Senate Report 109-186 - WATER INFRASTRUCTURE FINANCING ACT

[Senate Report 109-186]
[From the U.S. Government Publishing Office]

Calendar No. 304
109th Congress Report
SENATE
1st Session 109-186

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WATER INFRASTRUCTURE FINANCING ACT

_______

December 8, 2005.--Ordered to be printed

Filed under authority of the order of the Senate of November 18, 2005

_______

Mr. Inhofe, from the Committee on Environment and Public Works,
submitted the following

R E P O R T

[to accompany S. 1400]

[Including cost estimate of the Congressional Budget Office]

The Committee on Environment and Public Works, to which was
referred a bill (S. 1400) to amend the Federal Water Pollution
Control Act and the Safe Drinking Water Act to improve water
and wastewater infrastructure in the United States, having
considered the same reports favorably thereon with amendments
and recommends that the bill, as amended, do pass.

General Statement

S. 1400 is a bill that amends the Federal Water Pollution
Control Act (CWA) and Title XIV of the Public Health Service
Act (Safe Drinking Water Act) to reauthorize the State
Revolving Loan Funds (SRF) in each Act. The bill also creates a
research and demonstration program to develop new water and
wastewater treatment approaches and technologies; authorizes a
study of the nation's water resources and creates a clean water
and a drinking water targeted grant program to address specific
wastewater and water problems.

Background

Clean Water Act Program
Enacted in 1948 and comprehensively amended in 1972, 1977,
1981 and 1987, the CWA governs the discharge of pollution into
the nation's navigable waters. The 1972 amendments strengthened
the Federal construction grants program (Title II) through
which the Federal Government provided grants to municipalities
to construct publicly owned wastewater treatment plants
(POTWs). The Federal share of the projects was increased from
55 percent to 75 percent of the total project cost. Five years
later, in 1977, Congress increased the role of States in
managing the construction grants program and provided new
incentives to address wastewater needs with innovative or
alternative treatment technologies. Congress continued to
transition the program to the States by returning the Federal
cost share to 55 percent in its 1981 amendments to the Act.
The 1987 amendments further reformed the way the Federal
Government assisted local governments in meeting the costs of
water infrastructure projects. Recognizing a need to extend the
life of each dollar in the system, Congress adapted an
innovative approach, called the State Revolving Loan Fund (SRF)
through which States would receive an annual grant with which
they would capitalize revolving loan funds. Once a town repaid
a loan, the money could then be loaned again to another
community. The construction grants program was phased-out over
the next 5 years giving States ample time to get their SRFs
fully operational. The authorization for the construction
grants program ended in 1990. The authorization for the SRF
ended in 1994, after a sharp decline in its authorization level
from $1.2 billion in 1993 to $600 million in 1994. This decline
and eventual elimination of the authorization level is a clear
signal that Congress intended for the Federal contribution to
end and for the States and localities to assume full
responsibility for the cost of building their treatment
works.\1\
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\1\ ``Water Infrastructure Needs and Investment: Review and
Analysis of Key Issues.'' congressional Research Service Report for
Congress, RL3116. May 5, 2005; page 6.
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The 1987 amendments also created an allocation formula
according to which States would receive their annual share of
the Federal appropriation. The formula gave each State a
prescribed percentage that except for a few minor adjustments
in the 1990's to account for the end of financing to three of
the U.S. territories has remained the same for the past 18
years. There is growing concern that the current formula is no
longer reflective of which States have the greatest need for
infrastructure funds.
In order to receive their share of the Federal pot of
money, each State signs a capitalization agreement with the
Environmental Protection Agency (EPA) that includes a
commitment to match 20 percent of the Federal grant. States are
further required to create a priority list of projects that are
eligible for funding using criteria chosen by the State. The
State is not required to fund according to the order projects
appear on the list largely because at any one time a
particularly large project may not have the local funds in
place. Further, a State may place those projects along a
particular water body highest on its priority list but would
still need to provide funds to projects with perhaps great
local importance, but less State-wide significance. The loans
are available at market rates or below and must be repaid
within 20 years, the typical life of a treatment works.
Congress envisioned States providing loans expeditiously but
also leveraging some of money to gain interest and grow their
individual funds.
Currently, POTWs, projects contained in a State's nonpoint
source pollution plan (section 319) and projects contained in a
State's estuary comprehensive conservation and management plan
(section 320) are eligible for funding. States have provided
$1.8 billion for nonpoint source projects and estuary-related
projects\2\. The Clean Water Act and some State laws do not
allow privately owned treatment works to access the SRF.
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\2\ ``Clean Water State Revolving Fund Programs/2004 Annual
Report'' Environmental Protection Agency, April 2005. EPA-832-R-05-001.
Page 11.
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Safe Drinking Water Act Program
In 1974, the Safe Drinking Water Act (SDWA) was first
enacted as an amendment to the Public Health Services Act
through which the EPA had previously regulated contaminants in
drinking water. The 1974 law provided the EPA with authority to
regulate drinking water contaminants while providing the States
with authority over the implementation and enforcement of the
EPA established standards. The Public Health Service Act
required the regulation of 22 contaminants. In 1986, Congress
substantially amended SDWA to require the EPA to issue
regulations for 83 other contaminants by June 1989 and 25
others every 3 years thereafter. The EPA was also required to
publish regulations for the disinfection and filtration of
public water supplies.
Because the EPA, the States and public water systems had
difficulty with the requirements of the 1986 amendments,
Congress again amended SDWA in 1996.\3\
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\3\ Senate Report 104-169 accompanying Safe Drinking Water
Amendments Act of 1995. Page 2.
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Congress replaced the requirement that the EPA regulate 25
contaminants every 3 years with a requirement that beginning in
1998, and each 5 years thereafter, that the EPA publish a list
of contaminants that may need to be regulated. Beginning in
2000 and each 5 years thereafter, EPA must determine whether or
not to regulate five of those contaminants. Concern over how
communities, particularly small systems, would pay to meet
these requirements and upgrade their systems led Congress to
duplicate the Clean Water SRF with the Drinking Water SRF.\4\
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\4\ Ibid, pages 11-12.
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Similar in many ways to the Clean Water SRF, the Drinking
Water SRF provides communities with access to a State managed
loan program. However, Congress took this opportunity to
improve upon the SRF structure with many changes not included
in the Clean Water program that were designed to increase State
flexibility. To begin, to address the needs of disadvantaged
communities, the SDWA provides States with authority to provide
negative interest loans and principal forgiveness for
disadvantaged communities through the Drinking Water SRF and
give these disadvantaged communities 30 years to repay the
loan. The Drinking Water SRF's authorization of $1 billion
expired in 2003.
As with the Clean Water SRF, States must also create a
priority list but are required to fund in order with a `ready-
to-proceed' exception so that State programs do not sit idle if
the project at the top of its list is delayed in getting the
local share of financing in order. States are required to give
first priority to those projects that address the most serious
risk to human health, are necessary to ensure compliance, and
assist systems most in need on a per household basis. The
States are required to match 20 percent of the annual Federal
capitalization grant. Private utilities are eligible for the
Drinking Water SRF.
The SDWA also distributes money to the States based on a
formula. However, unlike the Clean Water SRF formula, the
Drinking Water SRF formula changes every 4 years with the
publication of EPA's drinking water needs assessment, required
by the Safe Drinking Water Act. States must document and submit
to EPA the funding requirements for their communities to meet
the costs of the Act. EPA then determines what percent of the
nationwide need each State has. The formula for the
distribution of Federal funds is the State's percent of the
nationwide need adjusted to ensure that those States with less
than 1 percent of the nationwide need, receive 1 percent of the
funding. This amount would assist small States, which otherwise
might not receive enough funds to provide adequate assistance
to their communities, in maintaining viable programs.

Need for legislation
The SRFs have been very successful in dispersing assistance
to POTWs and Public Water Systems (PWSs) throughout the
country. The State Clean Water SRFs have over $50 billion
available for assistance and have provided more than 15,000
loans to communities across the country.\5\ It is important to
note that some of these projects are initiated and implemented
by nongovernmental entities that may experience difficulty in
some States in applying for and receiving SRF funds. The
Drinking Water SRF has provided 3,700 loans totaling over $8.0
billion.\6\
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\5\ ``Clean Water State Revolving Fund Programs/2004 Annual
Report'' (EPA-832-R-05-001) Environmental Protection Agency, April
2005; page 2.
\6\ ``Drinking Water Infrastructure Needs Survey and Assessment''
Environmental Protection Agency, June 2005, page 2.
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However, the need for infrastructure dollars continues to
grow and according to several studies, outpaces what the nation
as a whole spends. The Environmental Protection Agency (EPA)
conducts two surveys, every 4 years, of the States' drinking
water and wastewater needs. According to the two most recent
needs surveys for drinking water (2003) and wastewater (2000),
EPA estimates the nationwide need to be $457 billion over 20
years. There are also several independent analyses of the `gap'
between what we as a nation currently spend on infrastructure
and what we need to spend. In 1999, the Water Infrastructure
Network, a consortium of water and wastewater providers,
researchers, environmentalists, engineers and product
manufacturers, released a study identifying the 20-year need
for clean water and drinking water as $11 billion a year for
drinking water capital construction costs and $12 billion a
year for clean water capital construction costs.\7\ In 2002,
the EPA determined the gap for clean water ranged from $21
billion to $122 billion over 20 years and the gap for drinking
water ranged from $45 billion to $102 billion.\8\ The
Congressional Budget Office also conducted a gap analysis in
which it concluded the gap ranges from $3 billion to $19.4
billion per year.\9\
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\7\ Clean and Safe Water for the 21st Century; Water Infrastructure
Network. 200. Page ES-1.
\8\ The U.S. Environmental Protection Agency. `The Clean Water and
Drinking Water Gap Analysis.' 2002. Page 43.
\9\ U.S. Congressional Budget Office. `Future Investment in
Drinking Water and Wastewater Infrastructure.' 2002. Page 26.
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The committee, for the third consecutive Congress, has
acknowledged that the nationwide drinking water and wastewater
infrastructure need continues to far outpace the amount of
funding that is available from all levels of government.
Therefore, the committee and the Congress has maintained a
commitment to fund the programs until the SRFs revolve at
levels sufficient to meet the needs of local communities. For
instance, in 1995, when appropriations were scheduled to cease,
the Clean Water SRF received $1.2 billion, double the
previously authorized level. The lowest amount of funding the
program received was $625 million in 1997. Since the expiration
of the Act's authorization in 1994, annual appropriations have
fluctuated. For several years, annual appropriations were $1.35
billion. However, in fiscal year 2005, appropriations were cut
to $1.1 billion and again in fiscal year 2006 to $900 million.
These respective amounts and the $850 million annually provided
to the Drinking Water SRF are not sufficient. Each level of
government--local, State and Federal--must assess what it is
currently contributing, add to the available funds, and
determine how to increase efficiencies in their systems to make
the most of the funds in the clean water and drinking water
programs.

Objectives of the Legislation

S. 1400 seeks to update the two State Revolving Loan Funds
(SRF), which are the primary Federal funding mechanisms for
clean water and drinking water. Both SRFs are expired and in
need of moderate updating. The Clean Water SRF lacks many of
the flexibility mechanisms that are currently a part of the
drinking water program. The bill also seeks to promote the
research and development of new ways of meeting water quality
goals through a research and demonstration pilot program.
Finally, the bill would help communities meet the costs
associated with many regulatory requirements, pursue watershed
plans, and address some of the nation's most pressing water
quality problems through limited and directed grant assistance.

Section-by-Section Analysis

TITLE I--WATER POLLUTION INFRASTRUCTURE

Sec. 101. Technical assistance for rural and small treatment works.
This section adds Section 222 to the Clean Water Act in
which it defines `Qualified Nonprofit Technical Assistance
Provider' as a qualified nonprofit technical assistance
provider of water and wastewater services to rural communities
of 10,000 users and fewer.
Section 222(a) will create a grant program through which
the Administrator may make grants to qualified nonprofit
technical assistant providers to:

(A) Assist small POTWs in planning, developing and
obtaining financing for eligible projects, defined in
section 603(c) of the Clean Water Act;
(B) To capitalize revolving loan funds, in
consultation with the State, to rural and small
municipalities for predevelopment costs, including
costs for planning, design, associated preconstruction,
and necessary activities for citing the facility and
related elements, or short-term costs incurred for
equipment replacement that is not part of a regular
operation and maintenance activities. Loan terms cannot
exceed 10 years and loans cannot exceed $100,000. Loan
repayments will be credited to the fund maintained by
the qualified nonprofit;
(C) Provide technical assistance and training for
rural and small POTWs and decentralized wastewater
treatment systems to enable them to protect water
quality and achieve and maintain compliance with the
Act; and
(D) To disseminate information to rural and small
municipalities with respect to planning, design,
construction and operation of POTWs and decentralized
wastewater treatment systems. The Administrator shall
to the maximum extent practicable ensure that grants
are made available in each State. The nonprofit
provider will submit a report to the Administrator
detailing the number of communities served, the sizes
of those communities and the types of financing
provided by the nonprofit provider.

Section 222 authorizes $25 million for each fiscal year
2005 through 2009.
Section 222(b) amends Section 602 of the Clean Water Act to
include a definition of small system as one that serves 10,000
or fewer individuals and is one for which a municipality or
intermunicipal, interstate, or State agency seeks assistance
under this section. Further, no later than 1 year after
enactment, the Administrator must assist States in establishing
simplified procedures for small systems to obtain assistance
and after providing notice and opportunity for public comment,
publish a manual to assist small systems in obtaining
assistance; and publish in the Federal Register notice of
availability of the manual.

