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Congressional Testimony
February 28, 2002 Thursday
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 2223 words
COMMITTEE:
SENATE ENVIRONMENT AND PUBLIC WORKS
HEADLINE: WATER INFRASTRUCTURE & CLEAN WATER
PROGRAMS
TESTIMONY-BY: JERRY JOHNSON,, GENERAL MANAGER
AFFILIATION: DISTRICT OF COLUMBIA WATER AND SEWER
AUTHORITY
BODY: Testimony by
Jerry Johnson,
General Manager District of Columbia Water and Sewer Authority on behalf of the
Association of Metropolitan Water Agencies
before the Subcommittee on
Fisheries, Wildlife and Water Committee on Environment and Public Works United
States Senate
on S. 1961 - The Water Investment Act of 2002
February 28, 2002 Good afternoon, Mr. Chairman, members of the
subcommittee.
My name is Jerry Johnson, and I'm the General Manager of
the District of Columbia Water and Sewer Authority. I'm testifying today on
behalf of the Association of Metropolitan Water Agencies (AMWA). AMWA is a
nonprofit organization representing the nation's largest publicly owned water
agencies. These large systems provide drinking water to approximately 110
million people from Anchorage, Alaska to Miami, Florida. The DC Water and Sewer
Authority provides retail water services to residents and businesses in the
District of Columbia and parts of Virginia. WASA also provides wastewater
treatment for the District of Columbia, portions of Montgomery and Prince
Georges counties in Maryland and Fairfax and Loudon counties in Virginia as well
as the town of Vienna, Virginia. WASA's Blue Plains Wastewater Treatment Plant,
located in South West Washington, is the largest advanced wastewater treatment
facility in the world.
Thank you for introducing S. 1961, the Water
Investment Act of 2002, which is the first legislation to increase the federal
investment in drinking
water infrastructure since the 1996
amendments to the Safe Drinking Water Act.
The association believes the
bill takes a major step in the right direction, by proposing to triple the
authorization of the Drinking Water
State Revolving Fund (SRF).
While the needs of drinking water agencies over the five-year period covered by
the bill are nearly $
60 billion, the bill's proposed
authorization, if enacted and appropriated, would fund hundreds of projects to
ensure safe drinking water for decades to come.
Assistance to
Metropolitan Water Agencies
Like current law, the bill's main focus is
to help drinking water systems comply with the Safe Drinking Water Act. The bill
also reinforces the Drinking Water SRF's support of small water systems, through
the capacity development program, restructuring assistance, technical assistance
and, most importantly, a 15- percent set aside for small systems. (Some states
make loans to large water systems to ensure the funds revolve, especially where
small systems are not prepared to apply for assistance.)
AMWA would like
the subcommittee to consider ways to help metropolitan water agencies with
replacing aging infrastructure. (Metropolitan water agencies serve the nation's
larger communities.) To get a sense of the needs facing metropolitan water
agencies, consider this: according to a recent survey, just 32 metropolitan
systems reported that they must spend $
27 billion over the next
five years on drinking water and wastewater infrastructure[1]. Nationwide, the
needs of metropolitan water agencies are much higher. Yet 31 states provided no
assistance to metropolitan water agencies in fiscal year 2001. If the proposed
authorization in S. 1961 is appropriated, states will have more money to lend to
metropolitan water systems, but higher authorizations and programmatic changes
are necessary, too.
The cities that are served by metropolitan water
utilities are the economic engines of their states and the nation, and a
significant federal investment in these large publicly owned agencies will
translate into stronger water delivery systems, better fire protection, and
thousands of new jobs.
Therefore, AMWA recommends a 15-percent set-aside
for metropolitan drinking water agencies, to make certain that states address
their needs. Under this proposal, small systems would continue to get the help
they need to comply with the Safe Drinking Water Act, and metropolitan water
agencies could invest the billions of dollars needed to replace aging
infrastructure. In states where there are few metropolitan systems or where the
systems do not need assistance, the funds set aside could be used for small
systems.
Security
The capital needs facing water systems to make
their facilities and consumer more secure are likely to run into the billion of
dollars, and AMWA believes the Safe Drinking Water Act should specifically
authorize Drinking Water SRF assistance for capital projects related to
security. EPA guidance to states indicates these projects are eligible for
funding, but something more substantial, namely legislation, is needed to show
Congressional intent to allow such assistance.
Rate Structure and Asset
Management
Among the new requirements established by S. 1961 are
implementation of responsible rate structures and asset management plans. These
practices embody those commonly used in metropolitan water agencies today. For
instance, WASA has developed a comprehensive, ten year capital improvement
program that totals $
1.6 billion, of which approximately
$
505 million is attributable to drinking
water
infrastructure projects. Since its creation in 1996, WASA has raised
its rates by 52 percent. Over the next ten years, WASA projects that it will
need to raise its rates by 5 to 7 percent annually, due primarily to
infrastructure upgrade and replacement needs.
In addition, WASA has an
asset management plan to ensure capital is available for future upgrades, and,
like most large water systems, the authority complies with the general
accounting standards for state and local government known as GASB 34.
These concepts are nothing new to metropolitan water systems.
Maintaining our bond ratings and accessing capital in open market necessitate
our adherence to these good practices.
