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Congressional Testimony
February 26, 2002 Tuesday
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 2254 words
COMMITTEE:
SENATE ENVIRONMENT AND PUBLIC WORKS
HEADLINE: WATER INFRASTRUCTURE AND CLEAN WATER
TESTIMONY-BY: DOUGLAS H. PALMER, MAYOR OF
AFFILIATION: TRENTON
BODY:
Statement of Honorable Douglas H. Palmer Mayor of Trenton On behalf of The
United States Conference of Mayors
Before the Senate Environment and
Public Works Committee On S. 1961, the Water Investment Act of 2002
February 26, 2002
Mr. Chairman and Members of the Committee.
My name is Douglas Palmer. I am the Mayor of Trenton, New Jersey and
Chair of the Conference of Mayors' Urban Water Council.
The Conference
of Mayors is a national nonpartisan organization that represents more than 1,100
cities across the nation. We represent the largest water and wastewater systems
in the United States. Mr. Chairman, I would like to thank you and the other
members of the Committee for introducing S. 1961, the Water Investment Act of
2002.
I would also like to thank you for holding these hearings and for
inviting me to give the Mayoral perspective on water and wastewater investment
issues.
As you know the issue of water and wastewater infrastructure is
critical to our nation and to our nation's cities. To maintain healthy and
viable communities, we must make sure that our water and drinking water supply
is clean and safe.
However, to do that, costs money. The estimate to
build, rebuild and maintain our water and wastewater infrastructure has been
estimated to cost close to one trillion dollars.
As Mayors we have
recognized that there is not enough local, state or federal money available to
satisfy all the
water infrastructure needs in the nation.
The Urban Water Council was created to focus on these issues. Its
purpose is to assist local governments in providing high quality water resources
in a cost-effective manner.
The Urban Water Council has identified three
basic approaches to help cities finance the water and wastewater infrastructure
development necessary to comply with clean and safe drinking water laws. These
include:
-Providing grants to municipalities, either directly or through
states, for water and wastewater infrastructure where there is an affordability
issue or when a community faces severe environmental problems;
-
Expanding some portion of the current 20-year loan category to include a 30-year
no-interest loan category under the
State Revolving Fund loan
program for water and wastewater infrastructure investment; and
-
Modifying current tax law by removing Private Activity Bonds (PABs) used for
water and wastewater infrastructure from the state volume cap.
In our
opinion, these approaches are the best means to meet our
water
infrastructure needs.
What we find productive and positive
about the bill:
The bill you have introduced has many excellent
components.
We agree with the Committee that the focus of this bill
should be on
water infrastructure investment instead of a new
set of provisions that would require municipal water and sewer operators to
assume even greater responsibilities. The current inventory of infrastructure is
barely sufficient to comply with current water quality criteria. Local elected
officials are engaged in trying to achieve water quality goals, but we need a
chance like this to focus on such achievements, and not be redirected to new
goals.
The bill authorizes $20 billion between 2003 and 2007 for the SRF
categories under the Federal Water Pollution Control Act; and $15 billion for
the SRF categories under the Safe Drinking Water Act. These SRF authorizations
are clearly not enough to subsidize the funding necessary to close the "needs
gap", but a combined $35 billion boost over the next five years is also clearly
much more than previous funding levels. For this, we are grateful to the Senate,
and we support this approach.
S. 1961 also incorporates some innovative
concepts, two of which are deemed crucial by the Conference of Mayors in
creating the right conditions for successful achievement of water quality goals.
First, the proposed Section 103 provision that would require a recipient of SRF
funds to consider, among other things, "forming public-private partnerships or
other cooperative partnerships" is a step -in the right direction. It has been
our experience since the mid-90s that alternative approaches to planning,
financing and operating water and wastewater projects can yield greater public
benefits for the amount of money invested. While choosing a publicprivate
partnership approach should not be prescriptive, it should be made possible for
those cities that want to take advantage of such an approach.
The Urban
Water Council has prepared two reports, which are available on our website at
http://www.usmaxors.org/ , that describe
over 40 public-private partnership projects that have realized savings related
to operation and maintenance of water and wastewater facilities. Regulations
under the federal tax code were modified in 1997 to allow long-term (20 year
plus) outsourcing of public infrastructure facilities. This tax regulation
modification, along with Executive Order 12803 which modified the construction
grant repayment provision, have removed serious federal impediments that cities
have faced. When Congress and the Administration provide the right types of
financial incentives, local elected officials can establish public-private
partnerships that benefit our citizens, our economy and the environment.
The Conference of Mayors adopted policy in 2001 to encourage competition
in the design-build-operate phases of new and refurbished water and wastewater
infrastructure. This policy was adopted once it was determined that competition
for both surface and sub-surface infrastructure projects can lead to less costly
projects than the traditional design-build methods employed in the past. The
Lynn, Massachusetts experience is an example of what can be achieved by using
competitive approaches to design, build and operate
water
infrastructure that is intended to achieve compliance with the zero
discharge requirement for storm waters. In that example, the City was required
to eliminate overflows and traditional design-build-operate planning anticipated
a $400 million (plus) solution. A competitive bid process, however, anticipating
a public-private partnership approach yielded a zero discharge solution that
cost less than one-quarter of the traditional approach. Hence, it is possible
through competition to achieve compliance with water quality goals at a cheaper
price.
