report. With
    nearly 5,600 miles of underground water pipes fed by two water
    filtration plants, approximately 1,500 miles of those pipes--or
    26 percent--are well over 50 years old. Several years ago, we
    embarked on an aggressive program to address this issue.
        During the current fiscal year, we plan to replace 41 miles
    of water pipe. By 2015, the number will top out at 5,500 miles
    of water pipe, assuming that we can afford to keep up that
    pace. In today's dollars the cost to replace a mile of pipe is
    approximately $1.4 million. Over the next 6 years, the price of
    replacing underground water pipes will cost our ratepayers an
    estimated three-quarters of a billion dollars, and we will need
    to keep that pace up forever. It is kind of like painting a
    bridge, when you get to one end of it and you are finished, you
    have to go back to the beginning of it and start over again.
        Our biggest challenge is funding. Ninety-five percent of
    our revenue comes from our customers. For 6 years WSSC has had
    no rate increases, followed by 3 years of increases that were
    below the inflation rate. For the last 5 years, however, even
    in this troubled economy, our county councils have recognized
    the pressing issues and have approved rate increases between 6
    percent and 9 percent. Unfortunately, more increases will be
    needed, even though our recent increases are lower than those
    in many parts of the country.
        So what are we doing about this challenge at WSSC? We have
    undertaken a comprehensive multi-year asset management program.
    When completed it will provide a road map for the optimum
    schedule for either repair, refurbishment, or replacement of
    every single WSSC asset. Our goal is to use technology to most
    effectively manage our customers' resources.
        WSSC has chartered an infrastructure funding working group,
    made up of WSSC and county stakeholders, to study various ways
    to fund infrastructure replacement while attempting to reduce
    some of the burden on our ratepayers. We look at every avenue
    to control and reduce costs.
        For example, energy is among our highest annual operating
    expenditures. For the last 4 years, we have been purchasing
    wind power as a direct purchaser from a wind farm in
    Pennsylvania. Now wind power provides about one-third of the
    electric power needed for our operations and saves our
    customers about $800,000 per year.
        We have also substantially reduced greenhouse gases as a
    result, in the equivalent of taking 20,000 cars off of the
    Washington Beltway on an annual basis.
        With help from Federal grants we are also studying
    anaerobic digestion, which could allow us to use methane to
    provide power for some of our energy needs. We are extending
    the life of our large transmission mains--those between 36 and
    96 inches in diameter--by installing acoustic fiber or optic
    fiber. This system of cables installed in the pipes allows us
    to listen for potential snapping of support wires embedded in
    the concrete walls of the pipe, allowing us to monitor
    conditions with a computer 24 hours, 7 days a week. Along with
    a regular inspection regime this will prevent another incident
    like the near-tragedy that you mentioned earlier that occurred
    on River Road as well as the one in 2010, which shut down the
    interstate for several hours.
        But at this point I have really given you only half of the
    story, the drinking water side of the story. WSSC also has
    5,400 miles of underground sewer pipes and seven wastewater
    treatment plants. Like many urban communities in this country,
    including DC and Baltimore, we are under a consent decree to
    repair and improve the sewage collection system. And we and our
    customers are also contributing $18.5 million annually to the
    Maryland State fund used to help clean up the Chesapeake Bay.
        But there are other costs that we incur as well. For
    example, there are three-quarters of a billion dollars for
    sewer pipe maintenance and replacement over the next 6 years.
    And again, these costs will continue into the future. We are in
    the process of adding enhanced nutrient removal to our five
    largest wastewater treatment plants as a part of the Bay
    program. These projects, when completed in 2015, will cost
    $61.4 million, of which we expect to get $56 million in
    construction grants from the Chesapeake Bay fund, which is
    levied by the State.
        WSSC ratepayers must also spend 46 percent of the cost for
    E&R for the Blue Plains wastewater treatment plant in the
    District of Columbia, with estimated construction costs of $311
    million, with only $227 million of that being reimbursed by the
    Fund.
        Along with the practical problems of rebuilding this
    massive infrastructure, we face another challenge. Unlike roads
    and bridges and even railroads, they are out of sight and out
    of mind. By and large, we deliver 24 hours a day, 7 days a
    week, 365 days a year on a demand basis. You turn on the
    handle, the water flows; you press the button, the wastewater
    goes away.
        These functions, water and wastewater, are not optional.
    And they rely on systems of national infrastructure no less
    critical than the roads, bridges, and airports. They are
    absolutely necessary for the health and the well-being of our
    citizens here and across the country. These systems prevent
    diseases, provided for fire protection, and are absolutely
    essential for the economic growth of the United States.
        We are out of sight and out of mind; however, we have
    projects that are shovel-ready. We are providing jobs for
    workers across a range of skills, and we can provide more, and
    we can do it quickly. We have customers who continue to carry
    the major part of the burden and who need the relief most of
    all.
