    [Senate Hearing 114-348]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 114-348

        THE FEDERAL ROLE IN KEEPING WATER AND WASTEWATER INFRASTRUCTURE
                                   AFFORDABLE

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

                                    HEARING

                                   BEFORE THE

                                  COMMITTEE ON
                          ENVIRONMENT AND PUBLIC WORKS
                              UNITED STATES SENATE

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                 APRIL 7, 2016

                                   __________

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

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                   COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

                        ONE HUNDRED FOURTEENTH CONGRESS
                                 SECOND SESSION

                      JAMES M. INHOFE, Oklahoma, Chairman
    DAVID VITTER, Louisiana              BARBARA BOXER, California
    JOHN BARRASSO, Wyoming               THOMAS R. CARPER, Delaware
    SHELLEY MOORE CAPITO, West Virginia  BENJAMIN L. CARDIN, Maryland
    MIKE CRAPO, Idaho                    BERNARD SANDERS, Vermont
    JOHN BOOZMAN, Arkansas               SHELDON WHITEHOUSE, Rhode Island
    JEFF SESSIONS, Alabama               JEFF MERKLEY, Oregon
    ROGER WICKER, Mississippi            KIRSTEN GILLIBRAND, New York
    DEB FISCHER, Nebraska                CORY A. BOOKER, New Jersey
    MIKE ROUNDS, South Dakota            EDWARD J. MARKEY, Massachusetts
    DAN SULLIVAN, Alaska

                     Ryan Jackson, Majority Staff Director
                   Bettina Poirier, Democratic Staff Director

                                C O N T E N T S

                                  ----------
                                                                       Page

                                 APRIL 7, 2016
                               OPENING STATEMENTS

    Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma...     1
    Boxer, Hon. Barbara, U.S. Senator from the State of California...     4

                                   WITNESSES

    Berger, David, Mayor, Lima, Ohio, on behalf of the U.S.
      Conference of Mayors...........................................     6
        Prepared statement...........................................     8
    Chow, Rudolph S., P.E., Director, Department of Public Works,
      Baltimore, Maryland, on behalf of the Water Environment
      Federation.....................................................    85
        Prepared statement...........................................    87
    Moore, Robert, General Manager, Marshall County Water
      Corporation, Madill, Oklahoma, on behalf of the National Rural
      Water Association..............................................   105
        Prepared statement...........................................   107
    Arndt, Aurel, former Executive Officer, Lehigh County Authority,
      Pennsylvania, on behalf of the American Water Works Association   136
        Prepared statement...........................................   139
    Gysel, Joe, President, Epcor Water (USA), Inc., Phoenix, Arizona,
      on behalf of the National Association of Water Companies.......   145
        Prepared statement...........................................   147
    Olson, Erik, Director, Health Program, Natural Resources Defense
      Council........................................................   159
        Prepared statement...........................................   161

                              ADDITIONAL MATERIAL

    Statement of the Associated General Contractors of America.......   198
    Letter to Senators Inhofe and Boxer from the Association of
      Metropolitan Water Agencies, April 7, 2016.....................   203
    Statement of the National Association of Clean Water Agencies....   207
    Testimony of Commissioner Todd Portune, Board of County
      Commissioners, Hamilton County, Ohio, on behalf of the
      ``Perfect Storm'' Communities Coalition........................   211
    Statement by the Unitarian Universalist Service Committee........   217

        THE FEDERAL ROLE IN KEEPING WATER AND WASTEWATER INFRASTRUCTURE
                                   AFFORDABLE

                                  ----------

                            THURSDAY, APRIL 7, 2016

                                           U.S. Senate,
                     Committee on Environment and Public Works,
                                                        Washington, DC.
        The committee met, pursuant to notice, at 10:01 a.m. in
    room 406, Dirksen Senate Office Building, Hon. James M. Inhofe
    (chairman of the committee) presiding.
        Present: Senators Inhofe, Boxer, Barrasso, Capito, Crapo,
    Boozman, Wicker, Fischer, Sullivan, Carper, Cardin, Whitehouse,
    Gillibrand, Booker, and Markey.

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

        Senator Inhofe. Well, the EPA has identified $384 billion
    in drinking water needs and $271 billion in wastewater needs
    over the next 20 years based on capital improvement plans
    developed by local utilities. According to the U.S. Conference
    of Mayors, which I really enjoyed visiting with the U.S.
    Conference of Mayors, and I am glad to have you here to
    represent them. That was, what, 3 weeks ago or so. Anyway, it
    is your meeting. It is nice to see some of the people are still
    in the U.S. Conference of Mayors that were there when I was a
    Mayor, a long time ago.
        But according to the U.S. Conference of Mayors, through
    2013, local governments have invested over $2 trillion in water
    and sewer infrastructure and continue to spend $17 billion a
    year. Now, these local expenditures represent over 98 percent,
    98 percent of the cost of providing services and investing in
    infrastructure. These costs are paid by you and by me and by
    our ratepayers, and as a general rule this is an appropriate
    thing to have users pay.
        But water and wastewater is funded by the taxpayers who
    receive these services. That is fine. Unfortunately, however,
    we are no longer just paying for services; we are also paying
    for unfunded Federal mandates, as I mentioned. And as Federal
    mandates pile up, the bills paid by individual homeowners get
    bigger and are becoming unaffordable for many Americans.
        Federal mandates also force local communities to change
    their priorities. In the water and sewer world, this pushes
    basic repair and replacement to the bottom of the list. When we
    force communities to chase mandates that may have very small
    incremental health and environmental benefits, we risk losing
    both basic public health protections and the economic
    foundations of our communities.
        There is a Federal interest in maintaining these health
    protections and economic benefits, and there are a variety of
    ways we can help. I want to list four here.
        First, we have to continue to support the clean water and
    drinking water State revolving funds that provide low cost
    loans for infrastructure improvements. The President's fiscal
    year 2017 budget proposed cutting the clean water fund by $414
    million and providing a $197 million increase in the drinking
    water fund. Now, this is robbing Peter to pay Paul, so it
    really doesn't make that difference; the net is a loss.
        Second, we have to find new ways to increase investment in
    infrastructure. In 2014, we took action by adding the Water
    Infrastructure Financing and Innovation Act, WIFIA, to the WRDA
    bill. EPA is finally requesting funding to startup the WIFIA
    program, although they are only requesting $15 million. In our
    proposal to help Flint and other communities around the
    country, we are planning to provide around $70 million, not $15
    million, but $70 million to capitalize WIFIA.
        Third, we need to look for ways to encourage even more
    private investment in water and wastewater infrastructure.
    WIFIA loans provide only 49 percent of the project costs, so
    where does the funding for the other 51 percent? So it is a 50-
    50 thing. If we can't be raised through municipal bonds, where
    is it going to come from?
        Fourth, we need to increase support for small rural
    communities who simply can't afford the investment that EPA
    wants them to make and need technical support to keep up with
    all the Federal mandates. Mr. Robert Moore of Madill, Oklahoma,
    will offer testimony on this.
        Finally, we have to make sure that Federal mandates don't
    force communities to spend hundreds of millions of dollars for
    projects that may have little impact on water quality while
    delaying other critical programs. The U.S. Conference of Mayors
    has spent a lot of time trying to work with the EPA on this
    issue. Despite the EPA's rhetoric on integrated planning and
    flexibility, communities are still being threatened with
    penalties even as they are trying to negotiate with the EPA.
        I strongly believe that investment in infrastructure
    expands our economy. The U.S. Conference of Mayors reports that
    each public dollar invested in water infrastructure increases
    private long-term gross domestic product by $6.35. To date, the
    Joint Tax Committee has not been persuaded by these numbers.
    The Joint Tax Committee assumes that these programs increase
    the use of tax-exempt bonds, creating a loss to the Treasury
    that we need to offset.
        This is exactly a barrier to increasing funding authority
    for the State revolving funds and loan programs, and WIFIA
    also. The Water Environment Federation, represented here today,
    has conducted a new study to measure the increases in personal
    and corporate income taxes paid into the U.S. Treasury
    attributable to water infrastructure investment. In other
    words, more money is coming into the Treasury as a result of
    this type of investment.
        This hearing is laying the foundation for legislation on
    water and wastewater infrastructure, and I hope to be ready to
    move it at the same time our Water Resources Development Act,
    or WRDA, is taking place.
        Senator Boxer.
        [The prepared statement of Senator Inhofe follows:]

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

        EPA has identified $384 billion in drinking water needs and
    $271 billion in wastewater needs over the next 20 years based
    on capital improvement plans developed by local utilities.
    According to the U.S. Conference of Mayors, through 2013 local
    governments have invested over $2 trillion in water and sewer
    infrastructure, including $117 billion in 2013 alone.
        These local expenditures represent over 98 percent of the
    cost of providing services and investing in infrastructure.
    These costs are paid by you, me and our neighbors when we pay
    our water and sewer bills.
        As a general rule, this is appropriate. Water and
    wastewater are funded by the ratepayers who receive these
    services. Unfortunately, however, we are no longer just paying
    for services. We also are paying for unfunded Federal mandates.
    And as Federal mandates pile up the bills paid by individual
    homeowners get bigger and are becoming unaffordable for many
    Americans.
        Federal mandates also force local communities to change
    their priorities. In the water and sewer world, this pushes
    basic repair and replacement to the bottom of the list. When we
    force communities to chase mandates that may have very small
    incremental health or environmental benefits, we risk losing
    both basic public health protections and the economic
    foundation of our communities.
        There is a Federal interest in maintaining these health
    protections and economic benefits, and there are a variety of
    ways we can help.
        First, we have to continue to support the clean water and
    drinking water State revolving loan funds that provide low cost
    loans for infrastructure improvements. The President's fiscal
    year 2017 budget proposed cutting the clean water fund by $414
    million and provided a $197 million increase in the drinking
    water fund.
        Second, we have to find new ways to increase investment in
    infrastructure. In 2014 we took action by adding the Water
    Infrastructure Financing and Innovation Act to the WRDA bill.
    EPA is finally requesting funding to start up the WIFIA
    program, although they are only requesting $15 million. In our
    proposal to help Flint and other communities around the
    country, we are planning to provide $70 million to capitalize
    WIFIA.
        Third, we need to look for ways to encourage even more
    private investment in water and wastewater infrastructure.
    WIFIA loans provide only 49 percent of project costs, so where
    does the funding come from if the remaining 51 percent cannot
    be raised through municipal bonds?
        Fourth, we need increased support for small rural
    communities who simply can't afford the investments that EPA
    wants them to make and need technical support to keep up with
    all the Federal mandates. Mr. Robert Moore of Madill, Oklahoma,
    will offer testimony on this.
        Finally, we have to make sure that Federal mandates don't
    force communities to spend hundreds of millions of dollars for
    projects that may have little impact on water quality, while
    delaying other critical programs. The U.S. Conference of Mayors
    has spent a lot of time trying to work with EPA on this last
    issue. Despite EPA's rhetoric on integrated planning and
    flexibility, communities are still being threatened with
    penalties even as they are trying to negotiate with EPA.
        I strongly believe that investment in infrastructure
    expands our economy. The U.S. Conference of Mayors reports that
    each public dollar invested in water infrastructure increases
    private long-term gross domestic product output by $6.35. To
    date, the Joint Tax Committee has not been persuaded by these
    numbers. The Joint Tax Committee assumes that these programs
    increase the use of tax exempt bonds, creating a loss to the
    Treasury that we need to offset. This is actually a barrier to
    increasing funding authority for the SRF loan programs and
    WIFIA. So the Water Environment Federation has conducted a new
    study to measure the increases in personal and corporate income
    taxes paid into the U.S. Treasury attributable to water
    infrastructure investment.
        This hearing is laying the foundation for legislation on
    water and wastewater infrastructure, which I hope to be ready
    to move at the same time as we move our Water Resources
    Development Act legislation later this month.

