BACKGROUND AND CONTEXT
Like the rest of the United States, New Hampshire has made great progress over the last thirty years in improving the quality of our surface water, groundwater and drinking water supplies. The cleanup of New Hampshire's rivers is an environmental success story, as we have gone from having one of the nation's ten most polluted rivers to having over 90 percent of the state's waters meeting or exceeding water quality standards. In addition, New Hampshire has achieved full compliance with the Surface Water Treatment Rule of the Safe Drinking Water Act for over 70 municipalities that originally had unfiltered surface water supplies. Unlined landfills, which are a significant source of groundwater and surface water contamination, are being closed systematically on a priority basis. These accomplishments by New Hampshire's municipalities would not have been possible without federal and state financial assistance. These grants and loans to communities in New Hampshire have included: * $837 million in wastewater treatment grants. In fact, long after the federal construction grant program has evolved to the revolving loan program, New Hampshire still provides municipalities with $10 to $12 million per year in grants of 20 to 30 percent for qualifying communities. * $250 million in state and federal revolving fund loans have been issued for wastewater system improvements, drinking water supply upgrades and landfill closures. * $14.7 million in state grants for drinking water supply upgrades for surface water treatment rule compliance. * $ 21 million in state grants for landfill closures. * $1.5 million in 25% state matching grants were provided to municipalities for land acquisition to protect current- and future - drinking water sources. This is a new program which was established in 2000. New Hampshire is the only state with grants and loan programs for improvements to wastewater and drinking water supply systems, source water protection by land acquisition, and landfill closures. We have long recognized that municipal environmental infrastructure upgrades need to be given high priority and considered in an integrated fashion to ensure environmental and public health protection in an affordable manner for our citizens.
We work not only with the U.S. Environmental Protection Agency but also with the U.S. Department of Agriculture's (USDA) Rural Development Program and the Department of Housing and Urban Development's (HUD) Community Block Grant Program, which is administered in New Hampshire by the Office of State Planning, to optimize funding for drinking water and wastewater projects for New Hampshire's communities.
In spite of all that has been accomplished, New Hampshire still has major challenges that will require state and federal funding well into the future to upgrade and improve our core infrastructure and improve water quality. These include:
* Aging infrastructure, in two broad categories: o First, most of our 85 publicly-owned wastewater treatment plants were constructed or upgraded over 20 years ago during the "federal construction grants" era. The end of the useful life of original equipment is being approached and substantial new investment will be required within the next 10 years. o Also, water and wastewater piping systems (portions of which are over 100 years old) are deteriorating in some systems. The limited available local monies from user fees and taxes invested in water and wastewater infrastructure are used primarily to meet regulatory requirements such as drinking water and water quality standards. When the core infrastructure is inadequate, new development will move to undeveloped land, remote from urban centers, where on-site water and wastewater disposal is feasible, contributing to "urban sprawl" and increasing potential for water quality degradation in undeveloped areas. "Smart growth" requires water and wastewater piping systems with adequate capacity and integrity for reasonable growth.
* Increasingly more stringent permit limits for wastewater treatment, particularly for organic loading, nutrients, and metals. These improvements are much needed to improve water quality but the cost is a concern for our communities. In New Hampshire, this is a particular concern for small, rural low-income communities located on water quality limited streams (such as in the headwaters of our rivers) that can least afford costly upgrades to advanced wastewater treatment levels. * Stormwater pollution caused by combined sewer overflows (CSOs), sanitary sewer overflows (SSOs), and stormwater systems. This is a significant, ongoing water quality and compliance concern, principally for New Hampshire's older industrial cities. These projects are large and costly over an extended time period, stressing available local and state resources.
* More stringent drinking water standards. New Hampshire strongly supports drinking water standards which are protective of public health. However, more stringent standards, particularly for naturally occurring contaminants such as arsenic and radon, disproportionately affect very small community public water systems where costs for one or more sophisticated treatment systems must be paid by a small user base, resulting in very high water rates.
* Completing the job of closing New Hampshire's unlined landfills which are a significant source of nonpoint source pollution. Of New Hampshire's 160 unlined municipal landfills, 80 have been properly closed and the other 80 are scheduled for closure over the next 10 years.
* Protection of land areas that contribute to current- and future - drinking water sources from contamination associated with development. Only about 12% of these critical areas are now protected. Beginning in 2000, New Hampshire has made this a priority for investment, with a budget of $1.5 million in state grant monies as a 25% match to local contributions to preserve valuable water supplies for future generations.
In order to meet these challenges and improve our environment and drinking water supplies, well-focused investment of federal, state, and local resources, targeted at priority needs, is required. New Hampshire's needs are generally described below. In addition, in the addendum to this testimony, five tables are provided that contain detailed information on these needs.
Drinking Water Supply Needs: New Hampshire has identified approximately $500 million in water supply infrastructure needs across categories that include transmission, treatment, storage, and source development. Our most recent water supply needs survey was completed in 2000. About $45 million (9%) of this need has been identified as necessary to comply with Safe Drinking Water Act requirements with established deadlines. In addition to the $500 million, estimated costs for compliance with the proposed radon and arsenic rules are $5 to $55 million and $2 to 4 million, respectively, depending on the final rule. The majority (63.5%) of the $500 million in water supply needs are for small community water systems serving fewer than 3,300 people where the user base is smaller and user rate impacts tend to be higher for major projects.
Wastewater Needs: Wastewater needs are estimated to be approximately $750 million for treatment, sewers, combined sewer overflows (CSOs), sanitary sewer overflows and landfill closures. Over 60% ($460 million) of these needs are to address CSOs in six municipalities whose sewerage systems were constructed over 100 years ago. Wastewater treatment needs are estimated at $98 million and are principally for upgrades to small municipal wastewater treatment plants for NPDES permit compliance.
