U.S. Senate Committee on Environment & Public Works
U.S. Senate Committee on Environment & Public Works
Hearing Statements
Date:   07/20/2004
Statement of Robert Carr
On behalf of City of Owasso and City of Collinsville
Field Hearing on water: cost of regulations

The Oklahoma Municipal Utilities Providers (OMUP) is an organization established in January 2003 by the Oklahoma Municipal League (OML) to represent the water and wastewater interests of municipalities. Since inception one and one-half (1½) years ago, two hundred fourteen (214) Oklahoma municipalities have become members of OMUP. This rapid organization growth is indicative of the collective magnitude of concerns relating to water-related issues in the state. Both the City of Owasso (population 22,500) and the City of Collinsville (population 4,300) are members of OMUP.

Data collected by the OML indicate that rural and urban communities in Oklahoma have long-term financial concerns. As shown below, the Oklahoma Municipal League reports that average 2002 Oklahoma municipal revenues were less than one percent (1%) derived by property tax (comparatively the 2003 national average was 26%).

In addition, thirty-two percent (32%) of municipal revenues were from sales tax (national average was 13%), and forty-three percent (43%) were the result of utility fees. No Oklahoma municipality had income tax as a revenue source (whereas the national average was 7%).

Average expenditures for utilities were reported to be thirty-nine percent (39%) of municipal budgets and, most importantly, comparative revenues and expenditures for Oklahoma utilities are essentially equal. It is also significant to note, the expenditures indicated do not reflect depreciation or any unbudgeted out-of-pocket expenses.

Sales tax revenues have been extremely volatile for the past few years. Municipalities have determined that they cannot count on sales tax revenue for stability.

Many of the municipal budget short-falls experienced have had to be subsidized by utilities revenues. As a result, utilities operations have been stressed to achieve consistent results with limited or non-existent additional funds to meet changing operating conditions. The City of Owasso FY04-05 Public Works Authority Fund ending balance is budgeted to decrease, as expenses will slightly exceed revenues by year end.

Data complied from work done by consulting engineers in Oklahoma, U.S. Environmental Protection Agency fact sheets, information from the Association of State Drinking Water Administrators and Oklahoma Department of Environmental Quality staff indicate the following costs can be anticipated based on new federal regulations:

Arsenic rule $1.25/gallon (construction) Surface water treatment $2.25/month (per connection) Stage 1 Disinfectant/Disinfection Byproducts $2.00/month (per connection) Groundwater rule $0.10/month (per connection)

These data indicate the result is higher costs to each customer. The construction needed may increase water bills by as much as 60% per customer.

Municipalities have had the security of being able to make long-term decisions to provide quality water to customers based on the stability of regulations. Changing regulations have complicated that ability. The security of capital investments may be severely impacted with changing regulations.

We design treatment facilities based on the requirements/regulations known today. When the requirements become more restrictive, the alternatives are expected to become more costly. Fewer options are available to the small utility. Economies of scale are more favorable to the larger utility that can absorb additional treatment costs among more customers. To have control of their own operations, the small utility is faced with locating new sources of supply.

The City of Owasso presently is a wholesale customer of the City of Tulsa. Under this scenario, conformance with these new regulations largely rests with Tulsa and costs can be allocated to many users.

The City of Collinsville, on the other hand, operates its own water treatment plant. Costs to achieve regulations conformance by Collinsville must be paid only by its customer based.

A study of the feasibilities of constructing a regional water treatment plant to serve the cities of Owasso and Collinsville (along with two adjacent Rural Water Districts) is presently underway and funded by a $100,000 grant from the U.S. Environmental Protection Agency. The purpose of the study is to evaluate means for the communities to have fiscal control over the water provided to their customers. Changing regulations can severely impact the results of this study and the long-term decisions being made today.

The OMUP questions whether costs versus benefit have been adequately addressed prior to implementation of the regulations. In a January 16, 2004 letter from the American Water Works Association (AWWA) to the U.S. Environmental Protection Agency commenting on the proposed rule for Stage 2 Disinfectants and Disinfection Byproducts Rule (Stage 2 DBPR), the following was stated

The Stage 1 FACA [Federal Advisory Committee] members recognized the preliminary nature of much of the science surrounding disinfection byproducts and jointly committed themselves to pursuing a demanding research agenda to fill in the significant gaps.

AWWA, like EPA, looks forward to seeing scientifically defensible health effects data to support formal risk assessments that meet EPA’s guidelines and that address stakeholder concerns. With this information, we can help advance an effective and timely research agenda.

AWWA looks forward to the preparation of formal risk assessments that meet agency guidelines for possible DBP-related … health effects.

In addition, the AWWA stated

The EPA cost/benefit analysis supporting the Stage 2 DBPR entails an analytical process with 13 distinct steps. In reviewing this analysis AWWA found significant issues affecting the reasonableness and credibility of the final conclusion in nearly every step.

They went on to say that “EPA may have overstated total benefits considerably.”

Similarly, in a January 9, 2004 letter from the American Water Works Association (AWWA) to the U.S. Environmental Protection Agency commenting on the proposed rule for Long-Term 2 Enhanced Surface Water Treatment Rule (LT2ESWTR), the following was stated

AWWA is very concerned that the agency’s Economic Analysis documents and preamble text have created an unrealistic expectation and implied a significantly greater benefit that will actually be realized through implementation of the LT2ESWTR.

These comments are concerning to OMUP and its member municipalities that are faced with more restrictions and increased costs. OMUP water suppliers are charged with investing public funds in a manner that protects their investments - where there are no uncertainties pertaining to the need for additional improvements to meet future regulations.