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Federal Document Clearing House
Congressional Testimony
March 27, 2001, Tuesday
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 4974 words
COMMITTEE:
SENATE ENVIRONMENT AND PUBLIC WORKS
SUBCOMMITTEE: DRINKING WATER, FISHERIES AND WILDLIFE
HEADLINE: TESTIMONY WATER INFRASTRUCTURE
TESTIMONY-BY: CHRISTINE TODD WHITMAN ,
GOVERNOR/ADMINISTOR
AFFILIATION: ENVIRONMENTAL
PROTECTION AGENCY
BODY: MARCH 27, 2001 STATEMENT OF
GOVERNOR CHRISTINE TODD WHITMAN ADMINISTRATOR U.S. ENVIRONMENTAL PROTECTION
AGENCY BEFORE THE SUBCOMMITTEE ON FISHERIES, WILDLIFE AND WATER COMMITTEE ON
ENVIRONMENT AND PUBLIC WORKS UNITED STATES SENATE Good morning, Mr. Chairman and
Members of the Subcommittee. I am Christine Todd Whitman, Administrator of the
Environmental Protection Agency. I welcome this opportunity to discuss the
Nation's investment in drinking water and sewage treatment facilities to protect
human health and the environment. As a Nation, we have made great progress over
the past quarter century in reducing water pollution and assuring the safety of
drinking water. The Clean Water Act and the Safe Drinking Water Act have served
us well and provide the solid foundation we need to make sure that all Americans
will continue to enjoy safe drinking water and clean rivers, lakes, and coastal
waters. Our success in improving drinking water and surface water quality is the
result of many programs and projects by local, State and Federal governments in
partnership with the private sector. But our cooperative investment in
water infrastructure -- in pipes and treatment plants -- has,
more than any other single effort, paid dramatic dividends for water quality and
public health. This morning, I want to give you a brief overview of the progress
we have made in improving water quality and the water pollution and public
health challenges we still face. I also will summarize what EPA knows about the
need for future investment in clean water and drinking water facilities and
identify the key challenges I see in meeting this need. I will conclude with
some thoughts about how Congress and others could proceed when addressing the
problems of financing
water infrastructure. Clean and Safe
Water -- Accomplishments and Challenges Most Americans would agree that the
quality of both surface waters and drinking water has improved dramatically over
the past quarter century. Thirty years ago, the Nation's waters were in crisis
-- the Potomac River was too dirty for swimming, Lake Erie was dying, and the
Cuyahoga River had burst into flames. Many of the Nation's rivers and beaches
were little more than open sewers. The 1972 Clean Water Act has dramatically
increased the number of waterways that are once again safe for fishing and
swimming. The Act launched an all out assault on water pollution, including new
controls over industrial dischargers, support for State efforts to reduce
polluted runoff, and a major investment by the Federal government to help
communities build sewage treatment plants. The $76 billion in Federal wastewater
assistance since passage of the Clean Water Act in 1972 has dramatically
increased the number of Americans enjoying better water quality. The economic
and social benefits of improved water quality are readily evident all across the
country. Some of the most dramatic improvements are seen in urban areas. In
cities such as Boston, Cleveland, St. Petersburg and Baltimore, the efforts to
restore the health and vitality of our waters has also led to economically
vibrant, water-focused urban environments. The dramatic progress made in
improving the quality of wastewater treatment since the 1970s is a national
success. In 1972, only 84 million people were served by secondary or advanced
wastewater treatment facilities. Today, 99 percent of community wastewater
treatment plants, serving 181 million people, use secondary treatment or better.
We have also made dramatic progress in improving the safety of our Nation's
drinking water. Disinfection of drinking water is one of the major public health
advances in the 20th century. In the early 1970's, growing concern for the
presence of contaminants in drinking water around the country prompted Congress
to pass the Safe Drinking Water Act. Today, the more than 265 million Americans
who rely on public water systems enjoy one of the safest supplies of drinking
water in the world. Under the Safe Drinking Water Act, EPA has established
standards for 90 drinking water contaminants. Public water systems have an
excellent compliance record -- more than 90 percent of the population served by
community water systems receive water from systems with no reported violations
of health based standards. In the past decade, the number of people served by
public water systems meeting Federal health standards has increased by more than
23 million. Despite past progress in reducing water pollution, almost 40 percent
of the Nation's waters assessed by States still do not meet water quality goals
established by States under the Clean Water Act. On a national scale, states
report that leading sources of pollution include urban runoff and storm sewers,
agriculture and municipal point sources. Other sources, ranging from factories
to forestry operations, cause water pollution problems on a site-specific basis.