For these reasons, AMWA applauds
the sponsors of S. 1961 for highlighting them, and AMWA encourages the
subcommittee to maintain these best practices as ideals and provide the
opportunity for utilities that have not yet adopted them to do so. There are a
wide variety of equally reasonable approaches to defining the full cost of
service and responsible asset management, and these areas are not in the realm
of state environmental agencies or the U.S. EPA, both of which would have to
develop rules or guidance and criteria for enforcement and compliance. Rate
design is a particularly complex issue. For instance, consider the possibility
that charging the full cost of service, covering all federal and state
regulations and replacement of aging infrastructure, could put rates far beyond
U.S. EPA's affordability criteria.
AMWA urges the subcommittee to avoid
a situation in which the states or U.S. EPA enter the domain of local government
and attempt to reinvent the wheel. Instead, industry organizations have many
years of experience in this area and could be relied upon to provide technical
and educational service to those utilities that have not adopted the practices.
Let's not discard what responsible water agencies have already accomplished and
create a layer of bureaucracy that could make applying for SRF assistance too
cumbersome, thus undermining the purpose of the program.
Consultation
with State Planning Agencies
AMWA appreciates S. 1961 highlighting the
importance of coordinating planning decisions with relevant state planning
agencies, but the association is concerned that a federal requirement to consult
these agencies may be burdensome or may intrude on the domain of local
government. Metropolitan water agencies are naturally a part of local land use
planning efforts, and consulting and coordinating with the appropriate bodies is
standard practice.
Consolidation, Partnerships and Nonstructural
Alternatives
AMWA applauds the bill's sponsors for emphasizing the
importance of creative approaches to managing a water utility by encouraging
consolidation, partnerships, and adoption of nonstructural alternatives. Many
water systems are already considering various approaches to regional water
management and it is important that these types of arrangements be evaluated and
supported.
An excellent example is the Contra Costa Water District, a
metropolitan system in California. Contra Costa is working with other local
water entities in a variety of partnerships, ranging from providing less costly
water supplies to cooperation in obtaining new supplies and developing needed
infrastructure. One Contra Costa partnership with a local water system will save
more than $
7 million over the cost of separate solutions.
Another Contra Costa partnership, involving three agencies, provided an
alternative water supply that will save up to $
13 million. In a
third, 10 water and sanitation agencies joined to conduct a water supply and
infrastructure study that focused on the region, thereby providing a more
beneficial plan for the region as a whole.
Rather than require
consideration of alternative approaches as part of a loan application process,
the SRF should provide financial incentives in the form of grants or loan
forgiveness for those drinking water systems that develop alternative
arrangements that provide more effective and efficient management of local
resources. In particular, financial incentives should be provided to those
drinking water systems that agree to partner with small systems facing
compliance problems.
Public-Private Partnerships
Among the
partnerships water systems would be required to consider under S. 1961 are
public-private partnerships. These could include design-build solutions,
contract management or other forms of privatization.
Whether a water
agency specifically considers public-private partnerships should remain at the
discretion of local government, because local factors will dictate whether the
partnership is in the interest of the consumers. Therefore, the association
urges the subcommittee to look into public-private partnerships more closely
before so strongly endorsing them. Privatization can be a very contentious issue
in communities and worth a full exploration before legislated by Congress.
Privatization experts have identified some of the issues that need
further exploration. Among them are those surrounding accountability and the
blurring of roles and responsibilities. For example, who is responsible for
complying with environmental regulations, resolving service complaints and
planning to meet future needs.[2] Who pays if the private partner fails? If the
private partner takes on more liability than it can afford, who's responsible
when something goes wrong?
Another issue that has recently emerged is a
concern about the implications of international trade agreements on domestic
privatization since four of the major companies involved in the U.S. water
market are located in other countries. For example, once a municipality
contracts with a foreign provider, can that municipality withdraw from the
agreement? What impact could the General Agreement on Trade in Services (GATS)
and the authority of the World Trade Organization (WTO) have on future
contracts?
Members of the subcommittee, AMWA is not here today to oppose
private-public partnerships. Many drinking water utilities have entered into
such arrangements for a variety of purposes. It is another matter, however, to
sanction these arrangements and make consideration of public-private
partnerships a requirement in federal law.
AMWA is simply urging the
subcommittee to look into public- private partnerships more closely before
endorsing them. Legislating privatization may not be in the public interest.
Procurement Requirements
Section 205 of the bill proposes
imposing on drinking water agencies procurement provisions that were abandoned
in the Clean Water Act when the Clean Water SRF program was adopted. The
requirements were abandoned because they encumbered both state agencies and
local government, overrode state and local procurement laws and created many
disputes. The same would hold true for today, and AMWA urges the subcommittee to
drop those provisions from the bill.
Rate Study and Water Resource
Planning Studies
Among the provisions of Title III is a study on rates,
affordability and how to define disadvantaged communities. Rate setting is a
very difficult process and many water systems will appreciate assistance.
Information on determining affordability and disadvantaged communities will be
very beneficial, too. AMWA believes that U.S. EPA's current affordability
criteria in many states does not fully capture the conditions that create
disadvantaged communities. Most states determine whether a community is
disadvantaged by looking at median household income and, sometimes, water rates.
A more well-rounded analysis would consider additional facts such as: the number
of people living below the poverty level, inflation and the loss of a tax base.
Title IV contains provisions for a study (and periodic update) of the
nation's water resources. The study and the updates will provide a wealth of
information that will help federal, state and local government make
well-informed decisions. We applaud the sponsors' appreciation of water resource
shortages. Again, thank you for introducing the Water Investment Act of 2002 and
for the opportunity to provide testimony on it.
LOAD-DATE: March 28, 2002