SECTION: CAPITOL HILL HEARING TESTIMONY

LENGTH: 3588 words

COMMITTEE: HOUSE ENERGY AND COMMERCE

HEADLINE: DRINKING WATER INFRASTRUCTURE

TESTIMONY-BY: MR. JAY RUTHERFORD, DIRECTOR, WATER SUPPLY DIVISION

AFFILIATION: VERMONT DEPARTMENT OF ENVIORNMENTAL CONSERVATION

BODY:
Testimony The Committee on Energy and Commerce W.J. "Billy" Tauzin, Chairman

Drinking Water Needs and Infrastructure Subcommittee on Environment and Hazardous Materials

April 11, 2002

Mr. Jay Rutherford Director, Water Supply Division Vermont Department of Enviornmental Conservation

SUMMARY OF MAJOR POINTS

RECOMMENDATIONS

Congress should extend the authorization of the DWSRF and the PWSS state grant program to 2010; increase funding levels to at least $3 billion and $250 million annually for the DWSRF and PWSS programs respectively; extend the transferability provisions between the DWSRF and the CWSRF; eliminate or significantly reduce the one-to-one match that states must obtain to access DWSRF funds to help run their drinking water programs; and add water system security upgrades to the list of eligible projects.

RATIONALE

The 1996 SDWA Amendments created enormous new programs and a complex regulatory structure that added significantly to the state implementation workload for the 49 states that have "primacy" and are responsible for implementing all aspects of the new Federal requirements for 169,000 public water systems nationwide. The primary Federal funding for states is the Public Water Supply Supervision (PWSS) program. Funding for states under this program has remained unchanged, at $87.3 million, since FY- 97 in spite of the significant new SDWA requirements, and new security activities in the wake of September 11. -While up to 10 percent of the DWSRF can theoretically be used by states for state program implementation, the practical reality is that states have only been able to use 4 percent on average nationwide. In spite of Federal, state, and DWSRF set-aside funding, a gap currently exists for state implementation programs. The state staffing and funding gap is estimated at 2,478 FTEs and $220 million in FY-02 growing to 3,533 FTEs and $300 million by FY-05. Drinking water systems also face significant infrastructure needs. EPA's 1999 Drinking Water Infrastructure Needs Survey indicates that water system infrastructure needs total $150.9 billion over the next 20 years with $102.5 billion needed immediately to ensure the provision of safe drinking water. These estimates do not include infrastructure needs for arsenic compliance or security upgrades.

Introduction

The Association of State Drinking Water Administrators (ASDWA) is pleased to provide testimony before the House Committee on Energy and Commerce Subcommittee on Environment and Hazardous Materials regarding drinking water needs and infrastructure. ASDWA represents the drinking water programs in each of the fifty states, territories, and the District of Columbia in their efforts to ensure the provision of safe, potable drinking water to over 250 million consumers nationwide. ASDWA's primary mission is the protection of public health through the effective management of state drinking water programs that implement the Safe Drinking Water Act (SDWA).

Water Infrastructure

Water Infrastructure Needs

Providing a supply of safe, potable drinking water is critical to protecting public health and ensuring current as well as long- term economic growth of this Nation. In February 2001 the United States Environmental Protection Agency (EPA) released a report entitled 1999 Drinking Water Infrastructure Needs Survey that indicated that drinking water systems infrastructure needs totaled $150.9 billion over the next 20 years and that $102.5 billion was needed immediately to ensure the provision of safe drinking water. The bulk of this need, $83.2 billion, is for transmission and distribution projects followed by treatment ($38.0 billion), storage ( $18.4 billion), source ($9.6 billion), and other needs ($1.9 billion). These needs are documented for the 54,000 community water systems and 21,400 not-for-profit noncommunity water systems nationwide. These estimates, however, do not include funds needed for compliance with the new arsenic rule or security upgrades for water system protection.

Why is there an Infrastructure Need?

Water utilities must continue to upgrade and improve their infrastructure to meet new SDWA regulatory mandates and to replace aging and failing distribution system pipes and appurtenances. Much has been learned over the last decade about specific health problems associated with distribution system problems such as leaking pipes, cross connections, and backflow. Many of these concerns are likely to be addressed specifically in the future as EPA proposes developing a distribution system rule. Since September 11, this need has expanded to include security- related upgrades for treatment plants as well as distribution systems.

