- THE STATE OF INFRASTRUCTURE IN RURAL AMERICA

[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]

THE STATE OF INFRASTRUCTURE IN RURAL AMERICA

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HEARING

BEFORE THE

COMMITTEE ON AGRICULTURE
HOUSE OF REPRESENTATIVES

ONE HUNDRED FIFTEENTH CONGRESS

FIRST SESSION

__________

JULY 19, 2017

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Serial No. 115-10

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

Printed for the use of the Committee on Agriculture
agriculture.house.gov

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26-588 PDF WASHINGTON : 2017

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COMMITTEE ON AGRICULTURE

K. MICHAEL CONAWAY, Texas, Chairman

GLENN THOMPSON, Pennsylvania COLLIN C. PETERSON, Minnesota,
Vice Chairman Ranking Minority Member
BOB GOODLATTE, Virginia, DAVID SCOTT, Georgia
FRANK D. LUCAS, Oklahoma JIM COSTA, California
STEVE KING, Iowa TIMOTHY J. WALZ, Minnesota
MIKE ROGERS, Alabama MARCIA L. FUDGE, Ohio
BOB GIBBS, Ohio JAMES P. McGOVERN, Massachusetts
AUSTIN SCOTT, Georgia FILEMON VELA, Texas, Vice Ranking
ERIC A. ``RICK'' CRAWFORD, Arkansas Minority Member
SCOTT DesJARLAIS, Tennessee MICHELLE LUJAN GRISHAM, New Mexico
VICKY HARTZLER, Missouri ANN M. KUSTER, New Hampshire
JEFF DENHAM, California RICHARD M. NOLAN, Minnesota
DOUG LaMALFA, California CHERI BUSTOS, Illinois
RODNEY DAVIS, Illinois SEAN PATRICK MALONEY, New York
TED S. YOHO, Florida STACEY E. PLASKETT, Virgin Islands
RICK W. ALLEN, Georgia ALMA S. ADAMS, North Carolina
MIKE BOST, Illinois DWIGHT EVANS, Pennsylvania
DAVID ROUZER, North Carolina AL LAWSON, Jr., Florida
RALPH LEE ABRAHAM, Louisiana TOM O'HALLERAN, Arizona
TRENT KELLY, Mississippi JIMMY PANETTA, California
JAMES COMER, Kentucky DARREN SOTO, Florida
ROGER W. MARSHALL, Kansas LISA BLUNT ROCHESTER, Delaware
DON BACON, Nebraska
JOHN J. FASO, New York
NEAL P. DUNN, Florida
JODEY C. ARRINGTON, Texas

______

Matthew S. Schertz, Staff Director

Anne Simmons, Minority Staff Director

(ii)

C O N T E N T S

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Page
Bacon, Hon. Don, a Representative in Congress from Nebraska,
submitted statement and report................................. 4
Conaway, Hon. K. Michael, a Representative in Congress from
Texas, opening statement....................................... 1
Prepared statement........................................... 3
Peterson, Hon. Collin C., a Representative in Congress from
Minnesota, opening statement................................... 4

Witnesses

Halverson, Ph.D., Thomas, President and Chief Executive Officer,
CoBank, Washington, D.C.; on behalf of Farm Credit System...... 13
Prepared statement........................................... 14
Coon, Ph.D., Thomas G., Vice President, Division of Agricultural
Sciences and Natural Resources, Oklahoma State University;
Chair, Task Force on Deferred Maintenance, Board on Agriculture
Assembly, Association of Public and Land-grant Universities,
Stillwater, OK................................................. 20
Prepared statement........................................... 21
Calhoun, Richard R., former President, Cargo Carriers, Cargill,
Inc., Silver Spring, MD; on behalf of National Grain and Feed
Association.................................................... 24
Prepared statement........................................... 26
Wynn, Curtis, President and Chief Executive Officer, Roanoke
Electric Cooperative; Vice President, Board of Directors,
National Rural Electric Cooperative Association, Ahoskie, NC... 30
Prepared statement........................................... 32
Submitted questions.......................................... 123
Otwell, CPA, Jennifer L., Vice President and General Manager,
Totelcom Communications, LLC, De Leon, TX; on behalf of NTCA--
The Rural Broadband Association................................ 35
Prepared statement........................................... 37
Submitted questions.......................................... 123
Macmanus, P.E., Brian E., General Manager, East Rio Hondo Water
Supply Corporation, Rio Hondo, TX; on behalf of Texas Rural
Water Association; National Rural Water Association............ 46
Prepared statement........................................... 48

Submitted Material

National Family Farm Coalition, submitted statement.............. 119
National Rural Health Association, submitted statement........... 120

THE STATE OF INFRASTRUCTURE IN RURAL AMERICA

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WEDNESDAY, JULY 19, 2017

House of Representatives,
Committee on Agriculture,
Washington, D.C.
The Committee met, pursuant to call, at 10:00 a.m., in Room
1300, Longworth House Office Building, Hon. K. Michael Conaway
[Chairman of the Committee] presiding.
Members present: Representatives Conaway, Thompson,
Goodlatte, Lucas, King, Rogers, Austin Scott of Georgia,
Crawford, DesJarlais, Hartzler, Denham, LaMalfa, Davis, Yoho,
Allen, Bost, Rouzer, Abraham, Kelly, Marshall, Bacon, Faso,
Dunn, Arrington, Peterson, David Scott of Georgia, Costa, Walz,
McGovern, Vela, Lujan Grisham, Kuster, Plaskett, Adams, Evans,
Lawson, O'Halleran, Panetta, Soto, and Blunt Rochester.
Staff present: Bart Fischer, Darryl Blakey, Emily Wong,
Matthew S. Schertz, Paul Balzano, Rachel Millard, Stephanie
Addison, Anne Simmons, Evan Jurkovich, Kellie Adesina, Liz
Friedlander, Troy Phillips, Nicole Scott, and Carly Reedholm.

OPENING STATEMENT OF HON. K. MICHAEL CONAWAY, A REPRESENTATIVE
IN CONGRESS FROM TEXAS

The Chairman. Good morning. This hearing of the Committee
on Agriculture entitled, The State of Infrastructure in Rural
America, will come to order. I would ask Mr. Bacon to open us
with a prayer. Don.
Mr. Bacon. Ladies and gentlemen, we are praying. Dear
Heavenly Father, Lord, we thank you for a beautiful day. We
thank you for the privilege of living in this country where we
are free. And we just thank you for our farmers, our ranchers,
our agriculture, which is such a rich resource for our country.
You have blessed us. And, Lord, we ask for your wisdom today
and for your presence. And we just ask you that you help us do
a good job for our country. In Jesus' name, amen.
The Chairman. Amen. Thank you.
Well, based on the level of conversation before we started
the hearing, apparently everybody is excited about our topic
today. This is good stuff. Again, thank you for being here. I
appreciate it.
There is, perhaps, no current public policy proposal that
commands more bipartisan support than the idea of rebuilding
America's public works. We have all heard the news reports
about the impact aging infrastructure has on our ability to
trade, travel, and communicate. But perhaps nowhere is the need
to renew our infrastructure greater than in America's
heartland. Many Americans are familiar with the crumbling
bridges and buckling roads that are highlighted in the news
stories, and the tragic crisis in Flint has brought into sharp
relief the urgent need to upgrade our water supply
infrastructure.
Like urban America, rural America has its share of roads,
bridges, and water systems in need of repair. We face unique
challenges that are different than our neighbors. Rural America
produces commodities, those fundamental products on which our
modern economy is built. We produce food, fiber, energy, ore,
lumber, and everything that goes into the products that are
made in our factories, factories that, in many cases, reside in
urban America. And transportation is the lifeline that
facilitates this partnership. If we cannot get the commodities
to market, urban manufacturers----
[Audio malfunction in hearing room.]
Mr. Yoho. Mr. Chairman, I don't believe your microphone is
on. It is not working. The red light is on.
The Chairman. Would you come and read this.
[Discussion off the record.]
The Chairman. All right. Is it working now?
Okay. Speaking of infrastructure needs: transportation,
improved communications technology remains a tremendous need in
rural America. Here in this room we take for granted the
awesome power of smartphones. Universal instantaneous access to
the Internet has become essential to our lives. And as
communications technology races ahead, we need to ensure rural
Americans are not being left behind.
Further, many of the gains in rural America over the past
100 years have been due, in part, to the public investments
made in agricultural research [Audio malfunction in hearing
room.]
As we have heard before, the infrastructure on which our
world class agricultural researchers rely is outdated,
crumbling, even as other countries are making significant
investments. At the root of many of these problems is the need
for capital to be invested in rural America. Our shifting
population moving out of rural communities into urban and
suburban counties, is also shifting the tax base making it
difficult for small communities to finance the upgrades they
need to continue to be competitive in a modern economy. It is a
cycle that seems unbreakable. Services are lacking, so families
move out. As families move out, the tax base shrinks. And as
the tax base shrinks, services must be curtailed and upgrades
must be postponed.
While it is tempting to think it is a local problem, it is
not. Our modern economy is built on the free movement of goods
and ideas. We cannot grow our nation's economy adequately if 50
million rural Americans are unable to participate.
For 200 years, Congress has debated Federal financing of
waterways, highways, electric systems, telephone lines, and
research infrastructure. Across all of those debates, we have
long understood the need to continue to pull all Americans
further into the networks of commerce.
I applaud the President for drawing attention to this
important issue. Today, we are fortunate to hear from six of
over 200 organizations participating in the Rebuild Rural
Coalition.
I want to thank them and the many other coalition partners
for joining us here today. It is important that your members
and our constituents are part of this process.
[The prepared statement of Mr. Conaway follows:]

Prepared Statement of Hon. K. Michael Conaway, a Representative in
Congress from Texas
Good morning and thank y'all for being here today.
There is perhaps no current public policy proposal that commands
more bipartisan public support than the idea of rebuilding America's
public works. We've all heard the news reports about the impact aging
infrastructure has on our ability to trade, travel and communicate. But
perhaps nowhere is the need to renew our infrastructure greater than in
America's heartland.
Many Americans are familiar with the crumbling bridges and buckling
roads that are highlighted in news stories. And the tragic crisis in
Flint has brought into sharp relief the urgent need to upgrade our
water supply infrastructure. Like urban America, rural America has its
share of roads, bridges, and water systems in need of repair. But we
face unique challenges that are different from our neighbors.
Rural America produces commodities, those fundamental products on
which we build our modern economy. We produce food, fiber, energy, ore,
lumber, and everything else that gets put into the products made by our
factories--factories that, in many cases, reside in urban America. And
transportation is the lifeline that facilitates this partnership. If we
cannot get commodities to market, urban manufacturing centers and rural
communities alike face challenges producing the very ``made in
America'' products that create the jobs and grow our economy. Because
of that, transportation infrastructure looms larger in rural America.
It's not just roads and bridges, it's also locks and dams and railways
and pipelines that allow our products to travel to the cities where
they are needed. ``Made in America'' depends on the transportation
networks we have built in rural America.
Like transportation, improved communications technology remains a
tremendous need in rural America. Here in this room, we take for
granted the awesome power of smartphones. Universal, instantaneous
access to the Internet has become essential to our lives. And as
communications technology races ahead, we need to ensure rural
Americans are not being left behind.
Further, many of the gains in rural America over the past 100 years
have been due, in part, to the public investments made in agricultural
research. As we have heard before, the infrastructure on which our
world-class agricultural researchers rely is outdated and crumbling,
even as other countries make significant investments.
At the root of many of these problems, is the need for capital to
be invested in rural America. Our shifting population, moving out of
rural counties and into urban and suburban counties, is also shifting
the tax base, making it difficult for small communities to finance the
upgrades they need to continue to be competitive in the modern economy.
It is a cycle that seems unbreakable--services are lacking, so families
move out; as families move out, the tax base shrinks; as the tax base
shrinks, services must be curtailed and upgrades must be postponed.
While it's tempting to think this is a local problem, it is not.
Our modern economy is built on the free movement of goods and ideas. We
cannot grow our nation's economy if 50 million rural Americans are
unable to participate.
For 200 years, Congress has debated Federal financing of waterways,
highways, electric systems, telephone lines and research
infrastructure. Across all of those debates, we have long understood
the need to continue to pull all Americans further into the networks of
commerce.
I applaud the President for drawing attention to this important
issue. Today, we are fortunate to hear from six of the over 200
organizations participating in the Rebuild Rural Coalition, and I want
to thank them and many other coalition partners for joining us here
today. It is important that your members--our constituents--are a part
of this process.
With that, I yield to Mr. Peterson for any additional comments he
might have.

The Chairman. With that, I would like to yield to Mr.
Peterson for any comments he would like to make

OPENING STATEMENT OF HON. COLLIN C. PETERSON, A REPRESENTATIVE
IN CONGRESS FROM MINNESOTA

Mr. Peterson. Thank you, Mr. Chairman. And I want to thank
the witnesses for being with us. And apologize. I have to go
down the hall and testify on my wolf de-listing bill. I will be
back, but I might miss a little bit.
Anyway, as the Chairman said, it is no secret that we have
infrastructure issues, and we have been in decline. Our roads
and bridges are in need of repair. And if we don't do it now,
it will just cost more later. Our rural economy, in particular,
faces unique infrastructure challenges. And it was said that
strong infrastructure is necessary in rural America because it
is so remote, and we depend on it to get our products to
market.
I know it is surprising to a lot of folks, but in my
district and others like it, there are large areas that lack
broadband service. And there are USDA programs to build more
broadband. But the problem is we don't have a sustainable long-
term funding source. And we need something like the Universal
Service Fund that we had when we built out the telephones. That
is the only reason we got telephones out to every part of rural
America. And, in my opinion, unless we have something like that
in place, that can be relied on, we are not going to get this
broadband done, it will be in fits and starts, with states
doing things and so forth. Somehow or another, we have to
figure out how to do this. It is not as easy to do on the
broadband as it was with telephones, but I think we can do it.
There are a lot of components that are overseen by
different Federal agencies. And if we are truly going to
rebuild and keep our rural infrastructure strong, all these
pieces need to work together. I appreciate the witnesses being
here today, and I look forward to their testimony. And I yield
back.
[Audio malfunction in hearing room.]
The Chairman. The chair requests that other Members submit
their comments for the record so witnesses may begin the
testimony.
[The prepared statement of Mr. Bacon follows:]

Prepared Statement of Hon. Don Bacon, a Representative in Congress from
Nebraska
I ask that The U.S. Infrastructure Advantage report be included in
the record for the hearing on the state of infrastructure in rural
America. I applaud the Association of Equipment Manufacturers for their
continued commitment to the future of our nation's infrastructure. The
work of industry leaders including my constituent Leif Magnusson of
CLAAS to produce The U.S. Infrastructure Advantage report is an import
step to shaping our discussion about infrastructure in Congress. Strong
infrastructure of all kinds will ensure that U.S. companies in all
sectors remain competitive. I look forward to working with my
colleagues to improve our infrastructure systems in the United States.
Attachment
The U.S. Infrastructure Advantage^TM
Introduction
The backbone of America's economy is its infrastructure. To have
the strongest, most resilient economy in the world, America must have
the best infrastructure in the world. In short, we must have an
Infrastructure Advantage.
America's competitors around the world understand this. They are
making unprecedented infrastructure investments and working hard to
overtake the United States. Meanwhile, America is underinvesting, and
is on the verge of squandering the Infrastructure Advantage we
inherited from the investments made by our grandparents and great-
grandparents.
It is time for America to rebuild and modernize its vast
infrastructure network--our roads, highways, bridges, transit systems,
ports, waterways, locks and dams, water and wastewater pipelines, as
well as broadband. We must renew and strengthen our Infrastructure
Advantage if we are to have the world's preeminent economy in the 21st
Century and beyond.
As equipment manufacturers representing the agriculture,
construction, forestry, mining, and utility sectors in North America,
several factors impact our ability to manufacture and sell our products
to customers inside and outside of the United States. These factors
include labor force skill, trade policies that facilitate commerce in
overseas markets, and Federal tax credits that boost reinvestment and
expansion. Another important factor, which is the focus of this report,
involves the maintenance and modernization of the U.S. infrastructure
system.
What makes American manufacturers competitive is not so different
from what makes the country economically competitive, and maintaining
our infrastructure in a good and updated state of repair is yet another
shared factor. In the 2016-2017 Global Competitiveness Report by the
World Economic Forum, the United States remained in third place behind
Switzerland and Singapore. More ominously, the U.S. ranked 11th in
infrastructure competitiveness, with the report noting that
``stagnating productivity has called for a downward revision of growth
prospects, highlighting the need for a renewed competitiveness
agenda.''
If the United States is to remain a global economic leader, its
infrastructure competitiveness ranking must be improved. The gradual
demotion and stagnation of the United States' world infrastructure
ranking is a direct consequence of an inability to strategically act on
the opportunities that people, industry, and technology present in
rethinking U.S. infrastructure.
This report makes the case for making U.S. infrastructure number
one in the world and reclaiming the United States' Infrastructure
Advantage. It outlines the consequence of not taking meaningful steps
to regain this advantage, and offers five policy areas that lawmakers
and infrastructure stakeholders should reference when considering
infrastructure policy proposals for modernizing U.S. infrastructure and
identifying a sustainable funding source. Rather than re-litigate our
infrastructure problems, this document offers solutions and moves the
conversation forward.
The Infrastructure Advantage
For the past 2 years, AEM and its member companies have sought
opinions from a broad range of diverse infrastructure stakeholders.
Based on this feedback it is clear that the United States must support
and promote the following vision in order to reclaim its Infrastructure
Advantage--the safe and efficient movement of people and goods,
connectivity between and within rural and urban America, as well as
strong economic growth and robust job creation. To effectively compete
in the global marketplace, America's infrastructure must be the best in
the world. That is the Infrastructure Advantage.
Why is the Infrastructure Advantage Important?
Rebuilding and modernizing America's core infrastructure to
reestablish an Infrastructure Advantage is not only important, it is
essential if the United States is to maintain its position as the
world's strongest economy. It makes America more competitive
internationally and puts domestic industry on the path to higher
economic growth, greater productivity, and stronger private-sector job
creation.
In today's global marketplace, U.S. companies must compete with
companies from around the world, including ones located in countries
with much lower labor costs and regulatory costs than the United
States. This puts U.S. companies at a competitive disadvantage, and it
creates incentives for U.S. companies to move their operations to
countries with lower costs in order to compete more effectively.
To level the playing field, the United States must invest in
strengthening its comparative advantages. The smartest area to do this
is through the country's infrastructure system, which is central to
international competitiveness. It is critical to moving goods, ideas,
and workers quickly and efficiently and providing a safe, secure, and
competitive climate for business operations.
Our competitors around the world understand this. They are spending
enormous sums and expanding their infrastructure, with China and India
leading the way.
Meanwhile, America is headed in the opposite direction. America's
infrastructure was once the envy of the world and gave U.S. companies a
big competitive boost in the international marketplace. But in recent
years we have been underinvesting in our infrastructure, resulting in a
decline in our roads and bridges, transit systems, air traffic control
systems, airports, railroads, ports and dams, and water infrastructure.
If America's businesses are to grow and remain competitive, and if
foreign investors are to invest in businesses in the United States,
then America needs to reclaim its Infrastructure Advantage. America
must modernize and rebuild its infrastructure so that it is once again
the envy of the world and ranks first in infrastructure
competitiveness.
China, India, and other countries with low labor and regulatory
costs are looking to the future by building a 21st century
infrastructure capable of supporting a strong 21st century economy.
This should be a wake-up call for the United States. It is time to
accept the challenge. It is time to rebuild and modernize our
infrastructure to ensure that America's 21st century economy is the
world's strongest economy.
In the short term, significant investment will be required to
modernize and rebuild America's core infrastructure. This
infrastructure investment will create tens of thousands of jobs across
a range of industries.
In the long term, the most important economic impact of the
investment needed to create the Infrastructure Advantage comes as the
investments are completed. The economic benefits of this investment are
long-term competitiveness, productivity, innovation, lower prices, and
higher incomes.
Consequences of Losing the Infrastructure Advantage
Every day Americans see the impact of underinvestment in our core
infrastructure--congestion, potholes, transit outages, water main
breaks, a sluggish economy, and the list goes on. This should not come
as a surprise.
The United States is currently investing \1/2\ of what it spent on
transportation infrastructure more than 50 years ago as a percentage of
the gross domestic product--close to 1.5% now compared with nearly 3%
in the early 1960's.
America is at a crossroads. We either significantly increase
investment in the infrastructure that has driven our economy in the
past, or we continue to underinvest. If we increase our investment to
levels sufficient to reclaim an Infrastructure Advantage, the benefits
will be significant.
But what if we instead simply maintain the status quo?
Over time, these impacts will affect businesses' ability to provide
well-paying jobs, further reducing incomes. If this investment gap is
not addressed throughout the nation's infrastructure sectors by 2025,
the economy is expected to lose almost $4 trillion in GDP, resulting in
a loss of 2.5 million jobs in 2025.ⁱ
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\i\ American Society of Civil Engineers, ``Failure to Act.'' 2016.
http://www.infrastructurereportcard.org/wp-content/uploads/2016/05/
2016-FTAReport-Close-the-Gap.pdf.
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Upon completion of the Interstate Highway System, business
logistics costs, as a percentage of United States GDP, were cut in \1/
2\ with a decrease from 16 percent in 1980 to eight percent in
2014.ⁱⁱ Failure to maintain and upgrade this system over the
past 37 years has instead increased transportation costs for a variety
of products, across many sectors. Congestion caused by highway systems
that are at capacity and in disrepair cause 141 million hours to be
wasted in freight truck productivity.ⁱⁱⁱ
---------------------------------------------------------------------------
\ii\ TRIP, ``The Interstate Highway System Turns 60: Changes to Its
Ability to Save Lives, Time and Money.'' June 27, 2016. http://
www.tripnet.org/docs/
Interstate_Highway_System_TRIP_Report_June_2016.pdf.
\iii\ American Automobile Association, American Trucking
Associations, U.S. Chamber of Commerce, Joint Congressional Letter.
January 26, 2015. http://newsroom.aaa.com/2015/01/aaa-ata-u-s-chamber-
ask-congress-fund-roads-bridges/.
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Failure to take meaningful action on upgrading United States
infrastructure could also impact agricultural product transportation.
Currently, America enjoys a trade surplus with it agricultural exports.
However, steps are need to repair and upgrade the locks and dams system
along U.S. inland waterways. These waterways serve as critical
transportation channels that alleviate congestion on roads and rail by
transporting agriculture commodities such as corn and soybean. For
example, the agriculture sector could hypothetically see a 40% decrease
in economic activity as the result of just one major lock disruption
along the Upper Mississippi River and Illinois Waterway.^iv
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\iv\ Yu, T.E., B.C. English and R.J. Menard. Economic Impacts
Analysis of Inland Waterway Navigability on the Transportation of Corn
and Soybeans. Staff Report #AE16-08. Department of Agricultural and
Resource Economics, University of Tennessee. September 2016.
---------------------------------------------------------------------------
Steps To Reclaim the Infrastructure Advantage
This report outlines five areas that should be leveraged in any
plan to reclaim the United States' Infrastructure Advantage. Within
each area, this report includes infrastructure-related policy and
regulatory suggestions that could be leveraged to facilitate promotion
and implementation.
Focus on Networks and Systems
To achieve maximum efficiencies and benefits, infrastructure must
be addressed on a network-wide and system-wide basis. A ``project here
and project there'' approach will not work. America must tackle its
infrastructure problems on a bigger scale. For example, the Interstate
Highway System would not have produced the economic benefits that it
has if it was simply a series of disconnected segments. The benefits
are derived from the fact that it is a connected network. The same can
be said for our national rail network. And this is especially the case
when talking about the movement of freight.
As manufacturers, AEM and its member companies understand the
importance of timely and reliable delivery--both in the transportation
of finished products as well as in the parts and pieces that go into
manufacturing those final products. As such, any proposal or plan must
consider the effective and safe movement of people and goods as a
primary objective. This requires efficient and well-designed networks
and systems.
In the short term, AEM supports future implementation of dedicated
transportation funding and policies that specifically target
intermodal--ship to train to truck--network bottlenecks such as what
was included in the 2015 Federal surface transportation
reauthorization. Establishing a dedicated multi-modal freight
discretionary grant program will ensure that authorized funding will go
to freight-focused projects only. Further, user fees generated from
freight providers would go towards this dedicated revenue stream.
In the long-term, the creation of a dedicated freight network will
facilitate more efficient movement of products and goods, and directly
alleviate personal vehicle congestion. AEM and its member companies
support the continued development and implementation of a national
freight plan.
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Headquartered in West Fargo, North Dakota, and with U.S.
manufacturing facilities in Bismarck, Gwinner, and Wahpeton, as
well as Litchfield, Minnesota, and Statesville, North Carolina,
Doosan Bobcat North America knows how reliant manufacturers are
on the surrounding infrastructure system--both in getting raw
materials to its facilities that produce loaders, excavators,
utility work machines, hydraulic cylinders, as well as
attachments for its heavy wheel loaders and excavators, but
also getting those component parts and final products out to
customers. That process must be efficient, cost-effective and
reliable from start to finish.
``We depend on predicable and economical transportation and
delivery options in getting our products and our attachments to
domestic and overseas markets,'' said Doosan Bobcat North
America and Oceania President Rich Goldsbury. ``The
infrastructure advantage afforded by our facility locations was
a principal factor in choosing where we expanded and located
our U.S.-based manufacturing operations. In certain cases, our
manufacturing facilities are operating along a two-lane
highway. As we identify new markets and products lines, it will
be critical for us to have a plan and adequate resources both
at the state and Federal level to build that supporting
physical infrastructure so that operations continue smoothly
and our product delivery to other facilities and our customers
is seamless--both logistically and economically.''
Maximize Use of Smart Technology
The integration of technology and infrastructure is already
underway, but that integration is currently being implemented without a
broad strategic plan in place. AEM and its member companies support the
development and implementation of a national plan to upgrade and
retrofit existing infrastructure systems with the latest in smart
infrastructure technology. The need for this is two-fold: (1) to ensure
that U.S. infrastructure is equipped to capitalize on the benefits that
will come with technological advancements in areas such as embedded
sensors, Information and Communication Technology, automation, and
unmanned aerial vehicle use, and (2) to ensure geographic parity across
the country, particularly in rural areas.
In the short-term, the United States can help reassert its
Infrastructure Advantage by auditing cross-agency research and
development activities in the context of how they advance
infrastructure innovation in this country. Currently, innovations are
produced and assessed in silos and opportunities are missed.
Collaborative policies need to be put in place that facilitate idea
sharing and innovative partnerships across all agencies, levels of
government, and the private-sector.
In the long-term, authorization for new federally supported
infrastructure construction, maintenance or repair efforts must be
contingent upon plans for technological upgrades and infrastructure
adaptation. For example, self-driving cars and the need for sensor
implementation is paramount to fully leveraging our infrastructure in a
way that takes advantage of the advancements being made in the
technological space across a range of industries. Roads, highways,
bridges, and pipelines can and should do more for users. Federal
infrastructure policy should require states and localities to
demonstrate their commitment to implementing smart infrastructure
across all assets and modalities. Infrastructure policy must put a
premium on next generation infrastructure that takes full advantage of
technological advancements that improve upon how current and future
assets perform.
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As an innovation company with its corporate headquarters in
Silicon Valley, and locations across the country, Trimble
integrates the digital and physical worlds by combining the
Internet of Things, sensor-based monitoring, automation and
data analytics into transformative solutions in a wide range of
sectors including construction, agriculture, utilities, and
transportation. The functionality and effectiveness of Trimble
data-enabled solutions rely on a robust deployment of an
expansive and reliable broadband infrastructure. To be
effective the broadband network must provide ubiquitous and
reliable connectivity from locations as diverse as a highway in
Los Angeles to a peanut farm in Sylvester, Georgia.
``Increasingly, infrastructure must be integrated with
technologies such as GPS,'' said Steve Berglund, Trimble's CEO.
``Updating infrastructure assets must involve retrofitting them
with technology that is going to enhance connectivity and
circumstantial awareness. The need will intensify with more
widespread adoption of autonomous vehicles, precision farming
techniques, and automated work tools and machines. Our updated
infrastructure will need to provide extended utility by
actively interacting with the other elements that increase
productivity, improve safety, or enhance quality of life--
whether they are our personal devices, our vehicles, or our
tools and machines. The end result will be an infrastructure
that is smarter both in terms of performance but also its
upkeep.''
Ensure Rural-Urban Connectivity
Our transportation networks and systems must be developed and
improved in a way that provides connectivity between and within urban
and rural America. For example, it is rural America that feeds and
fuels America. The food, fuel, and fiber produced in rural areas must,
however, move to urban areas and to world markets. This only happens if
America's transportation networks and systems provide connectivity. It
is imperative that policies recognize this and act accordingly.
In the short-term, agriculture product transportation must not be
overlooked, and future implementation and resource allocation of a
national freight plan must involve other infrastructure assets beyond
surface transportation such as waterways, rail, locks, dams and ports.
These assets are also critical economic drivers and should be included
in the freight funding category assigned in future surface
transportation solutions.
In the long-term, a plan and commitment to ensure rural America is
able to take full advantage of autonomous transportation and sensor
technology must also be a part of a national infrastructure plan. Rural
communities of populations of 50,000 or less stand to benefit from
these technologies, as well as the broadband network they rely upon to
function. Rural America must be included in any national plan to
retrofit existing or new infrastructure with technologies such as
embedded sensors. Much like the Federal support needed for public works
projects, adapting rural infrastructure to technological advancements
must be a part of the next wave of ensuring parity and connectivity
between urban and rural America.
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

As a global manufacturer of farm equipment such as combines,
forage harvesters, balers, hay tools, and tractors, CLAAS North
America not only manufactures equipment critical to agriculture
production, an economic driver for rural communities, but also
operates facilities in the very rural communities that rely on
this equipment. It's a company that contributes doubly to the
rural community.
``Rural infrastructure and the critical connectivity it
provides in feeding America and the world is just one reason
why it must be a part of a larger, national infrastructure
plan,'' commented CLAAS Global Sales America President Leif
Magnusson. ``We look very closely at logistic costs when
looking at the larger production picture, and if we can keep
that cost lower it means that we can provide our product to our
customers--farmers and ranchers in rural communities--at a more
competitive price.''
Broadband connectivity is also an important infrastructure
component when considering rural development planning. The
Internet of Things (IoT) is transforming agriculture and
working to help producers become more resourceful, sustainable,
and productive. Closing the digital divide in rural America
must be the focus of legislators and government agencies to
enable rural communities to compete in the digital age.
``Well over 35% of rural America remains without fixed
broadband support,'' said Magnusson. ``We manufacture farm
equipment that can transmit mission critical data for analytics
that then turns into actionable decisions. Connected machinery,
fleet vehicles, weather stations, and soil sensors are just
some of the early stages of connected farm innovations taking
place. The ingenuity of tomorrow's farm starts with the
infrastructure investments of today.''
Expedite Project Delivery
Modernizing and rebuilding America's core infrastructure is costly
and takes time. Approvals today can take a decade, sometimes longer.
Delay dramatically adds to costs, and prevents projects from getting
off the drawing board. Delay also prolongs bottlenecks which waste time
and energy, causing America to lag behind global competitors. The
impact of keeping project delivery on time extends beyond the life
cycle of a project, allowing for all industries to anticipate the
economic benefits that come with infrastructure update and increased
capacity.
In the short-term, Congress must tackle reforming existing and yet-
to-be-determined regulations that impact the most pressing
infrastructure assets. These include, but are not limited to, automated
vehicle guidance, water and wastewater rehabilitation standards, and
big data usage and privacy protection guidance. Tackling these
regulations now will empower the private sector to continue to
innovate. It will also provide state and local governments with helpful
guidance in preparing for future Federal funding opportunities.
In the long-term, AEM supports a 2 year or less environmental
approval process for future infrastructure project delivery
plans.^v A legally enforceable deadline from approval of
funds to a final permitting decision must complement this timeline so
that project completion can be anticipated and appropriately planned
for by state and local entities. AEM and its member companies support
deputizing one agency to oversee large-scale, interstate infrastructure
project approvals across all modalities and assets--from transportation
to utilities.
---------------------------------------------------------------------------
\v\ Common Good, ``Two Years Not Ten Years: Redesigning
Infrastructure Approvals.'' Philip K. Howard. September 2015.

Calder Brothers Corporation manufactures Mauldin Paving
Products at its Taylors, South Carolina facility, offering a
line of construction equipment such as asphalt pavers, asphalt
distributors, motor graders, rollers, and water tank trucks--
equipment that is integral in any road or highway worksite. In
this case, manufacturer and contractor depend on a project
approval and regulatory process that is streamlined and
efficient.
``Predictability in project approvals over a multiyear
horizon helps our customers determine if and when to place new
orders, first and foremost,'' commented Calder Brothers
Corporation Executive Vice President Glen Calder. ``If a
contractor can reliably predict when projects will be approved,
we both can plan accordingly to make sure they have the right
equipment to handle these infrastructure challenges. Equally
important is the confidence this multiyear predictably gives us
as manufacturers to invest in research and development, as well
as plan for future facility expansion and job growth.''
Provide Adequate and Reliable Resources
AEM and its member companies understand how important it is for
U.S. infrastructure to have a funding mechanism that is reliably and
responsibly resourced. As varied as infrastructure is, and as varied as
its uses are, it is appropriate to consider multiple funding proposals
based on the user, the mode, the product carried, and the frequency of
use. What might work for highways may not work for waterways, and what
is suitable for urban public transit may not be suitable for funding
the infrastructure priorities of rural communities. As such, Federal
lawmakers must consider a range of options.
In the short-term, this should include the widespread adoption of
user fees, such as a gas tax, for all publicly supported infrastructure
assets, not just ports, waterways, toll roads, or high-occupancy-
vehicle lanes in urban areas. The solvency of the Highway Trust Fund
depends on identifying and supporting a sustainable funding solution.
In the long-term, AEM and its members support infrastructure
financing policies that encourage partnerships with the private sector
(P3s), and recognize that this must also be coupled with a strong
Federal investment, as many important and necessary projects are unable
to generate a revenue stream sufficient to support P3 financing. In
addition, one of the barriers to fully leveraging the P3 model is that
not all 50 states have strong enabling legislation to fully facilitate
these partnerships. While recognizing individual state and project
needs, steps should be taken to standardize basic P3 enabling
legislation at the state level.
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

With manufacturing facilities in Pella, Iowa, Vermeer
Corporation produces a line of underground infrastructure
solutions used on a range of utility infrastructure projects.
These ``unseen'' infrastructure networks are critical to the
ensuring urban and rural communities thrive. However, for many
of these underground networks, public funds are essential and
badly needed to complete much-needed repairs and new
installations, either as the sole source or as a means to
leverage private investment.
``Just like with road and highway construction, the utility
construction sector needs funding and financing certainty with
its projects,'' said Vermeer President and CEO Jason Andringa.
``Utility infrastructure doesn't always attract private
investment and that's why Federal dollars play such an
important role. Navigating a utility infrastructure project
from start to finish requires using every option you have. This
has to be the funding and financing approach we take to
modernizing and repairing United States infrastructure.''
Conclusion
For the better part of a decade, stakeholders have painstakingly
detailed the pitiful state of American infrastructure, highlighted the
rising costs of inaction, and made continual appeals to decision makers
at the Federal level to do something--settling for piecemeal and short-
term fixes--to stem the structural and functional decline of roads,
bridges, ports, locks, dams, and water pipelines. Indeed, the path for
the United States to retake the lead in the global infrastructure race
appears steep.
What are the next steps in reclaiming the U.S. Infrastructure
Advantage and making our infrastructure great once again?
AEM and equipment manufacturers will continue to push for a long-
term plan to rebuild and modernize our infrastructure and help us
reclaim the Infrastructure Advantage. This includes supporting efforts
at the Federal, state and local levels intended to make U.S.
infrastructure the priority it should be.
On a parallel track, AEM and its member companies will urge
lawmakers to consider the five policy priorities outlined in this
document in short-term as well as long-term legislative efforts. It is
time to stop restricting the policy making process to the question of
funding the infrastructure systems of the 1980s and push forward with
efforts to retrofit the existing system in a way that will ensure the
safe and efficient movement of people and goods, facilitate
connectivity between urban and rural America, and promote economic
growth and job creation.
AEM and its member companies will continue to encourage greater
dialogue and collaboration among a broad variety of infrastructure
stakeholders about the next big national project, whether it is above
or below ground, on a magnetic levitation guideway, an autonomous
vehicle revolution, platooning trucks, or technological upgrades to our
once-impressive network of intermodal assets. It is time for the United
States to reclaim its Infrastructure Advantage and meet the needs of
the 21st century global economy.
About AEM
AEM is the North American based international trade association
providing innovative business development resources to advance the off-
road equipment manufacturing industry in the global marketplace. AEM
membership comprises more than 950 companies and more than 200 product
lines in the agriculture, construction, forestry, mining and utility
sectors worldwide. AEM is headquartered in Milwaukee, Wisconsin, with
offices in Washington, D.C.; Ottawa, Canada; and Beijing, China.
About the U.S. Infrastructure Advantage^TM
The U.S. Infrastructure Advantage^TM was developed by a
task force of executives from the equipment manufacturing industry
after 2 years of engaging in discussions with, and soliciting ideas
from, a wide range of infrastructure stakeholders. It will guide the
strategic direction for AEM's ongoing infrastructure advocacy efforts
and serve as a tool to assess infrastructure policy proposals at state
and Federal Government levels. Those contributing include:

Jason Andringa, President & CEO, Vermeer Corporation, Pella, Iowa
Steve Berglund, President and CEO, Trimble Inc., Sunnyvale,
California
Glen Calder, Executive Vice President, Calder Brothers Corporation,
Taylor, South Carolina
Ron De Feo, President, Kennametal, Pittsburgh, Pennsylvania
Rich Goldsbury, President, Doosan Bobcat North America and Oceania,
West Fargo, North Dakota
John Grote, Global Vice President of Marketing and Sales, Grote
Industries, Madison, Indiana
Dennis House, Vice President of Marketing, Topcon Positioning
Systems, Livermore, California
Jerry Johnson, President, Farm, Ranch, & Agriculture Division,
Blount International, Oregon, Illinois
Shan Kirtley, Vice President of Sales & Marketing, Ditch Witch,
Perry, Oklahoma
David Koppenhofer, Executive Director, OEM Sales & Support,
Cummins, Inc., Indianapolis, Indiana
Leif Magnusson, President, CLAAS Global Sales America, Inc., Omaha,
Nebraska
Kevin Smith, President, HammerHead Trenchless Equipment, Lake
Mills, Wisconsin
Jim Wessing, President, Kondex Corporation, Lomira, Wisconsin

The Chairman. And with that, I would like to welcome our
witnesses to the table.
First, we have Tom Halverson, President and CEO, CoBank.
Mr. Lucas, have you a witness you would like to introduce?
Mr. Lucas Thank you, Mr. Chairman. We have Dr. Tom Coon,
Vice President of the Division of Agricultural Sciences and
Natural Resources of Oklahoma State University; on behalf of
APLU. He is responsible for the extension service experiment
stations. He is a wonderful asset, and I look forward to his
comments today.
[Audio malfunction in hearing room.]
The Chairman. Have you a witness you would like to
introduce?
Ms. Adams. Thank you, Chairman Conaway. I am pleased to
introduce Mr. Curtis Wynn, from my State of North Carolina. He
is the President and CEO of Roanoke Electric Cooperative, and
the Vice President for the National Rural Electric Cooperative
Association. Mr. Wynn is nationally recognized in Roanoke, and
does work to support local communities. They have developed and
implemented pioneering financing community solar, and broadband
service programs. Mr. Wynn is a perfect voice to help this
Committee navigate the complexities of the development. I am
looking forward to hearing his testimony
The Chairman. Thank you, Ms. Adams.
We also have Ms. Jennifer Otwell from District 11, which is
kind of near and dear to my heart. Jennifer is the Vice
President and General Manager of Totelcom Communications, LLC,
De Leon Texas, on behalf NCTA--The Rural Broadband Association.
And Mr. Vela, would you like to introduce our witness?
Mr. Vela. Yes. Thank you, Mr. Chairman, for this hearing
and bringing our attention to the needs of rural America. Brian
Macmanus is the general manager of the Rio Hondo Water Supply
Cooperation. He was [Audio malfunction in hearing room.]--
authority where he serves as Vice President. Additionally,
Brian serves as Vice President of the Texas Rural Water
Association Board of Directors and President of the South Texas
Water Utility Managers Association. I am happy to have you here
today, Brian, and thankful that you are here to highlight the
water needs of south Texas and of all rural America.
The Chairman. I thank our witnesses. We are going to have
to take about a 7 to 8 minute break to reboot the system.
Please, everybody, stay where you are. We will reboot and try
to move on. Everybody hang with us.
If this problem persists, we will simply turn it all off. I
will ask the witnesses to speak loudly so the stenographer can
capture what you are saying. And we will not be able to
broadcast this thing out further than that. But we will move
forward.
So with that, Dr. Halverson 5 minutes.
Oh, by the way, given this delay, given the importance of
this and how much all of our Members are interested in this, I
am going to be really strict on the 5 minute clock. If you see
the red light go on and I start banging the gavel up here, then
I will need you to wind it up really quickly. And then,
Members, please understand, you have 5 minutes, and then I am
going to have to move on to the next person.
So with that, Dr. Halverson, your 5 minutes.