        With the exception of some of our policymakers, like
    those--like yourself and those who are members of this
    Committee here today, underground infrastructure has been a
    relatively low priority. The levels of Federal funding for this
    critical national infrastructure have been falling in numbers
    over the years. Water infrastructure should be a larger part of
    the ongoing national conversation because these challenges are
    not unique to WSSC and the Washington Metropolitan area, nor
    Baltimore.
        I hope this thumbnail sketch of the challenges we face as a
    local utility have been helpful. I again want to thank you for
    the opportunity to appear before you here today. Let's hope
    that the rest of March will be as mild as the earlier part of
    the winter, so that we don't experience quite as many water
    main breaks. Thank you for your tolerance with the timing.
        [The prepared statement of Mr. Johnson follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Cardin. Thank you very much for your testimony.
        Ms. Horne.

      STATEMENT OF KATHY HORNE, EXECUTIVE DIRECTOR, ALABAMA RURAL
                           WATER ASSOCIATION

        Ms. Horne. Thank you, Chairman Cardin, and Ranking Member
    Sessions, for the opportunity to testify here today.
        I am Kathy Horne, the Executive Director of the Alabama
    Rural Water Association, representing 550 public water
    utilities in the State of Alabama, serving 3.7 million people.
    I am also proud to represent the National Rural Water
    Association, which has over 28,000 small and rural community
    members.
        Alabama Rural Water has been in service since 1977. Our
    purpose is to assist and work with drinking water and
    wastewater systems in providing free localized training and
    onsite technical assistance. Many of the rural and small town
    water systems were constructed in Alabama during the 1950s and
    1960s. The vast majority of water suppliers serve a population
    of less than 10,000, which is equivalent to 3,333 customers.
        While most of the water systems in Alabama are managed
    successfully, very little net revenue is realized beyond the
    routine operational and maintenance cost. This makes it very
    difficult for small systems to meet the needs of financial
    reserves and system improvement funds while also properly
    maintaining the operation.
        I would like to highlight two areas of concern for
    community water systems and urge the Subcommittee to consider
    assisting in future Federal funding and policy. First is the
    problem of high unaccounted for water, and second is the lack
    of training resources for the governing body or board members
    of community water systems. Both of these challenges illustrate
    the critical need for increased funding to help in upgrading
    and expanding existing water system infrastructure.
        In Alabama 15 percent water loss is considered normal for
    firefighting, flushing, and routine line breaks. Last year
    Alabama Rural Water conducted 23 leak surveys free of charge,
    with an average water loss of 37 percent.
        On a national perspective, studies have estimated that 20
    percent to 25 percent of the treated water flowing within the
    distribution system is lost through leakage. I will give you an
    example. Last October, Alabama Rural Water conducted a leak
    detection survey for Centerville Water and Sewer Board in Bibb
    County. Centerville serves 1,945 customers. The survey resulted
    in the detection of a 6-inch main line that had blown apart at
    the coupling and was leaking 100 gallons per minute. Upon
    repair, this system saved approximately $6,480 monthly in
    service fees.
        This not only wastes the water supply but also the energy
    and the electrical costs associated with pumping and treating
    it. Energy bills are the highest expense for water utilities
    and correlate to a tremendous energy demand nationwide.
        My second concern is the lack of training resources for the
    governing board members of small water systems. In most all of
    the approximately 50,000 small community water systems, board
    members volunteer their time to make decisions on behalf of the
    citizens in their community regarding one of the most critical
    resources available to man: water. Many small water systems are
    lacking in essential resources like system maps, standard
    operating plans, et cetera. These are all very essential to
    identifying infrastructure conditions.
        As a part of this overall process, we urge Members of
    Congress, in addition to funding for tangible water
    infrastructure projects, to consider strengthening the capacity
    of local governments in providing additional resources in the
    investment of water and wastewater utility management. This
    would ensure the most effective use of State and Federal
    dollars invested in infrastructure projects.
        Federal funding sources have experienced drastic reductions
    in their most recent budgets, causing insufficient funding to
    address overdue improvement projects. With the shortfall the
    utilities are still expected to continue full service for the
    citizens, industry, economic growth and comply with all Federal
    and State regulatory requirements. Investing in the future of
    water infrastructure not only improves the quality of life for
    American citizens but also provides for future economic
    recovery, growth, and stability. It provides a natural
    resources that no one can live without.
        In summary, I respectfully urge Congress to consider the
    unique infrastructure needs and concerns facing our rural and
    small town water systems and incorporate these as priorities in
    future Federal water funding programs and policies.
        Thank you all for your service, and thank you for this
    opportunity.
        [The prepared statement of Ms. Horne follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Cardin. Thank you very much.
        Let me thank all our witnesses for their testimony. This is
    very important.
        Mr. Johnson, you mentioned the relatively low priority of
    these issues because of visibility, which I also pointed out in
    my opening statement. One of the reasons we are having these
    series of hearings is to establish the record which we hope
    will be for a greater commitment for the Federal Government in
    partnership on water infrastructure, but also a lasting
    commitment. We have made a lot of progress in the last 3 years,
    we really have. We increased dramatically the funding levels on
    the State Revolving Funds in the last 3 years. The budgets are
    higher.
