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U.S. House of Representatives,

Subcommittee on Water Resource and Environment,

Committee on Transportation and Infrastructure,

Washington, DC.

    The subcommittee met, pursuant to notice, at 2:06 p.m. in room 2167, Rayburn House Office Building, Hon. Sherwood L. Boehlert (chairman of the subcommittee)presiding.

    Mr. BOEHLERT. Good afternoon and welcome to the Water Resources and Environment Subcommittee.

    This is our first hearing in this Congress on the reauthorization of the Clean Water Act for this session since Christmas vacation.

    Today's hearing will focus specifically on our Nation's water infrastructure needs for clean water and drinking water infrastructure.

    As we'll hear from today's witnesses, our Nation's water infrastructure will require over $200 billion over the next decade. Our drinking water construction needs, alone, are in the neighborhood of $138 billion. Our clean water needs are just as great.
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    The year 1997 marks the 25th anniversary of the CWA, and it is important that we continue to fund this program at the levels that will allow us to make improvements to the quality of our lakes, rivers, and estuaries.

    Since 1972, the Federal Government has invested over $60 billion in clean water infrastructure. I can think of few programs that have provided greater benefit to the American people.

    Given these facts, I must admit that I was puzzled by the Administration proposing to cut over $275 million from their water programs, while increasing funding for the Superfund program by $700 million before we have the needed reform. And let there be no doubt, we need reform. We're going to get it.

    I have been working with the Appropriations Committee to restore water infrastructure funding levels to at least last year's level.

    Many of our Nation's smallest communities lack the cash base to ever participate in the state revolving fund program. We must consider various loans, principal subsidies, and extended payment plans in our efforts to make resources available to all communities.

    As a part of Clean Water Act reorganization process, I want to emphasize two critical points.

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    First of all, I will be working closely with my colleague, Mr. Borski, to develop a clean water reauthorization that has broad bipartisan support. That's the way Chairman Shuster operates this whole committee, and that's the way this subcommittee is going to operate.

    Second, it is critical that those interested in the Clean Water Act begin working off the Hill to develop and refine their views on the CWA.

    I would now like to observe that we have been joined by the chairman of the full committee, Mr. Shuster of Pennsylvania, and I will turn to him for any remarks he may have.

    Mr. SHUSTER. Thank you very much, Mr. Chairman, for holding this hearing as we move ahead on this very, very important legislation.

    Today we're focusing on the funding of infrastructure, and will also be touching on the controversial wetlands program. As we move ahead we will be focusing on the extraordinary challenges we face in these efforts.

    I think we should do several things. First, we've got to adequately fund the act. Second, we've got to increase flexibility at the State and local level. Third, we've got to target assistance for hardship communities. And, fourth, we've got to promote public/private partnerships.

    I realize privatization is not free from controversy, but I think it's got to be part of any solution that we put together.
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    So I am very pleased that the subcommittee is holding this important hearing today, and I join in welcoming our witnesses and look forward to hearing whatever they can add to our discussions as we consider this legislation.
    [The prepared statement of Mr. Shuster follows:]

    [Insert here.]

    Mr. BOEHLERT. Thank you very much, Mr. Chairman. I want to thank you for your tremendous leadership.

    Mr. Borski?

    Mr. BORSKI. Thank you very much, Mr. Chairman.

    I want to thank you for holding this hearing on meeting clean water and drinking water infrastructure financing needs.

    Our committee has demonstrated longstanding bipartisan support of Federal assistance to meet infrastructure needs.

    As I reviewed the testimony to be delivered today, two things became apparent. First, there is, as we all know, tremendous need. EPA, using state data, has placed the Nation's wastewater and drinking water needs at over $250 billion over the next 20 years. However, the Federal commitment is currently around $2 billion annually.
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    Additionally, the current State revolving loan fund program, although laudable, needs to be made, as Chairman Shuster has noted, more flexible and responsive to the varied needs of our communities.

    Mr. Chairman, I believe that you and I share many of the same goals for improving the financing of wastewater and drinking water needs of our communities, both large and small. The financing needs and options of Philadelphia differ from New Hartford. We must work to allow for the flexibility to meet these various demands.

    A second theme for our consideration is the need to make the best use possible of our limited resources. To that end, there is not enough Federal, State, or local money to achieve our water quality goals if the Nation does not take meaningful steps to address nonpoint source pollution.

    In many water bodies we could spend tens to hundreds of millions of dollars on additional point source controls from both municipalities and industry, and water quality standards still would not be attained.

    If this committee is to consider Clean Water Act legislation this Congress, it is imperative that we address nonpoint sources of pollution in an effective way.

    This is a matter where we need to exercise fairness, equity, and responsibility. It is also the only way we will achieve our Nation's water resource goals.

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    I look forward to today's testimony. Thank you, Mr. Chairman.

    Mr. BOEHLERT. thank you, Mr. Borski.

    I think it's interesting to note, as you've heard in the two statements, how great the need is and how great is the effort to meet that need. I think that says a lot about the working relationship we've enjoyed and the spirit in which we enter these very important deliberations.

    Are there any other colleagues who have any opening statements?

    Mr. Poshard?

    Mr. POSHARD. Mr. Chairman, I will submit an opening statement for the record. I just want to say that I agree with both what you and with what Mr. Borski and Mr. Shuster have said. However, many of us do represent farm and agricultural districts who are very sensitive to nonpoint source pollution issues. I know that you folks know we need balance and we'll work this out.

    [The prepared statement of Mr. Poshard follows:]

    [Insert here.]

    Mr. BOEHLERT. We appreciate your confidence.

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    Mr. POSHARD. Thank you, sir.

    Mr. BOEHLERT. Mr. Thune, the distinguished vice chairman.

    Mr. THUNE. Mr. Chairman, I want to thank you, as well, for taking on this subject.

    Growing up in a small State in rural South Dakota, I know well the importance of quality water to agricultural communities, and look forward to trying to work with the appropriations process to see if we can get the projects completed.

    I will also state that I think—having had some experience working for the cities and towns in my State—I see some of my friends here today—I know how important it is that we do provide the type of flexibility that is necessary in order for particularly smaller communities in rural areas to meet a lot of the goals of the Clean Water Act, and also a very common-sense approach to it.

    I also appreciate the comments that were made about the nonpoint source program, because I do represent an agricultural State. We share those concerns.

    The SRF program is one that has been very effectively utilized by our State. The infrastructure needs of the State are vast, and we look forward to working with this committee to develop a plan.

    Mr. BOEHLERT. Thank you.
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    Mr. Blumenauer?

    Mr. BLUMENAUER. Thank you, Mr. Chairman.

    I appreciate your launching this hearing today. We're talking about a matter that affects each of us. And I noted the chairman's words a few moments ago about flexibility and partnership. I'm hopeful that this committee will think of water infrastructure needs as the aquatic equivalent of ISTEA, because there is tremendous potential for looking at this in terms of the total water cycle. We're not just talking about water quality. We're not talking about meeting the needs to achieve that quality. We're talking about the capacity of our Nation to deal with water.

    I'm hopeful that we can zero in with our witnesses today on issues of how we can effectively deal with water conservation and what incentives are going to be provided for communities that are doing so. I'm concerned with how we clean water in a responsible fashion.

    Last but not least, we will be looking at our water infrastructure.

    I hope that our witnesses will help us zero in on opportunities to achieve our stated goals.

    Mr. BOEHLERT. We're all singing from the same sheet.

    Mr. Horn?
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    Mr. HORN. Since I grew up on a farm and now represent a county and cities that total 10 million people in the county, I agree with all of what my colleagues have said, regardless of party ideology, and we look forward to hearing from the witnesses.

    Mr. BOEHLERT. Thank you. With that we'll go to our first witness, the distinguished assistant administrator of the Office of Water in the Environmental Protection Agency, Mr. Robert Perciasepe.

    Mr. Perciasepe, is there any significance to you sitting alone at that table far to my left?


    Mr. BOEHLERT. Wouldn't you be more comfortable more in the center?

    Mr. PERCIASEPE. Actually, I'm on the right side of the table, Mr. Chairman.


    Mr. BOEHLERT. You are welcome, Mr. Perciasepe. Throughout this hearing we have a number of witnesses. We're going to try to adhere to the five-minute rule, with the exception of your first presentation, because it's so critically important.
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    Mr. Perciasepe?


    Mr. PERCIASEPE. Thank you.

    Mr. Chairman and members of the committee, I have written testimony that I would like entered into the record. I will present a little of the background. But I also have a series of charts which I didn't have copies of, which I would like to speak of to try to lay out the framework of some of the concepts and how we see this working.

    Mr. BOEHLERT. Your statement will appear in its entirety at this point in the record, and you are free to summarize.

    Mr. PERCIASEPE. The first chart really is an important chart because it demonstrates the success that we've had with the SRF and its predecessor the construction grants program, and I think it's an appropriate development.

    This year marks the 25th anniversary of the first major Water Pollution Control Act of 1972 and the beginning of a brand new program to put a major push on sewage treatment plan improvements in the United States.

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    Today, Mr. Chairman, over 16 billion pounds per year of pollutants are removed from sewage treatment plants in the United States as a result of the work that has been done over that time period.

    The point I want to make in this chart is really central. Since 1972, the population served by secondary or advanced wastewater treatment plants in the United States has gone from 85 million to almost 173 million.
    During that time of increased population and greater work that has been done under the Clean Water Act during that time period, a reduction of over 40 percent in the amount of pollutants that are being discharged by wastewater treatment plants, has occurred. It's a remarkable national success story that I think is worth noting as an introduction to the hearing today.

    What I want to do now is go through very quickly how does the SRF work and what have we seen as it's working.

    First and foremost, obviously, Congress appropriates the funds. That obviously is the appropriation process we're in now. There are awards of capitalization grants to the States. I'm not sure why this stays here, but—

    Mr. BOEHLERT. Could you identify that?

    Mr. PERCIASEPE. That I think is New York.

    Mr. BOEHLERT. Thank you.
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    Mr. PERCIASEPE. The States that make loans to the communities—the communities are represented here by these buildings. But communities can plan and design projects, they solicit bids, they select contractors, and they begin construction.

    You have to realize the sequence going backwards, that a mayor—and there are some in the room today—won't want to be soliciting bids and make that kind of commitment to a contractor unless all this has gone on before. So there's really a lead time into the bidding process.

    But once the construction starts, they draw on the funds at the Federal Treasury as construction is done, the Treasury does not pay the funds out at the beginning of construction or when the grant is made to the State except in some unusual circumstances. It's a short, 48-hour or so turn around for cash to the contractor as construction is done. So you have the disbursement of cash taking place over the course of construction of the project.

    That puts the average time for the projects at about 4.4 years going from the appropriations all the way through completion of the project. I might add it's about almost 40 percent faster than the construction grants program.

    You see the top is very much like a bank. There are other distinct advantages of the SRF.

    First of all, for leveraging, which I'm going to talk about in a moment, the State-matched funds that go into it, the leveraged bonds that States put into it, their funds, and then the principal repayments, they start to grow over time.
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    Compared to the grant program, for every dollar you put in you almost have $4 in the SRF program that are actually out there working. That's an important fact to get back to when we're talking about how much money is appropriated in a given year.

    The other thing I'd like to point out is that the subsidized rates—and I'll use the 7.5 percent market rate here for municipal bonds, I think currently it's probably in the 5's. You can adjust this up or down depending on what the current market rate is, but when the loan fund was created it was about 7.5, and I can't say what it will be in the future.

    But, a loan at 3 percent has the approximate value over the life of the project of a 30 percent grant. At a zero percent loan, which is authorized, that's equivalent to a 50 percent grant. Now, if this went down to 5 or 6 it would probably be more like 20 percent or 40 percent. I'm just giving you an indication of the 20-year or so impact of the subsidized rates.

    Now let's talk a little bit about what the bank is looking like today.

    This is something we've been working at for a while. What this chart shows is—the green bars are showing the cumulative amount of funds in the bank. Remember, it's 50 banks, but if I looked at it at an actual level, there's 25—it would be projected that the funds that were requested in the 1998 budget, $25 billion in the bank.

    The purple bars, and also the two smaller bars here, are the cumulative amount of loans out. You see the loans tracking the amount of funds from the bank numbers that I was showing in the earlier chart.
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    One of the reasons this is an important chart is because we look at the amount of money that's being asked for in this year's budget or next year's budget. Really what you're looking at is how fast you build the bank, not how much money is in this given year, but how much is it building in the bank and how much we going to be able to do in loans.

    The bottom line is that the amount of loans that will be able to be issued by States and communities in fiscal year 1998 will be pretty much the same as this year.

    I'll have some more information on that in a moment.

    This chart shows some of the things that have been happening to the fund over the last several years. They're things that we expected. They were anticipated by Congress when they created the fund.

    Back in 1990, 70 percent of the annual input into the loan fund on the national level was made up of the capitalization grants from the Federal Government, the Federal capitalization grants. But over time the leveraged bonds, the loan principle repayments, which are starting to grow now, and interest earnings are growing, so the composition of the annual amount is changing.

