[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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