        We see a dip this year, which has us greatly concerned. I
    plan to take some action on that and expect that some of my
    colleagues will be joining us in that regard.
        When it came to the use of recovery funds, we were able to
    get a significant amount of recovery funds dedicated to water
    projects. That was for two reasons: one because of the need,
    second the reason you just said, you were shovel-ready, which
    was something that we--unfortunately we have too many projects
    ready to go and not enough money to deal with those projects.
        Madam Mayor, let me ask you, I am very encouraged by your
    testimony in regard to your integrated plans with EPA. That is
    exactly what we want to see, a tailored program to deal with
    each of the communities. It is encouraging to hear your
    comments about EPA's willingness to try to tailor a program to
    meet your needs.
        Storm runoff is a challenge. Storm runoff could very well
    be a water quality issue from the point of view of the Clean
    Water Act, there is no question about it. We have a challenge
    in the Chesapeake Bay watershed as the largest single growth of
    pollutants going into the Bay are coming from the storm runoff
    issues.
        We also have a problem in managing the water treatment
    facility plants based upon the volume of storm runoff. We have
    that particular problem in Blue Plains, which has a major
    commitment to try to deal with storm runoff.
        I guess my question is--you mentioned that the EPA was
    having some difficulty in putting together the drinking water,
    safe drinking water with wastewater treatment, even though both
    come under basically their supervision. Are you having luck in
    dealing with the storm runoff with the wastewater treatment
    issues in an integrated plan with EPA? Are they willing to
    consider the challenges that you have in dealing with the
    infrastructure necessary to deal with storm runoff? We really
    have not had a great deal of Federal support in dealing with
    that part of the environmental challenge.
        Ms. Rawlings-Blake. I am encouraged. I have been mayor for
    just a little over 2 years. And in that time I have seen a lot
    of progress in the way that the conversation with EPA is going.
    So I know that the door is still open. Are we there yet? No.
    But the conversations, the fact that they are using the
    language of integrated planning, that they are talking about
    the possibility of a pilot city, I have one to recommend.
        I know that they are open to the common sense realities of
    what we face. I think what has been happening is a long
    tradition of dealing with all of these systems in segments. Our
    economies are forcing people to get out of that siloed thinking
    more than ever. To me, this is no exception. I believe that we
    can head that way, we can head that way in the future.
        So storm water is included, we are trying the drinking
    water included.
        Senator Cardin. Good. I appreciate that, because I think
    all three parts are important. If you can have an integrated
    plan, it makes a great deal of sense, rather than just
    stovepiping because of the funding source. And the funding
    source presents the challenge. So I am very pleased that EPA is
    willing to consider some flexibility.
        We do need to look at new avenues for partnership. I like
    your clean water trust fund; I think that makes a good deal of
    sense for us to consider that. To the extent that we can
    leverage the lower interest rates the Federal Government can
    obtain, to the extent that you can leverage the tax status, it
    gives us the possibility of leveraging more money. There is a
    lot of discussion here about infrastructure banks. And I have
    promoted that in any infrastructure bank, let's include water
    projects, not just the traditional thoughts of transportation
    or energy or education, which are the other areas that tend to
    get a lot of attention. We want to make sure that water is
    included in those areas.
        But I really applaud you, and the mayors collectively, for
    coming forward with creative sources. I think we should push
    for some form of a clean water trust account that could
    leverage the dollars that are available more effectively than
    we are doing today.
        Ms. Rawlings-Blake. Mr. Chairman, I agree, and I think we
    have a unique opportunity. There are not many national issues
    where rural areas and urban areas are dealing with an issue
    with the same amount of urgency. To me that provides an
    opportunity for partnership across the aisle and in ways that
    we haven't seen before. We are facing the same problems but in
    different ways. I really think we could all work together,
    rural areas, metropolitan areas, in the issue of water
    infrastructure funding, to create a solution that would help
    all across the country.
        Senator Cardin. I agree. I think there is bipartisan
    support here, as Senator Sessions indicated in his opening
    comments. Senator Inhofe has been a strong proponent of moving
    forward with water infrastructure as has Senator Boxer.
        Ms. Horne, I was concerned and impressed by your statements
    that talk about the challenges a rural community in getting the
    technical help that they need in order to be able to properly
    manage a water system. I must tell you, I visited many of the
    small water facilities that we have in Maryland, treatment
    facilities. I am impressed by the community sort of coming
    together to manage that. They don't have the same type of
    professional management that you would see in a large urban
    center.
        We do provide some technical help through the funds that
    are available nationally. But could you just go into the
    challenges that you see in the ability to manage a rural water
    plant that the Federal Government should be sensitive to trying
    to provide some--meeting some of those challenges?
        Ms. Horne. Some of the challenges that we see in the State
    of Alabama include, in working with members of management it is
    just the lack of opportunity that these individuals have for
    specific training that would help them to make better decisions
    regarding the management of that public water utility.
