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| #  Association of State and Interstate                                |
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| ##  *Water Pollution Control Administrators*                          |
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1221 CONNECTICUT AVENUE N.W, 2^ND^ FLOOR, • WASHINGTON, DC 20036 • TEL:
202.756-0600 • FAX: 202.756-0605 • WWW.ASIWPCA.ORG

Testimony on

Reauthorization of the Clean Water State Revolving Loan Fund

On Behalf of ASIWPCA and the Commonwealth of Virginia

Before the House Subcommittee on Water Resources and the Environment

January 19, 2007

Thank you for the honor of appearing before this distinguished committee
and for the opportunity you have provided by considering reauthorization
of the State Revolving Loan Fund so early in this session of Congress.

My name is Ellen Gilinsky and I am the Water Division Director for the
Virginia Department of Environmental Quality and a Board Member of the
Association of State and Interstate Water Pollution Control
Administrators (ASIWPCA). On behalf of the Association, I submit
ASIWPCA's written testimony, and will spend my time with you, sharing
the Virginia experience with the Clean Water State Revolving Loan Fund.

My colleagues have told you of the importance of the Fund in addressing
water quality throughout the United States. I am here to tell you first
hand how the Virginia Clean Water Revolving Loan Fund has been
instrumental in the achievement of water quality improvement and
protection in Virginia. Moreover, with the enormous needs Virginia faces
in the immediate future, maintaining this Federal/State partnership
program is more critical now then ever before.

To date the program has funded over \$1.5 Billion in clean water
projects in Virginia including: wastewater treatment upgrades, combined
and sanitary sewer overflow elimination projects, decentralized sewer
system replacements, agricultural best management practices, land
conservation priorities, and Brownfield remediation projects.

With escalating construction costs, increased regulatory requirements,
the importance of the restoration of the Chesapeake Bay, and the overall
aging of infrastructure in our older cities and towns, demand for loan
funds has grown astronomically. Just this year, we approved funding for
a state record \$302 million in loan funds, but unfortunately had to
deny funding to an additional \$464 million in requests due to a lack of
resources. We fully expect this level of demand to continue or increase
over the foreseeable future.

The State Revolving Loan programs are widely recognized as being well
managed and extremely cost effective from a Federal standpoint. Through
the aggressive use of fund leveraging in Virginia, we have been able to
provide over a 225 % Federal return on investment in the program to
date, and we expect this figure to exceed 300% by 2009.

Administrative costs in Virginia are extremely low, at less then 2% of
total funds distributed to date. And the actual expenditure and use of
available resources is very timely and expeditious, with well over 90%
of the program's funds having already been provided to recipients and
the remaining funds fully committed to projects under design.

Projects funded through the SRF make real differences in water quality
improvements and our quality of life. Let me share a few examples with
you:

-   The City of Lynchburg has used over \$70 million in SRF loan funds
    to finance their Combined Sewer Overflow program. This has already
    resulted in the elimination of over 100 of 132 overflow points,
    taking raw sewage discharges out of neighborhood streams as well as
    the James River.

-   The small low-income community of Dawn in Caroline County used
    \$2.85 million from the SRF in conjunction with Housing and
    Community Development assistance to install an alternative sewage
    collection and on-site treatment facility, eliminating a substantial
    health hazard situation from failing septic systems.

-   Numerous small towns in the coalfield region of Southwestern
    Virginia were able to replace their old primary sewage treatment
    facilities with updated secondary systems.

-   And hundreds of Virginia's financially strapped farmers have been
    able to install non- point source pollution controls such as animal
    waste facilities, stream fencing, and off-stream watering facilities
    or purchase no-till planters to protect water quality as a result of
    low interest SRF loans.

The single greatest water quality challenge currently facing Virginia
and the surrounding Bay States is the restoration of the Chesapeake Bay.
The estimates for wastewater treatment upgrade costs in Virginia alone
exceed \$2 Billion!

Virginia has stepped up with a strong commitment to provide substantial
grant funding for a significant portion of the costs by allocating over
\$400 Million in grant money from our Water Quality Improvement Fund,
which was started in 1997.To continue the Commonwealth's commitment,
Governor Kaine has recently proposed the Bay Bond Bill, which if passed
by the Virginia General Assembly, would provide another \$250 Million
over the next four to five years, supplying enough funding to achieve
our point source commitments in the Bay restoration.

Virginia is also committed to aggressively leverage the SRF to provide
loan funding for the remaining local share. This combination of funding
is essential to making the Chesapeake restoration efforts achievable and
affordable for Virginia's citizens, particularly those in the rural
areas of the state where per household treatment costs run high and
incomes are generally low.

