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Senator Bob Graham, D-Florida, today introduced landmark legislation to ensure the environmental and financial sustainability of our nation's water programs. The legislation authorizes $35 billion over 5 years to modernize the operation of state water pollution control revolving funds. It also revises the allocation of those funds to ensure that funding priorities reflect water quality needs.

Graham is chairman of the Subcommittee on Fisheries, Wildlife and Water, which has held nearly a year of hearings on the legislation. Joining Graham as sponsors of the Water Investment Act of 2002 are Senators James Jeffords, I-Vermont, chairman of the Environment and Public Works Committee; Vice Chairman Bob Smith, R-New Hampshire; and subcommittee Ranking Member Michael Crapo, R-Idaho.

"I am delighted that we are introducing this bill after almost a year of hearings in the subcommittee. We have solicited ideas from many organizations and government entities, and I think this bill responds to their pleas to fund our nation's looming water infrastructure needs," Graham said.
"What is especially important for Florida is that this bill represents a new awareness on the part of the federal government that our water supply is becoming an increasingly precious resource," Graham said.

"Sections of the country that had an abundance of water are now looking at restrictions. This legislation moves us toward suggestions of ways in which the supplies we have can be used more effectively and new supplies can be developed. The bill represents a recognition that the federal government will be working with states and localities to accomplish these goals."

The Committee will hold a hearing on the bill on February 26, 2002.

Sets for four specific purposes of Act:

This section includes definitions for disadvantaged community and small treatment works. Neither term is currently defined in the Clean Water Act. They are added here because provisions in this bill deal specifically with flexibility for states when administering their SRF funds for disadvantaged communities and technical assistance for small treatment works.

Section 102: This section increases the set-aside allowable for Indian tribes, former Indian reservations in Oklahoma and Native villages from .5 percent to 1.5 percent.

This section modifies the project eligibility list with three changes. First, language is included to clarify that costs for planning, design, associated preconstruction, and necessary activities for siting the facility and its related elements are eligible for funds under the Clean Water Act (CWA) SRF as standalone items. Second, language is included to clarify that conservation, reuse and recycling are eligible projects under the CWA SRF as standalone items. Finally, language is included to clarify that projects using non-traditional approaches to water quality problems are eligible for funding under the CWA SRF.

This section authorizes privately owned systems to access CWA funds. This is already allowed under the SDWA. Most privately owned wastewater systems are very small such as trailer parks, are very much in need, and are currently excluded.

This section includes a series of flexibility mechanisms designed to improve assistance provided to disadvantaged communities and increase the flexibility offered to states. These provisions mirror those already in existing law in the SDWA.

Program Administration This section increases the percentage of funds authorized to be used by the state for program administration from 4% to 5%.

This section adds a sentence to the existing section in the CWA on planning requirements to ensure coordination among local community planners when developing water projects. It requires states to ensure that applicants for assistance consult and coordinate with agencies responsible for developing local land use plans, regional transportation improvement and long-range transportation plans, and State, regional, and municipal watershed plans.

This section revises the existing priority list requirement in the CWA to include not only treatment works, but also all eligible projects. Currently, states are only required to list treatment works projects rather than include all eligible projects. This change ensures that projects included in 319 and 320 plans as well as conservation, reuse and recycling projects are also listed.

This section seeks to ensure that recipients of funds under the CWA SRF have basic technical, managerial, and financial capacity to operate their system and utilize the funds provide and to ensure that basic financial management practices such as asset management planning are in place or in development.
Capacity: Establishes a requirement for the development of technical, managerial, and financial capacity at treatment works. This provision mirrors the SDWA which requires that systems demonstrate basic ability to manage themselves before they receive funds. This section takes the following actions:
--requires States to develop a strategy within 3 years of the date of enactment to assist treatment works in developing this capacity
--if a State fails to develop this strategy within 3 years, it receives a 1-year grace period, and then if it still has no strategy, EPA will withhold 20 percent of its annual capitalization grant. (Similar provisions were included in the 1996 amendments to SDWA.)
--within 3 years, requires that treatment works demonstrate adequate technical, managerial, financial capacity, including an asset management plan, in order to receive assistance from the SRF. States are authorized to provide assistance, including principal forgiveness, to treatment works to help develop this capacity. The total subsidy provided here plus the subsidy provided to disadvantaged communities cannot exceed 30% of the capitalization grant provided to the states from EPA each year. Restructuring: This section also includes, as a condition of receipt of funds, that projects consider restructuring options and have considered options that are designed to improve the financial management of the treatment works.
These options include:
--consolidation of management or ownership with another facility
--forming public-private partnerships or other cooperative partnerships
--using non-structural alternatives or technologies.
Systems are also required, as a condition of receipt of funds, to have in place or have a plan in place to achieve in a reasonable period of time, a rate structure that reflects the actual cost of service and that the treatment works have in place, or to have in place by the completion of the project, an asset management plan. This feature in particular is designed to ensure that once this federal investment occurs, the local owners of these plants will take the management actions they need to take to repair and replace their existing infrastructure in the future without federal assistance.

Technical Assistance for Small Systems: This section includes an authorization for technical assistance to small systems serving less than 3300 people located in a rural area.

Competition: This section reinstates an existing provision in the Clean Water Act requiring that those entities that bid work with funds provided by the Clean Water SRF take steps to ensure that multiple bids will be sought in an effort to reduce overall project costs.

Public Participation: This section includes additional emphasis on public outreach to ensure that there is ample opportunity for public comment when developing project priority lists and intended use plans.