        They do have a lot of challenges that they deal with
    because their customer base is very small. And the regulatory
    requirements have not been reduced, of course; through EPA and
    the State regulatory agencies they have been increased. Many of
    those regulations impose some high costs, of course, for these
    utilities. And with small customer bases it is very difficult
    for management to be able to spread those costs throughout the
    customer base and to be able to maintain reasonable rates at
    the same time.
        So we primarily work with these utilities through
    governmental funding opportunities. And in doing so, that has
    provided a tremendous, a tremendous opportunity to assist those
    utilities with the infrastructure problems that they are
    facing. Yet there is so much, of course, that we have discussed
    today that still needs to be done that we haven't reached.
        I think that with the support from the Subcommittee to help
    us with resources that would allow the board members of these
    small public water utilities to have an opportunity to learn
    more about what resources are available to them and what
    others, even in larger municipalities, are doing to help in
    their particular cities, which may or may not be relevant to a
    small, rural community. It is still an opportunity for that
    person to become better informed and to make better decisions
    regarding that particular operation.
        Senator Cardin. Thank you.
        Let me yield to Senator Sessions.
        Senator Sessions. Thank you.
        Mr. Chairman, I would offer for the record a statement from
    the Birmingham Water Works Board.
        Senator Cardin. Without objection, it will be included.
        [The referenced statement follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Sessions. It deals with issues that we are talking
    about and the challenges that this older city system faces.
        Ms. Horne, Alabama Rural Water Association's purpose is to
    improve the quality of life for Rural Alabamians. Can you
    describe some recent situations where new water infrastructure
    has helped a rural community with economic growth and
    development?
        Ms. Horne. Sure. Most of the water systems in Alabama
    started, as I mentioned, back in the 1950s and the 1960s. Those
    were primarily funded through USDA loans and grants.
        I do know--what comes to mind is Millport, the water
    utility in Millport, that serves a little over 400 customers, a
    very small customer base. And a USDA loan and grant was made
    available to this utility to provide infrastructure
    improvements to allow Millport in Lamar County to be able to
    provide capacity to a recycling plant that was interested in
    locating there.
        Without this Federal support through funding, it would not
    have happened. It has worked very well; they did create this
    commercial user. And that is always really important in a rural
    community, to have an inviting environment where they can meet
    the demands of those particular industries or manufacturing
    plants that would even consider locating in those rural
    communities to be able to find the funding to improve their
    infrastructure to provide the service needed and meet the
    demands that are requested.
        Senator Sessions. You talked about the importance of the
    State Revolving Loan Fund, which provides low interest loans to
    communities so they can comply with the water standards that
    they need to meet and that the Federal Government requires. I
    understand that this program is due for reauthorization. It is
    a good example of a cooperative program between Federal and
    State governments that has helped meet our Nation's
    infrastructure needs. I think that is plain.
        The President's budget proposes some deep cuts, and we are
    facing deep cuts in a lot of different areas. We should respect
    that and just not immediately reject the budget that has been
    proposed. But could you explain why the SRF program is
    important to communities and how you think it is valuable and
    should be maintained?
        Ms. Horne. The State Revolving Fund is certainly valuable
    to all of our States. It provides a tremendous financial
    revenue source for our public water utilities and wastewater
    utilities through the Clean Water Revolving Fund. I think that
    with the State Revolving Fund, if more discretion could be
    given to the people in each State regarding the decisions that
    they make about the projects that are being approved, looking
    at priorities for those projects and determining whether or not
    the utility, for example, is in compliance or if they are
    having compliance issues.
        If that utility could be given some priority in the
    approval process and allow the discretion of those type
    decisions to be made at the State level. Who better knows the
    needs of that State than the people in the State? As we
    identify these areas of concern and the projects that are most
    needed with the public water systems that we work with, we
    partner in working with our regulatory agencies, USDA and
    others, to help identify these problems and then support the
    priority funding that is needed to correct the issue at hand.
        Senator Sessions. Well, thank you.
        Mr. Johnson, Ms. Rawlings-Blake, would you have any comment
    on that?
        Ms. Rawlings-Blake. I certainly agree that the Revolving
    Fund is important. My hope is that we can get the funding up to
    a meaningful level. The needs are great, and the Revolving Loan
    Fund, while it is important, does not come near to meeting the
    State's needs.
        We have very unique needs, rural communities, urban
    communities. If you take a look at the infrastructure
    improvements that are needed to meet the Federal mandates, that
    expense cannot be borne by ratepayers alone. We need to be able
    to leverage funds; we need access to cheaper capital money so
    we can make the improvements that we need.
        So we need the Revolving Fund as well as some other
    innovative financing options so we can work in partnership to
    create a safe environment for all of us.
        Senator Sessions. Mr. Johnson, would you have any comments
    on that, and maybe a question of increased flexibility?
        Mr. Johnson. I certainly agree with both speakers, with
    everything they have had to say. In particular the point of
    additional flexibility at the State level. What we found is
    that with the current affordability guidance, it makes it
    rather difficult for us to attract some of those moneys in the
    two counties that we serve. And if there were greater
    flexibility, I think those dollars would go a longer way.