Discussion

According to EPA, more than 70 percent of the nation's
housing units with inadequate plumbing are in small
communities. More than 19 million households in small
communities are on septic systems or cesspools as their primary
source of treatment.\10\ The 2000 EPA Clean Watersheds Needs
Survey indicates that small systems, those serving fewer than
10,000 individuals, represent about 10 percent of the
nationwide funding need, or $16 billion. Seventy-four percent
of wastewater treatment systems serve small communities which
account for only 12 percent of the nation's population. While
the needs of these communities are great, the ability of their
ratepayers to pay the costs of those needs is limited.
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\10\ The U.S. Environmental Protection Agency, `Wastewater
Treatment Programs Serving Small Communities.' (EPA 832-R-02-004.)
December 2002. Page 1.
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The Environmental Protection Agency has several existing
programs aimed at helping small systems and unsewered
communities to maintain and upgrade their systems. The National
Environmental Training Center for Small Communities develops
and delivers training courses for both POTWs and drinking water
systems operators. The National Small Flows Clearinghouse
provides information about treatment options and the Operator
On-Site Technical Assistance Program (section 104(g) of the
Clean Water Act) provides compliance assistance to small POTW
operators as well as help with maintenance and financing.
The committee however continues to hear of a need for
additional assistance for these small systems. In a letter to
the committee on February 5, 2004, the Rural Community
Assistance Program cited the need for assistance with
predevelopment costs. Many small POTWs cannot afford the costs
associated with planning a project, including the engineering
costs. Without these initial steps completed, the POTW often
has difficulty applying for an SRF loan to begin construction.
The U.S. Department of Agriculture Rural Community Advancement
Program, for example, runs several small SRFs in States to
assist small POTWs with these startup costs, enabling them to
then apply for funds through the State-run SRF for construction
costs. Section 101 enables the Administrator to provide money
to nonprofit technical assistance providers to create and run
these smaller SRFs. This section also provides nonprofit
technical assistance providers with funds to assist treatment
works in identifying and securing financing for projects;
provide technical assistance to operators of systems on how to
best manage their POTW and meet regulatory requirements. It
also authorizes funds for the dissemination of information on
financing, system management and water quality for small
systems.
Sec. 102. Projects eligible for assistance.

Summary

This section amends Section 603(c) of CWA by modifying the
project eligibility list with several changes.
Section 102(c) establishes that funds can be used only to
provide assistance to a municipality, intermunicipal,
interstate or State agency, or private utility that principally
treats municipal wastewater or domestic sewage for
construction, including costs of planning, design, associated
preconstruction and necessary activities for citing the
facility and related elements of a treatment works;
implementation of management program under Section 319;
development and implementation of a management plan under
section 320; projects by a municipality, intermunicipal,
interstate or State agency to increase security at a POTW,
excluding operation and maintenance costs; to control municipal
stormwater runoff; water conservation projects, the primary
purpose of which is to protect, preserve or enhance water
quality; and reuse, reclamation or recycling projects the
primary purpose of which is the preservation, protection or
enhancement of water quality.

Discussion

This section expands the entities and activities eligible
for assistance. By clarifying that preconstruction activities
are eligible for funding, Section 102(c) ensures treatment
works are able to receive financing for engineering costs and
other planning costs that precede actual construction. This
provision will ensure that small communities with few resources
available to develop a project in its early stages can receive
assistance for pre-construction activities.
This provision maintains current law eligibility of both
section 319 and section 320 projects.
This section would extend eligibility to privately owned
treatment works. These systems are currently not eligible for
assistance through the SRF. This section of the bill ensures
that the eligibility expansion to privately owned treatment
works only allows private utilities that ``principally treat
municipal wastewater or domestic sewage'' to access the SRF.
The committee does not intend for privately owned entities that
do not meet this definition to access the fund.
After the terrorist attacks of September 11, much attention
is being paid to security at the nation's treatment works.
While EPA currently allows POTWs to use the SRFs for security-
related costs, this provision would state the eligibility in
statute, clarifying that in fact capital costs are eligible.
Security costs associated with operations, maintenance and
personnel are not eligible for the SRF.
With finalization of the stormwater Phase II regulations
(64 FR 68721), municipalities across the country face
additional expenses trying to reduce and mitigate contaminated
stormwater. Because there has been some confusion over whether
these projects are eligible for SRF funding, this provision
clarifies that these costs are in fact eligible for SRF loans.
Finally, it would extend eligibility to water conservation
projects, the primary purpose of which is the protection,
preservation or enhancement of water quality. While typically
seen as a problem for western States, water supply has become a
nationwide concern. One aspect of the problem is the lack of a
clean water supply, not just the lack of water in general. This
provision envisions enabling States and localities to fund
water conservation, reuse, recycling and reclamation projects
that will enhance the supply of clean, safe water.
Sec. 103. Water pollution control revolving loan funds.

Summary

This section amends the types of assistance that can be
offered through the Clean Water State Revolving Fund (CWSRF) to
include a revolving loan fund operated by a municipal,
intermunicipal or interstate entity, State, public or private
utility, corporation, partnership, association, or nonprofit
agency to fund projects that are part of a 319 or 320
implementation. The loans must be fully paid within 30 years of
their issuance.

Discussion

Section 103 reiterates the authority of States to fund
smaller SRFs operated by a municipal, intermunicipal or
interstate entity, State, public or private utility,
corporation, partnership, association or nonprofit agency to
fund projects related to nonpoint source pollution and estuary
management plans. Funds cannot be used for traditional POTWs.
Sec. 104. Affordability.
This section amends Section 603 by adding a subsection (e)
which includes a series of flexibility mechanisms designed to
improve assistance provided to disadvantaged communities and
increase the flexibility offered to States. These provisions
are similar to provisions already in the SDWA.
Section (e)(1) defines `disadvantaged community' as a
service area, or portion of a service area that meets State
affordability criteria.
Section (e)(2) provides the State with authority to provide
additional subsidization, including principal forgiveness and
an interest rate on the loan of zero percent, to a
disadvantaged community or one the State expects to become
disadvantaged as a result of a project.
Section (e)(3) limits the total loan subsidy to no more
than 30 percent of the State's annual capitalization grant.
Section (e)(4) allows the State to extend the life of a
loan from the current statutory limit of 20 years to 30 years
but not to exceed the expected design life of the facility.
Section (e)(5) authorizes the Administrator to publish
information to assist States in establishing affordability
criteria.

Discussion

This section applies flexibility mechanisms from the Safe
Drinking Water Act and applies them to the Clean Water program.
These flexibility mechanisms provide the State with the ability
to provide additional assistance to disadvantaged communities,
such as forgiveness of their loans or zero-interest loans. It
also allows the State to provide a 30-year loan instead of the
current 20-year loan, provided the loan does not exceed the
life of the asset. New to both SRFs is the ability of the State
to provide these additional benefits to communities that may
not meet a State's criteria for a disadvantaged community as a
whole, but may have a `portion of a service area' that does
meet the criteria. Many large cities do not qualify as
disadvantaged under their State's definition of the term
because they have pockets of low-income ratepayers, industry,
and pockets of affluent ratepayers. Under Section 204(b) of the
CWA, each wastewater user or class of users must pay its
proportional share of the cost of service. Therefore, POTWs are
essentially prohibited from raising rates on one sector of
ratepayers, i.e. industry, in order to offset a cut in rates to
another sector, i.e. residential, if the facility has ever
received Federal grant money. Most of today's treatment works
were funded at least in part with Title II construction grant
dollars. Further, it is often politically difficult to raise
rates only on those people with a proven ability to pay. In
order to assist cities struggling to pay for infrastructure
upgrades without imposing too high a burden on their low-income
ratepayers, this provision makes them eligible for
disadvantaged assistance.
Sec. 105. Transferability of funds.

Summary

This section allows the States to transfer up to 33 percent
of their Clean Water SRF into the Drinking Water SRF. The funds
transferred however cannot be used by a State to meet its 20
percent match requirement.

Discussion

Each year the Committee on Appropriations in the
appropriations bill for the Environmental Protection Agency
includes a provision allowing States to transfer portions of a
State's capitalization grant from one SRF to the other. Section
106 permanently extends the authority to transfer no more than
33 percent of a State's Clean Water capitalization grant into
the Drinking Water State Revolving Fund (DWSRF). It clarifies
that the funds transferred cannot be considered by a State to
meet its SDWA requirement to match the Federal capitalization
grant for the DWSRF by 20 percent.
Sec. 106. Costs of administering water pollution control revolving loan
funds.

Summary

This section increases the percentage of funds a State is
authorized to set-aside for program administration from 4
percent to 6 percent.

Discussion

While the committee does not anticipate that the
requirements in this bill will result in new administrative
burdens to the States, with the intended increase in
appropriations authorized in the bill, it is reasonable to
allow States to reserve a larger, but still small, percentage
of the SRF to meet their administrative costs associated with
carrying-out their responsibilities.
Sec. 107. Water pollution control revolving loan funds.

Summary

This section amends section 603(h) of the Clean Water Act.
Section (h)(1) adds several definitions including:
`Restructuring' as the consolidation of management functions or
ownership with another facility or the formation of cooperative
partnerships; and `Traditional Wastewater Approach' as a
managed system used to collect and treat wastewater from an
entire service area consisting of collection sewers, a
centralized plant using physical or chemical treatment
processes, and a direct point of discharge to surface water.
Section h(2)(A) requires States to amend their existing
priority system so that projects would be more likely to
receive assistance by submitting such other information as
determined by the State, and:

(i) An inventory of assets, including a description
of those assets;
(ii) A schedule for replacement of those assets;
(iii) A financing plan indicating sources of
revenue;
(iv) A review of options for restructuring the
treatment works;
(v) A review of options for approaches other than
traditional wastewater approaches that may include
actions or projects that treat or minimize sewer or
urban storm water discharges including decentralized or
distributed storm water controls, decentralized
wastewater treatment, low impact development
technologies, stream buffers, wetland restoration and
actions to minimize the amount of and direct
connections to impervious surfaces;
(vi) Demonstration of consistency with State,
regional and municipal watershed plans;
(vii) A review of options for urban waterfront
development or Brownfields revitalization to be
completed in conjunction with the project; or
(viii) Provides an applicant with alternative
approaches to meeting Federal regulations that the
State determines to meet permit requirements for
permits that have been issued in accordance with the
national pollutant discharge elimination system or the
Administrator determines are measurably superior when
compared to regulatory standards.

Section h(2)(B) requires States to, in the development of
the priority system, take into consideration appropriate
chemical, physical and biological data that the State considers
reasonably available and of sufficient quality;
Section h(2)(C) requires the States to provide for public
notice and opportunity to comment on the priority system and
list;
Section h(2)(D) requires the State to publish, not less
than biennially, a description of the projects in the State
that are eligible for assistance including each project's
priority ranking and the funding schedule; and
Section h(2)(E) requires the State to ensure that projects
are designed to achieve the optimum water quality management,
consistent with the public health and the water quality goals
and requirements of the Act.

Discussion

Current law requires States to establish a list of projects
that are eligible for, and have submitted applications for
funding. The State then provides SRF funds to as many projects
on the list as it can with the available funds. As a State puts
together its priority list, it can assign priority based on
whatever system the State develops to meet its needs. Section
107 of S. 1400 would require the States to add additional
factors to their system for determining priority. The decision
regarding how much weight to give each of these additional
factors is left to the State. A State may choose, for example,
to give the most priority points to systems that serve under
10,000 people or to those systems that have a median income
below the poverty level even though S. 1400 does not refer to
these criteria. However, the factors listed in this section
must be incorporated into the State's priority system and used
to give a project greater weight as the State determines which
projects to fund in a given year from the State's priority
list.
The factors to which a State must give additional weight
include an inventory of assets, including a description of the
condition of those assets and a schedule for replacing those
assets. Aging systems are significant contributors to the
infrastructure-financing gap. According to a 2002 General
Accounting Office (GAO) report, 27 percent of drinking water
utilities and 31 percent of wastewater utilities do not have
plans for managing their existing capital assets.\11\ GAO also
found that `roughly half of the utilities actually
rehabilitated or replaced 1 percent or less of their pipelines
annually' even though 89 percent of drinking water utilities
and 76 percent of wastewater utilities believed a higher level
was necessary to maintain their systems.\12\ In order to fully
understand the scope of the problem the nation faces, there
must be an accounting of the health of our utilities. Further,
if utilities are to make maximum use of the funds available, it
makes good business sense to have a full understanding of the
condition of one's assets and how much capital will need to be
raised to replace those assets and over what amount of time.
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\11\ U.S. General Accounting Office. Water Utility Financing and
Planning. (GAO-02-764). August 2002. Page 7.
\12\ Ibid, page 42.
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Another factor is a financing plan indicating how that
capital will be raised including rate increases, grant
assistance, bonds, loans or other sources. In its 2002 report,
GAO found that 85 percent of surveyed drinking water utilities
and 82 percent of wastewater utilities were able to cover
operations and maintenance costs through local user fees.
However, an estimated 29 percent of surveyed utilities had to
defer maintenance because of insufficient funding.\13\ The
committee believes providing additional weight to projects that
have asset management and financing plans in place will
encourage utilities to incorporate these elements into their
systems management and business practices. Providing asset
management and financing plans additional weight will also
encourage utilities with these elements already in place to
review their existing plans; take whatever steps may be
necessary to update them; and seek additional funding, if
needed, to properly maintain their systems.
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\13\ Ibid, page 6.
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The States must ensure that applications to the SRF receive
additional weight if they have reviewed options for
restructuring their treatment works. It some cases, it may be
more efficient and cost effective for a utility to consolidate
with a neighboring one, to develop a partnership with the local
energy provider, or to consider other cooperative partnerships
like public-private partnerships or privatization. These are
all encompassed in the term restructuring, the goal of which is
to improve upon the management and financial structure of a
utility to ensure it is operating as efficiently and cost-
effectively as possible. Restructuring does not imply a
preference for privatization.
The States must ensure that applications to the SRF receive
additional weight if they look at nontraditional approaches,
including decentralized or distributed storm water controls,
decentralized wastewater treatment, low impact development
technologies and stream buffers. Communities and developers are
experimenting with approaches other than traditional treatment
and constructed conveyances to reduce contaminated runoff,
reducing the amount of water entering a treatment works or
adjoining waterways. These approaches may be more affordable
and more environmentally friendly than concrete and pipes.
Particularly in small, rural communities properly maintained
decentralized wastewater treatment systems to replace such
items as cesspools and individual sewer systems may be an
affordable alternative to a treatment works.
A number of efforts are currently underway across the
country to focus more holistically on watershed planning for
the improvement of water quality and resources, and to address
water supply. There has also been a renewed focus on
redevelopment opportunities for Brownfields and urban
waterfronts. Under this section, the State must ensure that
applications to the SRF receive additional weight if they
demonstrate consistency with State, regional and municipal
watershed plans or a review of options for urban or waterfront
development or Brownfields revitalization. Finally, the State
must ensure that applications to the SRF receive additional
weight if they promote new approaches to meeting permitting
limits such as watershed permitting as well as environmental
management systems that assist in the day-to-day operations of
a facility.
Sec. 108. Noncompliance.

Summary

This section prohibits assistance to those POTWs that have
been in significant noncompliance for any four out of the
previous eight of the last reporting quarters unless the POTW
is in compliance with or has entered into an Administrative
Order; the State or Administrator (whichever took the
enforcement action) determines the money will bring them into
compliance; or the State or Administrator (whichever took the
enforcement action) determines that the funding will be used
for a portion of the treatment works not associated with the
cause of noncompliance.