               OPENING STATEMENT OF HON. BARBARA BOXER,
               U.S. SENATOR FROM THE STATE OF CALIFORNIA

        Senator Boxer. Thank you so much.
        I am very pleased that we are having this hearing, and I
    think it is important to look at this issue of mandates, where
    the parties do have some significant differences.
        To me, useless mandates are ridiculous. They make zero
    sense. But common sense mandates based on science are critical.
    For example, yesterday we had a hearing on nuclear power
    plants. We could say, let's not spend any money worrying about
    the safety, but then we would have more problems, like we had
    at Three Mile Island or God forbid, Fukushima. Well, we are not
    going to have that because we have a law that says we are going
    to set standards and regulate these power plants.
        Now, Senator Inhofe and I may have a disagreement on how
    far that should go. That is fair. But the fact is we do
    something important for the American people, it is called
    protecting them, and that is critical. So as we discuss the
    Federal role in supporting our water infrastructure, safety
    should be prominent in our minds. Aging drinking water pipes
    and waste treatment systems are a nationwide problem, and the
    Society of Civil Engineers--and they are not Republicans or
    Democrats, they are everything--they give us a D, a D for our
    drinking water and wastewater infrastructure. It is
    unacceptable.
        Now, it doesn't mean that throwing a ton of money at it is
    going to change it. We have to be very smart the way we do it,
    but we have to do it, and I believe it is a national problem. I
    don't think it is fair that in one city in the country, you
    know, our kids are getting poisoned water, and we have that,
    examples of that all over, including in my State, because we
    have had some disposal of dangerous lead. We have it in
    Mississippi in a certain part; we have it in Flint, Michigan;
    we have it in Ohio. It is not fair that the child born there,
    just by circumstances of their birth, has less of a right to
    clean water. So the American people have a right.
        Now, these minimum standards also extend to, of course, our
    water infrastructure. I was so proud to join with my colleague,
    Senator Inhofe, in a rare moment of comity on the environment
    where we said there is too much lead in faucets and those
    facilities that deliver our water, and we changed that lead
    requirement based on science.
        Now, millions of homes across America receive water from
    pipes that date to an era before scientists and public health
    officials understood the harm caused by lead exposure. I am so
    happy to see Eric Olson, who used to be on my staff, Senator. I
    don't know if you recall, but Eric is an expert in protecting
    kids from dangerous toxins, and we worked on these. And we know
    now, from the American Water Works Association, that 7 percent
    of homes, this is a new study, 7 percent of homes, that is 15
    million to 22 million Americans, have lead service lines. Now,
    it doesn't mean that that lead is leaching, but some of it
    could be, and a lot of it could be in the future.
        As parents in Flint know, there is no safe level of lead in
    children. It affects their brains, their nervous systems in the
    fetuses. The children poisoned in Flint will be dealing with
    these harmful consequences all their lives. So we have a long
    way to go.
        We also have cities across the U.S. with sewer systems that
    discharge raw, untreated sewage to waterways where our children
    swim. Despite enormous successes since the passage of the Clean
    Water Act, there is much more to do. So we know the tragedy in
    Flint was due in part to the decision to switch to the polluted
    and highly corrosive Flint River as a source of drinking water,
    but the Flint River is not alone. Just last month EPA released
    a report showing nearly half of U.S. waterways are in poor
    condition, and one in four have levels of bacteria that fail to
    meet human health standards.
        Now, I know some testifying today have expressed concerns
    about the affordability of meeting the standards for protecting
    their own people. I understand the concerns. I was a county
    supervisor. Like many of us, I started there, and I dealt with
    those mandates.
        But what we have to do is hear you. If you think something
    is totally useless and won't have a benefit, tell us. But if it
    is going to have a benefit, we have to work together and make
    it easier for you to protect your people. You want to do that
    as much as any one of us.
        So we need increased investment. It is very, very clear. We
    should fund existing financing programs such as the State
    Revolving Fund. And I think there is broad agreement on that
    one, at least there used to be. We should update these programs
    to target those investments where it is needed most, which you
    will help us with. When we invest in water infrastructure, we
    support jobs and the economy. The Clean Water Council estimates
    that $1 billion invested in water and wastewater infrastructure
    can create up to 27,000 jobs, and jobs are important to all of
    us.
        Mr. Chairman, I will finish in 15 seconds.
        So I believe there is broad bipartisan support for the need
    for Federal investment in water infrastructure, and the next
    WRDA, which I am very excited about working with my colleagues
    on both sides, we have an opportunity to address our aging
    drinking water infrastructure and our wastewater
    infrastructure. The health and safety of our children and
    families depend on a modern infrastructure that provides safe
    drinking water and assures clean rivers and streams.
        I certainly looking forward to our panel.
        And Mr. Chairman, can I put my full statement in the
    record?
        Senator Inhofe. Sure. Without objection.
        [The prepared statement of Senator Boxer was not received
    at time of print.]
        Senator Inhofe. Thank you, Senator Boxer.
        Now, what we are going to do, we normally don't have this
    many people on a panel, so we are going to be trying to keep
    within the 5-minute limit that we have. We will start with
    David Berger, who is the Mayor of the city of Lima, Ohio.
        Mr. Berger.

             STATEMENT OF DAVID BERGER, MAYOR, LIMA, OHIO,
               ON BEHALF OF THE U.S. CONFERENCE OF MAYORS

        Mr. Berger. Well, good morning, Chairman Inhofe and Ranking
    Member Boxer and members of the committee. Thank you for the
    invitation to give mine and the Conference of Mayors'
    perspective on the Nation's water and wastewater issues.
        My name is David Berger, and I am in my 27th year as the
    Mayor of Lima, Ohio. I spent nearly 20 years in negotiations
    with Ohio EPA and U.S. EPA over long-term control plans and
    also participated in over 5 years of discussions with EPA
    concerning integrated planning, green infrastructure, and
    affordability. This, I believe, makes me a reluctant expert in
    the field.
        Local government, not the Federal Government, is where the
    job of providing water and wastewater services gets done and is
    paid for. Local government has invested over $2 trillion in
    water and sewer infrastructure and services since the early
    1970s, and $117 billion in 2013 alone.
        At the Conference we have unanimously adopted policies
    dealing with this issue. One is a simple message to the
    Congress and the Administration: give us money or give us
    relief. The Mayors of this Nation would be happy to implement
    any rule or regulation you or EPA comes up with, but you have
    to provide at least half the resources. And I am talking real
    money, not authorization levels that never get funded. I am
    talking about grants, not loans that must be paid back.
        The cost for unfunded Federal mandates are ultimately paid
    for by our customers, our citizens, many of whom are
    residential households. And the cumulative costs of these
    mandates have now reached or exceeded thresholds of clear
    economic burden on low- and fixed-income households. Let me
    give you a few examples.
        In Lima, more than a third of my residents live under the
    poverty threshold. EPA demanded that I spend $150 million to
    fix combined sewer overflows for a community which has only
    38,000 residents. The projected average annual sewer bill will
    be over $870 a year. This means that 46 percent of Lima
    households will be spending more than 4 percent of their
    household incomes on just their sewer bills, with nearly 14
    percent of my residents spending nearly 9 percent of their
    household income on their sewer bill.
        In the Conference of Mayors study of just 33 California
    cities, 24 cities report that more than 10 percent of their
    households are now paying more than 4.5 percent of their income
    on water, sewer, and flood control costs, with 10 of those
    cities having more than 20 percent of their households spending
    4.5 percent.
        Please keep in mind that many of these cities have not yet
    factored in the cost for TMDLs, which now are estimated to put
    just the cities in Los Angeles County up to $140 billion. One
    county--$140 billion.
        How did we get here? When the Clean Water Act and the Safe
    Drinking Water Act were first established, Congress set lofty
    aspirational goals. Congress put skin in the game and provided
    grants to local communities, and that investment fostered a
    reasonable attitude about how to accomplish those goals
    together.
        That is not the case now. Congress retreated from the grant
    program primarily because of the high costs. But the
    implementation of the water policies by successive
    administrations did not retreat with Congress's retreat from
    funding. Quite the contrary, the administrations transformed
    the aspirational goals into unfunded mandates involving
    hundreds of billions of dollars of costs imposed on local
    communities. Let me give you some examples.
        In CSO consent decrees, cities are held by EPA policy to an
    arbitrary number of no more than four overflows per year.
    However, there is no science substantiating the need for that.
    So in some cases cities are allowed 14, while in other cases
    zero overflows. Engineering a system that could handle any type
    of storm event with zero overflows is almost impossible,
    needlessly expensive, and wasteful of local resources.
        In my own city, I have a river that is labeled as fishable
    and swimmable. That river dries up in the summer to only 4-
    inch-deep pools of stagnant water. I can safely say that no one
    is ever going to swim in that river. Yet, we are held to that
    standard of compliance.
        Bottom line, EPA is dictating our priorities and where our
    taxpayer money is spent. I do not want to give any impression
    that Mayors do not care about clean water. We do. We care
    passionately, and our actions and investments speak loudly. But
    we need Federal and State government to once again be our
    partners. We fundamentally believe that change must take place,
    and we are asking Congress to act on the following: codify
    integrated planning, define affordability, develop reasonable
    and sustainable goals, allow for additional time, and establish
    a review process to appeal decisions made at the regional
    level.
        I thank you for the opportunity to speak here today.
        [The prepared statement of Mr. Berger follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Senator Inhofe. Thank you, Mayor.
        Mr. Chow is the Director of the Department of Public Works
    for the city of Baltimore.
        Mr. Chow.

      STATEMENT OF RUDOLPH S. CHOW, P.E., DIRECTOR, DEPARTMENT OF
       PUBLIC WORKS, BALTIMORE, MARYLAND, ON BEHALF OF THE WATER
                         ENVIRONMENT FEDERATION

        Mr. Chow. Good morning, Chairman Inhofe, Ranking Member
    Boxer, and members of the Committee. My name is Rudy Chow. I am
    the Director of the Department of Public Works for Baltimore
    City. It is my honor to be here today on behalf of the city of
    Baltimore, the Water Environment Federation, and the WateReuse
    Association to discuss the importance of the Federal role in
    keeping water and wastewater infrastructure affordable. I have
    over 30 years' experience working in the water and wastewater
    field.
        Today you are examining a very important national issue
    that is near to my heart--how we can address the burgeoning
    need for investment in our water infrastructure. My boss, Mayor
    Rawlings-Blake, appeared before this committee's subcommittee
    back in 2012 to testify on the challenges of financing water
    infrastructure using Baltimore experiences.
        Baltimore is faced with the massive cost of more than over
    $3 billion of regulatory mandates, including wet weather
    consent decree, or ENR, enhanced nutrient removal at our
    wastewater treatment plants as well as our stormwater
    improvements, and covering up our open finished water
    reservoirs.
        This is just a snapshot of the project that we must
    undertake to upgrade and to meet today's standard. We consider
    ourselves to be good stewards of the environment and public
    health of our community and the Chesapeake Bay Watershed, and
    take these obligations seriously. We are also tasked with
    maintaining and improving a large and aging infrastructure
    system.
        So how do we pay for all of these? To say that Baltimore is
    not a wealthy city is a gross understatement. The median
    household income, 40 percent of our population in Baltimore
    falls below the national median household income level, and 25
    percent falls below the poverty line. It is that population
    base that will be disproportionately impacted by water bill
    rate increases to pay for the infrastructure investment that we
    must take.
        My written testimony highlights a number of efforts to WEF
    and other water organizations are undertaking to identify
    policy changes and programs that will assist communities and
    ratepayers dealing with affordability issues. I urge you to
    review these items in the testimony.
        Senator Cardin's legislation to reauthorize and increase
    funding in the Clean Water and Drinking Water SRF program is an
    important first step. Congress should reauthorize both SRF
    programs and increase the funding for them. In Baltimore, we
    have direct experiences with SRF programs and know they work
    well. We have gotten, in the last 3 years, over $168 million in
    low interest loans from the Maryland SRF program and $4.5
    million of principal forgiveness loans.
        Additionally, Congress should support increased funding
    from other existing financing grant programs such as WIFIA,
    USDA Raw Development programs. All these programs are vital to
    help communities make needed and wise investments in their
    infrastructure.
        Note when I speak about the water infrastructure, I use the
    word investment. Those of us that are familiar with our Federal
    infrastructure funding programs have long known that the
    Congressional Budget Office scoring for the program does not
    fully reflect the complete economic benefits of these programs.
    For this hearing, WEF and WateReuse Association contracted a
    team of economists to conduct the quick analysis of the
    economic benefits. Though the analysis has not been completed,
    upon completion we will submit that for the record.
        The analysis estimated that economic impact of SRF spending
    in four example States, namely California, Maryland, Ohio, and
    Oklahoma, which represent a good cross-section of States across
    the Nation, representative of geographic size, population size,
    cost of living, as well as rural versus urban population, and
    general age of infrastructure.
        The model of analysis was based upon the IMPLAN economic
    model to estimate the impact of SRF spending on output, labor
    income, jobs, and Federal tax revenues in the four States.
    IMPLAN captures the effects of spending as it ripples through
    the economy. So, for example, utility spending of SRF will
    result in what we call direct impact effect, which is the
    construction contractor. When the construction contractor
    reuses that money to buy goods and services, that is what we
    call an indirect effect. And then the fact that the indirect
    spending generates employment, creating additional income for
    households, which result in what we call induced effect. So the
    total economic impact is the sum of the direct, indirect, and
    induced effects.
        The results of the analysis show that Federal investment in
    water and wastewater infrastructure through the SRF programs
    has meaningful benefits to the economy, U.S. Treasury, and
    households across the Nation.
        For starters, the analysis found that SRF spending
    generates Federal tax revenues. Total State and Federal annual
    SRF spending in the four States average about $1.46 million----
        Senator Inhofe. [Remarks made off microphone.]
        Mr. Chow. Thank you.
        So, in other words, every million dollars of SRF spending
    is estimated to generate about what we call $2.25 million in
    total output for the State economy, on average.
        I urge the committee and Congress to continue to support
    our efforts in the local levels to invest in water
    infrastructure. The investment we make, with your support,
    delivers environmental, public health, and economic benefits to
    our country. Thank you very much.
        [The prepared statement of Mr. Chow follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Senator Inhofe. Thank you, Mr. Chow.
        Robert Moore, from Madill, Oklahoma, is representing the
    National Rural Water Association.
        Robert.