    So the amount that the Federal funds represent in the annual amount of money that's available to make loans throughout the country has shrunk from 70 percent to 54 percent, while the amount of money that is allowed—that we have available to be loaned—is staying relatively constant over the last couple of years at close to $3 billion.
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    Now, that being said, we probably need to talk about the needs that most of you mentioned in your opening statements.

    This is the breakdown of the needs for the last clean water or wastewater survey and the most recent drinking water needs survey, and they look remarkably similar. Here I tried to aggregate things somewhat. We've got secondary treatment needs, advanced treatment needs, and nonpoint sources and stormwater identified here. We're working on the next need survey. We think we should have them available this summer. And what we're seeing preliminarily—we don't have them available yet, we're still reviewing the data—that the secondary treatment needs are declining, as we would expect. In fact, I think we're down to about 170 wastewater treatment plant in the United States close to 15,000 that don't have secondary treatment yet.

    But the conveyance system work is increasing. That conveyance system is pipes, pumping stations. Whether you're looking at sewer system overflows or new interceptors or collectors that are needed, those needs are generally on the increase.

    In drinking water, this is our first survey one, so there's nothing really to compare it to. You can see the treatment needs, source water protection needs, transmission, and distribution.

    I think the thing that's striking about both of these charts when we clump some of these things together is that more than half of the needs are the systems that collect the wastewater and the systems that distribute the drinking water. And that's important to know is that that's a big cost, a big expense out there of that underground infrastructure to transmit and collect that water and wastewater.
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    Going back to thinking about the cumulative long-term view of this vis a vis those needs that we just identified, when you start thinking about $1 billion up against $250 billion, you start to lose your perspective. But when you start looking at the 20-year needs and what's this fund going to do over 20 years when you add in the State match, add in the principal repayments, add in the leveraged bonds, and you start to see this kind of a pattern, this is running the numbers out to 2026 that are resultant from the appropriations schedule that we would be recommending in the President's budget, adjusted for inflation.

    This is important. While we're showing a target of $2 billion a year out here in 2020, if I just looked at the year 2020 you notice this has $2 billion. The actual dollars is about $5 billion, a little over $5 billion, but that would be in 1997 dollars only $2 billion.

    So what we're trying to do now is put money into the fund to build that bank to catch inflation in the future so we can keep the fund operating at a $2 billion level.

    I might add that if you decide it should be $2.5, maybe the long-term goal ought to be $2.5 billion a year. We need to determine how much more capitalization you have to put into it now, over the next decade, to make sure it's doing that out in the future.

    The same thing with the drinking water revolving fund in terms of—we're looking at around $500 million a year adjusted for inflation.

    So both of these use this kind of analysis to say that we think it ought to be more or less in the future, and you can make your adjustments now.
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    Again, it really won't matter on your annual appropriations. You're looking at how much you're going to get in the bank.

    Let me show you the consequences cumulatively of that.

    This is cumulative. The blue line shows the year 2026. You're talking about $80 billion. You start saying, ''That's not an insignificant Federal contribution over that time period.'' You could say it's not the right number, say, ''I want this line to go up to $100 billion.'' This is our policy shot at, but maybe it ought to be $100 billion.

    Well, if it ought to be $100 billion, run the number back to the other chart and see how much time you need to putting money into that bank to get to that number.

    It's the same thing with the drinking water. The Safe Drinking Water Act did authorize 33 percent switching between the funds.

    Now the drinking water fund is at almost 20 billion by 2026, cumulative loans. That means capitalization will be about $6 billion, depending on what numbers you decide over the course of time. So these lines get fuzzy down here depending on those State decisions. This is assuming States don't switch the money around, but if the States decide to take $6 billion out of the drinking water and put it in the clean water, this line would go up, or vice versa.

    One more summary chart, Mr. Chairman.

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    So what we've tried to do, instead of looking at what the current sequence is going to do, what are we doing in the Administration to push them forward on improvements to do what we all want to do?

    First of all, we want to maintain the Federal consultation needed to support the $2 billion draw or the half billion dollar drinking water draw. That means both of them are going to have someone who can find $6 billion more income.

    Obviously, this is the first year of the drinking water SRF. We've already made our first grant to a State, Georgia. We expect to have about 40 States in the grant program by the end of this first Federal fiscal year of the program, which is a pretty good pace and we'll work very hard to get it going when the guidance is done and it's out, and we will be working with State legislators to model legislation. We've been working with legislators all over the country to make sure that we get their laws in place. I think we're going to have all States with the necessary laws.

    We're talking about $25 to $80 billion. We want to make sure it's being managed properly. We're looking at the pace to make sure the pace is there to get us 40 percent faster than the grants program. We're working with the inspector general on an ongoing basis. We looked at audits to make sure programs are audited properly. So there has been a lot of work going on in the area of sound financial management, looking at regional capabilities, State capabilities, and working with individual States when they have a particular problem.

    It will require coordination. I did mention this earlier and I'd like to talk a little bit more about this. This is not the only water infrastructure funding that the Federal Government has. There is between $1 and $2 billion—I believe you'll find this in my written testimony—of water infrastructure funds both in the Rural Utility Service, formerly the Farmer's Home Administration, and the Department of Housing and Urban Development in their State-wide community development block grant program.
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    We have recently signed an agreement between EPA, USDA, and HUD to all our field people in how they should coordinate those funds out in the field.

    Support for small, disadvantaged communities—some of those were mentioned in the opening comments. We have a hardship community program which came out of Congress a couple of years ago. We have technical assistance. We have loan forgiveness provisions in the drinking water area.

    The last thing I want to mention is the improved long-term drinking water and clean water planning between the two funds. Remember, there's a 33 percent cross-over. We want to make sure that on the long haul the process is targeting—looking at minorities and working the infrastructure plan between those two kinds of infrastructures.

    We will work very hard with the States to improve the framework for doing this plan. We recently have done some work with the States on framework on moving toward a watershed approach on the clean water SRF and in the source water protection components of the drinking water SRF.

    So we're making a very strong effort working with the States on improving the plan aspects of targeting those funds to the needed projects on a State-wide basis on the watershed issue.

    So I think I will end there with this general overview of the program where it stands, what we are doing to continue to improve it, and sort of the perspective we have in looking at it in the long-term as opposed to looking at it by the year.
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    That's sort of the answer to your earlier question about the amount in the President's budget.

    Mr. BOEHLERT. Thank you.

    I'm not sure it's adequate. Let me give you one more factor. The '98 budget request is $275 million less than the President requested for 1997, and it's $275 million less than last year's appropriation, which was $1.35 billion.

    What's the justification for that? You can pass it off and say it's OMB's fault, but can you name any other program where the President is proposing similar reduction?

    Mr. PERCIASEPE. Well, again, I really want to try to focus on the long-term prospect of having the funds that we need in there to meet that goal. Are we going to leave the goal at $2 billion a year, higher, or lower? And we adjust the annual appropriations.

    Or, when you look at the long-term cumulative impacts of a little over—maybe it ought to be $100 billion or maybe $70 billion for 20 years. That's how you figure out how much money you want to have in there.

    This is a numbers game of this year's appropriation. The actual clean water appropriation for this Federal fiscal year 1996 was $625 million. So we actually have a $650 million increase. We can look at it that way, too.
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    Mr. BOEHLERT. But you say here in your presentation that the expected infrastructure needs in the early 1990s was an expected annual need of $13 billion a year over the next 20 years. To what extent does this underestimate the actual need, because, as we're going to hear later on from Mayor Tobey and Mayor McManus, controlling this may be far more expensive than previously thought.

    Mr. PERCIASEPE. I think in some of the other testimonies people have estimates of costs, and I think we'll hear some other testimony of annualized costs that are somewhere closer to $16 million. I can't remember the exact numbers in some of the other testimony.

    But I think $13 million a year is not an unreasonable estimate, as we understand the current needs, that ought to be put into the program.

    I did not have time to prepare a chart that shows these numbers. In the testimony it shows it based on what is combined for sewage construction program nationally from different sources, about how much is going to come from local sources and Federal sources in the SRF and the other Federal agencies that are putting funds into this kind of program.

    So there is a gap. There is a gap, and the gap, I think, tells us two things. It tells us how we might find increased funding, and I think a question for Congress is should that be the Federal Government or are there other ways to close the gap.

    The second thing is priorities. How do you take the $10 to $11 million we're spending a year now compared to $13 million and make better choices, perhaps, within the framework.
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    Mr. BOEHLERT. You've heard the opening statements and the views. Would EPA support increased funding on nonpoint source pollution prevention and resolving it? And, if so, would this be funding under section 319? What do you think?

    Mr. PERCIASEPE. I agree that nonpoint source is one of our key areas to target in water pollution control, and increased funding—I would say we absolutely agree that more funding is needed in the Clean Water Act. I would want to go through a process of looking at what we can do with the SRF.

    We already have about a half a million that has been spent on nonpoint source kinds of activities, but not so much on the kind of thing that you're talking about.

    We also have funding under the farm bill in regards to some of those programs, and obviously we have other existing funds.

    I think it would be a fair statement for me to say that funding for nonpoint source is a reasonable thing to consider.

    Mr. BOEHLERT. I hope it's more than reasonable. I hope it's approached with some enthusiasm.

    Mr. PERCIASEPE. We have a need that we've already identified of over $9 billion in that area. That's probably a slight understatement.

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    Mr. BOEHLERT. I would impose the same time limits on the Chair as everyone else, so I will now turn to Mr. Borski.

    Mr. BORSKI. Thank you, Mr. Chairman.

    Mr. Perciasepe, I welcome you and I commend you on your find statement.

    I want to begin where the chairman left off. Will the SRF program, alone, be sufficient addressing nonpoint source pollution?

    Mr. PERCIASEPE. The nonpoint source pollution problem is going to require a multi-faceted attack. It's going to require funding and coordinating of existing Federal funds, including farm bill funding.

    It isn't an unusual thing to see those two programs coordinated. We have a lot of work going on with USDA to, in fact, do that targeting.

    The projects that are identified under 319 of the Clean Water Act, which is the nonpoint source section, are eligible for SRF funding, and not enough of that has been done. We need to do more with the States to find ways to make that happen.

    But, on top of that, on top of the potential for this funding is going to be the need for a national statutory framework for nonpoint source controls in the pipeline that has some type of Congressional mandate to it. I think that's the only way the system can get the work done.
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    Mr. BORSKI. In reference to the best use of limited resources towards improving water quality, we see a shift from a comprehensive watershed-based approach to the drinking water problem. Part of that process involves establishing and implementing TMDLs. I would note that some States are concerned about the costs associated with TMDLs. In fact, one of the later witnesses will describe them as a paper exercise that very diverts significant resources from other activities.

    Could you explain to the subcommittee how TMDLs are being used and how they tie into the use of the SRF of watershed projects?

    Mr. PERCIASEPE. A TMDL, which is provided for under section 303.(d) of the Clean Water Act, is really a process. It's a process of first identifying the water bodies in your State that are not going to meet water quality standards, that are established by the State; water bodies where the simple implementation of technology standards—sewage treatment plant improvements that are technology baseline, the guidelines for industrial discharges that are technology baseline won't be enough to do it.

    In a sense, it's a risk-based priority approach for putting your resources where the highest priority is, and that is the areas that are not going to make it.

    And for the last 20 years of doing the technology part of the program, the time has come to identify those water bodies in each State that aren't going to make it and then figure out how we're going to get there.

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    Now, that leads to a whole host of plan opportunities, whether it be SRF funding or whether it be in-State funding, linkages with the farm bill, source water protection programs under the Safe Drinking Water Act.

    We are also looking—there is increased funding in the President's budget to help move the TMDL program forward.

    It really is a program to target our resources. Yes, it involves paper, but any kind of planning process to identify risks and priorities is going to have to. They're not going to fall out of the atmosphere. Somebody is going to have to do the analysis.

    And so we view this as a critical component to deriving more-efficient planning under the entire Clean Water Act.

    Mr. BORSKI. Thank you, Mr. Chairman.

    Mr. BOEHLERT. Thank you very much.

    Mr. Horn?

    Mr. HORN. Thank you, Mr. Chairman.

    I want to clear up the sequence on the State revolving loan funds.

    You're assistant director. What did you recommend to the administrator regarding the State revolving loan fund?
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    Mr. PERCIASEPE. I think we recommended $1.8 billion for the entire water construction fund in the loan programs. There were other funds that were recommended for Alaska villages, etc., to make the whole thing over $2 billion.

    And the decision on splits between two—with the drinking water program, we're trying to get that up to $1 billion a year, what Congress authorized, but we have no authorization for the clean water SRF.

    We know that last year it was $1.275 billion for the drinking water SRF, so maybe $1 billion a year on that request, you'd need another $725 million or so. If you subtract $725 million from $1.8 billion, you get the amount that we recommended for the clean water SRF, which is $1.075 billion.

    Mr. HORN. That's what your position in EPA recommended?

    Mr. PERCIASEPE. That's correct.

    Mr. HORN. What did the administrator recommend when she had to reconcile all the rest of the things?

    Mr. PERCIASEPE. Same number.

    Mr. HORN. Same number. And what did OMB recommend?

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    Mr. PERCIASEPE. Same number.

    Mr. HORN. So you're consistent with the Administration?