STATEMENT OF THOMAS HALVERSON, Ph.D., PRESIDENT AND CHIEF
EXECUTIVE OFFICER, CoBank, WASHINGTON, D.C.; ON BEHALF OF FARM
CREDIT SYSTEM

Dr. Halverson. Well, good morning, Chairman Conaway,
Ranking Member Peterson, and Members of the Committee. Thank
you for calling this hearing today. My name is Tom Halverson. I
am the President and CEO of CoBank, and I am testifying today
on behalf of the Farm Credit system.
We are proud to be helping to organize the Rebuild Rural
Coalition, engaging more than 200 organizations from across the
country that are dedicated to highlighting the unique
infrastructure needs of agriculture and rural communities and
advocating for investment in America's rural infrastructure.
We are grateful for the Committee's interest in rural
infrastructure, and we ask that, as infrastructure legislation
moves forward in this Congress, that you work aggressively to
address the important needs of agriculture in rural
communities.
As Rebuild Rural points out, our nation's ability to
produce food and fiber, and transport it efficiently across the
globe, is a critical factor in America's global
competitiveness. Infrastructure that supports rural communities
and links them to the global market has helped make the United
States the unquestioned leader in agricultural production.
People in rural communities have seen their infrastructure
deteriorate jeopardizing jobs, the competitiveness of American
agriculture and the quality of life for rural families and
communities. The scope of the investment that is needed is
staggering, and government resources cannot fill that need
entirely.
Creative solutions that pair government investment with
private sources of capital hold great promise. We stand ready
to work with you and the Trump Administration on this important
initiative. Among the Farm Credit institutions, CoBank is
uniquely chartered to directly lend to rural infrastructure
providers. CoBank's $31.5 billion in loan commitments to rural
infrastructure includes community facilities, rural water and
wastewater treatment companies, rural electric cooperatives,
and rural communications service providers.
CoBank partners with many Farm Credit associations to
finance an additional $9.4 billion in loan commitments to rural
infrastructure. We partner with commercial banks to add $1.6
billion more in commitments to that sum. And as a cooperative
owned by our customers who live and work in rural America, our
primary interest is maximizing the quality and the availability
of infrastructure to rural communities. Hospitals, senior care
centers, walk-in clinics, schools, and other community
facilities are critical to the viability of rural communities
and are important contributors to the quality of life for rural
families. In many rural communities, those essential facilities
are not available or need modernization.
A pilot program authorized by our regulator, the Farm
Credit Administration, helped to address the need for community
facility investment. Farm Credit was able to invest $733
million in 210 rural communities, catalyzing commercial bank
investment of an additional $315 million on almost \1/2\ of
those projects. That pilot program expired in 2014, and we
would hope that this Committee will encourage the Farm Credit
Administration to facilitate a new sustainable program to
resume these critical partnerships between Farm Credit,
commercial banks, and the USDA to support rural community
facilities.
GAO estimates that almost $190 billion is needed to cover
the cost of replacing outdated rural water and wastewater
infrastructure. There continues to be a well-publicized digital
divide between urban and rural broadband subscribers. The
Federal Communications Commission estimated that nearly 40
percent of rural Americans do not have access to the current
FCC target for ideal minimum Internet service. That lack of
access slows the deployment of technology, hampering efficiency
on our farms, limiting other business opportunities, and
threatening our local and rural communities.
Rural America helped pull the country out of the Great
Recession, thanks to the strength of agricultural exports and
rural energy production. In recent years, however, the rural
economy has suffered, due to low commodity prices and other
difficulties. All of us should be looking for ways to support
the health and the vitality of the rural economy during this
period of challenge. And infrastructure investment is one of
the best strategies to do that.
Thank you, Mr. Chairman, for the opportunity to testify
today. And I very much look forward to your questions.
[The prepared statement of Dr. Halverson follows:]

Prepared Statement of Thomas Halverson, Ph.D., President and Chief
Executive Officer, CoBank, Washington, D.C.; on Behalf of Farm Credit
System
Good morning, Chairman Conaway, Ranking Member Peterson, and
Members of the Committee. Thank you for calling this hearing today to
explore the infrastructure needs of rural communities and agriculture.
My name is Tom Halverson and I am President and CEO of CoBank.
Today, I am testifying on behalf of the Farm Credit System. CoBank, is
a proud member of the Farm Credit System, and we share the Farm Credit
mission to support rural communities and agriculture.
Farm Credit is proud to be helping organize the Rebuild Rural
Coalition, engaging more than 200 organizations from across the country
focused on U.S. agricultural producers, rural communities, businesses,
and families. Rebuild Rural is dedicated to advocating for investment
in rural America's infrastructure and understands that rural America's
infrastructure needs are fundamentally unique.
On behalf of the Coalition, we are grateful for the House
Agriculture Committee's interest in rural infrastructure and ask that
as infrastructure legislation moves in this Congress, as part of the
farm bill or other legislation, this Committee work aggressively to
ensure that the unique needs of agriculture and rural communities are
specifically addressed.
As the Rebuild Rural Coalition pointed out earlier this year. those
in rural communities have seen our infrastructure deteriorate,
jeopardizing jobs, our agricultural competitiveness, the health of
rural families and communities. Past public-sector infrastructure
initiatives often focused on urban and suburban infrastructure
improvements while ignoring or inadequately addressing the unique needs
of rural communities.
American agriculture truly feeds the world and creates millions of
jobs for U.S. workers. Our nation's ability to produce food and fiber
and transport it efficiently across the globe is a critical factor in
U.S. global competitiveness and economics. Infrastructure that supports
rural communities and links them to global markets has helped make the
U.S. the unquestioned world leader in agricultural production. Our
deteriorating rural infrastructure threatens that leadership position.
Transportation infrastructure improvement is the most obvious need
in rural communities, though not the only one. Highways, bridges,
railways, locks and dams, harbors and port facilities all need major
investment if we are to continue efficiently moving U.S. agricultural
products to domestic and global markets. For example, \1/4\ of our road
system's bridges require significant repair, or cannot efficiently
handle today's traffic and many of the 240 locks and dams along the
inland waterways are in need of modernization. Most of our locks and
dams have outlived their useful life. Those waterway corridors
supported $128 billion in agricultural exports in 2015. Importantly,
74% of bridges and 73% of roads are in rural areas. Additionally,
critical needs exist in providing clean water for rural families,
expanding broadband and other communications capabilities to connect
rural communities to the outside world, and enhancing the ability to
supply affordable, reliable and secure electric power for the rural
economy.
The scope of the investment needed to sustain and upgrade our rural
infrastructure is staggering. Clearly the Federal Government must
continue to play an important role in providing funding and we believe
that those Federal investments should increase. However, Federal
resources likely cannot fill the need entirely. Creative solutions that
pair Federal investment and state/local government investment with
private sources of capital hold promise for raising a portion of the
funds necessary to do the job.
The members of Rebuild Rural, including all of us in Farm Credit,
stand ready to work with Congress and the Trump Administration on this
important initiative. In fact, the Farm Credit System has a long
history of supporting rural infrastructure and CoBank has traditionally
led those efforts.
Farm Credit and Infrastructure
Unlike most Farm Credit institutions, CoBank doesn't directly lend
to individual farmers. Instead, we provide funding to 23 farmer-owned
Farm Credit associations that, in turn, finance more than 70,000
agricultural producers in 23 states in the Northeast, Plain States, and
West. As a cooperative, CoBank is owned by those Farm Credit
associations along with our infrastructure and agribusiness customers
throughout the country.
CoBank is unique in Farm Credit in that we finance or facilitate
the export of more than $9 billion worth of U.S. farm products
annually--by our estimate more than 15% of U.S. bulk and intermediate
agricultural exports--around the world. CoBank also lends to farmer-
owned cooperatives, agribusinesses, and rural infrastructure providers
that are essential to the financial success of farmers and economic
success of rural America. The importance of that infrastructure lending
is what brings me before you today.
I appreciate that you have called this hearing to examine The State
of Infrastructure in Rural America. As you know, the infrastructure
needs of the nation are substantial and exist in every state. But the
needs in rural America differ considerably from our urban centers and
their suburbs. Those unique needs deserve a second look and this
hearing is an excellent opportunity to highlight them.
In the critical area of agricultural research, Rebuild Rural has
identified $8.4 billion in funding needs for deferred maintenance in
the buildings and infrastructure where cutting edge research is
conducted. Investment in facilities provides critical research for
ensuring that U.S. agricultural remains the most productive,
sustainable, and economically efficient producer of agricultural
products in the world.
Rural communities also need access to health care, which has become
an increasing challenge. Eighty rural hospitals have closed since 2010
and 673 more facilities have been identified as vulnerable--that's over
\1/3\ of the rural health facilities in the nation. Funding is needed
to address the 77% of rural counties that are in Primary Healthcare
Professional Shortage Areas. Telehealth can ease this pressure but only
with significant additional broadband investment to close the rural-
urban digital divide.
Financing these improvements is a major part of the challenge we
face and I would like to describe some of our experience in lending in
these markets.
Community Facilities
Hospitals, senior care centers, walk-in clinics, schools and other
community facilities are critical to the viability of rural communities
and are important contributors to the quality of life for rural
families. In many rural communities those essential facilities are not
available or need modernization.
Federal investments, made available through USDA's successful
Community Facilities Loan and Grant program continue to be necessary.
Attracting private-sector investment in these facilities will help
speed up the progress of projects and increase the number of community
facilities.
Farm Credit institutions are working to create a scalable solution
for financing rural community facilities in partnership with community
banks and the USDA. The partnership will focus on building, modernizing
and expanding rural healthcare facilities, rural senior care
facilities, rural educational facilities and others critical to
creating vibrant rural communities.
Farm Credit will identify rural projects and partner with local
community and regional banks to create comprehensive financing packages
to include short- and long-term bond investments paired with USDA
guaranteed and direct loans and grants that fund facility construction
and provide stable permanent facility financing.
Previously, under a pilot program authorized by the Farm Credit
Administration (FCA), Farm Credit institutions invested in bonds issued
by the community developing the facility. In creating many of those
bond investments, Farm Credit worked closely with community banks to
include them in the financing package and then partnered with USDA's
Community Facility Loan and Grant program to ensure the project's
affordability for the community.
Rural Critical Access Hospital Expansion
For example, in 2016, Farm Credit institutions partnered with Grand
Marais State Bank, Central Bank and Trust, CenBank, Security State Bank
and the USDA to finance a $24.7 million expansion project for Cook
County North Shore Hospital and Care Center in Grand Marais, Minnesota
(population 1,353). The 16 bed critical access hospital and 37 bed
skilled nursing facility plans to add 26,150\2\ and renovate
42,680\2\ of existing space.
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

Hospital Administrators, county officials and patients break
ground on North Shore Hospital's expansion and renovation in
2015. Farm Credit, community banks and the USDA partnered to
finance the project in Grand Marais, MN.

A year before CoBank and AgStar (a Farm Credit association that
recently merged with two others to form Compeer Financial) led this
effort in Grand Marais, they partnered with three community banks, two
additional Farm Credit Institutions and a credit union on a hospital
improvement in Moose Lake, Minnesota. They financed a $38 million
addition to Mercy hospital that led to 900 more visits year over year
after completion, saving the residents an additional hour drive to
urban medical centers in Duluth.
Under the FCA pilot program, Farm Credit institutions invested $733
million in 210 rural community projects across the country. Commercial
banks partnered with Farm Credit on more than 100 of those projects,
catalyzing an additional $315 million of investment.
The original pilot program at FCA ended in 2014 and now the FCA has
to provide specific and individual approval for each community facility
investment made by each Farm Credit institution. This approach has made
the community facilities partnership non-viable.
Under current FCA procedures, Farm Credit institutions have to
individually apply to FCA for permission to make each bond investment.
FCA staff reviews the investment applications and prepares separate
recommendations for action by the FCA Board of Directors. The FCA Board
then must consider each application separately and formally vote on
approval. This process is expensive, slow and does not result in the
robust, sustainable business model necessary to facilitate partnerships
between Farm Credit, commercial banks and the USDA that would provide
communities with these vital facilities more quickly.
Congress should instruct the Farm Credit Administration to create a
more comprehensive, efficient and programmatic approach to approving
these investment partnerships. This would greatly enhance financing
options for rural community facilities and result in more projects that
provide jobs and offer more benefits for rural families.
CoBank finances infrastructure in every state. Our 1,267
infrastructure customers have loan commitments of $31.5 billion with
CoBank. That portfolio includes community facilities like those
described above; rural water and wastewater treatment companies;
wholesale electric generation and transmission cooperatives and retail
electric distribution cooperatives; and providers of rural telephone,
Internet, and cable television and wireless services.
Though CoBank leads Farm Credit's rural infrastructure effort, many
more Farm Credit institutions are deeply involved. Partnering together,
Farm Credit institutions finance an additional $9.4 billion in
infrastructure. We partner with commercial banks to fund another $1.6
billion in infrastructure. This Farm Credit partnership means that
rural America has a powerful financial ally in supporting its unique
infrastructure needs. And, as a cooperative--owned by our customers who
live and work in rural America--our primary interest is maximizing the
quality and availability of infrastructure to rural communities.
Water
There are approximately 54,000 community water systems in the
United States. The vast majority are small systems with less than 1,000
taps. Supporting rural communities and the businesses that provide
their economic lifeblood is a key role for water providers. Without the
capacity to deliver enough safe water, communities can't grow,
businesses can't expand, and opportunities for new employers to
revitalize rural areas are lost. There is significant need for capital
in this sector to continue to deliver clean and safe water and to
properly treat waste water to ensure environmental safety. The price
tag for this investment is high. In 2015 the U.S. Government
Accountability Office (GAO) released the results of their study of
rural water infrastructure. They found that many communities have a
hard time covering the cost of water system improvements or
enhancements, in part because of their smaller number of residents and
businesses. The GAO estimates that almost $190 billion is needed to
cover the costs of replacing water and waste water infrastructure in
rural communities.
The Federal Government is by far the largest provider of capital to
rural water systems and will play a vital role for the foreseeable
future. The government is able to provide grants and loans with
repayment terms of up to 40 years. This allows smaller water systems to
make improvements to their infrastructure in a cost effective manner.
CoBank offers a variety of loan products to compliment EPA and USDA
financing, such as bridge financing, interim financing and long-term
loans. We also believe innovative public-private partnerships can also
play a vital role in meeting the unique and vast funding needs for
rural water systems.
The EPA has estimated that over the next 20 years more than $384
billion is needed to repair or update the drinking water systems across
the country. Another $271 billion is needed for the wastewater and
storm-water systems. More than 10% of that need is to help systems
comply with Safe Drinking Water Act regulations. Approximately $64.5
billion of that sum would be needed just for the smallest systems in
the nation, which make up 83% of the number of community water systems
that need improvements. That is where many rural systems fit in. And
for 90% of our nation's water utilities, that need is just to keep
delivering safe drinking water to their customers.
Talquin Electric Co-op and Talquin Water and Wastewater serve
53,000 customers in the Florida Panhandle. Their location necessitates
preparation and specialized construction to address powerful storm
impacts. CoBank helped Talquin finance a new sewer main and pumping
station to serve Wakulla County residents. The station was deliberately
located away from the coastline to minimize the risk of storm damage
and associated environmental liabilities. To help the cooperative
reduce costs, CoBank provided almost $22 million in financing to
enhance the water and wastewater infrastructure and refinance some of
the long-term debt to reduce interest rates. Our leasing subsidiary
provides Talquin with leases for their fleet vehicles. With a variety
of services, Farm Credit helps Talquin reduce costs to hold rates
steady for its customers in four Florida counties.
In Texas, CoBank financing has allowed rural water and waste
systems address immediate needs to address severe drought. CoBank is a
primary source of financing for emergency wells and lines of credit for
emergency situations. We provide gap funding for grant-funded projects
and provide construction financing for USDA projects. We have also
helped save utilities significant money by refinancing old expensive
debt.
Energy
CoBank provides a variety of loan and leasing products to companies
that generate and distribute reliable, reasonably priced electricity,
natural gas, and other essential energy-related services to rural
communities. We have relationships with 58 of the 64 Generation and
Transmission (G&T) cooperatives in the U.S. The G&Ts generate
electricity and transmit it to our electric distribution customers
under long-term power purchase agreements. The electric distribution
cooperatives then distribute this electricity to serve their local
members.
The USDA's Rural Utilities Service (RUS) is a major provider of
capital to our electric distribution customers and CoBank frequently
partners with RUS under joint mortgage agreements to ensure that our
customers are able to fund their extensive capital spending needs.
CoBank also maintains a Project Finance division which makes loans
directly to independent power producers that specialize in producing
electricity for sale to utilities and corporations under power purchase
agreements or into the wholesale power markets. Many of our electric
distribution cooperative customers are also deploying broadband in
their service territories and CoBank leverages its long experience in
the communications industry in support of these important initiatives
that are helping to close the digital divide. CoBank has lent nearly
$60 million to electric co-ops in districts represented on the
Committee to support broadband delivery.
While we continue to see demand for traditional fossil-fuel fired
generation, especially natural gas-fired plants, renewable energy is
one of the fastest growing sectors in the economy. Our Project Finance
division finances many wind and solar projects. Moreover, our G&T and
regulated utilities customers are increasingly investing in renewable
energy as costs come down, reliability improves, and customer
preference for renewable energy increases. Many of our electric
distribution cooperatives are also investing in renewable energy
projects to reach their own sustainability goals and reduce their
reliance on power purchased from others. Bloomberg New Energy Finance
analysts estimate that U.S. power infrastructure spending will total
$283 billion over the next 10 years: 70% of this is expected to come
from renewables, with about \1/2\ of that from solar and the other \1/
2\ from wind.
Communications
Mr. Chairman, there is not a staffer (and probably not many
Members, either) who is not regularly checking their smartphone during
this hearing. Like your staff, their friends, family and classmates in
college became accustomed to high levels of service from their
communications technology. But when some returned to their rural
hometowns and farms, their broadband service did not follow them.
There continues to be a well-publicized ``digital divide'' between
urban and rural broadband subscribers. The FCC's 2016 Broadband
Progress Report estimated that nearly 40% of rural Americans do not
have access to Internet speeds of 25 Mbps, which is the current FCC
target for ideal minimum service. 25% lack access to 10 Mbps. Contrast
that with urban areas where less than 5% lack access to 25 Mbps and
only about 2% lack access to 10 Mbps.
That lack of access slows the deployment of technology; thus,
hampering efficiency on our farms. It stands in the way of adopting
telemedicine to manage costs and improve health outcomes for our rural
residents. It limits the availability of our rural students to access
the Internet to enhance their education, and that in turn is preventing
some people from bringing their skills and their families to rural
communities. It hinders businesses from locating in rural areas,
thereby reducing economic activity and rural employment opportunities.
Estimating the costs of closing the digital divide vary according
to assumed minimum required speeds. However, most analysts put the cost
of meaningfully closing the digital divide at as much as $100 billion
at the 25 Mbps level. 100% coverage of all Americans at the 25 Mbps
could cost upwards of $300 billion. By anyone's estimate, it is an
enormous task and private capital providers, including CoBank, cannot
do it alone. Government grants, loans or loan guarantees, public-
private partnerships, and a stable regulatory regime that supports
adequate cost recovery mechanisms for rural broadband operators will be
essential in closing the digital divide.
While the cost of expanding broadband in rural communities is
great, the cost of inaction that results in lost jobs and lost
communities is even greater.
President Trump emphasized that importance in Iowa last month as he
committed to a provision in his infrastructure proposal to promote and
foster enhanced broadband access for rural America also, saying, ``We
have to make sure American farmers and their families, wherever they
may be, wherever they may go, have the infrastructure projects that
they need to compete and grow.'' Access to enhanced broadband
infrastructure is essential to the long-term capacity of American
farmers to compete globally in marketing their production and manage
their farming operations to high degree of efficiency and
sustainability. On farm technology has skyrocketed over the past 10
years, and the most effective use of this technology requires access to
enhanced communications connectivity.
CoBank provides a variety of loan and leasing products to help
communications companies ensure that rural Americans have access to
advanced broadband services. CoBank provides funding to all types of
communication providers including rural local exchange carriers, cable
companies, wireless carriers, and other data infrastructure and
telecommunication services companies. The RUS is a major provider of
capital to rural communications companies. CoBank partners with RUS in
many situations, providing short-term interim financing for capital
spending projects until permanent financing through RUS is arranged and
longer-term financing for important projects that may not qualify for
RUS funding. CoBank also partners with other private-sector lenders to
catalyze additional capital to finance our communication customers.
Farm Credit firmly believes that a sustainable cost-recovery
mechanism is imperative to support the financing of rural broadband in
high cost areas. If communication companies don't have a sufficient,
sustainable predictable level of support, deploying affordable
broadband in high cost areas is not economically viable and therefore,
not financeable. In addition to the high costs associated with
constructing broadband infrastructure in rural areas, there are ongoing
costs associated with maintaining and upgrading these networks to
accommodate growth of data traffic. The broadband network is a dynamic
infrastructure, subject to frequent technological advances that require
upgrades and capital spending.
One of CoBank's Customers is Big Bend Telephone in Alpine, Texas,
serving 5,000 telephone lines and 2,800 broadband customers. This small
family-owned company has operated for 67 years and serves along 485
miles of the Texas-Mexico Border. Their customers include farmers and
ranchers, the U.S. Border Patrol, state and local law enforcement,
schools, medical providers the world renowned McDonald Observatory and
even Big Bend National Park.
Serving this huge, sparsely populated territory of 17,593\2\ miles
is difficult and expensive. There are just 0.333 customers per square
mile. In New York City, there are 27,000 customers per square mile! For
their capital needs they rely on the Federal Communications
Commission's Universal Service Funds and Farm Credit. CoBank worked
with the Farm Credit Bank of Texas and Capital Farm Credit to finance
Big Bend. According to Big Bend's General Manager, Rusty Moore, this
financing ensures that Big Bend can . . . ``deliver the vast array of
technology-centric solutions required to keep our nation's southern
border secure and our country stronger as a whole.''
Conclusion
As I have discussed, the infrastructure needs in rural America are
significant and unique. While Farm Credit and others are helping to
finance these needs, more needs to be done. As advocated by the Rebuild
Rural Coalition, infrastructure legislation by Congress should
specifically address the unique needs of agriculture and rural
communities. We also recognize that the Federal Government needs strong
private investor engagement to partner with to meet the infrastructure
needs in rural America. Farm Credit stands ready and capable to do its
part and work closely with the Federal Government and private investors
to meet rural infrastructure funding needs.
I appreciate the big job before you in addressing these challenges
and opportunities and the Farm Credit System looks forward to working
with the Committee as you begin writing and advancing the farm bill.
Thank you for this opportunity to testify and I look forward to
your questions.

The Chairman. Thank you, Tom.
Apparently, the clocks and the lights are not working for
the witnesses. With 30 seconds left, I will give you a tap on
the gavel as a heads-up.
So with that, Mr. Coon, 5 minutes.
Dr. Coon. Thank you.
The Chairman. Dr. Coon. Excuse me.
Dr. Coon. That is fine. Tom. That is what my mom called me.

STATEMENT OF THOMAS G. COON, Ph.D., VICE PRESIDENT,
DIVISION OF AGRICULTURAL SCIENCES AND NATURAL
RESOURCES, OKLAHOMA STATE UNIVERSITY; CHAIR, TASK FORCE ON
DEFERRED MAINTENANCE, BOARD ON
AGRICULTURE ASSEMBLY, ASSOCIATION OF PUBLIC AND LAND-GRANT
UNIVERSITIES, STILLWATER, OK

Dr. Coon. Thank you, Chairman Conaway, Ranking Member
Peterson, and Congressman Lucas and other honorable Members. I
am honored to represent Oklahoma State University and the
Association of Public and Land-grant Universities, or APLU,
here today. I also want to thank the Rebuild Rural Coalition
for including agricultural research infrastructure in their
initiative. The Farm Credit Council, the American Farm Bureau
Federation, and other members of the coalition, clearly see the
connection between the innovation that comes from agricultural
research at the nation's public schools of agriculture and the
positive influence that research has on economic development in
rural America. The Rural Prosperity Task Force lead by
Secretary Perdue also calls attention to the challenges that
our rural communities face today. Because most agricultural
production takes place in America's rural landscape, research
that strengthens agriculture's future helps to support strong
school systems, healthcare systems, and thriving businesses in
rural America.
My message is simple: First, prosperity in agriculture in
rural communities has depended on public investment and
research at our agriculture schools. Second, the future of that
infrastructure is at risk. Those of you on the Biotechnology,
Horticulture, and Research Subcommittee heard testimony from
Dr. Jay Akridge of Purdue University in March about the
importance of Federal funding in support of agricultural
research. In the 19th and 20th centuries, that support
transformed American agriculture and made our industry a world
leader of innovation.
In June, deans from public and land-grant universities in
Florida, California, Alabama, and Texas described ways they
have leveraged the Federal investment in agricultural research
with state, local, and private funds to continue growth and
innovation in their state's agricultural economy.
In 2015, the APLU commissioned a study to document the
state of research facilities at public schools of agriculture.
The study collected data from 91 schools and included nearly
16,000 buildings and 79 million gross square feet of space. The
replacement value of that space is $29 billion. The total value
of deferred maintenance across the 91 institutions is $8.4
billion. Of this, $6.7 billion, or 80 percent, is in facilities
that are more than 25 years old. Agriculture colleges are
funding maintenance at about 60 percent below the university
average. And because buildings require more maintenance as they
age, the combination of older infrastructure and under-funded
maintenance is undermining the productivity and dependability
of our research enterprise. The USDA Agricultural Research
Service works closely with public universities. And, in fact,
30 percent of the research is conducted in facilities of their
cooperators, most of which are universities.
In 2012, the ARS released a capital investment strategy
that is complementary to the APLU study. The ARS has facilities
valued at $3.7 billion. The report stated a need for $148
million in annual maintenance funding, and another $100 million
in annual expenditures to replace aging facilities.
It is clear that public agricultural universities need to
tackle these facility challenges on two fronts: One is that we
need to take better care of our facilities; and the other is
that we need to replace much of that outdated infrastructure.
Deans tend to fund faculty lines at the expense of
infrastructure needs, and that needs to be recalibrated. In
addition, we need to be honest and transparent about the real
cost of research. For example, the USDA limit on facility and
administration costs that can be recovered is set at 50 to 60
percent of the federally negotiated F&A rate, and that
undermines our investment in facility maintenance.
We need to invest aggressively in new facilities and major
renovations. We proposed a funding mechanism whereby Federal
funds are used to leverage other investments into our research
infrastructure needs.
Federal funding is especially important for addressing
research needs in the national interest. Federal funds should
come with some expectations and contingencies. They should be
competitive. They should address national or regional needs,
and they should be matched with state, local, university and/or
private funds.
The need is great. We project a need to replace $20 billion
in infrastructure over the next 10 years. If our Federal
partners can invest \1/2\ of that, it is incumbent on us as
deans to raise the other \1/2\ through our other partnerships.
The competitiveness of our agriculture sector, the security
and safety of our citizens' food supply and, in large part,
their health, as well as the health of our environment, depends
on the research our scientists produce. The challenging
investments that the partnership made in our research
infrastructure in the 20th century have created a dynamic,
innovative, and job creating food and agriculture industry and
a safe and secure food supply today.
We owe it to future generations to make the investments
that will ensure they benefit from the bounty of our tremendous
natural resources, and uniquely American collaboration between
scientists and the farmers, ranchers, and workers in our
nation's food and agriculture systems. Thank you.
[The prepared statement of Dr. Coon follows:]

Prepared Statement of Thomas G. Coon, Ph.D., Vice President, Division
of Agricultural Sciences and Natural Resources, Oklahoma State
University; Chair, Task Force on Deferred Maintenance, Board on
Agriculture Assembly, Association of Public and Land-grant
Universities, Stillwater, OK
Introduction
Thank you, Chairman Conaway, Ranking Member Peterson, Congressman
Lucas and other Honorable Members. I am honored to represent Oklahoma
State University and the Association of Public and Land[-g]rant
Universities (APLU) today.
I also want to express my appreciation for the inclusion of
agricultural research infrastructure needs in the Rebuild Rural
Coalition--The Farm Credit Council, American Farm Bureau Federation and
other members of the coalition clearly see the connection between the
innovation that derives from agricultural research at the nation's
public agriculture colleges and the positive influence that has on
economic development in rural America.
The Rural Prosperity Task Force that is being led by Agriculture
Secretary Sonny Perdue also calls attention to the challenges that our
rural communities face today. Because so much agricultural production
takes place in America's rural landscape, research that strengthens
agriculture's future helps to support strong school systems, health
care delivery systems, and thriving businesses.
Perhaps I can summarize my message in this way: prosperity in food,
agriculture and rural communities has depended on public investment in
research that supports food and agriculture industries, and we stand at
a crossroads of commitment for the future of the infrastructure that
has supported publicly funded research.
Investments in Research Fuel Innovation in Rural America
I have been fortunate to work with farmers, ranchers and natural
resource managers in my native Iowa, and in California, Minnesota,
Michigan, Missouri and Oklahoma. In every case, I have worked with
university colleagues who see their role as being in support of those
front line producers and managers. Our scientists push the envelope of
discovery to develop new insights and new technologies that enhance the
yield of our rich natural heritage for food, fiber and environmental
benefits for all Americans.
Just as roads, electricity, water and other infrastructures support
and sustain people in our rural communities, the innovations from
research have helped rural residents build individual and community
wealth, whether through improved plant and animal genetics, in healthy
soils and clean water, the latest irrigation scheduling application
software or improved food safety practices on the farm or in the
market.
Those of you on the Biotechnology, Horticulture, and Research
Subcommittee heard testimony from Dr. Jay Akridge of Purdue University
in March about the importance of Federal funding in support of
agricultural research. In the 20th Century, that support transformed
American agriculture and made our industry a leader of innovation. Dr.
Akridge pointed out that other nations have followed our lead, and as
public support for agricultural research has stagnated in the U.S.,
other nations have surpassed us. As of 2011, the nations of Brazil,
India and China together spend $2.15 for every $1.00 that the U.S.
invests in public agriculture research and development.
In June, a number of my colleagues from public and land-grant
agriculture colleges in Florida, California, Alabama and Texas expanded
on how they have leveraged the Federal investment in agricultural
research with state, local and private funds to continue growth and
innovation in their state's agricultural economy. One of the great
strengths of the American food and agriculture system is the tremendous
diversity of environments we use, the yields our farmers and ranchers
produce and the processed food and fiber products consumers can
purchase. The Federal partnership with state and local governments and
with industry and non-government organizations has created a unique
engine of innovation across the breadth of that diversity.
We have a similar heritage of resourcefulness and productivity in
Oklahoma, where in spite of diminished purchasing power of Federal
funds and recent declines in state funding, we continue to develop and
release new varieties of hard red winter wheat and forage crops
developed for the unique soil and farm management practices of the
southern plains, our scientists develop and release new software
applications to help manage beef cattle herd health and our scientists
are creating faster and more definitive technologies for detecting and
eliminating pathogens in food supply chains.
Research Depends on Modern Facilities
One of the hallmarks of our agricultural colleges at public
universities has been the infrastructure dedicated to research,
teaching and extension in agricultural and natural resource sciences.
That includes laboratories on university campuses as well as field
stations for research and extension demonstrations. The Hatch Act of
1887 recognized the need for specialized facilities dedicated to
research on agricultural topics, and many states have used the Federal
capacity funds they receive through the farm bill to build and maintain
those facilities.
However, those facilities are aging, and with stagnant or reduced
Federal and state funding, many of the facilities that helped to drive
innovation in agriculture have deteriorated to the point of limiting
their usefulness and safety for conducting 21st century research.
In 2015, the APLU commissioned a study to document the state of
research facilities at public colleges of food, agriculture and natural
resources. The study was conducted by an independent organization,
Sightlines, and they queried 101 institutions and received responses
from 91 of them. The study included data from 15,596 buildings, which
contain 87 million gross square feet of space. They estimate the
replacement value of this space, based on a larger database that
Sightlines maintains, at $29 billion.
Our study followed one completed by the USDA Agricultural Research
Service in 2012. In that study, they classified the status of 122 major
research facilities owned by the ARS, which totaled $3.7 in
capitalization value. That study applied an industry standard of annual
capital expenditures equal to 4% of the capitalization value to
conclude that $148 million would be needed annually for maintaining the
ARS facilities and another $100 million per year for replacement of
outdated facilities. As much as 30% of the ARS research is conducted in
facilities of cooperators, most of which are public universities, and
not in ARS facilities. The Capital Investment Strategy of the ARS is
complementary to the proposal we have developed based on the APLU
study. Indeed, implementation of the recommendations from the APLU
study will benefit ARS research as well.
One of the more noteworthy findings to emerge from the APLU study
is that the total value of deferred maintenance across the 91
institutions is $8.4 billion. Annual capital spending in agriculture
research infrastructure is estimated to be $1.82/GSF, which is 41% of
the public university average ($4.40/GSF). Of this, $6.7 billion (80%)
is in facilities that are more than 25 years old. Because buildings
require more maintenance as they age, the combination of older
infrastructure and under-funded maintenance is undermining the ability
of our research enterprise to provide the information needs of today
and the future.
The APLU study estimated the Net Asset Value of the
infrastructure--in other words the replacement cost minus the cost of
deferred maintenance to be at 71%. Moreover, the current deferred
maintenance figure of $95/GSF puts us very close to the threshold of
$100/GSF that is associated with a greater likelihood of building
systems failures--such as HVAC or electrical systems--that can result
in catastrophic losses of research findings.
Our study at Oklahoma State was reflective of the national study:
Of our facilities on campus, 49% of the square footage was assessed as
being in need of major repair or past useful life. Of our facilities at
our research farms in Stillwater, 38% was in that state of disrepair.
In some respects, our faculty are being penalized for being too
resourceful. One of our hallmark programs at Oklahoma State is our
Wheat Improvement Team, which includes a wheat breeder, a molecular
geneticist, two entomologists, a plant pathologist, a soil nutrient
agronomist, a commodity market economist, and a cereal biochemist.
Together, they have developed a number of varieties of hard red winter
wheat well suited to the agronomic practices and environmental
conditions of the southern Great Plains. For the crop that was
harvested this summer, we had 15 OSU varieties of wheat available for
growers to plant, and those comprised about \1/2\ of the acreage
planted in Oklahoma. Our wheat team continues to perform in a way that
is meeting the agronomic demands of our growers and the wheat quality
demands of millers. They are doing this in a greenhouse complex that
was constructed before World War II and in field laboratory buildings
that were constructed before I was born. We are extremely proud of
their accomplishments, but we also wonder how much more successful they
might be with modern facilities.
Addressing the Challenge
A group of administrators and scientists from APLU developed a set
of recommendations for following up on the findings of the facility
survey. Those include two primary directions: one is that we need to be
better stewards of our facilities. Clearly, the greatest assets of our
Agricultural Experiment Station resources are the faculty, technicians
and students who carry out the research. As universities have faced
stagnant and declining budgets, the tendency has been to protect
faculty positions as the top priorities. I think there has been a
tendency to interpret a decrease in funding as a temporary phenomenon
and so facility maintenance and upgrades are put off until the funding
picture improves. In the meantime, faculty are expected to bring in
funding through competitive grants and industry contracts to help
finance the additional personnel and operating costs of their research.
In many cases, the optimism that funding will return hasn't been
fulfilled, and so the facility maintenance delays become permanent
deferrals and we end up asking our scientists to ``get by'' with
diminished capacity and increased unreliability of our facilities.
University administrators need to be more disciplined in adopting
best management practices for facility maintenance and replacement. We
need to direct more of the funding for Facilities and Administration--
or Indirect Costs--into implementing those best management practices.
In addition, we need to clearly communicate with our funding partners
the real costs of research. Most Federal agencies pay a negotiated F&A
rate for university-conducted research. Those rates are carefully
scrutinized by the funding agencies and each university. However, the
U.S. Department of Agriculture is authorized to fund less than the full
indirect costs rate, yet we need those funds in order to carry out the
necessary stewardship of our research facilities.
Even improved stewardship will not fix the problems that the APLU
study has demonstrated. Some of the facilities we are using are simply
outdated and cannot be brought up to 21st century standards. The other
key recommendation from the APLU task force is to invest aggressively
in new facilities or major renovations to upgrade and modernize our
research infrastructure. There is still a great public good that comes
from research in food, agriculture and natural resource management. The
nation's interest depends on research findings that are made available
to all participants in the food, agriculture and natural resource
economy. The same is true for each state and local governmental entity.
At the same time, many private interests, from producers to processors
to wholesalers and retailers derive benefits from publicly funded and
publicly available research findings. They have a part to play in
financing investments in America's public agricultural research
infrastructure.
We propose a funding mechanism whereby Federal funds are used to
leverage state, local, private industry, and private philanthropic
investments into our research infrastructure needs. Our very successful
public agricultural research enterprise has been built on this multi-
partner model of collaborative funding.
Federal funding is especially important for addressing research
needs in the national interest. It would seem important to provide
Federal funds with some contingencies, such as a required match with
some combination of state, local, industry and/or non-governmental
organization support. In addition, Federal funds should be contingent
on demonstrating that the research will address national or regional
needs and that it will build on a record of accomplishment in research
among the faculty and programs that will use the facilities.
Collaboration across universities should be favored over duplicative
programs in neighboring states.
Based on the findings in the APLU study, we determined that we
would need to replace 68% of the research infrastructure over the next
10 years in order to position our scientists to be successful in
addressing food security, food safety, agricultural productivity and
environmental stewardship needs for the 21st century. The estimated
replacement cost of all research facilities included in the APLU study
is $29 billion, and 68% of that is $20 billion. A Federal program of
investing $1 billion per year over 10 years would help to stimulate the
other investments needed to complete this initiative and would position
the U.S. agriculture research system to be on par with other nations
who are competing in the world food and agriculture markets.
This proposed level of funding is large. Whether our Federal and
other partners are up to this challenge, it is important to recognize
that the need is real and it is of strategic importance. The
competitiveness of our agriculture sector, the security and safety of
our citizens' food supply--and in large part their health--as well as
the health of our environment depends on the research our scientists
produce. The challenging investments that Federal and state funding
made in our research infrastructure in the 20th century have created a
dynamic, innovative and job-creating food and agriculture industry and
a safe and secure food supply today. We owe it to future generations to
make the investments that will ensure they benefit from the bounty of
our tremendous natural resources and uniquely American collaboration
between scientists and the farmers, ranchers and workers in our
nation's food and agriculture systems.

The Chairman. Thank you, doctor.
Mr. Calhoun for 5 minutes.