In summary, Virginia's strategy to improve our water quality, while
funded in substantial part by our own state funds, relies on the SRF to
provide the difference in low interest loans and to allow us to leverage
our financial resources. Our story is not unique. It is essential that
Congress continue to support clean water through increased
appropriations to the Clean Water SRF and reauthorization.

Thank you again for allowing me the opportunity to testify on this
important matter.

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| #  Association of State and Interstate                                |
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| ##  *Water Pollution Control Administrators*                          |
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1221 CONNECTICUT AVENUE N.W, 2^ND^ FLOOR, • WASHINGTON, DC 20036 • TEL:
202.756-0600 • FAX: 202.756-0605 • WWW.ASIWPCA.ORG

**Testimony on**

####### **[Reauthorization of the]{.underline}**

####### **[Clean Water State Revolving Loan FUnd]{.underline}**

## Before the House Subcommittee on Water Resources and the Environment

### **January 19, 2007**

The Association of State and Interstate Water Pollution Control
Administrators (ASIWPCA) greatly appreciates the leadership the
Committee has so quickly taken to reauthorize the Clean Water State
Revolving Fund (CWSRF). We further appreciate the Committee's
recognition that the CWSRF is the appropriate vehicle for future
infrastructure financing and needs increased funding in the
appropriations process.

**[History of the CWSRF]{.underline}:** In the early 1980's, the Office
of Management and Budget (OMB) informed States that the Administration
would phase out the Federal construction grants program unless States
and Congress found a better vehicle. The grant program was too
expensive, burdensome and could not fund enough projects to meet the
needs. Congress and the States met that challenge, creating the CWSRF in
1987. Since the fund grows over time and revolves, the CWSRF serves as a
major source of funding for Clean Water Act implementation *in
perpetuity* for:

Traditional wastewater infrastructure and pollution control

Combined sewer overflow correction

Stormwater management

Nonpoint source pollution control (e.g., agriculture)

Implementation of estuary management plans

Assessment and watershed solution development by States, local and
regional governments.

**[Needs]{.underline}:** The Committee has asked ASIWPCA to speak to the
needs. There are several dimensions to the issue. The capital funding
needed for the above activities exceeds well over \$ 400 Billion. This
is a conservative estimate. Requirements and expectations for pollution
sources increase every year. The cost of watershed protection and clean
up will be expensive, but has not been quantified for the substantial
percentage of assessed waters that are impaired because they exceed
State water quality standards or are threatened with becoming so:

**Assessed Waters Needing Further Pollution Controls**

Rivers (miles) 16%

Lakes (acres) 53%

Estuaries (sq. miles) 55%

Great Lakes (shore line miles) 100%

Maintaining water quality is also a significant challenge as population,
economic growth, and public use of water resources increase over time.
The resulting increase in pollution loadings must be addressed, or the
nation risks sliding back to the water quality of the 1970's.

There are 16,000 publicly owned wastewater systems in the nation, most
of which are small. 23% of funding associated with their capital
expenses has been Federal. While over the last 30 years the focus has
been on upgrading treatment facilities and expanding systems, it has
expanded to address the need to renew and replace aging infrastructure.
In areas where the nation's population is becoming most concentrated,
the major challenges are municipal discharges and urban runoff.

The recent declines in Federal Funding and the potential to eliminate
further capitalization most certainly will affect water quality and
attainment of the Clean Water Act, because the Fund is not large enough
to meet these many needs. A better capitalized CWSRF is essential for
States to be successful helping municipal systems and other sources
upgrade and put other controls in place to achieve the Act.

**[Progress]{.underline}:** CWSRF is one of the most successful Federal
programs in history, because it is a *streamlined, State-based* program.
Since its creation, the CWSRF has addressed a wide array of water
quality problems, with projects built in half the time and at less cost
than under the Federal grants program. Since 1987:

-   More than \$24 Billion in Federal funds has been appropriated. With
    the additional State match, leveraging by States in the bond market,
    and loan repayments, there is over \$61 Billion in State CWSRFs. Due
    to the high demand for CWSRF funding, virtually all those funds have
    been loaned out.

-   Over 18,600 projects have been funded.

    -   In 2006, over \$5 Billion in loans were executed.

-   Cities and towns of all sizes have benefited:

    -   44% of funds went to projects serving populations of 100,000 and
        above.

    -   64% of loans went to communities with populations under 10,000.