    Mr. PERCIASEPE. Yes.

    Mr. HORN. Usually OMB cuts.

    Mr. PERCIASEPE. Well, at least for folks at EPA, we've been trying to meet OMB's targets. When they send us targets, we try to stay within the targets.

    Mr. HORN. Usually agencies submit more than OMB allows. Could you tell us what they did?

    Mr. PERCIASEPE. I can't speak to that.

    Mr. HORN. In your needs analysis, what do you think the state revolving loan fund should be?

    Mr. PERCIASEPE. Again, I think on an annual basis I think there can be some flexibility. I think you have to decide how much more money you want in the fund to do whatever you wanted to do in the future.

    Now I'm open for some discussion and the Administration would be as to what we think the target ought to be.
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    I think the Congress is going to have to work with the Administration on the overall balanced budget effort to figure out how much is going to be allocated for this type of activity.

    The needs go on, but the Federal budget can only do so much.

    I think one way of trying to put a planning context to this is to look at that long-term picture. Do you want this to fund $100 billion over the next 20 years, or $80 billion, or whatever.

    And then, once you've given thought to that, then you can run the numbers back, and then it doesn't even matter completely how much you put in on an annual basis, within some reason here, but just how much time you need to get to a certain amount of money.

    If you decide another $10 billion is needed, then you can allot over 5 years, 2 years, 1 year, 10 years, whatever. If the bank already has $25 billion in it and is less sensitive to those kinds of variations on an annual basis than it is what you're going to get in here over the next 5 or 10 years.

    Mr. HORN. Were you given a 5-year period?

    Mr. PERCIASEPE. I do believe that the OMB the water infrastructure fund out 3 to 4 or 5 years.

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    Mr. HORN. It seems like what the Administration has done is put all the heavy-duty work off on the year 2001 and 2002, which means beyond this Administration. That will be in the next Administration.

    Mr. PERCIASEPE. It tapers off as we have the amounts in the fund and can do the work that I described in my comments.

    Again, if you could increase that performance by just simply flat-lining the current amount or slightly increasing it, we show it tailing off by 2003.

    Mr. HORN. If we've done a needs analysis that says that we have a real mess out there, it's kind of like putting a muffler on the car. You've got a choice. You can do it now or you can let it get real bad and then it's going to cost you. Is that the kind of analogy relative to the state revolving fund?

    Mr. PERCIASEPE. We try to look at a current need, in particular, and also look at the whole 20-year period. So I think by setting priorities, which each State does through its intended use plan, some of those issues that are related to that, pay now or pay later, obviously, anybody who has ever been in the construction business knows the cost of construction keeps going up. The more you do now, the better you are. You need to balance that with all the other fiscal policies and the capacity of the construction industry, etc.

    Mr. HORN. Thank you very much.

    Mr. BOEHLERT. Thank you.
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    I think you can sense the frustration that's evident up here. The problem is the appropriators are going to say, ''We're accommodating the Administration's request. What are you guys doing over there in Transportation and Infrastructure?''

    And so that creates the problem. You're going to hear a lot more about this, Mr. Perciasepe.

    Mr. PERCIASEPE. I'm sympathetic to this dilemma, but I think it's easier for all of us to talk about it if you think about where is it that you want to go, not what your goal is for this year's appropriation, which I think is important. Don't get me wrong. I'm not trying to say this year's appropriation is meaningless. That is not what I'm saying.

    But what I'm saying is: where are we going with it? You know, if it was $2 billion instead of $1 billion, what is that going to mean 20 years from now as this bank starts to work? And will there be more loans made in fiscal year 1998? It's not going to be a billion dollars worth of loans made in fiscal year 1998, even though that's the Federal appropriation. When you put those other things in there—the leveraging, the State match, and everything else—it's going to be close to $3 billion of loans made in fiscal year 1998.

    So thinking that way is a place for us to talk between the authorizing committee, the appropriation committee, and the Administration as to what is the long-term goal that we want. And clearly that's a subject for the reauthorization.

    If you remember, the old law stopped in 1994 thinking that that was going to be all we needed to be in perpetuity. It didn't take into account the cost of inflation. We're trying to catch up on inflation.
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    Mr. BOEHLERT. I understand.

    Mr. Blumenauer?

    Mr. BLUMENAUER. Thank you, Mr. Chairman.

    I'm curious if, in your analysis of overall need and potential resources, there has been some work done looking at the potential shifting between categories, the nonpoint pollution problem, for example. Has there been some analysis done with that? If some of those resources from communities downstream were shifted upstream to help solve some of the point problems of the agricultural communities, that could result in an overall cleaner river, perhaps less than what would be mandated under an agency approach.

    Has that been analyzed at all?

    Mr. PERCIASEPE. It's hard to analyze that on a national level when it's different and all those individual decisions that would have to be made on a watershed-by-watershed basis, but I think the idea is definitely something that is important to us.

    The ability to move things around, move responsibilities around is somewhat limited because of a lack of national regulatory program for nonpoint sources.

    Again, that's another issue I think that's going to have to be dealt with in the reauthorization of the Clean Water Act. Getting everybody in the boat, so to speak, with equal responsibility is one way to have efficient trading in the type of trade-offs that we just spoke of.
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    I think we have to remember we've gone through a process to kind of do it in a reasonably rational process to bring that cost down to some achievable level over the next several decades. We really don't want raw sewage there during rainfall events. It's something that we can—that's the difficult one to trade on.

    But the idea of the quality of streams coming into an urban area is very important, and I think there are ways to get at some of those solutions for a watershed approach.

    So I would agree with you on your assessment that there is an advantage for being able to have that kind of flexibility on a watershed basis.

    Mr. BLUMENAUER. I appreciate that, but my question was have you done analysis on some particular watershed basins where you talked about the potential impact, what flexibility you need under the law to make it stick?

    Mr. PERCIASEPE. I personally know of none specifically right off the top of my head, but I would say yes, we've done that somewhere with a State or a State has done it. It's inevitable that there's an example out there that would be able to inform the idea you're talking about.

    Mr. BOEHLERT. Thank you.

    Mr. Johnson?

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    Mr. JOHNSON OF WISCONSIN. Are there ways to ensure that these sources of nonpoint source pollution, for example, that a farmer, in trying to reduce their contribution—ways to help them but not hamper their farming operation? Is this provided for?

    Mr. PERCIASEPE. The best answer I can give is yes, there are ways to deal with pollution problems in agricultural settings in a way that does not disrupt the farm. Some of these things are done on many, many farms. It isn't like you're starting from scratch. There has been tremendous work done on nutrient management, the right amount of nutrients at the right time; contour plowing to reduce soil erosion; protecting stream banks from livestock; managing the waste from livestock or whichever concentrated animal feed operation they have, whether it be swine or chickens, or whatever.

    Much work has been done, and there are large bodies of knowledge in engineering in farming practices—things like cover crops in the winter where you harvest corn and soybeans and you plant a cover crop and it takes up the nitrogen during the winter so it doesn't move through the soil.

    There are many things that can be done.

    The question is: how do you get that universally applied? How many acres of watershed needs to have what kind of practice? Crops move around, and there are changes in pattern of support.

    I think we're seeing a large move towards soybeans on a national level that normally might have happened in the past under the old farm bill. The question is: how is that all happening? You take into account the dynamic nature of water on a watershed basis so that the agricultural community is not going to be the same from 1 year to the other.
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    Then take a look at the cumulative acts on a long-term basis, every 5 years. I think that's the way you have to do it, and I think it can be done.

    Mr. JOHNSON OF WISCONSIN. Without hampering the farming operations and without putting an undue burden on them?

    Mr. PERCIASEPE. Well, I think there will be a need for financial support from things like the equip program in the farm bill where animal waste facilities can be supported, the 319 funding, and hopefully over more of a period of time there will be new flexibility in the new reauthorization, more of the SRF kind of funding.

    Mr. BOEHLERT. If I may, if the gentleman would yield, I'd point out two things.

    One, we're going to have a substantive hearing exclusively devoted to nonpoint source pollution. Secondly, we'll be having ongoing discussions with the Department of Agriculture relating to the farm bill and the conservation reserve program, because that offers great opportunity to deal with some of these water problems.

    We'll keep you posted on that.

    I thank the gentleman.

    Mr. JOHNSON OF WISCONSIN. Thank you very much, Mr. Chairman. I appreciate that.
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    Just another quick question. Are there ways that you see in the formula—you talked about the needs assessment—that recognize them as far beyond resources and dollars already invested by States, for instance by the State of Wisconsin? Is that looked at as a plus rather than a minus because they are already making investment on a State basis?

    Mr. PERCIASEPE. I think it depends on how you look at it. I mean, if we look—to the extent that these needs are used to allocate funds, and from time to time Congress likes to adjust the formula, and they usually do based on the needs, if a State has taken care of a lot of needs they wouldn't have much need, and if that's the basis for the formula it could have an ongoing impact on the funds going to the State.

    But, on the other hand, if you look at what the State has done, the work that needed to be done, there is the advantage.

    So it's hard for me to answer that except to say that we do base the funds that come to States under these programs in general based on the needs.

    Mr. JOHNSON OF WISCONSIN. So you're saying it's money well spent but we may not get more from the Federal Government?

    Mr. PERCIASEPE. Depending on how the needs look. Most States have programs that go beyond just these Federal funds.

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    Mr. BOEHLERT. Dr. Ehlers?

    Mr. EHLERS. Thank you, Mr. Chairman. I have no questions at this time. Thank you.

    Mr. BOEHLERT. We are privileged to have with us the distinguished ranking member of the full committee, our colleague, Mr. Oberstar.

    Mr. OBERSTAR. Thank you very much, Mr. Chairman.

    Mr. Perciasepe, it's good to see you here. I appreciate the series of hearings which we begin today on the authorization of the Clean Water Act.

    This was initiated in 1956. I administrative assistant to John Blatnik, former Chairman of this Committee, for 12 years. We sat right in this committee room and we hammered out, over a period of 10 months, the Clean Water Act. We spent $67 billion of Federal funds—invested $67 billion in clean water.

    Though we haven't really met the goal of fishable, swimmable, drinkable waters that was set forth in that act 25 years ago, we have made enormous progress.

    Somewhere in the deliberation that created that act we asked States, industries, and others to make a list of unmet needs—not a wish list, but real needs. It came to $125 billion. Today the list of unmet needs stands at $130 billion. We've come a long way, but we've still got a long way to go.
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    Lake Erie, that once was proclaimed dead, now has walleyes, a very sensitive fish, and many other species. The fish are back in the Great Lakes, but they're back with cancers and sores and lesions from toxic chemicals that are still in the lake, still in the sediments. They're part of the food chain that are coming into the fish.

    If you live anywhere in America today, you have one part per billion PCB in your body. If you live within 25 miles of one of the Great Lakes and you eat fish once a week, you have three to four parts per billion PCBs in your body.

    There is a lot of progress that we have to make in this country before we get there.

    The next issue that we're going to be wrestling with is nonpoint source solution. I've been an advocate of a very strong, flexible program. We need to come back to that, and I hope that we can address the nonpoint source issue vigorously.

    I listened with interest to the questions about the budget process. I'd like to step back about 16 years when a decision was made, a very important decision, in the then Reagan Administration to cut the $6 billion grant program to $1 billion and cut the Federal participation. That made a significant difference in the amount of money cities, States, and the Federal Government would invest in pollution control facilities.

    If the Administration would come forth with twice that amount, I just wonder how the votes would fall in the House on funding at the $2 billion level. I know how they fell in 1981. I know what happened to the program.
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    You talked about the State revolving loan funds, and that's all, frankly, that's on the table, but those loan funds haven't built the sewage treatment facilities that we've needed to build since then.

    I don't mean to portray that as a partisan action, but when I trace the problems that we have today funding the needs of the drinking water program, we go back to that one decision.

    Where do we go from here? That's been a matter of managed resources and limited resources, and that means fewer dollars trying to enforce a regulatory program which has eroded away.

    So the clean water program needs a balance of public funding for sewage treatment facilities and pollution prevention initiative. Those should be the hall marks of the future.

    Thank you.

    Mr. BOEHLERT. Thank you very much.

    Mr. Riggs?

    Mr. RIGGS. Thank you, Mr. Chairman.

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    Mr Perciasepe, I have just come back from my District in northern California, and I got an earful from property owners and folks in the community about water quality based on sedimentation areas. Can you tell me where the process stands based on sedimentation?

    Mr. PERCIASEPE. It might be related to a stormwater rule that we are working on that was in the 1987 Clean Water Act where we looked at construction sites. Is that—

    Mr. RIGGS. No.

    Mr. PERCIASEPE. Oceanfront construction sites?

    Mr. RIGGS. No. This is a watershed-wide look at water quality, and we are, I'm told—I haven't been able to confirm this, but I'm told that EPA has considered or has proposed new rules based on the sedimentation. It's based on sediment quality criteria.

    Mr. PERCIASEPE. Sediment quality criteria?

    Mr. RIGGS. Yes.