STATEMENT OF RICHARD R. CALHOUN, FORMER PRESIDENT, CARGO
CARRIERS, CARGILL, INC., SILVER SPRING, MD; ON BEHALF OF
NATIONAL GRAIN AND FEED ASSOCIATION

Mr. Calhoun. Good morning. I am Rick Calhoun, the immediate
past Chairman of the Waterborne Commerce Committee of the
National Grain and Feed Association on whose behalf I testify
today.
The NGFA was established in 1896, and consists of 1,050
member companies that handle approximately 70 percent of the
U.S. grain and oilseed crops. The importance of infrastructure
to the success of U.S. farmers in competing to provide
Americans agricultural bounty to consumers is undisputed. But
by numerous markers, America's infrastructure is falling
behind. We have fallen out of the top ten in the World Economic
Forum's global competitiveness report. We used to be able to
ship soybeans to China for nationally $80 a metric ton, cheaper
than Brazil. Today they have narrowed the transportation gap by
about 75 percent to just $20 a metric ton.
The American Society of Civil Engineers' most recent
infrastructure report card doled out the following grades:
Roads, D; inland waterways, D; and bridges, C+. NGFA
appreciates the renewed sense of urgency by Congress and the
Trump Administration to enact an infrastructure package that
includes a reliable funding mechanism to recapitalize our
dilapidated inland waterways and restore our rural roads and
bridges. Today, I will focus on the 12,000 mile inland waterway
system, which supports 540,000 jobs, and provides the lowest
cost, most fuel efficient, and environmentally friendly way to
transport grain and ag products.
Most of our locks and dams have exceeded their 50 year life
design, and it is starting to show. During the past decade,
work stoppages for repairs have increased 700 percent. In 2005,
Hurricane Katrina halted our ability to ship on the inland
waterways and ports, sending barge rates up as much as 50
percent and causing basis values on corn to decline 40 to 70
per bushel.
We appreciate that Congress has begun to respond. Thank you
for passing the WRDA Acts in 2014 and 2016 to streamline
projects and for increasing operation and maintenance funding
for locks and dams.
Also, President Trump recently visited the Ohio River to
put an unprecedented presidential spotlight on the state of our
locks and dams.
But to bring our waterway system into the 21st century, a
new approach is needed. Here are some ideas that we believe
would help you get the biggest bang for your buck. Priority
one, support stronger Federal investment in U.S. locks and
dams. Currently, there is a portfolio of 25 critical inland
waterways projects that need to be funded to modernize the
system at a cost of $8.75 billion. Also, the Harbor Maintenance
Trust Fund has a $9 billion surplus, and Congress should ensure
these funds be spent to maintain U.S. ports and harbors through
dredging.
Priority two, support the existing public-private
partnership to finance our locks and dams and oppose unworkable
tolling and lockage fees. The inland waterway system benefits
from the successful 3P, where the barge and towing industry,
but ultimately the U.S. farmer, pays 50 percent of the cost of
the inland waterways projects through a 29 per gallon diesel
fuel tax, which is matched by Federal dollars. Perennial calls
to impose lockage fees and tolling on the inland waterways by
past Administrations have consistently been rejected on a
bipartisan basis by Congress.
Commercial users of the inland waterway locks and dams are
the only private entities that pay into this trust fund even
though the benefits are freely enjoyed by numerous other
stakeholders. Therefore, the question should not be how much
more can we extract from those who pay, but rather how can we
get the other beneficiaries of the system to support it?
Rural America also relies heavily on roads, bridges, and
highways to transport ag products from farm to market and
provide access to education, jobs, healthcare, and social
services. But the roads and bridges that connect the country's
rural areas face several significant challenges, including
inadequate capacity to handle commerce, limited connectivity,
and deteriorated conditions.
Congress should explore prioritizing increases in Federal
funding and/or reclassification of rural roads and bridges to
be eligible for funding.
One concept that may warrant your consideration is to
develop a system of block grants where states and localities
with feedback from rural and ag stakeholders could prioritize
road and bridge projects they deem most important.
One final thought: By 2050, the world will be challenged to
feed nine billion people. If we maintain the status quo on
infrastructure investment we will fall short of meeting that
demand.
We need to be pragmatic. Let's not allow under $9 billion
in waterways investments to stand in the way of our ability to
better feed our country and the soon-to-be nine billion people
around the globe.
Thank you for the opportunity. I look forward to answering
your questions.
[The prepared statement of Mr. Calhoun follows:]

Prepared Statement of Richard R. Calhoun, Former President, Cargo
Carriers, Cargill, Inc., Silver Spring, MD; on Behalf of National Grain
and Feed Association
Good morning, Chairman Conaway, Ranking Member Peterson, and
Members of the House Committee on Agriculture. Thank you for the
opportunity to testify at this important hearing examining The State of
Infrastructure in Rural America.
I am Rick Calhoun, the immediate past Chairman of the Waterborne
Commerce Committee of the National Grain and Feed Association (NGFA),
on whose behalf I testify today. The NGFA was established in 1896, and
consists of 1,050 member companies that operate 7,000 facilities that
handle approximately 70 percent of the U.S. grain and oilseed crop.
NGFA also consists of 34 state and regional associations. I also
previously served as NGFA's elected industry Chairman and am a past
Chairman of Waterways Council Inc., the national organization
representing barge and tow-boat operators, shippers, conservation
groups, as well as labor organizations that focuses on the
modernization, rehabilitation, and operation and maintenance of our
nation's inland waterways' locks and dams. I retired June 30, 2017,
after working my entire 41 year career at Cargill Inc., most recently
as President of Cargo Carriers, the company's barge and marine
business, and as Senior Vice President of Cargill's Grain and Oilseed
Supply Chain North America.
Throughout my industry career, I witnessed first-hand how important
infrastructure is to the success of U.S. farmers, ranchers and
agribusinesses in competing to provide America's agricultural bounty to
U.S. and world consumers. But over the last decade, I also have
witnessed an alarming decline in historical competitive advantage that
our transportation infrastructure has provided U.S. agriculture, and
the corresponding increase in investment in critical infrastructure
being made by our foreign competitors.
The NGFA appreciates and agrees with the renewed sense of urgency
by this Congress and the Trump Administration to enact a comprehensive
infrastructure package that includes a predictable and reliable funding
mechanism to recapitalize our dilapidated inland waterways system, as
well as to restore our rural roads and bridges. Both are essential to
the future vibrancy of rural communities and competitiveness of U.S.
agriculture.
I want to focus primarily on the 12,000 mile inland waterways
system, which supports more than 540,000 jobs and provides the lowest-
cost, most fuel-efficient and most environmentally friendly and
sustainable way to transport grains, oilseeds and other agricultural
products. The U.S. inland waterways are used to transport about \2/3\
of the U.S. grains and oilseeds destined for export while U.S. ports
help move more than 90 percent of U.S. grain and oilseed exports. In
addition, U.S. inland waterways and ports are essential arteries for
farm inputs. For example, 33% of fertilizer relies on this
infrastructure in order to get essential nutrients to farmers for their
crops. Our country exports about 25 percent of its total grain
production, with nearly 50 percent of U.S. soybeans, more than 40
percent of U.S. wheat, and about 15 percent of U.S. corn exported each
year. On the meat and poultry side, the U.S. exports approximately ten
percent of its beef, 20 percent of its pork, and 15 percent of its
poultry production.
The U.S. transportation system is used more by agriculture than any
other business sector. In 2012, agriculture accounted for 22 percent of
all tons transported, and 31 percent of all ton-miles moved. Thanks to
our transportation system, U.S. agricultural exports will contribute
$21.5 billion to the U.S. balance of trade this fiscal year. Exports
invigorate the rural economy, support more than one million jobs on and
off the farm, and provide farmers with 20 percent of net farm income.
The Challenge
Earlier this year, during testimony before the House Transportation
and Infrastructure Committee on the importance of infrastructure,
Cargill's Chairman and CEO referenced a BusinessWeek article from 1964
that still rings true today about the indispensable role transportation
infrastructure plays in the success of U.S. agriculture. The excerpt
reads, ``What the grain division does is buy grain at a point of
surplus and carry it to a point of deficit. Or buy it at a time of
surplus and carry it over to a time of deficit. Our profit comes from
being able to do this at a lower cost than our competitors.''
Historically, the United States has been blessed with a
transportation system where the four major modes (truck, rail, barge
and ocean-going vessels) complement and to an extent compete with one
another. Utilizing the inland river system relieves congestion and wear
and tear on our highways and helps discipline rail rates. The result is
a highly efficient, balanced system that provides an edge in a fast-
changing market which saw U.S. agricultural exports double from 2006 to
2016. For America to avoid losing this edge, we must be strategic and
willing to make stronger investments in our transportation system.
However, as a percentage of gross domestic product (GDP) the U.S. is
spending less on its transportation infrastructure than at any point
since World War II and our major trading partners are besting us when
it comes to infrastructure investment.
As a result, our competition is catching up. USDA data show that in
2007, the total transportation costs to move a metric ton of soybeans
from Davenport, Iowa, to Shanghai, China, was $82.83. That compared to
a total transportation cost of $161.30 to get that same metric ton of
soybeans from North Mato Grosso, Brazil, to Shanghai.
Fast forward a decade and our competitive advantage is slipping. In
the first quarter of 2017, it cost $90.83 to ship a metric ton of
soybeans from Davenport to Shanghai and $111.80 to transport a metric
ton from Mato Grasso to Shanghai. Brazil has closed the transportation
cost gap by $57 or 73 percent per metric ton! Also of concern, Brazil
and China just announced a joint $20 billion effort in which China will
invest billions in Brazilian infrastructure projects.
By numerous markers, America's infrastructure is falling farther
and farther behind. For instance, the United States has declined to
11th in infrastructure in the World Economic Forum's most recent Global
Competitiveness Report. We were seventh as recently as 2008. The
American Society of Civil Engineers' 2017 infrastructure report card
doled out the following grades to American Infrastructure: Roads,
``D''; Inland Waterways, ``D''; and Bridges ``C+''. I wouldn't have
fared very well bringing home a report card with those kinds of grades.
A sense of urgency also is warranted given most of our inland
waterway locks and dams were built in the 1930s and have far exceeded
their 50 year design life. We're in a high-stakes game of rolling the
dice:

During the past decade, there has been a 700 percent
increase in unscheduled work stoppages for repairs.

A recent University of Tennessee study (http://
economics.ag.utk.edu/publications/logistics/
EconomicImpactsInlandWaterwaysDisruptions092016.pdf) concluded
that disruptions at Mississippi River Lock 25 would result in a
loss of 7,000 jobs and $2.4 billion in reduced economic
activity.

Hurricane Katrina in 2005 also demonstrated the economic
damage that results when the ability to ship on the inland
waterways and ports is halted, as barge rates increased by as
much as 50 percent (to 900 percent of tariff) and basis values
on corn declined 40 to 70 per bushel, and rippled temporarily
throughout the country--affecting not just farmers located near
the Mississippi River and the tributaries that feed into it.
Higher transportation costs resulted in significantly lower
prices paid to farmers, and complicated rail and truck
movements, as well.

We appreciate that Congress has begun to respond! Congress is to be
commended for enacting Water Resources Development Acts (WRDA) in both
2014 and 2016 to help streamline inland waterway renovation projects,
as well as consistently increasing operations and maintenance funding
for locks and dams stewarded by the U.S. Army Corps of Engineers.
President Trump also is to be applauded for recently visiting the Ohio
River to put an unprecedented presidential spotlight on the dilapidated
state of our locks and dams and the need to fix them.
But to truly bring our waterways system in to the 21st century, a
new approach is needed. Thus, as Congress develops priorities for an
infrastructure package with up to $1 trillion in public and private
funds, I'd like to take this opportunity to share several ideas on
where we believe it could get the biggest bang for the buck:
Priority No. 1: Supporting Stronger Federal Investment in U.S. Locks,
Dams and Ports
Currently, there exists a portfolio of 25 critical inland waterways
modernization projects that need to be funded to modernize the system
at a cost of $8.75 billion.
This includes a project of utmost importance to American
agriculture: The Navigation and Ecosystem Sustainability Program
(NESP). NESP already has been authorized by Congress and includes
construction of seven top-priority 1,200 locks (LaGrange, Peoria,
Upper Mississippi River Locks 20, 21, 22, 24 and 25) at the most
congested locations on the Upper Mississippi River System and Illinois
Waterway.
In addition, the Harbor Maintenance Trust Fund (HMTF) which is
supported via a 0.125% tax on the value of shipped cargo has a $9
billion surplus. Unlike the highway trust fund, the HMTF can only be
drawn on when Congress makes an appropriation. We believe Congress
should direct that these funds be spent to maintain U.S. ports and
harbors, including dredging activities. We appreciate that Congress,
through WRDA 2014, is directing that an increasing percentage of these
funds be used for their intended purpose.
Priority No. 2: Supporting the Existing Public-Private Partnership To
Finance Renovation of the Inland Waterways Locks and Dams
without Imposing Counterproductive, Inequitable and Ultimately
Unworkable Tolling, Lockage or Tonnage Fees
Since 1978, the inland waterways system has benefited from a
successful public-private partnership through the Inland Waterways
Trust Fund (IWTF). The barge and towing industry (but ultimately mostly
the U.S. farmer) pays 50 percent of the cost of inland waterway
construction and major rehabilitation projects, while Federal
appropriations are used to finance the remaining 50 percent.
The private-sector's contribution is made through the assessment of
a 29 per gallon diesel fuel tax paid into the IWTF. In the highly
competitive global agricultural market, transportation costs typically
cannot be passed on to the ultimate customer, so they are reflected
primarily in the price paid for commodities at the point of
production--the U.S. farmer. It's important to emphasize that in 2014,
U.S. farmers, agribusinesses and the barge industry raised their
collective hands and successfully advocated that Congress approve
legislation to increase this user fee by 45 percent to increase
private-sector investment in the inland waterways system.
Unfortunately, commercial users of the inland waterways locks-and-
dams are the only private entities that pay into this trust fund, even
though the benefits of the inland waterways are enjoyed freely by
numerous other stakeholders, including recreational users, those who
receive hydropower, municipal and agriculture water systems, and those
who benefit from flood control.
As this Committee is painfully aware, no effort to contribute more
to deficit reduction or offer to have your user-fees raised to support
the system goes unpunished. Perennial calls to impose lockage fees and
tolling on the inland waterways date to the Clinton Administration. The
Agricultural Transportation Working Group which is comprised of 40
diverse associations representing the ag value chain, including NGFA,
believe this is a mistaken approach for several reasons.
First, the waterways system differs from the highway system, where
a driver can choose between the new capacity provided by a toll road or
continue to rely on previously existing non-toll roads. Further, unlike
highways, major beneficiaries of the inland waterways noted previously
would not be subject to tolls.
We encourage Congress to continue its bipartisan opposition to such
a concept. Imposing additional costs on those utilizing commercial
barge transportation--on top of the 50 percent cost-share that farmers
and the private sector already pays into the IWTF--would risk diverting
traffic from the most efficient mode of transportation available to
U.S. agriculture, further congesting U.S. highways and resulting in
higher rail freight rates ultimately paid by farmers.
In 2015, the Illinois Corn Growers Association conducted a study to
examine alternative private financing options for Illinois Waterway
Projects and determined that this could result in an additional user
fee or lockage fee of $0.014 to $0.036 a bushel. This means that one 15
barge tow carrying 875,000 bushels of corn could cost an additional
$31,500 per lock. Again, this would be on top of the fuel tax industry
already pays.
As Congress and the Administration debate how to finance
infrastructure projects, the NGFA believes the question should not be
``how much can we extract from those who already pay?'' but rather,
``how can we get other beneficiaries of the system to support it
financially?'' That is the essence of equity and provides an
opportunity to greatly modernize the inland waterways system to benefit
all users.
Finally, to enhance efficiency and reduce costs of upgrading the
inland waterways, it will be important that any future funding
mechanism be reliable and predictable. Projects that are plagued by
stops and starts because of funding shortfalls create inefficiencies
that dramatically increase total costs.
Rural Roads and Bridges
Rural America, the home of 60 million Americans, also relies
heavily on roads, highways and bridges, which constitute the first step
in transporting agricultural products from farm to market and provide
access to education, jobs, health care and other social services, and
encourage tourism and movement of goods and services. Transportation
also is a critical factor in a company's decision on where to locate
new businesses.
The nation's rural areas account for 97 percent of America's land
mass and are home to the vast majority of the nation's 2.2 million
farms. As this Committee knows well, production agriculture, by
necessity, is geographically dispersed because the sources of
production cannot simply be relocated to be closer to customers.
Without functioning rural road and bridges, farmers and ranchers cannot
get their harvests to consumers both domestically or internationally.
Roads and bridges that serve and connect the country's rural areas
face several significant challenges, including inadequate capacity to
handle growing levels of traffic and commerce, heavier truckloads,
limited connectivity, deteriorated road and bridge conditions, and a
traffic fatality rate that is far greater than more urban roads and
highways.
Funding and Overall Condition
Road construction and maintenance primarily is a function of
government, with more than 80 percent of the financing derived from
fuel taxes, other fees and tolls. Needs and demands for maintenance and
construction of roads and bridges are outpacing current and projected
funding, creating a need to identify additional funding sources.
According to 2012 Federal data, 74 percent of bridges, 73 percent
of the 4 million miles of public roads, and 33 percent of all vehicle
miles traveled (VMT) are in rural areas. But only 44 percent of rural
road mileage is eligible for Federal grants, with the rest maintained
by state and local funding. Meanwhile,15 percent of the nation's major
rural roads consists of pavement rated in poor condition, while an
additional 21 percent is rated in mediocre condition.
Of the more than 445,000 bridges in rural areas, only 43 percent
are eligible for Federal aid. More than 20 percent of rural bridges are
rated either structurally deficient or functionally obsolete. Combined,
nearly 69,000 bridges on local and minor collector highways in rural
areas (not eligible for Federal aid) either are structurally deficient
or functionally obsolete. More than 32,000 bridges in rural areas that
are eligible for Federal aid either are structurally deficient or
functionally obsolete.
Potential Solution for Rural Roads and Bridges
To ensure rural Americans have access to adequate and safe bridges
and roadways, Congress should explore prioritizing increases in Federal
funding, and/or reclassification of rural roads and bridges to be
eligible for funding. One concept that may warrant consideration is to
develop a system of block grants with guidelines under which states and
localities could prioritize those road and bridge projects that they
deem most important. The NGFA would recommend that local rural and
agricultural stakeholders be required to be consulted as part of a
state's deliberations to ensure that the needs of farmers, ranchers and
rural communities are considered fully. Congress also should direct
agencies to account for the unique needs those rural roads and bridges
present to ensure they are eligible for Federal grants and funding.
Finally, identifying adequate long-term funding sources would provide
certainty, enable better long-term planning, and improve efficiency in
road maintenance and construction.
Conclusion
I'd close with a final thought. As you know, by 2050 the world will
be challenged to feed nine billion people. If the United States
maintains the status quo on maintaining our transportation
infrastructure, it will fall far short of meeting that demand. The
critical waterways projects I've discussed today will take several
years to construct and complete. So, we cannot wait until the moment is
upon us to get started. The road to feeding a growing country and world
population will be met by looking forward, not through the rear-view
mirror. Let's not allow just under $9 billion stand in the way of our
ability to feed our country and the soon to be nine billion people
around the globe.
Thank you for this opportunity to provide our thoughts on the
current state of the transportation supply chain and its infrastructure
that is of vital importance to rural America. We look forward to
working with this Committee, Congress and the Administration to pursue
enactment of a comprehensive infrastructure package that will make a
real, positive difference to rural communities, U.S. economic growth
and job creation, and world food security for decades to come.

The Chairman. Thank you, Mr. Calhoun.
Mr. Wynn, 5 minutes.

STATEMENT OF CURTIS WYNN, PRESIDENT AND CHIEF
EXECUTIVE OFFICER, ROANOKE ELECTRIC COOPERATIVE; VICE
PRESIDENT, BOARD OF DIRECTORS, NATIONAL RURAL ELECTRIC
COOPERATIVE ASSOCIATION, AHOSKIE, NC

Mr. Wynn. Thank you, Chairman Conaway and Ranking Member
Peterson, for inviting me to testify today. My name is Curtis
Wynn, and I am the President and CEO of Roanoke Electric
Cooperative. We are a member-owned, not-for-profit distribution
cooperative, and we serve 14,000 rural customers, in some of
the poorest parts of our state. That is why above and beyond
just delivering electricity, we have a calling to provide a
broad set of services and support to help our community thrive.
Among our biggest challenges, going forward, are adapting
to changes and consumer demand, accommodating an evolving
generation mix, and protecting against cyber threats. I am
going to talk today about some investments that my co-op is
making to modernize and meet these needs.
I am aware that resources will be limited in the upcoming
farm bills, but I believe a separate infrastructure package
gives us a great opportunity to make further investments like
these to ensure the success and stability of rural America in
the 21st century.
For decades, the Rural Utilities Service's electric loan
program has been the foundation of what we do, providing low
cost financing to co-ops for installing and maintaining the
grid. Today, RUS also helps us fund more advanced projects to
make our systems more modern, efficient, and secure.
We have enjoyed strong support for robust RUS funding
because we are such a good investment for the Federal
Government providing valuable services to our communities and
reliably paying back our loans.
We ask that you help us maintain that support. In the 21st
century, robust communications infrastructure is just as
important to our business as are traditional assets like poles,
wires, and power plants.
My co-op is currently investing $4 million to lay a fiber
communications backbone in our service territory. Our main
motivation is to take care of our internal operational needs to
make our system more efficient and secure. However, once this
foundation is in place, there are lots of things we can do with
it. One option could be providing broadband Internet to our
customers' homes. Many people in our region don't have access
to reliable Internet. That puts our consumers, schools,
hospitals, and employers at a disadvantage.
I believe it will take many different types of
technologies, partnerships, and engagement from all
stakeholders to address this challenge. As Congress thinks
about infrastructure and telecommunications policy, we believe
all potential providers who have a community need and a
willingness to engage, including some electric cooperatives,
should have access to a diverse set of tools to help bridge
this digital divide.
For years, electric co-ops across the country have provided
information and advice to consumers to help them use
electricity more efficiently and cost-effectively. Because we
don't have a profit motive, we have a unique opportunity to
help our consumers use less energy and save money. For example,
at Roanoke, we have a program called Upgrade to $ave, where we
work with our member owners to make energy efficient retrofits
in their homes, like adding insulation or replacing old HVAC
units.
Customers immediately began to save money without making
any up-front payments. And by sharing the energy savings, we
ensure full cost recovery for our cooperative. We can do all
this through a $6 million loan from the USDA through a new
energy efficiency and conservation loan program.
In the first 18 months of the program, we worked with local
contractors to retrofit over 200 homes with an average energy
savings above 20 percent. That is after the repayment of the
note. We also recently used a USDA Rural Energy for America
Program grant to build, through our power provider, a community
solar project. Now our members have the opportunity to purchase
energy from these panels investing in clean, renewable energy,
and lowering their monthly electric bills.
Last, the Rural Economic Development Loan and Grant Program
at USDA provides financing so that co-ops can partner with
local schools, hospitals, emergency services, and businesses to
fund projects that create jobs and meet our communities' need.
Since 2012, North Carolina has been involved with 99 REDLG
projects that created over 2,600 jobs. Most of our country's
food, minerals, energy, and manufactured goods still come from
rural areas. That is why the health of rural America should be
of interest to all Members of Congress and to all Americans.
You have a great opportunity and an infrastructure package
to make needed investments that will address our unique
challenges.
We look forward to working with you, and thank you very
much for this opportunity, Mr. Chairman.
[The prepared statement of Mr. Wynn follows:]

Prepared Statement of Curtis Wynn, President and Chief Executive
Officer, Roanoke Electric Cooperative; Vice President, Board of
Directors,
National Rural Electric Cooperative Association, Ahoskie, NC
Thank you, Chairman Conaway and Ranking Member Peterson, for
inviting me to testify today. My name is Curtis Wynn. I am the
President and CEO of Roanoke Electric Cooperative headquartered in
Aulander, North Carolina. I am also Vice President of the Board of
Directors for the National Rural Electric Cooperative Association.
Roanoke is a member-owned, not-for-profit, electric distribution
cooperative serving around 14,000 residential, agricultural, commercial
and industrial customers in northeastern North Carolina. Our system
consists of over 2,000 miles of line (about seven members per mile) in
seven counties.
We serve some of the poorest, most rural parts of our state. But
despite those challenges, we are doing some truly innovative work to
improve the quality of life for our members. While our first priority
is to deliver clean, safe, reliable, affordable electricity to our
members, we have a calling to be more than just a poles, wires and
electrons company. Our broader purpose is to provide the services and
support that empower our communities to thrive. Rural electric
cooperatives are much more than just electric utilities--we are the
engines that drive economic opportunity across the heartland and to
rural areas everywhere. I am proud of the role we play in these
communities.
More than ever, whether you live in a rural area or in a city, we
are all connected in this country. Rural areas, in particular, still
grow most of the food, generate much of the power, and manufacture many
of the goods that this country consumes. When rural areas suffer, the
country as a whole suffers. That's why the state of rural
infrastructure should be of interest to all Members of Congress, no
matter what type of district you represent.
Among our biggest challenges going forward are adapting to changes
in consumer demand, accommodating an evolving generation mix, and
protecting against cyber threats. I'm going to talk today about some
investments that my co-op is making to modernize and meet those needs.
I am aware that resources will be limited in the upcoming farm bill,
but I believe a separate infrastructure package gives us a great
opportunity to make further investments in these types of projects to
ensure the success and stability of rural America in the 21st Century.
Rural Utilities Service (RUS)
In the early 1900's, as urban areas began to electrify, rural areas
lagged behind. Eventually, farmers and ranchers in remote areas took
the initiative to form electric cooperatives and did it themselves. In
the past 80 years, a lot has changed, but the same fundamental
challenges still exist--how to affordably connect those few customers
in low-density, high-cost rural areas. What was then called the Rural
Electrification Administration (REA) is now the Rural Utilities Service
(RUS) and it is as relevant today as it was back then. REA and RUS
loans have helped build, expand, and improve the infrastructure across
rural America necessary to provide power, deliver clean water, and
deploy advanced telecommunications technologies to rural areas.
Today, RUS loans help electric co-ops reduce costs and improve
reliability for our members by financing basic maintenance like
replacing poles and wires. But it also helps us fund projects to make
our systems more modern, efficient, and secure.
RUS depends on a yearly appropriation from the Agriculture
Appropriations bill. We have historically enjoyed strong support for
robust RUS funding in large part because we're such a good investment
for the Federal Government. The President's Budget request for 2018
estimates that the Federal Government could earn up to $300 million in
net revenue from RUS loans. We ask that you help us maintain that
support.
We also ask that you support policies that allow us to use RUS
loans to address a broad set of co-op needs--whether for advanced
utility communications, renewable generation, baseload generation, or
for making environmental upgrades to existing generation. Just as the
times have changed and the needs of rural America have changed, so too
has the RUS loan program. We have appreciated working with the
Committee over the years to help make the program more streamlined and
efficient, and we look forward to exploring new ways to continue to
improve the program. Modernizing the RUS loan program is good for both
electric cooperative borrowers and taxpayers. The RUS annually reviews
and approves billions of dollars of loans, and finding ways to more
efficiently process those loans reduces burdens on taxpayers while
meeting borrowers' needs more efficiently as well. Another important
financing option available to electric cooperatives is loans from
cooperative banks. Co-op banks add healthy competition and a diversity
of sources of capital to the marketplace. We encourage you to continue
that policy.
Robust Communications Infrastructure
In the 21st century, robust communications infrastructure is just
as important to our business operations as traditional generation,
transmission and distribution assets. This high-speed communications
capability makes our system more efficient, it makes our grid more
secure, and it has the capability to make our consumers more
comfortable and productive.
Roanoke Electric Cooperative is currently undertaking a $4 million
project to lay a fiber communications ``backbone'' in our service
territory. Our main motivation for bringing this broadband technology
to the area is to take care of our internal, operational needs. As a
result, this project will reduce outage frequency as well as response
time to outages while better equipping Roanoke to help member-owners
manage energy and reduce system losses. We want to ensure that all of
our substations can communicate with one another in order that we can
better predict and manage outages, protect our substations and metering
equipment from vandalism and theft, and communicate with each
individual member-owner about their usage.
Once this foundation is in place, there are a lot of things we can
do with it. One option we are currently studying is whether we can
leverage this fiber backbone and partner to provide broadband Internet
to our consumers' homes. In a world of video streaming, telecommuting,
video conferencing, online education, and telemedicine, connectivity is
not a luxury. It's a necessity. A connected home is also a more
efficient, comfortable taking advantage of ``smart'' technologies like
thermostats and hot water heaters which assist the cooperative in
managing peak load and save money for our members.
Unfortunately, many homeowners and businesses in our region do not
have access to reliable Internet service. The absence of high-speed
Internet denies our member-owners and others in the region access to
all the amenities that most urban areas enjoy. It also discourages
businesses from investing in our communities which results in missed
job opportunities.
Many comparisons are drawn between the lack of access to robust
broadband service today and the need for electrification in rural areas
80 years ago--with the urban areas of the country well-served, and
rural areas being left behind. We believe that many different types of
solutions will be needed to help rural Americans keep pace with their
urban counterparts. As Congress contemplates telecommunication and
infrastructure policies, we believe that all potential providers
including electric cooperatives should have access to a diverse set of
tools to help bridge the digital divide.
Innovation and Energy Efficiency
Upgrade to $ave
For years, electric co-ops across the country have provided
information and advice to consumers to help them use electricity more
efficiently and cost-effectively. As I mentioned before, because we
don't have a profit motive, we have a unique opportunity to help our
consumers use less energy and save money.
At Roanoke, we have a program called Upgrade to $ave where we work
with our member-owners to make investments in energy efficiency in
their homes that allow them to save money on their bills without making
any up-front payments or incurring new debt obligation. In return,
participating member-owners share the energy savings with the
cooperative at a level that assures immediate financial savings for our
participants and full cost recovery for our cooperative. In addition to
improved comfort and saving money for our members, the program promotes
local jobs by using local businesses and contractors to do these
building retrofits.
We can do all this because we received a $6M loan from the Rural
Utilities Service through the new Energy Efficiency & Conservation Loan
Program (EECLP). In the first eighteen months of the program, local
contractors completed upgrades to over 200 homes with average estimated
energy savings above 20%. Most of the projects involved air sealing,
duct sealing, insulation, efficient lighting, and installation of high
efficiency HVAC equipment such as heat pumps.
In addition to generating energy savings, participants in Upgrade
to $ave also generate spillover benefits such as reducing demand during
periods of extreme weather. As a result, our cooperative benefits from
lower wholesale costs for both peak demand and energy. We use some of
the surplus benefits that accrue to all member-owners to pay for the
cost of administering the program, which is an option open to all
member-owners.
Community Solar
We're also proud to be partnering with several of our neighbor co-
ops to install a 360 panel community solar project in our service
territory. Our project was created in the same spirit that drove the
creation of Roanoke Electric Cooperative. More than 75 years ago,
electricity was out of reach for residents in our community. A group of
people joined together to create our electric cooperative and power our
lives. Today, solar energy is out of reach for a lot of people. Among
other barriers, it can be expensive to set up and maintain. So we
answered our members' call to do something about it.
Today, our members have the opportunity to purchase the energy
output of these panels, investing in clean renewable energy and
lowering their monthly electric bills. We think community solar has a
lot of advantages for our members. For example, it can be a cost-
effective alternative to installing new panels on your own home, and it
provides options for renters who don't own their own property. Our site
is well suited for a solar installation, so you can be sure you're
getting the most out of the sun's potential. And we take care of the
maintenance.
Today the North Carolina Electric Cooperatives and its consumer
members support more than 2MW of community solar at 11 electric
cooperatives throughout the state. To help make these projects more
affordable, we have received four Rural Energy for America Program
(REAP) grants from USDA. The total cost of all these projects was
approximately $5.1 million and the REAP grants offset approximately 20%
of the cost, around $1 million.
Microgrids
A microgrid is a group of interconnected loads and resources
connected to the main electric system, which can connect and disconnect
from the grid. North Carolina's electric cooperatives have the state's
first grid-interconnected microgrid on Ocracoke Island and another
microgrid in development, the Butler Farms Microgrid. We partnered with
several organizations, EPRI, Telsa, and Ecobee to implement the
microgrid.
The Ocracoke Island microgrid located off the outer banks is an
exercise in community resilience, protecting the island that is often
in the path of offshore storms, and can be used for demand response,
energy arbitrage, and ancillary services in the PJM power market. The
resources in the microgrid include a 3 MW diesel generator, a TESLA 500
kW/1 MWh battery, 15 kW of solar, and 300 Internet-connected consumer
devices (thermostats and water heaters). These resources also can
reduce reliance on the main power grid during times of high demand when
the island reaches its peak population in the summer. It also serves as
an opportunity to test the integration of this technology as the
state's electric cooperatives look to use the concept elsewhere.
The Butler Farms microgrid is an opportunity to integrate swine-
waste biofuel generation and solar existing on the farm to support the
local community. With the addition of a Samsung 250 kW/750 kWh battery
and distribution controls, the generator can continue to produce
energy, even if the main grid has been disconnected. Additionally,
another first for the state, up to 100 homes in the area can be
supported during times of localized outages through these distribution
controls. This utility-facing consumer microgrid will also be used for
demand response to save consumers money when electricity is most
expensive.
The North Carolina Electric Cooperatives are working together on
these innovative research projects in order to learn how these
technologies can be integrated into our distribution systems, while
continuing to provide affordable, reliable energy to our members. These
demonstration projects with successful outcomes can later be integrated
into the grid through multiple applications modernizing the electric
system.
Rural Economic Development Loans and Grants (REDL&G)
No matter how successful you are at delivering electricity, if you
don't have an economy that supports good jobs, rural America will
languish. Under the Rural Economic Development Loan and Grant (REDLG)
program, USDA provides zero-interest loans to utilities (including
electric co-ops), which, in turn, pass the funds through to local
businesses and other groups that create jobs in rural areas. This
positive cycle of business development can strengthen both the co-op
and the local community by helping stabilize populations and the co-
op's customer base. Since REDLG is funded in part by the interest and
fees paid by co-op borrowers, it's a good deal for the Federal
Government as well.
North Carolina has utilized REDLG loans and grants better than any
other state in the country. Since 2012, North Carolina electric
cooperatives have used REDLG programs to partner with 99 projects for a
total investment of nearly half a billion dollars which have created
over 2600 jobs. REDLG funding has been used for weatherization, school
construction, libraries, public safety, medical facilities and
equipment, industrial buildings and equipment, and infrastructure.
For example, Energy United provided a $2 million loan to Davie
County and $1 million loan to the town of Mocksville which was used to
provide infrastructure to support the recruitment of Gildan
manufacturing. Gildan ultimately invested $116 million in their new
facilities at the site and created 292 jobs.
Another example of how the REDLG program has benefited rural
communities is the $950,000 loan made by Lumbee River EMC to the Puppy
Creek Fire Department. The fire department is located in a rural area
of Hoke County which has grown recently due to its location near
military bases. Because the fire department didn't have the ability to
reach the upper floors of some of the newer, taller buildings,
insurance rates were going up for everyone in the neighborhood. We were
able to facilitate the purchase of a new ladder truck that could better
service the community, bringing down insurance premiums for the entire
community.
Regulatory Reform
Last, we believe electric cooperatives should have broad latitude
to take necessary actions they need to take to meet their consumer
demands. The cooperative model of local, democratic control makes us
good stewards of our communities. The Federal Government should have a
reasonable regulatory philosophy that recognizes that relationship.
We support reforms to the National Environmental Policy Act (NEPA)
and to the Endangered Species Act (ESA) to promote the development of
rural infrastructure. In addition, streamlining Federal Government
management practices on Federal lands will make it easier for electric
co-ops to maintain safety and reliability by performing needed
vegetation management to prevent threats to power lines and respond to
emergencies.
Conclusion
We are a healthy nation because we have vibrant, bustling urban
cities and because we have verdant, productive rural areas.
Unfortunately, whether it's infrastructure or jobs or access to health
care, it seems that too often rural America gets the short end of the
stick. You have an opportunity to address some of those disparities.
Electric cooperatives enjoy a productive partnership with the
Federal Government and with the communities we serve to promote the
health of rural America. We look forward to continuing to work with you
toward that important goal. Thank you again for the opportunity to
testify here today. I'm happy to answer any of your questions.

Chairman. Thank you, Mr. Wynn.
Ms. Otwell, 5 minutes.