      STATEMENT OF ROBERT MOORE, GENERAL MANAGER, MARSHALL COUNTY
    WATER CORPORATION, MADILL, OKLAHOMA, ON BEHALF OF THE NATIONAL
                        RURAL WATER ASSOCIATION

        Mr. Moore. Good morning, Senator Inhofe and members of the
    committee. I am Robert Moore from rural Oklahoma. I am a
    General Manger of the Marshall County Water Corporation. I am
    representing all small and rural community water and wastewater
    suppliers today through my association with both Oklahoma and
    the National Rural Water Associations.
        Our member communities have the very important public
    responsibility of complying with all Federal regulations and
    for supplying the public with safe drinking water and
    sanitation every second of every day. Most all water supplies
    in the U.S. are small. Ninety-four percent of the country's
    51,000 drinking water supplies serve fewer than 10,000 people.
        I want to acknowledge that rural America is very
    appreciative of you, Senator Inhofe, for standing up for rural
    communities on environmental issues. Your actions have improved
    the lives of all rural families, and the environment and the
    public health in rural USA.
        Small and rural communities often have more difficulty
    providing safe, affordable water due to our limited economies
    of scale. While we have fewer resources, we are regulated to
    the exact same manner as large communities. In 2016, there are
    rural communities in the country--and even in my county--that
    still do not have access to safe drinking water or sanitation
    due to the lack of density or the lack of funding.
        I am what you would call a working general manager. Much of
    my day is spent in the field repairing water lines, operating
    backhoe dump truck, helping conduct routine maintenance on our
    distribution system. If someone in the community loses water in
    the middle of the night, the emergency call gets forwarded to
    my cell phone at home.
        But Marshall County Water has a similar story to tell, such
    as many other rural and small water suppliers. We were started
    to provide the first water service to rural communities that
    had limited access to water or marginal water wells. In 1972,
    we began operations to supply water to about 800 farms and
    ranches. The Federal Government provided that funding to begin
    and later expand our water service through low interest loans
    from USDA. We now serve approximately 15,000 customers through
    a little over 6,000 taps.
        In crafting water infrastructure funding policy, we urge
    Congress to consider the following. First, local communities
    have an obligation to pay for their water infrastructure, and
    Federal Government should only subsidize water infrastructure
    when the local community can't afford it and there is a
    compelling Federal interest, such as public health, compliance,
    or economic development.
        We have recently been denied a $3 million USDA low interest
    loan for a 15-mile raw water line. USDA determined that we
    could afford a commercial loan from a bank and did not need the
    Federal taxpayer to subsidize our water infrastructure.
        The USDA and EPA SRF funding programs achieve this
    principal objective by requiring that Federal subsidies be
    targeted to communities most in need. One of our concerns with
    the new WIFIA program is that it lacks any needs-based
    targeting, credit elsewhere means-testing, or focus on
    compliance issues. This year's EPA budget request decreased
    funding for SRFs and substantially increased funding request
    for the WIFIA program. This gives the appearance that limited
    Federal water subsidies are being moved from programs targeted
    to the neediest communities to the communities with less need.
        Second, all EPA water funding programs should primarily be
    dedicated to the compliance issues with EPA Federal mandates
    and standards.
        Third, profit-generating water companies should not be
    eligible for Federal taxpayer subsidies.
        In closing, please know that the SFRs have no limitation on
    size or scope of a water project and can currently leverage
    Federal dollars to create a much larger loan portfolio.
    Oklahoma currently operates a water fund which leverages
    dollars at a 1 to 10 ratio. According to EPA, most SRF funding
    is allotted to large communities. A simple review or projects
    funded by the SFRs included in my testimony show numerous
    projects funded that cost over $50 million, and some over $1
    billion.
        Thank you all for your assistance and for this opportunity.
    I would be happy to answer questions.
        [The prepared statement of Mr. Moore follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Senator Inhofe. Well, thank you very much, Mr. Moore.
        Mr. Arndt is from Pennsylvania and here representing the
    American Water Works Association.
        Mr. Arndt.

      STATEMENT OF AUREL ARNDT, FORMER EXECUTIVE OFFICER, LEHIGH
    COUNTY AUTHORITY, PENNSYLVANIA, ON BEHALF OF THE AMERICAN WATER
                           WORKS ASSOCIATION

        Mr. Arndt. Good morning, Mr. Chairman, Ranking Member
    Boxer, and members of the committee. I want to thank you on
    behalf of the 50,000-plus water professionals that make up the
    membership of the American Water Works Association, or AWWA,
    for this opportunity to provide comments on the critical issue
    of affordable financing for our water infrastructure, and in
    particular what the Federal role should be.
        AWWA has had two longstanding policies which bear on
    infrastructure financing: first, that water service should be
    provided by utilities that are self-sustaining from local rates
    and other charges, and second, that water infrastructure can
    best be financed with a multifaceted toolbox, recognizing that
    there is significant diversity among water systems in our
    country and their infrastructure needs also differ widely.
        I would like to provide some context for the suggestions
    that I will make in a few minutes, because I think they are
    important to set the stage for the circumstances that we face.
        There are many studies and reports out there which attempt
    to analyze or estimate what our country spends on average
    annually for water infrastructure, and those results vary
    widely. However, most of the results seem to home in in the
    vicinity of $30 billion to $50 billion per year, and it is
    important to recognize that that number fluctuates widely from
    year to year based on circumstances such as the general
    economy, interest rates, the regulatory requirements that are
    imposed, and also competing local demands in many of our
    communities.
        What is very clear, however, is that the annual need for
    investment in our water infrastructure is going to grow
    dramatically in the coming decades. By most estimates, it will
    at least triple--and possibly even quadruple--by 2040.
        In 2012, AWWA produced a report that is called ``Buried No
    Longer: Confronting America's Water Infrastructure Challenge.''
    That report addressed one narrow area of our water
    infrastructure. Specifically, it looked at our aging water
    mains. And what that report concluded is that we will require
    an investment of $1 trillion over the next 25 years just to
    replace the water mains that will become obsolete during that
    timeframe. That number includes nothing for other growing
    drinking water needs, nor for CSO or SSO or other wastewater
    types of issues. Clearly significant numbers when you compare
    to what we are currently spending.
        Another important feature to recognize, that water services
    are the most capital intensive of all the utility services that
    we provide in our country. What this means is when we invest
    bigger dollars, more dollars in that water infrastructure, it
    is going to have a big impact on rate, and in turn will have a
    big impact on the affordability of those water rates to the
    consumers.
        We believe, given these circumstances, that we have to do
    two things, and we have to pursue these efforts relentlessly.
    First, we need to preserve existing sources of water
    infrastructure capital and add new sources to the toolbox to
    address those needs that are unmet by current tools. We also
    need to find ways to reduce the cost of the capital that is
    available for water infrastructure.
        In our written testimony, we identify four areas where we
    believe that the Federal Government has an important role.
    Specifically, they include tax-exempt bonds, the Water
    Infrastructure Finance and Innovation Act, the State Revolving
    Loan Funds, and private activity bonds.
        In my remaining comments, I am going to address the first
    two--not because the other two are unimportant, but I believe
    those other two will be addressed by other panelists here
    today.
        With regard to tax-exempt bonds, it is important to
    recognize that tax-exempt bonds are currently the largest
    source of funding for water infrastructure. Between 75 and 80
    percent of our annual investment is currently funded via that
    vehicle, and tax-exempt bonds are used by approximately 70
    percent of the utilities across the country.
        We acknowledge the concerns and the scrutiny on tax-exempt
    bonds that is currently under discussion, but we believe that
    concern is wholly inappropriate considering that they are used,
    in the case of water infrastructure, to finance essential
    public services. As water utilities, we need billions of
    dollars annually for water infrastructure, and we need to have
    lenders who can provide those billions of dollars. Recognizing
    the tax treatment, the steady stream of revenue, and the
    security of the investment, investors willingly accept a below
    market interest rate, and that interest rate is passed along to
    the utilities who use those tax-exempt bonds. In turn, those
    savings on the financing are used to reduce the rates to
    customers or maintain the rates to customers and improve the
    affordability of rates.
        If we take away this financing, the cost of capital and the
    customer rates that follow will rise to unprecedented levels
    and create unprecedented difficulties for affordability,
    particularly in our older cities.
        With regard to WIFIA, first of all, I want to thank the
    committee for their role in enacting WIFIA as part of the WRDA
    bill in 2014 and more recently removing the ban on using tax-
    exempt bonds to provide the local match for WIFIA loans. We
    think that is a great step forward.
        WIFIA is clearly one of those tools that can expand the
    pool of----
        Senator Inhofe. Mr. Arndt, you are quite a ways over your
    time. Please wrap up.
        Mr. Arndt. OK.
        Senator Boxer. But I like what he is saying.
        Senator Inhofe. I am listening to what he is saying.
        Mr. Arndt. I will wrap up very quickly.
        Senator Inhofe. That has been another one of our mutual
    projects, by the way.
        Senator Boxer. Yes. Very proud of that.
        Mr. Arndt. We have four recommendations with regard to
    WIFIA and they are in our testimony, but most importantly we
    need an appropriation so that program can be launched and that
    money can be put to work for water systems across the country.
        Thank you for your attention.
        [The prepared statement of Mr. Arndt follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Senator Inhofe. Thank you. That was excellent.
        Mr. Gysel is here from Phoenix, Arizona, representing the
    National Association of Water Companies.
        Mr. Gysel.