Point-source pollution has been so greatly reduced, that now non-point sources
are the leading cause of water pollution. Also, although compliance with
drinking water contaminant standards is good, public health risks from drinking
water can be further reduced. Clean Water and Drinking Water State Revolving
Loan Funds The primary mechanism that EPA uses to help local communities finance
water infrastructure projects is the State Revolving Loan Funds
(SRFs) established in the Clean Water and Safe Drinking Water Acts. The SRFs
were designed to provide a national financial resource for clean and safe water
that would be managed by States and would provide a funding resource "in
perpetuity." These important goals are being achieved. Other Federal, State, and
private sector funding sources are available for community
water
infrastructure investments. Under the SRF programs, EPA makes
grants to each State to capitalize their SRFs. States provide a
20% match to the Federal capitalization payment. Local governments get loans for
up to 100% of the project costs at below market interest rates. After completion
of the project, the community repays the loan and these loan repayments are used
to make new loans on a perpetual basis. Because of the revolving nature of the
funds, funds invested in the SRFs provide about four times the purchasing power
over twenty years compared to what would occur if the funds were distributed as
grants. In addition, low interest SRF loans provide local
communities with dramatic savings compared to loans with higher, market interest
rates. An SRF loan at the interest rate of 2.6% (the average rate during the
year 2000) saves communities 25% compared to using commerical financing at an
average of 5.8% (see Chart 1). To date, the Federal government has provided more
than $18 billion in capitalization
grants to States for their
clean water SRFs through FY 2001. With the addition of the State match, bond
proceeds, and loan repayments, the cumulative funds available for loans of the
clean water SRFs were more than $34 billion, of which $3.4 billion was still
available as of June 30, 2000. Since 1988, States have made over 9,500
individual loans for a total of $30.4 billion. In FY 2000 the Clean Water SRFs
issued a record total of 1,300 individual loans with a value of $4.3 billion
(see Chart 2). The Clean Water SRFs have provided about $3 billion in loans each
year for several years. In 1996, Congress enacted comprehensive amendments to
the Safe Drinking Water Act which created a SRF program for financing of
drinking water projects. The Drinking Water SRF was modeled after the Clean
Water SRF, but States were given broader authority to use Drinking Water SRFs to
help disadvantaged communities and support Drinking Water program
implementation. Through fiscal year 2001, Congress has appropriated $4.4 billion
for the Drinking Water SRF program. EPA has reserved $83 million for monitoring
of unregulated contaminants and operator certification reimbursement
grants. Through June 30, 2000 States had received $2.7 billion
in capitalization
grants, which when combined with state match,
bond proceeds and other funds provided $3.7 billion in total cumulative funds
available for loans. Through June 30, 2000, States had made close to 1,200 loans
totaling $2.3 billion and $1.4 billion remained available for loans.
Approximately 74% of the agreements (38% of dollars) were provided to small
water systems that frequently have a more difficult time obtaining affordable
financing. States also reserved a total of approximately $420 million of SRF
capitalization
grants for other activities that support the
drinking water program.
Water Infrastructure -- Future Needs
The Safe Drinking Water Act and Clean Water Act both require that EPA
periodically develop a "needs survey" to identify
water
infrastructure investments. One month ago, EPA released its second
report on drinking
water infrastructure needs. The new survey
shows that $150.9 billion is needed over the next 20 years to ensure the
continued provision of safe drinking water to consumers. The survey found that
water systems need to invest $102.5 billion, approximately 68% of the total
need, in what the report calls "current needs." In most cases current needs
would involve installing, upgrading or replacing infrastructure to enable a
water system to continue to deliver safe drinking water. A system with a current
need therefore, usually is not in violation of any health-based drinking water
standard. For example, a surface water treatment plant may currently produce
safe drinking water, but the plant's filters may require replacement due to
their age and declining effectiveness, if the plant is to continue to provide
safe water. Future needs account for the remaining $48.4 billion in needs; for
example, projects that systems would undertake over the next 20 years as part of
routine replacement such as reaching the end of a facility's service life.
Transmission and distribution costs are the largest category of need. The survey
includes needs that are required to protect public health, such as projects to
preserve the physical integrity of the water system, convey treated water to
homes, or to ensure continued compliance with specific Safe Drinking Water Act
regulations (See Chart 3). Transmission and distribution costs are the largest
category, at 56% of the total need, or $83.1 billion. Treatment projects make up
the second largest category of needs (i.e. 25%) and have a significant benefit
for public health. Approximately 21%, or $31.2 billion, is needed for compliance
with current and proposed regulations under the Act. Nearly 80% of the
regulatory need is to comply with rules which protect consumers from harmful
surface water microbial contaminants, such as Giardia and E. coli. Most of the
total needs derive from the costs of installing, upgrading and replacing the
basic infrastructure that is required to deliver drinking water to consumers
costs that water systems would face independent of any Safe Drinking Water Act
regulations. As you may know, EPA's most recent survey of clean
water
infrastructure needs was released in 1996 and we plan on releasing a
new clean water needs survey in 2002. The 1996 clean water needs survey
estimated wastewater needs of $140 billion, including $26.5 billion for
secondary treatment projects, $17.5 billion for advanced treatment, and $73.4
billion for various types of sewage conveyance projects, including collectors,
interceptors, combined sewers, and storm water and $10 billion for nonpoint
pollution control projects (see Chart 4). EPA is working to supplement the 1996
clean water needs survey as more accurate information becomes available. For
example, the Agency has developed a model to estimate costs associated with