    Mr. PERCIASEPE. We have research underway looking at the—if it's sediment quality criteria, the EPA looks at both the criteria for water quality in the water column in the actual water, but we also are doing research on the quality in the sediments, because a lot of pollutants fall out of the water and are in the sediments. Then the question is, those sediments become then contaminated over time. If you want to move them, it becomes a problem of where to put them.
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    So we are looking at establishing water quality criteria for the sediment, itself, in the water body that then could be translated back in whatever water quality standards or sediment quality standards the State may decide.

    The standards are actually set by the States, the criteria by EPA, and the State takes those criteria and translates them into standards.

    We've been doing research on that. We are considering publishing some of that information. How we would suggest the States use that in any kind of water quality standard program is still something we're in active discussion on inside of the EPA and also with the Army Corps of Engineers, so we haven't finalized between all of us how we would suggest they be used. But the science is pretty far along on how you would lay out that relationship between the sediments and the water quality.

    There's no rule on the horizon. It would be the publishing of those criteria.

    Mr. RIGGS. And that would require amendments to occur in Federal law, the Clean Water Act?

    Mr. PERCIASEPE. It would require what?

    Mr. RIGGS. It would not require amending the Clean Water Act?

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    Mr. PERCIASEPE. Not that I know of.

    Mr. RIGGS. And you used a new term just a moment ago that I am not familiar with.


    Mr. RIGGS. Yes. Total maximum daily load is in section 303 of the Clean Water Act. It's just a technical process that a State would go through to determine the amount of pollutants that could be in a water body and still attain water quality standards.

    So if you have a standard, then you'd use the TMDL process. There are many different models you could use to work backwards on how much pollution would be in that before that would violate those standards. It's an analytical process to determine the reductions that would be needed.

    Mr. RIGGS. One other question. As you're doing this research, will you also be looking at potential economic consequences and job impacts of any new rule that you might publish resulting from this research?

    Mr. PERCIASEPE. Again, I don't know that we would be publishing a rule. I don't know of any rule we're working on related to sediment, only working on publishing on the criteria and impact on the organisms. It's the States that would translate that into standards.

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    Mr. RIGGS. Will it be binding on the—

    Mr. PERCIASEPE. No. The States can take that. We have criteria out and States have not adopted it as their own, or they have taken ours and modified it based on sound science related to that.

    Mr. RIGGS. Thank you.

    Mr. BOEHLERT. Thank you very much.

    Mr. Perciasepe, we want to thank you once again for being with us today.

    We will have some other questions for you that will be submitted in writing, and we'd appreciate having the response.

    Once again, thank you and your staff for all your work.

    Mr. PERCIASEPE. And I want to let you know we're completely available for the committee as they look into this.

    Mr. BOEHLERT. Thank you very much.

    Our next panel consists of two mayors representing the U.S. Conference of Mayors: Mayor Patrick J. McManus from Lynn, Massachusetts; and from Gloucester, Massachusetts, Mayor Bruce Tobey.
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    Mayors, your statements will appear in their entirety. We would ask, in the interest of time, that you try to summarize your statement to approximately 5 minutes. We're falling way behind, but that's not unusual.

    Mayor McManus?


    Mr. MCMANUS. Thank you very much, Mr. Chairman and members of the subcommittee.

    I'm Patrick McManus from Lynn, Massachusetts, and I'm appearing here on behalf of the United States Conference of Mayors.

    Certainly we deeply appreciate the opportunity to let us be heard today.

    The Urban Water Council is a commission of the U.S. Conference of Mayors that was designed specifically to deal with water and wastewater issues. We held a number of regional hearings throughout the country to attempt to determine the magnitude of the needs in the different parts of the country and the cities.

    One common theme runs through all cities in all parts of the country. While the specifics of the capital programs may be different, they are all extremely costly.
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    As noted from the earlier testimony and the questions, the cities and the mayors share concerns about how do we pay for these big capital items.

    Certainly the SRFs are programs that have been very helpful at the local level, but the magnitude of these capital programs that are required over the next 10 to 15 years, unless we can come up with some vehicle to assist in paying for those programs, we literally are going to destroy budgets at the local level.

    We estimate that several hundred billion dollars will have to be spent on these programs, and while the SRF and the existing grant programs are helpful, certainly they do not have a impact of the grant programs that existed in prior years.

    We understand there are different priorities at the Federal level, that the probability of major grant programs in the future are minimal.

    Several things we have looked at that we feel may present some input—certainly the SRF is helpful, but to get the private sector involved with the public sector and, in my personal instance, labor, organized labor, I think there is much we need to evaluate.

    I know that 15 years ago 5 percent of our city budget was comprised of water and wastewater related issues. It will be over 30 percent next year. That is going—that's police officers and fire fighters and all our services. We need to come up with some vehicles to help us pay for these programs.
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    We have found a tremendous willingness by the private sector to bring to the local level water projects what we cannot provide ourselves—in my instance, essentially capital financing that is available.

    I personally am a very strong pro-labor advocate. I'm a public employee advocate, as most mayors I know. Our bread and butter is the public employees that provide the services at the local level.

    So I don't advocate privatization in the sense that you hear from some other people. I don't advocate putting employees out of work. But I do advocate opening the door to allow private companies to come in and bring some capital and some expertise. I think that that's an option that should be explored.

    This past January the Treasury Department released some regulations that did allow for more flexibility in dealing with tax-exempt bond issues, which has opened some doors for all of us in looking to the long-term contracts.

    When we ask that you consider the Clean Water Act, we ask that you also keep in mind the flexibility at the local level and the option to enter into a partnership with members of the private sector, in particular what they can bring to this process, that which we cannot provide at the public level—financing and a long-term scheme that helps with reasonable rate increase but not dramatic rate increases that are going to devastate a lot of local resources.

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    Again, I note that I am a very strong advocate of labor. For me, personally, I'd like to be in partnership between the public sector, the private sector, with organized labor at the table, because we're not in the business of trying to get rid of jobs. We're in the business of trying to improve our cities in our country and keep people working.

    Thank you very much, Mr. Chairman.

    Mr. BOEHLERT. Thank you very much.

    Mayor Tobey?

    Mr. TOBEY. Thank you, sir.

    If I seem a little disconcerted here, I've just seen that the back of my name tag says ''Ms. Tobey.'' Nevertheless, I will rise to the occasion regardless of what I'm called.


    Mr. TOBEY. My name is Bruce Tobey. I'm the mayor of Gloucester, Massachusetts, and a member of the National League of Cities' Energy, Environment, and Natural Resources Steering Committee.

    For NLC and the 15,000 cities and towns we represent, I want to speak to the financial needs of local government struggling to comply with Clean Water Act mandates.
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    Now, I know that struggle first-hand. Two geographic realities define my historic fishing community of 30,000: the Atlantic Ocean, which surrounds us, and the rolling granite hills our forefathers settled 375 years ago.

    Those realities have dictated 20 years of extremely difficult and seemingly endless construction: a sewer treatment plan, an outfall extending 1.5 miles into Massachusetts Bay, miles and miles of intercepter and lateral sewers, dozens of pump stations, and the separation of combined sewers.

    With disappearing State and Federal grant assistance and competing local needs, my city has had to share costs with homeowners in neighborhoods where we build sewers. The per-household bill I had to mail to more than 500 constituents in December 1996 was more than $16,000.

    Now, beware of mayors bearing gifts, but I've made up bills for several of you. Mr. Chairman, this is yours—$16,719. Imagine their impact on fishing families coping with the collapse of the New England ground fish industry.

    But EPA estimates over $138 billion exists in unmet needs which our cities and towns must address to comply with remaining Clean Water Act mandates. With current Federal assistance clearly inadequate, NLC is concerned that budget decisions resulting in even deeper cuts in domestic discretionary spending not make these unfunded Federal mandates an even greater burden on local taxpayers.

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    That's why NLC proposes the following ways to use more effectively available clean water dollars:

    First, reinvesting over the next 5 to 10 years at least $100 million from the State revolving loan funds for stormwater research and demonstration projects.

    Second, dedicating at least half of the SRF to economically-disadvantaged communities in grants for infrastructure requirements, which include rehabilitating, upgrading, and expanding sewers to meet current needs and to remediate combined sanitary sewer overflows.

    Third, creating two specific sorts of set-asides: loans to enhance pollution control activities for nonpoint sources, and grants to States for such uses as monitoring or technical assistance to local governments.

    Furthermore, NLC believes Congress must take several steps to assure the rational use of local resources.

    First, codifying EPA's interim guidance, postponing inclusion of numerical effluent limits in phase one stormwater permits.
    Second, assuring that the phase two stormwater program rule is issued in a form close to EPA's proposed rule drafted this past February.
    Third, assuring that all sources of pollution, not just point sources, share the burden of complying with total maximum daily loads, TMDLs, in proportion to their contributions to stream degradation.

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    I have two additional points on stormwater. First, no one knows how to attain numerical effluent limits for stormwater. EPA acknowledged this in interim guidance urging that permitting authorities not include such limits in permits for now, a policy already targeted for litigation but without much federally-funded research coupled with real-world demonstration projects. Cities and towns shouldn't be required under threat of civil and criminal liability to achieve the unknown or the impossible.

    Second, the cost for things I just spoke of are potentially staggering. For example, we estimate cost for the first two Phase II stormwater permit terms alone to be more than $1 billion annually nationwide.

    The implementation of TMDLs poses major unknown cost, too. Municipal and industrial point sources have, for the most part, implemented known, cost-effective pollution control measures. What remains to them now are very expensive control strategies which achieve minimum pollution reduction.

    Cities and towns can neither justify nor afford the cleanup of pollution caused by sources outside our jurisdictions. Equity requires that those polluters who can often obtain substantial reductions at minimum costs implement at least basic pollution control efforts.

    Our goal is not new mandates for nonpoint sources, but if those sources don't undertake significant efforts voluntarily, then other means must be used to get them to do the job.

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    Congress should also require other contributors to stream degradation such as mining, forestry, and Federal and State users, to control or eliminate their contributions.

    I thank you for the opportunity to present the views of the National League of Cities. I would also like to submit a written statement into the record on behalf of the CSO Partnership, to which Gloucester also belongs.

    I'd be happy to respond to any questions the committee may have.

    Mr. BOEHLERT. Thank you very much.

    The Chair will yield to Mr. McGovern.

    Mr. MCGOVERN. Thank you, Mr. Chairman.

    First of all I want to welcome the two distinguished mayors from a very great State, Massachusetts, and compliment them on their testimony.

    I do have one question based on Mayor McManus' testimony. Relative to your testimony, could you share some of your views on possible privatization?

    Mr. MCMANUS. Thank you, Congressman.

    Let me start by saying I hate the word ''privatization.''

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    Mr. MCGOVERN. Me, too.

    Mr. MCMANUS. I don't think it's an accurate reflection at all on what we are expecting.

    We currently have private companies that run our wastewater treatment plants. They have been there since over 15 years ago on 5-year contracts. And they follow the existing Federal requirements.

    But when I note more involvement, all I'm looking at is the difference between a 5-year and a 20-year contract with all the existing guidelines met, the same protections that are afforded to the public through public involvement still exist with the private facility there, but ultimately it's the city authorities that are responsible for ensuring that the EPA requirements and the State requirements are met.

    As a matter of fact, in our situation in Lynn we're actually going to de-privatize. We're going to make our private employees at the plants public employees because of the greater security that provides, but it will allow us to get into a 20-year contract to help us with the capital needs that we described for you.

    So the same protections exist, whether it be a private or a public agency that builds the plant because the authority to run those still comes through the local city or authority if owned by that city or authority.

    Mr. BOEHLERT. Thank you. Mayors, we thank you very much. Your entire statements will appear in the record. We want you to know we appreciate your being here with us.
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    Mr. MCMANUS. Thank you very much.

    Mr. TOBEY. Thank you.

    Mr. BOEHLERT. The third panel today will consist of: Terry Agriss, who is president of the New York State Environmental Facilities Corporation; Barbara Taylor, director, Water Resources, West Virginia Department of Environmental Protection, here as the spokesperson for the Association of State and Interstate Water Pollution Control Administrators; Erwin J. Odeal, executive director of the Northeast Ohio Regional Sewer District, representing the Association of Metropolitan Sewerage Agencies; and the president of Columbus Water Works, Billy G. Turner, who will be representing the Water Environment Federation; and, finally, the Council of Infrastructure Financing Authorities, James Smith.

    Ladies and gentlemen, your statements will appear in the record in their entirety. We ask that you summarize and stick within 5 minutes if you can possibly make it.

    We will go in the order that you were introduced, so that means that Ms. Agriss, you will be up first. Welcome back.

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    Ms. AGRISS. Thank you. I appreciate that.

    Good afternoon, Chairman Boehlert and members of the committee. My name is Terry Agriss. I'm president of the New York State Environmental Facilities Corporation.

    Among its other responsibilities, EFC, the Environmental Facilities Corporation, administers New York State's clean water state revolving fund program and, with the New York State Department of Health, will administer the new drinking water revolving fund program, as well.

    Mr. Chairman, as you know, New York has the largest clean water SRF in the Nation. Since we began the program in 1990, New York has made 387 loans worth more than $3.4 billion to 230 communities throughout the State.