      STATEMENT OF JOE GYSEL, PRESIDENT, EPCOR WATER (USA), INC.,
      PHOENIX, ARIZONA, ON BEHALF OF THE NATIONAL ASSOCIATION OF
                            WATER COMPANIES

        Mr. Gysel. Good morning, Chairman Inhofe, Ranking Member
    Boxer, and members of the committee. My name is Joe Gysel, and
    I am the President of EPCOR Water and serve as the current
    President of the National Association of Water Companies
    representing the regulated private water industry. I am pleased
    to join you today to talk about water infrastructure actions
    the Federal Government can take to advance innovative and
    sustainable solutions in meeting the Nation's needs.
        NAWC members span the Nation and range in size from large
    national and regional companies serving millions of customers
    to individual utilities serving less than a few hundred
    connections. Private utilities have existed in the United
    States for well over 100 years. We are regulated by State
    utility commissions and have one of the best compliance track
    records in the industry. Collectively, we serve more than 73
    million Americans.
        NAWC believes that by embracing the powerful combination of
    public service and private enterprise we can improve water
    infrastructure by investing in plant, improving customer
    service and reliability, and creating jobs. We applaud this
    committee for bringing water infrastructure issues to the
    forefront and your leadership in advancing necessary changes to
    preserve and enhance water infrastructure.
        This morning I would like to emphasize a few points
    regarding private water's role as part of the solution to our
    infrastructure and resource needs.
        It is unfortunate that our aging and deteriorating public
    water systems threaten the economic viability and public
    health. Communities nationwide are faced with massive fiscal
    challenges and competing priorities to replace critical
    infrastructure, as was evidenced in Flint, Michigan.
        The American Society of Civil Engineers gives U.S. water
    infrastructure a failing grade of D, with a current funding gap
    estimated to be as high as $1 trillion. Addressing these needs
    requires innovative funding solutions to include the private
    sector, as Federal funding alone will not be able to bridge the
    growing investment gap. This will require Congress to examine
    all future related funding policies to ensure that the private
    water industry is part of the solution.
        The private water sector continues to help communities with
    significant capital investment. NAWC's six largest members,
    which service about 6 percent of the U.S. population, are
    collectively investing approximately $2 billion annually in
    their systems. This is significant when compared to the latest
    annual Federal water appropriation funding of only $2.25
    billion. Clearly, the private sector has the financial
    capacity, resources, and expertise to assist in the Nation's
    water infrastructure challenges that plague many of our cities.
        Sustainable water management also requires innovative
    technologies and strategies for long-term resource planning.
    NAWC members operate in multiple jurisdictions and are uniquely
    qualified to deliver strategies and solutions for long-term
    resource development and security. These range from water
    conservation programs to developing wastewater recycling and
    recharge facilities, or long-term public-private regional water
    agreements such as the one EPCOR recently signed to utilize
    renewable resources when shifting from ag to municipal
    applications.
        Further support in funding the Nation's water challenges
    can also be achieved through public-private partnerships. Our
    member companies have experience with P3s, which have benefited
    communities in delivering superior water service while freeing
    up scarce municipal funds for competing priority projects.
    These same models can also be applied to broader water
    augmentation and infrastructure projects to serve large,
    multijurisdictional or State water projects to address growing
    water scarcity requirements.
        Unfortunately, current rules and regulations create
    impediments that restrict many municipalities from entering
    into cost saving partnerships with private water companies.
    Federal policy plays an important role in establishing
    incentives for water investment. Congress and the
    Administration can act to remove barriers to access the vast
    potential of private capital in much-needed water
    infrastructure projects.
        To succeed, NAWC recommends the following actions: removal
    of State volume caps on private activity bonds for water
    projects, allowing for increased private investment in water
    systems and the alignment of our critical infrastructure with
    airports, high speed rail, and solid waste disposal; second,
    clarify the Internal Revenue Code to avoid defeasance of
    beneficial P3s so that long-term concession agreements are no
    longer penalized; third, expansion of State Revolving Funds and
    their eligibility so private water utilities are no longer
    limited in their use of clean water funding; in addition, fully
    implement the WIFIA program to facilitate private investment in
    water infrastructure and ensure private companies have equal
    opportunity to participate and fully leverage those same
    programs; finally, establish a centralized office to navigate
    the complex P3 terrain, providing professional services to
    assist all municipalities with this model.
        Mr. Chairman and committee members, thank you again for the
    opportunity for the NAWC to address you today. We are committed
    to work with you, our industry colleagues and stakeholders to
    meet the challenges of sustainable water infrastructure, and I
    am happy to answer questions after.
        [The prepared statement of Mr. Gysel follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Senator Inhofe. Very good. Thank you.
        Mr. Olson is the Director of the Health Program for the
    Natural Resources Defense Council.
        Mr. Olson.

