Testimony of TOM MORRISEY, President,
Association of State and Interstate Water
Pollution Control Administrators
Mr. Chairman, Members of the Committee and Subcommittee, my name is Tom Morrissey. I am the President of the Association of State and Interstate Water Pollution Control Administrators (ASIWPCA) and Director of the Planning and Standards Division for the Connecticut Department of Environmental Protection.
I would like to provide a little history as a backdrop to the Association’s testimony here today. In the early 1980’s, representatives of our organization, along with the then chair of the National Governors’ Association (NGA), were called to the White House to discuss the future of the construction grants program. The $5 Billion program authorized by Congress for the construction of wastewater treatment facilities was under attack. The Director of the Office of Management and Budget told the State officials that the Administration intended to phase out the grants program. OMB’s Director said that if there was to be any subsidy for municipal wastewater treatment works, States and Congress would have to find a better vehicle. From the Administration’s perspective, the grant program had lost credibility and was too expensive, too burdensome and a drag on the national economy.
NGA and ASIWPCA took OMB’s counsel to heart, as did a member of this Committee (John Chafee (RI), Mack Mattingly (GA), David Durenberger (MN), etc.). Congress and the States met the challenge, drafted legislation in early 1987 and the Clean Water State Revolving Loan Fund (CWSRF) was born. The CWSRF has become one of the most successful Federal public works programs in history, which is attributable to its careful design as a streamlined, State-based program. Senate and House authors intended to address the vast array of State Water Quality Program priorities under a States’ Water Program fund.
Having just passed the 15th anniversary of the last Clean Water Act reauthorization, we have had sufficient time to build and document a track record of SRF success. We know, for example, that projects are built in half the time than those constructed under the Federal grants program. We know that the CWSRF has saved taxpayers hundreds of millions of dollars and we know that, with each Federal dollar, there has been an almost equal contribution at the State level. Since 1987:
by the CWSRF Since 1987
* Up to 9,999 population
* 10,000 – 99,999 population
* Over 100,000 Population
Mr. Chairman, States are committed to the Clean Water State Revolving Loan Fund, because it has met and exceed the expectations set by its creators.
ASIWPCA believes that in reauthorizing the CWSRF to it is vitally important:
The Water Investment Act of 2002 (Senate Bill 1961)
The Association takes great pride in the fact that the CWSRF program continues to enjoy the strong support of the Administration, the Congress and this Committee. We appreciate the Committee’s effort to develop S. 1961 and hold hearings. And, Mr. Chairman, as we have discussed with you in prior meetings, ASIWPCA appreciates your leadership in developing Year of Clean Water Legislation to commemorate the 30th anniversary of the Clean Water Act. The goals of S. 1961 are laudable and the bill, if enacted, could advance the program in key areas particularly related to:
Ø Increased CWSRF funding authorization levels,
Ø Expanded eligibilities,
Ø Extended loan repayment periods,
Ø Expansion to forgive principal in hardship situations, and
Ø Fund transfers between the Clean Water and Drinking Water SRFs.
These enhancements will, for example, better enable States to address small communities, on-site systems, nonpoint source pollution, urban stormwater and combined sewer overflows.
As appreciative as we are of the Senate Committee efforts to enhance the CWSRF, our hope and expectation was that this proposed legislation would modernize and minimize the program to make it more user friendly. To the contrary, we note certain provisions that appear to make matters more difficult by adding greater complexity. The Association does have some concerns relative to effective implementation. Some of these provisions pertain to:
Ø New requirements that need to be simplified and reduced. The cumulative effect of S. 1961’s provisions would seriously weaken the effectiveness of the CWSRF. The coordination required between State water quality and State SRF programs will be extensive at many levels. In some instances, we question the necessity of the new requirements, since there is no compelling demonstrated need. Overall, we are concerned that some of the new requirements will lead to extensive bureaucracy, burdensome implementation and oversight, project delay, increased costs and potential litigation. These concerns primarily relate to provisions on:
o Consistency with local land use and other plans,
o The State priority system and intended use plan, and
o Federal requirements for State regulation of local technical, management and fiscal capacity building through CWSRF loan assistance.