The 1996 Amendments to the SDWA require that EPA develop regulations to address microbial contamination, disinfection by- products, radon, radionuclides, arsenic, ground water protection, and filter backwash. EPA must also continue to evaluate potential contaminants for regulation well into the future. As a result, infrastructure funding needs will continue to escalate as more contaminants are promulgated that address new contaminants in drinking water, and as current regulatory levels are driven lower to meet improved analytical methods to bring standards closer to the maximum contaminant level goal. In addition, new treatment technologies such as membranes, ozone, and UV irradiation will become more commonplace in water treatment. Some of these technologies are capital intensive to install and operate, while others will require significant retrofitting of current treatment plants and upgrades to distribution systems. Many drinking water systems will also be required to comply with the new arsenic standard over the next several years. In many small systems, the installation of treatment for arsenic will likely result in the need for additional system upgrades.

In addition to meeting infrastructure needs associated with compliance with the SDWA, water systems also face the challenge of replacing miles of distribution pipes as materials age and begin to fail. The demographics of distribution pipe installation indicate that over the course of the next 20 years, many of the miles of pipes that have been put in the ground over the last 100 years will reach the end of their useful life and need replacement. Additional security upgrades will also be needed at water systems.

Current Funding Availability

Funding of water system infrastructure needs involves a partnership at the Federal, state, and local level. At the Federal level, funding is available through the Drinking Water State Revolving Loan Fund (DWSRF) that was established under the 1996 SDWA Amendments. In the SDWA, Congress authorized $9.6 billion between FY-94 and FY-03 for states to provide loans and "grant equivalents" to water systems in need. An important note is that although $8.6 billion was authorized through FY-02, only $5.27 billion has been appropriated leaving a funding gap of $3.33 billion that the states and water systems were expecting to be available to meet infrastructure needs and compliance requirements of the SDWA.

States also must match the DWSRF with 20 percent state funding as a way to further capitalize this program. Through June 30, 2001 states had contributed over $773 million additional funds for the program. To the extent that the full Federal amount has not been appropriated; however, revenue is also lost due to the loss of state matching funds. A number of states also leverage the funds to create additional dollars for infrastructure improvements. Through June 30, 2001, states had leveraged almost $1.5 billion in bonds to provide additional project funding. A number of states have also established their own grant and loan programs that are used to supplement DWSRF funding.

The DWSRF has proven to be very successful. Through July 2001, states have provided over $3.7 billion in SRF assistance for 1,776 drinking water projects. Twenty percent of the funds have gone to systems serving over 100,000 people, 40 percent have gone to systems serving between 10,000 and 100,000 people, and 40 percent have gone to systems serving fewer than 10,000 people.

Additional Federal funding also comes through the Rural Utility Service Water and Waste Loan and Grant Program under the U.S. Department of Agriculture's Rural Development office. These funds assist eligible applicants in rural areas and cities and towns serving up to 10,000 people. The Federal Housing and Urban Development (HUD) Agency also provides block grants to states under its Community Development Block Grant (CDBG) program to provide assistance to small local governments that generally serve less than 50,000 people and counties with a population of less than 200,000 people. Water and wastewater projects are eligible activities under the CDBG program. Many states use these funds along with USDA and DWSRF funding to package the appropriate mix of grants and/or loans to meet a community's specific financing needs.

At the local level, a primary source of funding for infrastructure improvements comes through rates charged by utilities to consumers for water use. In many cases, however, rates have been kept artificially low and long-term maintenance costs deferred. This has the potential to contribute to "rate shock" should customers have to bear the full cost of projected infrastructure replacement needs. Municipalities can also borrow money from the private sector such as banks or go to the bond market although many smaller water systems and non-municipal systems find it more difficult to access these types of funding.

Is There a Funding Gap?