STATEMENT OF JENNIFER L. OTWELL, CPA, VICE
PRESIDENT AND GENERAL MANAGER, TOTELCOM
COMMUNICATIONS, LLC, DE LEON, TX; ON BEHALF OF NTCA--THE RURAL
BROADBAND ASSOCIATION

Ms. Otwell. Thank you, Chairman Conaway, Ranking Member
Peterson, and other Members of the Committee. Thank you for
inviting me here today to talk about the importance of rural
broadband as part of rural infrastructure, how that
infrastructure is built and maintained, and the needs of rural
consumers.
Totelcom recently built fiber to the only hospital in
Comanche County, Texas, enabling countless important functions,
such as sending CT scans and other diagnostic imaging to
radiologists in faraway metropolitan hospitals. It is essential
for our county seniors and other residents to have our hospital
nearby, and that wouldn't be possible without a high speed,
high capacity broadband connection. This is one of many
examples I have witnessed during my tenure at Totelcom of
broadband making the rural way of life possible, to say nothing
of the agricultural and energy production and other rural goods
and services that broadband makes more affordable and available
to a global market.
Simply put, broadband is now essential rural
infrastructure, yet it is an expensive undertaking. Totelcom
serves an area of around 1,182\2\ miles, with an average of
only 3.4 customers per square mile. You can do that math. That
is not enough customers to recoup the cost of delivering
broadband over such a large area. But 59 percent of Totelcom's
customers have access to speeds of 10 megabits or greater, and
29 percent of our customers now have access to speeds of up to
1 gigabit, thanks to our recently completed Fiber to the Home
Project in the Town of De Leon.
These results are similar to what other small rural telecom
providers have achieved around the country, and none of it
would be possible without support from the USF High-Cost
Program, which helps rural carriers make the business case for
providing the service and securing loans from USDA's Rural
Utilities Service, CoBank, and RTFC, which are among the very
few lenders committed and willing to finance broadband-capable
plants in rural America.
Indeed, our U.S. loans and high cost USF support work in
concert to help deploy broadband where it is not sustainable
and improve it where it already is. For purposes of a
Congressional infrastructure initiative, let me reiterate: The
affordable financing is essential to rural broadband
deployment, but it is not feasible without the presence of
direct support for recovering the cost of providing the
service.
Providing rural broadband is an ongoing effort that
requires sustained commitment. We cannot declare success just
for the very preliminary act of connecting a certain number of
locations.
Congress was quite visionary in calling for reasonably
comparable services and rates between rural and urban America
in the 1996 Telecom Act. The FCC was wise to follow this
principle by drafting rules for USF that mandate robust
networks that can be readily upgraded over time to meet
increasing consumer demands and expectations. Anything less
would deny rural consumers the educational, economic,
healthcare, and public safety benefits of broadband that other
Americans take for granted.
While USF rules are designed to support robust networks,
its high cost program budget currently is not as it has been
under the same hard cap since 2011. Meanwhile, other USF
program budgets have grown considerably. This hard cap is now
driving consumer rates higher, deterring rural broadband
investment, and even cutting USF support for investments
already made.
The artificially low high-cost budget is the greatest
barrier to rural broadband deployment today. Because the USF
high-cost program is designed well but under-funded, we
encourage Congress to offset this shortfall via any
infrastructure package. This would help address the funding
shortfall and save time and resources that would otherwise go
towards creating and administering a new program from scratch.
Thanks to recent reforms, the high-cost program is already
designed to put support where it is needed most and avoid
wasteful overbuilding of existing networks by targeting very
specific locations. Also, efforts to standardize and speed
Federal land permitting processes would free resources for
broadband investment, and loan processes could be improved by
allowing environmental and historical reviews to be conducted
after funds are obligated but prior to disbursements.
In short, the best funded, best planned networks may never
fully deliver on their promise if they are caught in regulatory
red tape and needless delay. While small rural carriers have
done a remarkable job of leveraging available resources for
broadband deployment, much work does remain.
Fifteen percent of NTCA member customers don't yet have
access to 10/1 broadband, while 90 percent of Americans have
affordable access to 25/3 service or greater. The broadband
industry is eager to close this gap by working with Congress
and the Administration on policy that helps to build and
sustain broadband in rural markets that would not otherwise
justify such investments and ongoing operations.
Thank you for the honor of testifying today, and I look
forward to your questions.
[The prepared statement of Ms. Otwell follows:]

Prepared Statement of Jennifer L. Otwell, CPA, Vice President and
General Manager, Totelcom Communications, LLC, De Leon, TX; on Behalf
of NTCA--The Rural Broadband Association
Introduction
Chairman Conaway, Ranking Member Peterson, and Members of the
Committee, thank you for this opportunity to testify about the
importance of broadband infrastructure to rural areas and how rural
broadband networks are deployed and sustained. I am Jennifer Otwell,
Vice President and General Manager at Totelcom Communications in De
Leon, TX. My remarks today are on behalf of Totelcom, as well as NTCA--
The Rural Broadband Association, which represents approximately 850
rural community-based carriers that offer advanced communications
services throughout the most sparsely-populated areas of the nation.
NTCA members and companies like them serve just under five percent
of the U.S. population spread across approximately 37 percent of the
U.S. landmass; in most of this vast expanse, they are the only fixed
full-service networks available. Small telecom providers connect rural
Americans with the world--making every effort to deploy advanced
networks that respond to consumer and business demands for cutting-
edge, innovative services that help rural communities overcome the
challenges of distance and density. Fixed and mobile broadband, video,
and voice are among the services that many rural Americans can access
thanks to our industry's networks and commitment to serving sparsely
populated areas.
Totelcom is a local, community-based telecommunications provider
with 39 employees serving a 1,182\2\ mile area with an average of 3.4
customers per square mile. But, 19 percent of our customers reside in
just 2\2\ miles, while the remaining 81 percent reside in the other
1,180\2\ miles--so the population density of the more rural areas is
only 2.75 customers per square mile. We provide just over 4,000 total
connections to customers, delivering voice services and broadband using
a variety of methods. We employ fiber-to-the-home technology and
traditional copper-based facilities to provide broadband to most
customers, and even fixed wireless point-to-point broadband for the
most remote portions of our service area.
Our networks allow agricultural producers and other rural
businesses to communicate with suppliers and sell to new markets, they
enable education of our children on par with opportunities in urban
areas, and they make our communities attractive destinations for people
and businesses to relocate. In rural America, that translates into
economic development that produces jobs, not only in agriculture,
energy and other industries with a strong rural presence, but in the
healthcare sector, and just about any other retail industry that
requires broadband to operate.
Unique Challenges of Rural Broadband Deployment
Building broadband networks is capital-intensive and time-
consuming; building them in rural areas involves a special further set
of obstacles. The primary challenge of rural network deployment is in
crossing hundreds or thousands of miles where the population is sparse
and the terrain is diverse.
To complicate further the unique rural challenges of distance and
density, when crossing Federal lands or railroad rights-of-way in rural
America, network operators must address environmental and historical
permitting concerns or contractual obligations that can delay projects
and increase their already high costs. Then, once networks are built,
they must be maintained over those hundreds or thousands of miles--this
requires technicians who regularly travel long distances to make
service calls and customer service representatives trained to deal with
questions about things like router and device configurations that were
unimaginable for legacy ``telephone companies.''
And even the best local networks in rural markets are then
dependent upon ``middle mile'' or long-haul connections to Internet
gateways dozens or hundreds of miles away in large cities. Reaching
those distant locations is expensive as well, and as customer bandwidth
demands increase--moving from Megabytes to Gigabytes to Terabytes of
demand per month per customer--so too does the cost of ensuring
sufficient capacity to handle customer demand on those long-haul fiber
routes that connect rural America to the rest of the world.
Small telcos are eager to meet and overcome all of these challenges
for the rural communities in which they live and serve, but it's
important that they have the resources and regulatory stability to do
so considering the importance of broadband to the current and future
success and quality of life of rural America.
Broadband Is Essential Rural Infrastructure
Rural Broadband Benefits the Entire U.S.
Rural broadband has far-reaching effects for both urban and rural
America, creating efficiencies in health care, education, agriculture,
energy, and commerce, and enhancing the quality of life for citizens
across the country. A report released last year by the Hudson Institute
in conjunction with the Foundation for Rural Service found that
investments by rural broadband companies contributed $24.1 billion to
the economies of the states in which they operated in 2015. Of this
amount, $17.2 billion was the direct byproduct of the rural broadband
companies' own operations while $6.9 billion was attributable to the
follow-on impact of their operations.
The Hudson study also determined that while small telcos provide a
range of telecommunications services in rural areas, much of the
benefit actually goes to the urban areas where the vendors, suppliers,
and construction firms that rural telcos use are often based. Only $8.2
billion, or 34 percent of the $24.1 billion final economic demand
generated by rural telecom companies accrues to rural areas--the other
66 percent or $15.9 billion accrues to the benefit of urban areas.
Additionally, the report found that the rural broadband industry
supported nearly 70,000 jobs nationwide in 2015 both through direct
employment and indirect employment from the purchases of goods and
services generated in connection with broadband deployment and
operations. Jobs supported by economic activity created by rural
broadband companies are shared between rural and urban areas, with 46
percent in rural areas and 54 percent in urban areas.
Immense Benefits for Consumers and Communities
Beyond the direct economic impacts of broadband network investment
and operations that I have just described, the broader socioeconomic
benefits of broadband services for users and communities cannot be
ignored. A Cornell University study, for example, found that rural
counties with the highest levels of broadband adoption have the highest
levels of income and education, and lower levels of unemployment and
poverty. Access to healthcare is a critical issue for rural areas,
where the lack of physicians, specialists, and diagnostic tools
normally found in urban medical centers creates challenges for both
patients and medical staff. Telemedicine applications help bridge the
divide in rural America, enabling real-time patient consultations and
remote monitoring, as well as specialized services such as tele-
psychiatry. One study found that doctors in rural emergency rooms are
more likely to alter their diagnosis and their patient's course of
treatment after consulting with a specialist via a live, interactive
videoconference.
In Hawkinsville, Georgia, rural provider ComSouth partnered with
the county public school system to deploy telehealth equipment to
connect the school nurses' offices with physicians at Taylor Regional
Hospital. Working with the Georgia Partnership for Telehealth, the
hospital, the school system, and ComSouth facilitate better health care
for students who might not otherwise be able to be seen by a physician
in an area where parents can ill afford to miss a half or full day for
a doctor visit. This is a very simple but elegant telehealth solution--
the technologies (broadband and the monitoring equipment) are not new,
but ComSouth helped put the pieces together to improve student health
and save everyone time and money.
Other benefits accrue in the form of distance learning and
commerce. A shortage of teachers in many areas of rural America means
public-school districts rely on high-speed connectivity to deliver
interactive-video instruction for foreign language, science and music
classes. Broadband networks also enable farmers and ranchers to use the
Internet to employ precision agriculture tools and gain access to new
markets.
Retail e-commerce has benefited tremendously from sales in rural
America as well, where consumers may lack access to local retail
outlets, but through the availability of rural broadband networks, can
access a variety of shopping options. According to the Hudson
Institute, rural consumers generated $9.2 billion in online sales in
2015 and if all rural Americans had access to broadband networks, the
authors estimate that Internet sales would have been $1 billion higher.
A recent Pew Study further finds that among those Americans who have
looked for work in the last 2 years, 79 percent used online resources
in their most recent job search and 34% say these online resources were
the most important tool available to them.
Indeed, job creation appears to abound when fast, high-capacity
broadband is deployed in a rural area. In Sioux Center, Iowa, a major
window manufacturer recently built a 260,000\2\ plant to employ 200
people. The company considered more than 50 locations throughout the
Midwest, but selected Sioux Center in part because the rural broadband
provider enabled this plant to connect with its other locations
throughout the U.S. using a sophisticated ``dual entrance'' system that
could route traffic to alternate paths, ensuring that the main
headquarters 250 miles away and other facilities would remain
connected. In Cloverdale, Indiana, a rural broadband provider met with
developers and helped bring an industrial park to its service area.
Powered by this provider's broadband, the facility brought more than
800 jobs to the area. In Havre, Montana, a rural broadband provider is
partnering with a tribally-owned economic development agency to create
a Virtual Workplace Suite and Training Center that is expected to
create about 50 jobs. These stories are repeated throughout NTCA member
service areas.
Consumer Demand, Fiber, and Future-Proof Networks
Despite these unique rural challenges, small rural telcos have made
remarkable progress in deploying advanced communications networks.
Based in the communities they serve, these companies and cooperatives
are committed to improving the economic and social well-being of their
hometowns through technological progress wherever possible.
A survey of NTCA members conducted last year found that 49 percent
of respondents' customers are served via fiber-to-the-home (FTTH), up
20 percent from 2013. Twenty-nine percent of customers are served via
copper loops, 15 percent cable modem, six percent fiber-to-the-node
(FTTN), 0.5 percent fixed wireless, and 0.1 percent satellite. Due in
no small part to increased fiber deployment, rural customers have
access to faster broadband speeds. Per last year's survey, 85 percent
of NTCA members' customers can purchase broadband at speeds of 10 Mbps
or higher. Seventy-one percent can now access speeds above 25 Mbps.
Fifty-nine percent of Totelcom's customers have access to 10 Mbps
or greater service. The remaining forty-one percent are served by long
local loops that provide 1 to 6 Mbps service.
Totelcom recently completed its first fiber-to-the-home buildout in
the town of De Leon, Texas. Due to that and other Fiber to the Node
construction projects used to push high speed connectivity further into
the rural areas, 29% of Totelcom's customers now have access to speeds
up to 1 Gigabit. We work with our customers on an individual basis to
find solutions to their broadband needs.
Totelcom also serves many important community anchor institutions,
including a rural hospital and related EMS services, a low-income
government medical clinic that serves three area towns, three school
districts, two public libraries and nine public safety entities,
including police and rural volunteer fire departments. In 2015,
Totelcom built fiber to a new wind power facility, which currently
operates 87 wind turbines that generate enough energy to power 50,000
homes in Texas each year. Totelcom also operates our own ``genius bar''
in the form of the Totelcom Learning Center, open weekly to assist
customers in a one-to-one setting in a comfortable environment.
Customers can bring in their electronic devices and seek assistance
with email, saving and sending pictures, and even social media.
As we look to future data needs of our customers and our
communities, we have taken aggressive steps to focus on the anticipated
increase in usage, including establishing a future-proof connection to
a statewide fiber network that provides our middle-mile transport. This
puts our customers in a great position as data needs grow, as we have
seen our average data usage increase over 750% within the last 5 years.
Due to this demand, we continue to employ new technology in our fiber-
to-the-node and copper networks to meet demand, but also continue to
deploy fiber. The speed and sustainability of deployment, however, will
depend on both reasonable access to capital to finance construction and
the availability of USF support to make sure user rates on these rural
networks, once upgraded, are not astronomical and unaffordable.
Much Progress, but Much More Work to Do
Despite the progress discussed above, many parts of rural America
still need better connectivity. Fifteen percent of NTCA member
customers don't have access to even 10/1 broadband. In a country where
the Federal Communications Commission (FCC) has indicated that 90
percent of Americans already have affordable access to 25/3 Mbps
service and many urban consumers and businesses benefit from 100 Mbps
or Gigabit speeds, broadband access in rural America lags behind urban
areas despite the best efforts, innovation, and entrepreneurial spirit
of NTCA's members.
And the price of broadband for the consumer must be considered too.
As I will discuss later in this testimony, it does no good to build a
network if no one can afford to make effective use of the services
offered atop it. Federal law recognizes this by mandating that the
Federal Universal Service Fund (USF) ensure reasonably comparable
services are available at reasonably comparable rates in rural and
urban areas alike. Yet, in many of the rural areas served by smaller
providers today, this mandate is simply failing to be achieved, as the
combined effect of recent USF reforms and USF budget cuts have resulted
in prices that are tens or even hundreds of dollars more per month for
rural Americans than urban consumers.
Finally, once a network is built, it is not self-effectuating,
self-operating, or self-sustaining. Services must be activated and
delivered atop it, maintenance must be performed when troubles arise,
and upgrades must be made to facilities or at least electronics to
enable services to keep pace with consumer demand and business needs.
In addition to these ongoing operating costs, networks are hardly ever
``paid for'' once built; rather, they are built leveraging substantial
loans that must be repaid over a series of years or even decades.
All of these factors make the delivery of broadband in rural
America an ongoing effort that requires sustained commitment, rather
than a one-time declaration of ``success'' just for the very
preliminary act of connecting a certain number of locations.
Particularly when one considers that even where networks are available
many rural Americans pay far more for broadband than urban consumers,
it becomes apparent that the job of really connecting rural America--
and, just as importantly, sustaining those connections--is far from
complete. The rural broadband industry and our nation as a whole has a
great story of success but we also have much more work to do--and this
is where public policy plays such an important role in helping to build
and sustain broadband in rural markets that would not otherwise justify
such investments and ongoing operations.
A Holistic Approach to Broadband Infrastructure
The critical role of communications infrastructure is as necessary
to the present and future needs of rural America as is electricity and
other infrastructure that enables the ordinary course of a thriving
society. The current Administration expressly recognized the importance
of advanced communications networks by including ``telecommunications''
within an initial list of infrastructure priorities prior to taking
office, followed by over 100 Members of Congress writing to the
President urging him to include broadband within any broader
infrastructure initiative. President Trump indeed recently pledged to
include measures to spur rural broadband in his infrastructure
proposals. NTCA applauds the apparent consensus already achieved with
respect to making broadband an infrastructure priority, and welcomes
the opportunity to participate in a further discussion on how best to
tackle this priority.
Before turning to specific thoughts on paths forward, it may make
sense first to outline a few key objectives for consideration with
respect to any broadband infrastructure plan:

First, the plan should at least account for, if not
specifically leverage, what is already in place and has worked
before. Creating new programs from scratch is not easy, and if
a new broadband infrastructure initiative conflicts with
existing efforts, that could undermine our nation's shared
broadband deployment goals.

Second, there should be meaningful expectations of those who
leverage any resources made available through such an
initiative. Looking to providers with proven track records in
delivering real results makes the most sense, but whomever
receives any support should be required to show clearly that
they used those resources to deliver better, more affordable
broadband that will satisfy consumer demand over the life of
the network in question.

Third, any broadband infrastructure plan needs to be
carefully designed and sufficiently supported to tackle the
challenges presented. This is a question of both program focus
and program scope.

From a focus perspective, any infrastructure plan
should aim toward getting broadband where it is not and
also sustaining it where it already is; deployment of
duplicative infrastructure in rural areas that are
uneconomic--and may not even support a single network on
their own--will undermine the sustainability of existing
network assets.

From a scope perspective, deploying and sustaining
rural broadband is neither cheap nor easy; we obviously
need to recognize that finite resources are available to
address any number of priorities, but any plan that calls
for broadband deployment--especially in high-cost rural
America--should match resources to the size of the problem
to be solved.

Fourth, any resources provided as part of an infrastructure
plan should look to get the best return on such long-term
investments. For networks with useful lives measured in
decades--especially private investments that leverage Federal
dollars--this should mean the deployment of infrastructure
capable of meeting consumer demands not only today and
tomorrow, but for 10 or 20 years. Putting resources toward
infrastructure that needs to be substantially rebuilt in only a
few years' time could turn out to be Federal resources wasted--
and still risk leaving rural America behind.

Fifth, while the economics of deployment are an essential
component of any infrastructure plan, a comprehensive approach
to promoting deployment is required. Barriers or impediments to
broadband deployment must also be addressed as part of any
holistic plan to promote and sustain infrastructure investment.
Put another way, the best-funded, best-planned networks may
never deliver fully on their promise if they are caught in
regulatory red tape and needless delay.
Universal Service Fund and Rural Broadband Infrastructure
Any potential path forward with respect to broadband infrastructure
policy should be evaluated against such criteria. As one example of a
policy with promise, and as NTCA first outlined in a December 2016
letter to the National Governors Association when that group was
evaluating infrastructure priorities in collaboration with the
Presidential transition team, strong consideration should be given to
leveraging and supplementing the existing high-cost Federal Universal
Service Fund (``USF'') programs under the oversight of the Federal
Communications Commission (the ``FCC'') as a primary means of
implementing a broadband infrastructure initiative.
The USF programs have been in place for years, and the FCC recently
reoriented them under a ``Connect America Fund'' (``CAF'') banner to
promote broadband in high-cost rural areas. The high-cost USF/CAF
programs are essential both in justifying the business case for
broadband infrastructure investment in the first instance, and then in
keeping rates for services affordable atop the networks once they are
built.
The FCC's high-cost USF programs therefore could represent a
logical focal point for future broadband infrastructure initiatives.
The FCC is the nation's expert agency in telecom policy, and it is
already tackling the broadband challenges described above with respect
to availability and affordability. Moreover, recent USF reforms adopted
by the FCC have sought to: (1) reorient the programs toward broadband,
(2) ensure funding is targeted to where it is needed (i.e., to places
where the market does not enable service delivery on its own), and (3)
define what the FCC considers an efficient level of support in each
area.
The reformed program rules now compel significant accountability,
to the point that support recipients must meet specified deployment
obligations and geocode new locations to which they deploy broadband
leveraging USF support. The FCC is also working to finalize rules that
make USF resources in wide swaths of rural America available for
companies of all kinds--cable companies, traditional telcos, wireless
Internet Service Providers, and satellite providers--to leverage in
making the business case for rural broadband investment and service
delivery.
Although some implementation efforts remain ongoing and some
questions remain outstanding, and while some minor conforming changes
would likely be needed to implement any resources available as part of
a new broadband infrastructure initiative, it would seem more
straightforward to coordinate any new initiative as a supplement to
such existing programs than to stand up an entirely new program from
scratch and then attempt ``on the back end'' to coordinate that new
program with ongoing efforts. Indeed, as NTCA has recently described in
filings at the FCC and elsewhere, additional broadband infrastructure
resources, if flowed through the high-cost USF programs, could achieve
immediate and compelling effects given significant and troubling
current budget shortfalls in those programs.
USF High-Cost Program Budget
Unfortunately, these otherwise very effective programs are
significantly under-funded to achieve their goals as designed,
relegating tens of thousands of rural Americans to lesser broadband
than their urban counterparts (or no broadband at all), and leaving
millions of other rural Americans paying tens or even hundreds of
dollars more per month than their urban counterparts do for the same
broadband services. Such impacts undermine the benefit of building
rural broadband infrastructure in the first instance, as well as
hindering the value of broadband as a component of a broader economic
development strategy. They put at serious risk the very ability of our
nation to achieve the universal service mission articulated by Congress
in Communications Act Section 254 for millions of rural consumers and
businesses--and they will undermine the viability of a broadband
infrastructure initiative if not addressed up-front.
While the Federal Communications Commission (FCC) thankfully took
steps to provide some level of additional funding earlier this year
within the fixed overall USF budget for a subset of carriers that
elected model-based High-Cost USF support, the funding was insufficient
to achieve the goals of the model the FCC designed. An additional $110
million per year is needed to fully fund an alternative model that the
FCC created to promote broadband deployment. Because of this budget
shortfall, 71,000 rural locations will receive lower-speed broadband,
and nearly 50,000 may see no broadband investment at all.
And the problem is even more dire for those small carrier
recipients of High-Cost USF that could or did not elect model support.
The High-Cost USF has been locked at the same budget level overall
since 2011, and a lower budget target first adopted in 2011 for smaller
carriers within that overall budget total is now being enforced via a
strict budget control mechanism that threatens to wreak havoc on
consumer rates and network investment.
Under this tightly constrained USF budget, over the next 12 months,
small rural network operators will be denied recovery of $173 million
in actual costs for private broadband network investments that these
carriers have already made. In other words, small rural network
operators and the customers they serve will need to come up somehow
with $173 million to pay for broadband investments that the USF program
would have supported just a year ago--and that the rules would still
provide for recovery today via USF had it not been for arbitrary
``haircuts'' made to enforce an artificial budget target adopted 6
years ago when the program was oriented toward voice services only.
Real World Impacts of USF High Cost Budget Cuts
Because of these support cuts, rural network operators are already
increasing rural broadband rates for consumers and cutting back on
future infrastructure investments. NTCA reports, for example, that one
member telco has indicated it cannot justify seeking a $26 million loan
to build high-speed broadband infrastructure due to the USF cuts; a
project that would have delivered approximately 1,000 miles of fiber to
over 7,000 rural customers is now on indefinite hold. Similarly, due to
the USF budget cuts, a cooperative in the upper Midwest will put
several 2018 new construction projects on hold worth several million
dollars; these projects would have upgraded or delivered broadband for
the first time to approximately 500 rural consumers and businesses, but
the company now needs to scale back future investment because the USF
cuts are taking away millions of dollars that were counted upon for
investments already made in the past. In Mississippi, a small rural
provider has been forced to hold off indefinitely on plans for future
investments due to the USF budget concerns, instead making minimal
investments just to keep existing network plant operational rather than
upgrading that network for higher-speed broadband that would help those
areas thrive. In Nebraska, a small company with only 12 employees that
just recently completed a significant fiber-to-the-home project has
declined to fill four open positions--effectively cutting its workforce
by 25%--because of concerns with declining USF support and its impact
on the ability to pay for the network construction already completed.
And in Iowa, a small carrier has not been able to lower its prices for
standalone broadband because the USF budget cuts are effectively wiping
out any support for such connections, despite the intention of the
reforms and the repeated calls for such a fix from Congress.
All of these effects translate to one conclusion--the USF budget
cut is hindering recovery of prior private investments, deterring
future investments, driving up consumer prices, and hurting job
creation. These are all directly contrary to the stated goal of a
broadband infrastructure initiative, and highlight how predictable and
sufficient USF is a condition precedent to the success of any such
initiative.
Unpredictability of USF High Cost Support
Perhaps the most troubling aspect of this budget control is that it
not only cuts support that the rules indicate should be available, but
it does so in unpredictable ways. For the last 4 months of last year,
the budget control was 4.5% on average; for the first 6 months of this
year, it rose to 9.1% on average. Now, as of July 1, the budget control
will on average reduce USF support by 12.3% for the next 12 months. As
if the support losses for investments already made were not bad enough,
this lack of predictability makes it even harder to justify building
going forward.
If a company does not know whether the budget control will be 5% or
10% or 20% next year--and given the growth trends, all we can guess is
that the budget control will grow--that company cannot make informed
decisions to invest in capital-intensive broadband infrastructure. If
it does not get fixed soon, we will be looking at years of lost rural
broadband investment to the detriment of millions of rural Americans.
Rather than creating new programs from scratch or taking flyers on
untested theories of broadband deployment, why not use a program that
has a proven track record and has just been improved in recent years?
Why starve that program's budget while throwing dollars at new
initiatives that might not work or, worse still, might conflict with
this proven program? If rural broadband is really a priority, good
public policy would indicate we should be building upon what has worked
to promote it, rather than neglecting it.
Congressional Support for Addressing High Cost Budget
It's not just NTCA that is concerned about the USF budget
shortfall. In May 2017, nearly 170 Members of Congress--including 22
Members of the House Agriculture Committee--wrote to the FCC expressing
serious concern about how the USF budget shortfalls will undermine
private infrastructure investment and consumer rates. This letter
demonstrated the shared bipartisan interest in prompt action on this
issue, and a window of opportunity exists. We are hopeful that with
continued Congressional interest and leadership we can see these issues
addressed, and the promise of last year's USF reforms can be realized
by the millions of rural consumers served by smaller rural network
operators.
Benefits of Shoring Up USF High Cost Program
Providing additional resources to allow the FCC's cost models and
competitive bidding programs to function as designed could yield
measurably improved delivery of broadband to tens of thousands of
additional locations at higher speeds, and help deliver service to many
more who currently face the prospect of no broadband at all. Industry
estimates show that 71,000 more households would be the beneficiaries
of better broadband infrastructure if the FCC's cost model were funded
as designed, while 47,000 households are currently at risk of receiving
no broadband at all due to a lack of sufficient support.
Meanwhile, in other rural areas, additional resources could
mitigate the fact that millions of rural consumers are still forced to
pay tens or even hundreds of dollars more per month for standalone
broadband than their counterparts in urban areas--despite the fact that
hundreds of Members of Congress wrote to the FCC in 2014 and again in
2015 expressly asking for this concern to be resolved.
A recent survey of NTCA member companies revealed that the average
respondent estimates charging $126 per month for standalone broadband
under the budget control--far more than most rural consumers could
afford. Further, the average response predicted charging only $70 per
month for standalone broadband if the budget control were not in place
and carriers received support for investments under program rules.
These numbers reveal that the budget control is preventing the High
Cost program from helping rural providers offer reasonably comparable
services and rates as called for in the Communications Act.
From an infrastructure perspective specifically, it is far harder
to justify future investments in broadband networks when consumers face
prices such as these and cannot reasonably afford the services once
delivered. These are concerns common to many rural consumers, and they
are particularly acute of course in areas with significant rural
poverty levels and Tribal areas.
The FCC's various high-cost USF programs--both the CAF II
initiative and the programs that enable service delivery in rural areas
served by smaller businesses--therefore offer a ready-made platform
that, with additional resources but with very little additional ``heavy
lifting'' or process, could ``hit the ground running'' and yield
immediate, measurable benefits for rural consumers.
Other options for implementing a broadband infrastructure
initiative could include alternative grant or capital infusion programs
through other agencies, comparable to what several states have used to
address ``market failure areas''--places where the business case for
investment is difficult, if not impossible, to make without additional
resources. At the same time, creating such programs would require more
administrative effort than leveraging existing programs, and the rules
for any such new program must still be informed by the objectives I
first articulated above and any ``lessons learned'' from similar prior
efforts at the Federal and state levels. For example, as a matter of
program integrity and to ensure the most efficient possible use of
resources, it would be necessary to ensure such a capital infusion
program is carefully coordinated with the existing USF programs, among
other things. And although some have alternatively touted tax
incentives as offering promise--and while there are certainly areas in
which such incentives might help--such measures are unlikely to make a
material impact in most rural areas where distance and density make it
difficult, if not impossible, to justify a business case for
infrastructure investment to start.
Rural Utilities Service Telecom Financing
The Strength of RUS Experience
Deploying a communications network in a rural area requires a large
capital outlay due to the challenges of distance and terrain. The
number of rural network users (as compared with more densely-populated
urban areas) is too small to pay the costs of deployment and ongoing
operations through customer charges. As Congress considers the details
of legislation to promote infrastructure deployment, it's important to
note that USDA's Rural Utilities Service (RUS) has long played a
crucial role in addressing rural broadband challenges through its
telecommunications programs that finance network upgrades and
deployment in rural areas.
Since the early 1990s, the RUS telecom programs have financed
advanced network plant at a net profit for taxpayers and helped deploy
state-of-the-art networks to rural Americans left behind by providers
unable or unwilling to serve low-population-density markets. With rare
exception, RUS, CoBank and RTFC are the primary lenders that small
rural providers can turn to for outside financing. Not only does RUS
help rural America remain connected, its Broadband Loan & Guarantees
program and traditional Telecommunication Infrastructure Loan &
Guarantees program make loans that must be paid back with interest--
creating a win/win situation for rural broadband consumers and American
taxpayers.
RUS and USF Work in Concert
While RUS lending programs finance the substantial up-front costs
of network deployment, the USF High Cost Fund helps make the business
case for construction and sustains ongoing operations at affordable
rates. More specifically, USF by law aims to ensure ``reasonably
comparable'' services are available at ``reasonably comparable'' rates.
Not to be confused or conflated, RUS capital and ongoing USF support
serve distinctly important, but complementary rather than redundant,
purposes in furthering rural broadband deployment. The availability of
USF--the ability to make sure that consumers can actually afford to buy
services on the networks once built--is so essential to the RUS telecom
loan calculus that uncertainty in the Federal USF program in recent
years has hindered some of the success, momentum, and economic
development otherwise and previously enabled by the RUS
telecommunications programs.
Farm Bill Considerations
Apart from infrastructure legislation, the pending expiration of
the current farm bill affords opportunity to review the farm bill
Broadband Loans & Loan Guarantees program that was first authorized in
the 2002 Farm Bill. Each subsequent farm bill has made extensive
reforms to the program with the goal of greater accountability,
efficiency, and effectiveness. Two rounds of program reforms in less
than 15 years--the first of which was significantly delayed by the ARRA
BIP program's use of the Broadband Loan Program mechanism--means that
the Broadband Loan Program has been almost continuously ``under
construction'' since its inception, rendering the program inaccessible
to borrowers for long periods of time. While the program isn't perfect,
it may be helpful to simply let borrowers use the Broadband Loan
Program in current form and become familiar with it for a few years
before undertaking another extensive reform effort.
NTCA urges the Committee to continue to support the RUS Broadband
Loan program that is subjected to the farm bill reauthorization process
at or above current funding levels as you formulate recommendations.
Furthermore, we urge the Committee to continue its long history of
support for the Telecommunications Infrastructure and Community Connect
programs that are also vital to the ongoing deployment and maintenance
of advanced communications infrastructure throughout rural America.
The Broadband Opportunity Council (BOC), which includes USDA as a
member, released a report in September 2015 that recommended
authorizing more USDA programs to make grants and loans for broadband
infrastructure. The BOC's January 2017 progress report affirmed this
recommendation. While more resources for rural broadband deployment are
needed, involving more government entities and programs in broadband
financing should be undertaken cautiously to avoid duplicating efforts
and undermining a coherent, cohesive approach to financing and then
sustaining rural broadband networks.
Infrastructure Investment and Barriers to Deployment
Infrastructure investment depends not only on financing but also on
prompt acquisition or receipt of permissions to build networks.
Barriers or impediments to broadband deployment must also be addressed
as part of any holistic plan to promote and sustain infrastructure
investment. Such roadblocks, delays, and increased costs are
particularly problematic for NTCA members, each of which is a small
business that operates only in rural areas where construction projects
must range across wide swaths of land.
Permitting and access, particularly with respect to Federal lands,
can present a significant impediment to the deployment of rural
broadband infrastructure. Navigating Byzantine application and review
processes within individual Federal land-managing and property-managing
agencies can be burdensome for any network provider, but particularly
the smaller network operators that serve the most rural 40 percent of
the U.S. landmass. The review procedures can take substantial amounts
of time, undermining the ability to plan for and deploy broadband
infrastructure--especially in those areas of the country with shorter
construction seasons due to weather.
The lack of coordination and standardization in application and
approval processes across Federal agencies further complicates the
deployment of broadband infrastructure. While not specifically
regarding Federal lands, the terms of local franchises, pole
attachments, and railroad crossings can also create substantial costs
and concerns in deploying broadband infrastructure. Government at all
levels--state and local, counties, tribal lands, and Federal--should
work collaboratively to harmonize their process to expedite placement
of facilities.
These issues significantly affect broadband network operators and
consumers. In Wyoming, the Bureau of Land Management (BLM) state office
adopted a unique bonding policy and application process that appeared
to equate deployment of telecom facilities with installation of
pipelines transporting hazardous substances, dramatically increasing
the application burdens and potential costs. In California, the U.S.
Forest Service waited months to begin work on environmental reports for
a small rural provider's broadband deployment and then refused a
temporary construction permit, costing the carrier most of the 2017
construction season and delaying the project into next year. In Utah,
carriers have faced construction delays due to inter-agency permitting
disagreements between the BLM and the U.S. Department of
Transportation. From my experience at Totelcom, I can attest that when
building new fixed wireless towers for deployment, the cost of the
various permits and approvals normally runs higher than the actual
construction of the tower.
We have seen much agreement for some time now on solutions to
simplifying the administrative barriers to deployment. The
standardization of application, fee and approval policies and
procedures across Federal land-managing and property-managing agencies
to the extent possible should be a high priority. The Senate MOBILE NOW
(S. 19) bill contains changes that should be considered for near-term
implementation on Federal lands, such as improved ``shot-clock''
measures, while the FAST Act (P.L. 114-94) included sound reforms that
should be extended to smaller projects as well. Such actions would
enable smaller operators to remain focused on providing high-quality
broadband service to their customers rather than dealing with onerous
regulations.
FCC Chairman Ajit Pai's ``Digital Empowerment Agenda'' contains
many thoughtful suggestions on how ``to make it easier for [Internet
Service Providers] to build, maintain, and upgrade their networks,''
ranging from greater scrutiny of local franchising regulations to
ensuring reasonableness in the costs for pole attachments. Chairman
Pai's formation of a Broadband Deployment Advisory Committee also
represents a meaningful step in evaluating and taking real action on
these issues. Continued progress in consideration and implementation of
such ideas must be seen as an essential component of a holistic
broadband infrastructure initiative.
Finally, though rural telcos have long enjoyed productive working
relationships with RUS, there is always room for improvement. Small
carriers typically spend about 2 years and about $250,000 securing loan
approval from RUS. Some providers would love to take advantage of RUS's
low rates, but the procedural barriers to borrowing from RUS send them
to private lenders that offer higher rates. RUS could make its
processes more user friendly and free up resources for broadband
deployment with loan sequencing reforms that would allow borrowers to
delay costly reviews until a loan is approved, but before funding is
released.
Conclusion
Robust broadband infrastructure is crucial to the current and
future success of rural America. But the characteristics that enable
the unique beauty and enterprise of rural America make it very
expensive to deploy advanced communications services there. Our
nation's small, rural telecom providers are deploying faster broadband
throughout their service areas, but no carrier--regardless of size--can
deliver high-speed, high-capacity broadband in rural America without
the ability to justify and then recover the initial and ongoing costs
of sustaining infrastructure investment in high-cost areas.
A legislative infrastructure initiative offers a unique opportunity
to provide the resources needed to make these investments, and
mechanisms that ensure efficiency and accountability in the expenditure
of funds are already in place. Our industry is excited to participate
in this conversation regarding broadband infrastructure initiatives,
and we look forward to working with policymakers and other stakeholders
on a comprehensive infrastructure strategy to ensure that all Americans
will experience the numerous agricultural, economic, health, and public
safety benefits of broadband.
Thank you for the opportunity to testify, and for the Committee's
commitment to creating an environment conducive to broadband
infrastructure investment in rural America.

The Chairman. Thank you, Ms. Otwell.
Mr. Macmanus for 5 minutes.

STATEMENT OF BRIAN E. MACMANUS, P.E., GENERAL
MANAGER, EAST RIO HONDO WATER SUPPLY
CORPORATION, RIO HONDO, TX; ON BEHALF OF TEXAS RURAL WATER
ASSOCIATION; NATIONAL RURAL WATER
ASSOCIATION

Mr. Macmanus. Good morning, Chairman Conaway, Ranking
Member Peterson, and Members of the Committee. Vice Ranking
Member Vela, thank you for your kind introduction.
It is an honor to testify before you on the drinking water
and wastewater infrastructure needs and concerns for rural
America. I am Brian Macmanus, and I serve as the General
Manager of the East Rio Hondo Water Supply Corporation in the
Rio Grande valley of Texas.
In 1979, East Rio Hondo began construction of its potable
water system with our first USDA Farmers Home Administration
loan of $1,100,800 to serve 975 customers. These customers were
farmers, ranchers, rural, and colonia residents who were
utilizing a mix of contaminated and non-potable water sources.
The enormous cost to start a water system over such vast
rural areas was not a possibility without the grants, low-
interest loans, and 40 year terms that USDA funding made
possible.
The dollar value of the current infrastructure needs for
water and wastewater in rural America can be tied directly to
the current USDA rural water application backlog of $2.5
billion for almost 1,000 pending applications.
East Rio Hondo currently has an application pending for
approximately $4.5 million for a new, 1 million gallon elevated
water storage tank. This backlog truly represents my utility
and rural and small community water infrastructure projects
throughout the country.
Why does rural America water and wastewater infrastructure
matter to the average American? It is really simple. First, the
people living in rural America produce the food, fuel, and
fiber products for our entire country, and depend on safe and
clean water to maintain their health and their community's
economy. Second, all American citizens depend on safe drinking
water in rural America for the safety of their food supply as
it takes clean, potable water to wash and process the fruits,
vegetables, and meats at packaging facilities in rural America.
Third, the wastewater treated and discharged by rural American
communities is likely the drinking water source for the next
community downstream. Although small drinking water systems
outnumber large water systems ten to one, they still have a
minority of the country's population, often at a much higher
cost per household.
As a prime example, East Rio Hondo has constructed a UV
light disinfection treatment process at our surface water
treatment plant to inactivate cryptosporidium, which was
detected in our raw water source. This project cost East Rio
Hondo approximately $1.5 million in capital construction, or
$191 for each and every connection in our system.
Lack of economy of scale is also demonstrated by East Rio
Hondo serving 7,850 connections with 466 miles of pipe,
equivalent to 16.8 connections per mile. Much larger urban
utilities can have hundreds of equivalent connections per mile
of pipe, and more easily spread infrastructure cost over their
larger customer base. USDA funding is what continues to make
growth and compliance projects truly affordable to rural
America.
In 2017, there are still rural communities in the country
that do not have access to safe drinking water or sanitation
due to the lack of population density or lack of funding.
My associate, Finley Barnett, General Manager of S.U.N.
Water Supply Corporation in Merkel, Texas, is seeking USDA
funding for the expansion of his system to serve 300 rural
residents whose wells have gone dry.
My entire rural neighborhood hauled bottled drinking water
to our homes due to private wells with salty ground water until
2009 when East Rio Hondo laid a new pipeline on our rural road.
My next-farm-over neighbors, Richard and Cheryl Johnson,
were ecstatic to have safe potable water from East Rio Hondo as
they had both been previously hospitalized due to fecal
contamination of their private well from their septic system.
A very crucial point to take home today is that rural
America is being overlooked in the funding as currently
proposed to partially occur through the U.S. EPA's state
revolving fund process.
SRF dollars have historically been absorbed by large
metropolitan water utilities. East Rio Hondo's experience in
applying for DWSRF funding is that our applications
historically ranked too low, and have largely been
unsuccessful. East Rio Hondo's and NRWA's preferred funding
avenue for water and wastewater infrastructure projects is the
USDA Rural Development Direct Loan and Grant Program.
NRWA urges Congress to consider the following rural water
and wastewater infrastructure concepts: First, provide a
minimum set-aside for small and rural communities; second,
provide grants not just loans; third, contract qualified
private nonprofits to service the USDA water and wastewater
loan and grant programs. The current checklist for a USDA loan
and grant project requires an applicant and their consultants
to complete 90 separate items before beginning construction.
This checklist is included in Attachment C of my written
testimony.
NRWA would like to thank the Rebuild Rural Coalition for
organizing this effort today. Thank you, Chairman Conaway,
Ranking Member Peterson, Vice Ranking Member Vela, and Members
of the Committee for allowing me to testify.
I would be happy to answer any questions that you may have.
[The prepared statement of Mr. Macmanus follows:]