    We pride ourselves also on working closely with HUD in the rural development program of the now-named Rural Utilities Service to ensure low-cost financing for water pollution control projects in the smallest and least financially capable communities in New York.

    I was very pleased to hear Mr. Perciasepe earlier talk about the coordination that EPA is attempting to do with USDA and HUD on this program. It really is critical for us providing important services to our smallest communities.

    New York is also proud of the substantial efforts we have made toward financing projects to control water pollution from nonpoint sources, as well as from point sources.
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    For example, we have developed a program to use interest-free, short-term, clean water SRF loans to pre-finance State grants to close unpermitted, noncomplying municipal landfills that have been polluting our State's ground and surface waters.

    Through the use of interest-free, short-term SRF loans, communities can hire and pay contractors to undertake the necessary work without the local government having to put up any cash. When the work is completed, the State grant payments will pay off a portion of the short-term SRF loan and will provide low-cost, long-term SRF financing for the local share of the cost of the project.

    As you can well imagine, this program is very popular and many projects that previously had been viewed as unaffordable are now being accomplished.

    To date, EFC has made 107 short-term SRF loans for a total of $254 million.

    Other types of nonpoint source projects that we have been undertaking include a very broad variety of activities, including things such as: salt storage facilities; stormwater treatment projects; petroleum tank removal and remediation; land purchase for water quality protection; lake restoration; landfill capping for both inactive, hazardous, and municipal landfills; landfill leachate control systems; landfill reclamation.

    We have also been working with the Metropolitan Transit Authority regarding remediation of a variety of projects, including leaking underground storage tanks and the like.
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    There is so much that is right about the SRF program established under the Clean Water Act that I almost hesitate to suggest changes, but, of course, there are a few items that could improve what is surely one of the Federal Government's success stories.

    First, I recommend that, as part of the reauthorization of the Clean Water Act, you expand the clean water SRF program to make privately-owned water pollution control projects which serve the public eligible for clean water SRF funding.

    This would be similar to what has been allowed in the new drinking water SRF under the 1996 reauthorization in the Safe Drinking Water Act.

    Many States and local governments are looking at the option of privatizing wastewater treatment facilities; however, because only publicly-owned facilities are eligible for low-cost clean water SRF financing, privately-owned facilities are at competitive disadvantage.

    If publicly-owned facilities, as well as privately-owned facilities, were treated equally under the Federal clean water program, then taxpayers would have the benefit of whatever form of ownership makes the most economic sense for a community.

    Another feature that the clean water SRF could benefit from which was included in the drinking water SRF is the option to use what we call ''principal subsidies.'' Principal subsidies use interest earnings on monies within an SRF to pay a portion of the principal owed by an economically-disadvantaged community on its SRF loan.

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    This has the effect of the grant to the economically-disadvantaged community but does not require a State to invade or reduce its capital in the SRF, itself.

    I do not recommend, as others undoubtedly will testify, that grants be made from the capital of the SRF program. Congress has very wisely required us to continue the SRFs in perpetuity, but we cannot realistically do that if we are giving away our capital.

    Using the same reasoning, I urge the committee to avoid doing what was done with the drinking water program set-asides. In the drinking water SRF, more than 60 percent of the State's capitalization grant may be used for a number of non-loan activities.

    While each of these activities is certainly meritorious on its own, the amount of funds remaining for actual low-cost assistance to communities is very seriously diminished.

    This, fortunately, has not been the case for the clean water SRF, and I strongly recommend that you continue resisting efforts to set aside monies that otherwise could be used directly for the projects the program is designed to assist.

    Obviously, there are many similarities between the clean water and drinking water SRFs. To the extent we can use these similarities to benefit urgently-needed environmental infrastructure projects, we should do so.

    One financing area where this could easily be accomplished is cross-collateralization of the two funds. I know this is a fairly complex issue that you've probably heard of before, but basically it is the concept of using the security of one fund to back another.
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    Many of the State revolving fund programs have received the highest ratings from the nationally-recognized rating services, and many States are going to be entering into leveraging these programs.

    Because of these excellent ratings, States are able to offer clean water SRF borrowers very low interest rates.

    If we could cross-collateralize the programs, we would be allowed to start the drinking water program with the very high ratings that we've achieved on the clean water side, as well.

    I must emphasize that even though a State would be pledging assistance from one program to the other, the actual transfer of funds is, first of all, very unlikely and, if it occurred at all, would be, at worst, temporary.

    Congressman Boehlert, as a member of the Safe Drinking Water Act Conference Committee last year, you are aware that the committee included in your report the cross-collateralization of the funds was allowable. Unfortunately, EPA is taking what many of us believe to be an unnecessarily rigid view of cross-collateralization and is not allowing it because the Clean Water Act does not specifically authorize it.

    Therefore, I urge you to follow EPA's requirement, if you will, and specifically include such an authorization as an amendment to the existing statute.

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    Given how new the drinking water SRF program is, I do not want to make many comments on it. I believe we need to give the States some time to see how the program works before we recommend changes.

    However, I would be remiss if I did not explain how large the difference is between financing needs for safe drinking water projects and available funds—at least for the State of New York.

    For Federal fiscal year 1997, New York State received approximately $60 million in our Federal drinking water SRF grant. For Federal fiscal year 1998, under the President's budget, New York would receive about $45 million, giving us only slightly over $100 million for the 2 years.

    On the other hand, in November of last year the New York State Department of Health and the Environmental Facilities Corporation put out a call for projects for the drinking water SRF program.

    In response, we received about $2 billion worth of pre-applications. In the next year, alone, we have $1.1 billion of eligible projects ready to be financed.

    Even with Governor Pataki's $1.75 billion clean water/clean air bond act that was approved by the New York voters last November, and which is going to provide $265 million of capitalization for the drinking water SRF, and even with leveraging those funds three times, New York will be unable to finance hundreds of millions of dollars worth of critically-needed drinking water projects.
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    Notwithstanding the disparity of need and funding, New York is moving forward aggressively to implement their drinking water SRF and is looking forward to making our first loans in that program later this year.

    New York applauds Congress for developing both the clean water and drinking water SRF programs. They are truly shining examples of how the Federal Government can provide the means to the States to create financing programs that can be tailored to individual State's needs. And, perhaps even more importantly, they indicate how, with the appropriate Federal incentive, States will contribute their creativity to develop the innovations necessary to accomplish the environmental goals we all share.

    Mr. Chairman, I would also like to note that I will attach to my written testimony a letter from John Cahill, acting commissioner of New York's Department of Environmental Conservation, regarding critical water resource funding needs outside of the State revolving fund programs.

    Mr. BOEHLERT. Thank you very much. We appreciate that.

    Ms. AGRISS. Thank you.

    Ms. Taylor?

    Ms. TAYLOR. Thank you, Mr. Chairman, members of the committee, subcommittee. My name is Barbara Taylor. I am the Region Three board member of the Association of State and Interstate Water Pollution Control Administrators and the chief of the West Virginia Office of Water Resources.
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    As front-line implementers, the Association membership has a unique perspective on reauthorization issues and is committed to the objectives set forth in law.

    Tremendous strides have been made in cleaning up and protecting the Nation's water. The States' recommendations on the reauthorization are premised on the following principles: the Clean Water Act is fundamentally sound; States need to continue their lead role; refinements are necessary to provide: adequate funding; State flexibility; effective nonpoint source management; incentives for comprehensive watershed approaches; increased U.S. EPA priority program fundamentals.

    You have requested for this hearing that the Association speak to funding issues related to the future role of section 106, section 319, and the State revolving loan fund. In all three cases, the agenda Congress set forth in 1987 has yet to be fully achieved. More time and resources will be needed to meet the expectations.

    U.S. EPA and States are placing increased emphasis on development and implementation of TMDLs, a paper exercise that was mentioned earlier; urban and other weather runoff; sanitary sewer overflows; and addressing issues on a watershed basis.

    I will go through these issues and just highlight some of the things that are in our full testimony that was provided earlier.

    Section 106, State management assistance—this authorizes funding for States to carry out their partnership responsibility from the Clean Water Act that includes monitoring, standards development, basin and watershed planning, National Pollutant Discharge Elimination System (NPDES) permitting and compliance, stormwater management, and reporting.
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    Funding has been steady at $80.7 billion. We are very pleased that the fiscal year 1998 budget includes $85.7 billion for State agencies, with $5 million of that earmarked specifically for TMDLs and $9.5 million for tribes.

    But there is still a significant shortfall of over $300 million of State and Federal funds necessary to carry out the law under section 106 and provide the very basic level of services in the States.

    Consequently, States continue to cut back on implementation of other priorities. As tribal programs mature and evolve, competition with States for limited funds will also increase.

    The Association urges Congress to authorize 106 at a level of $150 million. More adequate mechanisms need to be found to fund tribes.

    With respect to the State revolving loan fund, much discussion has been had regarding that subject this afternoon. The law expanded, in 1987, the eligibilities to include development and implementation of estuary plans under section 320 and implementation of nonpoint source management programs under 319.

    All 50 States have created SRFs since 1987 and have been highly successful. In total, the number of loans executed is 4,472, with a total loan value of $17.54 billion.

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    Congress has important decisions to make regarding the future of the SRF. We believe it is the only viable infrastructure financing mechanism.

    U.S. EPA's upcoming needs survey may identify approximately $150 billion in needs, but does not meaningfully document expanded eligibilities or new policy initiatives. Therefore, the Association believes that needs are well in excess of $200 billion and will likely grow.

    A major gap exists relating to private wastewater treatment facilities that also serve public needs.

    The Association's recommendation is that all infrastructure assistance should be addressed under title six.

    The Association also believes that $2.4 billion should be authorized annually for title six SRF. This is in contrast with the Administration's suggestion for 1998 through 2002, which range from $1.075 to $1.175 billion annually.

    With respect to hardship needs, my Association colleagues feel that hardship and small community needs are best addressed through the SRF, which has performed well. Some States, such as West Virginia, still have difficultly in the loan program. However, the Association recommends that we should expand eligibility to include acquisition of land, easements, and right-of-ways; allow States to blend principal subsidies with SRF loans; allow 40-year loan payment period; allow the States sufficient amount of administrative revenue for technical assistance; complement a supplementary title six authorization for small hardship communities.
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    Relative to the Safe Drinking Water Act, the ASIWPCA membership is committed to the Clean Water Act and safe drinking water SRF programs, and it is beneficial to harmonize those two SRFs.

    Our recommendations include allowing transferability and cross-collateralization.

    With respect to nonpoint source management, the majority of our existing water quality problems stem from nonpoint source pollution. Section 319 provides the framework and priorities under which a myriad of agencies can come together and partner and coordinate activities covering surface water, ground water, and source water.

    Our future programs need to include the States in a lead role, and States should have a wide latitude when putting programs in place to achieve the maximum beneficial uses of water.

    Federal agencies need to be consistent with 319 management plans, and U.S. EPA and States must also focus on working with other Federal agencies creating incentives, developing BMPs, evaluating progress, evaluating program, and serving as a clearinghouse.

    My final comment is related to performance partnership agreements and performance based grants.

    The Association has testified before on the need to modernize the water program in this reauthorization. This involves: putting planning, program, and reporting activities on a 5-year cycle; revising the planning framework; streamlining and clarifying existing provisions of the law for managing water quality; allowing States to consolidate the law's many funding mechanisms; clarifying that States and EBOs such as ASIWPCA are exempt from FACA.
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    Regarding West Virginia's experience with performance partnerships or other modernization issues, I would be pleased to answer any questions that the committee may have.

    Thank you.

    Mr. BOEHLERT. Thank you very much.

    Mr. Odeal?

    Mr. ODEAL. Mr. Chairman and members of the subcommittee, I am Erwin Odeal, executive director of the Northeast Ohio Regional Sewer District. I am here representing the Association of Metropolitan Sewerage Agencies, AMSA. AMSA represents over 170 of the Nation's largest wastewater treatment agencies, serving the majority of the sewered population in the United States.

    On behalf of AMSA, I would like to thank the subcommittee for initiating discussion of the Clean Water Act this Congress. AMSA has enjoyed a long working relationship with both this subcommittee and the full Transportation and Infrastructure Committee, and we appreciate this opportunity to appear before you again to share our thoughts on clean water infrastructure needs.

    This year marks the 25th anniversary of the enactment of the Federal Water Pollution Control Act, commonly referred to as the Clean Water Act. The Clean Water Act is undoubtedly our Nation's most successful environmental statute.
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    Through a strong Federal financial commitment of grants in the 1970s and early 1980s and then later a national loan program, coupled with enormous local participation, municipalities have built and improved over 16,000 wastewater treatment plants.

    These facilities provide safe and reliable wastewater treatment services to over 70 percent of the Nation's population and over 99 percent of the urban population.

    Contributions of POTWs to municipalities go far beyond treatment of wastewater. Local economies rely on cleaner rivers, lakes, and streams to promote tourism and business development and preserve wildlife habitat. There is no doubt that investment in the clean water program pays.

    AMSA recently completed its sixth membership survey on POTW financing. The 1996 AMSA Financial Survey provides a national overview of municipal wastewater management and financing needs that was completed by 107 AMSA members. The report has been submitted with this testimony.

