Statement of the
AMERICAN SOCIETY OF CIVIL ENGINEERS
The Water Investment Act of 2002
Committee on Environment and Public Works
February 26, 2002
Mr. Chairman and Members of the Committee:
The American Society of Civil Engineers (ASCE) is pleased to provide this statement for the record on the drinking-water and wastewater infrastructure needs in the United States today and on the bill S. 1961, the Wastewater Investment Act of 2002.
ASCE was founded in 1852 and is the country's oldest national civil engineering organization. It represents more than 125,000 civil engineers in private practice, government, industry and academia who are dedicated to the advancement of the science and profession of civil engineering. ASCE is a 501(c)(3) non-profit educational and professional society.
ASCE is pleased to support passage of S. 1961, the Water Investment Act of 2002. The proposed funding levels in the bill are a far-sighted, responsible attempt to rebuild the nation's aging and corroded wastewater and drinking-water facilities and to upgrade their performance to meet the nation's health and security needs in the 21st century.
I. The Issue
In March 2001, ASCE released its 2001 Report Card for America's Infrastructure in which the nation's life-sustaining foundation received a cumulative grade of "D+" in 12 critical areas. The reasons for such a dismal grade include the growing obsolescence of an aging system; local political opposition and red tape that stymie the development of effective solutions; and an explosive population growth in the past decade that has outpaced the rate and impact of current investment and maintenance efforts.
The 2001 Report Card follows one released in 1998, at which time the 10 infrastructure categories rated were given an average grade of "D." This year wastewater declined from a "D+" to a D," while drinking water remained a "D." Wastewater and drinking-water systems are both quintessential examples of aged systems that need to be updated.
We know, of course, that the federal budget condition is less healthy now than it was in early 2001. When the Report Card was issued, the nation anticipated budget surpluses well into the future. The Congressional Budget Office (CBO) projected in January 2001 that, if the tax and spending policies then in effect remained the same, the government would run surpluses totaling more than $5.6 trillion over the 10-year period from 2002 through 2011. CBO revised those projections in August, reducing the 10-year surplus to $3.4 trillion.
But in January 2002 CBO estimated that the cumulative surplus for 2002 through 2011 under current policies would total $1.6 trillion – a drop of $4 trillion from last January's figure. More significantly, if current tax and spending policies remain in place, the total budget will show a deficit of $21 billion in 2002 and $14 billion in 2003, according to CBO. Indeed, total federal receipts in the first four months of fiscal year 2002 were down by $11 billion (1.6 percent) compared with the same period a year ago.
ASCE is well aware of the fiscal quandary that Congress must resolve. These short-term budget realities, however, should not blind Congress to the enduring need for a strong federal investment in public health and in the security and stability of the nation's wastewater and drinking-water infrastructure. Naturally the federal government cannot overcome these problems without help. To remedy the current nationwide infrastructure problem, ASCE estimates we will need to invest $ 1.3 trillion in all U.S. infrastructure over the next five years. This unprecedented need must be met by all levels of government – federal, state and local – as well as the private sector.
II. Drinking-Water Infrastructure Needs
The nation's 54,000 drinking water systems face staggering infrastructure funding needs over the next 20 years. Although America spends billions on infrastructure each year, we estimate that drinking-water systems face an annual shortfall of at least $11 billion to replace aging facilities that are near the end of their useful life and to comply with existing and future federal water regulations. The shortfall does not account for any growth in the demand for drinking-water over the next 20 years.
Although the Safe Drinking Water Act Amendments of 1996 (SDWA) authorized the Environmental Protection Agency (EPA) to spend $1 billion annually to construct and repair drinking water facilities, Congress has failed to appropriate the full amount. In FY 2002, the appropriated amount is $825 million. The total appropriated, which represents 82.5 percent of the $1 billion authorized level, is at the same level as the FY 2001 appropriation and equals less than ten percent of the total amount needed this year.
In January 1997, EPA presented to Congress the first drinking-water needs survey that indicated the nation's 54,000 community water systems will need to invest $138.4 billion over the next 20 years to install, upgrade, or replace infrastructure to ensure the provision of safe drinking-water to these systems' 243 million customers.
But the most recent study by the EPA reveals that the need is even greater. In 1999, the Agency conducted the second Drinking Water Infrastructure Needs Survey. The purpose of the survey is to document the 20-year capital investment needs of public water systems that are eligible to receive Drinking Water State Revolving Fund (SRF) monies.
The survey found that the total drinking-water infrastructure need nationwide is $150.9 billion for the 20-year period from January 1999 through December 2018.
Of course, notwithstanding the great need for further investment in replacement pipes and related infrastructure, we as a nation are making great strides in improving the quality of our drinking-water.
Health-based violations of federal drinking-water standards are declining steadily, according to data from the EPA. In 1993, 79 percent of Americans were served by water systems that did not experience health-based violations. By 2000, that number rose to 91 percent.
Nevertheless, without a significantly enhanced federal role in providing assistance to drinking water infrastructure, critical investments will not occur. Possible solutions include grants, trust funds, loans, and incentives for private investment. The question is not whether the federal government should take more responsibility for drinking-water improvements, but how.
III. Wastewater Infrastructure Needs
Although the federal government has spent more than $71 billion on wastewater treatment programs since 1973, the nation's 16,000 wastewater systems still face enormous infrastructure funding needs in the next 20 years to replace pipes and other constructed facilities that have exceeded their design life. Congress, however, has not authorized new funding for wastewater treatment plants since 1987, and the current benchmark authorization of $600 million (established for FY 1994 in 1987) is far too low to meet current needs.
With billions being spent yearly for wastewater infrastructure, the systems face a shortfall of at least $12 billion annually to replace aging facilities and comply with existing and future federal water regulations. As with drinking-water needs, this total does not account for any growth in demand from new systems.