Discussion

One purpose of the Clean Water SRF is to assist systems in
complying with the Clean Water Act. Significant noncompliance
is a category used by the Environmental Protection Agency to
prioritize enforcement actions. This provision seeks to provide
an incentive for systems to avoid getting into significant
noncompliance and to remain in compliance. Because this
provision is designed to target the worst actors that continue
to mismanage their facilities over a long-term period, it
exempts those systems which will use the money to come into
compliance; may be using the funds to comply with an
administrative order that already seeks to correct the
noncompliance; or assistance is for a portion of the treatment
works not associated with the noncompliance such as an upgrade
to a pumping station that is unrelated to an ongoing CSO
compliance issue.
Sec. 109. Allotment of funds.

Summary

Section 109 requires that the Administrator provide 1.5
percent of available funds to Indian tribes and that funds then
be distributed to the States in accordance with the chart
listed in the statute.

Discussion

This section updates the formula by which the Administrator
distributes the Federal Clean Water SRF funding to the States.
It replaces each State's existing statutory percentage of funds
with a new percentage.
Sec. 110. Authorization of appropriations.

Summary

This section authorizes funding of $3.2 billion in 2006 and
2007, $3.6 billion in 2008, $4 billion in 2009, and $6 billion
in 2010. The EPA is authorized to reserve not more than $1
million per year to pay the costs of conducting the Clean Water
Needs Survey required by CWA Section 516.
Sec. 111. Critical water infrastructure projects.

Summary

Section 111(a) requires the Administrator to establish a
program through which eligible entities can apply for grants to
carry out projects and activities for the primary purpose of
watershed restoration through protection and improvement of
water quality.
The Administrator must ensure equitable distribution of
funds under this section taking into account the cost and
number of requests for each category of eligible projects.
Eligible projects include:

Projects listed on a State's priority list;
Projects to mitigate wet weather flows;
Upgrades of POTWs with at least an average
capacity of 500,000 gallons of wastewater per day with new
technology to reduce total nitrogen to an average annual
concentration of 3 milligrams per liter; or total phosphorous
to no more than 1 milligram per liter; or both total nitrogen
and total phosphorous;
Implementation of locally based watershed
protection plans created by local nonprofit organizations
through a public process that account for both point and
nonpoint contributors;
Projects contained in a State Section 319 or
320 management plan; or
Projects that include a means to develop
alternative water supplies.

In prioritizing projects, the Administrator shall consult
with and consider the priorities of affected State and local
governments and public and private entities. Local communities
are required to provide 45 percent of the cost of the project,
provide any associated land and pay 100 percent of the
operation, maintenance, repair, replacement and rehabilitation
costs associated with the project. The Administrator may waive
the requirement to pay the non-Federal share of the cost of
carrying out an eligible activity if the Administrator
determines that an eligible entity is unable to pay, or would
experience significant financial hardship if required to pay
the non-Federal share.
This section authorizes $300 million per year for each of
fiscal years 2006 through 2010.

Discussion

In this section, the committee acknowledges there is a
growing interest in providing grant funding for the common
goals of restoring watershed functions; upgrading treatment
works; assisting POTWs in complying with new and existing
Federal pollution control requirements; identifying alternative
water supplies; and addressing high priority projects, such as
storm water, combined sewer overflows and nutrient loadings. In
the previous versions of the water infrastructure bill, S. 1961
in the 107th Congress and S. 2550 in the 108th Congress, the
committee has considered language in the water infrastructure
bill that authorizes several independent and narrowly focused
grant programs focusing on specific water bodies or regions. S.
1400 recognizes that grant funding for watershed restoration
and critical water infrastructure projects is needed across the
country. In prioritizing projects under this new section, the
Administrator must consult with State and local governments and
the public and private entities active in local watershed
planning and restoration efforts to identify high priority
projects. The Administrator must also ensure an equitable
distribution of funding between all eligible categories to
ensure that one high-cost category does not dominate the
prioritization of projects and available funds provided to the
program.
Sec. 112. Capitalization grant agreements.

Summary

This section requires all projects financed in whole or in
part through the Clean Water State Revolving Loan funds to meet
the requirements of Section 513 of the Clean Water Act, which
applies Davis-Bacon prevailing wage requirements to Federal
construction projects.

TITLE II--SAFE DRINKING WATER INFRASTRUCTURE

Sec. 201. Preconstruction work.

Summary

This section modifies the project eligibility list with
several changes.
Section 203(1) clarifies that planning, design, and
associated preconstruction costs are eligible for funds under
the Drinking Water SRF as standalone items.
Section 203(2) states that replacement and rehabilitation
of aging systems, treatment, storage (including reservoirs) and
distribution systems are eligible expenses for the fund. This
section also ensures that projects to upgrade the security of a
water system are eligible.

Discussion

By clarifying that preconstruction activities are eligible
for funding, Section 203(1) ensures water systems are able to
receive financing for engineering costs and other planning
costs that precede actual construction. This provision will
ensure that small communities with few resources available to
develop a project in its early stages can receive assistance
for pre-construction activities.
The Safe Drinking Water Act establishes a priority for
systems to receive funding under the Drinking Water SRF (SDWA
Section 1452(b)(3)) to include projects that address the most
serious risk to human health, are necessary to ensure
compliance, and assist systems most in need on a per household
basis. This section does not modify that priority system.
Instead, it clarifies that replacement and rehabilitation are
also eligible expenses under the Drinking Water SRF. As Jerry
Johnson testified before the Fisheries, Wildlife and Water
Subcommittee on behalf of the nation's largest water utilities
on February 28, 2002, many large systems' biggest expense is
replacing old infrastructure and pipes. The committee, by
reiterating their eligibility, seeks to ensure that once a
State has addressed the compliance and public health threats
and helped those systems that are disadvantaged, it gives
consideration to helping systems meet the cost of replacing
their aging infrastructure.
After the terrorist attacks of September 11, much attention
is being paid to security at the nation's water systems. The
Public Health and Bioterrorism Response Act of 2001 (P.L.107-
188) required PWSs to assess their vulnerabilities. Systems are
now in the process of determining what changes need to be made
to their facilities and how to pay for those upgrades. While
EPA currently allows PWSs to use the SRFs for security-related
costs, this provision would state the eligibility in statute,
clarifying that capital costs for security are eligible.
Security costs associated with operations, maintenance and
personnel are not eligible for the SRF.
Sec. 202. Affordability.

Summary

This section allows public water systems to receive funding
assistance for portions of a service area served by the
utility.

Discussion

Many large cities do not qualify as disadvantaged under
their State's definition of the term because they have both
pockets of low-income ratepayers that meet the affordability
criteria and industry and pockets of affluent ratepayers. These
cities have difficulty raising rates because they have many
ratepayers who simply cannot pay more and it is politically
difficult to increase rates on only those with a proven ability
to pay. In order to assist cities struggling to pay for
infrastructure upgrades without imposing too high a burden on
their low-income ratepayers, this provision allows a
municipality to receive negative interest loans or principal
forgiveness if a portion of their service area meets a State
definition of disadvantaged.
Sec. 203. Safe drinking water revolving loan funds.

Summary

This section changes the amount of their SRF the States can
set-aside to meet their administrative costs from 4 percent to
6 percent. It further strikes the requirement that State match
any funds, up to 10 percent of their SRF, it opts to set aside
for public water system supervision programs, to administer or
provide technical assistance through source water protection
programs, to develop and implement a capacity development
strategy as defined in Section 1420(c) and for an operator
certification program to meet the requirements of Section 1419.
Finally, it allows the State to transfer up to 33 percent of
its Drinking Water SRF funds into the Clean Water SRF fund.
However, the transferred funds cannot be used by a State to
meet its 20 percent match requirement.

Discussion

Section 203 allows States to reserve up to 6 percent of the
SRF for administrative costs. According to the State drinking
water administrators, the cost to administer the program
exceeds the current 4 percent allowable set-aside.\14\ In 1996,
Congress created the SRF and gave States the authority to
operate the program. With this new responsibility came new
costs. While the committee does not anticipate that the
requirements in this bill will result in new administrative
burdens to the States, with the intended increase in
appropriations authorized in the bill, it is reasonable to
allow States to reserve a larger, but still small, percentage
of the SRF to meet their administrative costs.
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\14\ Association of State Drinking Water Administrators, letter to
the Committee, November 6, 2003.
---------------------------------------------------------------------------
Section 203 also provides States with more flexibility by
changing one of the cost-share requirements in current law.
States are currently permitted to use 10 percent of their SRFs
for specific set-asides as long as they match that 10 percent.
However, States are also required to first match 20 percent of
the capitalization grant they receive each year from the
Federal Government. The subsequent 10 percent match for set
asides is essentially a double-match requirement for the
States. From 1996 through 2003, States had reserved 4 percent
of their grant with nine States reserving the full amount and
seven reserving none. This section waives the matching
requirement for the 10 percent set-aside.
This section also would make permanent the ability of
States to transfer up to 33 percent of the Drinking Water SRF
into their Clean Water SRF. Each year the Committee on
Appropriations in the annual spending bill for the
Environmental Protection Agency includes a provision allowing
States to transfer portions of a State's capitalization grant
from one SRF to the other. During a funding cycle, a State may
have a particularly large drinking water or clean water project
for which it needs additional funds. This provision allows them
to transfer some money from one account to the other while
protecting the corpus of the funds. The transferred funds
cannot count toward the State's required 20 percent match of
the Federal grant.
Sec. 204. Other authorized activities.

Summary

This section permits use of the Drinking Water SRF for
implementation of source water protection plans.

Discussion

The SDWA required States to develop source water protection
plans by May 2003. States were allowed to use up to 15 percent
of their SRF for the development of these plans, as well as
conservation easements, wellhead protection programs, capacity
development programs and implementation of voluntary,
incentive-based source water protection projects. However, no
more than 10 percent of these funds could be used for any one
of the categories listed above. With many State plans
completed, funds are now needed to implement the plans. This
section will allow States to use their SRF funds to implement
their source water protection plans.
Sec. 205. Priority system requirements.

Summary

Section 205 amends Section 1452 of the Safe Drinking Water
Act by adding the definition of restructuring as ``changes in
operations (including ownership, cooperative partnerships,
accounting, rates, maintenance, consolidation, and alternative
supply)''.
It reiterates the current requirement that a State give
highest priority to those projects that

(i) address the most serious risk to human health;
(ii) are necessary to ensure compliance with this
title (including requirements for filtration); and
(iii) assist systems most in need on a per-
household basis according to State affordability
criteria.

Section 205 requires the Administrator to then give
additional weight to applications for assistance by a community
water system if the application includes such other information
as the State determines to be necessary and--

(i) an inventory of assets, including a description
of the condition of the assets;
(ii) a schedule for replacement of assets;
(iii) a financing plan indicating sources of
revenue from ratepayers, grants, bonds, other loans and
other sources;
(iv) a review of options for restructuring the
public water system;
(v) demonstration of consistency with State,
regional and municipal watershed plans; or
(vi) a review of options for urban waterfront
development or Brownfields revitalization to be
completed in conjunction with the projects.

Section 205 changes the requirements that the priority list
be updated periodically to at least biennially.

Discussion

Section 205 adds the definition of restructuring and
traditional approach to the statute. As part of its
capitalization agreement with the EPA, each State is required
to develop a priority system that outlines the projects a State
will fund each year with its available funds. States must give
priority to those projects that address the most serious risk
to human health, are necessary to ensure compliance, and assist
systems most in need on a per household basis. This section
leaves that requirement in place unchanged and requires that
States must ensure that applications to the SRF receive
additional weight if they have in place an asset management
plan, a capital replacement plan, a financing plan or have
reviewed their restructuring options and nontraditional
approaches.
While many PWSs have a long-term plan for replacement of
their aging assets, many do not. Yet in order to fully
understand the scope of the problem the nation faces, there
must be an accounting of the health of our utilities. Further,
it makes good business sense to have a full understanding of
the condition of one's assets and how much capital will need to
raised to replace those assets and over what amount of time.
Additional factors States must include in their priority
system include a financing plan indicating how that capital
will be raised including rate increases, grant assistance,
bonds or other loans. PWSs will also receive additional credit
if they have reviewed options for restructuring their water
systems. In some cases, it may be better for a utility to
consolidate with a neighboring one, develop a partnership with
the local energy provider, or consider other cooperative
partnerships like public-private partnerships or privatization.
These are all encompassed in the term restructuring, the goal
of which is to improve upon the management and financial
structure of a utility to ensure it is operating as efficiently
and cost-effectively as possible. Restructuring does not imply
a preference for privatization. The States must ensure that
applications to the SRF receive additional weight if they
explore nontraditional approaches to treatment and source water
protection. These new technologies may prove to be less
expensive and/or more effective than traditional approaches.
A number of efforts are currently underway across the
country to focus more holistically on watershed planning for
the improvement of water quality and resources, and to address
water supply. There has also been a renewed focus on
redevelopment opportunities for Brownfields and urban
waterfronts. Under this section, the State must ensure that
applications to the SRF receive additional weight if they
demonstrate consistency with State, regional and municipal
watershed plans or a review of options for urban or waterfront
development or Brownfields revitalization.
Sec. 206. Authorization of appropriations.

Summary

This section authorizes funding of $1.5 billion for 2006,
$2 billion for 2007 and 2008, $3.5 billion for 2009, and $6
billion for 2010. The EPA is authorized to withhold not more
than $1 million per year to conduct the drinking water needs
survey required by SDWA Section 1452(h).
Sec. 207. Critical drinking water infrastructure projects.

Summary

(i) develop alternative water sources
(ii) provide assistance to small systems; or
(iii) assist a community water system
(a) to comply with a national primary
drinking water regulation; or
(b) to mitigate groundwater contamination

This section defines an eligible entity as a community
water system as defined in Section 1401 of SDWA or a system
that is located in an area governed by an Indian Tribe, as
defined in Section 1401 of SDWA.
In prioritizing projects, the Administrator shall consult
with and consider the priorities of affected State and local
governments and public and private entities. Local communities
are required to provide 45 percent of the cost of the project,
provide any associated land and pay 100 percent of the
operation, maintenance, repair, replacement and rehabilitation
costs associated with the project. The Administrator may waive
the requirement to pay the non-Federal share of the cost of
carrying out an eligible activity if the Administrator
determines that an eligible entity is unable to pay, or would
experience significant financial hardship if required to pay,
the non-Federal share.
This section authorizes $300 million per year for each of
fiscal years 2006 through 2010.