      STATEMENT OF ERIK OLSON, DIRECTOR, HEALTH PROGRAM, NATURAL
                       RESOURCES DEFENSE COUNCIL

        Mr. Olson. Thank you, Chairman Inhofe, and thank you,
    Senator Boxer and other members of the committee. It is an
    honor to testify this morning on behalf of the 2 million
    members and activists at the Natural Resources Defense Council,
    and I wanted to summarize. It has been more than 30 years I
    have been working on drinking water and water infrastructure
    issues, and we have been talking about deferred maintenance,
    about the failure to upgrade treatment and upgrade technology,
    steady deterioration of our water supply for many, many years;
    and I find myself in agreement, actually, with several of the
    points that have been made earlier, that we really need to be
    making these investments.
        We have long known that wastewater and drinking water
    infrastructure are deteriorating, and frankly the chickens are
    coming home to roost. Where we are now is that what we have all
    taken for granted, which is safe drinking water, we can't
    really consider a given any longer. Flint really does remind us
    that the penny wise and pound foolish decisions to save a few
    bucks by not investing in our water infrastructure can really
    come home and harm public health, as well as harming the
    economy, and really erode public trust.
        I think in these debates sometimes it is easy to forget the
    impacts of these decisions on real people, and this really came
    home to me a week or so ago when we were working on behalf of
    some of the citizens in Flint, and we were working with one
    mom, her name is Miriam. Her husband and her two kids live in
    Flint, and she has lived there most of her life, and when the
    water was switched in 2014 in Flint, she noticed that the water
    started to smell like rotten eggs, that it tasted awful, that
    it was brown. She wondered about it. They switched over to
    bottled water, but public officials kept saying, no, it is
    perfectly safe, don't worry about it, so they went back to tap
    water. It was really expensive. They are not wealthy people,
    and they switched back to tap water.
        Unfortunately, Miriam's family started to suffer from some
    adverse health effects. In June 2014, Miriam had a miscarriage.
    She had never had a miscarriage before. She started getting
    skin rashes. Clumps of her hair started to fall out. A doctor
    prescribed treatments for her hair loss, which helped a little
    bit, but her skin rash continued. Her husband also had skin
    rashes and hair loss. Her son, who is 13, had a bad outbreak of
    eczema sores all across his back, and this happened after the
    water change, and it got far worse than it had ever been. They
    stopped using the Flint water for bathing and his skin rashes
    disappeared.
        Miriam read that lead contamination can be linked to
    miscarriages and to complications in pregnancy, and she told
    us, ``Just not knowing whether lead exposure may have caused my
    miscarriage is really painful.'' She worried about the possible
    health effects on IQ of her children and on their ability to
    learn, and she's really worried about continuing to have to use
    bottled water for all of their purposes, for cooking and
    drinking. She takes her kids to her parents, who are on a
    different water supply, just to go bathing, which is quite an
    inconvenience. She says it has really taken an emotional toll
    on her family.
        So the reason I mention this is that it is really easy in
    these policy debates to forget that we are really dealing with
    real people who are adversely affected. And unfortunately, we
    have a widespread problem with lack of investment in water
    infrastructure.
        I think a lot of water utilities have done a fantastic job
    in improving our water infrastructure, but we have huge
    challenges. We do not want a two-tiered water system where
    wealthy people get good water that is clean and safe, and poor
    people get crummy water that is threatening their health. We
    have a real backlog, as we have heard, of investment in water
    infrastructure. We really need to fix this problem fast.
        Infrastructure investments, the good news is, create a lot
    of good jobs, and we strongly support, as our testimony
    highlights, investments in this area.
        I wanted to also point out that there are ways we can
    reduce the cost for citizens that are paying for water bills. I
    lay out several of them in the testimony, including protecting
    the water before it gets contaminated so polluters are paying
    to clean up, rather than consumers paying to take those
    contaminants out of their water. The National Drinking Water
    Advisory Council and Affordability Group, which I served on,
    had several recommendations, including low income water
    assistance program, affordable rates for low income consumers,
    targeted compliance assistance, and increased funding.
        I realize my time is almost out, so I will just highlight
    the seven recommendations very briefly that we have in the
    testimony.
        First, we need to fix Flint's infrastructure. We support
    Senator Stabenow et al.'s bill, 2579; second, we need to really
    invest in our water infrastructure. We support Senator Cardin's
    bill that would increase State Revolving Fund funding. We need
    to fix our source water protections; we need to address small
    system regionalization to cut costs; fix the lead and copper
    rule; and, finally, let citizens act immediately when there is
    an imminent and substantial endangerment to their health.
        Thank you very much for the opportunity to testify. It is
    an honor.
        [The prepared statement of Mr. Olson follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Senator Inhofe. Thank you, Mr. Olson.
        Mayor Berger, 27 years, is that right?
        Mr. Berger. Yes, sir. I am a slow learner.
        [Laughter.]
        Senator Inhofe. Well, there have been a lot of ideas here,
    a lot of testimony here, but the thing that seems to be missing
    is affordability and flexibility.
        Now, you are here representing the U.S. Conference of
    Mayors, as well as a Mayor yourself. Can you tell us why the
    U.S. Conference of Mayors believes that the EPA's integrated
    planning policy isn't sufficient to address the Mayors'
    concerns about the affordability that we talked about?
        Mr. Berger. Thank you.
        Senator Inhofe. It is meant to do that, but is it doing it?
        Mr. Berger. First of all, I can say for a fact that because
    Lima was the first city to actually negotiate successfully a
    consent decree involving integrated planning, that we would
    never have gotten to that point of actual agreement without the
    integrated planning policy. It does give us the flexibility
    that we need to proceed and move forward, and we actually are
    grateful for the fact that there were champions in headquarters
    at U.S. EPA that created the policy and actually worked through
    with us the negotiations with the regional office.
        Our concern is the fact that it is a policy; it is not the
    law. Our concern is that it should be codified so that cities
    all across the country in fact have the opportunity to use it
    to do their long range planning and priority setting for their
    own systems.
        We are coming up on a process--we are already in this
    process of actually electing a new President. Who knows what
    happens to that policy under the next Administration? So there
    is that transitional change that we are concerned about. But
    second, I can also tell you that the experience of cities
    around the country is that there is enormous resistance in the
    regional offices to actually implementing the integrated plan
    with cities.
        As of this point, we know of really only four communities
    that have been able to successfully put in place integrated
    plans, that being Lima, Ohio, Evansville, Indiana, Springfield,
    Massachusetts, and Spokane, Washington. So our concern is that
    this is an opportunity that cities have but aren't able to
    successfully implement. It needs to be part of the law.
        Senator Inhofe. Thank you. It was someplace in the U.S.
    Conference of Mayors that the word was used as prosecutors,
    that the EPA treats some of the small communities like
    prosecutors.
        Mr. Berger. Oh, I think that is a widespread experience for
    cities. We are treated as polluters; we are not treated as
    stewards, along with the State, for the public environment, for
    our systems. And it was very clearly the case that regional
    staff was dismissive. It took us 10 years to get to an
    agreement. And I believe that that attitude of, frankly, an
    arrogant, dictatorial attitude out of the agency is very real
    for most cities.
        Senator Inhofe. Do you agree with that, Mr. Chow?
        Mr. Chow. Yes, sir, I do. First of all, Baltimore City, we
    also use integrated planning and basically try to manage our $4
    billion worth of capital projects.
        Senator Inhofe. OK.
        Mr. Chow. But yes, we do experience that as we negotiate
    with our consent decree, SSO consent decree. We do get more
    favorable comments or support from the headquarters rather than
    from the region.
        Senator Inhofe. Mr. Moore, this is Senator Wicker over
    here. He introduced S. 611, I think it was, and they passed his
    bill, and it is now law, and that establishes technical
    assistance under the Safe Drinking Water Act for small and
    rural communities, which you are representing. Do you think
    that bill should include also communities meeting wastewater
    mandates?
        Mr. Moore. Yes. The technical assistance end of this we
    certainly support a certain percentage of, you know, whether it
    is SRF or the WIFIA, to go to technical assistance to supply
    that assistance to the smaller systems that cannot go out, you
    know, and afford the engineers, or it puts a burden on them.
        Senator Inhofe. You know, I understand that, because in our
    State of Oklahoma there are a lot of Madills around. We have a
    lot of communities that would say that you are representing
    them well. And I think these are some of the things that we can
    do in our committee.
        Senator Boxer.
        Senator Boxer. Thanks, Mr. Chairman.
        Many say that in addition to bread, water is the staff of
    life, so you are dealing with something that is critical, and I
    thank you for all your passion about it, I really do, and
    dedicating your life to it. Everybody takes it for granted, we
    all do, until a kid gets violently ill or a woman has a
    miscarriage or there is rashes all over our body. Then we go
    what have we done wrong, all of us together. We are in this
    together; this isn't an us-versus-them situation. As Eric said,
    it is all about our families.
        So when something goes wrong like that or when a child
    swims in a lake that has untreated sewage in it, Mr. Berger,
    and they get very ill because of it, everyone focuses on it. So
    today we are focusing on it. We are focusing on other things
    that I believe are secondary, because let me tell you
    something. We have spent, so far, $2 trillion in the war in
    Iraq, OK? I care about this country. I care about our kids
    being safe. And to say, oh, we can't afford it, baloney. We
    could afford the war. Thank God not with my vote, but we could
    afford the war. So we can afford this.
        I mean, I really appreciate all of you coming here today to
    help us figure out how we can do this and not harm our people
    physically, mentally from this problem, and also in their
    pocketbooks.
        So I want to talk about a few of those things, but first I
    wanted to ask Mr. Olson are frequent discharges of combined
    sewage overflows and sanitary sewer overflows, are they a
    concern? Because we are focused on lead, as we should be. What
    about these overflows, with the bacteria?
        Mr. Olson. Yes, these are definitely a concern. These are
    definitely a public health concern, as well as an environmental
    concern. From a public health standpoint, very often raw sewage
    is actually dumped into lakes and streams, and that can cause
    massive contamination. We see beaches being closed; we see
    people getting sick, waterborne disease from swimming in it,
    from being exposed to it.
        Senator Boxer. So it is a problem that should be addressed,
    in your opinion?
        Mr. Olson. It is definitely a big problem in hundreds of
    communities across the country.
        Senator Boxer. Because that is what the studies are now
    showing. It is disgusting, and we have to fix it. And we can
    argue over everything. We have to fix it.
        Now, Mr. Berger, I want to be your partner. The first part
    of your testimony I agreed with it, but the rest of it I found
    very disturbing. First of all, you mentioned my State, and you
    talk about what it costs. I want you to know that my State has
    tougher environmental laws than the Federal Government, A. That
    is what the people there want. OK? B, no one in L.A. ever
    called me to complain, so who is it you talked to specifically
    that I can contact and say what are the problems?
        Mr. Berger. Well, the Conference of Mayors published a
    study of 33 cities----
        Senator Boxer. You mentioned Los Angeles.
        Mr. Berger. That is correct.
        Senator Boxer. Who told you they are upset about this?
    Because I want to contact them.
        Mr. Berger. We will give you the published study with those
    names.
        Senator Boxer. I am not asking for a study. You talked
    about L.A. Because you do not represent L.A., I do. So you tell
    me who is complaining. And I would really appreciate it if you
    present it in writing.
        Now, Mr. Berger, in your testimony you complain that EPA
    resists flexibility. This could be true. We want to make sure
    they don't. We want to get it done just as much as you do, with
    maximum flexibility. And insists on unrealistic timetables for
    meeting water quality requirements. Yet, your consent decree
    provides the city 24 years to come into----
        Mr. Berger. Yes, ma'am.
        Senator Boxer. Let me ask my question.--to come into
    compliance with the Clean Water Act. This consent decree comes
    after years of the city failing to comply with water quality
    requirements. And it is also my understanding that you have one
    of the longest consent decrees in the country.
        Is 24 years an unreasonable timetable?
        Mr. Berger. That is why we agreed to it, because it is not.
        Senator Boxer. So it isn't. So then why, on the other
    hand----
        Mr. Berger. But it took us 10 years of negotiation in order
    to be able to deal with the agency.
        Senator Boxer. Well, you didn't mention the fact that your
    efforts paid off. And let the record show you got a 24-year
    consent decree.
        Now, let me ask you, Mr. Berger, do you think it is
    appropriate for cities to make improvements to stop the
    discharges of raw sewage into waterways that are used by our
    kids?
        Mr. Berger. I believe that it is appropriate for us to take
    reasonable measures, whether it is with combined sewer
    overflows or sanitary sewer overflows, to minimize those kinds
    of problems.
        Senator Boxer. Good.
        Mr. Berger. But there are also instances, and many
    instances, where the requirements are not realistic.
        Senator Boxer. I understand. You said that.
        Mr. Chow, would increased funding of the programs that you
    say are helping you, will increased funding help the
    communities facing affordability issues? We all care about
    that.
        Mr. Chow. Yes, it definitely would. With the fact that we
    are forced to use local money to pay for the rehabilitation of
    our infrastructures.
        Senator Boxer. Thank you.
        Mr. Chow. So Federal dollars certainly would be very
    helpful.
        Senator Boxer. OK. Well, I will close because I know my
    Chairman wants me to. I will. But I want to thank Mr. Arndt for
    your kind statements about WIFIA, because we are excited about
    it. We have to fix it to meet some of the real needs, and we
    will, but we are very excited about it. We think it is a new
    tool, and we think the leverage is going to be fantastic for
    you.
        Thank you, Mr. Chairman.
        Senator Inhofe. Thank you, Senator.
        Senator Wicker, now that I have teed you up with your
    legislation, you are recognized.
        Senator Wicker. Thank you, Mr. Chairman. I have so much to
    say, and 5 minutes is inadequate, but I will do my part.
        It is a fact that EPA has used its discretion to actually
    reduce the availability of technical assistance to small
    communities by 75 percent. This has eliminated two full-time
    circuit riders in my State of Mississippi. And I do appreciate
    the Chair mentioning the legislation which Senator Heitkamp and
    I championed last year, the Grassroots Rural and Small
    Community Water Systems Assistance Act. This was signed into
    law by the President on December 11, 2015.
        Let me just tell you what we are facing in Mississippi. The
    town of New Hebron has 400 people. They are being told they
    have to spend $3 million to comply with the EPA. How are they
    going to do that? Lawrence County Water system, with
    approximately 2,000 persons, needs half a million for a new
    well. The Town of Como, population 1,200, is facing
    overwhelming water challenges and failing to meet the current
    EPA permit. They just finished paying approximately $1 million
    loan. Now they have to spend another $1 million. The town of