Ø The significant increase in State management and administrative burdens that should be addressed. The additional administrative and regulatory requirements will be very costly unfunded mandates, will slow the program and will yield minimal, if any, water quality improvement.
Ø The need to recognize that the CWSRF is a financing mechanism focused on addressing priority water quality problems. States are held accountable for pollution abatement and control, yet several provisions in the bill would suggest that the CWSRF become a panacea for solving environmental, management, development and social issues.
Mr. Chairman, we recognize and appreciate the fact that this bill represents the collective work of a lot of fine minds, those who care about clean water. However, unless you are on the front lines of day-to-day CWSRF implementation, it would be difficult to know that the collective impacts of many of these individual provisions would have serious and unintended negative consequences. The CWSRF’s competitiveness as an effective tool to accomplish environmental results must not be weakened in any significant way. Unless refinements are made, provisions of S. 1961 will be perceived by a significant number of potential recipients as so onerous as to outweigh the value of CWSRF assistance. Again, we are looking for modernization and streamlining of the existing program.
The Association strongly urges the Committee to consider the enhancements recommended by the State professionals who have the responsibility for the success of the SRF. And, because the States and our ASIWPCA membership have had limited time to review the bill in detail, additional suggestions may be forth coming.
SRF Authorization Funding: We applaud the Committee for the increased authorization levels and we look to this Committee to work through the appropriation process to secure ultimate approval by Congress for S. 1961’s higher levels of funding. Infrastructure needs under the Clean Water Act (the Act) are well in excess of $200 Billion and the bill represents a significant move in the right direction.
Eligibilities: We are encouraged that the bill supports coverage of facility siting, related elements and other new coverage. We urge that the Committee also recognize the following:
Ø The need to support restoring impaired and addressing threatened waters (implementation of TMDLs and watershed protection plans should be broadly eligible).
Ø States need CWSRF funds to support technical assistance – this workload will increase significantly under S. 1961.
Ø The need to minimize the distinction between point and nonpoint source projects which inhibits State ability to address priority water quality problems. There are necessary and worthwhile improvements (such as facilities and best management practices for concentrated animal feeding operations (CAFOs)), which should be eligible for CWSRF assistance.
Ø The State’s lead role (e.g., Sections (1)(C and D) should read: “water quality benefits as determined by the State”).
Ø The need to protect the corpus of the fund, (e.g., “Private utility” may be more appropriately changed to “privately owned system”).
Maintenance of the Fund: The language in (c)(2)(B) needs to clarify what constitutes “balances in the fund.” States are uncertain what the term means.
Loan Terms and Repayments: 40 year loans should be allowable with the same condition, i.e., that the loan term cannot be longer than the project life. Interceptor sewers and collection systems can last 40 - 50 years.
recommend that this Section 603(d)(1)(D) on repayments be changed to read “A
State shall determine that the recipient of a loan has provided a dedicated
source of income, and as appropriate adequate security, for the repayment of
the loan.” The proposed language in S.
1961 could be read to require septic tank owners to provide security for loans. It also seems to require all private systems
to demonstrate security. Further, it
restricts the security requirement only to privately owned systems, whereas the
intent should be that all loans are adequately secured, as necessary.
Meeting Hardship Community Needs: States strongly support principal forgiveness. We appreciate the Committee’s recognition that the definition of disadvantaged community should be a State responsibility.
Ø States support the goal of addressing hardship needs within larger community jurisdictions. However, we have some concerns relative to the wording in Section 103(c)(8) of S. 1961 on dealing with communities to charge different rates on the basis of user income levels (pockets of hardship). This appears to be an open invitation to litigation. It should be left to each State to decide how to craft an approach to get to this issue under the framework of disadvantaged community.
Ø We need to be cognizant of the fine line States need to walk between meeting hardship needs, which
under S. 1961, could take up to 45% of the annual capitalization grant and the importance of protecting the corpus of the Fund.