        One of the things I think you have to understand is in an
    urbanized community like the two counties that we serve,
    Montgomery and Prince Georges, there are still areas and
    pockets of the community where there are unserved and under-
    served residents who are still living with septic tanks and
    wells that are currently failing and going bad. We are now
    struggling to try to determine how we extend the modern system
    to many of those residents. We are talking about subdivisions
    of 40 houses here and 20 or 30 houses there, and sometimes
    single residents in some of the far reaches of the two
    counties.
        So I really empathize and understand and can very much
    relate to some of the things that are happening in the rural
    areas as well, although we are in a very urbanized area. So I
    think the notion of flexibility and certainly additional
    funding would do well to serve us in the State of Maryland.
        Senator Sessions. Mr. Chairman, as I think about water, my
    three rural grandparents' homes, all three, when I was a kid,
    still had a well, bucket well, shallow well where you got water
    from. All three had attempted with various degrees of success
    to drill a well, but some had too much iron, some sand would
    cave in, and it would be in trouble.
        In my mother's family home they liked the water from an
    artesian well. We would go periodically with jars and fill up
    with water, and so did my father's home place. So these are the
    kinds of things people have lived with for years and years.
        But a water system is relatively inexpensive. It is amazing
    to me how low the rates can be for people out on the road, with
    a new system, the plastic piping can rush out there and put a
    water tower up, and it works. So it becomes economically
    feasible and realistic, providing a reliable source of water,
    which also can attract business. And without it, you won't be
    able to attain business development.
        So I think it is a good infrastructure investment. We don't
    have near as much as we would like to have. I understand the
    difficulties with the budget. But I sure hope that we can
    figure out a way not to lose momentum in being able to expand
    the water systems in our country.
        Senator Cardin. Senator Sessions, thank you very much. I am
    going to follow up on some of your economic issues here because
    I think you are absolutely correct. If a business is going to
    be able to locate they have to have access to water. It is just
    a fact. They are not going to be able to do what your
    grandparents did in order to deal with their business needs.
    They are going to locate where they can get a reliable source
    of clean water.
        And as we look at where population trends are taking place,
    and when you try to have proper planning for economic growth,
    the availability of water through a system is critical. So it
    is absolutely directly involved in economic issues.
        But you raise a very important point. And that is, people
    are sort of accustomed to being able to get water at a rather
    reasonable, some would say cheap rate. And perhaps we are not
    doing an effective enough job in pointing out to the public
    what is involved in getting safe drinking water to their homes
    so that we can have revenue options that are currently not
    available through the rate increases to be able to get the
    continuation of reliable service in a more efficient manner,
    without all those leaks. Any suggestions here of how we can get
    a more realistic expectation from the users as to what the
    costs of these systems are involved?
        Mr. Johnson. Senator, I think that there are a number of
    elements that relate to that question. One is straightforward
    education, education, education. And it is making our customers
    more aware of what it takes to get water. And there are a
    variety of different things, from exposing them to our
    facilities and offering tours and opportunities for them to see
    what we are doing, taking them to our various work sites and
    the like.
        And when we are going into neighborhoods and doing pipe
    replacement, explaining to them the level of effort that it
    takes, the kind of equipment that it takes, the dollars that it
    takes to do that kind of work. Replacement of a mile of
    standard line, ductal line pipe, is about $1.4 million today.
    In addition to that replacement, we have to do extensions and
    other kinds of work.
        So I think that a good bit of it has to do with education.
    Truly, I believe that people are getting a real bargain with
    water supply and water service. When you compare the water bill
    to other utility costs and look at the essential nature of
    water service, it is a real bargain.
        But understand that in our urban areas communities can't
    function without fire protection. Hospitals can't operate
    without a clean, safe supply of water. Not all of the water,
    obviously, is used for consumptive purposes. There are many
    other uses of water. I think making people aware that they do
    have options for other utilization of re-used water and the
    like I think is also very important to our customers.
        And getting them to get behind certain other initiatives
    that we might be undertaking, things like the Mayor mentioned,
    the trust fund. If customers understood the nature of a trust
    fund and how something like that could work to benefit them and
    not to reduce the cost but to hold the trajectory of costs
    down, I think would be very important to them.
        And also looking at our assets and how we might be able to
    leverage them for more resources.
        Senator Cardin. Madam Mayor.
        Ms. Rawlings-Blake. Yes, thank you very much, Mr. Chairman.
        I have certainly worked diligently on the education effort.
    Because we have had to raise the rates--the water rates--
    annually for the past few years. And with the clear
    understanding at the time that we started the roll out of the
    increases that it would go on for some time in the foreseeable
    future.