    Utica, with a population of 850 persons, is facing $1 million
    compliance upgrade.
        I don't know why anybody runs for city councilman or Mayor
    in these small towns. My hat is off to them for trying to make
    small town and local government better.
        The small town of Shaw, 1,900 people, was under a boil
    water order because of a broken chlorinator that they couldn't
    afford to fix. The city of Mound Bayou has approximately 2,300
    persons; $87 million to pay for a new sewer treatment facility
    that EPA is mandating on them because of nitrogen and
    phosphorus discharges.
        Senator Heitkamp and I had hoped that, at a very minimum,
    the legislation that the President signed would result in a
    return of circuit riders in rural areas instead of increasing
    regulatory requirements. Sadly, the circuit riders have not
    returned to my State with the assistance that they have so
    capably provided to us.
        Mr. Moore, we see the burden of Federal unfunded mandates
    increasing and EPA assistance decreasing. Is EPA insisting on a
    Cadillac for these communities when actually a used Chevrolet
    would do all right? Is there a middle ground there? I am very
    concerned about the horror stories that Senator Boxer
    mentioned. I think we all are. Lead in the water, completely
    unacceptable; children swimming in lakes polluted by raw
    sewage, absolutely unacceptable anywhere, particularly in the
    United States of America in the 21st century. But is there a
    balance there that the regulators who come in and treat you
    like they are prosecutors, rather than partners, is there a
    balance there that we are missing? And what can you tell us in
    that regard? What do you say to these small towns?
        Mr. Moore. Well, first, I would say that even as a small
    community or a small rural water system, it is our top priority
    to put out safe water. We will not put out water that is in any
    way unsafe.
        Senator Wicker. Absolutely.
        Mr. Moore. Talking about comparing a Cadillac system or
    something that a big municipality would need, you know,
    compared to us, we have to have the facilities that create that
    safe water, and there is only so much, you might say, bells and
    whistles that go on some of the bigger water treatment plants
    that maybe we don't need.
        What was the other part of your question?
        Senator Wicker. Mr. Berger, how can these small
    communities, these small towns and municipalities, pay for
    these mandates?
        Mr. Berger. Well, Senator, I think that part of it has to
    do with what the requirements are, and I think the opportunity
    for technical assistance is essential to be able to make
    certain that they have proper technical advice about what is
    appropriate. When it comes to the actual affordability issue,
    there is no question that the Federal Government needs to
    become a major funder in the form of grants. Grants are now
    made to States, and States turn around and loan those moneys to
    cities. That impacts the affordability and makes it
    unaffordable. So I think that the Federal Government needs to
    look back at the time of the Clean Water Act first being
    implemented and the Safe Drinking Water Act and look at the
    successes that were achieved when the Federal Government had
    skin in the game in the form of direct assistance to
    localities.
        Senator Wicker. Thank you very much.
        Senator Inhofe. Thank you, Senator Wicker.
        Senator Cardin.
        Senator Cardin. Thank you, Mr. Chairman.
        I want to thank the entire panel.
        My good friend, Senator Wicker, I want you to know that I
    visited the water treatment facility plants in my State. I was
    just at the Ashburton facility in Baltimore City this past
    Monday, I was at the WSSC plant also on Monday, and I am very
    proud of the commitment that the local governments of Maryland
    have made to make sure that we have safe drinking water, and we
    do. But it is not a Cadillac; it is not a used Chevy. We are
    rebuilding the Model T. They are 100 years old. The plant in
    Baltimore was first built 100 years ago. It was state of the
    art, state of the art, and we are modernizing it, but it is
    still the 100-year-old facility. So it is a struggle.
        And obviously we all want to make sure that regulations are
    done as efficiently as possible, but the bottom line is we must
    make sure that there is safe drinking water for the people of
    our country.
        What happened in Flint was absolutely outrageous, and I
    think we all understand that. There were some conscientious
    decisions made there that should not have been made. But we
    have problems throughout this country, let's make no mistake
    about it. In Washington, DC, in the early part of the last
    decade, lead leached into water of possibly 42,000 children;
    and nearly a decade ago, in my city of Baltimore, we have
    closed the drinking water fountains in all of our public
    schools, and the reason is not that the water isn't safe coming
    into the community, it is the connections into the facilities
    that contain lead that can't be used.
        So we have serious modernization. Mr. Arndt, you indicated
    that your organization's studies showed in 2012, I think it
    was, that there is $1 trillion of backed up water
    infrastructure improvements over a 25-year period that could be
    spent. The EPA did a study showing there is over $600 billion
    in the next 20 years in order to modernize.
        I was listening to each one of you, and you all said the
    capacity here just isn't there to do that. The ratepayers can't
    burden that type of amount. And when you look at the Federal
    tools, and there are several, including the tax-exempt
    authorities that you all would like to see and WIFIA, but if
    you look at the State Revolving Funds, it is one-third the
    level it was in 2009.
        And I want to thank the Chairman, and I want to thank the
    Ranking Member, because they are trying to do something about
    that. We are going to try to reauthorize the State Revolving
    Fund, and that would be at a level, I hope, that reflects at
    least what the Federal partnership should be, and I thank our
    leadership on our committee because this committee, in a
    bipartisan manner, has tried to make more predictable water
    infrastructure Federal partnerships and a reasonable amount to
    deal with the needs that are out there. So we are going to
    continue to try to make those investments, and I have
    introduced some legislation, and I thank the leadership of this
    committee for their encouragement of the legislation that we
    are pursuing.
        Mr. Chow, I want to give you an opportunity to respond to a
    point that you made in your statement, and that is recent
    findings of economic benefit analysis on the State Federal
    Revolving Fund. You indicate that the way this is scored
    doesn't always reflect the true economic cost and benefit of
    the Federal investment. Could you elaborate on that a little
    bit more?
        Mr. Chow. Sure, Senator. So, traditionally, when we are
    looking at the State Revolving Fund, we are looking at the
    money coming from the Federal Government and/or from the State,
    which is looking from that end, sort of one-sided. So, for
    example, the four States in the study showed that the total
    State and Federal investment for the years 2012 to 2014
    amounted to about $1.46 billion. So as a result, that study
    actually showed that combined investment generated about
    $160,000 in terms of the Federal tax from that investment.
        But if we are just looking at the Federal portion of SRF,
    which only amounts to about 23 percent of that total combined
    Federal and State, that every million dollars actually
    generates $695,000 in terms of the Federal tax from those
    States.
        So, in other words, $695,000 in Federal tax revenue is
    generated by a Federal investment of 23 percent of $1 million,
    so that is quite awesome.
        Senator Cardin. Thank you for underscoring that. Obviously,
    we are interested in clean, safe drinking water, but there is
    also an economic impact here, and I think the committee
    understands that, and I appreciate your testimony.
        Senator Inhofe. Thank you, Senator Cardin.
        Senator Fischer. Thank you, Mr. Chairman.
        And I thank the witnesses for being here today.
        We need to discuss the real world implications of these
    unfunded Federal mandates, as well as the lack of flexibility
    and the fair penalties that many of our communities are facing.
    The affordability of water and wastewater infrastructure is a
    critical concern around the country. In my home State of
    Nebraska, the city of Omaha is faced with the challenge of
    addressing a $2 billion unfunded combined sewer overflow
    mandated from the EPA, and the cost to the 600,000 residents in
    Omaha's sewer service area is a burden, and it is particularly
    hard on our low- and fixed-income residents.
        So, Mr. Mayor, I would like to ask you a question. In your
    testimony you discuss the extensive and the costly process that
    your city endured to reach an agreement with the EPA's required
    CSO mandate. In your experience, what are the necessary tools
    that Congress can provide municipalities and communities to
    better equip themselves to comply with those mandates with the
    CSO?
        Mr. Berger. Thank you, Senator. I believe that, first of
    all, one of the critical elements of integrated planning is the
    opportunity to prioritize. For an example, we have SSOs in our
    communities that we demonstrated had no public health impact or
    environmental impact but which will cost us $30 million to
    eliminate. We were able to push those off to a later time while
    we took on much more serious issues relating to the CSOs. That
    ability to prioritize is part of integrated planning. It needs
    to be part of the law. It shouldn't just be a policy.
        The second issue really is around affordability, and the
    Conference of Mayors has developed proposals for how to, in
    fact, define affordability based upon not MHI, because median
    household income really masks the impact that these costs will
    have on low-income households. We believe that a definition of
    affordability, which absolutely respects the need to do
    something, but to do it within the affordable limits of a
    community's resources, is important to ultimately getting to
    solutions. And we think that additional time.
        You know, the Clean Water Act just had, I think, its 42nd
    birthday, and what we have accomplished didn't happen
    overnight. What has been accomplished to the Nation's waters in
    fact took 40 years to get to this point, and we are still
    making advances. So any expectations, which are there in the
    regional offices, that things must be accomplished in 10 or 15
    years as the norm really are not realistic. So part of the
    challenge of dealing with affordability is allowing for the
    kind of time that communities need to accomplish it within
    their budgetary means.
        Senator Fischer. Right. Could you speak a little more on
    the necessity to address those high priority control measures
    and specifically what impact does that prioritization have on
    public health and water quality? How can we have Omaha be able
    to benefit from that prioritization flexibility?
        Mr. Berger. Well, I think that comes back to the technical
    assessment of where, in any system, there are places where
    things are happening at higher levels, more frequency events,
    and then there are places and systems which do not have that
    kind of frequency or impact. And I think assessments of the
    entirety of the solution and then plotting that over time for
    implementation is the key to ultimately getting to something
    that is reasonable for any given community.
        Senator Fischer. Thank you.
        Mr. Chow, the Mayor just spoke about the median household
    income, and in your testimony you spoke about the impact on EPA
    when the agency looks at the community's affordability to cover
    the unfunded mandates, and you specifically mentioned the
    benchmark that is used there. Could you explain why that median
    household income benchmark is harmful to our low- and fixed-
    income families?
        Mr. Chow. Sure. Of course, as I mentioned, Baltimore, 40
    percent of our populations in the city are below median
    household income at this level, and 25 percent of the
    population is below the poverty line. So when you are looking
    at just the median household income, the curve is skewed; you
    are sort of looking at----
        Senator Fischer. So what should they look at?
        Mr. Chow. They should be looking at the low end, meaning
    the folks who are most vulnerable, because that is the greatest
    economic impact, is to that population. As we raise water
    rates, for example, we raise water rates across the board. So,
    in essence, what the local end up having to do is that we have
    to come up with programs that will assist senior citizens as
    well as low-income citizens to help offset. So looking at the
    low end would be more practical and more reasonable for us.
        Senator Fischer. Thank you.
        You know, Mr. Chairman, we have a lot of low-income
    residents in Omaha, and people on fixed incomes who are being
    hit right now with their water and sewer bills, so anything we
    can do to provide that flexibility to help those folks, I would
    really appreciate it. Thank you.
        Senator Inhofe. Senator Whitehouse.
        Senator Whitehouse. Thanks, Chairman.
        Three quick points I would like to make. One is that when
    you are talking about wastewater, it is like talking about real
    estate: location, location, and location are the three keys,
    and very often what is reasonable is in the eye of the
    beholder; and there is a conflict, inevitably, between the
    upstream and the downstream. And I would say to Mayor Berger
    there are a whole bunch of municipalities up in Massachusetts
    who are up the Blackstone River from Rhode Island who probably
    think that they are doing what is reasonable for getting rid of
    their wastewater and their overflow into the Blackstone River,
    and they push back pretty hard against EPA trying to get them
    to clean it up, but the Blackstone River leaves their
    municipalities, and it comes down and flows through our
    municipalities in Rhode Island, and we have to deal with water
    that isn't clean because they haven't bothered to do the steps
    that we have undertaken actually in Rhode Island to protect our
    bay that they haven't done themselves.
        So I hope we all remember that there is an eye-of-the-
    beholder issue here, and the downstreamers very often have a
    different opinion about what a good job the upstreamers are
    doing.
        The second point that I would like to make is that for all
    of the mockery and scorn that conversations about climate
    change generate from that side of the committee, in Rhode
    Island the wolf is already at the door. This is not a
    hypothetical for us. And what we are seeing is the things that
    are most clearly connected with climate change, from a water
    point of view it is rain bursts, and from a general point of
    view it is sea level rise. Unless somebody wants to repeal the
    law of thermal expansion, the sea level is going to rise, and
    our coastal States are going to get it, and we are already
    seeing that. We had, in 2010, back-to-back 100-year storms. We
    had more than 10 feet above flood level flooding. Our towns of
    West Warwick and Cranston and Warwick all had their sewage
    facilities flooded out by the rising river. I remember stopping
    on a highway overpass near where 95 was flooded and looking
    down into the Warwick sewage treatment facility, and all you
    could see was the tops of the fences and the roofs of the
    buildings, and everything else, all the sewage was off and down
    and out into people's yards.
        So if you are talking about how individual communities
    should pay for that, pretty tough to tell Warwick, by the way,
    you have to rebuild your thing entirely because suddenly rain
    bursts that you had no cause in, that 15, 20 years ago, when
    this was built, weren't anticipated, are suddenly drowning out
    your system.
        And on our coasts it is actually even worse. Our sea grant
    program and our University of Rhode Island have identified 10
    at-risk coastal wastewater facilities. Ten in little Rhode
    Island, where sea level rise plus stronger offshore storms mean
    that velocity zones and flood zones, treatment plants are now
    there. So who is going to pay to move that? You are going to
    ask little Narragansett, little North Kingstown to pay to
    completely build a new--I don't think they are capable of doing
    that. And again, they didn't cause the sea level rise; it
    wasn't something that years and years ago was anticipated. Now
    it is very, very clear.
        So I urge my colleagues say what you want about sea level
    rise, enjoy your jokes and your mockery, but remember that for
    States like mine it is very, very real. It hits home.
        And the last thing that I want to say is, to Senator
    Cardin's point, we are dealing with a lot of pretty old Model T
    stuff. You guys have seen these before, but I love to bring
    these out. Here is a pipe from a water repair that was done in
    Rhode Island. You can see how big the pipe is. You know, I can
    barely get my finger through the little hole in the middle of
    it because it has been so filled up with sediments over the
