Kukurin Contracting, Inc. of Export, PA
Before the Senate Committee on
Environment and Public Works
The Water Investment Act of 2002
February 26, 2002
Good morning, Mr. Chairman and distinguished members of the Committee. My name is Bill Kukurin and I am President of Kukurin Contracting, Inc. located in Export, PA. On behalf of Associated Builders and Contractors (ABC), I would like to thank Chairman Jeffords, Ranking Member Smith and the members of the Senate Committee on Public Works for providing me with this opportunity to discuss the Water Investment Act of 2002 and the important role it could play in improving our nation’s water quality and infrastructure. I will be summarizing my comments, but I would request that my full statement be submitted for the official record.
For nearly 30 years, Kukurin Contracting, Inc. has been operating in Western Pennsylvania as a family owned and operated business. Kukurin Contracting, Inc. has 125 employees and focuses primarily on municipal work, specifically the construction and maintenance of water and sewer lines, pumping stations, water tanks, reservoirs and sewage treatment facilities. We have built our reputation through providing quality workmanship for our clients and safe, healthy worksites for our employees. In 1997 and 1999, Kukurin Contracting, Inc. was recognized by ABC National as one of the leaders in the construction industry and presented the annual Excellence in Construction Award for our work on the Long Run Sewage Retention Facility and the Plum Creek Sewage Retention Facility, respectively.
Kukurin Contracting, Inc. has been a member of the Western Pennsylvania Chapter of ABC for 20 years. ABC is a national trade association representing more than 23,000 merit shop contractors, subcontractors, materials suppliers and construction-related firms within a network of 82 chapters throughout the United States and Guam. Our diverse membership is bound by a shared commitment to the merit shop philosophy within the construction industry. This philosophy is based on the principles of full and open competition unfettered by the government, and nondiscrimination based on labor affiliation and the awarding of construction contracts to the lowest responsible bidder, through open and competitive bidding. This process assures that taxpayers and consumers will receive the most for their construction dollar. With 80 percent of the nation's construction workers choosing not to be represented by a union, ABC is proud to be their voice.
I would like to commend Chairman Jeffords and Senators Smith, Graham and Crapo for introducing S. 1961, the Water Investment Act of 2002. I also commend this committee for undertaking a comprehensive look at our nation's water infrastructure needs. The costs of insufficient attention to clean water issues are indisputable. Non-point source pollution, leaking toxics, stormwater run-off and coastal pollution pose grave risks to water quality. Our nation's water quality and "environmental" infrastructure could not be more vital to our health, safety and overall quality of life.
The Water Investment Act of 2002 would serve to ensure the environmental and financial sustainability of our nation’s water programs. The measure would authorize the Clean Water and Safe Drinking Water State Revolving Loan Fund (SRF) Program at $35 billion over 5 years. The SRF program allows states to provide low-cost financing to communities for the construction, repair and rehabilitation of wastewater collection and treatment facilities. While this legislation seeks to provide additional resources to states and localities to aid them in meeting water infrastructure needs and increased state flexibility to states in administering their water programs, the imposition of the Davis-Bacon Act to this vital program would negate many of these efforts.
While ABC members have concerns regarding a number of wastewater needs, I will focus my comments today on funding for construction of wastewater treatment facilities and on the detrimental impact that the discriminatory and antiquated Davis-Bacon Act would have, if included in the legislation, on these vital projects.
The commitment Congress made with the states beginning in 1972 to clean up the country's waters by funding projects relating to water supply and wastewater treatment is responsible for the significant progress made in restoring the quality of our nation's waters. When Congress decided to turn the program over to the states in the Water Quality Act of 1987, a schedule was set to phase out direct grants for construction and provide seed money to the states to establish revolving loan funds. These funds would eventually become self-sustaining and fund the states' wastewater treatment construction needs.