        So in Baltimore the relative cheapness or inexpense of
    water is going away. And people are feeling the squeeze. And it
    is becoming increasingly difficult when we know that we have
    inefficiencies and we know that we have daily water loss that
    costs us more money to be able to produce that water, when we
    know that because of an inefficiency in the way that we must
    deal with our capital projects, because we are not at the point
    where we have this integrated plan or this holistic plan means
    that we can't really deal with the aging infrastructure issue
    in a pace where we think would be helpful to keep the costs
    down, because we have to meet these other Federal mandates.
        So it is more expensive; it requires education. But at a
    point--at least in Baltimore--people are going to want to see
    evidence of more cooperation on providing the efficiencies and
    the autonomy that is needed to be able to save the ratepayer
    money. So the money that we are charging we know is going to
    create the most efficient and effective system possible.
        Senator Cardin. Just one last question on the economics
    here of moving forward, Mr. Johnson, you mentioned 1,700 breaks
    a year. That is an unbelievable number. If my math is right,
    that is four or five a day that you get every day of the year.
    And Mayor Stephanie Rawlings-Blake, you mentioned the number of
    leaks that you are having in Baltimore, and Ms. Horne, you
    mentioned 20 or 25 percent leakage. That is an unbelievable
    number of how much water is wasted.
        That is a huge cost. I can't imagine how much it costs you
    just to investigate each leak and try to deal with it before it
    becomes a major problem for a break that can cause a major
    disruption to a community, loss of water. In Dundalk we had
    people for days had to boil their water. They couldn't get
    water. And that is in Baltimore.
        So that is a huge cost. Can you quantitate that at all?
        Mr. Johnson. I can in just a minute. I can get that
    information back to you.
        Senator Cardin. I think it would be helpful for us to have
    if you could, quantitate the cost of inaction, the leakage plus
    the breaks plus all the repair work that you have to do. If
    deferred maintenance catches up with you, and that is what is
    happening in America, your analogy of painting a bridge is
    absolutely right. The problem is we haven't completed it the
    first time.
        Mr. Johnson. You are right.
        Senator Cardin. And it is already peeling at the back end.
    And we have to catch up in a much more aggressive way.
        Let me turn it over to Senator Sessions, and I will come
    back and give you all an opportunity.
        Senator Sessions. Mayor Rawlings-Blake, I offered for the
    record a statement from the Birmingham Water Works Board, which
    I think is doing very well. But I am sure you are probably
    aware that Jefferson County, which is also part of the
    Birmingham area water works system, declared bankruptcy, one of
    the largest bankruptcies, and what an embarrassing, difficult
    time that has been. The rates surged for the consumers to a
    point they couldn't be sustained.
        I was attorney general at a point when the EPA filed a
    complaint against the system. It was supposed to cost $1
    billion to fix the problems; it ended up costing about $4
    billion. And it was those bonds and the floating of that and
    some unwise decisions they made about how to finance it that
    led to this bankruptcy.
        I understand you had a recent settlement of $250 million
    with EPA. More than that? OK.
        Ms. Rawlings-Blake. I think the consent decree is around
    $1.2 billion settlement.
        Senator Sessions. Yes. I believe Mr. Johnson had a smaller
    one.
        I guess the question is, do you think you can stay on those
    numbers? Are you afraid that they will go out of control and
    not be able to accomplish everything you are mandated to
    accomplish? What kind of risk does that place you in?
        Ms. Rawlings-Blake. If you were to come to one of our Water
    Council meetings and see mayors from across the country, small
    cities, large cities, Republican, Democrat, deal with the
    fiscal reality of trying to meet these mandates, you will see a
    frustration beyond belief. Because every single one of us wants
    a safe water system. We want a safe environment.
        But we can't do it just on the backs of the ratepayers. We
    are all at risk. We don't want to see another story of a
    bankrupt city, another one, another one, when we know that
    there are other options out there. It requires us to think
    differently and smarter about these financing options so we can
    use the resources that we have.
        The ratepayers, I think the rate of default for these water
    bonds is one of the lowest out of any of it. You have the
    regular ratepayers paying the water bill. But we need to be
    able to leverage that to get a more efficient system quicker.
        Senator Sessions. Well, as I understand the EPA law, and I
    think it controls what they do, they are not able to say, well,
    your sewer system overflows, and you have to stop it, but you
    can do it over a period of time, which they do. But
    fundamentally they are required to end it immediately. If it
    creates a risk they are not supposed to consider particularly
    how you pay for it and what kind of system of repair over a
    period of years would be the most efficient way to achieve that
    goal. They push for rapid completion of these problem areas
    almost immediately. It can be a great cost.
        I sensed--when I observed the settlement of $1 billion in
    Alabama, I thought the city couldn't afford that. But before it
    was over it was about $4 billion. And it took them down.
        Mr. Johnson, you had a settlement also. Do you find that
    the EPA legal requirements are such that it makes it difficult
    to work out a cost-effective way to improve your systems?
        Mr. Johnson. I would assume, I think that is a relative
    question. It depends on the nature of the problem and the
    issues that you are dealing with. I have had the experience of
    doing this in several different cities and in the community
    that I am in now. And it is a heavy burden. And the burden
    comes on top of all of the other things that you know you have
    to do just as good management and good operating practices.