Prepared Statement of Brian E. Macmanus, P.E., General Manager, East
Rio Hondo Water Supply Corporation, Rio Hondo, TX; on Behalf of Texas
Rural Water Association; National Rural Water Association
Good morning Chairman Conaway, Ranking Member Peterson, and Members
of the Committee. It is an honor to testify before you on the drinking
water and wastewater infrastructure needs and concerns for rural
America. I am proud to represent the many rural water and wastewater
utility systems across America in sincerely thanking this Committee for
your long support of the Department of Agriculture's (USDA) Rural
Development water programs that have lifted up the quality of life for
so many of the residents in my home state of Texas and throughout this
great nation.
I am Brian Macmanus and I serve as the General Manager of the East
Rio Hondo Water Supply Corporation (ERHWSC). I am a licensed engineer
and water and wastewater treatment operator in the State of Texas.
ERHWSC was incorporated in 1972 and began construction of our first
pipelines in 1979 when ERHWSC closed our first Farmers Home
Administration loan of $1,100,800 in order to serve 975 customers.
Since our inception, we have expanded our water service and started
wastewater service using additional funding assistance from the United
States Department of Agriculture (USDA) (see Attachment B). ERHWSC now
directly serves approximately 24,000 residents in Cameron and Willacy
Counties, and wholesales potable water to an additional 1,816 people
through the U.S. Immigration Customs Enforcement, Port Isabel Detention
Center, the Town of Indian Lake, and to a portion of Military Highway
Water Supply Corporation, all within a 407\2\ mile service area.
I come before this Committee representing the Texas Rural Water
Association which is a state affiliate of the National Rural Water
Association. The National Rural Water Association (NRWA) is a water
utility organization with over 31,000 community members. Our member
communities have the very important public responsibility of complying
with all applicable regulations and for supplying the public with safe
drinking water and sanitation every second of every day. Most all water
supplies in the United States are small; 94% of the country's 51,651
drinking water supplies serve communities with fewer than 10,000
persons, and 80% of the country's 16,255 wastewater supplies serve
fewer than 10,000 persons. In my home state of Texas, the national
trend continues as there are presently 4,310 community water systems
that have a population under 10,000 people, representing 93% of the
water systems in the state.
I am here today to testify on the water and wastewater
infrastructure needs of rural America. I believe it is important in my
testimony today that I identify to the average American who lives in an
urban or suburban setting why it is important to invest our United
States Federal budget dollars in the water and wastewater
infrastructure of rural America. I know that the Members of this
Committee are very familiar with the fact that our country's food,
fuel, and fiber come primarily from rural America. The people in
communities producing the food, fuel, and fiber depend on safe and
clean water to maintain their health and their community's economy, no
differently that most Americans. Let's take it a step further though on
why the average American citizen should care about investing in safe
drinking water in rural America.
The United States currently enjoys the safest most affordable food
supply of any industrialized country in the modern world. This is due,
in a large part, to the efforts of past and present Members of this
Committee and we wish to thank you for this tremendous achievement. A
huge part of this achievement was past investment in the rural water
infrastructure to produce safe drinking water and properly treated
wastewater in rural America. Imagine consuming fruits and vegetables
that were processed at packaging facilities in rural America, typically
not far from where they are harvested, that were washed in water from
an unsafe potable water supply. The potential resulting food borne
outbreak could endanger the health and lives of many people in the more
populated centers of our country. Fortunately, each of us can follow
the USDA My Plate nutrition guidelines and make half of our plate fruit
and vegetables, and do so in confidence because our fruits and
vegetables were washed with clean potable water in rural American
packaging facilities and again at our homes to prevent the spread of
parasitic organisms such as E. coli. This clean potable water used to
wash them did not show up on its own. In rural America, it was likely
provided via USDA water and wastewater loans and grants.
There is a saying in the water and wastewater industry, that a
certain product rolls down hill. This stands true for any community in
America, including rural communities, that discharge treated wastewater
into our rivers and streams. Their wastewater is likely the drinking
water source for the next community downstream, which could easily be
an urban center. Sufficient wastewater treatment is critical to
maintain the safety of the drinking water source. I hope I have your
attention on the critical need to sustain the infrastructure for our
water and wastewater systems in rural America.
One other point which I will cover in more detail later in this
testimony is that suburban America is now growing into what today is
rural America. We have all seen the subdivisions occurring in areas
that were previously farms, ranches, and forests. Growing rural America
on the outskirts of population centers is a key component of the
American economy growing again, and having water and wastewater
infrastructure available to handle new growth is critical for the
financial viability of these potential developments.
When thinking about national water infrastructure proposals, I ask
you to reflect on my previous statement of facts that most water
utilities are small. These small systems have more difficulty affording
public water service due to lack of population density and lack of
economies of scale. My utility, ERHWSC, is a prime example of this lack
of economy of scale with approximately 7,850 connections being served
by 466 miles of pipe which equates to 16.8 connections per mile of
pipe. This concentration is considered high for some rural systems, yet
large urban centers can have hundreds of equivalent connections per
mile of pipe, depending upon their density.
The small community paradox in Federal water policy is that while
we supply water to a minority of the country's population, we have much
more difficulty providing safe, affordable drinking water and
sanitation due to limited resources and technical expertise. Also,
while we have fewer resources, we are regulated in the exact same
manner as a large community; we outnumber large communities by a
magnitude of ten-fold, and Federal compliance and water service is
often a much higher cost per household. As a prime example of this,
ERHWSC has constructed an ultra-violet (UV) light disinfection
treatment process at our surface water treatment plant, to maintain
compliance with US EPA log removal requirements for the parasite
cryptosporidium, which was detected in our raw water source. This
project cost ERHWSC approximately $1.5 million in capital construction,
or $191 for each and every member (connection) in our system. Much
larger urban utilities would be able to more affordably spread this
cost over a much larger customer base. USDA funding made this project
affordable for the rate payers in ERHWSC.
A great man named Billie Joe Simpson was the founder of ERHWSC and
my predecessor until his passing in 2013. He told me shortly before his
death that he could not believe what ERHWSC had grown into and what an
impact it had created upon the local rural economy. ERHWSC was truly a
rural community of farmers, ranchers, rural residents, and colonia
residents when Billie Joe and his wife Martha Ann applied to USDA for
our first project. The enormous cost to start a water system over such
vast rural areas was not a possibility without the grants, low interest
loans, and long loan terms of 40 years that USDA funding made possible.
This story of small beginnings and huge results repeats itself,
although with different demographics, over and over again throughout
our great country. The continued development of growing rural America
is a strong stimulus to our nation's economy. The USDA rural water and
wastewater loan and grant program is what continues to make growth and
compliance projects like ERHWSC's UV light disinfection system truly
affordable to rural America.
The dollar value of the current infrastructure needs for water and
wastewater in rural America can be tied directly to the USDA rural
water application backlog of $2.5 billion with 995 pending
applications. I can tell you from first hand discussions with other
water and wastewater utility managers in Texas, this number is
artificially low because many utilities fall into noncompliance with
regulatory requirements while waiting, sometimes for years, for closure
on the funding process. As you can see in Attachment B, ERHWSC
currently has an application pending for $4,454,238.00 for a new
1,000,000 gallon elevated water storage tank. The backlog of pending
applications truly represents my utility and rural and small community
water infrastructure projects throughout the country that can't access
alternative affordable sources of funding.
In 2017, there are rural communities in the country that still do
not have access to safe drinking water or sanitation due to the lack of
population density or lack of funding--many in rural Texas. Just this
past week, my colleague Finley Barnett, the General Manager of S.U.N.
Water Supply Corporation in Merkel, Texas, told me how dependent he was
on affordable USDA funding for the expansion of his system to serve 300
rural residents whose wells had recently gone dry. Each day, there are
numerous rural families driving their pick-up trucks to central filling
stations to fill up large plastic storage containers to ``haul'' the
water back to their remote and isolated homes, farms, and ranches.
Included with my written testimony are just a few of many recent news
profiles of communities that lack basic drinking water access
(Attachment A). My water utility and our rural water association's
mission has been to expand water service to these communities and rural
areas--often for the first time. The delivery of drinking water and
sanitation to rural America has been one of the great public health
accomplishments of the second half of the twenty-first century.
Over the last 73 years, through the combined financial assistance
of the U.S. Department of Agriculture's rural water grant and loan
initiative (exceeding $50 billion), the country has made great
advancements in the standard of living in rural America. Millions of
rural Americans now have access to safe potable drinking water that
their parents did not have. I personally hauled bottled drinking water
to my home in 5 gallon bottles due to salty groundwater until 2009 when
ERHWSC laid a new pipeline to me and my neighbors on our rural road. My
next-farm-over neighbors, Richard and Cheryl Johnson, were ecstatic to
have safe potable water from ERHWSC as they had both been previously
hospitalized with gastrointestinal disease due to fecal contamination
of their well from their septic tank. Thousands of rural communities
now have public sanitary wastewater systems that have allowed for
elimination of millions of questionable septic tanks, cess-pools,
straight pipes, or worse. This rural water infrastructure development
has been the engine of economic development in rural communities, and
it has provided for dramatic improvements to the environment and public
health.
As an example of the key role that USDA rural water grant and loan
initiative plays in the development of rural systems and the economy of
communities they serve, please reference the loan and grant portfolio
which ERHWSC has generated since its beginnings (see Attachment B). As
noted above, without the total grant funds and affordable loans
provided to ERHWSC via USDA funding, rural Cameron and Willacy Counties
would never have seen the development of a potable water system. The
farmers, ranchers, rural and colonia residents in ERHWSC's service area
were utilizing high iron and brackish, non-potable wells, shallow wells
contaminated by fecal coliform (like Richard and Cheryl Johnson), or
raw or partially treated Rio Grande River water contaminated with
wastewater discharges from upstream in Mexico. These south Texans, with
at times completely inadequate water infrastructure, would never have
been able to afford a potable water system without the collective
community efforts made possible via USDA funding. USDA funds for water
and wastewater infrastructure are critical to the affordability of
continuing this life-critical service.
Rural America faces a significant dichotomy today. Some rural areas
and particularly the Great Plains are depopulating because of changing
factors in predominantly agriculture economies where farms are larger
and farmers are fewer. A decreasing customer base makes financing
projects mandated by continually growing regulations a difficult if not
unaffordable task. In Texas, many towns and counties in far west Texas
struggle to overcome depopulation. Other rural communities are
challenged with areas of rapid growth where populations from nearby
urban and suburban growth centers are moving to locales of what used to
be farms, forests, and ranches. It seems at times that everyone wants a
little piece of the calmness of the country in rural America after the
wear and tear of work in suburban/urban America. Rural system
infrastructure that is prepared and capable of growing affordably with
new arrivals from neighboring population centers is critical for this
stimulus in our national economy to occur. In Texas this too is
occurring in the area called the Texas Triangle between Houston,
Dallas-Fort Worth, and San Antonio. My good friend Chris Boyd, General
Manager of Mustang Special Utility District, struggles to keep up with
capital infrastructure in Collin County, Texas, 50 miles north of Fort
Worth, in an area that is quickly changing from farms to subdivisions.
Maintaining affordable water and wastewater rates via USDA capital
project funding is critical for both spectrums of our rural American
economy.
Just how much water and wastewater infrastructure demand is there
today? Every 4 years, EPA works with states and community water systems
to estimate the drinking water state revolving fund-eligible needs of
community drinking water systems by state. In 2011, EPA published their
fifth national assessment of public water system infrastructure needs
and it showed a total twenty year capital improvement need of $384.2
billion. This estimate represents infrastructure projects necessary
from January 1, 2011, through December 31, 2030, or an average of
$19.21 billion per year, for water systems to continue to provide safe
drinking water to the public. EPA's Clean Watersheds Needs Survey
(CWNS) is an assessment of capital investment needed nationwide for
publicly-owned wastewater collection and treatment facilities to meet
the water quality goals of the Clean Water Act. These capital
investment needs are reported periodically to Congress. EPA's 2012 CWNS
Report was the sixteenth survey since the enactment of the CWA in 1972
which requires the Report. The total capital wastewater and collection
needs for the nation are $245.8 billion over the next 5 years, or an
average of $49.16 billion per year as of January 1, 2012. This includes
capital needs for publicly-owned wastewater pipes and treatment
facilities ($197.8 billion), and combined sewer overflow (CSO)
corrections ($48.0 billion).
President Trump has made improving the country's infrastructure,
including water and wastewater, a priority. NRWA is extremely grateful
for this prioritization and excited about the potential for rural
America. However, despite my testimony to the critical nature of this
funding in rural America, my main point here today is to tell you that
rural and small town America is being overlooked in the proposed
process to develop the funds for new water and wastewater
infrastructure initiatives. The funding as currently proposed to
partially occur through the US EPA's State Revolving Loan process will
by-pass rural America and be absorbed by large metropolitan water
developments.
Most of the funding for rural American's water and wastewater
development has come from the U.S. Department of Agriculture's (USDA)
rural water grant and loan initiative because it targets communities
who are most in need based on economics and water quality. Most of the
EPA water infrastructure funding is dedicated to larger communities
because EPA does not require a similar needs-based criteria.

Approximately 77 percent of Clean Water State Revolving Fund
(CWSRF) funding for Fiscal Year 2015 were awarded to
communities with a population over 10,000 (EPA Clean Water
State Revolving Fund Annual Review (https://www.epa.gov/sites/
production/files/2016-05/documents/2015_annual_report_
3-14-16.pdf)).

Approximately 72 percent of Drinking Water State Revolving Fund
(DWSRF) funding for Fiscal Year 2016 were awarded to
communities with a population over 10,000 (EPA Drinking Water
State Revolving Fund National Information Management System
Reports (https://www.epa.gov/drinkingwatersrf/drinking-water-
state-revolving-fund-national-information-management-system-
reports)).

My water system's experience in applying for DWSRF funding is that
ERHWSC's applications have historically been ranked insufficiently to
receive funding. The normal annual funding is usually consumed by the
top projects ranked at the very top of a list of hundreds of applicants
in Texas alone, and large municipal projects take very large
percentages of the funding. Although ERHWSC has received DWSRF funding
on one project recently, it was only due to ranking in the top ten in
the state, due to potential emergency water outages brought on by
drought conditions. All other ERHWSC applications for DWSRF funding
have not scored high enough on the state ranking to receive funding.
ERHWSC's preferred funding avenue for water and wastewater
infrastructure projects is the USDA-Rural Development Direct Loan and
Grant Program.
If forced to choose, NRWA would prefer the USDA water and
wastewater loan and grant program over DWSRF, although both can provide
significant benefit. The USDA water and wastewater loan and grant
program has been the historical solution for small and rural water
infrastructure needs and is largely responsible for the success of
delivering water and sanitation to almost every corner of rural
America. Since Fiscal Year 1940 USDA's Water Program has made 96,724
loans and grants totaling $54.6 billion. This is perhaps the most
discriminating assessment of need because it only measures rural and
small community projects that meet USDA strict criterion for need-based
high cost per household and local economic conditions.
To make sure any water infrastructure initiative helps rural and
small town America, NRWA urges Congress to consider the following
global policy principles--and observations--based on their merit:

1. A minimum portion of the infrastructure initiative funds should
be specifically set-aside for small and rural communities,
regardless of how the funding is established. This ensures
that small and rural communities are not left out of the
solution.

2. Allow infrastructure funds some ability to provide grants--not
just loans. Commonly, low income communities do not have
the ability to pay back a loan, even with very low interest
rates, and require some portion of grant or principal
forgiveness funding to make a project affordable to the
ratepayers.

3. A small percentage of water funding programs should be set-aside
for experienced nonprofit entities to provide specific
technical assistance in completing the applications for
water and wastewater infrastructure funding. Small
communities often lack the technical and administrative
resources to achieve compliance and complete the necessary
applications to access the Federal funding programs.
Providing these small communities and the funding agency
with shared technical resources can expedite loan closing
and construction of facilities. This assistance can save
thousands of dollars for the community and help the systems
maintain long-term compliance with EPA rules by expediting
the loan process.

4. Federal water funding programs should be used to ameliorate
compliance with Federal unfunded mandates or standards.
Currently, the Safe Drinking Water Act and Clean Water Act
are creating a tremendous financial burden on small and
rural communities. Federal compliance costs for the Federal
drinking water rules, many for naturally occurring elements
in groundwater, can be exorbitant. The U.S. Environmental
Protection Agency's (EPA) most recent noncompliance
reporting data, via the Government Performance and Results
Act, shows that for drinking water regulations 9,949
communities are in noncompliance; most all of these
communities are simply struggling to achieve Federal
compliance and avoid fines.

EPA lists 444 communities in violation of the arsenic
standard; all have a
population of fewer than 25,000 persons; 98% have a
population of fewer
than 10,000 persons; and 85% have populations under 1,000
persons.

EPA lists 1,374 communities in violation for the most
recent disinfection
byproducts rule; 1,310 have a population of fewer than
25,000 persons; and
94% have a population of fewer than 10,000 persons.

EPA lists 76 communities in violation for naturally
occurring fluoride in
their drinking water; all but two of these communities
have a population
of fewer than 10,000 persons; and 80% of these
communities have a popula-
tion of fewer than 500 persons.

5. Local communities have an obligation to pay for their water
infrastructure and the 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. The USDA water infrastructure
program contains this needs-based criterion. USDA calls
this the ``credit elsewhere'' criterion and it is unique to
USDA's funding.

As you are aware, Texas is one of the four border states that serve
colonias. ERHWSC is one of many rural water and wastewater systems that
has benefitted from USDA infrastructure funds to remedy the deplorable
conditions that exist in these low-income communities. Colonias are
often in unincorporated areas, which unfortunately are similar to some
Tribal areas, and lack some of the most basic necessities such as
potable water and functional sewer systems, without municipal
jurisdiction for development or zoning. ERHWSC and many rural water
supply corporations along the border are prime examples of how a
regional rural water utility can provide the capacity with USDA capital
low interest loans and grants to relieve the squalid conditions that
exist in these communities. NRWA encourages the availability of
affordable colonia specific funding sources as part of the
infrastructure package.
NRWA provides the following conceptual changes specifically to USDA
water and wastewater loan and grant funding to the Committee for
consideration:

1. Provide the Secretary with the authority to use a small
percentage of the funding made available for the Rural
Development programs to contract with private nonprofits
with demonstrated experience to conduct non-inherent
government activities and functions necessary to deliver
and service the Rural Utilities Service Water and Waste
Water Disposal loan and grant programs. The application
process to access USDA water and wastewater infrastructure
funding can easily overwhelm the small and rural
communities who often lack the capacity to administer and
deliver the items required in the lengthy application
process. The current application form (see Attachment C)
requires an applicant or the applicants engineer or
attorney to complete 90 separate checklist items before
beginning construction on a project. The back and forth
corrections between the applicant and USDA in completing
this checklist can often take months and sometimes years.
This impediment is compounded by the recent reduction of
over 1,000 Rural Development program staff and office
locations that can assist applications with the process.
NRWA has identified over 40 loan processing and servicing
functions and activities that can be performed by non-
governmental third party entities. The inherent government
activities would still be performed by Federal employees.
Assistance could include but not limited to preparing the
application with all required documentation (audits,
environmental report, preliminary engineering report,
etc.). Direct assistance could also be performed for
preconstruction requirements, closing review, Buy America
compliance, construction inspection, rate studies, budget
preparation, warranty inspection, addressing letter of
conditions, drafting emergency response plans and other
activities as needed. Assistance to the applicants in all
of the applicant checklist requirements would greatly
expedite the process of capital delivery for construction
purposes. My personal experience at ERHWSC regarding the
loan processing timeframe from application to closing is
that it can take years. The assistance of experienced
private nonprofits to manage and expedite this process
would be a welcome occurrence in rural America.

2. Allow the Secretary the flexibility or waiver authority to exceed
the current population ceiling of 10,000 for the Rural
Development Water and Wastewater Direct Loan and Grant
Programs will also help many rural communities. With the
changing demographics in Rural America, we believe that
providing the Secretary flexibility to assist these
communities that are still experiencing economic hardship
would be beneficial. The Committee could limit this
authority to areas that are rural in character; provide a
demonstrated need for financial assistance; demonstrate the
ability to complete construction within a reasonable time
frame; and demonstrate they cannot afford commercial credit
at the prevailing rates and terms.

3. Allow the Secretary the flexibility or waiver authority to
increase the Water and Waste Water Guaranteed Loan Program
to a much higher population ceiling, for example 50,000,
would be a benefit to higher populated communities that
don't need the subsidized loan or grant funding. This
program currently has a positive subsidy of only .48
percent. This program has been vastly under-utilized, for
example, in FY 2016, only four guaranteed loans were
obligated that totaled $7,118,000. This change would
stimulate private capital at minimal cost to the Federal
Government.

4. Allow the interest on these federally guaranteed water,
wastewater, and essential community facilities loans to be
tax exempt. This modification would generate increased
affordable financing options for rural communities
including increasing the lending authority and activity of
rural banks, allowing for longer loan terms, reduced
interest rates as well as improving the marketability of
the loans on the secondary market. The utilization of these
guaranteed programs would increase while simultaneously
reducing the current backlog.

Thank you Chairman Conaway, Ranking Member Peterson, and Members of
the Committee for allowing me to testify. I would be happy to answers
any questions that you may have at this time.
Attachment A
[1]
A Toilet, but No Proper Plumbing: A Reality in 500,000 U.S. Homes
The New York Times
By Sabrina Tavernise (https://www.nytimes.com/by/sabrina-tavernise)
Sept. 26, 2016
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Dorothy Rudolph in front of her home in Tyler, Ala., which
does not have a septic tank. Credit Bryan Meltz for The New
York Times.

Tyler, Ala.--The hard clay soil in this rural Southern county has
twice cursed Dorothy Rudolph. It is good for growing cotton and
cucumbers, the crops she worked as a child and hated. And it is bad for
burying things--in particular, septic tanks.
So Ms. Rudolph, 64, did what many people around here do. She ran a
plastic pipe from her toilet under her yard and into the woods behind
her house. Paying to put in a septic tank would cost around $6,000--a
little more than half of her family's annual income.
``It was a whole lot of money,'' she said. ``It still is.''
Here in Lowndes County, part of a strip of mostly poor, majority-
black counties that cuts through the rural center of Alabama, less than
half of the population is on a municipal sewer line. While that is not
a hardship for more affluent communities--about one in five American
homes are not on city sewer lines--the legacy of rural poverty has left
its imprint here: Many people have failing septic tanks and are too
poor to fix them. Others, like Ms. Rudolph, have nothing at all.
That is not so uncommon. Nearly \1/2\ million households in the
United States lack the basic dignity of hot and cold running water, a
bathtub or shower, or a working flush toilet, according to the Census
Bureau. The absence has implications for public health in the very
population that is the most vulnerable.
Crumbling infrastructure has been a theme of this country's
reinvigorated public conversation about race--for instance, a botched
fix for old pipes in Flint, Mich., that contaminated the city's
drinking water with lead. But in poor, rural places like Lowndes
County, there has never been much infrastructure to begin with.
``We didn't have anything--no running water, no inside bathrooms,''
said John Jackson, a former mayor of White Hall, a town of about 800 in
Lowndes that is more than 90 percent black and did not have running
water until the early 1980s. ``Those were things we were struggling
for.''
There is no formal count of residents without proper plumbing in
Lowndes, but Kevin White, an environmental engineering professor at the
University of South Alabama, said that a survey that he did in a
neighboring county years ago found that about 35 percent of homes had
septic systems that were failing, with raw sewage on the ground.
Another 15 percent had nothing.
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

Cheryl Ball in her trailer home in Tyler, Ala. Ms. Ball can't
afford a septic tank, so she runs a plastic pipe that empties
waste behind her property. Credit Bryan Meltz for The New York
Times.

``The bottom line is, I can't afford a septic system,'' said Cheryl
Ball, a former cook who had a heart attack several years ago and
receives disability payments. She lives in a grassy field on which only
three of seven homes have septic tanks. Most banks now require proof
that a home has proper sewage disposal before lending, but Ms. Ball
paid cash for her mobile home--$4,000.
This area, known as the Black Belt (so called more for its soil,
than its demographics), is haunted by its history of white violence
toward African Americans and a deep, biting poverty. Lowndes is one of
the poorest counties in the country, and its rural population, whose
trailers and small houses dot the lush green landscape, often cannot
afford the thousands of dollars it costs to put in a tank.
Municipalities, with low tax bases, cannot afford extensive sewer
lines.
Ms. Rudolph, a retired seamstress, and her husband, a carpenter,
live in a tiny, white clapboard house that he built after he, his
parents and his siblings fled their home on land owned by a white man
who forbade the family to vote. She remembers, as a young girl in the
1950s, not having electricity. They obtained running water in the early
1990s, she said, and used an outhouse until the mid-1990s.
So their white toilet with a fuzzy green cover was a marker of
progress. A plastic pipe carries its contents outside and empties into
a wooded area not far from the house. There is no visible pooling of
sewage, but there are other problems.
``The smell gets so bad,'' said Ms. Rudolph, sitting on her porch
guarding her chicken coop against a marauding fox. When it rains, she
wages war with her toilet. One recent downpour brought its contents
gurgling up to the rim.
``I was sitting there looking at it and got me a plunger,'' she
said. ``It took me some plunging to get it clear. I was scared it was
going to come back and go on the floor. Horrible.''
She added, ``There's nothing we can do.''
The problem is prickly for the state. Parrish Pugh, an official
with the Alabama Department of Public Health, agrees that money plays a
part.
``That's where the rubber hits the road,'' he said.
``But Alabama law forbids the use of `insanitary sewage
collection,' and the responsibility for that rests squarely with the
homeowner,'' Mr. Pugh said. Resisting is not only illegal, but could
have health consequences: Raw sewage can taint drinking water and cause
health problems.
`` `My parents had a pipe that ran into the woods, and that's good
enough for me,' '' Mr. Pugh said, explaining a common argument. ``But
we didn't know as much about disease back then. People are more
educated nowadays. They are more concerned.''
The state health department begs, cajoles, and eventually cites
people who have problems and do not fix them. In the early 2000s, the
authorities even tried arresting people. That prompted a public outcry
and the practice soon stopped, but one person spent a weekend in jail
and others were left with criminal records.
The department cited about 700 people in the 12 months that ended
in March, often because someone complained.
The clay soil makes the problem worse.
``Rural wastewater is usually managed with a septic tank and a
drain field, which slowly infiltrates the wastewater into the ground,''
Professor White said. ``Well, it won't go into the ground here.
Period.''
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

John Jackson, former mayor of White Hall, Ala., said that
until the early 1980s, ``we didn't have anything--no running
water, no inside bathrooms.'' Credit Bryan Meltz for The New
York Times.

He added: ``There are some options that may be available, but it's
going to cost thousands of dollars, and most people here can't afford
it. The answer, quite frankly, is not out there yet.''
Experts and advocates have tried to find one. Grants from the state
and Federal Governments to study the problem have come and gone, as
have academics wielding surveys. There was even talk of self-composting
toilets.
``It's like we're going in circles,'' said Perman Hardy, a cook in
Tyler who even did a urinalysis (http://health.nytimes.com/health/
guides/test/urinalysis/overview.html?inline=nyt-classifier) for a study
of health effects. For years, her sewage backed up every time it
rained. In December, she spent all the money she had saved for
Christmas presents on a new septic tank.
Some change is happening. The town of White Hall recently received
funding to connect about 50 homes to sewer lines, the first in its
history. Town officials are thrilled: City sewer lines are critical to
attract businesses that would bring jobs. But the pace is glacial.
Eli Seaborn, 73, a White Hall councilman, said progress would be
slow, like the pace of civil rights gains, where legal discrimination
is gone but lingers in other forms. Similar patience is required for
sewage, he added.
``Time is going to be the only thing that solves this problem,'' he
said. ``It took more than 50 years for it to happen. But hopefully, it
won't take more than 50 years to fix it.''
[2]
What happens when a water utility becomes an orphan
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In tiny Coal Mountain, in West Virginia, residents are left
to fend for themselves with a water system they can't afford to
test for lead. Government agencies have all but given up on
forcing tests even though residents continue drinking the
water. Jasper Colt.
Editor's note: the video clip What happens when a water
utility becomes an orphan, is retained in Committee file, and
is available at: https://www.usatoday.com/videos/news/nation/
2016/12/13/what-happens-when-water-utility-becomes-orphan/
95332502/.
[3]
The American Neighborhoods Without Water, Sewers, or Building Codes
Low-income residents bought cheap land outside of border
cities decades ago. But the promised infrastructure never came.

The Atlantic
Alana Semuels (https://www.theatlantic.com/author/alana-semuels/)
Mar. 3, 2016
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]>

A boy in Los Fresnos colonia in Texas Jessica Rindaldi/
Reuters.

Montana Vista, Tex.--No one objected when developers bought up
dusty vacant land here in the 1950s and 1960s and turned it into
unincorporated subdivisions--areas outside city limits where no one had
authority to enforce building standards.
Neither the state nor the county stepped in when the developers
turned around and sold that land--making empty promises to later add
running water and sewer systems--to low-income immigrants who wanted,
more than anything, to own a home of their own. And no one batted an
eyelash when low-income landowners in these unincorporated border
subdivisions, called colonias, started building homes from scratch
without building plans or codes, or when they started adding additions
to those homes as their families grew, molding structures together with
nails and extension cords and duct tape.
That's because, in Texas, all of these actions were perfectly
legal. Texas prides itself on its low taxes and lack of regulation, but
it's possible that decades of turning a blind eye to unregulated
building is starting to catch up with the state. Today, around 500,000
people live in 2,294 colonias, and many still lack access to basic
services, such as running water or sewer systems. Lots of residents
live in dilapidated homes with shoddy plumbing and electrical wiring
that they've cobbled together themselves to save money on contractors.
And now, they want the state to pay to extend basic services in their
homes. Water, for instance, should be a human right in America, they
say.
``You have families that live in third world conditions in the
state of Texas with a modern city just miles away,'' said Veronica
Escobar, the County Judge of El Paso, who functions as a county chief
executive. ``But the state of Texas has essentially put counties in
charge of health, safety and welfare, at the same time they give us
very limited authority.''
Alejandra Fierra lives with her husband in the Hueco Tanks colonia,
where they bought land in 1987. They still don't have access to running
water or a sewer system. When her children were growing up, she would
pour water from a well into a tub and wash them, one, two, three, in
the same water. She does the same for her dishes. She gets a delivery
of a 2,500 gallon water tank for bathing and washing, and buys bottled
water from Walmart for drinking and cooking.
In Montana Vista, a colonia some 22 miles east of El Paso, the
septic tanks of the 2,400 families who live there frequently overflow,
creating rivers of sewage in their backyards. In the summer, the smell
can be horrific. Tina Silva, a resident and activist, lives here in a
spacious one-story adobe house surrounded by a stone wall. She raises
chickens and a giant pig in her backyard, where a rusted out car sits,
half painted, in the sun. She loves her home and her neighborhood, but
she doesn't understand why it has taken so long to put in a sewer
system. ``We're human beings. We pay taxes. Somebody needs to listen to
us,'' she says. Various politicians have promised her they'd help get
the money to install services, but it's never actually happened, Silva
told me.
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Tina Silva feeds the chickens in her backyard at Montana
Vista (Alana Semuels/The Atlantic).

Part of the problem is that no one wants to take responsibility for
paying to install these services. The developers who sold the land
promising water and sewers are long gone. And for many the thinking--at
least according to Escobar--is that if the homeowners wanted to buy
land without access to running water, that's their problem.
It may seem obvious that the homeowners who bought cheap land
without access to water and sewers should be responsible for installing
access to services. But that isn't realistic either. More than 40
percent of colonia residents live below the poverty line, according to
a 2015 report (https://www.dallasfed.org/assets/documents/cd/pubs/
lascolonias.pdf) from the Federal Reserve Bank of Dallas. The median
household income in colonias is less than $30,000 per year. And the
conditions in the colonias are troubling. There are water and mosquito-
borne illnesses, high rates of asthma, lice, and rashes. One doctor
told the Texas Tribune (https://www.texastribune.org/2011/07/10/
conditions-health-risks-sicken-colonias-residents/) that rates of
tuberculosis in the colonias are two times the state average and that
there is a lingering presence of leprosy.
In 2012, the Texas Department of State Health Services issued a
nuisance determination in Montana Vista documenting the health problems
the septic tanks were causing, which meant the El Paso Water Utility
could receive a grant for more than half of the project costs. In
December, the Texas Water Development Board agreed to provide a $2.8
million grant to El Paso Water Utilities so that the utility could
start designing the sewer system. But it will cost an estimated $33
million to build the system, and that money has not yet been secured.
``It's getting there, unfortunately, it's taking a lot of time,''
said Munzer Alsarraj, the infrastructure program manager for El Paso
County.
The state is stepping in to upgrade some of the colonias, too.
Between 2006 and 2014, 286 more colonias, were linked to drinking
water, drainage, wastewater disposal, paved roads, and legal plats,
according to the Federal Reserve report. In 2006, 443 colonias had
access to no basic infrastructure, by 2014, that number had dropped to
337.
But it's slow going.
It's not easy to install infrastructure in areas that are far from
the main water and sewer lines and in places that have grown with no
central plan. It was not until 1989 that the Texas Legislature even
asked state agencies to come up with rules (https://
www.texasattorneygeneral.gov/cpd/historical-laws-colonias) that would
ensure new residential developments had access to water and sewer
services. Now, cities can regulate development in Texas, but in
unincorporated areas, counties have little regulatory power. Zoning
regulations that would limit the size of buildings or of lots in cities
don't exist for the colonias.
In some instances, the county can't install infrastructure to homes
because they're not up to code. Because people building on
unincorporated land don't have to follow many rules, there are odd
constructions in the colonias, including units that combine two RVs,
homes with rooms tacked onto the side standing on cinder blocks, homes
with extension cords that run outside, wooden planks as sidewalks. This
makeshift construction can lead to roof collapses and electrical fires,
said Irene Valenzuela, the interim director of community services for
El Paso County.
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

A home in a Texas colonia consists of a trailer and a house
(Eric Gay/AP).

The county is giving grants out to people interested in bringing
their homes up to code, but people are often hesitant, she said. ``I
think the majority of them are afraid,'' she said. ``They say, `This is
a takeover. What are you going to ask for next? If you assist me, are
you going to take my property away when I pass away?' '' Alsarraj, with
the county, added.
Then there's the cost. The county is trying to install sewer lines
in the Square Dance colonia. That colonia is located just a few blocks
from established subdivisions that are part of the county's water and
sewer system. But the price of adding those services to the colonia's
264 homes is $8.5 million. Installing water and sewers in another
colonia, called Hillcrest, would cost about $120,000 per home, Alsarraj
said. But the homes are worth just $20,000 to $30,000 each.
It's ironic, too, that the county is trying to extend water and
sewers to far-off subdivisions as it also tries to execute a vision
(https://www.theatlantic.com/business/archive/2016/01/el-paso-urban-
walkable-americans/431661/) that cuts down on sprawl. ``For 30, 40
years, we've continued to sprawl out to the edges of the [E]arth and it
was costing us more than we were making as a community,'' Beto
O'Rourke, a U.S. Congressman who led the charge to cut down on new
subdivisions, told me.
But El Paso has had little success regulating far flung
subdivisions, even when they are incorporated.
Perhaps most worrying to Escobar and others is that new colonias
(http://www.bloomberg.com/news/articles/2015-10-15/texas-towns-push-
back-on-instant-slums) are still being built across the state. This
time around, they have basic water and sewer hookups, but don't have
paved roads or streetlights, according to the Federal Reserve. Plots
cost as little as $25,000, and developers offer 20 year financing at a
12 percent interest rate and just $500 down, according to Bloomberg
News (http://www.bloomberg.com/news/articles/2015-10-15/texas-towns-
push-back-on-instant-slums).
It's proof to Escobar that developers will always be willing to
sell substandard plots of land to people desperate to own a home. But
she had hoped Texas would step in and regulate.
Two sessions ago, the county tried to get permission for zoning
authority over 60\2\ miles near a border crossing south of El Paso. But
the state legislature refused to grant it, in part because real-estate
agents objected to the bill, said Escobar, the judge. Legislators also
didn't believe that government should trump property rights, she said.
But perhaps that's because they don't have to deal directly with the
after-effects.
``We are having to fix the problems caused by unregulated
government,'' Escobar said. ``There are innumerable examples and costs
associated with fixing problems that could have been prevented. There's
just a fundamental belief in Texas--if you own property, you can do
what you want with it.''
[4]
Like Flint, water in California's Central Valley unsafe, causing health
problems
Fox News Latino (http://latino.foxnews.com/index.html)
By Rebekah Sager (http://latino.foxnews.com/archive/rebekah-sager)
Published March 8, 2016
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

(Photo by Justin Sullivan/Getty Images) (2015 Getty Images).

While the water crisis in Flint, Michigan (http://
latino.foxnews.com/latino/news/2016/01/22/flint-immigrants-last-to-
know-about-contaminants-in-water/), made headlines around the country
when the city's leaders exposed residents to a tainted water supply for
almost 2 years, families living in the Central Valley of California
have been struggling without clean drinking water for decades.
The population of the Central Valley, a basin surrounded by
mountains that once offered hope to migrants like the fictional Joads
in the ``The Grapes of Wrath,'' today is about 80 percent Latino, and
92 percent of the migrant farm workers in the Valley are Latino.
There are vast dairy farms reeking of manure, highways lined with
fast-food restaurants, liquor stores, prisons and numerous dialysis
centers.
Much of fruits and vegetables consumed in the U.S. are grown here,
and the soil has been decimated by agricultural activity--overuse of
fertilizers and pesticides, manure from livestock. One result is a
toxic soup of nitrates in the area's drinking water.
Residents in towns along the San Joaquin Valley rely predominantly
on pumps and ground water--which is not effectively regulated for
contamination.
When pumped up into people's homes, the nitrates are so dangerous
that people are known to get rashes when they shower. The presence of
nitrates in the water supply also has been linked to ``blue baby
syndrome,'' which is caused by the decreased ability of blood to carry
oxygen--one of the most common causes is nitrate in drinking water.
People turn to buying 5 gallon jugs to shower with and using 300
gallon tanks of non-potable water for basic needs.
``Generations of people who live here know not to drink the
water,'' Susana De Anda, a clean-water advocate and the co-executive
director and co-founder of the Community Water Center NGO, told Fox
News Latino.
``People pay more for this `toxic water'--sometimes as much as $100
a month for water just to shower with. On top of that they're paying
for drinking water,'' De Anda said.
According to the Environmental Justice Coalition for Clean Water,
rural Central Valley communities pay the highest drinking water rates
in the state, with some families shelling out as much as two to six
percent of their income for water that they can't drink.
According to a Pacific Institute report (http://www.pacinst.org/wp-
content/uploads/sites/21/2013/02/nitrate_contamination3.pdf), nitrate
exposure's health impacts in the Central Valley fall disproportionately
on poor Latino communities.
Due to the state's severe drought, new wells have to be dug more
deeply, demand is high and the cost is between $1 million and $2
million.
``The drought actually causes the pollutants in the soil to be more
concentrated and levels of contaminants such as nitrates to rise. Also,
when deeper wells are dug, and that would be by maybe wealthier
farmers, they actually end up syphoning water away from poor
communities,'' Genoveva Islas--program director at Cultiva la Salud
(``Cultivate Health''), a nonprofit health advocacy organization in the
Central Valley--told Fox News Latino. ``And it creates a real
inequity.''
Most people in the area live a large distance from the closest big
grocery store. Liquor and convenience stores become the default place
to buy food and produce, and, all too often, sugary drinks are less
expensive than drinking water.
``We're in a food desert. People would buy water in bulk, but big
stores are often very far outside of communities, and so families make
a tough trade-off. Soda might be more affordable,'' De Anda said.
In addition to other factors, the consumption of soda vs. water is
one of the leading reasons for the severe health problems in the
Valley. The region has big problems with obesity and the highest rate
of Type 2 diabetes in the state.
An analysis of state's death records by the Fresno Bee (http://
www.fresnobee.com/news/local/article19499391.html) and the Center for
California Health Care Journalism at the University of Southern
California paints a vivid picture of the disproportionate toll diabetes
has taken in the Valley.
At least 19 people die from diabetes-related complications in the
eight San Joaquin Valley counties every day, the highest rate in the
state.
``I've lived here all my life, and not until I was an adult was
really aware of dialysis clinics. Now, I have an aunt and a close
family friend who are both on dialysis. I'm seeing a number of these
[places] pop up. More than ever before,'' Islas says.
The Central Valley may be the fruit and veggie center of the
country, but for poor people healthy food is still significantly more
costly than food sold in bulk, such as beans, rice, tortillas, white
bread, ground beef and large bottles of soda. Many of the stores in the
Valley offer free soda with groceries, and a small bottle of water runs
about $1.69 versus a large soda at 99.
In the last 3 years, the state has paid to retrofit water filters
on drinking fountains in some pockets of schools and daycare centers,
and provided filtered bottle stations, where people can fill-up
containers. But Islas says it's not universal.
``There's still a lot of marketing of sugary drinks to kids, which
in addition to diabetes and obesity, dental health problems. In Flint,
the Governor has set aside money for the kids impacted by the lead, but
in the Central Valley, we have the same issues of long term health
problems for impoverished kids. We use education as a pathway out, but
if you're thirsty or you have health concerns, it's pretty hard to
learn,'' Islas says.
The drought in California may be shining a light on the region and
its water supply, but the issues in the Valley have been left largely
unaddressed.
``All these are interim solutions, but we also need to create water
awareness. The water may look clean, but that doesn't make it safe. It
shouldn't matter who you are or where you live, clean drinking water is
a basic human right,'' De Anda says.

Rebekah Sager is a writer and editor for FoxNews.com. She can
be reached at [email protected]. Follow her on Twitter
@rebekah_sager.
Attachment B

East Rio Hondo Water Supply Corporation USDA and DWSRF Debt
--------------------------------------------------------------------------------------------------------------------------------------------------------
Unpaid
Closed Loans With Original Original Principal Interest Monthly Maturity Grant Amount Notes:
USDA Original Date Date Principal Amount Balance Rate Payment
--------------------------------------------------------------------------------------------------------------------------------------------------------
USDA RD 91-14 2/8/1978 $163,000.00 $-- 5.00% $801.00 2/8/2018 AWSC Merger paid
in full
USDA RD 91-01, 91- 9/17/1979 $1,100,800.00 $-- 5.00% $5,405.00 3/12/2020 $2,866,000.00 Original system
02 note
USDA RD 91-03 5/7/1981 $556,500.00 $-- 5.00% $2,683.00 5/7/2021 $1,669,500.00 Original plant &
distribution
USDA RD 91-06 3/14/1996 $909,500.00 $590,038.59 5.00% $4,393.00 3/14/2036 $580,500.00 Plant expansion
USDA RD 91-11 9/26/2003 $677,000.00 $568,195.04 4.25% $2,969.00 1/26/2043 $-- MASWT plant
USDA RD 91-12 9/26/2003 $7,890,200.00 $6,561,632.81 4.25% $34,560.00 9/23/2043 $1,946,200.00 MASWT plant
USDA RD 91-15 5/2/2001 $593,800.00 $478,165.06 4.50% $2,696.00 5/2/2041 $-- Arroyo WSC
USDA RD $-- $-- 0.00% $-- N/A $2,392,000.00 Wastewater, PH I
USDA RD 91-18 11/9/2010 $650,000.00 $593,417.73 3.759% $2,620.00 11/9/2050 $104,000.00 Nelson Rd. ground
storage tank
USDA RD 91-17 10/22/2014 $3,065,200.00 $2,994,878.07 4.00% $12,813.00 10/22/2054 $-- FM510 Transmission
line
USDA RD 91-22 $677,000.00 $677,000.00 2.125% $2,133.00 4/10/2058 $379,400.00 UV Disinfection
project
USDA RD 91-26 $243,600.00 $243,600.00 1.750% $719.00 4/10/2058 $-- UV Disinfection
project
----------------------------------- ------------------
$16,526,600.00 $12,706,927.30 $9,937,600.00
--------------------------------------------------------------------------------------------------------------------------------------------------------
Loans Pending Closing With USDA
--------------------------------------------------------------------------------------------------------------------------------------------------------
USDA RD $1,109,000.00 2.75% $3,812.00 $2,872,838.00 Colonia WW Phase
II
USDA RD $889,000.00 2.50% $2,932.00 $484,700.00 Bean Road
Transmission
Pipeline
--------------------------------------------------------------------------------------------------------------------------------------------------------
Loan Applications
--------------------------------------------------------------------------------------------------------------------------------------------------------
USDA RD $4,454,238.00 Loan & Grant Determination Pending Unknown 1.0 MG Elevated
Water Tower
--------------------------------------------------------------------------------------------------------------------------------------------------------
USEPA--Drinking Water State Revolving Fund
--------------------------------------------------------------------------------------------------------------------------------------------------------
Texas Water L10 00198 8/14/2014 $1,379,000.00 $1,264,300.00 * $8,364.83 9/1/2034 $591,000.00 HWWS Pump Station
Development Board
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Not Fixed.