Discussion

This section authorizes $300 million per year for 5 years
for the Administrator to establish a grant program to assist
community water systems. Eligible projects may include projects
to develop alternative water sources, provide assistance to
small systems, or assist a community water system with
compliance with the SDWA or mitigation of groundwater
contamination. Similar to the critical water infrastructure
grant program (Sec. 111), this section is designed to address a
multitude of critical drinking water projects across the
country rather than focusing grant authorization on specific
regional or local concerns that may limit funding. With an
emphasis on small and disadvantaged communities, this program
is expected to address high priority drinking water concerns
for States, Tribes and local governments nationwide.
Sec. 208. Small system revolving loan funds.

Summary

This section would establish a loan fund to be operated by
a qualified private, nonprofit entity for the purposes of
helping small water systems with predevelopment costs and
short-term costs. This program, in addition to those technical
assistance programs already statutorily provided in the Safe
Drinking Water Act, are authorized at $25 million per year for
fiscal years 2006 to 2010. States shall provide to the EPA an
annual report on the activities supported by this program. Loan
terms cannot exceed 10 years and loans cannot exceed $100,000.
Loan repayments will be credited to the fund maintained by the
qualified nonprofit.

Discussion

The EPA has several existing programs to assist small PWSs,
including an information clearinghouse for technical assistance
providers called Simple Tools for Effective Planning. The
Agency also runs the Small System Technical Assistance Center
Network, a series of technical assistance centers at
universities throughout the country. The Agency partners with
the National Rural Water Association and the Rural Community
Assistance Partnership to provide technical assistance to PWSs
including how to locate financing for projects and how to run a
water system. Further, the States may reserve up to 2 percent
of their SRF to provide technical assistance to small systems.
Between 1996 and 2003, States had reserved 1.5 percent of their
grants. Twenty-three States reserved the full 2 percent while
two States did not reserve any funds.
The committee however continues to hear of a need for
additional assistance for these small systems.\15\ Many small
PWSs cannot afford the costs associated with planning a
project, including the engineering costs. Without these initial
steps completed, the PWS often has difficulty applying for an
SRF loan to begin construction. The U.S. Department of
Agriculture Rural Community Advancement Program, for example,
runs several small SRFs in States to assist small PWSs with
these startup costs, enabling them to then apply for funds
through the State-run SRF for construction costs. This
provision enables the Administrator, with the Agency's
technical assistance funds, to provide money to nonprofit
technical assistance providers to create and run these smaller
SRFs.
---------------------------------------------------------------------------
\15\ Rural Community Advancement Program, letter to the Committee.
---------------------------------------------------------------------------
Sec. 209. Study of plumbing components.

Summary

This section authorizes $500,000 for the Administrator to
contract with the National Academy of Sciences (NAS) to study
existing market conditions for plumbing components, including
pipes, faucets, water meters, valves, household valves, and any
other plumbing components that come into contact with water
commonly used for human consumption. The NAS will look at the
availability of plumbing components at various levels of lead
content; the market share and relative cost of plumbing
components; issues surrounding transition from current market
to plumbing components with not more than 0.2 percent lead; the
feasibility of manufacturing plumbing components with lead
levels below 8 percent; and the use of lead alternatives in
plumbing components with lead levels below 8 percent. In
conducting this study, NAS must consult with the National
Sanitation Foundation (NSF) and individuals with expertise in
plumbing components, products, and materials; engineering;
economics; and other appropriate fields from academia, industry
and other organizations.

Discussion

The committee looks forward to the results of the NAS study
to further inform its members about the use of lead in plumbing
products that come into contact with water commonly used for
human consumption.
Sec. 210. District of Columbia lead service line replacement.

Summary

This section authorizes $30 million per year for fiscal
years 2006 through 2010 to assist the District of Columbia with
lead service line replacement. $2 million must be reserved each
year for low-income residents and individual grants are limited
to $5,000.

Discussion

Lead, a known toxin, is used in plumbing fixtures and had
been a primary ingredient in paint and automobile fuel until it
was phased out beginning in the 1970's (The Elimination of Lead
in Gasoline v. M. Thomas).\16\ Great progress has been made in
reducing exposure to lead by phasing out leaded gasoline and
slowly rehabilitating lead-painted homes, and the nationwide
incidence of elevated blood lead levels in children has
continued to decline. Today, while lead in drinking water
remains an exposure route and lead service lines still exist in
many cities, including the District of Columbia, lead dust and
paint chips in homes, and the tendency by young children to
ingest them, remains the most common route of lead exposure in
children.
---------------------------------------------------------------------------
\16\ Annual Review of Energy and the Environment. 20:201-324, 1995.
---------------------------------------------------------------------------
In 1991, the EPA finalized the lead and copper rule (56 FR
26460), which would minimize lead and copper in drinking water
by reducing corrosivity. Under the rule, the goal for lead in
drinking water is zero parts per billion (ppb). The rule also
established an Action Level, which is a combined measurement of
lead amounts and prevalence at which the PWS is required to act
to reduce the lead. The Action Level is defined as 10 percent
of homes tested exceeding 15 ppb. At this level, the system is
required to increase monitoring and testing, optimize corrosion
control treatment and inform the public about the exceedances.
If the corrosion control treatment does not result in a
decrease in households that exceed the action level, the system
is required to begin replacing lead service lines at a rate of
7 percent per year.
Unlike other contaminants regulated under the Safe Drinking
Water Act, lead is measured inside the residence or business,
not at the treatment plant, because it leaches into the water
from the distribution system, service lines and other plumbing
components found within or adjacent to homes and businesses.
In accordance with the rule, the Washington Aqueduct, owned
and operated by the U.S. Corps of Engineers, installed the
corrosion control treatment in 2000. During the monitoring
period July 2000-June 2001, WASA reported sampling 50 homes.
However in its compliance order, Docket No. SDWA-03-2004-0259
DS, EPA found that of those 50 samples, 2 were taken from a
previously sampled location. WASA was required to sample from
50 unique locations during this time. Five of these samples
were taken outside of the required sampling period. EPA also
found that WASA failed to report six samples that were taken.
EPA found that if WASA had included these unreported samples,
WASA would have exceeded the action level of lead in the 90th
percentile during the July 2000--June 2001 timeframe.
In August 2002, WASA reported that during the compliance
period July 1,2001--June 30, 2002, it exceeded the action level
for lead. The lead level in first draw water samples from the
90th percentile of 53 residences tested was 75 ppb, well above
the action level of 15 ppb. WASA was required to implement a
lead in drinking water public education program, and to
initiate lead service line replacement at a rate of 7 percent
per year.
From January 2003 through December 2003, WASA continued to
test homes and continued to exceed the action level. As such,
WASA was required to continue a public education program and
its lead service line replacement efforts.
EPA included several categories of findings regarding
WASA's compliance with the lead and copper rule in their
consent order which included a failure to take samples within
the monitoring period, a failure to conduct follow-up
monitoring of partially replaced lead service lines, and a
failure to comply with requirements for public service
announcements and to use required language in written materials
provided to the public as well as a failure to perform
corrective action. It should be noted that EPA was informed by
WASA of these events and the data and signed off on the public
service announcements.
The EPA consent order requires WASA to take several
corrective actions including:
Plans for updating its lead service line inventory and
reporting to EPA.
Requirement for WASA to strongly encourage full replacement
of lead service lines with owners paying for their portion,
including submission of a plan to EPA for encouraging
homeowners to agree to full replacement.
Requirement for WASA to develop and submit a public
education plan including public health issues, steps to reduce
health risks and steps to address EPA recommendations on
effectiveness of prior public education.
Requirement for WASA to document to EPA that they have
provided water filers to all customers suspected or known to
have lead contamination at no charge as well as those with
unknown service line materials.
Requirement for WASA to submit detailed sampling plans to
EPA.
On August 23, 2004, WASA began adding orthophosophate to
the drinking water supply through the city to reduce the
corrosivity of the water supply in an effort to reduce lead
levels. The addition of orthophosphate has resulted in lower
lead levels in the District's drinking water. From January
through April 2005, 90 percent of homes sampled had lead levels
below the EPA's action level of 15 ppb.\17\ However more
testing will be done as the Lead and Copper Rule requires that
lead levels remain below the action level for two consecutive
6-month periods to return to compliance.
---------------------------------------------------------------------------
\17\ ``Community Update: Getting the Lead Out of DC Tap Water,''
Environmental Protection Agency, D.C. Water and Sewer Authority, D.C.
Department of Health and Washington Aqueduct. July 2005, page 1.
---------------------------------------------------------------------------
While lead levels in the water do appear to be going down,
the District is still obligated to replace its lead service
lines. To speed the corrective efforts, Mayor Williams, the
Council of the District of Columbia, and the D.C. Water and
Sewer Authority, plan to replace all of the lead service lines
in the city. To execute this plan, the committee believes
additional assistance must be provided to the city. This
section would authorize $30 million per year for fiscal years
2006 through 2010 for the District of Columbia to replace its
lead service lines, as dictated in its consent order with the
EPA.
Sec. 211. Contaminant prevention, detection and response.

Summary

Section 211 amends Section 1434 of the Safe Drinking Water
Act which requires the Administrator to evaluate the potential
means, methods and equipment terrorists could use to impact a
public water supply. Section 211 would require the
Administrator to provide to Congress a report with:

(a) a description of the progress made in
implementing this section; and
(b) a description of any impediments to
implementation identified by the Administrator
including difficulty in coordinating the implementation
with other Federal, State or local agencies and
organizations; insufficient funding; lack of
authorization to take certain actions and the
technological impediments to developing the methods,
means and equipment.

Section 211 also creates a new subsection 1474(c) that
requires the Administrator to develop and carry out an
implementation plan that is consistent with the actions taken
to date and incorporates the results of the report under
subsection (b). This section authorizes $7.5 million per year
for each fiscal year 2006 through 2010.

Discussion

Under Presidential Decision Directive 63 signed by
President Bill Clinton in 1998, the Environmental Protection
Agency was designated the lead agency for identifying and
addressing vulnerabilities at the nation's water and wastewater
facilities. In response to the terrorist attacks of September
11, 2001, Congress enacted the Public Health Security and
Bioterrorism Preparedness and Response Act of 2002. The
Bioterrorism Act required the Administrator of the
Environmental Protection Agency to review current and future
methods to prevent, detect and respond to the intentional
introduction of chemical, biological or radiological
contaminants into community water systems and source water for
community water systems. The review was to include the methods,
means and equipment, including real time monitoring systems,
designed to monitor and detect various levels of chemical,
biological, and radiological contaminants or indicators of
contaminants and reduce the likelihood that such contaminants
can be successfully introduced into public water systems and
source water intended to be used for drinking water. The
Administrator was further charged with identifying the methods
and means to provide sufficient notice to public water systems
and individuals served by those systems of a contamination
event; the methods and means for developing educational and
awareness programs for community water systems; procedures and
equipment necessary to prevent the flow of contaminated
drinking water to individuals served by public water systems;
methods and means which could negate or mitigate deleterious
effects on public health and the safety and supply caused by
the introduction of contamination of a drinking water supply
and the biomedical research into the short-term and long-term
impact on public health of various contaminants that may be
introduced into a public water system.
Section 211 requires the Administrator to report on the
progress made in implementing this section and identify any
impediments to its implementation. The Administrator is to
incorporate the findings of the report into an implementation
plan for carrying out this section, consistent with steps
already taken and carry out that plan. Section 211 authorizes
$7.5 million for each of fiscal years 2006 through 2010 for
developing and carrying out the implementation plan.
Sec. 212. Labor standards.

Summary

This section requires that laborers and mechanics employed
by contractors and subcontractors on all projects financed in
whole or in part through the Drinking Water State Revolving
Loan Funds be paid in accordance with the Davis Bacon
prevailing wage requirements.

TITLE III--MISCELLANEOUS

Sec. 301. Definitions.

Summary

This section clarifies that references to the
`Administrator' are to the Administrator of the Environmental
Protection Agency. It also defines references to the
`Secretary' as the Secretary of Agriculture in section 303, and
the Secretary of Interior, acting through the Director of the
United States Geological Survey, in section 306.
Sec. 302. Demonstration grant program for water quality enhancement and
management.

Summary

Section 302(a) authorizes the Administrator to award grants
and enter into cooperative agreements with research
institutions, educational institutions and other appropriate
entities for research and development of innovative and
alternative technologies to improve water quality or drinking
water supply. Eligible projects include those to increase the
effectiveness and efficiency of public water supply systems; to
encourage the use of innovative or alternative technologies or
approaches related to water supply or availability; and to
increase the effectiveness and efficiency of treatment works.
Section 302(b) establishes a nationwide demonstration grant
program within EPA to promote innovations in technology and
alternative approaches to water quality management as well as
reduce costs to municipalities incurred in complying with the
CWA and the SDWA.
Section 302(b) requires municipal applicants to submit to
the Administrator a plan that is developed in coordination with
the State in which the municipality is located and interested
stakeholders. It further requires the applicant to describe the
water impacts it seeks to address, include a strategy to
address the water quality program and achieve the same goals
that could be achieved using more traditional methods or those
required by the CWA and the SDWA and include a schedule for
achieving the goals.
Section 302(c) further defines the types of projects that
are eligible to include those that address excessive nutrient
growth; urban or rural population pressures; lack of an
alternative water supply; difficulty in water conservation and
efficiency; lack of support tools and technologies; lack of
monitoring or data analysis; nonpoint source water pollution;
sanitary and combined sewer overflows; problems with naturally
occurring constituents of concern; problems with erosion or
excess sediment; new approaches to water treatment,
distribution and collection; and new methods for collecting and
treating wastewater.
The Administrator much ensure, to the maximum extent
practicable, that the projects are diverse geographically, in
terms of the technologies tested and the nontraditional
approaches used and that each category of projects described
above is adequately represented. Higher priority should be
given to projects that address multiple problems and are
regionally applicable.
The Administrator must ensure, to the maximum extent
practicable, that at least one community serving less than
10,000 receives a grant each year and that no municipality
receives more than 25 percent of the funds.
This section also limits the Federal cost share to 80
percent which the Administrator may waive for affordability
reasons.
Section 302(c) requires each grant recipient to report to
the Administrator on the progress of the project after one, two
and 3 years. The Administrator must report to Congress 2 years
after enactment on the results of the demonstration program.
Section 302(d) requires the Administrator, to the maximum
extent practicable, to incorporate the results of the projects
into programs administered by the Administrator.
This section authorizes $20 million per year from fiscal
year 2006 through fiscal year 2010 to carry out this Title.
Section 302(f) authorizes $20 million for each year from
fiscal year 2006 through fiscal year 2010 to carry out Section
302 except (a).