-   In the last 5 years, \$1.1 Billion in assistance has been for
    nonpoint sources.

-   Loans can be made based on affordability -- e.g. at low to zero
    interest. Cumulatively, the CWSRF has saved borrowers \$17.5 Billion
    (54%), with an average interest rate of 2% recently.

-   Each Billion in CWSRF funding creates 16,000 -- 22,000 jobs in the
    short term (up to 5 years) and 5,000 in the longer term. In
    addition, many more jobs are created as a result of watershed
    revitalization, e.g. due to restoration of recreational waters and
    city river fronts.

> \[For environmental results achieved recently under the program see
> attachment\]

Recommended Principles in Reauthorization: As Congress seeks to
reauthorize the CWSRF, it is vitally important to:

-   Continue and increase capitalization levels for the Fund and
    increase annual appropriations.

-   Assure the CWSRF remains competitive in the financial market place.

-   Maintain a streamlined and State based program.

-   Enable States to direct funding to their diverse priority water
    quality needs -- for each State is unique.

Careful attention needs to be given to the collective impact of any new
requirements. The CWSRF's effectiveness in achieving environmental
results should not be weakened in any significant way. In addition
ASIWPCA recommends:

-   The CWSRF should continue to be maintained as the umbrella funding
    mechanism for achieving goals of the Act in the nation's watersheds.

-   The States' ability under the CWSRF should be expanded to:

```{=html}
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-   Fund a broader range of eligibilities,

-   Extend loan repayment periods,

-   More adequately cover State administrative costs,

-   Allow States to blend financing mechanisms (loans and principal
    subsidies) to make projects more affordable, and

-   Enable States to better provide planning and technical assistance,
    particularly to small entities.

We urge the Committee to:

-   Continue State ability to transfer funds between the Clean Water and
    Drinking Water SRFs.

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```
-   Avoid USEPA micromanagement so that States can focus on
    environmental results.

**[Impacts of *Not* Funding the CWSRF]{.underline}:** The Committee has
asked ASIWPCA to speak to the impacts of not funding the program in the
future. There are many aspects to that.

-   [The Clean Water Act Tool Box:]{.underline} For each Federal dollar
    lost to the program, there is an even a greater amount in State
    contributions and leveraged funds that will be lost. No other
    funding mechanism comes close to the CWSRF's buying power, in terms
    of meeting infrastructure needs. To that extent, the tool will be
    lost and is irreplaceable.

-   [Solving Problems:]{.underline} There will be diminished ability to
    address existing and future water quality problems because the fund
    is not large enough and would diminish over time.

-   [Diminished Water Quality:]{.underline} Water quality will be
    adversely affected. Good quality waters will deteriorate as needs
    cannot be met.

-   [Impacts On The economy:]{.underline} There will be diminished
    economic growth. The infrastructure will not be there to accommodate
    it and States have very limited ability to allow such growth in
    impaired waters.

-   [Implementation:]{.underline} Clean Water Act implementation will
    slow down.

-   [Costs:]{.underline} Infrastructure costs will increase as needs are
    met more slowly over time and subsidized interest rates are not
    available. .

-   [Small towns:]{.underline} Smaller towns are of particular concern.
    Frequently, they have affordability problems and limited (or no)
    access to the bond market. States will be less able to provide
    technical assistance to get needed projects completed.

-   [Compliance:]{.underline} There will be increased non-compliance and
    more need to rely on enforcement and penalties to motivate action.

-   [Collaborative Problem Solving:]{.underline} There will be less
    watershed initiatives to collaboratively solve complex problems,
    because there will be not funding for the 604(b) setaside and there
    will be less CWSRF seed funding to get stakeholder buy in to
    implementing solutions.

-   [Partnership:]{.underline} Viewing such impacts in their entirety,
    the partnership between Federal, State and local governments,
    citizens and other stakeholders would be subject to great strain.
    Implementation of the Clean Water Act will be much more difficult. A
    weakened CWSRF undermines the carefully crafted strategy Congress
    enacted.

Mr. Chairman, we applaud the Committee for moving forward to reauthorize
the Clean Water Act State Revolving Loan Fund in this Congress.
Understandably of equal importance is the Committee's strong support for
increasing funding in the appropriations process. These actions are of
vital importance to continue to improve the nation's water quality and
maintain the significant progress we all have achieved. We, at ASIWPCA,
are eager to work with you and your fine staff to move the nation
forward in the pursuit of cleaner water. We appreciate the opportunity
to testify and we are available at any time to meet with you and the
members of your staff on the recommendations provided in this statement.