Statement of Louisa Strayhorn, Council Member, Virginia Beach, Virginia

Good morning Mr. Chairman and Senators. My name is Louisa Strayhorn, and I am a City Councilwoman for the City of Virginia Beach, representing the Kempsville Borough. I appreciate this opportunity to testify before the Committee about the City's past and ongoing work with the U.S. Army Corps of Engineers for our numerous beach and navigation projects.

As you probably know, Virginia Beach is a beautiful resort city located only a few hours drive from the nation's capitol, and it is the largest City in the Commonwealth. Having served on the City Council for the past four years, I know first-hand how the well-being of our beaches is crucial to the City's economy. The City has over 6 miles of commercial beach front which is critical to the livelihood of many Virginia Beach residents and the City's financial health since tourism is our largest employer. Over two million out-of-town visitors arrived in Virginia Beach last year. These visitors spent approximately $500 million in the City and directly created about 11,000 jobs.

In addition to our visitors, the second biggest employer for Virginia Beach is the U.S. Navy as the Naval Air Station (NAS) Oceana supports the largest naval complex in the free world. After three rounds of Base Realignment and Closure (BRAC), expansion of this megaport continues with an increase of as many as 6,000 sailors and family members in the next year with the F/A 18 transfer from Cecil Field to Oceana. Our City's economic health directly impacts the quality of life enjoyed by the thousands of Naval personnel in Virginia Beach.

Therefore, because of these many varying factors which constitute the City: the size of our population (nearly 400,000), our location on the Atlantic Ocean and Chesapeake Bay, and our dependence on tourism as the largest segment of our economy, the Virginia Beach City Council has a particular interest and directive to protect our beaches and navigable waterways.

Sandy beaches are a integral part of the City coastal infrastructure and provide the first line of defense against storm waves and form the

basis for our continued economic vitality. For the past 25 years, the City, in conjunction with the Corps, has been working to finish the region's highest priority, the Virginia Beach Erosion Control and Hurricane Protection Project. This project protects and enhances six miles of commercial and residential beach front, consisting of over a billion dollars in flood insured development, against a direct hit from a hurricane. The project protects hundreds of millions of dollars of City infrastructure, our tourism industry and more than a thousand of commercial and residential properties along the shore.

Study on this program as a federal project began in the 1960's, and after long anticipation the project was authorized by Congress for construction in the 1986 Water Resources Development Act. Actual construction began in fiscal year 1996, and depending on appropriations levels, initial construction will be completed in 2001. A vast improvement in protection from storm events, the area protected by the project will be saved from average annual flooding damages estimated at over $13 million during the project's 50-year life.

The project scope required phasing of the work to match funding levels and comply with procurement policies. The recent policy change to prohibit "continuing contracts," coupled with the reductions in Civil Works appropriations, has slowed progress and complicated the sequencing of the work. However, in May the rules changed again to re-allow continuing contracts, and with continued support for this project by the appropriators it appears that we are back on track for a 2001 completion of construction.

Most projects of this scope and size authorized by this Congress require multi-year and phased contracting for construction to match and track with appropriations levels. Last year's change and subsequent reversal in the "continuing contract" policy severely impacted many projects throughout the country. I believe it may be appropriate for your Committee to consider language in this year's WRDA to clarify and resolve the issue.

Another issue facing this Committee as you prepare the WRDA is the Administration's proposed revision in cost-sharing for beach replenishment. Once construction of this Beach Erosion Control and Hurricane Protection project is complete, the authorization includes the periodic renourishment of the project beach for a 50-year period. The very basis for the project's performance estimates is founded in the premise that the beach and seawall or dunes will act together to provide the protection benefits -- the beach must be maintained.

Though not specifically addressed in the draft language supplied by the Administration, the application of revised cost-sharing must not affect on-going or existing projects. We have based our participation in this project, and agreed to maintain the constructed project, with the belief that the cost-sharing formulation in the 1986 Water Resources Development Act, and subsequently in our Project Cooperation Agreement, would remain at the authorized level of 65% federal and 35% local. The Administration has proposed to change the beach replenishment portion of these projects to 35% federal and 65% local. While the merits of revision could be argued, any application of new cost-sharing levels must be limited to new authorities and I urge you to specifically address this issue as you move forward with the WRDA.

If the Administration's new cost-sharing formula were applied to our existing project, the cost to the City of Virginia Beach, over and above the amount specified in our Project Cooperation Agreement, would escalate by more than $40 million. As a member of City Council when the Council authorized our City Manager to enter into the agreement with the Corps of Engineers, I can tell you first hand that the City Council would feel betrayed if the rules were changed in the middle of the project and our cost share increased as a result by over $40 million.

Our discussions with Administration officials indicate that their intention was to exclude existing projects and authorities from the proposed revision. We are comforted by this response, but given the seriousness of the issue, we feel it is necessary for you to consider specific

language in this year's WRDA to clarify and resolve the issue that existing projects would not be subject to any new cost-sharing formulas.

As you consider this issue, please keep in mind the merits of these types of projects and the methodology used to judge these merits -- strict interpretation of National Economic Development policies. Flood damage reduction to the businesses and residences insured under the National Flood Insurance Program is the primary benefit calculated in the authorization documents. An annualized benefit of over $13 million in these flood damage reductions justifies the $10 million annualized costs for the project. Under the current authority and policy, the City of Virginia Beach pays for 35% of these costs though the benefits for this national program are entirely federal.