While it is possible, through instruments such as EPA's drinking water needs survey, to project drinking water infrastructure needs over the next 20 years, it is much more problematic to define how large an infrastructure funding gap exits. To calculate this accurately, one needs to have a solid understanding of the current and long term funding needs and then have a fairly accurate assessment of the total sources of revenue at the Federal, state, and local level that can be brought together to meet these infrastructure funding needs. The delta (or difference) between these two numbers represents the funding gap or need but only at the gross national level. The "gap" can vary significantly on a water system-by-water system basis depending on system size, contaminants of concern, the system's current rate structure, access to available capital, and the age of the system, among many factors.

Conclusion

Drinking water system infrastructure needs will continue to increase due to new SDWA regulatory requirements as well as the need to replace aging and failing pipes in distribution systems, and implement new security upgrades. A continued partnership among Federal, state, and local funding sources will be essential to ensure the long-term provision of safe, potable drinking water to consumers nationwide. Numerous needs surveys, including EPA's recent analysis, have concluded that nationally, water systems face a daunting task in continuing to ensure safe drinking water. The highly successful DWSRF should be continued as a viable mechanism for meeting current and future water system funding needs.

Recommendations

Congress should reduce the current drinking water funding gap by appropriating the full authorization of the DWSRF and the backlog of unappropriated funds.

Congress should extend the current DWSRF authorization through FY 2010.

Congress should appropriate at least $3 billion each year for FY 2003-2010.

Congress should extend the ability to transfer funds between the DWSRF and CWSF.

Congress should include security upgrades as eligible projects under the DWSRF.

State Infrastructure

State Implementation Responsibilities

State drinking water programs also need adequate funding to ensure the effectiveness of their own "infrastructure" to carry out the myriad responsibilities of the SDWA. Since the SDWA Amendments of 1996, state program responsibilities have dramatically expanded to move beyond compliance at the tap to delineating and assessing the sources of all waters used for public water supplies, ensuring qualified operators at all water systems, defining and implementing water system capacity programs, creating a new DWSRF funding mechanism, and providing significantly more information and outreach to the public. These efforts are in addition to implementing Federal as well as state- specific drinking water regulations addressing specific contaminants. Since September 11th, significant new security responsibilities have fallen to states for training, communication, and in some instances conducting vulnerability assessments for water systems. In addition, almost half the states are currently experiencing drought conditions that are significantly taxing state staff and resources.

Forty-nine of the 50 states currently have "primacy" or enforcement authority for the Federal SDWA. To achieve and maintain primacy, states must adopt rules that are no less stringent than the Federal requirements and have the ability to enforce these regulations. Although some states have requirements that are more stringent; for the most part, state drinking water programs are implementing and enforcing Federal requirements.

Collectively, state programs provide oversight, implementation assistance, and enforcement for approximately 169,000 public water systems nationwide. These systems range from large metropolitan municipalities to mobile home parks and schools. The vast majority (over 95 percent) of these systems are small, serving less than 3,300 people. Many of these systems require extensive technical assistance, training, and oversight.

Today, the regulatory landscape is significantly more complex than ever before. Since FY-97, state Public Water Supply Supervision (PWSS) dollars have had to stretch to cover development, implementation, and enforcement of numerous new regulations and programs such as those to address arsenic, radionuclides, the microbial/disinfection byproducts rule cluster, unregulated contaminant monitoring, consumer confidence reports, capacity development, expanded operator certification requirements, source water assessment and delineation, and the DWSRF. States anticipate new regulations to be put in place this year to address radon and groundwater. States are also expected to implement revisions to the surface water treatment and lead and copper rules, public notification, and variance and exemption requirements. These requirements are in addition to the state program responsibilities for core activities such as compliance monitoring, data management, training, and enforcement for 88 currently regulated contaminants. States also are responsible for ensuring that public health is protected through preventive measures such as disease surveillance, risk communication, sanitary surveys, laboratory certification, permitting, and emergency response. States expect that their responsibilities will continue to expand as EPA promulgates additional regulations and reviews current regulations for modification. This overwhelming new workload has added to the historical strain on state program resources and staff.

State Funding

The SDWA authorizes EPA to fund up to 75 percent of the costs to states to implement the drinking water program. Historically, however, states have contributed 65 percent of the funding while EPA has only contributed 35 percent. While this gap has closed in recent years due to the advent of set-asides from the DWSRF, many states still substantially over match the Federal contribution. Given current state fiscal constraints, it is questionable whether states will be able to keep pace with these funding levels in the future.