Total Annual Needs: New Hampshire's annual need is estimated to range from $77.5 million to $155 million per year for a period of investment bracketed between 10 and 20 years. New Hampshire's total long-term public drinking water and wastewater infrastructure needs are estimated at $1.55 billion. Assuming 20 years of uniform investment (to be consistent with the time frame in the USEPA's 2000 drinking water needs survey), the total need is estimated to be about $77.5 million annually. However, this is probably low because most of the identified needs either exist now, or will exist shortly based on predictable events. Also, as noted above, the costs for compliance with proposed new arsenic and radon standards are not included so the total needs may also be low. To account for the potential for more rapid implementation, a 10-year construction period has also been included, resulting in an upper range for annual investment of $155 million per year.
AVAILABLE FUNDING SOURCES
Collectively, in 2001, state and federal sources will provide about $35 million in grants and $40 million in low interest loans to New Hampshire's municipalities for wastewater and drinking water projects. These state and federal funding sources include: * Both Wastewater and Drinking Water Supply Grants and Loans from the USEPA and NHDES. These programs are managed by NHDES. * Rural Development Grants and Loans from the USDA's Rural Development Program. * HUD Community Development Block Grants. This program is managed by the New Hampshire Office of State Planning. These state and federal agencies work in close partnership to optimize funding packages for municipalities as projects are identified that require assistance. In particular, special attention is given to communities where drinking water supply and wastewater projects will have significant financial impact on low income households.
MUNICIPAL FUNDING BURDEN
New Hampshire's estimated annual needs and available funding can be summarized as follows: Infrastructure needs: $77.5 to $155 million per year Available grants and loan subsidies $ 53.6 million per year Required local funding $23.9 to $101.4 million per year (including SRF loans)
In a typical year, the available state and federal grants are all used. Additional local funding is provided by either increasing user rates or through property taxes (or both in some cases). In communities with stressed water and sewer rates, upgrades to address noncompliance with drinking water or water quality standards will generally be funded while pipe replacement or upgrade projects will not. Thus, affordability becomes the dominant issue, particularly for small rural communities and water supplies.
In New Hampshire, both median household incomes (MHIs) and water and sewer rates vary widely. The table below serves to illustrate this issue.
Municipality Median Household Income (MHI) Average annual user fees Water & sewer rates (as % of MHI) Berlin $ 25,040 $1,083 4.3% Ashland $ 25,495 $1,295 5.1 % Jaffrey $ 32,540 $1,012 3.1% Hanover $ 51,899 $ 454 0.9% Merrimack $ 52,798 $ 296 0.6% Without federal and state funding, infrastructure projects in communities such as Ashland, Berlin, and Jaffrey will either further financially stress low income households or discretionary projects will be delayed. As a result of a recent drinking water system upgrade, Ashland has the highest water and sewer rates as a percent of MHI in New Hampshire. Jaffrey is under administrative order to develop and implement a multi-million dollar wastewater treatment plant upgrade to meet stringent water quality limits. Likewise, Berlin also has multimillion dollar drinking water supply infrastructure needs that the city is attempting to address. For both Jaffrey and Berlin, the result will be increased water and sewer rates within a few years, even with 20 to 30% state-aid grants and, for Berlin, additional federal grants that have been received, further stressing the resources of these low income communities.
As illustrated by Ashland, Jaffrey, and Berlin, many New Hampshire communities have a significant problem with high water and sewer rates. In fact, of 80 municipal utilities for which DES has current data on both water and sewer rates, 33 (40%) currently have combined water and sewer rates that exceed 2% of the MHI. Two percent of MHI is the commonly accepted threshold by state and federal agencies, including the USDA's Rural Development Program and HUD's Community Development Block Grant Program, at which water and sewer rates are considered excessive.
CONCLUSIONS AND RECOMMENDATIONS
New Hampshire has significant need for additional federal investment to fund drinking water and wastewater infrastructure improvements. This is important to meet already well-defined needs, both for regulatory compliance and to maintain and improve core infrastructure elements, like aging piping and treatment equipment.
As alternatives are considered at the national level, we strongly recommend that the existing State Revolving Loan Fund program be maintained as the cornerstone of these programs. We recommend that additional funding be provided through the existing SRF program. Construction grants distributed to communities through existing state processes to augment the SRF could also be used effectively if targeted based on state priorities to augment SRF loans for communities with high water and sewer rates.
As we have for years, the New Hampshire Department of Environmental Services is well prepared to establish statewide priorities and needs with input from our communities, and to manage and distribute funds on a priority basis. In New Hampshire, the integration of grant and loan functions with the technical programs has resulted in outstanding performance for decades and will continue to do so into the future. The SRF, coupled with the state-aid grant programs, have worked very well and any additional federal resources provided would be used effectively to leverage these existing resources. This approach needs to be preserved.
State environmental agencies should also be provided with greater flexibility to establish state-specific criteria for, and address, financial hardship caused by excessively high water and sewer rates. This would help us to develop funding packages that make these improvements more affordable for communities with low income levels and accelerate environmental improvements by facilitating local approvals for funding. This is particularly crucial for communities that are, in a short time frame, confronted with the need for major upgrades to meet regulatory and core infrastructure requirements for some combination of water supply, wastewater and solid waste facilities, considering that any of these demands alone could stress a low income community.
Finally, there is also a significant gap in the resources for New Hampshire and other states required to manage existing mandates to clean up our water. We continue to face extraordinary demands to manage water quality and water supply programs. As is also expressed in the Environmental Council of States Resolution on the Water Quality GAP Analysis, as the Subcommittee considers its options for addressing the water supply and wastewater infrastructure needs, we also urge you to support state program management capacity to meet those needs.