Funding for wastewater infrastructure has remained essentially flat for a decade. In Fiscal Year 2002, Congress appropriated $1.35 billion for wastewater infrastructure, the same appropriation as FY 2001. The amount represents about 11 percent of the annual need nationally. Requirements for communities that have not yet achieved secondary treatment or must upgrade existing facilities remain very high: $126 billion nationwide is required by 2016, according to the most recent estimate by the EPA.
The largest need, $45 billion, is for projects to control combined sewer overflows. The second largest category of needs, at $27 billion, is for new or improved secondary treatment (the basic statutory requirement of the Clean Water Act). In addition to costs documented by EPA, states estimate an additional $34 billion in wastewater treatment needs for projects that do not meet EPA documentation criteria but, nevertheless, represent a potential demand on state resources.
Between 35 percent and 45 percent of U.S. surface waters do not meet current water-quality standards. According to the EPA, sewer overflows are a chronic and growing problem. Many of the nation's urban sewage collection systems are aging; some sewers are 100 years old. Many systems have not received the essential maintenance and repairs necessary to keep them working properly.
IV. The Water Investment Act of 2002 (S. 1961)
The Water Investment Act of 2002 (S. 1961) would amend and reauthorize the Clean Water Act and the Safe Drinking Water Act to provide substantially greater funding for wastewater and drinking-water facilities.
The bill is intended to modernize state water pollution control revolving funds and the allocation for those funds to ensure that the funds distributed reflect water quality need; to streamline state water pollution control assistance programs and state drinking-water treatment assistance programs to maximize the use of federal funds and encourage maximum efficiency for states and localities; to provide additional structure to the water supply research conducted in the United States; and to ensure that the federal government is performing the appropriate role in analyzing regional and national water supply trends.
The bill would authorize funding of $35 billion over five years. It would authorize more than $20 billion for clean water and $15 billion for safe drinking water projects, respectively. There are provisions for the Clean Water Act and the Safe Drinking Water Act that are designed to help water utilities better manage their capital investments using asset management plans, rate structures that account for capital replacement costs, and other financial management techniques.
In addition, there are provisions that seek to ensure that the "next generation" of water-quality issues receives a major focus. The bill includes incentives for use of non-structural technologies. The bill would make these approaches eligible to receive funding under the Clean Water Act State Revolving Fund and require that recipients of funds consider the use of low-impact technologies. Moreover, it would authorize a demonstration program at $20 million per year over five years to promote innovations in technology and alternative approaches to water quality management and water supply. This program requires that a portion of the projects use low-impact development technologies.
V. Recommended Improvements to S. 1961
The Water Investment Act of 2002 could be amended to enhance its effectiveness and improve on its ability to build modern wastewater and drinking-water facilities and protect national security. ASCE strongly encourages the Committee to adopt the following provisions to S. 1961 as it deliberates the legislation:
· The bill should give a state the discretion to use the design-build project delivery method for each facility financed under the SRFs. The use of this method should be consistent with state law. Once a state decides that the design-build project delivery system is appropriate for a given project, the recipient should be required to the use of the two-phase competitive source-selection procedures authorized under section 303M of the Federal Property and Administrative Services Act of 1949.
· The bill should require that each contract and subcontract for architectural and engineering design services, program and construction management and other professional services should be awarded in the same manner as contracts that are awarded under title IX of the Federal Property and Administrative Services Act of 1949.
· The bill should expressly authorize the Environmental Protection Agency to use the Clean Water Act State Revolving Loan Fund (SRF) and the Safe Drinking Water Act SRF to provide financial assistance for the construction of physical security measures at wastewater and drinking-water plants. Certain terrorist groups have made it clear that the destruction of U.S. water-treatment facilities is one of their aims. Federal funds should be made available through the SRFs to deal with specific security needs, including improved building design and construction requirements, fencing and other physical security measures. No funds should be made available to hire security guards, establish private police forces or implement other non-structural protections, which should be addressed through operating funds.
· Some have argued that federal regulatory programs establishing water-quality standards under the Clean Water Act and drinking-water standards under the Safe Drinking Water Act are too restrictive; others argue that the current regulations may not be protective enough of human health and the environment. Without taking a position either way at the present time, ASCE does not believe that legislation designed to provide indispensable financing for our aging infrastructure should be the forum to address controversial regulatory changes about which there is little consensus at the moment.
VI. Future Policy Options
ASCE recommends that funding for water infrastructure system improvements and associated operations ultimately be provided through a comprehensive program that addresses the infrastructure needs of drinking-water and wastewater systems. At some point, Congress needs to create a federal water trust fund to finance the national shortfall in funding for water and wastewater infrastructure. Money in the trust fund should not be diverted for non-water purposes.
Moreover, we support the use of federal appropriations from general treasury funds and the issuance of revenue bonds and tax-exempt financing mechanisms at the state and local levels, as well as public-private partnerships, state infrastructure banks, and other innovative financing procedures.
Congress also should consider the use of federal capitalization grants to purchase or refinance outstanding debt obligations of water or wastewater service providers; guarantee, or purchase of insurance for, an obligation of a water or wastewater system; and secure the payment or directly repay principal or interest on general obligation bonds issued by the state if proceeds of the bonds will be deposited into the SRF.
As part of the federal funding package designed to lower the cost of capital for recipients that choose to leverage their federal capitalization grants and for individual issuers seeking to borrow in the public capital markets, Congress should exempt from state private activity bond volume caps state and local private activity bonds for water and wastewater infrastructure, where such bonds (1) are used to finance core water or wastewater infrastructure, as defined below, and (2) produce public health or environmental protection benefits that are generally available to the public.
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