The current Federal PWSS grant provides $87.3 million for states to implement their programs (the remainder of the $93 million currently appropriated by Congress is directed to Indian Tribes). This level has not increased for states over the last five years (since FY-97), even though many of the new initiatives under the 1996 Amendments became effective almost immediately. The level funding of $87.3 million actually means that states have lost funding due to inflation and rising personnel costs. A recent state survey, conducted by ASDWA and EPA, indicates that the current state funding gap is $220 million climbing to $300 million by FY-05.

Congress recognized the need to fund state program activities and in the 1996 Amendments allowed states to take up to a 10 percent set-aside from the drinking water SRF for program implementation. EPA, however, has never requested the full $1 billion per year authorization and states have only been able to access 4 percent of the set-aside funds. To the extent that SRF funds are also used to provide resources for new programs such as operator certification training reimbursement and unregulated contaminant monitoring the corpus of the funds available for state use is further reduced. Many states have also encountered significant barriers to fully accessing these funds including:

the inability to obtain the needed one-to-one state match with new state revenue (for program implementation activities) the inability to shift resources directed to water system infrastructure improvements to state program implementation the unstable nature of the annual SRF funding allocation which is based on water system needs and is affected by the states' annual intended use plan for projects and set-asides the threat of up to 40 percent withholding for failure to implement certain program requirements such as capacity development and operator certification the unwillingness of state legislatures to approve new hires using "temporary" funding (the drinking water SRF is only authorized until 2003)

To supplement insufficient Federal funding, many states have turned to state general revenues and fees to maintain an adequate core program. These additional funds; however, have not be adequate to fully meet state program implementation costs.

ASDWA and EPA conducted a national resource gap analysis in 2001 to estimate state resources needed to implement the drinking water program between 1999 and 2010. The analysis showed that in FY-02, the funding gap for states to implement the SDWA equaled $220 million and staffing needs fell short by 2,478 full time equivalents (FTEs). By FY-05, the gap will widen to $300 million and 3,533 FTEs.

Even the U.S. General Accounting Office (GAO) has raised state funding concerns. In August 2000, GAO released a report to Congress entitled, Drinking Water: Spending Constraints Could Affect States' Ability to Implement Increasing Program Requirements. An extrapolation of their findings indicate that even if all states had been able to access the maximum 31 percent of DWSRF set-asides for program implementation and related activities, there would still be a funding gap beginning in FY- 02. Since few states are able to access the full set-aside amounts, the funding gap is much greater than GAO's "optimum" estimate, and in fact, a gap already exists. The Report further notes that even those states that felt they were managing to keep up with the pace of implementing and enforcing the new statutory program requirements, at least for the short term, were only able to do so by ". . .scaling back their drinking water programs, doing the minimum necessary to meet requirements, and setting formal or informal priorities among their responsibilities." This is a blueprint for a public health crisis.

Conclusion

Adequate infrastructure funding needs for state SDWA program implementation is just as critical as adequate funding for water system infrastructure improvements. States are responsible for ensuring water system security and compliance and providing "infrastructure" for source water assessments, certified and trained water system operators, water system financial, technical, and managerial competency, public outreach and communication, and working directly with water systems to obtain and maintain compliance. As Congress moves forward to evaluate and find solutions for the water infrastructure funding gap attention must also be directed to the state program funding gap.

The goal of both of these efforts is protecting public health. It is about knowing that whenever you brush your teeth, bathe your child, or prepare your food, the water has been monitored and tested for contaminants; that the responsible operator has been trained and certified; and that the drinking water system has demonstrated that it is technically, financially, and managerially capable of providing safe drinking water. In order to meet Congressional expectations and Federal regulations to successfully implement the SDWA, states and water systems both need increased funding to ensure a safe and dependable supply of drinking water today and for future generations.

Recommendations

Congress should extend the PWSS authorization through 2010 and authorize and appropriate $250 million per year for state drinking water implementation activities. Congress should significantly reduce or delete the one-to-one DWSRF match required by states to access DWSRF funds for program implementation.



LOAD-DATE: April 29, 2002