        The question that the Senator asked me just a minute ago
    about the cost of maintenance of the water and sewer pipes,
    just that maintenance alone is $21.6 million a year. So if you
    take that as a given, then recognize that you now have to take
    on a regulatory responsibility that has to be completed within
    a specified period of time, it does put a strain on the system,
    and you have to make some tough choices. Do you continue to
    replace these water mains and the other systems that you know
    are going to go bad, or do you let them languish while you go
    forward and focus on the other parts of the system that you are
    being required to do because of an EPA order?
        Those are very difficult. And you have to do it within a
    finite number of dollars and resources that you have available.
    This is not unique to our utility. As the Mayor indicates, this
    happens across the country and creates a very vexing kind of
    dilemma for the various organizations that have to undertake
    it.
        Senator Sessions. Thank you.
        Mr. Johnson. However, the comments that the Mayor made
    earlier about this integrated planning approach has great
    potential and has great opportunity to begin to save the
    ratepayers and the communities dollars. Because if we look at
    these issues in an integrated fashion and recognize, as an
    example, that sewer flow and stormwater flow are both water-
    related issues, and all of it has to be dealt with through a
    wastewater plant or certain other facilities, and we begin to
    look at that planning effort on an integrated basis, that
    becomes method of saving money when we come out of that
    stovepipe.
        Senator Cardin. I have one more observation and one
    question, then we may have some additional questions for the
    record.
        Let me just point out, what Senator Sessions is saying
    about coordination, and Mayor Rawlings-Blake said about
    integrated plans, it takes me back--the problems in Baltimore
    pre-date our mayor, and pre-dates your service even as a city
    councilwoman. We have been in legal issues for a long time
    concerning compliance with Federal regulation in our water.
        We had an issue with the Army Corps with the Patapsco River
    restoration, where a lot of the pipes are laid, as to when they
    are doing the restoration work, why couldn't they at the same
    time do some of the water work and count it all as one project.
    And we had the hardest time getting them to do two things at
    one time, two different agencies.
        So I think Senator Sessions' point is a very valid point. I
    really am encouraged by what the Mayor is saying in your
    conversations with EPA, of looking at three different sources
    and putting them together as a coordinated plan. I know you are
    not quite there yet. But we are going to be interested in
    following that and trying to help you get through the
    administrative bureaucratic issues so that we can look at
    results.
        And we might want to bring in the programs, such as what
    the Army Corps does on restoration and say, look, that may be a
    source that we can also get some help, as we do some of our
    restoration work, also look at storm management and issues like
    that, that make your job a little bit easier, so that we sort
    of coordinate all this at one time.
        I am looking at the transportation bill as an opportunity
    to deal with storm runoff. We can use that as a way, again, to
    make your job just a little bit easier.
        But my last question deals with green technology. Mr.
    Johnson, you have been an innovator in looking at innovative
    ways to deal with water issues. Can you just briefly tell us
    the promise for green technology as you deal with managing the
    water issues as to how much promise that holds for not only
    being gentler to our environment but also more economically
    efficient?
        Mr. Johnson. As I mentioned in my earlier presentation, we
    have bought into a wind farm in Pennsylvania that is now saving
    our customers about $800,000 a year and reducing traffic on 495
    or the Beltway by about 20,000 cars per year. So that is one
    innovation. We are also looking at how we go about re-using
    much of what we do at the wastewater treatment plant. Are there
    ways that we can approach the digestion system at the plant, as
    an example, to recapture methane gas and re-use that for
    offsetting some of our energy needs. Are there ways that we can
    use solar power. We have fairly large land holdings. I think
    that presents some opportunities for us to do some of those
    kinds of activities.
        But the private sector investment also needs initiative. I
    think that some of the tax credits that have been provided by
    the Federal Government for some of those energy initiatives is
    something that could help us as well. Because then we can
    incent the private sector folks to come in and do the
    photovoltaic kinds of projects and other things that would
    allow us to function much better.
        We are also looking at better ways of eliminating biosolids
    and methods of re-using that in a more effective way, as we
    know that land application is not going to be the way of the
    future. So we have to look down the road at ways of dealing
    with that as well.
        So we look at the whole operation: can we reduce chemical
    use, and our carbon footprint to ensure that we have resources
    available for our children and their children's children in the
    future.
        Senator Cardin. Thank you.
        Do either of the other two witnesses want to comment on
    this issue?
        Ms. Rawlings-Blake. We are certainly looking, Mr. Chair, at
    uses of green technology in our holistic approach, our
    integrated planning proposal.
        Senator Cardin. Thank you.
        Let me thank all three of you for being here and just tell
    you some of the things that we are going to be looking at.
    Senator Sessions mentioned that the State Revolving Fund
    reauthorization is an issue that enjoys bipartisan support.
    This Committee has a history of working together on those
    issues. As we look at the future of the State Revolving Funds,
    I think the comment that Ms. Horne made is accurate, we are
    looking at ways of giving you more flexibility as we move
    forward with the Federal partnerships. So we will continue to
    do that.