Administrative Costs: Increasing the percentage of capitalization grants which can be used for State administration of the CWSRF from 4% to 5% is helpful, but falls short of the amount needed to cover CWSRF administration in the current program. This need would be exacerbated by the new responsibilities S. 1961 imposes on the States. Should capitalization end or be held in abeyance, no funds would be available for administration. Several options should be considered:
Ø Increase the percentage (e.g., up to 4% of the authorization and State match); allow States to use up to ½% of the CWSRF's current valuation (the total assistance outstanding plus any funds available for new loans, including State match); or allow States to use up to $400,000 per year – which ever is greater. (However, to the extent that S. 1961 contains new requirements, these levels will need to increase)
The Act should allow fees and surcharges collected by a State for CWSRF administration to be deposited in the fund to help defray administrative costs.
Community Development: Applicants should be able to certify as to consultation/coordination, but shifting the burden to the CWSRF to “ensure” they do so in a certain way is an unreasonable and difficult standard to meet.
Ø Requirements for clearinghouse review by the local planning agencies already exist. The Act requires coordination with all water quality plans; if land use plans, especially those designed to encourage smart growth, have been prepared -- local entities are required to comply. The States question what more is envisioned and what problem this provision is designed to resolve.
Ø With the addition of a significant number of new requirements, ASIWPCA has concerns about the potential for significant delays in program implementation at the State and Local level.
Priority System Requirements: The proposed changes to the States’ priority systems should be minimized, because such a major restructuring will delay project funding, divert staff and resources and, is frankly not necessary.
Ø The development of the State’s priority system and intended use plan already involve extensive public outreach and involvement. The requirement for “significant public outreach” (a new and undefined term for the Act) should be deleted. It implies a level of intensity that will be difficult to achieve and will undoubtedly delay and over complicated the CWSRF program. States feel strongly that the CWSRF should not be held to higher standard than other existing Clean Water Act programs.
Ø States are required to use ranking criteria that are extensive, well documented and emphasize environmental benefit. The CWSRF is a primarily mechanism States have to focus limited resources on TMDL implementation in impaired waters and a extensive water quality information feeds into that process. It is reasonable for the CWSRF to consider relevant information in the 305(b) report. States and USEPA are investing significant time and resources integrating the 305(b) report and the 303(d) listing process. S. 1961 should not have the CWSRF move in a different direction, duplicate other efforts or use a different standard with no demonstrable improvement in water quality. (States should not be required to “take into consideration all available water quality data”, because this is too ambiguous, differs from how data is considered in the water quality program and invites litigation.)
Ø Under the proposed S. 1961, there appears to be little to no latitude to consider critically important factors, including readiness to proceed. Is the Senate promoting a strict funding in priority sequence? The bill appears to also be in conflict with the existing statute and the current State priority systems, which are based on water quality contributions, rather than project type. The bill should be modified accordingly. If our national goal is clean water, then programmatic decisions need to be based on water quality improvement.
Ø It is beneficial to prioritize Section 319 and 320 projects. However, requiring one integrated priority ranking system for Section 319, 320 and 212 projects may, in some States, diminish the ability to fund 319/320 projects, because they may not rank well in such a competitive process. To develop and implement a successful program overall, States need to be able to prioritize 319 projects with other similar projects.
Ø Requiring States to identify and prioritize each and every Section 319 project upfront (with schedules) in the yearly priority funding list is a major change and is close to impossible to implement, because such details are often not known that far in advance. We question what it means to require States to publish a summary of projects every 2 years and how that differs from the lists currently required. This program needs to be simple, straightforward and unintrusive if we are to expect and secure the participation of the nonpoint source community. It would be desirable for States to accept applications from farmers on a monthly basis.
Ø S. 1961 in Section (g) (4) should clarify that the determination of “optimum water quality management” is a State decision.
Technical, Managerial and Financial Capacity
We agree with the Committee that there is a need for capacity building. Loan recipients should be required to demonstrate the ability to effectively manage their wastewater system and successfully repay loans. However, ASIWPCA is concerned that S. 1961 goes beyond what is reasonable and realistic. The Association would suggest that this provision be streamlined, because as currently written, it entangles the program in extensive, unnecessary and burdensome bureaucratic process. In addition:
Ø We question whether the CWSRF is the appropriate tool to accomplish this objective and whether it is fair to hold recipients of CWSRF funds to a higher standard than other facilities, including those funded annually under set asides or site specific appropriations. We also question the equity of placing such requirements on CWSRF loan recipients that own treatment works – while not imposing such mandates on owners of collection systems or interceptor sewers.