    years. Here is a bigger version of the same thing. This was a
    nice big pipe at one point, but now you can see it got pretty
    clotted up.
        In my lifetime, we have actually been removing wooden water
    infrastructure out of older Rhode Island communities.
        So we have a big, big catch-up gap just in terms of this
    being this ain't a Chevy, this ain't a Cadillac, this is horse
    and buggy stuff, and we need to invest in building it so that
    we don't get the public health concerns that we have
    experienced.
        And I thank the Chairman for his attention to this. I think
    that working with Chairman Inhofe on these infrastructure
    issues is a very positive thing, and I appreciate his interest
    in it, and of course the Ranking Member as well, who is
    terrific on these things. So thank you both very much for this
    hearing.
        Senator Inhofe. Thank you, Senator Whitehouse.
        Senator Sullivan.
        Senator Sullivan. Thank you, Mr. Chairman. I want to thank
    you and the Ranking Member for calling this hearing; it is a
    really important one.
        And I want to commend the witnesses today. I have read
    through your testimony and really appreciate the diverse views
    and a lot of the insights that you are bringing to this
    hearing. I wanted to ask a couple questions that relate more
    to--and I appreciate the focus on the small communities,
    because that is one of the things that we struggle with in
    Alaska.
        You know, a number of those Senators have been talking
    about the challenges of old infrastructure. I actually, in my
    State, have the challenge of no infrastructure. There is a big
    difference. So I am sympathetic with communities that have to
    get rid of pipes and deal with old aging infrastructure, but we
    are kind of unique in that we have entire communities with no
    infrastructure. So in rural Alaska there are over 30
    communities, thousands of my constituents that have no running
    water, no flush toilets. They use what we call in Alaska honey
    buckets. And trust me, the honey buckets don't smell good. That
    is a euphemism.
        So I am going to be looking forward to working with the
    committee. I have talked to the Ranking Member about this a
    little bit and trying to address some of these urgent issues.
        As I mentioned, one in four rural homes in Alaska lacks
    running water or flush toilets. And as you know, particularly
    those from the rural communities, that can actually lead to
    very high levels of disease, third-world disease levels in some
    of these communities in America--in America. I think most
    Americans would be surprised. Yes, we have old infrastructure,
    but we have third-world conditions, and it is unacceptable.
        I wanted to ask, Mr. Moore, you were talking about the
    small community paradox. I think it is a really important point
    that even if we did have infrastructure, or tried to get it or
    tried to upgrade it, in a lot of small communities, like you
    were talking about, there is no ability to bond, there is no
    ability to amortize financing on future projects just because
    of the lack of a population base that hits critical mass. How
    do we address that? And I will start with you on that issue,
    then I really want to open it up to anyone else.
        Mr. Moore. Well, we address trying to reach out our water
    system to those around us, you know, that does not have, like
    you said, even access to water at this point, or they have
    wells that are marginal water quality.
        Senator Sullivan. But I mean in terms of financing, should
    it be grant programs? I mean, if your community doesn't even
    have the ability to bond, there is kind of a different step you
    need to take. Anyone else see what I am talking about? It just
    seems like you are kind of stuck if you are not like L.A.,
    where you can do a bond, or any big city. It is different for
    the small communities.
        Mr. Moore. The low interest loans, you know, combined with
    a grant is our best option.
        Senator Sullivan. So you think the Federal grant program
    also has to be part of that option.
        Mr. Moore. Yes.
        Senator Sullivan. Does everybody else agree on that?
        Mr. Arndt. Senator Sullivan, I think one of the things that
    we need to look at closely as it relates to small systems are
    the State Revolving Loan Funds. At least in my State in
    Pennsylvania, they have used a substantial part of their
    funding for the small system needs in the State of
    Pennsylvania, and certainly, given the volume of dollars that
    are available through the State Revolving Loan Funds, it is not
    like they can fund these major CSO and SSO issues and needs
    that are out there. So I think there is a direct linkage there,
    so robust funding for the SRFs is clearly something that is
    important.
        The other thing I would say to you, like many, many
    problems, there is no silver bullet, but my authority over the
    last 40 years has acquired approximately 40 systems in
    Pennsylvania. Of those systems, all but two or three of them
    were small systems, and what we were able to do is leverage the
    presence of our core system to solve problems in those smaller
    systems, whether it is replacing supplies, upgrading mains. The
    fact that you have the ability to spread the cost over a
    broader customer base is an advantage. I recognize that may not
    be practical in Alaska.
        Senator Sullivan. Let me just ask one final question. Mayor
    Berger, you raised it, and it has been in testimony. I think it
    is a really important issue. According to the U.S. Conference
    of Mayors, the EPA, with regard to these water issues, has
    moved from being no longer a ``partner to local government that
    it once was. The agency has, instead, assumed the role of a
    prosecutor.'' And I couldn't agree more with that assessment.
    That is from the U.S. Conference of Mayors.
        But Mayor Berger, you were alluding to this issue of moving
    from partner to prosecutor to one-size-fits-all to extremely
    onerous regs even for small towns like you mentioned Lima,
    Ohio. Can you go into that a little bit more? And is there
    anything we should be able to do from a statutory standpoint if
    the EPA has turned into a prosecutor, not a partner, which I
    fully agree with? They also don't abide by their own regs and
    law a lot of the time. What should we do in the Congress in
    terms of trying to change that attitude which you articulated
    so well?
        Mr. Berger. Well, in the consent decree process you have
    not just the agency, EPA, you also have the Department of
    Justice. This is a hostile setup. So the principal fix that can
    change that is to take it and transform it to a permitted
    process. This set of arrangements made between the State and
    Federal Government and locals doesn't have to be enforced
    through consent decrees; it can be built into permits that get
    renewed with a set of obligations that get attached to it over
    time. So changing it from a consent decree process to a
    permitted process would change that.
        Senator Sullivan. Thank you.
        Thank you, Mr. Chairman.
        Senator Inhofe. Thank you.
        Senator Capito.
        Senator Capito. Thank you, Mr. Chairman, and thank the
    Ranking Member as well.
        And I want to thank all of you for being here today.
        I wanted to talk to you, Mr. Moore, about rural America. We
    heard our Senator from Alaska, some of the issues. Obviously,
    he has a much greater land mass and fewer people than anybody
    else in the United States, so those are particular challenges.
    But I think we found in rural West Virginia, at least, that the
    places that have the least amount of resources are still asked
    to comply at the same kinds of levels, and it is difficult
    because you have to go to the ratepayer first to try to see if
    you can--we have a public service commission, that is how ours
    is regulated--to see if the ratepayer can bear some of the
    burden, and a lot of times in these rural areas is where we are
    economically challenged at the same time.
        So what kind of solutions do you see to be able to
    alleviate--maybe not alleviate the burden because we want clean
    water everywhere, of course, but to help rural areas get over
    this hump?
        Mr. Moore. Our Oklahoma Rural Water Association, through
    EPA funding, has circuit riders.
        Senator Capito. Right. We have those too.
        Mr. Moore. And they are instrumental in our State at
    helping with compliance and getting the ideas there that
    hopefully can solve a problem, rather than bringing in millions
    of dollars of new equipment, because we just can't afford that.
        Senator Capito. So when you are putting into an expansion
    or doing a replacement, what other resources are you looking at
    besides the ratepayer? I don't know if Oklahoma has a State
    infrastructure bank or anything of that nature.
        Mr. Moore. Yes.
        Senator Capito. What other? If you could just enumerate
    them kind of quickly. Small cities block grant?
        Mr. Moore. Yes, we do have that, and the SFRs are
    administrated through the Oklahoma Water Resources Board, and
    then the USDA rural development.
        Senator Capito. Right.
        Mr. Moore. That is normally where----
        Senator Capito. Where your resources are. OK.
        Mr. Gysel, I would like to talk about public-private
    partnerships, because in the last bill we passed, the WIFIA,
    which we think has some promise in terms of being able to
    access public and private dollars to maximize the availability
    of resources, how do you see that and are you familiar with it,
    No. 1? It hasn't actually been funded yet, so as soon as we
    have it funded maybe you would have a better answer, but what
    kind of promise do you think that has?
        Mr. Gysel. Thank you, Senator. We think it has a lot of
    promise in the fact that WIFIA--and we are assuming it is going
    to go ahead, hopefully--allows for both the blending of Federal
    funding as well as private money to come together and leverage
    that out properly. As we said in our testimony, the
    infrastructure gap is so great right now we don't think that
    Federal funding will be able to bridge that gap, and we have to
    bring in these other funding resources through public-private
    partnerships to do that.
        A big part of public-private partnerships is not just the
    funding component, but is also the risk transference that
    happens between the municipality or the customer and the
    company taking on that risk. And we feel that through what we
    have accomplished through public-private partnerships, that
    risk transfer can generate incremental value to that customer
    as a definitive delivery of a model for fixed price and for
    fixed delivery over the life of the project. The infrastructure
    initially is very important, but the life of the project, the
    next 30 years of operations, before you turn that
    infrastructure back to the client, is very important as well.
        Senator Capito. Right. I know on TIFIA, which is the
    transportation that has allowed a lot of PPPs to move forward,
    one of the things we are doing in our State through the
    creativity, I think, of our Governor and others is to have the
    company come in and sort of forward-fund the project, and then
    have the State reimburse over a longer period of time. So you
    cut not just the initial dollar that is needed at the public,
    but you also cut the timing, and you can front-end load it. Do
    you see that as having the same possibilities in these kinds of
    projects?
        Mr. Gysel. Very much so. Very much so.
        Senator Capito. Your dollars are going to go farther.
        Mr. Gysel. They will. And our company is in the process of
    building the largest P3 project in Regina, Saskatchewan in
    Canada. It is a $200 million wastewater treatment plant for
    compliance reasons, and they have a 30-year ongoing operation
    maintenance program for another $600 million, and then they
    turn it back to the city at the end of the time.
        Senator Capito. OK.
        Mr. Gysel. But the timeline, you are very correct, the
    timeline to crunch this down, to turn the financing and deliver
    the project is critical in these value generations.
        Senator Capito. I am a big supporter of WIFIA. Thank you.
        Mr. Gysel. Thank you.
        Senator Inhofe. Thank you, Senator Capito.
        Senator Markey.
        Senator Markey. Thank you, Mr. Chairman, very much.
        You know, clearly Flint is the perfect example of how water
    policy can just go completely wrong. They had the highest bills
    and the worst water in times of quality simultaneously, and in
    a very poor community. And we know that communities that are
    poor are disproportionately harmed by this issue, and other
    environmental issues as well. So I have a group of questions I
    would like to ask, because as we saw in Flint, Michigan, the
    timeliness of reporting water quality issues to the residents
    exacerbated the problem. It took too long for the proper
    agencies to receive notification of the extent of the problem
    and too long for the information to be relayed to the citizens
    of Flint.
        Does anyone disagree that one way to get EPA the
    information would be to require States to inform the EPA about
    persistent violators or systems who have serious violations?
    Does anyone disagree with that?
        Mr. Berger. Senator, I believe they already are required to
    do that.
        Senator Markey. They are already required?
        Mr. Berger. Yes, sir.
        Senator Markey. OK. So none of you disagree with that it is
    already a requirement.
        Does anyone disagree that public awareness of drinking
    water quality in their communities would be increased if it was
    online and reported electronically, instead of through annual
    paper reports?
        Mr. Gysel. We agree. In fact, our utilities are moving to
    that very online reporting as well.
        Senator Markey. So would that be a reasonable requirement
    for communities to do it online, rather than paper reports?
        Mr. Gysel. That is what we are doing, yes.
        Senator Markey. Does anyone disagree with that?
        Mr. Arndt. The only difficulty with going exclusively to an
    electronic-based report is that there are still elements of the
    community that are not accessible to that kind of information,
    surprisingly. So I think really the best way is to do it in
    both fashions.
        Senator Markey. So you are saying that a Flint, Michigan,
    wouldn't have the capacity to be able to report that? A poor
    community would not have the capacity to be able to do it
    electronically, as opposed to on paper?
        Mr. Gysel. Not to speak for him. I think what he was saying
    is that the customers may not have the ability to receive that
    electronic information.
        Senator Markey. But ultimately should a community have that
    capacity, even if individuals do not within it? Because even in
    a minority community you would have well over 50 percent who
    would have digital access that would make it possible for them
    to report.
        Mr. Arndt. I would think you would find general agreement
    in the water works industry that the electronic distribution is
    a preferred approach. But you also have to be careful so that
    you can reach every one of your customers.
        Senator Markey. So there were clear communications issues
    between agencies with the Flint crisis. Does anyone disagree
    that the CDC and State and local public health agencies should
    be immediately notified if drinking water violations are found
    that could have an adverse effect on public health so that
    those public agencies can help to detect and respond to the
    illness or evidence of exposure?
        Mr. Chow. I think we are pretty much doing that as a part
    of our water quality permit requirement already, as is.
        Senator Markey. Does anyone disagree that encouraging real-
    time monitoring of drinking water quality can ensure that
    potential concerns which may have adverse effects on human
    health are handled in a timelier manner? Obviously, that was
    not the case in this situation.
        Mr. Berger.
        Mr. Berger. Senator, real-time implies huge, sophisticated
    system for testing and evaluation. Again, I think that what is
    now required is a timely report, and I think Flint broke down
    not because of reporting but because there were some pretty bad
    decisions made, deliberate human decisions made, with a variety
    of circumstances that just built on itself. So my sense is that
    the regime in most places allows for the kind of notification
    and timeliness that you are seeking.
        Senator Markey. Yes, sir.
        Mr. Olson. Senator, I think that there was a combination of
    problems in Flint. Some of it was a lack of swift reporting and
    adequate testing, and we certainly would strongly support
    immediately reporting of violations and providing that to
    public health authorities, particularly in cases of significant
    health threats. Frankly, blood lead levels aren't even
    automatically reported to CDC, and I know there is legislation
    Senator Cardin and others have proposed to address that.
        Senator Markey. Thank you.
        Thank you, Mr. Chairman.
        Senator Inhofe. Thank you, Senator.
        Senator Barrasso.
        Senator Barrasso. Thank you, Mr. Chairman.
        Mr. Moore, shortly after they passed the Clean Water Act in
    1971, continuing to today, Congress has appropriated money to