    Through the survey, AMSA found that 93 percent of the responding agencies were providing secondary or greater wastewater treatment, and that by the year 2007, 95.3 percent expect to reach this goal.

    Even as we document significant progress, the need for clean water investment to be a national priority is clear. Since AMSA last surveyed its membership in 1993, 5-year capital improvement needs have shifted away from treatment expansion and upgrades to collection system needs. This shift can be directly attributed to facilities attaining secondary or greater treatment, and costs associated with controlling pollution caused by wet weather events, including stormwater, combined sewer overflows, and sanitary sewer overflows.
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    Overall, 93 AMSA member agencies noted capital improvement needs of $22.5 billion for 1996 to 2000. This is a 41 percent decrease from the 1993 capital needs total of $32.4 billion, but with a corresponding 48 percent increase in per capita debt.

    Over the last 3 years, municipalities have invested heavily in their treatment facilities and completed many major capital improvement projects. AMSA's survey shows that most of these projects were completed using local dollars.

    In 1993, members reported per capita debt at $189. The number has soared to $279 in 1996. This debt increase directly translates into higher service charges to households.

    The 1996 AMSA Index shows rates increasing at 2.6 times the rate of inflation over the past 6 years. For the years 1996 to 2000, local ratepayers can expect to carry over 85 percent of the capital improvements costs for POTWs.

    In addition to upgrades and improvements needed to meet regulatory standards, facilities are aging. Many wastewater treatment plants were built over 20 years ago and are now in need of capital-intensive repair. These facilities are irreplaceable. Let's think long term, invest wisely, and protect our community assets.

    When faced with the numbers presented in AMSA's survey, combined with other priority municipal costs, it is no wonder that Federal, State, and local officials are looking to the private sector for financial assistance.
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    Over the past 15 months, AMSA has been working closely with its membership to address this issue and produced two publications, ''Evaluating Privatization: An AMSA Checklist,'' and ''Managed Competition: Developing and Responding to RFQs and RFPs'' to assist our members in evaluating privatization proposals. These publications have been submitted with our formal testimony.

    While providing service at a reasonable cost is important, we must remember that wastewater treatment facilities exist for the protection of public health and the environment. We must also recognize the important and dramatic progress that has been made by publicly-owned treatment works over the past 25 years. Much of the progress can be directly attributed to a partnership of Federal, State, and local investment in excess of $500 billion since 1972 in support of the goals of the Clean Water Act.

    This investment has yielded public assets that go far beyond improved water quality and it is important to preserve the equity of taxpayers who made these investments possible.

    Today's wastewater utilities are full-serve providers, tasked by their communities with much more than simply treating wastewater. POTWs are often at the forefront of new and innovative environmental programs. Where communities have moved towards watershed management to control water pollution, POTW employees are often heading up the program.

    When evaluating privatization, it is important to consider whether or not a private provider would be willing to continue to provide these same services currently provided by POTWs. This is especially important when considering the implications of privatization on watershed management projects and other innovative environmental programs.
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    It is also important to recognize that POTW privatization doesn't mean that someone else is footing the bill. Ratepayers are still ultimately responsible for the cost of operating and maintaining wastewater facilities. To date, no analyses have been performed on the long-term effects of privatization on ratepayers. It's just too new and there are not enough examples.

    We urge you to carefully consider the long-term ramifications of any legislation that would actively promote the transfer of POTW operations and maintenance or assets to the private sector without serious evaluation.

    In these times of decreasing Federal investment in the national clean water program, we should look for opportunities to get the most out of every dollar invested. AMSA believes that investments can be maximized by implementing a national program of comprehensive watershed management.

    Establishing watershed management as an integral focus of the act would go a long way toward shifting the direction of our national clean water program—away from command and control and toward a bottom-up, stakeholder-driven process.

    Our job is not done, and Congress still has an important role to play in providing funding to support clean water progress. AMSA's Financial Survey results provide concrete evidence that investment in the national clean water program pays.

    We urge you to support continued clean water progress through the following actions:
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Amend the Clean Water Act to facilitate and fund watershed planning and implementation programs.

Strengthen nonpoint source controls.

Expand eligibility and provide funding consistent with Clean Water Act requirements and new environmental mandates.

Streamline SRF regulations.

And dedicate fees, enforcement revenues, and other monies resulting from any new clean water revenue sources solely to provide additional funding for environmental improvements.

    Mr. Chairman and members of the committee, we thank you again for taking the first steps towards reauthorizing the Clean Water Act. AMSA looks forward to continued opportunities to share our perspectives with you as you discuss ways to improve the national clean water program.

    This concludes my testimony. I would be pleased to answer any questions you may have.

    Mr. RIGGS [assuming Chair]. Thank you, Mr. Odeal. Thank you for your testimony.

    Our next witness, representing the Water Environment Federation, is Billy G. Turner, president of Columbus Water Works from Columbus, Georgia.
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    Thank you for being here. You are recognized to proceed with your testimony.

    Mr. TURNER. Mr. Chairman and members of the subcommittee, I am Billy Turner, president of the Water Environment Federation. The Federation is a professional organization of over 40,000 members devoted to protection and enhancement of water quality.

    WEF strongly urges and supports reauthorization of the Clean Water Act in this Congress based on five principles: setting priorities for a national clean water program, ensuring the requirements are based on sound science, implementing a watershed approach, expanding water quality research, and a continuing and expanded commitment to Federal financial assistance.

    As you know, Mr. Chairman, WEF believes that a primary goal of the Clean Water Act should be the adoption of a watershed-based approach to water quality management. We believe this will drive and facilitate many improvements and efficiencies. Further, we believe the watershed management approach offers an opportunity to increase public support and involvement.

    While tremendous progress in treating municipal and industrial wastewater has been achieved since the Clean Water Act was passed, great challenges with urban wet weather sources and the control of rural runoff remain.

    To address these remaining challenges, the Federal Government must reestablish a program such as that used in early years of the Clean Water Act.

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    A gap exists between funding requirements under the Act and available funding at all levels of government. This gap will increase as new requirements for controlling stormwater, combined sewer overflows, and sanitary sewer overflows are implemented.

    We believe the Act must be reauthorized with a watershed-based incentive program if this gap is to be closed and progress maintained.

    As a Nation, we have made a substantial investment in wastewater and water infrastructure during the past 25 years. In the next 25 years our national purpose should be to build and maintain sustainable wastewater and water infrastructure to adequately protect public health and the environment. Such infrastructure supports America's economic well-being and its citizen's quality of life.

    A comprehensive assessment of clean water and drinking water infrastructure needs should be conducted using data from a variety of sources. EPA's needs survey is not a complete expression of what municipalities and others will be required to spend.

    WEF's own review of available data from a variety of sources finds the total need for wastewater and drinking water infrastructure of approximately $400 billion. This figure includes only capital costs and does not take into account the estimated $35 billion in current annual local expenditures for operation and maintenance.

    To address these costs, local governments have four choices:

    One, revise local budgets by increasing water and sewer rates, adding debt, seeking cost savings through improved efficiency, or eliminating other municipal programs.
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    Two, search for Federal or State funding or private capital.

    Three, reduce services.

    Four, fail to comply with regulatory requirements.

    Most of these options are unachievable or unacceptable.

    The cost of building, operating, and maintaining wastewater and drinking water infrastructure now falls primarily on local ratepayers. Studies by WEF and AMSA cited in our prepared statement put the local share of costs at well over 90 percent.

    Regulatory problems continue to increase, including new controls on toxicity, while at the same time the Federal Government is reducing its financial support.

    In order to have a sustainable clean water infrastructure, Congress should, in my personal view, establish a program administered by the State to strengthen available funding to local governments for clean water and drinking water requirements.

    On an annual basis, wastewater capital needs approach $20 million, drinking water capital needs are about $10 billion, and operating and maintenance costs are about $35 million for both, for an overall total annual need of $65 billion.

    Recognizing the significance of these infrastructure needs and the national purposes which they are to address the $30 billion in annual capital needs should ideally be born by local, State, and Federal Government on an equal basis. This would mean a total annual Federal investment of $5 billion for both water and wastewater infrastructure.
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    Matching of this $10 billion investment at the State level still leaves $45 billion per year, or 70 percent of the need, to be funded by local ratepayers.

    As a part of this reauthorization, Congress also should consider alternative sources of Federal funding. These alternatives are discussed in more detail in our prepared statement and in a 1996 EPA report to Congress. An analogy in this respect is the dedicated revenue funding for national transportation needs.

    Mr. Chairman, a strong Federal incentive approach that would provide a more meaningful Federal contribution to sustainable infrastructure for local compliance with mandated requirements is needed and needed now to move the national clean water program forward.

    This approach, combined with the flexibility in targeting allowed by watershed based management will enable us to sustain the national purposes for which the Clean Water Act and Safe Drinking Water Act are dedicated.

    WEF has pledged to work with Congress and other interested parties to establish a consensus for a framework that would include a more meaningful funding role for the Federal Government.

    This concludes my statement. We would be pleased to respond to questions and provide additional information to the subcommittee.

    Mr. RIGGS. Thank you, Mr. Turner.
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    Our last witness on panel three, representing the Council of Infrastructure Financing Authorities, is Mr. James Smith from Washington, D.C.

    Mr. Smith, thanks for waiting here. We are prepared to receive your testimony.

    Mr. SMITH. Thank you, Mr. Chairman and members of the committee.

    I'm here today as the executive director of the Council of Infrastructure Financing Authorities. I'm substituting for our president, Shockley Gardner. He was detained in Richmond today and offers his apologies and regrets that he couldn't be here.

    The Council is made up of State organizations and authorities that basically have the capacity to issue debt on behalf of the States. We are very pleased to be here today and testify before you in this session of the Congress.

    Much of what I will say here and testify to has already been said very articulately and very well by those that have preceded me, so I won't elaborate too much.

    Let me just quickly summarize a few points.

    I think it's recognized that the SRF is one of the really innovative financial mechanisms. The total SRF lending pool, according to recent EPA data, has grown to approximately $22 billion. Through State match and fund leveraging, and the return flows of interest and principal back to the fund, the Federal capital contribution of approximately $11 billion, has been more than doubled. That's a pretty good return on the Federal dollar.
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    Over 4,400 low-interest loans have been made, 1,000 of these in this past year.

    The principal and interest return flow that's coming back into the fund now is approximately about $1 billion every year. We're pleased with that. It's significant, but obviously it's not enough to take care of the immense need that is out here for wastewater treatment.

    We were disappointed that the Administration has not requested more in its budget. We hope that the appropriating committees, which heretofore have been fairly generous with funds, will continue to be that way in this appropriating year.

    Funding authorization—we would like to see some changes in the program, even though it is working quite well. Many of the things we would suggest or recommend coincide closely to the provisions of the title six amendments that were in H.R. 961, the committee's reauthorizing legislation in the last Congress.

    The authorization of $2.3 billion a year for capitalizing the SRF is a provision we would strongly support in this Congress.

    CIFA supports the concept of extending repayment periods and flexibility to provide principal subsidies for loans to economically disadvantaged communities.

    These provisions to extend special financial terms to disadvantaged communities were included in the Safe Drinking Water Act of 1996, and we recommend the Clean Water Act adopt comparable provisions, although we believe that the 30 percent dedication of capital grant money to principal subsidy is excessive.
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    Additionally, we urge an amendment making loan funds available to the private sector borrower for the provision of wastewater treatment facilities serving the public.

    Finally, to achieve efficiency and to improve performance of the loan fund, we would ask the Congress to provide explicit authority for States to jointly manage the clean water and drinking water SRF in a single fund with the ability to combine the credits of the two funds as well as other State revolving funds as common security for a single bond issue.

    Cross-collateralization will enhance the underlying credits of the bonds, which result in higher bond ratings and, consequently, savings to the borrower.

    The reason the SRF program is operating so efficiently and experienced so much innovative in most States is that Congress provided a wide margin of flexibility in how they were established and how they would be operated. Title six, for the most part, is not a prescriptive provision.

    As you consider reauthorization for the Clean Water Act and integration of the new drinking water SRF, we urge the committee to maintain and encourage this principle of flexibility for State administration that encourages innovations.

    CIFA and its members are available to work with you and the committee staff as you fashion these financing provisions. We would welcome the opportunity to do so.

    Thank you for the opportunity to testify.
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    Mr. RIGGS. Thank you, Mr. Smith. Please give our best regards to Mr. Gardner. We're sorry he couldn't be with us.

    I want to thank all the witnesses for your testimony and for your kind words of encouragement.

    I want to ask you just one question. Since there has been for the last several years a growing recognition that State water quality officials can do a better job if given tools and flexibility to meet the appropriate goals or outcomes, if you will, without unnecessary Federal intervention, what I'd like to know is: do you feel that the EPA has provided you the flexibility that is necessary?

    Ms. Taylor, why don't you start off.

    Ms. TAYLOR. Thank you.

    Our State has been working on the flexibility issue—and this is a West Virginia perspective. I know some of my counterparts in other States have been working on partnerships, as well.