Discussion

One important aspect of reducing the infrastructure
financing gap is finding more affordable alternatives for POTWs
and PWSs. As the Deputy Assistant Administrator from EPA's
Office of Water testified before the committee on February 26,
2002:

`This strategy to renew our water and wastewater
infrastructure . . . puts a high premium on optimizing
the efficient use of our current capital assets and the
new investments we must make. That will require the use
of innovative technologies for improved services at
lower life-cycle costs, which in turn means supporting
research and development on these innovative
technologies.'

To further encourage research into innovative technologies,
Section 302 establishes in the EPA both a research and
development program and a demonstration grant program. The
research program is aimed at increasing the effectiveness and
efficiency of public water supply systems, encouraging the use
of innovative or alternative approaches to water supply or
availability, and increasing the effectiveness of the treatment
works. It is authorized at $20 million per year from fiscal
year 2006 through fiscal year 2010.
The demonstration grant program targets water quality
management and enhancement. It requires at least a 20 percent
non-Federal cost share for projects. The program will promote
innovations in technology and alternative approaches to water
quality management and supply, with the goal of reducing
municipal costs of complying with the Clean Water Act and the
Safe Drinking Water Act. Municipalities selected for programs
must describe a strategy by which the demonstration grants
could achieve similar results as those mandated by the two
statutes or those that could be achieved by traditional water
quality methods. Grant recipients must submit annual reports to
EPA who must submit a report to Congress. The Administrator
must ensure to the maximum extent practicable that innovative
technologies, geographic distribution, and non-traditional
approaches are represented.
The National League of Cities, the Conference of Mayors,
and the American Metropolitan Sewerage Association (AMSA)
testified in favor of a demonstration grant program at a
February 2002 hearing. AMSA testified that such a program is
`vitally important.'
Sec. 303. Agricultural pollution control technology grant program.

Summary

This section provides a one-time grant of $50 million to be
distributed evenly among the States to create an SRF for
farmers who may have an innovative approach to reducing
polluted runoff. States are required to match 20 percent of the
Federal share and return any unused amounts to the Federal
Government after 2 years. Loans are limited to $250,000 and
must be repaid within 10 years.

Discussion

Research is being conducted around the country into new
technologies to address air and water pollution at agricultural
sites. This research is often hindered because traditional
agriculture loan and grant programs do not readily accommodate
innovative approaches or experimental projects. In many cases,
State agricultural and environmental quality officials and
farmers want to try a new agricultural pollution control
technology but they lack funding. This revolving loan program
gives States a dedicated source of funding to work with
producers who are interested in experimenting with, and
improving upon, new technologies (including, for instance,
methane digesters on dairy farms) by designing and constructing
agricultural pilot projects.
Sec. 304. State revolving fund review process.

Summary

This section requires the Administrator to consult with
States, other Federal agencies, and utilities to identify ways
to expedite and improve the application and review process for
the SRFs and take such administrative action as authorized
under existing law to achieve that goal. The Administrator
shall provide to Congress a report that contains
recommendations for legislation to further improve the
processes.

Discussion

While each State is required to comply with several Federal
requirements, each also imposes many of its own. This provision
requires the Administrator to work with States and other
agencies to develop recommendations for streamlining the
application process and lessening the amount of time it takes
to receive funds. One of the goals of the Water Infrastructure
Financing Act is to make the SRF more user-friendly. This study
is one step in that effort. At times, SRF funding may not be
allocated to communities needing assistance the most because
these communities may be overwhelmed or intimidated by the
process. In other cases, the SRF process may be discouraging to
small treatment works because they cannot afford to spend
resources on the paperwork necessary to participate and
compete.
Because this is an issue that should be addressed carefully
and appropriately to ensure the SRFs maximize benefits and
address high priority projects, including those in smaller
communities with limited resources, those who know about the
processes and their complexities are best served to review the
question and advise Congress. It is hoped that, by streamlining
the process, the SRFs would be used as efficiently and
effectively as possible, while ensuring that the accountability
of all parties remains.
Sec. 305. Cost of service study.
This section requires the NAS to:

Determine whether rates at public water
systems and treatment works were established using a full-cost
pricing model;
Identify incentives that have been successful
in significantly reducing water demand, wastewater flows,
stormwater runoff and the quantity of pollution generated by
stormwater;
Identify a set of best industry practices for
use in establishing a rate structure that addresses full cost
of service and water conservation while taking into
consideration disadvantaged individuals and communities;
Identify existing standards for affordability;
Determine the manner in which those standards
are determined; determine how affordability differs depending
on community size and location;
Study the extent to which affordability
affects the decision of a utility to increase rates; and
Evaluate the factors and characteristics that
are required for a community to be considered disadvantaged.

Discussion

Rate structures are the primary means of generating revenue
for public wastewater and drinking water facilities. Typically,
local governments or State public utility commissions establish
rates taking into consideration the capital replacement needs
of the facility, the cost of operation and maintenance, debt
service, and the conditions of various rate classes.
Communities must also consider what is `affordable' for its
most vulnerable populations when setting its rates.
A water facility may have significant financial need, but
setting a rate sufficient to address that need may be
unattractive or untenable for local governments. Many times
this condition perpetuates a vicious cycle of pushing
infrastructure costs to the future where they become even more
costly. In order to provide a tool for water systems, section
305 requires EPA to complete a study with the National Academy
of Sciences on the rate structures of public water systems and
treatment works as well as an assessment of how communities and
States define ``disadvantaged'' and to what extent this
population factors into rate setting decisions. The study will
also give special consideration to identifying incentive rate
systems that reduce per capita water demand, the volume of
wastewater flows, the volume of stormwater runoff, and the
volume of pollution generated by stormwater. This section
authorizes $1 million for the study for fiscal years 2006 and
2007.
Sec. 306. Water resources study.

Summary

Section 306 authorizes $3 million until expended for the
Secretary of Interior through the U.S. Geological Survey (USGS)
to conduct an assessment of water resources in the United
States and update the assessment every 2 years thereafter. The
assessment shall measure the status and trends of fresh water
in rivers and reservoirs; groundwater levels and volume of
freshwater stored in the aquifers and fresh water withdrawn
from streams and aquifers; and provide measurements for
watersheds defined by the 352 hydrologic accounting units and
the major aquifers as identified by the Secretary. The
Secretary must provide a report to Congress not later than 1
year after completing the initial assessment and every 2 years
thereafter describing the results of the assessment and
containing recommendations that are consistent with existing
laws, treaties, decrees and interstate compacts, and respect
the primary role of States in adjudicating, administering and
regulating water rights and uses.
The Secretary shall coordinate a process among Federal
agencies and appropriate State agencies to develop and publish
within 1 year after the date of enactment a list of water
resource research priorities that focus on--

water supply monitoring;
means of capturing excess water and flood
water for conservation and use in the event of a drought;
strategies to conserve existing water
supplies, including recommendations for repairing aging
infrastructure;
identifying incentives to ensure an adequate
and dependable supply of water;
identifying available technologies and other
methods to optimize water supply reliability, availability, and
quality, while safeguarding the environment; and
improving the quality of water resource
information available to State, tribal, and local water
resource managers.

The list shall be used by Federal agencies as they make
decisions on the allocation of water research funding
priorities. The Secretary shall coordinate a process to develop
a way to deliver the information to decisionmakers at the
Federal, State, Tribal, regional, and local levels; the private
sector; and the general public. The information may include:

the results of the national water resource
assessments
a summary of the Federal water research
priorities
near real-time data and other information on
water shortages and surpluses;
planning models for water shortages or
surpluses (at various levels including State, river basin, and
watershed levels);
streamlined procedures for States and
localities to interact with and obtain assistance from Federal
agencies that perform water resource functions; and
other water resource materials, as the
Secretary determine appropriate.

The provision also includes a savings clause to protect the
rights of States. The savings clause states that nothing in
this section--

(1) modifies, supercedes, abrogates, impairs, or
otherwise affects in any way--
(A) any right or jurisdiction of any State
with respect to the water (including boundary
water) of the State;
(B) the authority of any State to allocate
quantities of water within areas under the
jurisdiction of the State; or
(C) any right or claim to any quantity or
use of water that has been adjudicated,
allocated, or claimed--
(i) in accordance with State law;
(ii) in accordance with subsections
(a) through (c) of section 208 of the
Department of Justice Appropriation
Act, 1953 (43 U.S.C. 666);
(iii) by or pursuant to an
interstate compact; or
(iv) by a decision of the United
States Supreme Court;
(2) requires a change in the nature of use or the
transfer of any right to use water or creates a
limitation on the exercise of any right to use water;
or
(3) requires modifying the delivery, diversion,
non-diversion, allocation, storage, or release from
storage of any water to be delivered by contract.

Discussion

Water supply is growing concern not only in the western
United States, which is commonly associated with water
shortages and fights, but also in the eastern United States
which recently suffered from a long drought and continues to
have drought conditions this year. While water supply is and
should continue to be a State governed issue, there are several
Federal programs that address the issue of supply. Better
coordination of these programs may be necessary. Further, the
Federal Government may be able to provide useful resources,
information and tools to the States while respecting their
primacy over the issue.

Legislative History

On July 14, 2005, Senator Chafee introduced S. 1400, which
was cosponsored by Senator Clinton, Senator Inhofe and Senator
Jeffords. The bill was received, read twice and referred to the
Senate Committee on Environment and Public Works. The committee
met on July 20, 2005 to consider the bill. S. 1400 was ordered
favorably reported, with amendment, to the full Senate.

Hearings

The committee has been working on legislation to
reauthorize the two SRFs and provide additional resources to
communities throughout the 107th and 108th Congresses. The
Subcommittee on Fisheries, Wildlife, and Water held four
hearings related to clean water and drinking water programs and
one legislative hearing on S. 1961. The full committee held one
legislative hearing on S. 1961.
On March 27, 2001, The Subcommittee on Fisheries, Wildlife,
and Water held a hearing on water and wastewater infrastructure
needs. Testimony was received from Hon. Christine Todd Whitman,
Administrator, Environmental Protection Agency; Mr. Jon
Sandoval, Chief of Staff, Idaho Department of Environmental
Quality, Boise, ID; Mr. David Struhs, Secretary, Florida
Department of Environmental Protection, Tallahassee, FL; Mr.
Harry Stewart, Director, Water Division, New Hampshire
Department of Environmental Services, Concord, NH; and Mr.
Allen Biaggi, Administrator, Nevada Department of Conservation
and Natural Resources, Division of Environmental Protection,
Carson City, NV.
On April 30, 2001 in Columbus, Ohio, the Subcommittee
Fisheries, Wildlife, and Water held a field hearing, focusing
on the types of water infrastructure challenges facing local
communities in that region. Testimony was received from Hon.
Lydia Reid, Mayor of Mansfield, OH; Hon. Robert Vicenzo, Mayor
of St. Clairsville, OH; Mr. Christopher Jones, Director, Ohio
Environmental Protection Agency; Columbus, OH; Mr. Erwin Odeal,
Executive Director, Northeast Ohio Regional Sewer District,
Cleveland, OH; Mr. Robert Stevenson, Commissioner, Department
of Public Utilities, Division of Water/Wastewater, Toledo, OH;
Mr. Patrick T. Karney, P.E., Director, Metropolitan Sewer
District of Greater Cincinnati, Cincinnati, OH; and Mr. Patrick
Gsellman, Environmental Supervisor, Bureau of Engineering,
Akron, OH.
On October 31, 2001, the Subcommittee on Fisheries,
Wildlife, and Water held an oversight hearing on innovative
financing techniques for water infrastructure improvements.
Testimony was received by Mr. G. Tracy Mehan III, Assistant
Administrator, Office of Water, Environmental Protection
Agency; Mr. Stephen E. Howard, Senior Vice President, Lehman
Brothers; Mr. Rick Farrell, Executive Director, Council of
Infrastructure Financing Authorities; Mr. Peter L. Cook,
Executive Director, National Association of Water Companies;
Mr. Harold J. Gorman, Executive Director, New Orleans Sewage
and Water Board, on behalf of the Association of Metropolitan
Water Agencies; and Mr. Paul Pinault, Executive Director,
Narragansett Bay Commission, on behalf of the Association of
Metropolitan Sewerage Agencies.
On November 14, 2001, the Subcommittee on Fisheries,
Wildlife, and Water held a hearing on water supply. Testimony
was received from Hon. Mike Parker, Assistant Secretary of the
Army for Civil Works; Mr. John Keys, Commissioner for the
Bureau of Reclamation, Department of the Interior; Mr. Tom
Weber, Deputy Chief of Programs, Resources Conservation
Service, Department of Agriculture; Ms. Ane Diester, Associate
Vice President, Metropolitan Water District of Southern
California, testifying as the non-Federal Chair of the National
Drought Council; Mr. Jay Rutherford, Director, Water Supply
Division, Vermont Department of Environmental Conservation, on
behalf of the Association of State Drinking Water
Administrators; Mr. Ken Frederick, Senior Fellow, Resources for
the Future; and Mr. Leland `Roy' Mink, Director, Idaho Water
Resources Research Institute.
On February 26, 2002, the Committee on Environment and
Public Works held the first legislative hearing on S. 1961 and
other water infrastructure related bills. Testimony was
received from Senator Jon Kyl; Mr. Ben Grumbles, Deputy
Assistant Administrator for Water, Environmental Protection
Agency; Hon. Douglas H. Palmer, Mayor of Trenton, NJ and
chairman of the Urban Water Council of the Conference of
Mayors; Hon. Joseph A. Moore, Alderman of the city of Chicago,
on behalf of the League of Cities; Ms. Nancy Stoner, Director,
Clean Water Project, Natural Resources Defense Council; Mr.
Paul Schwartz, National Policy Director, Clean Water Action;
Mr. Bill Kukurin Associated Builders and Contractors; Mr. Jim
Barron, President, Ronkin Construction, on behalf of the
National Utility Contractors Association; Mr. Terry Yellig,
Building Trades Attorney, Sherman, Dunn, Cohen, Leifer &
Yellig, on behalf of the International Union of Operating
Engineers.
On February 28, 2002, the Subcommittee on Fisheries,
Wildlife, and Water held the second legislative hearing on S.
1961 and other water infrastructure related bills. Testimony
was received from Senator Paul S. Sarbanes; Mr. Robert Hirsch,
Associate Director of Water, U.S. Geological Survey; Mr. Andrew
M. Chapman, President, Elizabethtown Water Company, on behalf
of the National Association of Water Companies; Mr. Ed
Archuleta, General Manager, El Paso Water Utilities, on behalf
of the Association of the Metropolitan Water Agencies; Mr. Paul
Pinault, Executive Director, Narragansett Bay Commission on
behalf of the Association of Metropolitan Sewerage Agencies;
Mr. Elmer Ronnebaum, General Manager, Kansas Rural Water
Association, on behalf of the National Rural Water Association;
Mr. Howard Neukrug, Director, Office of Watershed of the
Philadelphia Water Department, on behalf of the American Water
Works Association; Mr. Tom Morrissey, President, Association of
State and Interstate Water Pollution Control Administrators;
and Mr. Jay L. Rutherford, P.E., Director, Water Supply
Division for the Vermont Department of Environmental
Conservation, on behalf of the Association of State Drinking
Water Administrators.
On February 15, 2002, Senators Graham, Crapo, Jeffords and
Smith introduced S. 1961, the Water Investment Act of 2002. The
committee reported the bill on May 17, 2002 by a vote of 13 to
6.
On June 21, 2004, Senators Crapo, Inhofe and Murkowski
introduced S. 2550, the Water Infrastructure Investment Act of
2004.
On July 14, 2005, Senators Chafee, Clinton, Inhofe and
Jeffords introduced S. 1400, the Water Infrastructure Financing
Act of 2005.