    the EPA to provide nonprofit organizations with experience and
    with expertise in the water and wastewater industry to assist
    rural communities, to assist them in operations, in training,
    management, regulatory compliance for their water and their
    wastewater systems. But it seems to me that the EPA, over the
    last several years, has shifted a portion of that funding
    provided for this initiative away from this previous on-the-
    ground technical assistance in training to other methods that
    included funding entities with very little or no experience in
    the water industry with no established relationships with
    utilities that are being served. Things like Webinars were used
    as a primary tools to provide outreach and training rather than
    people on the ground.
        Do we want communities and utilities to use a Web site or
    Webinar, or call some university automated help line to get
    help, or is it better to have them rely on experienced boots-
    on-the-ground technicians who can provide onsite training and
    technical assistance, especially during an emergency? I would
    just appreciate your thoughts on that.
        Mr. Moore. I do know that the circuit rider program has
    taken cuts in the last few years, and a lot of States have lost
    circuit riders. There is nothing wrong with Webinars, but in
    the State of Oklahoma we have many small rural water systems
    that may have 100 users. They operate out of an office in
    someone's home. They do not have access to the Webinars. Where
    the circuit riders can come in and they do a job, they are
    there face-to-face and they see the infrastructure, they see
    the problem, and they normally have immediate response that
    they can implement.
        Senator Barrasso. And you think they have knowledge of what
    the system situation is on the ground?
        Mr. Moore. Yes.
        Senator Barrasso. Just because they live there, they are
    part of the community.
        Mr. Moore. Yes. And the circuit riders, they are there for
    that reason, and they have seen other systems, the neighboring
    systems, the systems across the State, and they have gathered
    that information, and they can bring that information that
    applies to your system and give it to you.
        Senator Barrasso. In your testimony you talked about the
    onsite technical assistance that allows communities to comply
    with the EPA rules. I just ask how valuable it is, this onsite
    technical assistance, especially to utilities that lack the
    capacity or the financial ability to have the expertise to
    comply with the EPA.
        Mr. Moore. It is critical that we fund these circuit rider
    programs. Like I said, on the very small rural water systems in
    the small cities, they rely very heavily on that technical
    assistance.
        Senator Barrasso. Thank you.
        Mayor Berger, if I could ask you about a question that you
    might have some insight into. We have several small communities
    in Wyoming, Bridger Valley, Southwest Wyoming. They were in
    compliance with the EPA's arsenic maximum contaminant level
    standard until that level was changed from 50 parts per billion
    to 10 parts per billion a number of years ago. You know, these
    communities had arsenic levels in the mid to low 20s, but the
    EPA lowered the level from 50 to 10, so for decades the 50
    parts per billion was an acceptable health level. Suddenly it
    has changed, and then it becomes very expensive, very cost
    prohibitive to implement the technology to get down to that 10
    parts per billion. Some engineering quotes in the first years
    were in the millions to get that number down.
        So the costs may have come down maybe $100,000, but for a
    community of 200 to 400 people, that money is still out of
    reach when you think about the other issues that our Mayor has
    to deal with; other people clamoring for that same money, and
    you are seeing more bang for the buck with other things. So
    shouldn't we just be reducing the regulatory burden on
    communities to allow them to have the funds to address the
    immediate health and safety challenges of an aging
    infrastructure and give them the authority to make these
    decisions?
        Mr. Berger. Well, there is no question that the technology
    of measurement has changed dramatically over the last 40 years.
    Who could have imagined that we would ultimately be measuring
    things down to the nano level? And following the measurement,
    the regulations have become mandates to treatment levels. So
    the question becomes, for any given circumstance, when you are
    looking at a single regulation, how does that compare to the
    other public health challenges that a community has. And I
    think that often the regulators come in in a very siloed kind
    of way. They are charged with this particular mandate and
    ignore the rest of the mandates that a community might have. So
    I think, again, integrated planning allows folks to be able to
    look at all the challenges in front of them and make choices
    and set priorities, and I think that is why it has to become a
    part of the law.
        Senator Barrasso. Thank you, Mayor Berger.
        Thank you, Mr. Chairman.
        Senator Inhofe. Thank you, Senator Barrasso.
        Senator Carper.
        Senator Carper. Thanks so much. I apologize for arriving
    late. We had a classified briefing on another subject, and I
    needed to stay there through its conclusion. So thank you for
    still being here, and thank you for attending and giving us
    your thoughts and responding to our questions.
        I would like to ask a series of questions, and I am going
    to ask these for each of you, and just yes or no answers,
    initially. Except I am not going to ask, Mr. Olson, you to
    respond to these questions, they are really more for folks that
    are representing a utility or maybe a city that provides water
    for its residents.
        Here is the first question: Do you charge more for water
    when supplies are tight?
        Mr. Berger. No, sir.
        Mr. Moore. No.
        Mr. Chow. No, sir.
        Mr. Arndt. No, sir.
        Mr. Gysel. No, sir.
        Senator Carper. OK. Do you charge more for water used for,
    say, watering lawns or washing cars than for essential
    functions like drinking and bathing?
        Mr. Chow. No, sir.
        Mr. Berger. No, sir.
        Mr. Arndt. No, sir.
        Mr. Gysel. No, sir.
        Mr. Moore. We do have a tiered system that the water rights
    began at $5 per thousand, and then when it gets over 10,000 it
    is $7 per thousand.
        Senator Carper. OK. I think you may have just answered this
    question for yourself, Mr. Moore. Do you charge more per person
    for water use as people use more water?
        Mr. Moore. Yes, it is a tiered system.
        Senator Carper. That is for each of you.
        Mr. Berger. We do not.
        Senator Carper. OK.
        Mr. Chow. Actually, ours is a declining rate, so the more
    you use, the lower the unit rates become.
        Senator Carper. OK.
        All right, go ahead, Mr. Moore.
        Mr. Moore. No, I was just saying ours is an escalating
    tiered system; the water cost goes up.
        Senator Carper. Just the opposite of Mr. Chow. OK.
        Mr. Gysel. Inclining.
        Senator Carper. Mr. Arndt, same question.
        Mr. Arndt. Lehigh County Authority has multiple different
    rate schedules depending on a service area, but in some cases
    we have a flat rate where the same rate is charged no matter
    what the use; in some cases there is actually a declining block
    rate where there are lower rates as consumption increases.
        Senator Carper. OK.
        Mr. Gysel. We have an inclining block rates that are
    accelerated, so the largest tier is that much more of your bill
    as well. So not only increasing, but increasing it
    dramatically.
        Senator Carper. OK. Thank you.
        Let me just ask, and this would be for all of you,
    including Mr. Olson, why can't or shouldn't we embrace time of
    use rates or price increases, when prices increase, demand
    increases, or similar to what we do, say, with electricity? And
    if you would just lead off, Mr. Berger. Why shouldn't we
    embrace time of use rates where prices increases, demand
    increases, like we do with electricity?
        Mr. Berger. I think it depends upon the stress of the
    system. If your system has plenty of water, then there is no
    need to impose those kinds of restrictions. We do have the
    authority under city ordinance that at the point of drought or
    other kinds of stress, shortages, we do and can impose limits
    on consumption.
        Senator Carper. OK, thanks.
        Mr. Chow, just very briefly, please.
        Mr. Chow. No, we do not have restrictions set; however, we
    do get into that drought situation that Mayor Berger just spoke
    about.
        Senator Carper. OK.
        OK, very briefly, why couldn't we or why shouldn't we not
    just do, but the rationale?
        Mr. Chow. Well, I think, first of all, water usage is
    really individual, so individual household, individual
    residents within the household, the usage pattern is different
    and so on. To sort of set a standard per person, how many
    gallons you can use per day, that may not be practical.
        Senator Carper. All right, thank you.
        Mr. Moore. Real briefly.
        Mr. Moore. Especially on a residential rate, I have no
    problem escalating that rate because they use a certain amount
    for domestic use, and then everything above that goes on a lawn
    or something, that type of use.
        Senator Carper. Mr. Arndt.
        Mr. Arndt. I think one of the issues that relates to the
    technology, the availability of the metering capability to do
    this in a practical way. The other part of it is in our State
    we have what we call a uniformity clause that you have to
    charge the customer the same rate within a collect, so every
    residential customer needs to be treated the same. So if you
    have a customer who works night shift, and therefore perhaps
    uses water differently than someone who works day shift, you
    are actually creating a disadvantage or discrimination with a
    rate structure.
        Senator Carper. All right, thank you.
        Mr. Gysel. Very briefly, same question.
        Mr. Gysel. I am sorry?
        Senator Carper. Very briefly, same question, please.
        Mr. Gysel. Yes. It is all about technology. We have
    metering that is just going from fixed full metering to AMR
    technology. We are now moving to AMI technology. We haven't
    advanced as far on the technology side to measure the time of
    use, never mind to do the repository of all the data that would
    be required for----
        Senator Carper. OK, thank you.
        Mr. Chairman, I have just one more yes or no question, if
    you would give me the opportunity.
        Last question: Should water utilities consider inverted
    block pricing where prices increase with consumption? Again,
    should water utilities consider inverted block pricing where
    prices increase with consumption, yes or no?
        Mr. Berger. No.
        Senator Carper. OK.
        Mr. Chow.
        Mr. Chow. It really depends on the driver in terms of are
    you trying to stimulate economy and/or are you looking at
    industry versus residential. So every municipality community
    might be different.
        Senator Carper. OK. Thank you.
        Mr. Moore.
        Mr. Moore. I do recognize the difference, you know, in
    municipal water and rural water, but yes, I do think we have
    the right to set those rates.
        Senator Carper. Mr. Arndt.
        Mr. Arndt. It should be an option, but I think it is very
    much driven by the specific circumstances of each system
    whether it is workable or not.
        Senator Carper. OK.
        Mr. Gysel and Mr. Olson, then I am done.
        Mr. Gysel. I would agree with the caveat that the cost
    structures of utilities are usually inversely related to the
    revenue structures, and by that I mean that 70 percent of our
    costs are fixed, but usually 70 percent of the revenues are a
    risk on consumption. If you have inclining or increasing block
    rates, that last blocks, and it is large enough, represents a
    real threat to the utility recovering the true cost of
    delivering the water service.
        Senator Carper. OK, last witness, Mr. Olson.
        Mr. Olson. And I would agree that generally it makes sense
    to increase the rate with more use; it encourages conservation
    and helps low-income people pay a lower rate.
        Senator Carper. Thank you all. Thanks very much.
        Thanks, Mr. Chairman.
        Senator Inhofe. Thank you, Senator Carper.
        We have had good participation today, and I just would like
    to conclude by, first of all, recognizing that there is a very
    significant thing that came from Madill, Oklahoma. It is the
    wife of the Speaker of the House. So we want to recognize that.
        I would like to also just make a comment. You get mixed
    reports from the media as to what is going to happen with the
    WRDA bill. I have every conference. I am in the leadership; I
    have talked to the leadership on our side, Barbara has done the
    same thing on her side, and I am anticipating that we will be
    able to do this, get this out of committee, on the floor during
    this work period.
        And I also acknowledge that there are a lot of problems
    that we have, but there are a lot of solutions just from
    members of this committee. Senator Cardin's SRF legislation and
    his proposal for grants to replace lead service lines, Senator
    Booker's trust fund ideas, Senator Boozman's alternative water
    supply bill, rural water ideas. So we are working on ideas, and
    it has been very helpful to have you folks coming in from your
    different perspectives and levels to give us a better idea from
    hometown what the problems are.
        Senator Boxer.
        Senator Boxer. Thanks, Senator, so much.
        Let me be brief but take a couple of minutes to thank each
    and every one of you. I want to thank Senator Carper. Those
    questions were fascinating to the Senator from California,
    where we have such a terrible drought. So for us to hear, well,
    you pay less when you use more, it is like culture shock. But I
    completely understand that every district and every State is
    quite different from the next, and I think that is a critical
    part of the discussion.
        But as we move to the WRDA bill, which I am following the
    leadership of my great Chairman here, you don't know how bad it
    gets until you have a severe drought and then you don't have
    enough water. So I am going to be looking at desalination and
    other kinds of ways we can help.
        Very briefly, all of you want to see more grants rather
    than loans, and I completely get it, and I will work toward
    that as best we can, given resources. If you look at the
    history of Federal grants on water, it is very interesting, Mr.
    Berger, because when the program started it was 100 percent
    grants, until 1987, and Ronald Reagan worked with the Congress
    because they were putting pressure on Federal spending, and it
    changed to the State Revolving Fund, where now there was more
    of a partnership in terms of funding.
        But what is important is, and we have the SRF, it was added
    to drinking water later. The States can come in to pick up the
    matching, too. So your States could really help you as well. I
    want to make that point. And I think as we look at public-
    private partnerships, if it is done right, that is another
    level of funding we can count on.
        But I want to close with this, and hope that you will
    answer this in writing, all of you. We heard some pretty harsh
    words about the EPA and the EPA being a prosecutor. What is
    interesting to me is I look at Flint. I wish to heck they had
    been. They were very soft. They wrote little notes behind the
    scenes: problems, problems. They were quiet. They weren't
    aggressive enough.
        So I still don't dismiss the point that you feel like they
    are prosecutors, but I hate that broad brush comment. And I
    think what is very important is that you write to us and tell
    us the cases of specifically, specifically where they were.
        Now, some of you may not agree that they are prosecutors,
    but I know a couple of you do. So please give me that in
    writing, because if that is going on, that isn't good.
        So I will say to all of you thank you very much, thank you
    to my Chairman, and I am so looking forward to another WRDA
    bill. Mr. Chairman, we have just dwindling time on our
    partnership here. You will be here forever, but I won't. So as
    long as we are a team and we have proven we can do it, I am
    counting on you. Do you have any words of advice?
        Senator Inhofe. We are going to be doing it. You know, it
    is funny, because we don't agree on a lot of things.
        Senator Boxer. Really?
        Senator Inhofe. For example, I think one of the reasons
    that I disagree with her last statement was that I sat on that
    side of the table for a long period of time and I know what
    bureaucratic intimidation can mean, and I have been suffering
    from that.
        But on things I really believe Government is supposed to be
    doing, our highway bill, we wouldn't have had a highway bill if
    she and I hadn't worked together to make this happen. And I
    would say the same thing with the WRDA bill. It is very
    significant what is coming up. So we are going to be working
    together.
        And we are adjourned.
        Senator Boxer. Thank you, everybody.
        [Whereupon, at 12 p.m. the committee was adjourned.]
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