    In West Virginia we have begun the negotiations, and yes, I think at least in theory the opportunity for flexibility is available. However, how that filters down to the regional offices within EPA, it loses a little bit, I think, of its meaning once it leaves headquarters and makes it to the regional office.
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    We have had some difficulties on either side, within the State and within EPA, I think, coming to the issues of trust and how clean water protection is implemented on a State level.

    We hope to have a performance partnership complete by October 1997, so we're still working on that and I think we have a long way to go.

    Mr. RIGGS. Do you know how many other States have entered into performance partnership agreements with EPA?

    Ms. TAYLOR. I can't give you an exact number, but I'm thinking there are at least 25 to 30 that do have a partnership agreement in place or are close to it.

    Mr. RIGGS. Thank you. Ms. Agriss, any comment?

    Ms. AGRISS. Very briefly, I think generally EPA has been very helpful and quite flexible relative to the financing proposals that we have brought to them, and I think they have tried very hard to work with us.

    There are specific instances where we would hope that EPA were more flexible, particularly relative to some of the Federal cost cutting responsibilities that we have and also, for instance, such things as States such as New York where we have our own environmental review requirements, EPA has imposed an additional burden on not only the State but, more importantly, our SRF borrowers to follow a Federal process as opposed to allowing a State to use its own.
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    Mr. RIGGS. Thank you very much. I'd thank all the witnesses.

    Mr. BOEHLERT [resuming Chair]. Our fourth and final panel for today consists of: Mr. Stephen Krchnavy of the Pennsylvania Rural Water Association; from National Utility Contractors Association, Richard Foster; Paul Schwartz of Clean Water Action; and from Save The Sound, Inc., John Atkin.

    I would ask that each of you summarize your statement to 5 minutes or so if you possibly can. Your entire prepared statement will appear in the record in its entirety.

    I will go in the order you were introduced, so Mr. Krchnavy, you are up first.


    Mr. KRCHNAVY. Thank you, Mr. Chairman.

    I appreciate the opportunity to testify before the committee today. My name is Stephen Krchnavy, and I'm the executive director of the Pennsylvania Rural Water Association, a not-for-profit organization that is dedicated to assuring environmental quality and service in rural water and sewer systems.
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    Our organization has over 609 community members, 323 water, and 267 sewers.

    Before coming to Rural Water, I worked for a small community water system in western Pennsylvania. Out of that I became an on-site technical assistant circuit rider for Pennsylvania's rural water systems. As a circuit rider, I traveled to just about every corner of Pennsylvania, making over 1,700 technical assistance visits to small and rural systems. I spent my days, evenings, and even a few nights on a site at systems assisting with problems such as leaks, treatment processes, finances, and compliance issues.

    I believe without this on-site assistance, many of these systems would not be viable today.

    Mr. Chairman, I'd like to focus my remarks on two concerns of small and rural communities with regard to clean water needs and funding.

    I think we heard a lot earlier about the dollars needed to get the job done out there in the field. First, I'd like to talk about the need for technical assistance in the operation and maintenance of small systems.

    Hands-on technical assistance is the backbone of small community compliance with the Clean Water Act. Small system operators wear many hats in the communities. They're water operators, they're wastewater operators, snow plow operators, grass cutters, and pothole fillers.
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    On-site technical assistance makes it possible for system operators to learn how to prepare and effectively operate their systems with the help of qualified, experienced peers that can concentrate on their needs at that time.

    We take highly-qualified small system operators who know what it's like to work with little or no budget to meet compliance regulations, to find middle ground with elected officials, and resources that are available at minimum or no cost.

    Rural water circuit riders and technicians become trusted friends of small system operators. They're people that they can count on.

    Currently, the circuit rider program is funded by Rural Utilities Services, and we believe it should be funded in the Clean Water Act also.

    One example of technical assistance is with the small community of McConnellsburg. They were having a problem with some overloading at their sewer treatment facility due to infiltration of inflow to the collection system.

    This problem would have put them in violation of their Clean Water Act program.

    The town contacted an environmental consulting group that was going to charge them $60,000 to conduct a study. However, the county could not afford to do the study and also do the repairs. They were stuck between a rock and a hard place, and this is a situation that is commonly facing small systems today.
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    In McConnellsburg our circuit rider instructed the town how to smoke test the system, themselves, and by doing the work themselves the system saved over $60,000 in cost, and now could use the money saved for actual construction and repair of their system.

    I have included numerous examples of types of technical assistance in my written testimony.

    The second key is cost. The cost of sewer projects can be overwhelming to small and rural systems. Many rural customers are facing sewer rates over $1,000 per year. These costs are not affordable for small community systems.

    For the Clean Water Act to be more effective to assist small communities, it should provide a percentage of funds to be used for negative interest financing targeted to communities for the highest cost per household.

    In closing, Mr. Chairman, small and rural communities thank you for your assistance and this opportunity for being here today, and we urge you to make the clean water state revolving fund more rural-friendly by including our suggestions.

    Thank you.

    Mr. BOEHLERT. Thank you very much, Mr. Krchnavy. We are very sensitive to the needs of rural America. We appreciate your advice. It is advice that will be well-taken. Thank you.
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    Mr. Foster?

    Mr. FOSTER. Good afternoon. I'm Dick Foster. I'm one of the founders of a construction company, PKF-Mark III, located in Newtown, Bucks County, Pennsylvania. I am also a member of the National Utility Contractors Association.

    We think the substantial water resource requirements do still exist. That has been pretty well described here today by others.

    We also think the two programs that you have in place are darned good ones, and that has been pretty well spoken to today.

    But the bottom line is we still need some environmental heroes, and we look to your subcommittee and the full committee as those heroes. NUCA looks forward to helping you in any way we can. We want you to know we're having a series of reports and economic models prepared right now which we will share with you as soon as they're finished later on this year.

    We do believe the Federal Government must continue to play a lead role in the water pollution arena. If I accomplish nothing else here today, that's the point I'd like to stress with you.

    Some folks think that the Government is done, but I don't believe anybody in this room today shares that view, and I certainly don't.

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    The Federal participation is perhaps an obvious need when you consider the number of States that share bodies of water, such as rivers—the Mississippi, the Colorado, the Delaware. And certainly we share rivers and bodies of water with other countries. Federal participation is absolutely necessary.

    The company that I founded in 1967 does specialize in environmental work. We've built over 120 water and wastewater treatment plants.

    I have been personally exposed to the changes that have taken place in the construction and treatment technologies of both water and sewer facilities since we've been in business.

    In the past quarter of a century I think it's fair to say we've had phenomenal results.

    I have personal experience. My home is located a couple of miles up the road from the Delaware River. When I first moved there, we'd hear stories about shad runs. They didn't exist when I moved in there. Mr. Borski is shaking his head. He's in the neighborhood where I live. He's thinking the same thing.

    Today we have shad festivals along the river because they have returned in increasing numbers and are heading for their breeding places this time of the year, and it's a marvelous thing to see. The Clean Water Act has had real results.

    I can say to you that 30 years ago when I started treatment plant work we'd do a good job and replace a system. We'd go in there, and they would essentially put a little chlorine in it and dump it in the creek. As a result of the Clean Water Act, we started building plants to separate liquid from sludge, treat the liquid and discharge it into the river or ocean, and put the sludge in a drying bin and let it evaporate, and then it would be removed and taken to controlled landfills. That was a great system for treatment. Rivers stopped burning, fish stopped dying, people started swimming and fishing in the water.
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    Today we have increased the number of high-tech facilities for water treatment. People in our country have responded to the Clean Water Act.

    Just last Wednesday I was on a project that we have in Worchester, Massachusetts, and I observed the final testing of a new sewage treatment plant, and I can tell you the automated sampling, testing, and recording instruments at the new facility are really something to behold. They had equipment there sampling different streams of the treatment process as often as every 6 minutes and running tests to show that the process was being operated properly.

    Some people might say that such sophisticated facilities are not necessary, but I think you will agree that people in Washington, DC, who have had unfortunate circumstances with water problems wouldn't think that at all.

    In conclusion, we feel this is an area the Congress can and should act on. We look forward to assisting you in that effort. We're here to offer whatever we can to help you.

    Thank you.

    Mr. BOEHLERT. Thank you very much, Mr. Foster.

    Mr. Schwartz?

    Mr. SCHWARTZ. Good afternoon. Thank you.
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    I'm Paul Schwartz. I'm the national campaign director with Clean Water Action, a grassroots environmental organization in the country with over 700,000 members. We were founded 25 years ago and we helped draft and provide the grassroots lobbying support for some fishing organizations around the country working on the Clean Water Act, and 2 years later for the Safe Drinking Water Act.

    I'm also here today representing an organization that you might not be familiar with, Campaign for Safe Drinking Water, which is a coalition of over 300 local, State, regional, and national organizations that comprise everything from the health community to the HIV and AIDS community. These organizations are people from across America. I have attached to the testimony a list of those organizations and the principles of drinking water protection that those organizations have endorsed.

    I'm really pleased to be here today to express our support for the Safe Drinking Water Act amendments of 1996. I particularly want to commend you, Mr. Chairman, on the bipartisan work that went on in this committee to slow down the process last year to take a focused look at the Clean Water Act reauthorization before we moved forward precipitously.

    I'm going to summarize a few remarks that might be somewhat different than the general consensus that we've had on the issue, but I do want to highlight some of my differences, a couple of issues in relation to drinking water situation that your committee might not be as familiar with.

    Our Nation's drinking water utilities are massively under-capitalized. Most of our systems are doing an abysmal job of protecting water and have aging and outmoded distribution and treatment systems that are declining.
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    A good portion of our drinking water systems, community water system levels, small to moderate water size, are still operating on World War I or Victorian Era technologies.

    Community utilities that are in total compliance with Federal and State standards are having a difficult time. The most egregious example is the example of Milwaukee, where 4 years ago there was a flood event down the Milwaukee River and the drinking water filtration system was overwhelmed. A hundred people died and 4,000 were made hospitalized and 400,000 were sick.

    Right here in Washington, D.C., the Potomac River has just been added back to the ten most endangered and threatened rivers in the United States. This is a river that was a national priority to clean up. This committee and Congress, in general, put millions of dollars into the cleanup effort. One of the reasons why we had a problem is that we've gone from 7 million head of chicken in the mouthwaters of the Potomac River to 95 million head of chicken in the last 10 years, so we've got a real problem in source water for our drinking water here in the Nation's capital.

    I just want to report a couple of things to the committee.

    We believe that the $8.6 billion SRF authorization amount might be in jeopardy of being misspent in a number of different ways, and we believe that the process of the implementation is exacerbating the issue.

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    The last thing that I want to say, which might be a unique contribution to this panel today, is that there is one funding source that we haven't been addressing that is available for this committee and this Congress to avail itself. This is outlined in my testimony.

    This funding source is to go to the logical place for a large pool of money that's available, and that's the people who made the mess in the first place, the polluters. Polluter-pays funding mechanisms, as outlined in 1994 and last year in the Safe Drinking Water Act reauthorization, are different ways of getting at financing to local and State programs.

    It made sense to people in communities that suffer increased water and sewer bills and public health consequences from pollution that polluters ought to kick in a share of the money to do additional prevention, treatment, and monitoring costs.

    Thank you very much for your time. I will be happy to take questions.

    Mr. BOEHLERT. Thank you very much.

    Finally, Mr. Atkin.

    Mr. ATKIN. Thank you, Mr. Chairman, and I thank the committee for the opportunity to testify here this evening.

    My name is John Atkin. I'm president of Save the Sound. We're a 25-year-old nonprofit organization based in Stamford, Connecticut, and Glen Cove, New York. I'm also a past member of the Connecticut General Assembly, having served for 10 years in the State House and State Senate.
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    Save the Sound is a member of the 990-member Clean Water Network, and I also serve on the board of directors of Restor America's Estuaries, and co-chair with David Miller the Long Island Sound Study's Citizens' Advisory Committee.

    I just wanted to start by saying I remember growing up on the shores of Long Island Sound and my father and uncle telling me how they used to be able to catch scallops off the back of their boat in Huntington Harbor on the north shore of Long Island over 70 years ago. Since that time, scallops have disappeared from the Sound, mostly because of the loss of various submerged aquatic vegetation that young scallops use as habitat when the you're growing up.

    Only recently have experiments in aquaculture allowed even a minimal return of that species back to the sound. Much needs to happen to bring scallops and other fauna back to the Sound, and most of it, of course, costs money.

    In addressing the area of funding, particularly for infrastructure improvements for clean water, it requires to take a step back and look at a broader range of improvements needed, not just necessarily the traditional bricks and mortar.

    It also requires us to look for funding mechanisms and to examine the environmental and economic costs of not spending the money and how that affects the public health of all of our citizenry.

    We've heard a lot about the strides that have been made in clean water since the Clean Water Act's passage in 1972—and I have some of that backup again in my testimony that I won't go into at this time—and, of course, the history of SRF going from an outright grant to a loan program in 1987.
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    Again, as Paul mentioned, with the passage of the Safe Drinking Water Act last year, the SRF can now be used for infrastructure needs to improve drinking water quality, and it's becoming increasingly evident that top consideration must be given to increasing SRF funding overall to meet the continued need and increased demands of water quality.

    Funding should be available to locations when needs are documented and the communities and localities are prepared to meet performance goals.