Rollcall Votes

The Committee on Environment and Public Works met to
consider S. 1400 on July 20, 2005. A manager's amendment
offered by Senators Inhofe and Jeffords was modified by
unanimous consent and agreed to by voice vote.
An amendment offered by Senator Boxer to direct the United
States Geological Survey to conduct a nationwide assessment of
sites contaminated with perchlorate was defeated by a vote of 5
ayes and 13 nays with Senators Baucus, Boxer, Carper, Lieberman
and Obama voting aye and Senators Bond, Chafee, Clinton,
DeMint, Inhofe, Isakson, Jeffords, Lautenberg, Murkowski,
Thune, Vitter, Voinovich and Warner voting nay.
An amendment offered by Senators Lieberman, Boxer and Obama
to impose Davis Bacon prevailing wage requirements on projects
funded by the Clean Water Act State revolving loan fund was
modified by voice vote and approved by voice vote.
An amendment offered by Senators Lieberman, Boxer and Obama
to impose Davis Bacon prevailing wage requirements on projects
funded by the Safe Drinking Water Act State revolving loan fund
was approved by voice vote.
The bill, as amended, was ordered favorably reported by
unanimous consent.

Regulatory Impact Statement

In compliance with Section 11(b) of rule XXVI of the
Standing Rules of the Senate, the committee makes evaluation of
the regulatory impact of the reported bill. The bill does not
create any additional regulatory burdens, nor will it cause any
adverse impact on the personal privacy of individuals.

Mandates Assessment

In compliance with the Unfunded Mandates Reform Act of 1995
(Public Law 104-4), the committee finds that S. 1400 would not
impose unfunded mandates on local, State or tribal governments.

Cost of Legislation

Section 403 of the Congressional Budget and Impoundment
Control Act requires that a statement of the cost of the
reported bill, prepared by the Congressional Budget Office, be
included in the report. That statement follows:
----------

S. 1400, Water Infrastructure Financing Act, As ordered reported by the
Senate Committee on Environment and Public Works on July
20,2005
Summary
CBO estimates that implementing this legislation would cost
about $17 billion over the next five years, assuming the
appropriation of the authorized amounts. The funds would be
used by the Environmental Protection Agency (EPA) to provide
grants to states and nonprofit organizations to support a wide
range of water quality projects and programs. The Joint
Committee on Taxation (JCT) estimates that enacting S. 1400
would reduce revenues by $214 million over the 2006-2010 period
and by $1.9 billion over the next 10 years. Enacting the bill
would not affect direct spending.
S. 1400 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act (UMRA).
The bill would benefit state, local, and tribal governments;
any costs they incur would result from complying with
conditions for receiving federal assistance.
Estimated Cost to the Federal Government
The estimated budgetary impact of S. 1400 is shown in Table
1. The costs of this legislation fall within budget function
300 (natural resources and environment).
Basis of Estimate
For this estimate, CBO assumes that S. 1400 will be enacted
near the end of 2005, that the full amounts authorized will be
appropriated for each year, and that outlays will follow the
historical pattern of spending for EPA's infrastructure
programs. Components of the estimated costs are described
below.

TABLE 1. ESTIMATED BUDGETARY EFFECTS OF S. 1400, THE WATER INFRASTRUCTURE FINANCING ACT
By Fiscal Year, in Millions of Dollars
----------------------------------------------------------------------------------------------------------------
2005 2006 2007 2008 2009 2010
----------------------------------------------------------------------------------------------------------------
SPENDING SUBJECT TO APPROPRIATION
EPA's Spending for Water Infrastructure and
Grants Under Current Law.....................
Budget Authority\1\....................... 1,929 0 0 0 0 0
Estimated Outlays......................... 2,113 2,027 1,659 956 289 0
Proposed Changes..............................
Authorization Level....................... 0 5,483 5,928 6,328 8,228 12,728
Estimated Outlays......................... 0 626 1,565 3,169 4,915 6,398
EPA's Spending for Water Infrastructure and
Grants Under S. 1400.........................
Authorization Level\1\.................... 1,929 5,483 5,928 6,328 8,228 12,728
Estimated Outlays......................... 2,113 2,653 3,224 4,125 5,204 6,398
CHANGES IN REVENUES
Estimated Revenues\2\......................... 0 -2 -7 -24 -61 -120
----------------------------------------------------------------------------------------------------------------
\1\The 2005 level is the amount appropriated for that year to EPA for the clean water state revolving fund and
the safe drinking water state revolving fund.
\2\Estimate provided by JCT.

Spending Subject to Appropriation

S. 1400 would authorize appropriations totaling nearly $39
billion over the next five years for EPA's water infrastructure
and grant programs. Amounts for individual programs are shown
in table 2.

TABLE 2. AMOUNTS AUTHORIZED TO BE APPROPRIATED TO EPA PROGRAMS UNDER S. 1400
By Fiscal Year, in Millions of Dollars
----------------------------------------------------------------------------------------------------------------
2006 2007 2008 2009 2010
----------------------------------------------------------------------------------------------------------------
Clean Water SRF Grants........................................ 3,200 3,200 3,600 4,000 6,000
Safe Drinking Water SRF Grants................................ 1,500 2,000 2,000 3,500 6,000
Watershed Restoration Grants.................................. 300 300 300 300 300
Critical Drinking Water Infrastructure Grant Program.......... 300 300 300 300 300
Small System Revolving Loan Funds............................. 25 25 25 25 25
Grants for Lead Service Line Replacement in the District of 30 30 30 30 30
Columbia.....................................................
Technical Assistance for Nonprofits........................... 25 25 25 25 25
Research and Demonstration Grant Programs..................... 40 40 40 40 40
Agricultural Pollution Control Technology Grant Program....... 50 0 0 0 0
EPA Support for Containment Prevention, Detection, and 8 8 8 8 8
Response Activities..........................................
DOI Water Resources Study..................................... 3 0 0 0 0
National Academy of Sciences Studies.......................... 2 0 0 0 0
Total Authorization Level............................. 5,483 5,928 6,328 8,228 12,728
----------------------------------------------------------------------------------------------------------------
NOTE: SRF = state revolving fund; DOI = Department of the Interior.

The bill would authorize the appropriation of $35 billion
over the 2006-2010 period for EPA to provide capitalization
grants for the State Revolving Fund (SRF) program ($20 billion
for the clean water SRF program and $15 billion for the safe
drinking water SRF program). States would use such grants along
with their own funds to make low-interest loans to communities
and grants to Indian tribes to construct wastewater treatment
facilities and to fund projects that would improve the quality
of drinking water. This bill would make several revisions to
those grant programs, including expanding the types of projects
eligible for assistance, changing the formulas used to allocate
grant money among the states, and extending the repayment terms
for loans made by states.
This legislation also would authorize the appropriation of
$1.5 billion over the 2006-2010 period for EPA to make
``watershed restoration'' grants to states to remedy sewage
overflows (that is, the discharge of untreated wastewater) and
stormwater discharges (that is, water from rain or snow that
doesn't infiltrate the ground). S. 1400 also would authorize
the appropriation of $1.5 billion over the same period for EPA
to make grants to small public water systems to address the
cost of complying with drinking water regulations.
In addition, the bill would authorize about $650 million
over the next five years for various other purposes, including
establishing a small system revolving loan fund, several grant
programs aimed at promoting innovations in technology and
alternative approaches to water quality management, a grant
program to address the replacement of lead drinking water
service lines in the District of Columbia, a Department of the
Interior study of water resources, and EPA studies of the rate
structures of public water systems and treatment works, and on
plumbing components.

Revenues

This bill would authorize funds for EPA's clean water SRF
and the safe drinking water SRF, and the appropriation of the
agricultural pollution control technology grant program. The
JCT expects that some of these funds would be used by states to
leverage additional funds by issuing tax-exempt bonds. The JCT
estimates that the consequent reductions in revenue would total
$214 million over the 2006-2010 period and about $1.9 billion
over the next 10 years as shown in table 3.

TABLE 3. ESTIMATED REVENUES LOSS UNDER S. 1400
By Fiscal Year, in Millions of Dollars
--------------------------------------------------------------------------------------------------------------------------------------------------------
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
Estimated Revenues.............................................. 0 -2 -7 -24 -61 -120 -195 -280 -357 -408 -424
--------------------------------------------------------------------------------------------------------------------------------------------------------

Intergovernmental and Private-Sector Impact
S. 1400 contains no intergovernmental or private-sector
mandates as defined by UMRA. The bill would benefit small and
rural municipalities as well as disadvantaged communities by
authorizing funding for water and wastewater projects. States
and local governments would be subject to a new priority system
for awarding funds in addition to wage requirements under the
Davis-Bacon Act. Any costs incurred by governmental entities,
including matching funds and costs associated with wage
requirements, would result from complying with conditions for
receiving federal assistance.
Estimate Prepared By: Federal Spending: Susanne S. Mehlman;
Federal Revenues: Annabelle Bartsch; Impact on State, Local,
and Tribal Governments: Lisa Ramirez-Branum; Impact on the
Private Sector: Craig Cammarata.
Estimate Approved By: Peter H. Fontaine, Deputy Assistant
Director for Budget Analysis.

Changes in Existing Law

In compliance with section 12 of rule XXVI of the Standing
Rules of the Senate, changes in existing law made by the bill
as reported are shown as follows: Existing law proposed to be
omitted is enclosed in [black brackets], new matter is printed
in italic, existing law in which no change is proposed is shown
in roman:
----------

[33 U.S.C. 1251 ET SEQ.]

FEDERAL WATER POLLUTION CONTROL ACT

* * * * * * *

TITLE II--GRANTS FOR CONSTRUCTION OF TREATMENT WORKS

Sec. 201. (a) * * *

* * * * * * *

SEC. 221. SEWER OVERFLOW CONTROL GRANTS.

(a) * * *

* * * * * * *

(d) Cost-Sharing.--The Federal share of the cost of
activities carried out using amounts from a grant made under
subsection (a) shall be not less than 55 percent of the cost.
The non-Federal share of the cost may include, in any amount,
public and private funds and in-kind services, and may include,
notwithstanding section [603(h)] 603(i), financial assistance,
including loans, from a State water pollution control revolving
fund.

SEC. 222. TECHNICAL ASSISTANCE FOR RURAL AND SMALL TREATMENT WORKS.

(a) Definition of Qualified Nonprofit Technical Assistance
Provider.--In this section, the term `qualified nonprofit
technical assistance provider' means a qualified nonprofit
technical assistance provider of water and wastewater services
to small rural communities that provide technical assistance to
treatment works (including circuit rider programs and training
and preliminary engineering evaluations) that--
(1) serve not more than 10,000 individuals; and
(2) may include a State agency.
(b) Grant Program.--
(1) In general.--The Administrator may make grants
to qualified nonprofit technical assistance providers
that are qualified to provide assistance on a broad
range of wastewater and stormwater approaches--
(A) to assist small treatment works to
plan, develop, and obtain financing for
eligible projects described in section 603(c)
or 518(c);
(B) to capitalize revolving loan funds to
provide loans, in consultation with the State
in which the assistance is provided, to rural
and small municipalities for predevelopment
costs (including costs for planning, design,
associated preconstruction, and necessary
activities for siting the facility and related
elements) associated with wastewater
infrastructure projects or short-term costs
incurred for equipment replacement that is not
part of regular operation and maintenance
activities for existing wastewater systems,
if--
(i) any loan from the fund is made
at or below the market interest rate,
for a term not to exceed 10 years;
(ii) the amount of any single loan
does not exceed $100,000; and
(iii) all loan repayments are
credited to the fund;
(C) to provide technical assistance and
training for rural and small publicly owned
treatment works and decentralized wastewater
treatment systems to enable those treatment
works and systems to protect water quality and
achieve and maintain compliance with this Act;
and
(D) to disseminate information to rural and
small municipalities with respect to planning,
design, construction, and operation of publicly
owned treatment works and decentralized
wastewater treatment systems.
(2) Distribution of grant.--In carrying out this
subsection, the Administrator shall ensure, to the
maximum extent practicable, that technical assistance
provided using funds from a grant under paragraph (1)
is made available in each State.
(3) Consultation.--As a condition of receiving a
grant under this subsection, a qualified nonprofit
technical assistance provider shall consult with each
State in which grant funds are to be expended or
otherwise made available before the grant funds are
expended or made available in the State.
(4) Annual report.--For each fiscal year, a
qualified nonprofit technical assistance provider that
receives a grant under this subsection shall submit to
the Administrator a report that--
(A) describes the activities of the
qualified nonprofit technical assistance
provider using grant funds received under this
subsection for the fiscal year; and
(B) specifies--
(i) the number of communities
served;
(ii) the sizes of those
communities; and
(iii) the type of financing
provided by the qualified nonprofit
technical assistance provider.
(c) Authorization of Appropriations.--There is authorized
to be appropriated to carry out this section $25,000,000 for
each of fiscal years 2006 through 2010.

* * * * * * *

TITLE VI--STATE WATER POLLUTION CONTROL REVOLVING FUNDS

SEC. 601. GRANTS TO STATES FOR ESTABLISHMENT OF REVOLVING FUNDS.

(a) * * *

* * * * * * *

SEC. 602. CAPITALIZATION GRANT AGREEMENTS.