        We also believe the funding levels have to be maintained.
    Senator Sessions raised a very valid point about our budget
    challenges. We all need to be mindful that we have to have a
    sustainable Federal budget. Infrastructure is a critically
    important priority for this country, and we want to make sure
    that water, along with our other transportation, our
    transportation priorities and energy priorities, are included
    at a high level. So we will continue to fight for that.
        We will look for creative ways to provide additional
    opportunities. I think the testimony of Mayor Rawlings-Blake
    helps us in thinking about additional avenues that we can look
    at to provide additional partnerships.
        But I really thought the point that all of you raised about
    coordination is important here. We have multiple goals. The
    easier we can work on those multiple goals and have the Federal
    Government helpful rather than just giving you mandates without
    an avenue to meet those needs in a more cost-effective way,
    which is what I think we all are trying to do with the Federal
    partnerships.
        So this hearing will be extremely valuable to our Committee
    in coming up with a strategy to try to help you, as your
    partner, to help meet the expectations of our public for safe
    and clean water. Thank you very much for your testimony.
        We will stand adjourned.
        [Whereupon, at 11:21 a.m., the Committee was adjourned.]
        [An additional statement submitted for the record follows:]

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

        I appreciate that Senator Cardin and Senator Sessions have
    called another hearing on water infrastructure needs in our
    country. I have often said that the best way to ensure we are
    providing safe drinking water and clean water is to improve
    water infrastructure. I look forward to working with them and
    other members of the Committee this year on this vital issue.
        It is clear that the United States' water infrastructure is
    in dire need of repair. In the American Society of Civil
    Engineers' most recent report card for United States'
    infrastructure, they gave the wastewater and drinking water
    infrastructure a grade of a D^. At our last hearing, Mr.
    Gregory E. DiLoreto, president-elect of ASCE, testified that if
    current infrastructure investment trends persist, by 2020 the
    anticipated capital funding gap will be $84 billion. He noted
    that ``Even with the increased use of sustainable practices and
    cost-effective development of other efficiency methods, the
    growing gap between capital needs to maintain drinking water
    and wastewater treatment infrastructure and investments to meet
    those needs will likely result in unreliable water service and
    inadequate wastewater treatment.'' Yesterday the American Water
    Works Association released a report showing that the United
    States will need to spend $1 trillion in the next 25 years to
    maintain the current level of drinking water service and
    accommodate economic growth.
        A nationwide investment in improving the aging water
    infrastructure will create jobs and protect public health and
    the environment. Public investment in improving the aging water
    infrastructure, according to the Department of Commerce, yields
    significant economic benefits estimating that $1 invested in
    water infrastructure generates more than $2 in economic output
    in other industries and that each job created in the local
    water and sewer industry creates nearly 4 jobs in the national
    economy. The U.S. Conference of Mayors notes that each public
    dollar invested in water infrastructure increases private long-
    term GDP output by more than $6.
        Given the incredible need, the incredible benefits from
    investment, I was extremely disappointed to see that EPA's
    fiscal year 2013 budget requested a decrease in funding for the
    Drinking Water and Clean Water State Revolving Fund programs
    for the second year in a row. Every Federal dollar that EPA
    directs away from addressing the primary goal of the SRF
    programs reduces the capacity of a State to leverage Federal
    funding and address infrastructure needs. One million in
    Federal funds from these programs is leveraged into $3 million
    in capacity for funding additional infrastructure projects. As
    Joe Freeman, Chief Financial Assistance Division, from the
    Oklahoma Water Resources Board testified before this
    Subcommittee in December, ``In the past two decades few
    federally authorized programs have proven as effective in
    realizing their intended goals as the SRF programs.''
        I am looking forward to hearing about the challenges facing
    water systems, both small and large. I continue to believe that
    the most successful approaches to helping water systems meet
    their individual water quality needs are developed at the local
    level. Because water challenges differ from State to State and
    city to city we must promote solutions that are flexible and
    provide solutions for both small and large systems.
        I am especially pleased to have Kathy Horne, Executive
    Director of the Alabama Rural Water Association, here to share
    her perspectives on issues affecting rural water systems. As
    you know, Oklahoma has a large number of rural water systems.
    Rural systems often lack the financing and engineering
    resources of many larger systems yet still are tasked with
    providing safe drinking water to the people they serve.
    Ensuring that treatment technologies are cost effective is
    critical for these systems since they serve fewer people often
    over large geographical areas, and costs are shared between
    fewer people than urban drinking water systems. Rural
    populations often must pay more money to receive the same water
    service, which is not affordable for many rural Americans who
    live on fixed incomes.
        Considering the importance of water infrastructure to the
    well being of the American people and our economy, I will
    continue to support investment in water infrastructure and am
    looking forward to hearing the testimony of our witnesses on
    the important issues facing both rural and urban water systems.
        Thank you.

        [Additional material submitted for the record follows:]

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