All states have established the legal and procedural mechanisms to administer the new loan programs and are now eligible to receive State Revolving Fund (SRF) capitalization funds under title VI. Some with prior experience using similar financing programs moved quickly, while others had difficulty in making a transition from the previous grants program to the one that requires greater financial management expertise for all concerned. Moreover, many states have complained that the SRF program is unduly complicated by Federal Rules--some contained in the statute, others in EPA guidance--even though the states were intended to have greater flexibility.
Small communities and states with large rural populations are having the largest share of problems with the SRF program. Many small towns did not participate in the previous grants program and consequently are likely to require major projects to achieve compliance with the law. Yet these communities often lack an industrial tax base and thus face the prospect of very high per capita user fees if their citizens are required to repay the full capital cost of sewage treatment projects. According to testimony from the General Accounting Office, SRFs will only meet about one-third of the states' funding needs and will generally be unable to meet the needs of disadvantaged communities. States simply have not been provided enough time or seed money to sufficiently capitalize their revolving funds. There are many small communities that do not have the capital base necessary to support a state revolving loan fund.
ABC believes inadequate and insufficient wastewater facilities represent a large segment of clean water problems facing our nation today. It is imperative that the federal government immediately address our country’s need for clean water infrastructure investment. ABC is encouraged by the efforts being made by the Senate Environment and Public Works Committee and the House Transportation and Infrastructure Committee and supports the arrangements being made for small communities, such as modifying the procedural or repayment requirements of the SRF loan program.
Combined sewer overflows (CSO) are an example of a significant problem in over a thousand cities nationwide. Billions of dollars are needed to clean up previously overlooked and outdated systems. Nearly 1,200 municipalities have combined sewers where domestic sanitary sewage, industrial wastes, infiltration from groundwater and stormwater runoff are collected and treated together. These systems serve approximately 40 million persons, mainly in older urban and coastal cities.
Combined sewers are categorized as point sources under the Clean Water Act, yet they have not been considered a high regulatory or permitting priority for EPA or states. There are no express provisions in the Clean Water Act dealing with CSOs, except to the extent that they are subject to permit requirements and deadlines as are other point sources. The cost of controlling CSOs is potentially very high and local governments say that resources are not available for a program of that size. Conceivably, an extended program can also address improved drinking water filtration or solid waste disposal facilities. ABC supports the idea of allowing localities greater flexibility to consider costs and site-specific factors when designing various wastewater treatment facilitates.
ABC also supports continued federal funding to further capitalize state revolving funds for the construction of wastewater treatment facilities or environmental infrastructure projects. Clearly, our clean water needs are vast and the federal government must maintain a certain level of participation. Shifting resources to state revolving funds to provide a self-sufficient program and stable revenue source is a productive use of federal funds. Requirements for state revolving funds should be as uncomplicated as possible to facilitate an accessible and efficient program.
Other forms of innovative financing and cooperative efforts will expand the power of federal resources and should be encouraged. Privatization and public-private partnerships for example, are being used more frequently to augment federal, state and local activities--and they work. These efforts bring experience, business savvy and financial strength of the private sector to government entities for the benefit of all. ABC supports the provision in S. 1971 that would allow private utilities to access Clean Water and Drinking Water SRFs.
ABC urges Congress to rely on market incentives rather than pursuing taxes to induce environmental conformance. To that end, ABC commends the sponsors of the legislation for including a provision that encourages competitive bidding of all projects to help reduce overall project costs. In addition, any funding plan should consider that states would have to impose user fees to meet their share requirements.
Continued federal funding is not a panacea. A long-term integrated plan that takes into account new environmental problems and establishes realistic and achievable clean water goals should be adopted. We also believe every state must develop an environmental needs inventory and strategy for the future to ensure efficient management of resources.
ABC commends the sponsors of this vital legislation for not expanding burdensome Davis-Bacon Act requirements to the Clean Water and Safe Drinking Water State Revolving Funds. The SRF program has operated efficiently without Davis-Bacon since 1995, and ABC encourages the committee to continue to allow states and municipalities the flexibility to operate the SRFs without this expensive and discriminatory requirement.