Granted, the project provides benefits far beyond those calculated in the National Economic Development methodology; chiefly, preservation of our City's tax base and the underpinning of our $500 million dollar portion of one of the nation's largest industries-- tourism. The 11,000 jobs supported by our tourism industry, and the spin-off economics of those jobs, clearly enhance the merits of the project far beyond flood protection benefits. These benefits and others should be included in project formulation to allow full review of the merits of these projects.

With this in mind, I would ask this Committee to consider the broader range of federal benefits derived from Beach Erosion Control and Hurricane Protection projects in its deliberations on any proposed revisions to the 1986 Water Resources Development Act cost-sharing formulation for beach replenishment. Prior to 1986, beach replenishment was authorized at 50% federal and 50% local. Owing to the multitude of benefits derived from such projects, this Committee changed the cost-sharing formulation to 65% federal and 35% local in 1986. If changes are deemed appropriate at this point, I would urge you to reject the Administration's proposal and consider a cost-share formulation that reverts to no less than the pre-1986 levels in consideration of both flood damage reduction benefits and the vital economic contributions that the nations' beach tourism industry generate.

Another Water Resource Development issue for our City relates to the Sandbridge Beach Erosion Control and Hurricane Protection Project which was authorized in the 1992 Act. Sandbridge is our southernmost beach community, the beach there has all but vanished through years of erosion and storm activity and damage to public and private infrastructure which occurs increasingly each year.

Three years after authorization, in 1995, the Administration, without notice or warning, arbitrarily terminated new construction starts for this class of projects. Our community relied on this authorization to move ahead with a special tax district to raise funds for the local cost-share and take other steps to protect public and private property from storm damage while we awaited construction of the project. The authority to construct this project was based on the same National Economic Development criteria as the Virginia Beach project-- the benefits which outweigh the costs were tabulated solely on flood damage reduction to the 1,500 or so insured properties in the Sandbridge community.

Lacking a federal appropriation and support from the Administration to construct this project, and in response to the devastation of the community from erosion, the City of Virginia Beach has fully funded the initial construction of this project. The City Council appropriated $8.1 million dollars in fiscal 1998 for a 100% locally funded emergency beach restoration project at Sandbridge. I am pleased to report that construction is now underway of this vital project as authorized by your Congress, though the continued authorized renourishment cannot be programmed without federal support, it is simply beyond our means as a city to fully implement the authorized project.

While we anxiously await support from the Administration to implement this project, an issue developed during the emergency beach restoration phase which may be of interest as you consider the WRDA. The amended Outer Continental Shelf Lands Act authorized the Department of the Interior to assess fees for the extraction of minerals from the continental shelf. The program is managed by the Mineral Management Service, who in late 1997 finalized their policies regarding fee assessment. In short, their policy would exempt federally funded beach replenishment projects from fees for sand minerals mined from the shelf for such projects. However, locally funded beach replenishment projects are not exempt, regardless of federal authorization.

As a result of this recent policy development, the City of Virginia Beach was assessed a federal fee for mining the sand used to construct the federal project at Sandbridge solely because the federal government did not contribute to the cost of construction. This was the first such assessment anywhere in the nation, and we find it objectionable, outrageous, and bad public policy. The purpose for establishing fees for mineral extraction from the continental shelf was to assure that the citizens were compensated for allowing the use of public resources by profit seeking endeavors. Clearly Congress did not intend for the Department of the Interior to assess fees to local governments who would use the mineral for a purely public purpose -- flood protection.

In our case, a fee of $0.18 per cubic yard was assessed, and we were compelled to enter into a lease agreement with MMS before our emergency beach erosion project could go forward. Including this fee in our project finances limited us to contracting for only 1,100,000 cubic yards of sand, paying the Department of Interior $198,000 in mineral fees to construct the federal project. In this time when the Administration is proposing to rely more heavily on local sponsors for the funding and execution of federal flood protection projects, clearly the counter productive nature of assessing these fees to local sponsors should be eliminated. I urge you to consider language for the WRDA that would prohibit the Interior Department from applying its authority under the Outer Continental Shelf Lands Act for any project authorized by the WRDA.

In that the City of Virginia Beach is the only locality in the country to have ever been compelled to pay the mining fee, directive language for reimbursement of the $198,000 would be greatly appreciated if the Committee agrees that the fees should not be assessed to localities.

In conclusion, I would like to highlight the following points and recommendations to the Committee:

First, I urge the Committee to clarify in its Bill that any revisions to the cost-sharing formulation for beach replenishment only apply to projects not yet authorized or constructed.

Secondly, I urge the Committee to identify in its Bill the contracting methods by which the Army Corps of Engineers will execute authorized projects to facilitate good planning and avoid the pitfalls of midstream policy changes.

I would also urge the Committee to review all of the merits and benefits of the federal beach replenishment program and strive to reach a compromise to the cost-sharing formula reversal proposed by the Administration.

Finally, in our view the Department of the Interior has overstepped its authority by assessing fees to local governments for mining beach replenishment sand in the furtherance of projects authorized by this Committee.

Mr. Chairman, I want to thank you again for the opportunity to speak with you today on these issues of extreme importance to the nearly 400,000 citizens of the City of Virginia Beach. The work of this Committee has had a very positive affect on our community through nearly 50 years of continuous beach replenishment and now with the construction of the new Beach Erosion Control and Hurricane Protection project at our resort area.