Private Utilities and the Needs Survey: This section requires that if a state elects to include the needs of private utilities in its needs survey, they must ensure that private utilities are eligible for assistance from the Clean Water SRF under state law.

Reports: This section requires a report on progress made on the requirements added by this Act.

Formula: This section includes a revision to the Clean Water SRF distribution formula. It is divided into two sections. For the first four years of the authorization, the funds are distributed as follows:
--Up to $1.35 billion in appropriations according to a formula based on the most recent needs survey with a 1.1% floor.
--Between $1.35 and $1.55 billion distributed to states that receive a smaller proportionate share for these four years.
--Above $1.55 billion distributed according to the formula based on the most recent needs survey with a 1.1% floor.
Beginning in the fifth year, after the new needs survey is completed, funds will be distributed according to a formula based on that needs survey with a 1.1% floor.

Authorization of appropriations: This section authorizes funding of $3.2billion in 2003 and 2004, $3.6 billion in 2005, $4 billion in 2006, and $6 billion in 2007. The EPA is authorized to reserve not more than $1 million per year for work on the needs survey.

Title II: Changes to the Safe Drinking Water Act

Section 201: Eligibility This section modifies the project eligibility list with three changes. First, language is included to clarify that planning, design, and associated preconstruction costs are eligible for funds under the Safe Drinking Water Act (SDWA) SRF as standalone items.

This section makes multiple changes to the SDWA SRF.

This section adds a planning requirement to ensure coordination among local community planners when developing water projects. It requires states to ensure that applicants for assistance consult and coordinate with agencies responsible for developing local land use plans, regional transportation improvement and long-range transportation plans, and State, regional, and municipal watershed plans.

Capacity Development and Financial Management:

Capacity:
This section adds one element to the existing SDWA section on capacity, which mirrors the requirement, described above in Title I to develop technical, managerial, and financial capacity at public water systems.

Restructuring:
This section also includes, as a condition of receipt of funds, that projects consider restructuring options and have that are designed to improve the financial management of the water systems works. These options include:

--consolidation of management or ownership with another facility
--forming public-private partnerships or other cooperative partnerships
--using non-structural alternatives or technologies.

Systems are also required, as a condition of receipt of funds, to have in place or have a plan in place to achieve in a reasonable period of time, a rate structure that reflects the actual cost of service and to have in place, or to have in place by the completion of the project, an asset management plan. This feature in particular is designed to ensure that once this federal investment occurs, the local owners of these plants will take the management actions they need to take to repair and replace their existing infrastructure in the future without federal assistance.

Eligibilities:
This section includes language to clarify that consolidation is an eligible expense under SDWA when it is conducted to meet water quality standards or make more efficient use of funds. It also includes language authorizing bond issuance costs as eligible expenses under SDWA.

Allows more favorable loan terms, including principal forgiveness, for communities that are not disadvantaged if those communities demonstrate that the financial benefit they received will be directed through the rate structure toward disadvantaged individuals (based on income) in their service area. This is limited to 15% of the total capitalization grant received by the state each year. The other flexibility provisions included in Title I of this bill are already authorized under SDWA.

Section 204: Private Utilities and the Needs Survey This section requires that if a state elects to include the needs of private utilities in its needs survey, they must ensure that private utilities are eligible for assistance from the CWA SRF under state law.

Section 205: Competition This section mirrors the requirement in the CWA requiring that those entities that bid work with funds provided by the SDWA SRF take steps to ensure that multiple bids will be sought in an effort to reduce overall project costs.

Section 206: Technical Assistance for Small Systems This section reauthorizes two programs, the small public water systems technology assistance centers and the environmental finance centers that were authorized in the 1996 SDWA to provide assistance to small systems.

This section authorizes funding of $1.5 billion for 2003, $2 billion for 2004 and 2005, $3.5 billion for 2006, and $6 billion for 2007. The EPA is authorized to withhold not more than $1 million per year for work on the needs survey.

Under current law, states are allowed to transfer funds from one SRF to the other and back again. It provides them much needed flexibility in meeting their overall state needs. This provision has expired and is reauthorized in this title.

This section authorizes a grant program from EPA for 10 pilot projects per year to promote innovations and alternatives for technologies in water quality management or water supply and to reduce costs.

One of the largest determining factors in the ability of a water utility to meet their own infrastructure needs without federal assistance is a utility's rate structure. During work on this bill, it has become evident that rates are often random, are heavily influenced by local politics, and are not necessarily governed by any type of best management practices. However, rates are usually one of the determining factors in determining the affordability of a project for a particular community. This section requires the National Academy of Sciences to conduct a study to analyze this situation and provide information on best practices.

Section 304: Savings Clause This section includes language ensuring that the existing state role in water resource management is not impacted by this Act.

This title calls for the Secretary of Interior, through USGS, to conduct three specific tasks:

--to assess the state of the water resources of the U.S. --to develop and execute federal water research priorities --to share and distribute information.

The main product will be a nationwide assessment that identifies areas of the U.S. at risk for water shortage or surplus in the next 50 years and areas where these risks are regional.

The research priority list is intended to provide some structure to ongoing federal water resource research.

The information-sharing requirement provides to local decision makers the following:

--results of the national water resource assessment
--summary of Federal water research priorities
--near real-time data and information on water shortage and surplus
--planning models
--streamlined procedures for states and localities to interact with federal agencies with water resource responsibilities.

The Secretary is required to provide the results of the assessment to Congress and report every 2 years on the implementation of this title.

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