During this time of economic recession, while fighting a costly war on terrorism and facing a federal budget deficit, any expansion of the Davis-Bacon Act would be fiscally irresponsible and unjustified. In an era of constrained resources, the promotion of higher federal construction costs to the benefit of a few and to the detriment of the American taxpayer can no longer be accepted. The Davis-Bacon Act unnecessarily raises the cost of federal construction by an average of 5-15 percent and an enormous 25-38 percent in rural areas—where clean water infrastructure improvements are most desperately needed. This is a needless waste of taxpayer dollars and thwarts the progress of additional projects that could be built.
Davis-Bacon is a relic of the infamous Jim Crow era. The law, enacted in 1931, was intended to prevent minority workers, mostly from the South, from competing with northern, mostly union construction firms for federal contracts in the North. Conceived during a time of discrimination, the Act still has much the same effect today. Davis-Bacon disadvantages small, emerging, and minority businesses. Davis‑Bacon discourages many qualified small and minority-owned contractors from bidding on public projects, because the complex and inefficient wage and work restrictions make it nearly impossible for small businesses to compete with well-capitalized corporations. To seek Davis-Bacon contracts, small and minority owned firms must not only pay the “prevailing wages” and adopt inefficient work practices and rigid union-based job classifications, but also must expose themselves to huge compliance costs and burdensome paperwork regulations. As a result, few small and minority firms win Davis-Bacon contracts, and many others give up trying.
According to the Congressional Budget Office, repealing the Act would save taxpayers $10.5 billion over 10 years. Eliminating Davis-Bacon requirements would reduce unnecessary federal spending and guarantee more construction for the dollar for important public projects such as water infrastructure needs, schools, roads, bridges, low-income housing, hospitals and prisons. It would also remove barriers that preclude emerging businesses and entry-level workers (helpers) from working on public projects paid for with their own tax dollars. If funds wasted on Davis-Bacon wage rates were utilized in a more efficient manner, they could be put towards meeting our overwhelming national demand for environmental and infrastructure improvements.
The federal Davis-Bacon law hurts states and localities because its requirements are imposed even if the federal government contributes a minimal amount of funds. For example, the federal government could offer a small amount of money for a primary state, local or privately funded project, and the artificially inflated Davis-Bacon wage rate would have to be paid to all workers on that job. Often times these increased costs nullify the federal contribution and states are better off not accepting federal help. The federal government should not impose costly Davis-Bacon requirements on financially strapped state and local governments.
Especially in the case of state revolving funds, where the federal government does not directly appropriate money for projects, Davis-Bacon requirements are not applicable. In the Clean Water Act of 1987, Davis-Bacon requirements sunset on all SRF assistance in FY 1995, and has not applied to such funds since. This loan program, whereby the funds are repaid and then revolved, is no place for federally mandated Davis-Bacon.
Davis-Bacon violates states’ rights for those twenty states that have chosen not to have a state prevailing wage law because the wage mandates inflate construction costs. These states should not be saddled with the outdated federal law, which serves as an expensive and burdensome “unfunded mandate” imposed on state and local governments. In fact, even states that have “little Davis-Bacon” laws have voiced their opposition to federally-mandated Davis-Bacon on Clean Water Act SRF projects. When the building trades sued to re-impose Davis-Bacon on CWSRFs, thirteen states, six of which have their own state prevailing wage laws, formally wrote the EPA in opposition to the re-application of federal Davis-Bacon requirements.
In conclusion, Mr. Chairman, ABC strongly supports the efforts being made by the Environment and Public Works Committee to ensure that our nation's water quality is improved. ABC supports the Water Infrastructure Act of 2002 as currently written. We believe that with full funding and without any expansion of the Davis-Bacon Act our water infrastructure needs will begin to diminish and our nation's water quality will dramatically improve. It is imperative to improve the efficiency of the State Revolving Loan Fund program by not imposing outdated and unnecessary prescriptive administrative requirements the federal government places on municipalities, namely the Davis-Bacon Act.
On behalf of Associated Builders and Contractors, I again want to thank you and the members of the Committee for the opportunity to testify here today, and I will be happy to answer any questions you may have.