reducing sanitary sewer overflows that predicts costs significantly higher than
the estimate in the 1996 needs survey. The Agency is also reviewing issues
related to long-term needs, assessing different analytical approaches to
estimating those needs, and estimating the gap between needs and spending. Some
elements of this analysis known as the Gap Analysis have been presented to a
range of interested parties and EPA is committed to improving and refining this
important work. To this end, the EPA plans to make this analysis available for
peer review by expert organizations in the near future. Broader Context of
Water Infrastructure Financing Over the past year, several
interest groups including the
Water Infrastructure Network, the
Association of Metropolitan Sewerage Agencies, and the Water Environment
Federation issued reports estimating
water infrastructure
needs. These estimates were all substantially above those of EPA's Needs
Surveys. In general, these cost estimates differ from EPA's because the
methodologies and definitions for developing them differs. For example, EPA
Needs Surveys include only projects that are eligible for SRF funding under the
Clean Water Act and Safe Drinking Water Act. Also, EPA requires that costs
included in the Needs Surveys be established by planning or design
documentation. Nevertheless, EPA recognizes that effective decision-making
concerning
water infrastructure financing would benefit from a
better understanding of the broader context of this effort. Key components in
the broader context of
water infrastructure that need to be
more fully evaluated are described below. Population Growth: Steady growth and
shifts in population puts substantial pressure on local governments to provide
expanded drinking water and sewer services. Aging Infrastructure: Many sewage
and drinking water pipes were installed between 50 and 100 years ago and these
pipes are nearing the end of their useful life. Emerging Environmental and
Public Health Demands: As our knowledge of threats to water quality and public
health improves, the public expects its
water infrastructure to
continue to provide clean safe water at reasonable cost. Increasing Operation
and Maintenance Costs: As the size and complexity of water and sewer systems
increase, and facilities get older, the costs of operations and maintenance tend
to increase. Affordability: Although water has historically been underpriced,
some systems may find it difficult to replace or update aging water and sewer
systems and keep household user charges at affordable levels. This issue needs
to be kept in mind as future regulations are developed. FY 2002 --
Water
Infrastructure Investments The President's FY 2002 budget proposes to
maintain Federal support for both clean water and drinking
water
infrastructure. The Administration proposes $1.3 billion for wastewater
grants to States in FY 2002. This funding will provide a
substantial and sustained contribution to clean
water
infrastructure needs. The $1.3 billion requested for wastewater
grants to States is $500 million more than the previous
Administration's FY 2001 request. Because of the revolving nature of the clean
water SRFs, this FY 2002 capitalization amount will allow the SRFs to provide $3
billion in loans over the next several years. In addition, EPA expects that,
over the long-term, the clean water SRFs will be able to provide average annual
assistance of $2 billion (see Chart 5). The Congress recently enacted important
new legislation to help communities address water pollution problems caused by
overflows of combined and sanitary sewers. In response to this new legislation,
the Administration will propose
grants to States for these
important projects in FY 2002. In the case of safe drinking water projects, the
Administration proposes to maintain capitalization of the drinking water SRF in
FY 2002. By the end of FY 2002, we expect the number of loans issued by State
drinking water SRFs to reach 2,400, with about 850 SRF funded projects having
initiated operations by that date. In addition, the law currently
grants a State flexibility to transfer funds between its clean
water and drinking water SRFs. The Administration supports this mechanism to
help States fund their priority needs. This proposed FY 2002 funding will help
communities across the country finance important clean water and drinking water
projects. As your committee continues to study the
water
infrastructure needs, the Administration would like to encourage a
constructive dialogue on the appropriate role of the federal government in
addressing these needs. Conclusion Thank you, Mr. Chairman, for giving me the
chance to outline EPA's view of the
water infrastructure
challenges the Nation is facing. Let me conclude by identifying some of the key
issues that Congress, the Administration, the private sector and other
interested parties will need to consider as we work toward a common approach to
solving
water infrastructure problems. 1) We need a common view
of the scale of the
water infrastructure problem that we face
and the long-term timeframe for making needed investments. 2) We need to
consider the best role for the Federal government to play in helping States and
local governments finance both Drinking Water and Wastewater infrastructure
projects and evaluate any barriers faced by local governments in getting access
to needed capital as part of this process (e.g. poor bond ratings, interest
rates). 3) We need to consider the strengths and weaknesses of the existing
funding mechanisms and consider the best mix of financing under various
circumstances. We also need to review the role that privatization might play in
the future. 4) We need to review water and sewer rate structures, encourage
rates that make systems sustainable and address concerns that rates are
affordable, especially in poor communities. 5) We need to look closely at
Federal mandates to ensure that those mandates are not needlessly costly and
burdensome. 6) Finally, addressing water investment needs in years to come will
not only require a strong commitment from Federal, State and local governments,
it will call for innovative funding mechanisms, public/private partnerships, and
advancements in technologies. Ensuring that our
water
infrastructure needs are addressed will require a shared commitment on
the part of the Federal, State and local governments, private business, and
consumers. I pledge that EPA will continue to work in partnership with Congress,
States, local governments, the private sector and others to better understand
the
water infrastructure challenges we face and to play a
constructive role in helping to define an effective approach to meeting these
needs in the future. I will be happy to answer any questions.
LOAD-DATE: April 17, 2001, Tuesday