Ø States, under the leadership of the National Governors’ Association have consistently raised concerns about Federal unfunded mandates. If S. 1961 were to be enacted, higher levels of funding would be necessary to carry out these provisions.
Ø ASIWPCA remains concerned about the long-term integrity of the fund corpus. Each requirement has the potential to erode the fund and hence limit the utility of the SRF. To make CWSRF funding attractive, States would need to move to a zero interest rate which further erodes the corpus. Even that may not be sufficient to overcome the added burden of participation.
Strategy: The provision that States have a strategy in place to assist applicants in their development of financial, managerial and technical capability is laudable and supportable. In the development of such a strategy, the States need latitude to design it to meet their diverse challenges.
Ø As a house keeping measure, whenever (i) refers to “State” the term should be replaced by “State agency”.
Ø Section (B) should be deleted – as unnecessary and overly prescriptive. In order to develop a meaningful strategy, States do not need to describe or analyze the litany of “institutional, regulatory, financial, tax, or legal factors at the Federal, State, and local levels that encourage or impair the development of technical, managerial, and financial capacity.” Requiring States to describe “the manner in which the State intends to use the authorities and resources of the State” implies more than a strategy and clearly invites litigation that could be misused. Sanctions could apply to successful and effective State programs, if there is a perceived failure to carryout a particular element in precisely a certain way.
Ø Given the potential for misinterpretation and misuse of this provision, a 20% sanction is excessive. In making a determination of failure: 1) USEPA should be required to notify the State of the decision, justification and actions that need to be taken, and 2) States should have at least one year to correct the inadequacy before sanctions apply.
Ø A simplified report every 3-5 years to USEPA on progress made under State strategies is the most efficient and effective means. Annual updates to measure and report on local improvements in technical, management and financial capacity is an undue burden for a CWSRF, especially since trends are difficult to detect and measure annually. The Committee needs to take a step back and generally review reporting requirements under the Act and how they can be most efficient and effective.
Condition for Receipt of Assistance: States support asset management and it may be workable to have treatment works certify they have needed capacity and make that rationale transparent to the public. However, ASIWPCA urges the Committee to reconsider how best to accomplish the objective, before adding statutory requirements and deadlines. Specifically we would ask the Committee to consider the following:
Ø Overseeing development and evaluating local technical, managerial and financial capacity and asset management plans will be a substantial workload, and we question the utility of this provision. The provision for States to require treatment works to demonstrate “adequate” capacity will require a fair amount of subjective judgment and new USEPA bureaucracy. This may not yield the desired result.
Ø States should not be expected to police asset management, unless there is consensus on: 1) The content of the plans with respect to capital replacement, etc. and 2) A clear definition of adequacy.
Ø If asset management is a good idea, it should be required of all systems, not just those that receive future SRF assistance.
Restructuring: This section should be deleted and the Committee should consider other avenues. We make this suggestion because (j)(1) (A)-(C) will require: 1) Additional hoops which will result in disincentives to participate in the program, 2) The provision will be accompanied by considerable Federal bureaucracy, 3) The requirements will entail considerable State work load, 4) The policy assumptions are not necessarily valid (e.g., that consolidation, public/private partnerships and nonstructural alternatives are environmentally beneficial) and 5) The focus of the Act should be on clean water and not bureaucratic processes and procedures. Regarding (j)(2):
Ø Rate structures are not appropriate for regulation under the CWSRF. Other State agencies (public utility commissions) have purview and since the definition of “adequate” is unknown (does it include complete capital replacement, for example), the program would be extremely difficult to implement in the CWSRF. Does the Committee really want to use the CWSRF for this purpose and is the Committee prepared to deal with unintended consequences? How is the CWSRF going deal, for example, with loan recipients that apply an inappropriate burden on certain customers through double and triple rates?
Ø Making the requirement effective upon enactment seems premature – since the National Academy of Science study is not required until 2 years after enactment. Time should be allotted to thoughtfully consider the results of the congressionally mandated study. Hence, any provisions to address rates at the State and local level in S. 1961 would need to apply at least 30 months (or later) after study completion.