Attachment C

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

The Chairman. Well, thank you very much.
The chair will remind Members that they will be recognized
for questioning in order of seniority for Members who were here
at the start of the hearing. After that, Members will be
recognized in the order of arrival. And, again, I appreciate
Members' understanding, the strict adherence to the 5 minute
clock.
I now recognize myself for 5 minutes.
Well, thank you very much for your testimony. It is clear
the challenges facing the entire spectrum of infrastructure
with respect to rural America. And the witnesses have laid that
out really, really well this morning. I appreciate that.
Ms. Otwell, one of the fundamental concepts behind Federal
communications policy was this universal service. In other
words, everyone should have a landline.
Can you talk to us about why that was important in the past
and why, looking forward, that we need to morph that concept
across the entire spectrum of communications?
Ms. Otwell. Absolutely. Thank you, Mr. Chairman.
The concept of universal service is that no matter where an
American lives, if they are lucky enough to be in a rural area
or if they live in an urban area, that they should have access
to equal services at reasonably comparable rates.
It started with voice services, and it was a huge success
for rural America. We got everyone connected. Now we are
connecting everyone with broadband, which is the connection of
the present and of the future, and it is even easier to see the
benefits of a broadband connection with the educational
opportunities, telehealth, telework, some smart farming
initiatives. Broadband makes everything more efficient. The
concept of universal service is something that every single
representative at this table can agree upon, the fact that
whether you are connecting people with water, electricity,
actual highways, or the information superhighway, that the
continued connection to that, regardless of where you live, is
what continues to make America the land of opportunity.
The Chairman. I wish the rest of us were as cooperative as
the Cities of Comanche and De Leon were. With respect to your
hospital, it is about equidistance between the two communities,
and it is a great example of a good partnership.
Mr. Calhoun, I live in a relatively dry part of Texas. We
call the Pecos River a river, but it would only be called that
in Texas.
Help us understand how do we go about communicating to
those who don't really have an appreciation or direct contact
with locks and the waterways of our country to make sure they
understand it is important? How can we do a better job of
communicating that?
Mr. Calhoun. Well, thank you, Mr. Chairman. It is a tough
thing to do, because the further that you are away from a
navigable river, the less important it would seem to you. But I
would contend that there are many different things, from
airplane jet fuel to agricultural products to coal to steel to
cement, everything that builds and rebuilds America and will
make it great again.
A lot of them move on the waterways. And we just need to
continue to tell our story. And the real key is getting people
within this body, within Congress, to understand the value of
it and getting your colleagues that don't understand the value
of the rivers and the navigable waters of the nation to
understand them better. I think that is one of the things we
can continue to do, as well as educate the general public. But
education, as we all know, is a difficult task.
The Chairman. Sure. I appreciate that.
Dr. Halverson, I was pleased to see that CoBank was able to
step up and meet the needs of Texans when they were facing
drought conditions, by providing emergency capital and gap
funding to communities in need. For reference, how quickly can
communities access private capital for such projects? By
comparison, how long would an USDA project take and does a
partnership help expedite the project?
Dr. Halverson. Well, thank you, Mr. Chairman.
We, as a privately owned cooperative, have tried to be as
extremely responsive in terms of time, terms and conditions to
our customers as we can, whether the situation that they face
is a wildfire or a flash flood, or what have you. We work with
lots of partners to that end, be they partners in the Farm
Credit System, the Department of Agriculture, state and local
authorities, or whichever combination is most appropriate.
We value, particularly, our relationship with USDA, and we
look for ways to expedite those situations to the maximum
degree possible when they arise.
The Chairman. I appreciate that. Again, thank you,
witnesses, for your being here today and being really clear
about the needs of rural America.
Mr. Peterson, 5 minutes.
Mr. Peterson. Thank you, Mr. Chairman.
Ms. Otwell, I had the Minnesota telecom people into my
office yesterday, and they were telling me that, for $200
million a year, we could get broadband everywhere. And in your
testimony, it says $110 million. What is the number? Do you
know?
Ms. Otwell. Absolutely. I can speak to that.
The rural community-based carriers that NTCA represents, we
currently have two paths for how we are going to go about
regulations, these updated regulations. Both are significantly
under-funded, though the first is a model-based path. And that
one ties a certain number of locations to a certain amount of
money. That one is under-funded currently by $110 million. And
we know because it is tied to numbers and locations, how many
consumers that affects. So that is going to affect 70,000 rural
Americans that are going to get less broadband than they would
under full funding. And 50,000 additional rural Americans
probably will receive no broadband because of the underfunding.
On the other side, the non-model side, is actually worse.
They are under-funded for the next 12 months by $173 million.
And that represents money that has already been invested, but
the support mechanism is under-funded so much that they did not
receive that recovery of $173 million. What that means is they
plan their infrastructure projects for 2018, 2019 and forward.
They have to make up that difference. That difference has to
come from somewhere. So that means lesser deployment to the
tune of that amount. That is where you get those different
amounts.
Mr. Peterson. This is money that is used to actually put
the system in place.
This is not necessarily the money to keep it running once
it gets there.
Ms. Otwell. That is actually the money to keep it running.
In rural America, because we have so few customers per square
mile, we need that ongoing support to make the business case to
be there in the first place.
Mr. Peterson. One of the reasons, from what I know, the
Universal Service Fund worked for telephones is that we had a
tax on the bill, and so you could collect it from everybody.
But we don't have a tax on the Internet. There is no way to
collect anything from broadband service. What we are doing is
we are collecting money on the telephone, and we are using some
of that for broadband. And that is why, when I hooked up my
hunting cabin, I had to put a landline in even though I didn't
want one, because that is what I had to do in order to get
Internet, I guess.
Ms. Otwell. You are absolutely correct.
Part of the changes to our regulations now, we no longer
would necessarily need to require that landline. However,
because it is so under-funded, the average company, in order to
provide standalone broadband would cost $226 in our area to
provide standalone broadband, and that is not a reasonable cost
compared to urban America.
But you are exactly right. That is part of the problem.
Mr. Peterson. Well, I have some co-ops that have really
done a great job. They have taken money from RUS and other
places, and they have gotten 1 gigabyte service to every
community in their service territory. We have other places that
don't have anybody out there serving them because the big
companies abandoned those folks, and there is no co-op in that
area, and so forth. And so they have nothing.
I have been trying to figure out how we can work this out.
And it is very frustrating. We had one situation where the city
in this county had service, and the state had a grant program
that would have worked to extend it to the rest of the county.
But the two big companies that I won't mention that were in
that city vetoed it. They not only abandoned these areas, they
are actually standing in the way of us getting service out
there. And I had the electric co-op come in and try to talk
them into going into the business. Well, they looked at the
situation. And because there is no ongoing funding to make up
the shortfall, they decided they couldn't do it.
Somehow or another, we have to figure out how to get a
funding stream, as I said in my statement, that is there on an
ongoing basis so people can go out and extend this stuff out
there and make it happen, like we did with telephones back in
the 1930s. And whatever we can do to get that done, sign me up.
Thank you very much. I yield back.
The Chairman. The gentleman yields back.
Mr. Austin Scott, 5 minutes.
Mr. Austin Scott of Georgia. Thank you, Mr. Chairman. I was
just wondering if maybe the telecom companies can tell us where
that hunting camp was. I am kidding. I am just picking on you,
Mr. Peterson.
Ms. Otwell, I read your testimony. And the one issue, I
take with it is that you say we are paying more for the same
level of service. I would suggest we are paying levels and
paying more not getting the same level of service in rural
America. I live in a little town of Chula, Georgia, in between
Tifton and Ashburn. And while, certainly, Ashburn has had its
challenges with Internet services, Tifton being a little
larger, has done better. But you get into those small towns
that even are pretty close to larger areas, our service is
subpar at best.
And it was interesting that my neighbor decided to try a
different route because they weren't satisfied with what they
currently had. And so when they tried that different route, the
different route didn't work. Then they had to go back into a
waiting list to even get back on the Internet service that they
had before, which, again, was a little slow.
I appreciate you mentioning ComSouth in Hawkinsville in my
district. They are a great company. I want to mention one of
the things that has become a concern to us in Georgia with a
different carrier up in the northern part of the state is that
they take money to expand the networks, but it is the CAF
funds, I believe--is that correct--where they are actually
supposed to--well, maybe those funds are being taken and not
being used for the proper purposes, and maybe being diverted to
other projects.
What type of accountability measures would you suggest so
that we make sure that the money that we as Congress put into
expanding access actually gets used for access, instead of
supplanting funds that the companies would have put into those
areas?
Ms. Otwell. That is a great question, Congressman. I
appreciate that.
Whenever we talk about the small company, the rural
community-based carrier, Universal Service Fund, some of our
forms have recently been updated for more accountability. For
example, all companies, no matter which model or which
regulation path you took, every year we have to report geocoded
locations to all the locations we build broadband to. And if
you are in that model-base path, we actually even have to
report locations we previously have built to. At the end of
that 10 year period, the FCC will have a geocoded map of every
single place that we have broadband service. We also are not
receiving support in certain Census blocks. Census blocks that
are deemed either too low cost for the high-cost area or have a
competitor already serving without support, those blocks are
not eligible for support. Our system really has been built to
only put the money where it is desperately needed and to
enforce build-out requirements in those areas.
Mr. Austin Scott of Georgia. You mentioned one thing that
we need to revisit, and that is competitors. It seems to me
that one of the problems is that once someone receives a grant
for an area, if they are not doing a good job in that area,
nobody else is eligible for a grant in that area when maybe
they would do a better job for the people.
Ms. Otwell. That is not untrue. And what you are mostly
talking about there are areas that we call the----
Mr. Austin Scott of Georgia. It is or is not true? It is
true or it is not true?
Ms. Otwell. That others may not be eligible?
Mr. Austin Scott of Georgia. That is right.
Ms. Otwell. You are correct about that. Those are what are
in the price cap areas. So that is your larger providers
usually. There are lots of rural areas that they cover that
there is not as much accountability for.
Mr. Austin Scott of Georgia. In an area where, say,
Windstream had taken a grant to expand access, but maybe did
not do what we expected them to do with the grant, because of
the way the current law is written, you can't turn around and
support somebody else that may come in and do what the funds
were intended for.
Ms. Otwell. For example, a company like mine, we cannot
come in and receive funding for that area. Most of these areas
are your higher-cost areas with fewer consumers. And so without
that ongoing support, there is really not a business case for
one network much less two. We do try to not be inefficient in
our building and using funds in the same area.
Mr. Austin Scott of Georgia. Sure.
Ms. Otwell. But that is an issue.
Mr. Austin Scott of Georgia. But my concern is where we
have allocated Federal money to expand it. It is not being used
by the company as we intended for it to. But then we can't help
somebody who actually would compete with them.
Ms. Otwell. Now, there is an option. In some of the latest
reforms, some of those companies can turn in some of their
areas that they are not serving, and there is----
Mr. Austin Scott of Georgia. They are not going to do that.
They are not going to voluntarily turn in those areas.
Mr. Chairman, my time has expired, but I hope that we will
continue to look at that area, because a lot of money is being
taken and then not used for the purpose that it was intended
for.
The Chairman. The gentleman's time has expired.
Mr. David Scott.
Mr. David Scott of Georgia. Thank you, Mr. Chairman.
As we approach this issue of rebuilding the crumbling
infrastructure, there is another pressing need that we need to
attach to that. I believe strongly that divine intervention and
divine providence has played an extraordinary role in the
movement forward of our nation. And nowhere is that more
prevalent than in our having the right people at the right time
in the right places, and we have had many great Presidents, two
of which are FDR, Franklin Delano Roosevelt, who gave us the
New Deal, and Dwight David Eisenhower, who gave us the building
of the highway interstate system. Both men at the right time.
But it wasn't just that. It was the fact that they utilized
these Public Works programs to address lifting up the
employment, and the opportunities, and training that strengthen
and broaden a new era, each time. And as we move to rebuild
this crumbling infrastructure, we have another problem, and
that is the crumbling family infrastructure.
We have an extraordinarily high unemployment rate which is
accompanied by the opiate crisis. And where is that happening?
No greater place than where we are going to rebuild the
crumbling infrastructure, in our inner cities, and in the rural
areas, where, among our American young men, the employment rate
in some of our rural and urban centers is a staggering 41
percent.
And so I would like for us to take a look at a bill that we
have introduced in a bipartisan way. Kevin Cramer and I, my
Republican friend and I, have come up with a bill that would
use this Public Works, Private Works Partnership as we move to
rebuild the crumbling infrastructure, much as Dwight David
Eisenhower used the Highway Bill, much as Franklin Delano
Roosevelt, without which we never would have survived.
We have a severe opiate crisis throughout our community.
But nowhere is it more piercing than in the rural areas.
Families breaking down, joblessness, hopelessness. We put House
Resolution 52 together that would direct our Secretary of Labor
to connect on-the-job apprenticeship training programs that
would help in these areas.
Our American families right now are in a crisis,
particularly as it appeals to our young men between the ages of
18 and 39.
And so we hope that we can address that as we move forward.
And our bill is H.R. 52, and my colleague, Kevin Cramer, and I,
the gentleman from North Dakota, would appreciate it if you
did.
Let me ask you, Dr. Halverson, in your testimony, you
described the Community Facilities Program as a successful
model for public-private partnerships. Could you tell us, is
there anything that we in Congress can do to help you improve
this program?
Dr. Halverson. Well, this is a program that we think has
proved highly successful over time on its face. It also is
successful, not just for the individual investments that have
been made, but also because it mobilizes and catalyzes
additional capital to communities that need it. So not just
capital from CoBank and/or the Farm Credit System, but from
community banks, local banks, and state and local authorities,
and our request to the Committee to help us do this is to speak
with our regulator.
We have an approval process now that I would describe as
administratively burdensome, one at a time approvals. We would
like to see that become an institutionalized programmatic
approval process so that the business can be executed in a more
sustainable and viable manner, because we think there are ample
opportunities for us to do this in rural America, and we would
like to do it in a more skilled way than we currently can.
Mr. David Scott of Georgia. Thank you, Mr. Chairman.
The Chairman. Thank you. The gentleman yields back.
Mr. Rick Crawford.
Mr. Crawford. Thank you, Mr. Chairman.
Dr. Halverson, the President has indicated that private
dollars can be leveraged with public funds to repair crumbling
infrastructure. In your view, are the private financiers of
CoBank prepared to meet that demand?
Dr. Halverson. We absolutely are. As I said in my verbal
testimony and written testimony, CoBank and the Farm Credit
System cannot meet every demand for every project in every
place in America. We have decades of experience, however, of
leveraging private-sector capital, working closely with
commercial banks, in particular, and USDA and others to do
precisely that. What is happening and changing, particularly
around communications infrastructure is technology is changing,
the demand for capital that deal with these issues is growing.
We have a great track record, we believe, of doing the
right thing to meet the needs, and we would like to continue to
do more of it and make a substantial contribution, along with
all of the other sources of capital that include commercial
banks, other private sources, as well as state and local
governments where appropriate, and the Department of
Agriculture.
Mr. Crawford. CoBank has a history of these kinds of
partnerships, financing through partnerships with local banks,
as you mentioned, and through utilities, the Rural Utilities
Service. Why do you think others have been sort of shying away
from that type of partnership?
Dr. Halverson. Well, I want to give credit where it is due,
right? There are thousands of community banks across the
country who do a lot to provide for the needs of their local
communities, and regional banks as well. But as you heard in
Ms. Otwell's testimony and other members of the panel here this
morning, it is nothing new in the economies of scale problem.
There aren't that many people in rural America, so the revenue
stream that is possible upon which to make investments and
build businesses is much more challenging where population
densities are as low as they are in rural America.
And in its wisdom, the Congress established the Farm Credit
System 101 years ago, and our mission is to meet that
fundamental issue, and do as much as we possibly can to meet
the needs of agriculture, and in the last several decades,
infrastructure investment. And we intend to continue to do
that, and broaden and deepen our partnerships with other
capital providers to meet these very substantial needs that you
are hearing about this morning.
Mr. Crawford. Ms. Otwell, in your testimony, you talked
about the important distinction between raising capital for
construction and assistance in funding the ongoing costs of
servicing the system. It is kind of like buying the horse and
feeding the horse.
Ms. Otwell. Exactly.
Mr. Crawford. The initial investment is one thing, but the
upkeep is another. Can you talk about that? Why is it not
enough to just simply provide cheaper financing to rural
systems?
Ms. Otwell. Absolutely. Thank you for the question. It
does. It takes both. The initial loan from either public
sources or private sources is what helps us put the
infrastructure in the ground. But as I talked about in my
testimony, with only 3.4 customers per square mile, that is
simply not enough customers to provide for the ongoing costs of
operating that network, making the loan repayments, et cetera.
We really do need that predictable, sustainable support to make
the business case for the loans in the first place and the
investment in the first place.
Mr. Crawford. I am going to stick with you on this one too.
If you would kind of explain some of the effects of the
shortfalls of the USF, how that is affecting you and other
companies like you in rural communities that you serve.
Ms. Otwell. Sure. Just like when I was talking to Mr.
Peterson, we have some actual numbers for the shortfalls. For
the model side, it is 70,000 rural Americans will get lesser
service, 50,000 may get none. For my company alone, it is 551
customers over the next 10 years. And if you are one of those
customers, you are likely in some of the highest cost areas
that we serve, which means you likely don't have another
option. So that is definitely a detriment to rural companies.
Companies are having to slow down their investments. When
we are making long-term investments like this, any sort of
unpredictability definitely is hard to make those long-term
investments on. Workforces are reducing in some cases, and so
it is really bad for rural consumers.
Mr. Crawford. Thank you.
Mr. Chairman, I yield back.
The Chairman. The gentleman yields back.
Ms. Adams for 5 minutes.
Ms. Adams. Thank you, Mr. Chairman, Ranking Member
Peterson.
And thank you to all of the witnesses who have testified
today. And particularly to you, Mr. Wynn. Thank you for coming
in from North Carolina.
Ensuring that we have sound and flourishing rural
infrastructure is essential to addressing disparities in
economic opportunity. The state of our rural infrastructure
affects food security, education quality, access to necessities
like broadband, clean water, and many other important issues
that North Carolina and states across America face. Hopefully,
the Committee won't lose sight of what constitutes rural in
terms of my district and many others across the country.
Also looking forward, we must ensure that any potential
infrastructure package addresses the concerns of our rural
areas, land-grant universities, particularly 1890s, and our
most vulnerable Americans.
Mr. Wynn, let me begin with you and ask, in your testimony,
you mentioned that in today's world of video conferencing and
online education, telemedicine connectivity is not a luxury, it
is a necessity. I agree with you. Broadband Internet helps
close educational divides. It provides access to quality
healthcare and crucial work support. But unfortunately, many
North Carolinians still don't have access to reliable Internet
service.
Could you talk a little bit about what types of tools that
you believe electric cooperatives should have access to in
order to help bridge this digital divide between the haves and
the have nots?
Mr. Wynn. Yes. Thank you, Ms. Adams. And as some of the
colleagues here at the table have been already saying, it is a
challenge, and it is a necessity to have those things as rural
citizens. And we hear it clearly from our members who know that
rural electric cooperatives have brought electricity to rural
areas where no one else would. And we are hearing that same
theme as we realize that broadband and telecommunications is
necessary.
Some of the tools that are necessary, of course, obviously,
funding is a major need. I think that we have an opportunity
that we are seeing at our cooperative as we try to address this
in the ability to leverage what we already have. And as I
mentioned in my testimony, we have started building
infrastructure for the purpose of providing better service for
being more cost effective from a utility standpoint.
But as we build this infrastructure and start looking at
the possibility of leveraging that infrastructure to bring
broadband, doing it in a way that is closely connected and tied
in with our current business structure is one that provides
somewhat of a promising opportunity for us, because a lot of
the investment is already being made on the utility side of the
business, and to leverage that investment to bring broadband is
in many ways making the numbers look a lot better.
I think that the tools, some of them have already been
mentioned, as far as looking at the Universal Service Fund, as
far as looking at RUS financing, those tools are great, but
many of my colleagues across the country are still finding it
very hard to make the numbers work because of the sparseness of
our populations.
Ms. Adams. Thank you very much.
Dr. Coon, it is good to have you here representing APLU.
Last month, the Committee heard testimony from Dr. Walter Hill
from Tuskegee who, in his testimony, talked about the
devastating land-grants deferred maintenance. Tuskegee alone
has about $43 million. My alma mater, North Carolina A&T, has
as part of its course, $8 billion.
What infrastructure priorities would you recommend to
ensure that 1890s and all land-grant universities are prepared
to take on the important agriculture research of the 21st
century?
Dr. Coon. Well, one of the great opportunities here is for
the Committee, through policy, but then also in the
administration of that through the USDA, to identify those
priorities. For example, our sister institution, Langston, has
a very strong programming goat research and delivering that
information to goat producers not only in Oklahoma but far
beyond. I know the small farmer programs at North Carolina A&T
are very strong programs. We talked about that.
Dr. Hill was on the Committee that I was a part of, and we
talked about having sort of several tiers to a grants program
for infrastructure. So that you can set the priorities as they
are needed to support those kinds of programs, but also that
the level of funding is tiered as well. If there is a need for
$1 million to help with the facility, that that is not in some
way competing with another program that another university
requires $30 million for.
Ms. Adams. Okay. Great. Thank you very much. I am out of
time.
Mr. Chairman, I yield back.
The Chairman. The gentlelady's time has expired.
Mr. Davis for 5 minutes.
Mr. Davis. Mr. Chairman, I find it ironic that out of all
the microphones that don't work today, it happens to be mine.
Is there some type of conspiracy from any of our colleagues?
Completely on purpose, let the record show. But now what is
wonderful is I have two microphones, so I am in stereo and even
louder.
First off, thank you to the witnesses. I want to start my
questioning with Mr. Calhoun. I am about to go over to another
hearing for another committee that I serve on, the
Transportation and Infrastructure Committee, to talk about the
importance of our locks and dams in our inland waterway
navigation system. And I would like to get your opinion on a
few of the issues that you mentioned in your opening testimony
in regards to that inland waterway system.
As you know, Mr. Calhoun, there are a lot of my farmers
that rely upon their grain being able to be shipped via barge
on the Illinois and Mississippi Rivers in and around the areas
that I serve in central Illinois. But we saw the Obama
Administration zero out dollars for those projects in the line
item that we call NESP.
Can you give us a brief synopsis of why it is important for
our agricultural sector, not just in the Midwest, but
nationwide, to have access to that inland waterway system and
why it is crucial to invest more dollars into it?
Mr. Calhoun. Thanks, Congressman. The two words that I
always come back to are competition and capacity. And without
the waterways, the nation is going to lack capacity to get your
farm products to market. And when you don't have enough
capacity, do prices go up or down? They go up. And the price of
transportation goes up. The price of grain then goes down.
And likewise, when you want to have competition, you want
to have different modes. You need the access to the waterways,
and competition is a great thing when it comes to American
business. Those are the two words that I focus on.
The projects in your neck of the woods are very important.
They are very important. I had a previous life. I worked for
Cargill for 41 years. They are very important to all the
members of the National Grain and Feed Association. They are
important to all farmers, because the river prices every bushel
of grain that is produced in this country, not just the ones
that are grown around the river. When the prices along the
river decline, the prices all over the nation are going to
decline.
And so it is very, very critical, some of these locks and
dams are older than I am, and I am old. And they need to be
replaced and they need to be revitalized. Because if we have a
catastrophic failure, it will cost this country billions of
dollars if you shut down one of these segments for extended
periods of time. And I don't think this nation can afford to do
that.
I know you are on the T&I Committee, and I wish you great
luck over there. We are very excited about what the President's
come out, and he is paying attention to infrastructure. But the
trillion dollar question always is, who is going to pay for it
and how is it equitably to be done.
Mr. Davis. Right. Thank you very much for your response.
Dr. Coon, I thank you for being here. As somebody who
represents a land-grant institution in central Illinois, the
University of Illinois, I am always thankful that anyone from
Oklahoma State continues to support the U of I colors every
time you come in. I notice that Chairman Lucas does the same on
a regular basis. I am thankful for that.
But in all seriousness, I want to talk to you a little bit
about ag research. It has been dwindling. I mean, we haven't
grown it at the rate that other research dollars and other
agencies have grown. Now, as we move forward, I only have a
little bit of time left, so if you could on behalf of all the
land-grant institutions, and especially the one I represent,
can you kind of talk about some of the regulatory hurdles that
you face in accessing those ag research dollars right now and
what we can do to relieve them in the future?
Dr. Coon. Thanks for the question, Congressman. And first
of all, there is no blue. This is all black.
Mr. Davis. It is that orange.
Dr. Coon. Yes. Well, that is \1/2\ of the Illinois colors.
Congressman Lucas just showed up. I had to cover that.
Seriously, with respect to the regulatory hurdles, any kind
of public investment is going to come with some level of
accountability. And we understand and we appreciate that. We
want to be accountable.
But sometimes the accountability ends up consuming more of
our time, perhaps, than the actual doing of the research. And
if we can find a way to get to a point of simply saying, did we
do what we said we would do? Did we spend money responsibly to
accomplish it? And did what we accomplish make a difference, or
do we have a reasonable expectation that it will make a
difference? If we can get back to sort of those sorts of
principles, it might help.
Certainly, in animal handling and well-being, it is
important that we are good stewards of the animals that we work
with, pretty high levels of accountability there as well,
sometimes puts us in kind of a quandary of, well, are we going
to invest in that or are we going to, actually, going to get
some research done with the facility?
Mr. Davis. Thank you. My time has expired.
Thank you, Mr. Chairman.
The Chairman. The gentleman's time has expired.
Ms. Plaskett for 5 minutes.
Ms. Plaskett. Thank you, Mr. Chairman. And thank you all
for being here.
This is, of course, one of the primary subject matters that
we here in ag need to be discussing.
I was very grateful that yesterday, I had a meeting with
the Secretary of Agriculture and talked with him about the
President's infrastructure proposal and the need to really have
concretely in there issues relevant to the rural area.
Dr. Halverson, you mentioned in your testimony innovative
public-private partnerships and the role that they play in
helping to meet financial needs for infrastructure projects.
That is a particular area that is very important to me.
Before coming to Congress, when I had a real life, I was an
attorney doing public finance law. Public-private partnerships
are something that I think are very important and instrumental.
One of the concerns I have with regard to public-private
partnerships is how do we incentivize developers and others to
come to rural areas to engage in those projects? And how do we
incentivize developers to come into areas where there is not
going to be the amount of local public funding to support that?
For example, in the Virgin Islands, which I represent, we
face enormous financial issues. And so what are the ways that
you think that we can deploy funding into rural areas that have
those limited local resources? And have you seen that, and what
are examples of that that you can cite for us?
Dr. Halverson. Well, thank you, Representative Plaskett,
for the question. The facts and circumstances in the local area
are going to be very determinative in what is possible, right?
Whether you are in a place with one person per square mile or
50 persons per square mile and so forth is going to make a big
difference. The level of capital requirement and the type of
business that we are talking about.
That is a long way of saying, it depends on what the facts
and circumstances are and the location that you are looking at.
And there isn't a one-size-fits-all answer. You can look at
them on a continuum, and on one end of the continuum you need a
higher amount of public funding, Universal Service Funds, and
other forms to help drive down the costs. But you always look
for the ability to attract institutions, like CoBank and our
partners in the Farm Credit System, who are providers of
reasonably priced capital in loan form.
And there are, in fact, a great array of private companies
already that are in the infrastructure business, whether it is
communications or otherwise. And we bank a lot of those
companies, and they are always looking for new places to go to
continue to grow their businesses. We try to support them in
whatever way is appropriate. If you have a particular situation
you would like us to look at, we would be happy to do so.
Ms. Plaskett. Thanks. Thanks so much.
Ms. Otwell, a question for you. In the agriculture
appropriations bill, they recently reported out, the full
committee report, language directing USDA, the FCC, and the
Commerce Department to prepare a report that details each
agency's area of responsibility for addressing data speed. We
talk about building infrastructure, we talk about the role of
broadband in that infrastructure for rural areas. One of the
things that we find very troublesome is the data speed and the
lack thereof in rural areas, and this becoming a divide for our
farmers and for these communities in rural areas.
Do you believe that it is the Agriculture Department's area
of responsibility to address this? And if so, how? And how does
the Department of Agriculture and this Committee work to create
any broadband infrastructure investment plans in this area?
Ms. Otwell. Thank you, Congresswoman. That is a very good
question. We do have issues with speeds in rural areas.
Sometimes that is what we talk about when we are trying to
build future proof networks. And when we are putting fiber in
the ground, that is only limited by the electronics on either
end. And so when we try to build networks, that is part of what
we are trying to put in the best possible infrastructure to be
ready for the future. Some of what the FCC still deems as
broadband is really not fast enough to do all these
applications that we talk about.
One thing we do want to think about is with limited
resources from whatever possible way, we don't want to
necessarily reinvent the wheel. The FCC oversees that Universal
Service Fund that has been revamped. It is ready to go. It just
doesn't quite have enough funding in it right now.
We are always interested to hear other opportunities,
things like that. But we want to be careful not to reinvent
processes and not be efficient in that way. We also don't want
to overbuild networks where they do already exist and waste
money that way either.
Ms. Plaskett. Okay. Thank you very much.
I yield back. Thank you.
The Chairman. Yes, ma'am. The gentlelady's time has
expired.
Mr. Rick Allen, 5 minutes.
Mr. Allen. Thank you, Mr. Chairman.
And we are, I guess, going to talk about broadband here and
the critical application of that service. Obviously, we know
that agriculture, from a technology standpoint, has advanced
very rapidly. And I will say that I planted some peanuts, and
the first time I have ever done that, and I touched the wheel
of the tractor, and I planted them like 17" over from the year
before. And so it is pretty amazing what we are able to do in
agriculture today.
But the bottom line is, we have to do something about
connecting our rural America, our farmers, and all those in
agribusiness, not only through the various programs, but also
education and things of that nature. And we have to have good
service, because these folks are, obviously, very dependent on
it.
With that, as far as, if you could share your
organization's perspectives on the need to develop
infrastructure that supports broadband in both wired and
wireless formats and, in particular, where access to high-speed
mobile services are currently lacking. Who in the panel would
want to address, how can we get where we need to get here?
Ms. Otwell. I would love to speak to that. Thank you,
Congressman.
Mr. Allen. Yes.
Ms. Otwell. We do see a lot of working together with
wireless networks. In our area, in some of our most remote
areas, we do actually use a fixed wireless product to serve,
especially some of those farms in those extremely remote areas.
However, the thing to know about that is that even with a
wireless network, those customers don't know which one they are
on. They don't care. They are still generating huge amounts of
data.
You talked about some of the smart farming initiatives.
People are using video streaming for some of the educational
things, telehealth applications, that is generating huge
amounts of data. And any wireless network cannot handle that
amount of data except over a very short distance. You still
have to have that wired network in place to the tower to be
able to offload that data.
In our area, we also have some national cellular carriers
that have towers in our area, and we have built fiber to those
towers, because they face the same problem. It is still a huge
amount of data that has to meet the rest of the world
somewhere.
Mr. Allen. Is this like a density issue, in other words,
costs per user situation to pay for this amount of data that is
needed?
Ms. Otwell. It is. I mean, it doesn't matter if you are in
a rural area or not, we are still using massive amounts of
data. And certain networks just can't handle that yet.
Mr. Allen. Okay.
Yes, sir.
Mr. Wynn. Yes. Congressman, I think the same issues that
the farmers and other people that you mentioned are having, so
are utilities, electric co-op.
Mr. Allen. Okay.
Mr. Wynn. Because the way we operate as a business now has
changed tremendously over time. We have to have smarter devices
downstream on the lines, which really require broadband
infrastructure. Anything we do now has to almost be connected
some way and have some level of communication.
One solution that we are looking at is as we build our
infrastructure as the electric cooperative, the members who are
being served by us are also reaping the benefits of that. So
that leveraging is another possibility that we are toying
around with. The utility, the cooperative that is having to do
this is almost not an option as it once was in the past, so
there may be some opportunities.
Mr. Allen. All right. Well, we have private companies
implementing broadband service or co-ops in private companies
right now. We have had this tremendous lag from getting service
to the user as we get more dispersed into the less populous
areas of the country. And, of course, that is a financial
matter.
Of course, it sounds like it is also a data requirement
matter. In other words, our farmers and folks like that need
tremendous access to data, and I guess it is the same in the
electric co-ops as well, it is pretty complex?
Mr. Wynn. Absolutely. Data is becoming the thing that we
really have to have to operate. And it is really driven by the
demands of our members or consumers. What they expect today is
totally different from before, and data is definitely in the
mix of being necessary.
Mr. Allen. Right. Well, of course, in my district,
agriculture is the number one industry. And in my State of
Georgia, agriculture is the number one industry. I don't quite
understand why we can't serve that industry the way we need to
serve that industry with these technical services. And,
obviously, electric co-ops are a big part of my district as
well. Thank you for your testimony.
Mr. Chairman, I yield back.
The Chairman. The gentleman's time has expired.
Mr. Panetta for 5 minutes.
Mr. Panetta. Thank you, Mr. Chairman.
And thank you to all the witnesses who are here, your
preparation, your time, as well as your testimony. I appreciate
you coming in. And I apologize for having to step out, but I am
back, and now you get to hear from me a little bit.
I hail from the central coast of California, what many of
my members here know as the salad bowl of the world. We have a
number of specialty crops. Specialty crops take a lot of labor
to produce. Unfortunately, we have a lack of labor right now,
and that is an issue. And there is, obviously, two ways to deal
with that. One is here in Congress with proper immigration
reform, but two is mechanization in dealing with the lack of
labor.
One of the valleys I have is Salinas Valley. Right now, it
is obviously big in specialty crops. There are a number of
other valleys. But one of the other valleys that is paying
particular interest to the Salinas Valley is Silicon Valley,
because they are seeing that that is kind of a way to go in
regards to where their investment can go. And that is
happening. We are seeing a lot of ag tech innovation. And they
are very excited about it, let me tell you. They are very
excited about coming up with ways to help the farmers out to
fill that lack of labor.
But my question to you is, and what I am seeing and what I
am hearing, is that without proper broadband, the mechanization
will not be implemented, and it will inhibit innovation when it
comes to mechanization. And so I was wondering if any of the
witnesses could testify to that fact as to how it does inhibit
innovation, how it could prevent actual implementation of
mechanization in our agriculture.
Dr. Halverson. Well, I will take a stab at that,
Congressman Panetta. I have had the opportunity to be out in
your area, and we have some very important Farm Credit partners
who lend to farmers and ranchers in your district and all over
the State of California. But I hear that exact same thing all
over the country. Right? I go out and I visit farmer producers
all over the place. And modern technology, which generates
exponential growth in data, as my colleagues just indicated, is
a substantial contributor to the dramatic increases in
productivity in American agriculture over our lifetime.
And there is no end in sight to the upside to our ability
to continue to produce. We do have some significant
constraints, however, in our ability to realize the tremendous
value that our agricultural productivity can generate in the
long run. Right? One of them is the transportation
infrastructure, the other is communications.
If Congressman Allen were here, I would tell him the same
thing. If you get into your combine or your tractor, sometimes
you need a USB chip with a bunch of data in it and you need
wireless communications; otherwise, you can't actually operate
your technology. To your point, it becomes a real impediment.
Many of the pieces of high technology equipment these days
that people use, whether in specialty crops in particular, they
get downloads of new software overnight. Their difficulties get
diagnosed remotely from the foreign country where the thing was
produced or from somewhere else in the country, and they can't
take it to a shop, and there is not somebody for 500 miles to
come and fix it. It gets diagnosed remotely.
What we are seeing is a dramatic convergence between the
communications industry and the agricultural industry, because
they are so interdependent on each other. And our ability to
continue to generate the kind of agricultural productivity that
we have, whether in base row crops or specialty crops,
increasingly depends on our ability to deploy high-quality,
ubiquitous communications infrastructure.
Mr. Panetta. Exactly. Thank you.
Any other witnesses?
Dr. Coon. Yes. Congressman, just a few other things.
Information really is key to success in agriculture today. And
the faster the better. And so in cooperative extension, we find
ourselves with a tremendous opportunity to deliver information
and programs to producers very effectively using technology,
but it doesn't get to them if they don't have the bandwidth.
Right? So that is one of the challenges.
And, likewise, we have a meteorological network within
Oklahoma that we provide, along with the University of
Oklahoma. And, again, it is extremely valuable information for
producers in determining when it is best to spray or burn or
whatever, but they have to be able to get that data, so it is
really key.
One of our ag econ faculty members is conducting a study
currently. It is USDA funded. Dr. Brian Whitacre is looking at
if you make it available, how do people use information when it
becomes available in a rural setting? And so he is going out
and basically, creating hot spots in rural communities and then
studying the behavior of people as they use that to get
information. What are they using it for? Where are they going,
and so on.
Finally, rural health is also tied in with this. And our
dean for the Center of Health Sciences, Dr. Kayse Shrum, is
developing a network to provide telemedicine, in effect, in
rural communities. Again, we have to have that bandwidth.
Mr. Panetta. Thank you.
Thank you, Mr. Chairman.
The Chairman. The gentleman's time has expired.
Mr. Denham, 5 minutes.
Mr. Denham. Thank you, Mr. Chairman, and thank you for
holding a hearing on this important topic.
This is an area I focus a lot on, on Natural Resources and
Transportation and Infrastructure as well. I introduced the New
Water Act, because in our area, agriculture does not survive
without having, not only proper conveyance, but equally
important, if not more important, proper storage.
And I thought it was important to make sure that we had a
program where we could borrow money where users would pay that
up-front funding back, as a water user, I pay for my water, and
that would go to paying back the infrastructure.
Our challenge is, like WIFIA and TIFIA, we need another
type of funding for the Bureau of Reclamation districts, so the
New Water Act would deal with WIFIA.
Mr. Macmanus, I wonder if you could tell us a little bit
about some of the work that has been done with WIFIA and
whether or not you see other benefits to storage across the
country?
Mr. Macmanus. Congressman, thank you for your question. I
was beginning to feel a little neglected up here.
But our focus in the water industry is on potable water,
predominantly. We do not focus on the irrigation and delivery
and conveyance for crop production. But we deliver
predominantly to people's homes, businesses, and commercial
facilities, processing facilities but not irrigation water. We
are not familiar intimately with that program.
Mr. Denham. But you have utilized WIFIA in the past?
Mr. Macmanus. Sir, I am not familiar with that program.
Mr. Denham. Okay. Well, let me just ask it one step
further. On the Clean Water Act, we end up with a lot of
compliance issues. You had talked about this in your testimony.
What I have heard from some water users is that the
compliance issue oftentimes is a hindrance to putting new
projects in place, because they are concerned about whether or
not, as they have implemented new projects, they can actually
achieve the compliance and end up facing penalties that they
would not have faced previously.
Mr. Macmanus. Yes, sir. The example I gave in my testimony,
the UV disinfection system, we sampled our raw water the first
time in 2010. And when our samples came up positive for the
cryptosporidium, we had to start a process of implementation to
get this infrastructure built to have a treatment technique
that would deal with these log removals that the EPA requires.
My concern with the regulation itself is no matter how the
results on our raw water turn out again in the future, if the
cryptosporidium is no longer there, the EPA still mandates that
I provide the treatment continuously whether or not the
cryptosporidium is even present anymore. A lot of the
regulations that we deal with don't necessarily have a real-
world practical application.
The other side of this story is we have been treating the
same raw water from the Rio Grande River in our treatment
facility with conventional coagulation, sedimentation, and
filtration for 30 years, have never had a water-borne disease
illness outbreak. And now that we have started testing for
cryptosporidium, I have to add an additional $1\1/2\ million of
infrastructure to treat an organism that we have haven't really
had an issue with.
Do the regulations always make sense? No, sir, I can't say
that they do on the investment that we have to make in that
regard.
EPA is always going to err on the side of safety when it
comes to public health, and their drive on this whole issue on
the cryptosporidium goes back to Milwaukee when you had a
massive release of manure into the receiving stream or the raw
water source for the City of Milwaukee, and they had a massive
water-borne disease outbreak. We are not looking at the same
circumstances by any means, but we are still having to comply
with those strict issues.
And I will give you another example.
Mr. Denham. Thank you. My time is short. I have one more
question. But I do agree that we have seen a lot of projects
that have been hindered just because of the compliance and the
fees associated with it.
My final question. Mr. Calhoun, on the Transportation and
Infrastructure Committee, we talk a lot about the inland
waterways and the conveyance of a lot of our products that move
interstate commerce through our waterways.
We have a 29 tax, fuel tax, that goes to the Inland
Waterways Trust, which is also matched by public funds. It is a
great way to make sure that those waterways stay open. But we
always see new efforts to put new fees, toll ways, locks and
dams, that could interfere with that interstate commerce. I
wonder if you could briefly discuss that.
Mr. Calhoun. Certainly, thanks, Congressman. I commented in
my testimony about our objection to tolls and fees. There is
the difference between the waterways and a toll road. First of
all, if you build a new toll road, you still have the state
highway you could drive on and go around it. You have other
alternatives than paying these high-priced fees, and we don't
see that on the waterways. You have one way to go, and it is
through the locks and dams.
And we feel very strongly that you are going to penalize
the users of the system, in this case the American farmer.
Because if you have a 25, 50, 75 charge, that will have to
be passed through to either the ultimate consumer or the person
who produced the product. So that cost is going to go
someplace.
Mr. Denham. Thank you. I am out of time, but if I could ask
you to respond in writing, if you could elaborate on the other
beneficiaries that may also have a stake in the inland waterway
system and making sure that it works properly. We are looking
at those other beneficiaries that might also not be able to be
helpful.
Mr. Calhoun. Absolutely.
Mr. Denham. I yield back.
The Chairman. The gentleman's time has expired.
Ms. Blunt Rochester.
Ms. Blunt Rochester. Thank you, Mr. Chairman.
Many people don't realize that Delaware, they might drive
to our beautiful beaches, but don't recognize the diversity of
our state. We have a very strong agricultural community, and so
I want to, first, thank the Chairman and the Ranking Member for
this panel. I mean, speaking of diversity, it is very diverse
issues as well.
Really, I want to address my first question to Dr. Coon.
And I am on the Biotechnology, Horticulture, and Research
Subcommittee, and so it kind of dovetails with Ms. Adams'
question and also Mr. Davis' question. As we know, there are
many benefits of research conducted at public universities,
including the fact that the information gathered is publicly
available and transferable. The academic setting allows for
more long-term goals in research, and we can look forward, and
it is not constrained by the profitability goals of private
research. Also, as our country ramps up and tries to make sure
that our investments are there, it helps us to be competitive.
I am fortunate to have two land-grant institutions in my
state, University of Delaware, which is my alma mater, and also
Delaware State University, both doing really great research in
the areas that are important to this Committee and supported by
Federal funds.
But you talked about the fact that, basically, you have to
deal with faculty lines over facility lines. And my question
is, how does deferring maintenance over time increase the
likelihood of agricultural research being dominated by private
research? And what kind of research may we lose out on because
of this shifting dynamic?
Dr. Coon. Thank you, Congresswoman. I appreciate the
question, your thoughtful considerations there.
I think, in part, the risk of everything become being
privatized, it is real. And at the same time, right now, we
have a healthy balance in that a lot of the fundamental
research that is important for agriculture still is being done
primarily at the public universities. It has been that way,
still is that way. And where the private-sector takes over is
in the application of that, developing varieties, using
technology that was originally developed at the universities. I
think that is a good balance.
And the risk is if the support for the fundamental research
goes away, what will happen to the private interests that have
depended on that in the past? Will they pick that up? There is
a lot of risk with it. A lot of things don't turn out, and so
the payoff isn't quite the same. We run the risk of losing our
overall capacity if it all becomes in the private-sector.
And then at the same time, the private-sector tends to
focus on the larger commodities, the more profitable areas and
so on. Specialty crops tend to not get as much attention, and
some of the other local issues don't get the attention that
they might otherwise.
Ms. Blunt Rochester. Thank you.
I have a quick question for Mr. Wynn. It might not be
quick, but I have a quick question for you. You mentioned
microgrids. Can you talk about why these are an important
infrastructure investment, and also, if there is potential for
them to help alleviate the maintenance cost of having to wire
our most rural areas?
Mr. Wynn. They are important because of the diversity of
our system and how it is evolving and the demands of our
consumers.
Having a microgrid also provides more resiliency when there
are outages. And electricity is becoming more and more
critical, and the loss of it is becoming more and more of an
issue when it is not there. Microgrids provide another
opportunity to make sure that our systems are more resilient.
We are kind of going back from where we come, because in
the beginning, that is what we really had, was microgrids, and
we got larger and became more centralized. I think that is
important.
The second part of your question was?
Ms. Blunt Rochester. And do you think it would help
alleviate the maintenance of having to wire?
Mr. Wynn. There are situations even with our system where
we are looking at the possibility of microgrids, especially in
rural areas where you, in some cases, have miles and miles of
line to get to a load that is centralized, that is very far
away from the centralization. There are going to be
opportunities, yes, that I think microgrids will make a lot of
sense financially.
Ms. Blunt Rochester. Great.
And I only have like 10 more seconds, and I wanted to ask
Ms. Otwell a really quick question.
You mentioned about sending information to the FCC on the
geocoded map. Is there a map of the country, I have heard yes
and no, that shows how we look from a broadband perspective?
Ms. Otwell. I don't think there is an accurate one right
now. How about that?
Ms. Blunt Rochester. Thank you.
The Chairman. The gentlelady's time has expired.
Mr. Dunn, 5 minutes.
Mr. Dunn. Thank you, Mr. Chairman.
Dr. Coon, in recent months, a proposal to cap the indirect
cost of certain Federal grants, research grants, has been
floated. Today, fortunately, in the Appropriations Committee,
they are marking up a bill that would prohibit those caps on
NIH grants and USDA grants.
Would you discuss the impact those caps have on your
research?
Dr. Coon. Thank you, Congressman. I appreciate the
question. And thank you also for all who had a part in
protecting us from that change.
We call them facilities and administration costs. They are
real. If we are doing research in a building that was built for
classes, that is great, but the research that is going on in
there wasn't necessarily included in that original
construction. We really have to recognize that the mission of
the university going into research is beyond what it was
created for, or what our state funding offers for.
We really need to find a way to pay for the actual cost of
the utilities that go into the research and so on.
Mr. Dunn. I am going to suggest that you keep pounding on
everybody that the cost of overhead is how you do business. I
mean, your business is research.
Dr. Coon. Absolutely.
Mr. Dunn. Your overhead is not going to go away.
Dr. Coon. It is real.
Mr. Dunn. Yes, it is real. So thank you very much. I am
going to keep you in mind.
Dr. Coon. Thank you.
Mr. Dunn. Ms. Otwell, I so liked the last question on the
mapping, because that is the complaint that I hear about, that
the maps aren't real. We hear that there is broadband and there
isn't, or there isn't broadband and there is. And so I am just
going to ask, submit to you that I think that we need some
better maps. And I have an Internet page that looks like it
reveals that information, can you comment.
Ms. Otwell. And that is why some of our reforms have
changed, to give a better view of what is exactly out there to
each and every location. I think that is definitely the reason
why some of those have changed.
Mr. Dunn. In general, it is a bad idea for the government
to be competing against private enterprise in these spaces.
However, Mr. Scott made a good point. Just because you have a
provider and service in there doesn't mean it is good service.
In the 2 minutes or so left to us, I would like you and I
to speculate on which technology or technologies are actually
ultimately going to deliver the broadband to all the rural and
remote areas in our country, whether the Virgin Islands or in
the second district of Florida, which is very agrarian, and a
lot of areas that are under-served. This is part cost-benefit
analysis, and it is part sort of science techie analysis. I
also sit on the Science, Space, and Technology Committee. We
think we have some insights to share with you over there on
that. Please speculate.
Ms. Otwell. You are right. There are definitely some
varying options for different technologies. However, I would,
once again, restate that a lot of those futuristic
technologies, some of your satellite and wireless and whatnot,
those cannot handle the amount of data currently that we are
looking at.
In my company alone, our average usage for our users at
night has gone up more than 750 percent over the last 5 years.
And that is not slowing down. It grows exponentially by the
day. And so right now, the only technology that can handle that
much data is a fiber network.
Some of these other options are great for that last little
bit to reach the consumer. I had mentioned that we also use
some fixed wireless in some of our higher cost areas. It is a
better benefit ratio. But there comes a point where you have to
have that wired network to complement all of those other
options. They really are complementary networks.
Mr. Dunn. I actually sat with some of the very, very large
ISP providers. I don't need to name them. You know who they
are. And they are hesitant to build out that. It is the cost-
benefit analysis. They just don't see that they are ever going
to get that investment back on fiber or wire or beamed
broadband. But they do think that they have the solution in
hand with satellites. There are new satellites, new cube sats,
constellations of cube sats that they have already rented the
launch times in Florida to put these things up.
I think that that is what you are going to see, is going to
be the----
Ms. Otwell. The only thing I would say about satellite
technology, especially in these rural areas, sometimes our
network is the only voice network, and that is still extremely
important for public safety purposes, things like that. And
with satellite, you do have issues with weather. Sometimes they
have latency issues, and so we do want to keep that in mind
too, that there are other things that these networks are used
for that maybe some of that technology is just not quite there
and can provide just yet.
Mr. Dunn. All right. Well, thank you very much. I thank all
the panel.
I yield back, Mr. Chairman.
The Chairman. The gentleman yields back his time. Thank
you.
Mr. O'Halleran. Tom, I am going to figure out how to say
your name one of these days.
Mr. O'Halleran. We will talk about it. Thank you, Mr.
Chairman.
Getting back to cost-benefit analysis, I guess I wasn't
going to go in that direction initially, but it is the right
direction to go in.
We have these urban centers all around the world, but in
America especially, and then we have rural areas. And they are
interdependent on one another. There is just no doubt that the
urban centers need that electrical grid, they need the water,
they need the natural resources that come out of these rural
areas, they need the food. And the rural areas need the
telemedicine. They need the quality of life issues. The urban
areas need the rural areas. On the weekend, this coming
weekend, we will be flocking out of Washington to get to those
rural areas to relax and enjoy and hopefully have decent
broadband.
But the core issue here is that there is a cost-benefit
analysis on that side of the equation. The idea that this