    It's also critical that the programs are held accountable. Increase in funding improves the quality of life in a region, because not only is the environmental quality improved, but jobs are created, as well.

    Mr. Foster here from NUCA's organization estimates that nearly 50,000 people are employed by $1 billion expenditure in water pollution control infrastructure construction projects.

    I want to touch on a few quick areas that are a little bit more extensive in my testimony where I feel that funds can be expended and funds can be looked at.

    The first is the national estuary program which was established in 1987 with the reauthorization of the Clean Water Act. Twenty-seven estuaries in the United States and Puerto Rico are part of this NEP, and their objectives is to develop a management plan—this one happens to be on Long Island Sound—through the involvement of the stakeholders in the various watershed communities.
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    With 50 percent of this Nation's population living along a coastline and only 11 percent of the Nation's land in that coastline area, obviously the stress on our waterways continues, and greater concentrations of people obviously result in more intense development and the obvious increase in generation of waste and pollution.

    Investments in infrastructure are surely needed, and the SRF needs to be increased to meet these needs.

    Along with increasing the SRF overall, I urge consideration of providing set-asides within these areas that would have management plans specifically for CCMP implementation.

    Your colleagues, Representatives Lowey and DeLauro have probably discussed with you, Mr. Chairman, the proposal that would increase overall SRF program to $5 billion. This type of investment in our environment not only helps economies grow with new jobs, but it helps fishing operations, recreation, and tourism.

    Jumping to polluted runoff, it's another major contributor, as we've heard about today, to impairing the water quality of our Nation's waters. Though I realize this is not under the jurisdiction of this committee, one program addressing that type of pollution, of course, is the 6217 section of the Coastal Zone Act Reauthorization Amendments of 1990 and is woefully under-funded.

    Polluted runoff, as you know, causes the closures of tens of thousands of shellfish beds annually, causes red tides, and other harmful algal blooms, fish kills, sediment contamination, habitat destruction, drinking water contamination, and fish consumption advisories.
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    Although, as I've mentioned, it's not part of this committee's jurisdiction, I certainly hope you will look at increasing the recommended funding.

    Mr. BOEHLERT. We share the jurisdiction, and we will take that advise.

    Mr. ATKIN. Great. Thank you. I know it's an under-funded area.

    The area of habitat restoration—estuarine habitat, of course, provides food, shelter, rest areas, and breeding areas for thousands of species of flora and fauna. Without these habitats, estuaries would be virtually dead.

    Estuaries around the country have lost varying degrees of habitat, from 40 to 95 percent of tidal wetlands, depending on the particular estuary—Narragansett Bay, San Francisco Bay, the Long Island Sound area.

    Tens of thousands of more acres continue to be destroyed each year—habitat that is the lifeblood of 75 percent of all commercial fish species and 28 million jobs that depend on health, and vibrant estuaries.

    These astounding statistics require action, and we do have time to act. Congress should set an ambitious target for restoration by dedicating the new resources needed to catalyze an effort that will work to restore one million acres of estuarine habitat by the year 2010.
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    This kind of leadership will make a difference in working to preserve and restore the health and vitality of our estuaries.

    The area of toxic pollution—contaminated sediments due to historic toxic pollution is another area in need of review. In the past, of course, Congress has supported research for the assessment and remediation of contaminated sediments.

    Funding mechanisms can be developed that will provide strong incentives to phase out toxic releases, while improving infrastructure.

    One method of relieving the current budget situation, reducing pollution, and increasing business efficiency would be to institute a tax that increased over time on the most toxic, persistent, or bioaccumulative pollutants.

    Urban areas have to be examined, as well. I know there are sections of the Clean Water Act dealing with urban areas. Representative Norton previously sponsored legislation that even more succinctly addressed urban river pollution.

    Funding—we've talked about the SRF funding. I talked a little bit about it. Mr. Schwartz mentioned the polluter pays concept, which I would also support.

    In conclusion, I would just like to say that I obviously know, as a former legislator, myself, it's always easier to ask for money to provide clean water than it is, of course, to vote for it, but I ask you to think about the cost of not providing it. Imagine the holes in the economy if 28 million jobs generated by commercial fishing, recreation, and tourism were gone because we didn't have clean water.
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    I'd like to see the day where I can take my young son to Huntington Harbor where 70 years ago my father found scallops and let him find them. I'd like to be able to take my son to the beach and not have him worry that there's a ''No swimming today, beach closed'' sign up again. And I know that we will be able to see that day in our lifetime with the will of this Congress and those of us who work with you to make the laws that you pass work.

    Thank you, Mr. Chairman.

    Mr. BOEHLERT. Thank you very much. I just want you to know you're preaching to the choir.

    I'm disappointed, and understandably so, that one of our resident experts in estuaries, Mr. Gilchrest of Maryland, is not here. He is in a leadership meeting.

    All eyes are on New York. You have to be happy with what's happening up there, aren't you?

    Mr. SCHWARTZ. First off, we don't have an office in New York, I'm sorry to say. We have them in 14 other States. But I have been following that to some extent and have talked to a number of people who are a part of that.

    I think that it's a good first step to look at source water protection as a first option.

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    The one thing that I would say is that we are still very concerned about some of the exceptions that are in the 500-page document.

    Overall, we think it's a really positive step. It's really that type of approach that citizens need to be involved in conversation about what's at stake, and need to look at cost-effective solutions.

    Mr. BOEHLERT. I agree.

    Mr. SCHWARTZ. And we need to involve citizens around the country up-front in the decision-making process.

    Mr. BOEHLERT. I appreciate that input.

    Mr. Krchnavy, I think I know the answer but I want to get it on the record. You've said there's still a need for technical assistance for operating wastewater treatment plants in rural communities.

    Mr. KRCHNAVY. Well, there's still a tremendous need out there. With evolving technologies and the new systems that are coming on line, and as technical assistance goes along, too, it's from the management on down to the operation and maintenance.

    Sometimes it takes quite a bit of technical assistance with the elected officials or the appointed boards to get them to understand the needs of the operators to do the operation and maintenance.
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    Mr. BOEHLERT. Thank you very much. I did anticipate that answer. They say you shouldn't ask a question you don't know the answer to.

    Mr. Horn?

    Mr. HORN. Thank you very much, Mr. Chairman. I have three questions, one for all of you.

    You've heard some of these numbers mentioned this morning by both the chairman and myself.

    The clean water bill that passed the House last year authorized approximately $2.3 billion a year for capitalizing the clean water State revolving fund. The Administration is requesting approximately $1 billion for clean water State revolving funds for fiscal year 1998. Last year's appropriation amounted to $1.35 billion in clean water State revolving fund.

    What number would you consider an accurate account? Do you want to start, Mr. Schwartz?

    Mr. SCHWARTZ. Sure. Not going over all the numbers and not having a chart, we have seen some pretty amazing statistics for what agencies face in terms of water needs and what some of the water and sewer increases look like in cities around the country.
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    But I don't think the official counts of what the needs are vastly under-state what the real needs are in the country.

    The figure that I have heard is that we have $1 trillion of original investment in the Nation's drinking water and sewage systems, and we're looking at somewhere between a $3 to $4 trillion replacement value.

    I don't know how many billions of dollars we need to get to the point where we actually repair or replace existing systems, but I do know that without a lot more being done at all levels of government and through private markets and in any other way we can figure out how to leverage money, the public health and environmental consequences could really be devastating.

    One thing I want to say is that if you go outside and look at the potholes and bridges that are collapsing, you're looking at visible infrastructure that people see on a daily basis. And, as they say at NUCA, all our stuff is under ground, out of sight, out of mind.

    I think that really spells a need for a major education campaign.

    Mr. HORN. Thank you. I agree with you.

    Mr. Foster, do you have any feeling on those numbers?

    Mr. FOSTER. Yes. NUCA has had studies prepared and that's one of the studies we're updating right now. You've had your own studies, EPA and others.
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    For the past few years, NUCA has strongly recommended $5 billion a year as a minimum Federal investment.

    Mr. HORN. And how about you, Mr. Krchnavy?

    Mr. KRCHNAVY. Just from a State level, in Pennsylvania currently there's $300 million in applications and pre-applications to Rural Utility Services, so I would say that we would really see a need for the higher number.

    Mr. HORN. Mr. Atkin?

    Mr. ATKIN. Yes. My testimony suggested a $5 billion figure based on the legislation submitted by Representatives DeLauro and Lowey and past sessions.

    Mr. HORN. Okay. My next question is on architectural plans. Mr. Foster, you're probably the best person to answer that.

    Given the difficulties small communities have to get a clean water operation, would it be possible to have one or two or three basic plans small communities could use? And would we save money? I mean, granted, that's a cookie cutter approach and everybody will always say, ''We're different. We're special.'' The fact is, classrooms across America, rightly or wrongly, have been built for 100 years on a cookie cutter approach often. In the same State the State architect will do it, and whether it's 200 communities or 20, they'll often have the same plan for a school.
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    How difficult is it to economize by having a basic plan presented or five basic plans from which you would choose?

    Mr. FOSTER. Congressman, I'm familiar with some basic plans that have been submitted to the contracting industry and to the design industry by different industries. ''Package plants'' is what we call them. They're very economical, quite easy to install.

    I can't address the operation and maintenance of them perhaps as much as Mr. Krchnavy could, but we have found—back in our earlier days, we did a lot of that kind of work, and you had a selection of the various manufacturers producing these package plants so you were getting competitive pricing, but they did offer very, very economical means for particularly small communities.

    Mr. HORN. What percent of the total amount they need to build a plant does planning and architectural drawings represent? I realize the architects won't like me, but that's okay.

    Mr. FOSTER. I don't have that information. I know what construction costs are, but I don't know what design costs are.

    Mr. HORN. Often I think it would probably be 10 percent of the project, wouldn't it, on many of these?

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    Mr. FOSTER. I would think it would be.

    Mr. HORN. We'll try to get an answer for the record, Mr. Chairman.


    Mr. KRCHNAVY. To answer your last question there, the costs usually run from 10 percent to 15 percent of the total cost of the project, and there are a number of small package-type facilities that are available to small and rural systems as long as they can be approved by EPA or the State regulatory agencies.

    I think sometimes there's a concern from their point of view that we're trying to put in a small facility that is not going to have longevity for the community.

    But, in fact, we've found that a lot of these alternative technology, as they're called, is very beneficial and long-term to the communities.

    Mr. HORN. One last question, Mr. Chairman, and that's on the litigation fees.

    Mr. Schwartz, it's directed at you.

    Make polluters pay sounds great. I'm all for it. Only we've got one horrible example where it doesn't work, and that's the Superfund. Most of the money seems to go into lawyers' pockets and very few Superfund sites have been cleaned up, and it's a national disgrace the way that program is run.
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    Why won't your program work the same way?

    Mr. SCHWARTZ. Well, we're certainly not a pro-lawyer-funding group, but if you take a look at the three different options that are outlined under the polluter pays, the Studds bill, H.R. 2199, is actually a fee-based bill with a graduated fee based on the toxicity of what's produced and manufactured and stuck out on the land.

    But we think that is a market-based approach that offers incentives both to consumers and to the market to substitute less toxic inputs and to then ratchet down the amount of money that they have—small amount of money they have to put in off the top to mitigate the damage that they create through nonpoint runoff of those farm chemicals.

    And so, for instance, I would say that there are a number of different approaches.

    It's the principle I think that is attractive to most people, which is that they understand there's some nexus between who is sticking the stuff in there and who is responsible for the additional costs and health problems that they have.

    I think if we can find a way to keep the lawyers from getting their hands in the till, that would be an important part of any one of these solutions.

    Instead of calling it ''polluter pays,'' we could call it ''redistribution of income,'' but that would be in a different committee.
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    So I really appreciate it.

    Mr. BOEHLERT. Thank you very much. And thank all of you very much.

    This meeting will not be adjourned until I do a couple of things.

    Without objection, the testimony of the Western States Water Council will be included in the record at this point.

    [The prepared statement of the Western States Water Council follows:]

    [Insert here.]

    Mr. BOEHLERT. And without objection I am submitting for the record the December, 1996, General Accounting Office report entitled, ''State Revolving Fund Loans to Improve Water Quality'' and accompanying testimony. This is an important study that took a detailed look at nine States' use or lack of use of their SRFs. The study found that ''in eight of the nine States officials identified the expiration of authorizing legislation as well as Federal requirements as affecting the amount and percentage of funds let.

    ''For example, officials in seven States said that the legislation's expiration created uncertainty about the loan conditions that might apply in the future and cause some communities to postpone seeking or accepting loans.
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    ''The officials in seven of the States also said other Federal requirements acted to discourage communities from using the loans.''

    This report reinforces why all of us were here today.

    [The December 1996, General Accounting Office report entitled, ''State Revolving Fund Loans to Improve Water Quality'' and accompanying testimony follows:]

    [Insert here.]

    Mr. BOEHLERT. I thank all of you for being resources for the committee, and I want all to know that this hearing stands adjourned.

    [Whereupon, at 5:10 p.m. the subcommittee was adjourned, to reconvene at the call of the Chair.]

    [Insert here.]