Ø States question the need for and the workability of applying the requirement to non-traditional needs such as nonpoint sources.
Technical Assistance: States have a long and successful history providing technical assistance to loan recipients. This provision (Section 206) is disturbing in that it seems to presume that States are incapable of, or are not interested in, providing assistance to small systems. This is not an accurate assumption. Furthermore, the provision takes the circuitous route to reach an unspecified goal – e.g., creating a program to fund non-profit entities to provide small community assistance for CWSRF participation. States do not see the need for this provision, especially since it is not clear how the program would operate and relate to the CWSRF and Section 104(b). If there needs to be a grant program, State, Regional and Local initiatives should be eligible. Activities funded should be coordinated with State efforts so they are mutually supportive. S. 1961’s reliance on USEPA (the Agency furthest from the point of need) is, at best, an ineffective approach. If this provision is to be included in national legislation, a State/Local advisory committee should be used to help create, focus and administer the program.
Competition Requirements: Requirements of the old construction grants program (Section 204(a)(6)) should not be reinstated. This is a good example of the bureaucracy and pitfalls that the CWSRF was created to avoid. The Association would ask what documented problem in the loan program is this provision intended to address.
Formula: States have questions about the formula and request additional information relative to how the numbers were derived and the effects of the proposed formula on States’ allotments at various appropriation levels. The results of the 2000 Needs Survey should be released as soon as possible, so that States can gage the full impact of proposed changes. And, if the eligibilities are expanded to include CAFOs, etc., the allocation formula should reflect such needs.
Furthermore clarification is needed relative consistency. If the Committee intends that all needs (which are included in the calculation of a State’s allocation formula) be eligible under a State’s CWSRF program (to receive funds for those needs under Title VI) – the provision needs wordsmithing (i.e. the issue may pertain to not just private utilities).
Clean Water Act / Drinking Water Act Fund Transfers: ASIWPCA is supportive of this provision and suggests that, in addition to providing for the transfer of funds between the Clean Water and Drinking Water SRFs, S. 1961 should also allow for full cross-collateralization between the funds.
Demonstration Program for Water Quality Enhancement: The goals of this effort are at once broad and inclusive of watershed protection of surface and source water, and yet focused on primarily municipal boundaries and wastewater facilities. The ASIWPCA suggests that: 1) Eligibilities go beyond municipalities to include State, regional and watershed based entities – governmental and non-governmental, 2) The list of project types be expanded to include integrated water management, etc. and 3) A advisory group with balanced stakeholder representation be convened to assist in carrying out the intent of Congress.
NAS Rate Study: This study should be carried out in consultation with a balanced group of stakeholders, including a significant number of State and Local government officials responsible for on-the-ground implementation of the Clean Water Act requirements.
Water Resource Planning: State water quality agencies question the need for this provision and are concerned about adverse impacts on other efforts of the US Geologic Survey (USGS). It appears to duplicate what States currently have underway with other Federal agencies, including the Bureau of Reclamation. USGS services are already being reduced and further mandates are counter-productive. For example, the stream-gauging program is critical to the State development of TMDLs. To further divert USGS attention away from its highest priorities to other activities, especially when they are already being performed by other agencies, seems counterintuitive. States need USGS to do what it does best – provide accurate timely water quality data for program implementation and decision-making. There may be a role for USGS within the context of the Clean Water Act and Mr. Robert Hersh will be articulating such activities in his testimony. In any event, State Water Quality Agencies must be integral to the creation of any clean water related authorities for USGS. The Department on Interior should be directed to closely coordinate and consult with the State water quality officials and agencies in carrying out the objectives of S.1961.
Again Mr. Chairman, we applaud the Committee for beginning the discussion on the Clean Water Act SRF reauthorization and we, at ASIWPCA, are eager to work with you and your fine staff to refine legislation that will move this country forward in the pursuit of cleaner water. We thank you for the opportunity to come before you and we are available at any time to meet with you and the members of your staff on the recommendations provided in the statement. Please contact our Executive Director, Robbi Savage, at 202-898-0917. Thanks again for inviting the State Water Program Administrators.