The second innovative approach incorporated in S. 1961 is under
Title III, Section 302 - the demonstration program for water quality enhancement
and management. One of the most difficult problems we face as cities involves
achieving state water quality objectives and total maximum daily loads (TMDLs)
and the virtually unregulated nonpoint sources that are usually outside our
jurisdictions.
The U.S. Environmental Protection Agency (EPA) has
recognized that agricultural and livestock land uses contribute a major portion
of nonpoint source pollution in many areas. Many of our cities are engaged in
watershed management efforts to deal with nonpoint sources (including urban
runoff). Yet there is a critical lack of regulatory drivers forcing the
agricultural and livestock land users to contribute to the solution. In some
cases, the timing of pending TMDL requirements will force cities to pay for
water treatment caused in part by the upstream, non- urban land users.
The Conference of Mayors adopted an action plan for sustainable
watershed management in 1998. One of the five principles of that plan is to
focus on non-urban, nonpoint source water pollution, and pursue public policy
that would assign responsibility to pay for the treatment of polluted water
commensurate with the contribution of the pollutant loadings. The action plan
also clearly calls for allowing the agricultural and livestock land users to
employ best practices and least cost approaches that are effective in lieu of
stringent and costly regulations. Mayors fully recognize that these land users,
although they may or may not be part of our cities, are important contributors
to our regional economies. While we prefer to use the powers of persuasion to
convince them to participate in the water pollution solutions, we have begun to
experience failure in cooperative efforts, and have in some instances resorted
to legal actions.
The demonstration projects provision of S. 1961 can
provide some of the appropriate financial incentives necessary to bring
voluntary cooperative efforts to bear to solve the water quality
designation/TMDL problems that we are facing. The Conference of Mayors supports
this innovative approach. It is our belief that Congress can do more to specify
in this bill that achieving water quality goals in watersheds through the use of
SRF financing to install technology that is currently available to ameliorate
the impact on streams lakes and estuaries from animal feeding operations will be
more cost effective than requiring downstream cities to pay for the upstream
pollution.
We support, (with some caveats), the proposed requirement for
recipients of an SRF loan to develop and submit asset management plans that
specify how water and wastewater facilities will be properly maintained over
time. Asset management is critical to the preservation of infrastructure. We
have a long history of experience with using asset management planning; this is
not a new or radical concept. We would like to mention that formalizing such a
requirement as a condition of receiving SRF funding should be integrated into
the loan program with caution. The focus of our efforts at the local government
level should remain principally with ensuring the proper treatment of drinking
water and wastewater for public health, local economy and environmental
protection reasons. The asset management plan is important, but the current
proposal on what is acceptable is not entirely clear. We have a concern that
aggressive federal intrusion could prove counter-productive. We would be happy
to work with the Committee to explore what an appropriate scope and details of
an asset management plan should be.
What can be improved in the bill:
The bill specifies that disadvantaged communities can receive SRF loans
with a 30- year repayment term. Perhaps the most significant shortcoming of the
S. 1961 proposal is the lack of a similar 30-year repayment term for other
communities. A 30-year, no-interest loan program administered under the SRF
program would provide a financial incentive that many local elected officials
would welcome. It obviously would make new infrastructure investment more
affordable than the traditional 20- year loan period. It also has the potential
to increase aggregate
water infrastructure investment because
local government now has to make difficult choices on where to spend limited
financial resources.
Similarly, the bill does not contain any reference
to removing private activity bonds used for water and wastewater from the state
volume caps. I understand fully that changing the tax code is not in the
jurisdiction of this particular Senate Committee. However, I would like to
convey to this Committee that one of the most fruitful financial incentives the
Congress can provide for increasing aggregate
water
infrastructure investment is to make certain that the largely unfunded
environmental mandates and environmental goals they impose on local government
should not be impeded by a rigid and inflexible tax code.
If
public-private partnership approaches based on competitive pricing in the market
place is increased, then more water projects can be completed with a given
amount of financing than what would occur via traditional financing approaches.
If this hypothesis is true, then shifting some, but not all, of the water
investment financing to private activity bonds should lead to improved water
quality in the aggregate. What we have found to be true in general is that more
money spent on water treatment results in improved water quality. While there
are some exceptions to this assumption, the reverse is almost inevitable - "the
failure to invest leads to continually deteriorating water quality".
There also is no mention in S. 1961 of the imminent need for water
systems to conduct security assessments and retrofit the proper anti-terrorist
controls necessary to ensure the safety of our water supplies, and the physical
integrity of our
water infrastructure. Federal funding
assistance in this area is in the public interest, and we support a greater
federal subsidy in this area as a result of the September 11, 2001 terrorist
episode. We would be happy to work with the Committee to recommend a provision
to address this problem in S. 1961.
We also support the Committee's
provisions addressing clarification of the state intended use and priority
projects lists. It is important to the cities we represent to ensure that states
fully understand the close relationship between water quality and watershed
management, and that the SRF program can play a critical role if states
prioritize solutions that focus on the other, non-urban land uses in the
watershed that contribute to impacts on streams, lakes and estuaries.
Conclusion
On behalf of the Conference of Mayors and the Urban
Water Council I wish to thank you again for this opportunity to speak before
this committee. We look forward to working with you as you move forward on this
very important piece of legislation.
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February 26, 2002