(a) * * *

* * * * * * *

(b) Specific Requirements.--The Administrator shall enter
into an agreement under this section with a State only after
the State has established to the satisfaction of the
Administrator that--
(1) * * *

* * * * * * *

[(6) treatment works eligible under section
603(c)(1) of this Act which will be constructed in
whole or in part before fiscal year 1995 with funds
directly made available by capitalization grants under
this title and section 205(m) of this Act will meet the
requirements of, or otherwise be treated (as determined
by the Governor of the State) under sections 201(b),
201(g)(1), 201(g)(2), 201(g)(3), 201(g)(5), 201(g)(6),
201(n)(1), 201(o), 204(a)(1), 204(a)(2), 204(b)(1),
204(d)(2), 211, 218, 511(c)(1), and 513 of this Act in
the same manner as treatment works constructed with
assistance under title II of this Act;]
(6) treatment works eligible under section
603(c)(1) that are constructed, in whole or in part,
using funds made available by a State water pollution
control revolving loan fund under this title will meet
the requirements of section 513 in the same manner as
treatment works constructed using assistance provided
under title II;

* * * * * * *

(c) Guidance for Small Systems.--
(1) Definition of small system.--In this
subsection, the term `small system' means a system--
(A) for which a municipality or
intermunicipal, interstate, or State agency
seeks assistance under this title; and
(B) that serves a population of 10,000 or
fewer individuals.
(2) Simplified procedures.--Not later than 1 year
after the date of enactment of this subsection, the
Administrator shall assist the States in establishing
simplified procedures for small systems to obtain
assistance under this title.
(3) Publication of manual.--Not later than 1 year
after the date of enactment of this subsection, after
providing notice and opportunity for public comment,
the Administrator shall publish--
(A) a manual to assist small systems in
obtaining assistance under this title; and
(B) in the Federal Register, notice of the
availability of the manual.

SEC. 603. WATER POLLUTION CONTROL REVOLVING LOAN FUNDS.

(a) * * *

* * * * * * *

[(c) Projects Eligible for Assistance.--The amounts of
funds available to each State water pollution control revolving
fund shall be used only for providing financial assistance (1)
to any municipality, intermunicipal, interstate, or State
agency for construction of publicly owned treatment works (as
defined in section 212 of this Act), (2) for the implementation
of a management program established under section 319 of this
Act, and (3) for development and implementation of a
conservation and management plan under section 320 of this Act.
The fund shall be established, maintained, and credited with
repayments, and the fund balance shall be available in
perpetuity for providing such financial assistance.]
(c) Projects Eligible for Assistance.--Funds in each State
water pollution control revolving fund shall be used only for--
(1) providing financial assistance to any
municipality or an intermunicipal, interstate, or State
agency or private utility that principally treats
municipal wastewater or domestic sewage for
construction (including planning, design, associated
preconstruction, and activities relating to the siting
of a facility) of a treatment works (as defined in
section 212);
(2) implementation of a management program
established under section 319;
(3) development and implementation of a
conservation and management plan under section 320;
(4) providing financial assistance to a
municipality or an intermunicipal, interstate, or State
agency for projects to increase the security of
wastewater treatment works (excluding any expenditure
for operations or maintenance);
(5) providing financial assistance to a
municipality or an intermunicipal, interstate, or State
agency for measures to control municipal stormwater,
the primary purpose of which is the preservation,
protection, or enhancement of water quality to support
public purposes;
(6) water conservation projects, the primary
purpose of which is the protection, preservation, and
enhancement of water quality to support public
purposes; or
(7) reuse, reclamation, and recycling projects, the
primary purpose of which is the protection,
preservation, and enhancement of water quality to
support public purposes.
(d) Types of Assistance.--Except as otherwise limited by
State law, a water pollution control revolving fund of a State
under this section may be used only--
(1) to make loans, on the condition that--
(A) such loans are made at or below market
interest rates, including interest free loans,
at terms not to exceed 20 years;
(B) annual principal and interest payments
will commence not later than 1 year after
completion of any project and all loans will be
fully amortized not later than 20 years after
project completion;
(C) the recipient of a loan will establish
a dedicated source of revenue for repayment of
loans; and
(D) the fund will be credited with all
payments of principal and interest on all
loans;
(2) to buy or refinance the debt obligation of
municipalities and intermunicipal and interstate
agencies within the State at or below market rates,
where such debt obligations were incurred after March
7, 1985;
(3) to guarantee, or purchase insurance for, local
obligations where such action would improve credit
market access or reduce interest rates;
(4) as a source of revenue or security for the
payment of principal and interest on revenue or general
obligation bonds issued by the State if the proceeds of
the sale of such bonds will be deposited in the fund;
(5) to provide loan guarantees for similar
revolving funds established by municipalities or
intermunicipal agencies;
(6) to earn interest on fund accounts; [and]
(7) for the reasonable costs of administering the
fund and conducting activities under this title, except
that such amounts shall not exceed [4 percent] 6
percent of all grant awards to such fund under this
title[.] ; and
(8) to carry out a project under paragraph (2) or
(3) of section 601(a), which may be--
(A) operated by a municipal,
intermunicipal, or interstate entity, State,
public or private utility, corporation,
partnership, association, or nonprofit agency;
and
(B) used to make loans that will be fully
amortized not later than 30 years after the
date of the completion of the project.
(e) Types of Assistance for Disadvantaged Communities.--
(1) Definition of disadvantaged community.--In this
subsection, the term `disadvantaged community' means
the service area, or portion of a service area, of a
treatment works that meets affordability criteria
established after public review and comment by the
State in which the treatment works is located.
(2) Loan subsidy.--Notwithstanding any other
provision of this section, in a case in which the State
makes a loan from the water pollution control revolving
loan fund in accordance with subsection (c) to a
disadvantaged community or a community that the State
expects to become a disadvantaged community as the
result of a proposed project, the State may provide
additional subsidization, including--
(A) the forgiveness of the principal of the
loan; and
(B) an interest rate on the loan of zero
percent.
(3) Total amount of subsidies.--For each fiscal
year, the total amount of loan subsidies made by the
State pursuant to this subsection may not exceed 30
percent of the amount of the capitalization grant
received by the State for the fiscal year.
(4) Extended term.--A State may provide an extended
term for a loan if the extended term--
(A) terminates not later than the date that
is 30 years after the date of completion of the
project; and
(B) does not exceed the expected design
life of the project.
(5) Information.--The Administrator may publish
information to assist States in establishing
affordability criteria described in paragraph (1).
[(e)] (f) Limitation To Prevent Double Benefits.--If a
State makes, from its water pollution revolving fund, a loan
which will finance the cost of facility planning and the
preparation of plans, specifications, and estimates for
construction of publicly owned treatment works, the State shall
ensure that if the recipient of such loan receives a grant
under section 201(g) of this Act for construction of such
treatment works and an allowance under section 201(l)(1) of
this Act for non-federal funds expended for such planning and
preparation, such recipient will promptly repay such loan to
the extent of such allowance.
[(f)] (g) Consistency With Planning Requirements.--A State
may provide financial assistance from its water pollution
control revolving fund only with respect to a project which is
consistent with plans, if any, developed under sections 205(j),
208, 303(e), 319, and 320 of this Act.
[(g)] [(h) Priority List Requirement.--The State may
provide financial assistance from its water pollution control
revolving fund only with respect to a project for construction
of a treatment works described in subsection (c)(1) if such
project is on the State's priority list under section 216 of
this Act. Such assistance may be provided regardless of the
rank of such project on such list.]
(h) Priority System Requirement.--
(1) Definitions.--In this subsection:
(A) Restructuring.--The term
`restructuring' means--
(i) the consolidation of management
functions or ownership with another
facility; or
(ii) the formation of cooperative
partnerships.
(B) Traditional wastewater approach.--The
term `traditional wastewater approach' means a
managed system used to collect and treat
wastewater from an entire service area
consisting of--
(i) collection sewers;
(ii) a centralized treatment plant
using biological, physical, or chemical
treatment processes; and
(iii) a direct point source
discharge to surface water.
(2) Priority system.--In providing financial
assistance from the water pollution control revolving
fund of the State, the State shall--
(A) give greater weight to an application
for assistance by a treatment works if the
application includes such other information as
the State determines to be appropriate and--
(i) an inventory of assets,
including a description of the
condition of those assets;
(ii) a schedule for replacement of
the assets;
(iii) a financing plan that factors
in all life-cycle costs indicating
sources of revenue from ratepayers,
grants, bonds, other loans, and other
sources;
(iv) a review of options for
restructuring the treatment works;
(v) a review of options for or use
of approaches other than a traditional
wastewater approach that may include
actions or projects that treat or
minimize sewage or urban stormwater
discharges using--
(I) decentralized or
distributed stormwater
controls;
(II) decentralized
wastewater treatment;
(III) low impact
development technologies;
(IV) stream buffers;
(V) wetland restoration; or
(VI) actions to minimize
the quantity of and direct
connections to impervious
surfaces;
(vi) demonstration of consistency
with State, regional, and municipal
watershed plans;
(vii) a review of options for urban
waterfront development or brownfields
revitalization to be completed in
conjunction with the project; or
(viii) provides the applicant the
flexibility through alternative means
to carry out responsibilities under
Federal regulations, that may include
watershed permitting and other
innovative management approaches, while
achieving results that--
(I) the State authorized
under section 402(a)(5) to
issue national pollution
discharge elimination permits
determines meet permit
requirements for permits that
have been issued in accordance
with the national pollution
discharge elimination system
under section 402; or
(II) the Administrator
determines are measurably
superior when compared to
regulatory standards;
(B) take into consideration appropriate
chemical, physical, and biological data that
the State considers reasonably available and of
sufficient quality;
(C) provide for public notice and
opportunity to comment on the establishment of
the system and the summary under subparagraph
(D);
(D) publish not less than biennially in
summary form a description of projects in the
State that are eligible for assistance under
this title that indicates--
(i) the priority assigned to each
project under the priority system of
the State; and
(ii) the funding schedule for each
project, to that extent the information
is available; and
(E) ensure that projects undertaken with
assistance under this title are designed to
achieve, as determined by the State, the
optimum water quality management, consistent
with the public health and water quality goals
and requirements of this title.
(3) Savings clause.--Nothing in paragraph
(2)(A)(viii) affects the authority of the Administrator
under section 402(a)(5).
[(h)] (i) Eligibility of Non-Federal Share of Construction
Grant Projects.--A State water pollution control revolving fund
may provide assistance (other than under subsection (d)(1) of
this section) to a municipality or intermunicipal or interstate
agency with respect to the non-Federal share of the costs of a
treatment works project for which such municipality or agency
is receiving assistance from the Administrator under any other
authority only if such assistance is necessary to allow such
project to proceed.
(j) Transfer of Funds.--
(1) In general.--The Governor of a State may--
(A)(i) reserve not more than 33 percent of
a capitalization grant made under this title;
and
(ii) add the funds reserved to any funds
provided to the State under section 1452 of the
Safe Drinking Water Act (42 U.S.C. 300j-12);
and
(B)(i) reserve for any year an amount that
does not exceed the amount that may be reserved
under subparagraph (A) for that year from
capitalization grants made under section 1452
of that Act (42 U.S.C. 300j-12); and
(ii) add the reserved funds to any funds
provided to the State under this title.
(2) State match.--Funds reserved under this
subsection shall not be considered to be a State
contribution for a capitalization grant required under
this title or section 1452(b) of the Safe Drinking
Water Act (42 U.S.C. 300j-12(b)).
(k) Noncompliance.--
(1) In general.--Except as provided in paragraph
(2), no assistance (other than assistance that is to be
used by a treatment works solely for planning, design,
or security purposes) shall be provided under this
title to a treatment works that has been in significant
noncompliance with any requirement of this Act for any
of the 4 quarters in the previous 8 quarters, unless
the treatment works is in compliance with, or has
entered into, an enforceable administrative order to
effect compliance with the requirement.
(2) Exception.--A treatment works that is
determined under paragraph (1) to be in significant
noncompliance with a requirement described in that
paragraph may receive assistance under this title if
the Administrator and the State providing the
assistance determine that--
(A) the entity conducting the enforcement
action on which the determination of
significant noncompliance is based has
determined that the use of assistance would
enable the treatment works to take corrective
action toward resolving the violations; or
(B) the entity conducting the enforcement
action on which the determination of
significant noncompliance is based has
determined that the assistance would be used on
a portion of the treatment works that is not
directly related to the cause of finding
significant noncompliance.

SEC. 604. ALLOTMENT OF FUNDS.

[(a) Formula.--Sums authorized to be appropriated to carry
out this section for each of fiscal years 1989 and 1990 shall
be allotted by the Administrator in accordance with section
205(c) of this Act.]
(a) Allocation of Funds.--
(1) In general.--Funds made available to carry out
this section for a fiscal year shall be allocated by
the Administrator in accordance with this subsection.
(2) Indian tribes.--Of the total amount of funds
available, 1.5 percent shall be allocated to Indian
tribes (as that term is used in section 518(c)).
(3) States and territories.--Of the total amount of
funds available after the allocation made under
paragraph (2), funds shall be allocated among the
States and territories in accordance with the following
chart:

State: Percentage:
Alabama................................................... 0.68
Alaska.................................................... 1.00
Arizona................................................... 0.91
Arkansas.................................................. 0.50
California................................................ 8.02
Colorado.................................................. 0.50
Connecticut............................................... 1.34
Delaware.................................................. 1.00
Florida................................................... 3.46
Georgia................................................... 1.81
Hawaii.................................................... 0.50
Idaho..................................................... 0.50
Illinois.................................................. 6.39
Indiana................................................... 2.48
Iowa...................................................... 0.82
Kansas.................................................... 0.55
Kentucky.................................................. 1.29
Louisiana................................................. 1.49
Maine..................................................... 0.50
Maryland.................................................. 1.47
Massachusetts............................................. 2.06
Michigan.................................................. 4.36
Minnesota................................................. 1.12
Mississippi............................................... 0.92
Missouri.................................................. 2.89
Montana................................................... 1.00
Nebraska.................................................. 0.50
Nevada.................................................... 0.75
New Hampshire............................................. 0.61
New Jersey................................................ 5.77
New Mexico................................................ 0.50
New York.................................................. 12.89
North Carolina............................................ 1.93
North Dakota.............................................. 0.75
Ohio...................................................... 5.80
Oklahoma.................................................. 1.07
Oregon.................................................... 0.69
Pennsylvania.............................................. 4.02
Rhode Island.............................................. 1.00
South Carolina............................................ 1.13
South Dakota.............................................. 1.00
Tennessee................................................. 1.48
Texas..................................................... 2.78
Utah...................................................... 0.50
Vermont................................................... 1.00
Virginia.................................................. 2.17
Washington................................................ 1.06
West Virginia............................................. 1.58
Wisconsin................................................. 1.64
Wyoming................................................... 0.50
District of Columbia...................................... 0.50
Puerto Rico............................................... 0.50
0.32.ritories...............................................

* * * * * * *

[SEC. 607. AUTHORIZATION OF APPROPRIATIONS.