interdependency is only a one-way street that we have to look
at these urban centers with large populations in order to make
sure that we have benefit from the cost standpoint when it is a
shared environment. And we must find a way to be able to
identify that.
What I am asking is does anybody up there know of any type
of studies that have been done to clearly identify this cost-
benefit of the urban environment coming out to us and our
environment coming into urban all the time, and that this is a
crucial area for us to invest in as a country, and the urban
people get as much out of it as we do in rural Arizona?
Anybody.
Ms. Otwell. I would be happy to speak to that. I don't have
it in front of me. I would be more than happy to send it to you
afterwards. Last year, the Hudson Institute did a study in
combination with the Foundation for Rural Service that showed
just rural broadband infrastructure contributed $24 billion to
the nation's economy as a whole, and that \2/3\ of that
actually benefited urban Americans with only \1/3\ of it
benefiting rural Americans.
And so just like you said, they need us; we need them. And
so anything we can do, like providing adequate broadband in
rural areas, everything we do to make rural areas more
efficient saves money for urban Americans too. The price of
milk, different commodities that come out of rural America,
those efficiencies in turn help urban Americans save too.
Mr. O'Halleran. Ms. Otwell, I did read in your testimony,
or somebody did. But the core issue to me is that we study the
economic development potential and the potential of the cost to
rural areas of serving that population that is coming out. The
cost to the children that live in rural areas by not having the
education necessary, the cost-benefit of rural areas being able
to go out and compete for language teachers, doing it through
telecommunications or broadband, telemedicine through
broadband, instead of having to have that specialist at the
hospital.
There are these benefit analysis processes that must go on,
I believe, in order for us to get a true picture and thereby be
able to justify the investment in broadband throughout our
country. Because my district, when you take a look at Navajo at
60 percent unemployment and White Mountain at 80 percent
unemployment, these are critical issues. In rural America in
general, the unemployment rate is so high, much higher than in
urban settings.
And so we have to find a way to balance this process in an
appropriate way, and get others to recognize the need for more
of a community approach to this than just, well, I have to run
a line from point A to B, and here is how much it costs, and we
just can't do that. It costs us all, if the quality of life of
people and our ability to get people to service the
infrastructure of America is lost, and these towns and cities
are lost.
I open up that to anybody for discussion in 34 seconds.
Dr. Halverson. Well, sorry. Go ahead.
Mr. Wynn. I yield.
Dr. Halverson. I mean, the logic of that is very
compelling, Congressman. The challenge, of course, is it is
really, really hard to measure. Right? We recently produced a
piece of research to try to illuminate the differences between
the service provision and various infrastructure segments in
rural America versus urban America, and we found it challenging
to get data to demonstrate the case and to measure some of
these things.
What you tend to get is organizations who are focused on a
more micro level on their industry, their region, or what have
you. I am unaware of anyone who has done this in the way that
you are describing, which is kind of on a national basis, to
try and come up with some proxy for what is the value to urban
America of everything they get in rural America and, therefore,
that they ought to contribute in some way to paying for, which
is, we would probably agree is worthy, but very, very hard to
measure.
Mr. O'Halleran. Thank you, Mr. Chairman.
The Chairman. The gentleman's time has expired.
Mr. LaMalfa, 5 minutes.
Mr. LaMalfa. Thank you, Mr. Chairman.
Ms. Otwell, you mentioned that there are Federal proposals
to accelerate the ability to do projects, and examples I have,
like in the Siskiyou County in the far north part of my north
Cal district, you have delays from U.S. Forest Service, for
example, in starting environmental reports, because they are
doing a lot of other things besides that.
For one provider, their project has already cost them a
full year, and now additional delays are taking into the next
year. This happens a lot. You have BLM, where there is cross
jurisdiction, perhaps. Again, Forest Service, California
Department of Transportation. Then you have to deal with NEPA
and historic preservation compliance.
And we are not talking like we are building a dam here. We
are not building a four-lane freeway. We are running some wire,
maybe in a lot of cases already down in, perhaps, an existing
right-of-way or something that will be buried and never seen
again after we have made our initial footprint.
Do you see that some of the proposals being talked about to
accelerate projects is--do you really think it would provide
any true regulatory relief? Do you have any recommendations
that we could build off of those to take it a little farther
and be able to accelerate what people need in these areas?
Ms. Otwell. Absolutely. Thank you, Congressman. That is a
very timely question. Anything that can be done to streamline
the many difference processes, especially involving areas that
deal with Federal lands, would be helpful and free up resources
to go back into deployment.
For example, sometimes when you are dealing with those, you
are going to have to file the same type of report and reviews
across many different agencies. They all have their own
timeline, they all have their own processes. Anything that can
streamline that would definitely be a savings, and maybe having
a certain agency be a lead on that and kind of oversee the
whole process.
Another thing that happens sometimes, we have duplicative
reports between state and Federal levels. Sometimes, if there
is a way that the Federal permit can use the state review as
being useful, then that helps too.
Mr. LaMalfa. Well, we are looking at some one-stop shopping
proposals. Do you see anything on the horizon already I might
not be aware of that is being done administratively or other
legislation that we should be aware of to get behind?
Ms. Otwell. There are a few things. I know there was a 2015
highway bill that involved some NEPA reviews, trying to
consolidate those, but they were only for projects over $200
million, which is quite a bit larger than most of our companies
are doing. Sometimes, even just making sure those thresholds
are low enough to benefit the small companies as well would be
very helpful.
Mr. LaMalfa. Yes. A tiny threshold maybe would be good
here, because these seem like pretty low impact, low footprint
projects we are talking about.
Mr. Wynn, kind of a similar line with you here on this, is
that you mentioned that reform priority, NEPA, ESA. And we are
going to have a pretty good look at ESA this week as well.
Would significant reform help stretch the dollars significantly
further for infrastructure funding? With the limited funds we
have available, do you see these hangups being actually very
costly in getting them accomplished?
Mr. Wynn. Yes. Congressman, they are costly in terms of
lost opportunities that we otherwise would have if those were
not there. So the short answer is yes.
Mr. LaMalfa. Not necessarily the building of the
infrastructure, but just blowing up the idea, people look at it
and throw their hands up and say----
Mr. Wynn. In our world, yes, there are costs. And some of
those regulations are really driving us towards private sources
of funding because of the overhead burden that is there, the
need for engineers to come in and do the inspections even after
the fact.
We think there are some real costs involved that----
Mr. LaMalfa. What would be one or two things you would like
us to get done in that area, if we could? One NEPA, or what
would it be?
Mr. Wynn. Well, really, just recognizing the nature of our
business. We are electric cooperatives that really don't have a
profit motive at all. We are governed by people we serve. Just
the model itself really can alleviate some of the concerns that
may be there that we are not going to intentionally do
something that would hurt our neighbor if you would. I think we
just really should be taking a new look at the motive behind
some of the regulations in the beginning and realizing that the
threat that might have been feared is not there any longer.
Mr. LaMalfa. Bring them back to the original mission?
Mr. Wynn. That is right.
Mr. LaMalfa. Okay. Thank you, panelists.
And thank you, Mr. Chairman. I yield back.
The Chairman. The gentleman's time has expired.
Ms. Lujan Grisham, 5 minutes.
Ms. Lujan Grisham. Thank you, Mr. Chairman, and thank you
for this hearing today.
Ms. Otwell, the Federal Government has historically played
a major role in the expansion of all major technology advances
in communications. Whether it is electricity or radio, the
telephone, the Federal Government has certainly made these
technologies ubiquitous throughout the country.
And, well, it feels a little bit awkward to say this, given
that I have been talking about broadband since, it seems like,
laying fiber was invented. Clearly, for rural America, it is
the next frontier. And unless we get that done, we are not
going to be able to support, not only our rural communities,
but I would submit that even in ag, narrowing it completely,
just the advances now in dairy farming, where quite literally
we have dairy cattle wearing pedometers and computer technology
figuring out when these cows are ovulating, and they are having
a huge increase in the success rates of fertilization for their
herds by using technology.
Interestingly enough, where we have some of the largest
dairies in the country, we can't access any of this technology
in a routine and productive manner. And when we talk about
innovations in ag communities, we know that most of these large
ag enterprises are, thank goodness, are in rural America and
providing incredible economic footprints as well as feeding the
world. But they can't take advantage of those innovations and
the work that we invest in, in other titles in the farm bill
unless we deal with broadband.
And my colleague, Congressman Scott, he actually stole my
question, because I spent 30 years working in state government
on and off, and the big issue about any technology investments
through government was that the accountability aspects, we
would be promised a product, we would be promised that this
would happen in this way, that would not occur. We would spend
billions of dollars and folks would feel a bit as if we are not
understanding technology in the way that makes it reasonable
for a lot of stakeholders or folks who are doing that contract
work or competitive review or accountability, perhaps we
shouldn't be investing anymore. And the problem is, of course,
that is not right and, at least in my opinion, that gets you
nowhere.
You started to talk about accountability. What could we do
in addition that makes it very clear that getting broadband
everywhere it needs to be should be a priority and should be in
the farm bill, making sure that states like mine, where you
heard them refer to the Navajo Nation, 90 percent of the Navajo
Nation has no access to the Internet, 90 percent.
We have to get that addressed, and they are a huge ag
producer. What else can we be doing?
Ms. Otwell. Thank you, Congresswoman. I appreciate the
question. To be perfectly honest with you, for the community-
based rural carriers that have served some of those most rural
areas, we have just undergone the reform to address some of
those sparsest areas. However, the funding is not there for the
mechanism.
We have actual numbers for how much it is unfunded. You can
see the investment that rural broadband deployers want to put
in but simply can't because it is not there.
Ms. Lujan Grisham. But I want to make that case for you. I
agree with you.
Ms. Otwell. Yes.
Ms. Lujan Grisham. What would I tell my colleagues about
making sure that the investments that we could put into the
farm bill would be carried out in the most effective,
reasonable, and accountable manner, given that, I would guess,
there is not a single Member who hasn't felt like some
stakeholder in a technology investment at government didn't
exactly get what we thought we were going to get and yet spent
a ton of money? Any specific ideas that we could advocate for
that, because I feel like the farm bill is one of the most
accountable efforts in terms of a private-public partnership to
advance the issues that we think are a priority, including
rural economic development.
Is there anything specific for you, or anybody on the
panel, that we could contemplate to create that balance, and
then maybe provide an incentive for more funding as a result?
Ms. Otwell. I think just pushing those that have worked on
these mechanisms to fund them, that accountability is there,
the targeted funds to build those targeted locations is there.
There was a letter that many of the Committee Members
signed to the FCC earlier this year talking about that lack of
funding, impressing upon them to put the funding there, to put
these reforms into action, because it will build broadband.
Ms. Lujan Grisham. Thank you. I yield back.
The Chairman. The gentlelady's time has expired.
Chairman Lucas for 5 minutes.
Mr. Lucas. Thank you, Mr. Chairman.
Dr. Coon, in your comments, you noted that the land-grant
universities, and I would be remiss if I don't remind everyone
the miracle and the wonder of the Morrill Act of 1862, and the
1862 land-grants, and the 1890 land-grants, and the 1994
facilities. That opportunity for the first time truly in the
history of the world for anyone with enough effort, enough
energy, and some smarts to be able to secure a college
education. Just an amazing thing, the land-grant universities.
But you mentioned the $29 billion replacement value of the
infrastructure of these facilities and the $8 billion in
deferred maintenance that we face now. Could you expand for a
moment on what kind of things we are talking about that $8
billion would go to? And would you explain how that would help
facilitate researchers, students, and the industries that
utilize all this information that is developed?
Dr. Coon. Well, thank you, Congressman. I appreciate your
loyalty to the land-grant system and share your respect for it.
Where we find ourselves is we need to look at ways of
solving the problem without simply going out and saying we are
going to spend $8.4 billion. Because the kind of facilities--
let me use it as an example from Oklahoma State. We have a
dairy barn. It is a beautiful dairy barn built in the 1940s.
And gorgeous design and so on. Our Holsteins don't fit in it.
It was built for Jerseys. Our Jerseys would probably fit in it,
but they wouldn't stay in it today if we tried to put them
there. And it is this gorgeous wooden roof that has no
protection or prevention for a fire. And so to go in and make
that a useable facility, we would spend millions of dollars to
put sprinklers in and so on and so forth, and end up with a
substandard facility.
In cases like that, we are better off to do what we are
doing, which is to build a new free stall barn at a lot lower
cost that is going to last for a long time. Some of it is
simply replace it. But the rest of it is to, as I said, to be
more diligent in ourselves in using our finances to make sure
that we are taking care of the facilities. And no one wants to
spend money on that, because it isn't glitzy and it doesn't get
the attention of the public. But, the bottom line is it is good
stewardship, and that is what we need to take on.
Mr. Lucas. And those facilities enable the scientists, who
are also professors and teachers, working with the
undergraduate and graduate students to do their work.
Expand on that for just a moment. Sometimes we forget that
land-grants are a hands-on experience.
Dr. Coon. Absolutely. Well, one of the great risks that I
fear is if we don't address this adequately, we are going to
continue to lose our most valuable faculty, our greatest
expertise, either to the private-sector, or it may be we are
stealing each other's best, perhaps from one university to
another. But what that means is that we no longer have that
expert on our campus teaching students, either graduate
students or undergraduates. In other words, we are not creating
the next generation of scientists.
And so it is important to have the research done. But in
the process of conducting that research, we are also building
in the sustainability of this whole approach to agriculture
that we created beginning in 1862, where research is what is
driving innovation in agriculture.
Mr. Lucas. I was late this morning, slightly, because a
number of us from the Financial Services Committee had gone
down to the Federal Reserve Board to visit with the Chair and
the Vice Chair and one the Governors. And we got into a
discussion about productivity and the decrease in the rate of
productivity improvement in this country in the last 20 years.
And the bottom line from their research department was,
essentially, we weren't investing with the intensity we had in
the previous decades or century, and that this dramatic
increase in productivity, which is how you increase people's
standards of living. They produce more. You don't run faster.
You work more efficient with more efficient processes, that we
were entering a point where, through lack of investment, that
rate of productivity was slowing in comparison to the rest of
the world, and that, if we were going to increase the standard
of living, we had to enhance that, which tees off quite well in
what you are describing about continuing the mission.
Because there will come a time, correct, as you just noted,
where if we don't invest enough, and that infrastructure, both
physical and intellectual, will go away, and we will never
catch up once we are behind the curve.
Dr. Coon. Well, as you know, we have a fantastic wheat
breeder, Dr. Brett Carver, who heads up our wheat improvement
team, and he puts up with some really ugly facilities.
Mr. Lucas. He could work on any of four continents if he
wanted to go somewhere.
Dr. Coon. Yes, he could. He could go anywhere in the world
and be paid a lot more than we are paying him. Don't let him
know that I said that.
But, the point is he will probably stay with us. And I am
going to do everything I can to make sure he has great
facilities. He will probably stay with us. But who is going to
follow him? How do we replace him if we don't have any better
facilities than we have today?
Mr. Lucas. Thank you, Mr. Chairman.
The Chairman. The gentleman's time has expired.
Ms. Kuster, 5 minutes.
Ms. Kuster. Thank you, Chairman Conaway. And thank you for
this hearing on rural America. We appreciate it.
Most of you have spoken about conditions that are very
familiar to me in New Hampshire and rural New England. And we
have talked about all of these things in the 4\1/2\ years that
I have been in Congress, and made some good progress on red-
listed roads and bridges, replacing aging municipal water
systems, modernizing our electrical grid, and expanding
broadband access to our rural communities.
But I want to focus in on the broadband, because that has
been of particular concern to regions of my district. According
to the FCC 2016 Broadband Progress Report, there are over
99,000 Granite Staters who live without access to fixed
advanced telecommunications capability. And a lack of broadband
infrastructure has had significant consequences for those rural
regions of the state. When the rural markets go unserved,
companies are less likely to relocate and invest in new jobs.
Housing prices are now depressed because of lack of access.
Schools are burdened with costs and hospitals are less likely
to use innovative telemedicine.
My question is for Jennifer Otwell. In your testimony, you
referred to the importance of the Universal Service Fund and
how it relates to Federal loans and grants by small telecom
providers. Can you explain why it is so important and what
effects the current shortfalls in the budget are having on
small telecom providers in rural communities?
Ms. Otwell. Absolutely. Thank you, Congresswoman. The
Universal Service Fund is what allows our company to make the
business case to have those networks in the high-cost rural
areas in the first place. If we only have 3.4 customers per
square mile, those customers themselves cannot pay enough, or
should not have to pay enough to make those networks feasible.
While we have programs like RUS and companies like CoBank and
RTFC that provide the capital to make that initial investment,
the loan programs that allow us to make those very finance-
heavy investments, we really need that predictable sustainable
USF support to make the business case for it to be there in the
first place.
Ms. Kuster. My question is what can we do in a bipartisan
way? And in particular, do we need to change how the USF
collects fees? And I am concerned about what is going to happen
to rural broadband deployment if the high-cost budget doesn't
change.
Ms. Otwell. You and me both. That is a very good question.
There are proposals out there to start thinking about
contributions and who is contributing to the fund. Those are
very pressing questions that the FCC needs to work through, and
we need Congress to continue to press them to work through
those issues.
Ms. Kuster. Thank you.
Now this is a question for Curtis Wynn. Can you share with
us a bit what the increased adoption of distributed energy
resources, like wind or solar, is doing in your system? I know
you have community solar. And if you could talk about your
investments for the future, are you considering distributed
energy in future investments?
Mr. Wynn. Yes, Congresswoman. We are, in North Carolina,
really embracing this whole concept or movement, if you will,
of distributed energy resources. We are investing, as you
mentioned, in the community solar projects. There are several
in the state where, if you look at it from the standpoint of
how it gets the availability of solar to every person who wants
it, whether they are a renter or they live in an area that has
trees that can't get to the sun, it is available through a
model that has been pretty creative and very effective. So that
has been one area.
But as in terms of the impact, it is another source of
power, is the way we look at it. And how it fits into the grid
is very important, and we are making the adjustments. Because
the traditional way that the grid was built was basically not
designed to have the fluctuation and power sources coming as
they are. But that is not an excuse. That is just a reality of
how things are going. And we are making adjustments.
As a matter of fact, in my testimony I mentioned that we
have a microgrid project that is an experimentation opportunity
for us to see how it can be more fully deployed throughout the
whole state with other systems, and across the nation, because
it actually is a collaboration between our national association
and our state G&T.
Ms. Kuster. Well, I just want to give a shout-out to a
wonderful project in my district, the Town of Peterborough, New
Hampshire, where they took a water treatment facility that had
big ponds, and they used USDA funding for a much more efficient
tertiary water treatment plant, and then they took the 7 acres
where the ponds had been and filled it in and covered the whole
thing with solar. And the whole town is using it. It is great.
Thank you. I yield back.
The Chairman. The gentlelady's time has expired.
Mr. Yoho.
Mr. Yoho. Thank you, Mr. Chairman. Thank you all for
enduring a long hearing, and we appreciate you being here.
I would like to expound on what Chairman Lucas was talking
about. But before that, I want to mention what Congressman
Crawford said about the horse. Buying the horse is the cheap
part. Being a veterinarian, I know that. And that is the easy
part.
I want to start with you, Dr. Coon. With the land-grant
universities, and I hail from Florida, University of Florida,
Double Gator. And they're great facilities. I mean, it is a
marvel. I went to vet school there. Their vet school would put
a lot of human hospitals to shame. Great facility. And then we
met with the director of IFAS, and he was talking about they
need more facilities, and we have to build them. And yet they
are complaining about the maintenance of maintaining them. And
so I want to praise my university, and I am going to pick on
them a little bit, because I know this applies to all
universities in the land-grant situation.
When we put these infrastructures in, sometimes they become
a Taj Mahal. And they are looking at expanding a research
facility. We were just down there on an ag tour. And they were
talking about the new research facility that they are going to
put in, state of the art. But I worry about the maintenance of
this.
And so when you put in a project, what do you do for long-
term maintenance? And before you answer that, I want to add
that I was talking to somebody that is in charge of a
municipality, their infrastructure as far as their water,
wastewater. And I asked them, I said, ``What do you build into
the project to take care of it, for the maintenance and
replacement 10, 15, 20 years down the road?'' He shocked me
because he says, ``Oh, we don't plan on that.''
When you guys design something, as you are the association
for public land-grants, when you sit down and you are into your
think tanks and you are talking to people, yes, build this nice
facility, but where is the funding for the maintenance? Because
where we are at today, and Chairman Lucas brought this up, the
competitiveness and the productivity of what we have today is
based on what we invested in 150 years ago, and now we are at
the point where we haven't kept up with that. How do we get
beyond that for the next generation so that your top researcher
stays at your university and that it invites the new ones?
What is your recommendations on that?
Dr. Coon. Well, thank you, Congressman. We talked about
this in one of the reports that preceded this. And that was
that, basically, if you are going to get Federal funds, you
need to have a stewardship plan as part of the proposal. In
other words, to answer your question, before you ever are
granted the funds. It is a best practice that we have shirked,
and just as the fellow you talked with perhaps may have in the
water treatment system. We need to build it in at the
beginning.
And one of the ways that we are already doing that is, if
someone comes to us and says they want to give us land, but
they want us to keep it forever so that it doesn't get
developed, and so on and so forth, that is great. And what we
say to them is, we will do that under one condition: Provide us
an endowment that will cover those maintenance costs. We need
to do the same with anything we build.
Mr. Yoho. Let me ask you about that, because I know some of
these universities are sitting on a billion or billions of
dollars endowment. The question that I have here is what are
some of the ways that the institutions are looking beyond
Federal appropriations to modernize the facilities and
equipment? Keep in mind where we are as a nation. We are at $20
trillion in debt. And we have to bend that cost curve or this
is going to get worse next year and the next year.
Go ahead.
Dr. Coon. For one thing, it is always going to be a mixed
package. Federal funds are part of it. They are never going to
be the whole package. State funds have to be part of it,
university funds and others. If it involves teaching, student
fees end up coming in and helping to cover it as well.
Philanthropy is huge. It is big part of it, certainly for us
and for a lot of universities.
That is part of the mixed package, I guess, but the
opportunity here at the Federal level is to use Federal funds
to bring that other money. In other words, to make it
contingent. You only get the Federal funds if you are able to
match it with these other sources.
Mr. Yoho. I am going to move on to another question. I am
running out of time.
Ms. Otwell, so many times we can bring the infrastructure,
the rural broadband, so far. How do you go that last mile? What
is the best way to go? Because, as you said, you might have one
or two people per square mile. Who should be responsible for
that? And is there a smarter way to do it? And then keeping in
mind 20 year replacement or maintenance of that.
We have 20 seconds.
Ms. Otwell. Okay. Exactly. We are looking to put in future-
proof networks as much as possible. If you are going to go
through putting in a piece of fiber into the ground, you want
it to be what will last for 20, 30 years. Some of those older
networks, there is really not a midrange network. The older
networks, they are already almost obsolete for what we are
going to need them for in just a few years. There are different
technologies. You almost always need that fiber----
Mr. Yoho. I am out of time, and I will reach out to you.
Thank you, ma'am, because I want to follow up.
The Chairman. The gentleman's time has expired.
Mr. Soto, 5 minutes.
Mr. Soto. Thank you, Mr. Chairman.
I have the honor of representing central Florida on citrus
and cattle country. We, in the citrus areas, are facing a huge
crisis with citrus greening. Over 70 percent of our production
is down from peak production. And as we are developing
resistant rootstocks that are currently about to be deployed,
we are going to need an ability to be able to get these out
into the field quite a bit.
And I want to thank you, Dr. Halverson, you and CoBank, for
your partnership with our citrus producers.
If we were able to get out a lot of these resistant
rootstocks, are you prepared, with your bank, to work with our
growers and government to help really deploy these, even if
they are semi-resistant in getting us closer to addressing this
great crisis?
Dr. Halverson. Absolutely, we are. I mean, that is really
why the Farm Credit System is here, to support agriculture.
There are risks, obviously, associated with that, and the
industry is facing some really catastrophic difficulties. We
will absolutely be able and willing to support the growers
through other Farm Credit Association institutions that will
lend directly to the growers but also to the co-ops as well.
Mr. Soto. Well, as we continue on our quest for the
resistant-proof, citrus greening rootstock, in the meantime,
there are a lot of good strains that are being developed right
now.
The second thing I would like to talk about is organics. As
we know, investments in infrastructure are key to spurring more
production of organics, including organic grain. And since it
has to be processed in a facility that is certified to handle
organic products, it could require a lot of investment in
infrastructure.
How can CoBank and other of our ag lenders help with these
organic hotspots to bring more opportunities to our rural
economy?
Dr. Halverson. Well, there is clearly a lot of dynamic
change going on in agricultural production. Organic production
is a part of that. And without getting into too much detail
about the mechanisms and mechanics of becoming organically
certified and otherwise, we, the Farm Credit System, we,
CoBank, we finance everybody. We finance organic producers, and
non-organic producers.
What I would say, as you know, we are delighted to be
focused and have the Committee's attention as well focused on
infrastructure, because whether you are an organic producer or
not an organic producer, all of these producers are going to
benefit from the type of quality of infrastructure that we are
focused on providing for them.
Mr. Soto. Well, I would strongly encourage you all to
consider pilot programs on the subject, being that the profit
margins are pretty good, and they really bode well for the
future of our American farmers.
Turning next, this Committee is about new infrastructure,
which is really an opportunity in rural America. And I know
that our national rural electric cooperatives are really
leading the way in renewable energy.
And, Mr. Wynn, you may be familiar of the Town of Clewiston
in Florida, which is run predominantly by bagasse, which is a
byproduct of sugar. Where are we with renewables and going
forward? How key is that going to be in delivering energy in
our rural communities?
Mr. Wynn. I think you said it in terms of its deployment.
NRECA and its member systems have been very aggressive in many
ways and very proactive in terms of deploying renewable energy.
Many of our cooperatives are developing systems on their
utility lines to help to modernize the system, help them become
more resilient. We have really embraced that. It is conceived
as a part of our future, and we are embracing that.
Mr. Soto. Well, I strongly encourage you to consider
continuing doing that, whether it be biofuels through
byproducts of commodities that aren't used, whether it be
hydroelectric or solar, these are all great opportunities for
areas that may not have access to other sources.
And I want to end with you, Ms. Otwell. We have certain
fields in Florida where they have WiFi to be able to measure
how tall a crop is, or sensors to develop when they need to
have more water nutrients. Do we have that capability now in
most of our farms, based upon our broadband access to really
have those types of high-tech opportunities available?
Ms. Otwell. Absolutely. And we are trying to build to as
many farms as we possibly can. And with the fully funded USF
budget, we will have the ability to make those investments,
knowing that there is a business case to build out to the most
rural farms in those areas.
Mr. Soto. Thank you, and I yield back.
The Chairman. The gentleman yields back.
Mr. Thompson, 5 minutes.
Mr. Thompson. Thank you, Mr. Chairman, and thanks for this
important hearing as well, looking at the state of
infrastructure in rural America.
Mr. Macmanus, I have a close working relationship with the
Pennsylvania Rural Water Association. I appreciate what you all
do at the state level, and certainly our National Rural Water
Association. When we talk, especially potable water, we kind of
hear about some cities that have had some issues. But, I know
when some of my townships and boroughs are replacing water
lines, we are still finding some wooden water lines.
And so my question for you is you recommended allowing not-
for-profit organizations to take over some of the non-
inherently governmental activities and functions of USDA. What
activities are you talking about, and how would this suggestion
improve the ability of systems like yours to build
infrastructure and serve our rate payers?
Mr. Macmanus. I have been doing USDA rural development and
loan and grant applications for 17 years at East Rio Hondo, and
I can tell you the most difficult part is the bureaucracy of
the waiting process of the back and forth between the funding
agency and the entity. And what we are proposing is that
nonprofits would be able to do the loan processing and
servicing functions that is difficult, in particular for small
communities, to follow the process.
And I mentioned in my testimony Attachment C, the 90 points
that the individual systems have to do on the checklist. I
think it is greatly beneficial. If you had an individual whose
sole function in life was to help the system and the USDA
employees that are processing the loans to get a complete
package from the applicant initially up front and then to push
that through with the USDA employees, that is the exact type of
assistance we are talking about. Hands-on, checking the list
off with the customer, the applicant, and then helping the USDA
employee verify their end of it as well.
Mr. Thompson. Thank you.
On the theme of bureaucracy, and how that impacts on
infrastructure, I had the opportunity to go to the White House
last week for a small luncheon, bipartisan, but it was on
infrastructure. Really pleased to hear the White House. The
President is committed to make sure that there is some type of
rural title within that, which was outstanding. I know
Secretary Perdue has done a lot of work with that.
But it was interesting to me that the numbers, where the
Federal Government owns, if you want to put it that way, about
eight percent of infrastructure. We fund 12 to 14 percent of
it. But we permit 100 percent of infrastructure.
And the countries like Australia, which is pretty green
actually, in their infrastructure, is my understanding, they
have reduced their permitting time down to 18 months, a
considerable economic activity that it has increased. Our
average for this country is 10 years, not 1\1/2\ years.
And so my question, just a broad question. When it comes to
infrastructure in rural America, and Ms. Otwell already
outlined some strategies on how to do this without really
cutting any, without compromising the environment. How
important is this in terms of the infrastructure in rural
America? What would it mean for you or your members if we were
able to get the permitting streamlined, get it closer to
Australia versus our current 10 years?
I will just throw that open to whoever would like to
respond.
Ms. Otwell. I'm sorry. Go ahead.
One thing for our companies, the less time and energy and
resources we have to spend on permitting for multiple agencies
and on individual basis, the more time we have to build
broadband.
Mr. Thompson. Mr. Macmanus?
Mr. Macmanus. And I would add, Congressman, when you have
identified a need in your system, you need the infrastructure.
The faster you can get that built, the less the inflation
factor of your identified cost is going to have on eating away
at what you are applying for. If you are sitting, waiting,
because of permitting and other issues, the money that you are
trying to apply for is not going to be sufficient by the time
you get to construction. You are going to have to turn around
and apply for another loan or whatever it may be to find that
additional financing to actually complete the project if there
is a long delay in the permitting. It has a direct impact on
the end-user on the cost that they will end up paying for the
project itself.
Mr. Thompson. Dr. Halverson, I appreciate CoBank and Farm
Credit. I appreciate in your testimony you had about the role
of both with our rural critical access hospitals. I mean, we
have had 80 rural hospitals close since 2010. Part of that is
just dealing with the bureaucratic cost inefficiencies. And so
I am out of time, but I just want to say I appreciate the role
that both CoBank and Farm Credit has played. Because if we
don't have those facilities in our rural communities, I don't
care how you pay for healthcare, we don't have access to
healthcare. So thank you.
The Chairman. The gentleman's time has expired.
Mr. Costa, 5 minutes.
Mr. Costa. Thank you very much, Mr. Chairman. I think this
is a very important conversation. I thank the Chairman and the
Ranking Member for holding this hearing.
A lot has been discussed about broadband. I am not going to
go back over that area. Obviously, it is important.
Transportation, access to our markets to move our farm products
to where they need to go is clearly critical, not only for our
population centers, but also for our export purposes. Water has
been discussed earlier. It seems to me the focus of the
discussion, though, on water has been more as it relates to
local water quality issues and water access to rural
communities.
I don't know that any of you have touched upon the notion
possibly in this effort to develop a bipartisan, big
infrastructure investment in America that we are considering
water projects that have been so important to the West for
generations. I am talking about major water projects to
investing and using, not only investments in reservoirs, but
the kinds of investments that we might see in groundwater
recharge and using all the water management tools in our water
toolbox to take advantage of the changes that are occurring.
What I would like to ask the witnesses is--let's say that
we come together with--the President's talked about $1+
trillion package, and we are still grappling on how we finance
that. But it seems to me that the rural component is going to
be some part of it, if we are successful. Now, is it going to
be 20 percent of it, 25 percent of it? I know this Committee
would like to, obviously, put our stake out there in terms of
what we think is appropriate for rural America. That often gets
overlooked. I would like you to respond to that.
I would also like you to respond to the notion of
leveraging. We have a number of localities, either counties,
communities, service districts, that put together financing to
help deal with their water needs, their infrastructure needs.
Are there transportation needs? States that have put up
significant money that have skin in the game.
One of the ways that we always finance projects here is
Federal, state, and local funding. Are we going to acknowledge
and reward those localities or those states that already are
making investments so that we can further leverage the
potential of this infrastructure package?
Who would like to address those basic concepts? Because, I
mean, we all have our wish list. And then finally, how do we
prioritize? Because we all have our wish list, but how do we
prioritize where the greatest needs are for rural America,
knowing that transportation, water, and communications, i.e.,
broadband and others are critical needs.
Dr. Coon. So thank you, Congressman. There is a lot to
cover there, and I promise I won't try to do it all.
But, in terms of the investment and attracting other money,
leveraging money, part of it is thinking about what is it that
attracts private capital, for example. And generally, it is the
promise of a return on that investment. And so the public-
private partnerships that work very well in other sectors,
could they apply here? Are there applications, whether it is,
perhaps, with irrigation projects, like you have suggested, or
others where there is something to be earned over the long-term
that would justify private investment in those projects. That
is one example.
And as I said earlier, one of the things is whatever
Federal funds come, they really need to be tied to other
sources of funding or the Federal money doesn't come.
Mr. Costa. Should we reward states and localities that
already have skin in the game as we construct the package?
Dr. Coon. Absolutely.
Mr. Costa. How do we prioritize?
Mr. Calhoun. If I could, I think that is a difficult
question, because I guarantee you, if you went around to 20
people and said let's prioritize where the project should go,
you are going to get 20 different answers.
Mr. Costa. I know it is difficult.
And I don't want to end up with just a political response
in the legislation, hopefully, we come together with, because
we know how the political responses usually get handled.
Mr. Calhoun. Well, I would look to get answers from your
constituents and then try to get a group like this to come
together and try to make that prioritization, because if we
went around here today and you saw all the questions that were
asked----
Mr. Costa. No. And the needs are going to be far greater
than what we are funding that with, or we will be able to come
up with.
Mr. Calhoun. Absolutely.
Mr. Costa. And that is why it is important to prioritize
based upon some sort of criteria that makes sense.
Mr. Calhoun. Yes. I am not sure I can tell you what that
criteria is.
The Chairman. The gentleman's time has expired.
Mr. Bost for 5 minutes.
Mr. Bost. Thank you, Mr. Chairman.
Mr. Calhoun, in your opening testimony, you referred to the
need to fund 25 different inland waterway modernization
projects. Can you tell us, the Committee, where those are,
where they are located, what benefits they will have as the
bottom line, and for the shippers, that use the waterways?
Mr. Calhoun. Certainly. The 25 projects are projects that
have been authorized but not appropriated by Congress over the
years. A number of years ago, the Inland Waterway Users Board
came together with the Corps of Engineers and tried to
prioritize these projects in the order of importance based on a
criteria of risk of failure, where the greatest economic
benefit was to the nation. A number of different criteria. And
that list at the time was developed at a point in time, and, of
course, as time changes, that list could change too. But that
is where the list came from. And it is all over the system. It
is in the Gulf regions. It is in the upper Midwest. It is in
the Pittsburgh area. It is all over the navigable system.
Mr. Bost. Could you elaborate a little bit on the
importance of the Federal and non-Federal levee systems, and I
will tell you where I am going with this, but as far as
navigation and the importance of flood protection?
Mr. Calhoun. Well, navigation is just one of the values of
the inland waterway system. Certainly, flood protection,
irrigation, water use. We talked about water use, in California
you pay for water. You don't pay for water off the Mississippi
River.
Mr. Bost. Right.
Mr. Calhoun. There are a number of different beneficiaries.
The problem we have had funding the river, historically, is
only one of the beneficiaries pays anything into the trust
fund, which is why the trust fund is low today.
There are a lot of beneficiaries. And the trick has been,
how do you charge someone on the other side of the levee for
having that levee there? And when you talk about privatizing
the locks, how do you charge recreational boaters for using it,
for the improvement on the value of the real estate?
Municipalities don't pay for water. There is a lot of value
being created, but nobody is being charged. And for the first
200 years in the nation, nobody was charged anything.
It is a more recent trend that we want to try to have the
users pay that back. But so far, we have only identified one
user that we have been able to tax.
Mr. Bost. Right.
Dr. Halverson, as a follow-up to the question I just asked
on the importance of levees. In Illinois, the Len Small levee
in my district is a non-Federal levee that was breached, what
they refer to as the holiday flood of 2015 and 2016. Let me
tell you, it was no holiday.
Dr. Halverson. I imagine.
Mr. Bost. There is a mile-wide gap in this levee now. And
this leaves about 38,000 acres of productive farmland in
several rural communities without any flood protection.
Would Farm Credit, or any other lender, for that matter,
engage with a levee district to finance a reconstruction of the
non-Federal levees in the absence of any involvement with the
Army Corps of Engineers?
Dr. Halverson. That is a very good question. I can't tell
you the answer, off the top of my head. I would give you a
commitment that we will go and research that and come back to
you in writing.
Mr. Bost. We are trying desperately to figure out the
damage, as a matter of fact, one reason why I wasn't here
earlier is we were in Transportation dealing with the Army
Corps specifically on this, because if we don't get that one
repaired, it is not only for the farmland, but also for
navigational purposes. Because if you look at the State of
Illinois and you go down to the bottom, there is a place where
the river bends like this. It is actually called the Dogtooth
Bend. It is about 17 miles around. Drops 12 in that 17 miles.
If that levee is not replaced, it is already cut better than a
mile of the 3 miles across, and navigation from New Orleans to
the Great Lakes will be stopped.
And so we are trying desperately to express how important
it is to put the protection back in place. And it is amazing
when dealing with bureaucracies how we can't get things done.
Thank you, Mr. Chairman. I yield back.
The Chairman. The gentleman yields back.
Mr. Lawson, 5 minutes.
Mr. Lawson. Thank you, Mr. Chairman. And a welcome to the
Committee. When I left the Committee, you all were talking
about the tremendous amount of infrastructure research that the
land-grant institution had such a backlog. I want to ask a
question about that.
But I was deeply concerned about the co-ops, because I can
recall, when I was growing up in the rural areas, when we first
got electricity, my brother and I stayed up all night trying to
see what was going to happen with that light, but it never did
go out. And so that was very interesting.
But my question today centers around there are 1,000 people
that are moving to Florida a day. And we are told that a lot of
these people now, they wanted to be on the coastline, but now
they are moving into rural areas where they are going to be
served by co-ops.
My question will be what kind of pressure does this put on
electric co-ops, Mr. Wynn? Because if that many people come in,
and Florida is now the third largest state in terms of
population in America, but it is going to put a considerable
amount of pressure on co-ops. How are they going to be able to
handle it?
Mr. Wynn. Well, we are welcoming growth from most co-ops. I
know many of us don't get an opportunity to see growth. I know
the ones in Florida are experiencing that. But the good thing
about it is that the good news is that we have access to
capital, which is the biggest restraint that we would probably
run into in terms of getting people to build the lines. That is
something that we can always do. But, fortunately, we have
three very good sources of capital. CoBank is one, RUS is the
other, and CFC is another. And then there are syndications that
can happen to bring other people to the table to do the
financing.
I don't really see many barriers, barriers to the growth,
but it is certainly something that can be managed and has been
managed in other areas.
Mr. Lawson. Okay. And I guess the question would be with
the President's proposal to cut back on rural funding, serving
in the Florida Legislature for a number of years, roundabout 28
years, House and Senate, one of the greatest things that, when
the gavel went down, that we carry back were water projects.
Water projects from these local governments in those areas,
which I had about 13 rural counties that I was serving in.
Water projects meant everything to him.
And so when they are doing this farm bill, and I know the
Chairman here, and they probably referred to it, it would be
just devastating to cut back on water projects for rural areas.
And if you have already talked about it, I don't think there is
enough talking that we can do about it. I would ask Dr.
Halverson, will you comment on that.
Dr. Halverson. Well, I would share your focus and your
concern, Representative Lawson. I refer to my testimony, the
fact that there is somewhere in the ZIP Code of $190 billion
worth of investment required in refurbishing and reinvesting in
the nation's water infrastructure. That number gets bigger
every day, not smaller. It is a deferred maintenance bill.
We are making contributions as CoBank and the Farm Credit
System. We would like to do more, but we can only make a small
dent in what is a very large total requirement there. But we
are very passionately committed to doing so, and that is why we
are so encouraged by the Committee's interest in moving this
forward and expanding that activity.
Mr. Lawson. Okay. Thank you.
And, Dr. Coon, I have limited time left. And you might have
mentioned it. I caught the back end when I was going to the
other committee. What are universities doing to try to make up
for all of the infrastructure backlog that they have in terms
of research?
Dr. Coon. We are looking for help everywhere we can get it.
Basically, it ends up being pretty much crisis management. If
we have freezers that go down, we have to go and address that
right away. And so that takes our attention away from whatever
else we might have been doing. We really need to step back and
develop more complete plans that are more sustainable than the
current reactionary mode that we are operating in.
Mr. Lawson. Okay. Thank you.
Mr. Chairman, I yield back.
I know one thing, in your closing argument if you could
say, how does this relate with our competition with other
countries.
The Chairman. Thank you. The gentleman yields back.
Mr. Arrington, do you have questions?
Mr. Arrington. Thank you, Mr. Chairman. I do.
The Chairman. Five minutes.
Mr. Arrington. Thank you all for coming. And we have a
budget markup today. I apologize for coming in late.
But Ports-to-Plains is a transportation infrastructure
initiative to enhance and expand transportation in middle
America, essentially from Texas to Canada. Probably most of you
are familiar with it. And, again, I apologize if I am making
you repeat yourself. But talk about initiatives like Ports-to-
Plains and the transportation infrastructure and how important
that is, and how would you rank that, and what thoughts do you
have, strategically, on that component of sustainable rural
communities in getting our food, fuel, and fiber to market?
And anybody can take the question. Whoever wants to
volunteer first.
Mr. Calhoun, they seem to think you have the answer to
this.
Mr. Calhoun. Well, that was a draft, by the way. I don't
know I volunteered.
But I am not familiar with the initiative that you are
speaking about, which is why I didn't volunteer. But, one of
the things when we talk about the inland waterways, one of the
problems that we face is we are not actually under the
jurisdiction of the Transportation Department. It comes under
the Army Corps of Engineers. It is handled in a different
fashion.
When you talk about the things that I talked about today,
that we have talked a lot about, broadband and everything else,
but just physically the roads and bridges to get around this
country, which are getting old and dilapidated and in need of
fixing up. There is a large job to do, and it needs to be done
in a coordinated fashion as much as we can. I don't know that I
answered your question.
Mr. Arrington. Yes. No. That is great.
Dr. Halverson. I would just supplement that by saying the
Administration is very focused on international trade and our
trade balance and the like. And agriculture is one of the
biggest single positive contributors to the trade balance and
the current account balance of the United States for many, many
years. That looks likely to be the case in the future, provided
we can continue to innovate and continue to invest in our
backlog of infrastructure weaknesses.
We need to be able to get our agricultural production from
the farm gate to a waterway. And ultimately, \1/4\ to \1/3\ of
all of our agricultural production gets exported to foreign
markets. It is vitally important. And it is why the Rebuild
Rural Coalition is very, very focused on it, because our long-
term trade, our long-term competitiveness for rural America and
the quality of life is very dependent on our ability to get our
products to the marketplace.
Mr. Calhoun. Yes. Last year, the U.S. ag exports, they
contributed $21.5 billion to the balance of trade. And trade is
very important to this country. And as I mentioned in my
remarks, feeding a growing world is going to be very important
to this country. And you cannot do it without the
infrastructure.
And the other thing that we haven't talked about here much
today is just the length of time it takes to build this
infrastructure and get to where we need to be. Some of these
projects, particularly on the inland waterway system, have
taken 10, 15, 20 years to build. And then the permitting
process before that. If you start today, you are not going to
be done for a decade. And we just can't afford to delay this
process any longer.
Mr. Arrington. Thanks again for your time.
And, Mr. Chairman, I yield back.
The Chairman. The gentleman yields back his time.
Thank you all.
Dr. Halverson, given the role that the Rebuild Rural
Coalition had in putting the panel together today, would you
give us a couple of seconds or a couple of sentences on how you
have been doing with that coalition? And are you worried that
partisan politics might creep into what you are trying to do
and accomplish? And if that is the case, what are you doing to
try to avoid that?
Dr. Halverson. Thank you, Mr. Chairman. We have been
serving in a, call it a convening capacity for that coalition.
We are deeply excited and enthusiastic about the fact that we
have been able to convene such a broad and deep group of
institutions around what others have said should be and
hopefully will be a relatively bipartisan agenda. There is
seemingly, not a lot of things people can agree on these days,
particularly here. We are hopeful and optimistic, based on the
dialogue we are having within that coalition, that this is a
bipartisan consensus.
The devil is in the details, and there will be challenges
ahead if we get legislation or an ability to mobilize some of
the resources that everybody is interested in and addressing
the question that Mr. Costa asked, which is how do you allocate
that and so forth? But hopefully, that good old fashioned
allocation mechanism that Congress has been familiar with for
over 200 years can be digested in a relatively nonpartisan way.
And we are hopeful and optimistic, and we will do everything
within that coalition to support your efforts in that regard.
The Chairman. Well, thank you very much. I appreciate that.
Thank you for what the coalition is doing and the impact that
you are going to have.
We are at a great point with two opportunities to address
within this broad spectrum of challenges. We will have the
infrastructure bill probably before the farm bill, but we will
have the infrastructure bill as well as the farm bill itself to
take a look.
The bad news about the farm bill is we are going to have a
whole lot fewer resources this time than we did in 2014 to get
that done, which will present terrific challenges. Mr. Costa
asked about setting priorities. We are going to get an exercise
in trying to do that, because we will have to get the farm bill
done.
I appreciate all of you coming to D.C. today and presenting
a very clear statement as to why this is important to rural
America, the impact across the entire spectrum. All your
comments are very timely and much appreciated. And we hope
there are other people listening and paying attention to this
today, because this is a big deal to the folks like us who,
like Jodey and I, live in rural America, and so we appreciate
that.
Under the Rules of the Committee, today's hearing will
remain open for 10 calendar days to receive additional material
and supplemental written responses from the witnesses to any
question posed by a Member.
This hearing of Committee on Agriculture is adjourned.
Thank you.
[Whereupon, at 1:00 p.m., the Committee was adjourned.]
[Material submitted for inclusion in the record follows:]
Submitted Statement by National Family Farm Coalition
The National Family Farm Coalition (NFFC) and their member
organizations represent farmers, ranchers, community-based fishermen
and their rural communities who strive daily to provide food and create
jobs by adding value to sustainable agriculture and fisheries. In order
to further these goals, our farmers and their communities rely on
critical rural infrastructure such as affordable and reliable water and
waste water systems. Rural Communities continue to lose population with
the graduation of each senior high school class. What's left behind are
the elderly and the poor representing the under-served in communities
who are sometimes susceptible to suffer from health issues or witness
environmental degradation due to a lack of safe drinking water and
waste water sewer systems.
In an Environmental Protection Agency (EPA) report entitled Still
Living Without the Basics in the 21st Century: Analyzing the
Availability of Water and Sanitation Services in the United States, the
U.S. EPA echoed this predicament. In the report, EPA highlights the
fact that the people who lack these basic services live in some of the
most productive farmland in the United States, along the U.S.-Canada
and U.S.-Mexico borders, on Indian reservations, and in the states of
the South and the Southeast. The EPA report further states that rural
people are working and living in rural areas with dilapidated or
nonexistent infrastructure. For example, rural places with populations
of less than 1,000 and rural farm populations have the highest
percentage of homes lacking services, well above the national average
of 0.64 percent. See, http://opportunitylinkmt.org/wp-content/uploads/
2015/07/Still-Living-Without-the-Basics-Water.pdf.*
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* Editor's note: the hyperlink to the report, Still Living Without
the Basics in the 21st Century: Analyzing the Availability of Water and
Sanitation Services in the United States, is no longer valid. The
correct link is http://rcap.org/wp-content/uploads/2017/05/Still-
Living-Without-the-Basics-Water.pdf.
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NFFC members--like all rural residents--rely heavily on the USDA's
Water and Environmental Program (WEP) for funding to meet the needs
safe drinking water and environmentally sound sewer systems. Other
relevant water and waste water program includes EPA's Clean Water State
Revolving Fund (CWSRF), Drinking Water State Revolving Fund (DWSRF),
and Environmental Justice Grants and Cooperative Agreements. In Fiscal
Year 2016, USDA Rural Development through WEP, funded 945 projects with
a total funding amount of $1,766,037,313. NFFC applauds USDA for its
implementation of the WEP program. Nevertheless, we are compelled to
point out that equity issues exist when local leaders of the funding
projects place poor and minority communities on the back burner when
deciding which area of the local municipality to first service.
Under the USDA regulations that guide the implementation of the
Water and Environmental Program, small towns and cities with
populations of less than 10,000, have discretion, through the votes of
local elected officials, as to which part of the city or town will be
first serviced with new or improved water or sewer systems. Applicable
case studies reveal that non-minority, affluent parts of a rural city
are serviced first with USDA loans and grants. This environmental
injustice typically occurs when USDA WEP funds are exhausted and the
town's project is cut back or down sized during the design phase. When
downsizing occurs, the city council votes to fund the project in the
rich part of town leaving the poor minority communities on a funding
waiting list that may take decades to receive attention. Poor rural
communities that must wait for basic services such as water and sewer
will continue to see a swift decline in population. Young rural
citizens are not likely to remain.
Housing
Rural residents--farmers and fishermen as well as small business
entrepreneurs--also need access to high-quality, dependable broadband
Internet services. As the USDA moves to become more efficient by
requiring farmers to submit many of their reports online, the ability
to upload and share data in a timely manner becomes even more
necessary. `Last mile to the farm' initiatives, such as Maine's Three-
Ring Binder project, have been supported by rural development funds
through public-private partnerships that should be continued and
expanded, especially as the proposed cuts to rural USDA offices go
forward. We must think of this initiative as equivalent to the rural
electrification projects in the 1940s and 1950s or, even more apropos,
a universal service obligation like the post office or the phone
companies. Broadband is indisputably necessary to the continued
development of our farms and fisheries, rural economies and
communities.
The National Family Farm Coalition recommends that Congress
mandate, through statutory language, that all rural communities,
regardless of socioeconomic status, are treated equitably in the
application of all water, waste water, housing, telecommunications and
environmental programs, regardless of funding shortfalls.
______