[There is authorized to be appropriated to carry out the
purposes of this title the following sums:
[(1) $1,200,000,000 per fiscal year for each of
fiscal year 1989 and 1990;
[(2) $2,400,000,000 for fiscal year 1991;
[(3) $1,800,000,000 for fiscal year 1992;
[(4) $1,200,000,000 for fiscal year 1993; and
[(5) $600,000,000 for fiscal year 1994.]

SEC. 607. AUTHORIZATION OF APPROPRIATIONS.

(a) In General.--There are authorized to be appropriated to
carry out this title--
(1) $3,200,000,000 for each of fiscal years 2006
and 2007;
(2) $3,600,000,000 for fiscal year 2008;
(3) $4,000,000,000 for fiscal year 2009; and
(4) $6,000,000,000 for fiscal year 2010.
(b) Availability.--Amounts made available under this
section shall remain available until expended.
(c) Reservation for Needs Surveys.--Of the amount made
available under subsection (a) to carry out this title for a
fiscal year, the Administrator may reserve not more than
$1,000,000 for the fiscal year. to remain available until
expended, to pay the costs of conducting needs surveys under
section 516(2).

* * * * * * *

----------

TITLE XIV OF THE PUBLIC HEALTH SERVICE ACT

SAFETY OF PUBLIC WATER SYSTEMS (SAFE DRINKING WATER ACT)

* * * * * * *

Sec. 1400. This title may be cited as the ``Safe Drinking
Water Act''.

* * * * * * *

SEC. 1434. CONTAMINANT PREVENTION, DETECTION AND RESPONSE.

(a) * * *

* * * * * * *

[(b) Funding.--For the authorization of appropriations to
carry out this section, see section 1435(e).]
(b) Report.--Not later than 180 days after the date of
enactment of the Water Infrastructure Financing Act, the
Administrator shall submit to Congress a report that includes--
(1) a description of the progress made as of that
date in implementing this section;
(2) a description of any impediments to that
implementation identified by the Administrator,
including--
(A) difficulty in coordinating the
implementation with other Federal, State, or
local agencies or organizations;
(B) insufficient funding for effective
implementation;
(C) a lack of authorization to take certain
actions (including the authority to hire
necessary personnel) required to carry out the
implementation; and
(D) technological impediments to developing
the methods, means, and equipment specified in
subsection (a)(1).
(c) Implementation Plan.--The Administrator shall develop
and carry out an implementation plan for this section
consistent with actions taken to date and incorporating the
results of the report under subsection (b).
(d) Funding.--There is authorized to be appropriated to
carry out this section $7,500,000 for each of fiscal years 2006
through 2010.

* * * * * * *

research, technical assistance, information, training of personnel

Sec. 1442. (a)(1) * * *

* * * * * * *

(e) Technical Assistance.--[The Administrator may provide]
(1) In general.--The Administrator may provide
technical assistance to small public water systems to
enable such systems to achieve and maintain compliance
with applicable national primary drinking water
regulations. Such assistance may include circuit-rider
and multi-State regional technical assistance programs,
training, and preliminary engineering evaluations. The
Administrator shall ensure that technical assistance
pursuant to this subsection is available in each State.
Each nonprofit organization receiving assistance under
this subsection shall consult with the State in which
the assistance is to be expended or otherwise made
available before using assistance to undertake
activities to carry out this subsection. There are
authorized to be appropriated to the Administrator to
be used for such technical assistance $15,000,000 for
each of the fiscal years 1997 through 2003. No portion
of any State loan fund established under section 1452
(relating to State loan funds) and no portion of any
funds made available under this subsection may be used
for lobbying expenses. Of the total amount appropriated
under this subsection, 3 percent shall be used for
technical assistance to public water systems owned or
operated by Indian Tribes.
(2) Small system revolving loan fund.--
(A) In general.--In addition to amounts
provided under this section, the Administrator
may provide grants to qualified private,
nonprofit entities to capitalize revolving
funds to provide financing to eligible entities
described in subparagraph (B) for--
(i) predevelopment costs (including
costs for planning, design, associated
preconstruction, and necessary
activities for siting the facility and
related elements) associated with
proposed water projects or with
existing water systems; and
(ii) short-term costs incurred for
replacement equipment, small-scale
extension services, or other small
capital projects that are not part of
the regular operations and maintenance
activities of existing water systems.
(B) Eligible entities.--To be eligible for
assistance under this paragraph, an entity
shall be a small water system (as described in
section 1412(b)(4)(E)(ii)).
(C) Maximum amount of loans.--The amount of
financing made to an eligible entity under this
paragraph shall not exceed--
(i) $100,000 for costs described in
subparagraph (A)(i); and
(ii) $100,000 for costs described
in subparagraph (A)(ii).
(D) Term.--The term of a loan made to an
eligible entity under this paragraph shall not
exceed 10 years.
(E) Annual report.--For each fiscal year, a
qualified private, nonprofit entity that
receives a grant under subparagraph (A) shall
submit to the Administrator a report that--
(i) describes the activities of the
qualified private, nonprofit entity
under this paragraph for the fiscal
year; and
(ii) specifies--
(I) the number of
communities served;
(II) the sizes of those
communities; and
(III) the type of financing
provided by the qualified
private, nonprofit entity.
(F) Authorization of appropriations.--There
is authorized to be appropriated to carry out
this subsection $25,000,000 for each of fiscal
years 2006 through 2010.

* * * * * * *

general provisions

Sec. 1450. (a)(1) * * *

* * * * * * *

[(e) The Administrator shall take such action as may be
necessary to assure compliance with provisions of the Act of
March 3, 1931 (known as the Davis-Bacon Act; 40 U.S.C. 276a-
276a(5)). The Secretary of Labor shall have, with respect to
the labor standards specified in this subsection, the authority
and functions set forth in Reorganization Plan Numbered 14 of
1950 (15 F.R. 3176; 64 Stat. 1267) and section 2 of the Act of
June 13, 1934 (40 U.S.C. 276c).]
(e) Wage Requirements.--
(1) In general.--The Administrator shall take such
action as is necessary to ensure that laborers and
mechanics employed by contractors and subcontractors on
construction projects financed, in whole or in part, by
a grant, loan, loan guarantee, refinancing, or any
other form of assistance provided under this title
(including assistance provided from the State drinking
water revolving fund under section 1452) are paid at
rates that are not less than the rates prevailing for
the same type of work for similar construction in the
immediate locality, as determined by the Secretary of
Labor in accordance with subchapter IV of chapter 31 of
title 40, United States Code (commonly known as the
`Davis-Bacon Act').
(2) Authority.--The Secretary of Labor shall have,
with respect to the labor standards specified in this
subsection, the authority and functions set forth in
Reorganization Plan Numbered 14 of 1950 (15 Fed. Reg.
3176) and section 3145 of title 40, United States Code.

* * * * * * *

Sec. 1452. (a) General Authority.--
(1) * * *

* * * * * * *

(2) Use of funds.--Except as otherwise authorized
by this title, amounts deposited in a State loan fund,
including loan repayments and interest earned on such
amounts, shall be used only for providing loans or loan
guarantees, or as a source of reserve and security for
leveraged loans, the proceeds of which are deposited in
a State loan fund established under paragraph (1), or
other financial assistance authorized under this
section to community water systems and nonprofit
noncommunity water systems, other than systems owned by
Federal agencies. Financial assistance under this
section may be used by a public water system only for
expenditures [(not] (including expenditures for
planning, design, and associated preconstruction and
for recovery for siting of the facility and related
elements but not including monitoring, operation, and
maintenance expenditures) of a type or category which
the Administrator has determined, through guidance,
will facilitate compliance with national primary
drinking water regulations applicable to the system
under section 1412 or otherwise significantly further
the health protection objectives of this title. The
funds may also be used to provide loans to a system
referred to in section 1401(4)(B) for the purpose of
providing the treatment described in section
1401(4)(B)(i)(III). The funds shall not be used for the
acquisition of real property or interests therein,
unless the acquisition is integral to a project
authorized by this paragraph and the purchase is from a
willing seller. Of the amount credited to any State
loan fund established under this section in any fiscal
year, 15 percent shall be available solely for
providing loan assistance to public water systems which
regularly serve fewer than 10,000 persons to the extent
such funds can be obligated for eligible projects of
public water systems or to replace or rehabilitate
aging treatment, storage (including reservoirs), or
distribution facilities of public water systems or
provide for capital projects to upgrade the security of
public water systems.

* * * * * * *

(b) Intended Use Plans.--
(1) * * *

* * * * * * *

(3) Use of funds.--
[(A) In general.--An intended use plan
shall provide, to the maximum extent
practicable, that priority for the use of funds
be given to projects that--
[(i) address the most serious risk
to human health;
[(ii) are necessary to ensure
compliance with the requirements of
this title (including requirements for
filtration); and
[(iii) assist systems most in need
on a per household basis according to
State affordability criteria.]
(A) Definition of restructuring.--In this
paragraph, the term `restructuring' means
changes in operations (including ownership,
cooperative partnerships, accounting, rates,
maintenance, consolidation, and alternative
water supply).
(B) Priority system.--An intended use plan
shall provide, to the maximum extent
practicable, that priority for the use of funds
be given to projects that--
(i) address the most serious risk
to human health;
(ii) are necessary to ensure
compliance with this title (including
requirements for filtration); and
(iii) assist systems most in need
on a per-household basis according to
State affordability criteria.
(C) Weight given to applications.--After
determining project priorities under
subparagraph (B), an intended use plan shall
further provide that the State shall give
greater weight to an application for assistance
by a community water system if the application
includes such other information as the State
determines to be necessary and--
(i) an inventory of assets,
including a description of the
condition of the assets;
(ii) a schedule for replacement of
assets;
(iii) a financing plan indicating
sources of revenue from ratepayers,
grants, bonds, other loans, and other
sources;
(iv) a review of options for
restructuring the public water system;
(v) demonstration of consistency
with State, regional, and municipal
watershed plans; or
(vi) a review of options for urban
waterfront development or brownfields
revitalization to be completed in
conjunction with the project;
[(B)] (D) List of projects.--Each State
shall, after notice and opportunity for public
comment, publish and [periodically] at least
biennially update a list of projects in the
State that are eligible for assistance under
this section, including the priority assigned
to each project and, to the extent known, the
expected funding schedule for each project.

* * * * * * *

(d) Assistance for Disadvantaged Communities.--
(1) * * *

* * * * * * *

(3) Definition of disadvantaged community.--In this
subsection, the term ``disadvantaged community'' means
the service area, or portion of a service area, of a
public water system that meets affordability criteria
established after public review and comment by the
State in which the public water system is located. The
Administrator may publish information to assist States
in establishing affordability criteria.

* * * * * * *

(g) Administration of State Loan Funds.--
(1) * * *

* * * * * * *

(2) Cost of administering fund.--Each State may
annually use up to [4] 6 percent of the funds allotted
to the State under this section to cover the reasonable
costs of administration of the programs under this
section, including the recovery of reasonable costs
expended to establish a State loan fund which are
incurred after the date of enactment of this section,
and to provide technical assistance to public water
systems within the State. For fiscal year 1995 and each
fiscal year thereafter, each State may use up to an
additional 10 percent of the funds allotted to the
State under this section--
(A) for public water system supervision
programs under section 1443(a);
(B) to administer or provide technical
assistance through source water protection
programs;
(C) to develop and implement a capacity
development strategy under section 1420(c); and
(D) for an operator certification program
for purposes of meeting the requirements of
section [1419,
if the State matches the expenditures with at least an
equal amount of State funds. At least half of the match
must be additional to the amount expended by the State
for public water supervision in fiscal year 1993.]
1419. An additional 2 percent of the funds annually
allotted to each State under this section may be used
by the State to provide technical assistance to public
water systems serving 10,000 or fewer persons in the
State. Funds utilized under subparagraph (B) shall not
be used for enforcement actions.

* * * * * * *

(5) Transfer of funds.--
(A) In general.--The Governor of a State
may--
(i)(I) reserve not more than 33
percent of a capitalization grant made
under this section; and
(II) add the funds reserved to any
funds provided to the State under
section 601 of the Federal Water
Pollution Control Act (33 U.S.C. 1381);
and
(ii)(I) reserve for any fiscal year
an amount that does not exceed the
amount that may be reserved under
clause (i)(I) for that year from
capitalization grants made under
section 601 of that Act (33 U.S.C.
1381); and
(II) add the reserved funds to any
funds provided to the State under this
section.
(B) State match.--Funds reserved under this
paragraph shall not be considered to be a State
match of a capitalization grant required under
this section or section 602(b) of the Federal
Water Pollution Control Act (33 U.S.C.
1382(b)).

* * * * * * *

(k) Other Authorized Activities.--
(1) * * *

* * * * * * *

(2) Limitation.--For each fiscal year, the total
amount of assistance provided and expenditures made by
a State under this subsection may not exceed 15 percent
of the amount of the capitalization grant received by
the State for that year and may not exceed 10 percent
of that amount for any one of the following activities:
(A) To acquire land or conservation
easements pursuant to paragraph (1)(A)(i).
(B) To provide funding to implement
voluntary, incentive-based source water quality
protection measures pursuant to clauses (ii)
and (iii) of paragraph (1)(A).
(C) To provide assistance through a
capacity development strategy pursuant to
paragraph (1)(B).
(D) To make expenditures to delineate or
assess source water protection areas pursuant
to paragraph (1)(C) (including implementation
of source water protection plans).

* * * * * * *

[(m) Authorization of Appropriations.--There are authorized
to be appropriated to carry out the purposes of this section
$599,000,000 for the fiscal year 1994 and $1,000,000,000 for
each of the fiscal years 1995 through 2003. To the extent
amounts authorized to be appropriated under this subsection in
any fiscal year are not appropriated in that fiscal year, such
amounts are authorized to be appropriated in a subsequent
fiscal year (prior to the fiscal year 2004). Such sums shall
remain available until expended.]
(m) Authorization of Appropriations.--
(1) In general.--There are authorized to be
appropriated to carry out this section--
(A) $1,500,000,000 for fiscal year 2006;
(B) $2,000,000,000 for each of fiscal years
2007 and 2008;
(C) $3,500,000,000 for fiscal year 2009;
and
(D) $6,000,000,000 for fiscal year 2010.
(2) Availability.--Amounts made available under
this subsection shall remain available until expended.
(3) Reservation for needs surveys.--Of the amount
made available under paragraph (1) to carry out this
section for a fiscal year, the Administrator may
reserve not more than $1,000,000 per year to pay the
costs of conducting needs surveys under subsection (h).

* * * * * * *