Submitted Statement by National Rural Health Association
The National Rural Health Association (NRHA) is pleased to provide
the Committee on Agriculture a statement regarding the state of
infrastructure in rural America and the role it plays in rural health
care delivery.
NRHA is a national nonprofit membership organization with a diverse
collection of 21,000 individuals and organizations who share a common
interest in rural health. The association's mission is to improve the
health of rural Americans and to provide leadership on rural health
issues through advocacy, communications, education and research.
Access to quality, affordable health care is essential for the 62
million Americans living in rural and remote communities. Rural
Americans are more likely to be older, sicker and poorer then their
urban counterparts. Access in rural America is impeded by not only
geography, but also by decreasing reimbursements, physician shortages,
and excessive regulatory burdens.
Rural communities rely on rural infrastructure--from suitable roads
and bridges, to clean water and broadband Internet access--to serve as
necessary access points for a community, just as they rely on the rural
health care delivery system as their access point for medical services.
Investing in hospitals, broadband, and transportation will not only
bolster local rural economies, but will also provide increased access
to care.
The Rural Hospital
Investing in rural health infrastructure is more important than
ever as rural America faces a hospital closure crisis. Eighty-one rural
hospitals have closed since 2010, resulting in 10,000 rural Americans
losing their jobs and 1.2 million rural patients losing access to their
nearest hospital. Even more concerning are the 673 rural hospitals at
risk of closure.\1\ Sustained Medicare cuts threaten the financial
viability of one in three rural hospitals. The loss of these hospitals
would result in 11.7 million patients losing access to care in their
communities. Continued cuts to rural providers have taken their toll,
forcing far too many closures. Medical deserts are appearing across
rural America, leaving many of our nation's most vulnerable populations
without timely access to care.
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\1\ 81 Rural Hospital Closures: January 2010-Present. (n.d.).
Retrieved July 21, 2017, from http://www.shepscenter.unc.edu/programs-
projects/rural-health/rural-hospital-closures/.
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Paired with the closure crisis, rural hospitals are also facing a
brick and mortar crisis. Several rural hospitals standing today are
original Hill Burton facilities. Built decades ago, these facilities
need renovations or replacements, but unfortunately the rural hospital
or community does not have the resources to replace their buildings.
Local care is necessary to ensure patients' ability to adhere to
treatment plans, to help reduce the overall cost of care, and to
improve patient outcomes and their quality of life. The crisis of rural
hospital closures cannot be overstated: closures are devastating to the
health of a community and to its local economy. When a rural hospital
closes, rural residents lose access to their nearest emergency room.
Rising Emergency Medical Services (EMS) costs, delays in obtaining
results from diagnostic laboratory tests and scans, and difficulty in
obtaining treatment for chronic conditions characterize communities
that have experienced hospital closures. Additionally, the network of
other providers that surround hospitals tend to become unstable or
dissolve completely when a hospital is lost.\2\
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\2\ Thomas, S.R., MPP, Kaufman, B.G., BA, Randolph, R.K., MRP,
Thompson, K., MA, Perry, J.R., & Pink, G.H., Ph.D. (2015). A Comparison
of Closed Rural Hospitals and Perceived Impact (Rep.). Chapel Hill, NC:
NC Rural Health Research Program.
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The economic implications of rural hospital closures are
staggering. When a rural hospital closes, the community it served
experiences a per-capita income decrease of $703. Unemployment
increases by 1.6 percentage points. Retirees and businesses are
discouraged from relocating to the community. If all of the 673
vulnerable hospitals were to close, rural America would lose 99,000
direct health care jobs and 137,000 additional community jobs. Over 10
years, rural communities will lose $277 billion in GDP.\3\
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\3\ http://www.shepscenter.unc.edu/wp-content/uploads/2015/04/
AfterClosureApril2015.pdf.
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Both the physical health of patients and the fiscal health of local
economies are hurt when rural hospitals close. Therefore, it is
imperative to fortify this key aspect of the health care infrastructure
in rural communities. To help stabilize rural hospitals, Medicare bad
debt cuts must end. Under the ACA, Medicare bad debt reimbursement to
rural hospitals was cut. Unfortunately, for those hospitals with a
large pool of dual-eligible patients, bad debt cuts can spell financial
disaster.
Bad debt cuts hurt the rural health infrastructure in particular
because rural areas have a higher proportion of dual-eligible patients
than urban areas. Bad debt cuts have been partially responsible for the
closure of one rural hospital per month since 2010. In order to stem
this closure rate and avoid the serious economic and health-related
implications of more rural hospital closures, cuts in bad debt
reimbursement must be reversed. Enactment of such a policy would
empower rural hospitals to not only treat the poorest, sickest patients
in its community, but also to remain operational and provide access to
care to rural Americans.
Rural Transportation
In rural America, transportation infrastructure is dilapidated.
Traffic crashes and fatalities are 2\1/2\ times more likely to occur on
rural non-interstate roads.\4\ Over \1/3\ of rural America's roads are
in poor or mediocre condition.\5\ Due to such poor conditions, farmers
may have difficulty transporting crops to market. Small business owners
may be unable to attract customers. Logistics can be more expensive.
And in the health sector, patients face barriers to care that can range
from inconvenient to insurmountable.
---------------------------------------------------------------------------
\4\ Rural Hospital Closures Decimating Rural Health Care Delivery
(2016). National Rural Health Association; Washington, D.C.
\5\ Rural Transportation Facing a Rough Road. (2017, June 30).
Retrieved July 26, 2017, from https://www.infrastructurereportcard.org/
rural-transportation-facing-a-rough-road/.
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Rural transportation infrastructure can encumber--or, with
improvement, expedite--travel to medical care providers. Patients who
must travel long distances to providers and those who lack readily-
available methods of transportation are more likely to be late to or
altogether miss appointments, face disruptions in care for chronic
diseases, and forego preventive care because of transportation costs.
The regularity with which patients use some medications, like insulin
for diabetes patients, decreases the further the patient lives from his
or her provider.\6\
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\6\ Transportation Fact Sheet (Rep.). (n.d.). Washington, D.C.:
Rebuild Rural.
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The transportation infrastructure of rural America can be a key
barrier for accessing health care. For those that cannot afford to miss
work hours, do not own a car or another mode or transportation, or live
considerable distances from the nearest clinic or hospital, poor
transportation and inadequate roads cause unnecessary difficulty that
discourages patients from seeking primary and preventive care. If
patients utilize primary and preventive care, then health outcomes
improve. Additionally, such utilization of primary and preventive care
helps reduce health care costs.\7\ Therefore, improvements in
transportation contribute directly to making health care more
accessible.
---------------------------------------------------------------------------
\7\ Rural Health. (n.d.). Retrieved July 24, 2017, from https://
www.ruralhealthinfo.o/topics/transportation#consequences
---------------------------------------------------------------------------
Increasing access to care via infrastructure improvements requires
public funding and leadership. The public maintains roads and bridges;
therefore, public funds are required to renovate them. Rural America
faces a unique challenge in this regard: only 44% of rural road mileage
is eligible for Federal grants. Expanding eligibility requirements for
Federal funding will allow more rural roads to become eligible for
Federal funds,\8\ thereby increasing opportunities for refurbishment.
---------------------------------------------------------------------------
\8\ Syed, S.T., Gerber, B.S., & Sharp, L.K. (2013). Traveling
Towards Disease: Transportation Barriers to Health Care Access. Journal
of Community Health, 38(5), 976-993. http://doi.org/10.1007/s10900-013-
9681-1.
---------------------------------------------------------------------------
Other measures should also be taken to improve rural transportation
infrastructure. Developing a system of block grants for investment has
significant upside. Block grants would allow states and local
communities to assign priority to certain infrastructure projects. If
rural stakeholders are involved in setting priorities, Federal block
grants can both fund rural infrastructure improvements, while limiting
the cost to the Federal Government and incentivizing an efficient use
of government resources.
Finally, widespread adoption of the public-private partnership
(PPP) concept could achieve results like those of block grants. As
private companies vie for the government's business, competitive
economic forces drive the prices of their services down. Additionally,
private corporations promise high quality in order to compete. Value
engineering, emphasis on rapid project completion, innovation, and
utilizing economies of scale are advantages of PPPs.\9\ Thirty states
and the District of Columbia have drafted or passed legislation
allowing PPPs to undertake infrastructure improvements. If the Federal
Government can do the same to bring PPPs to more of the country's
infrastructure improvement projects, the result could be infrastructure
that helps facilitate, rather than deny, patients' access to health
care.
---------------------------------------------------------------------------
\9\ Written Testimony on The State of Infrastructure in Rural
America, 115th Cong. (2017) (testimony of Richard R. Calhoun).
---------------------------------------------------------------------------
Telemedicine to Bridge Infrastructure Gaps
Telemedicine can serve as a method of circumventing the challenges
of physical infrastructure. It has, for some time, experienced growth
in popularity and capabilities. For the physician, telemedicine eases
the consultation process. All physicians can benefit from consultation,
but the practice is particularly relevant to younger, inexperienced
doctors. Especially for young doctors working in rural and health
professional shortage areas, ease of consultation may encourage them to
remain in their respective communities. This would help reduce the
ongoing physician shortages in rural America.
Last, telemedicine can help diminish the need to see patients in
person for preventive appointments or education sessions. Of course, in
many cases physicians have no choice but to call a patient into the
office or venture to a patient's home, for example, to perform a
physical examination. However, for those cases in which the physician
does not need to see the patient in person, he or she can visit with
the patient virtually, eliminating the need for travel on the part of
the physician or the patient.
To encourage the implementation and use of telemedicine, the
Federal Government must lead on two fronts. First, geographic site
restrictions in Medicare must be lifted to encourage the widespread
realization of the benefits of telemedicine. Restrictions like these
inhibit adequate reimbursement for rural providers that use
telemedicine services to see patients.\10\ Second, the licensure
process for telemedicine providers must be streamlined. Current
licensure restrictions can be cumbersome and limiting to providers for
whom telemedicine would be hugely beneficial. Encouraging uniformity
among state regulatory bodies that handle licensure is imperative.
These bodies should be encouraged to collaborate to allow rural
telemedicine users to obtain licenses efficiently and effectively care
for their patients.\11\
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\10\ Stitt, C. (2017, March 3). Infrastructure Spending and Public-
Private Partnerships--by Charles. Retrieved July 26, 2017, from https:/
/www.hudson.org/research/13407-infrastructure-spending-and-public-
private-partnerships.
\11\ Daniel, H., BS, & Sulmasy, L.S., JD. (2015). Policy
Recommendations to Guide the Use of Telemedicine in Primary Care
Settings: An American College of Physicians Position Paper. Annals of
Internal Medicine,787-789. doi:10.7326/M15-0498.
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Rural Broadband
Before expansions in telemedicine can become widespread, steps must
be taken to shore up the rural broadband infrastructure. Internet
access in rural America is poor compared to access in urban areas.
Thirty-nine percent of rural Americans lack access to appropriate
broadband Internet speeds (as defined by the FCC). In urban America,
only 4% lack access to Internet of these standard speeds.\12\ Internet
access for health care providers is worse in rural areas than in urban
areas as well: 7% of providers in rural America lack access to
appropriate Internet speeds. The national average is 1%.\13\ Last, even
when the appropriate speed is available, it can be three times more
expensive in rural areas than in urban areas.\14\ Before health
outcomes can significantly improve in rural America, comprehensive
broadband access is needed.
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\12\ Giger, J., & DeVany, M. (2013). Streamlining Telemedicine
Licensure to Improve Rural America (Issue brief). Washington, D.C.:
National Rural Health Association.
\13\ 2016 Broadband Progress Report. (2016, January 29). Retrieved
July 19, 2017, from https://www.fcc.gov/reports-research/reports/
broadband-progress-reports/2016-broadband-progress-report.
\14\ Kaushal, M., Patel, K., McClellan, M.B., Darling, M., &
Samuels, K. (2016, July 28). Closing the rural health connectivity gap:
How broadband funding can improve care. Retrieved July 19, 2017, from
https://www.brookings.edu/blog/health360/2015/04/01/closing-the-rural-
health-connectivity-gap-how-broadband-funding-can-improve-care/.
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The ramifications of lacking appropriate Internet are manifold.
Without reliable Internet connections, modern telemedicine is
impossible. Timely consultations are made more difficult. Patient
education and access to provider information is limited.
There would be significant benefits to the rural health care system
from improving rural broadband access. Rural areas can be equipped with
cutting-edge telemedicine services. Rural patients can be empowered to
seek education regarding their medical care. Patients and providers can
benefit through access to electronic health records.
The Federal Government can support broadband Internet access for
rural America through a few courses of action. First, it must continue
funding for the Universal Service Fund (USF). Cuts have diminished the
USF budget considerably. Sufficient funding is a prerequisite to
adequate broadband access in rural areas. Additionally, continued
support of the Rural Utilities Service's (RUS) Broadband Loan Program
can help to finance the high up-front cost of developing a broadband
network in a rural area, thereby removing barriers to implementing
broadband networks in rural areas.
Finally, like the case of transportation infrastructure
improvement, PPPs and public-private cooperation (PPC) can drive down
the cost of network implementation and improve quality through
competition and shared risk. A public entity, whether on the local,
state, or Federal governmental level, can lower barriers like
regulation and taxation of private companies to incentivize the
extension of broadband Internet services to rural communities.
Again, the permeation of broadband Internet access into rural
communities can work to improve or encourage patient engagement in
care, patient education, the convenience of provider consultations, and
the adoption of telemedicine. Each of these areas can translate into
enhanced health care access and improved health outcomes.
Conclusion
Rural infrastructure could be improved to better provide the health
care services that rural Americans need. Rural hospital closures, poor
transportation, lack of telemedicine services, and insufficient
broadband coverage inhibit patients' access to care, worsen health
outcomes, and increase health care costs. Increased funding for
infrastructure in rural health can improve access to health services
and stimulate economic growth in rural America.
The National Rural Health Association appreciates the opportunity
to provide our input to the Committee. We greatly appreciate the
support of the Committee and look forward to working with Members of
the Committee to continue making these important investments in rural
America.
______

Submitted Questions
Response from Curtis Wynn, President and Chief Executive Officer,
Roanoke Electric Cooperative; Vice President, Board of
Directors, National Rural Electric Cooperative Association *
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* There was no response from the witness by the time this hearing
was published.
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Questions Submitted by Hon. Vicky Hartzler, a Representative in
Congress from Missouri
Question 1. When traveling around my district and talking with
everyone from school teachers to farmers, the need for access to high
speed broadband is always on the top of my constituents' minds. I
joined my colleagues in a letter to President Trump earlier this year
in asking for rural broadband to be included in the infrastructure
package, and I have been working diligently with state and local
partners to address the challenges facing the rural portions of my
district.
I have found there is inconsistency with the definition of rural
broadband across the country and throughout various Federal programs.
Currently, the FCC defines broadband speed at 25 megabits per second
download and 3 megabits per second upload while various programs within
the Rural Utilities Service at USDA have different minimum speed
definitions for broadband.
Would a unified definition of broadband across Federal agencies
create a more equitable environment for rural Americans? How would a
unified definition of broadband impact infrastructure investment
decisions on companies?

Question 2. Is the FCC the best suited Federal agency to set the
Federal benchmark for high speed Internet?
Response from Jennifer L. Otwell, CPA, Vice President and General
Manager, Totelcom Communications, LLC; on behalf of NTCA--The
Rural Broadband Association
Questions Submitted by Hon. Vicky Hartzler, a Representative in
Congress from Missouri
Question 1. When traveling around my district and talking with
everyone from school teachers to farmers, the need for access to high
speed broadband is always on the top of my constituents' minds. I
joined my colleagues in a letter to President Trump earlier this year
in asking for rural broadband to be included in the infrastructure
package, and I have been working diligently with state and local
partners to address the challenges facing the rural portions of my
district.
I have found there is inconsistency with the definition of rural
broadband across the country and throughout various Federal programs.
Currently, the FCC defines broadband speed at 25 megabits per second
download and 3 megabits per second upload while various programs within
the Rural Utilities Service at USDA have different minimum speed
definitions for broadband.
Would a unified definition of broadband across Federal agencies
create a more equitable environment for rural Americans? How would a
unified definition of broadband impact infrastructure investment
decisions on companies?
Answer. A unified definition of broadband would only impact rural
broadband investment to the extent it helped identify areas in need and
then directed sufficient funding through the USF High Cost program to
meet the Communications Act principle of reasonably comparable services
and rates in urban and rural America. The High Cost program is what
helps rural carriers make the business case to serve territory where
the customers gained cannot begin to cover the enormous capital and
operating expenses of rural network deployment.
The FCC decided over 2 years ago that a 25/3 Mbps broadband
connection represented ``table stakes'' for modern communications. Many
reports on the state of the Internet today report average speeds that
are relatively close to this figure as well. And yet the FCC's High
Cost program is not designed or funded to ensure rural Americans can
receive at least such speeds. Instead, most components of the High Cost
program only aim to promote the deployment of 10/1 Mbps service,
apparently because the High Cost program lacks the resources to support
more robust, efficient, and future-proof deployments.
Thus, even if there were a ``unified definition'' of broadband
across Federal agencies, in the absence of resources to back that
definition up, a definition--assuming it were set at speeds comparable
to what most urban Americans enjoy--would only serve to highlight the
failure of our universal service policies to help rural America keep
pace. In fact, the High Cost program has been under the same overall
hard cap since 2011, and the underlying budget that helps enable
investment and operations specifically by smaller operators based in
rural America is predicated upon the same 2011 funding levels as well.
As a result, an additional $110 million per year is needed to fully
fund an alternative model that the FCC created to promote broadband
deployment--this shortfall will leave 71,000 rural locations with
lower-speed broadband and nearly 50,000 may see no broadband investment
at all. And just as troubling if not more so, the outdated budget level
dictates that small carrier recipients of High-Cost USF that could or
did not elect model support will, from July 1, 2017 through June 30,
2018, be affirmatively denied recovery of $173 million in actual costs
for private broadband network investments that these carriers have
already made.
A recent survey of non-model NTCA member companies revealed that
the average respondent estimates charging $126 per month for standalone
broadband under the budget control--far more than most rural consumers
could afford. Further, the average response predicted charging only $70
per month for standalone broadband if the budget control were not in
place and carriers received support for investments under program
rules. These numbers reveal that the hard cap on the High Cost budget
that has been in place since 2011 is preventing the High Cost program
from helping rural providers offer reasonably comparable services and
rates as called for in the Communications Act.
Thus, to summarize, a Federal definition of broadband, if revisited
regularly to keep pace with technology developments to ensure true
reasonable comparability, could create a more equitable environment for
rural Americans. But such a definition is only as good as the
underlying programs designed to achieve it--and in the case of
universal service policy, such a goal must be tied to sufficient
resources in the form of USF support to support deployment of networks
capable of delivering broadband at the ``Federal speed.''

Question 2. Is the FCC the best suited Federal agency to set the
Federal benchmark for high speed Internet?
Answer. The FCC--with the expertise and data the agency has at its
disposal--is well situated among Federal agencies to set a Federal
benchmark for broadband. But again, setting one Federal benchmark will
only be helpful if matched with resources to finance and support
broadband deployment in the highest-cost areas of the nation. It is
also worth noting that RUS, which continues to help finance in the
first instance construction of many of the networks in rural America
just as it did in wiring rural America for electricity, can and should
play a useful role in any such exercise, particularly as (in its
financing role) it takes a unique and well-informed long-term
perspective on the sustainability of rural infrastructure, rather than
merely thinking of short-term objectives that might quickly become
outdated.

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