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25–370 2017

REINVESTMENT AND REHABILITATION OF OUR 

NATION’S SAFE DRINKING WATER DELIVERY 

SYSTEMS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ENVIRONMENT 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

FIRST SESSION 

MARCH 16, 2017 

Serial No. 115–13 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

(II) 

COMMITTEE ON ENERGY AND COMMERCE 

GREG WALDEN, Oregon 

Chairman 

JOE BARTON, Texas 

Vice Chairman 

FRED UPTON, Michigan 

JOHN SHIMKUS, Illinois 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Ohio 

BILLY LONG, Missouri 

LARRY BUCSHON, Indiana 

BILL FLORES, Texas 

SUSAN W. BROOKS, Indiana 

MARKWAYNE MULLIN, Oklahoma 

RICHARD HUDSON, North Carolina 

CHRIS COLLINS, New York 

KEVIN CRAMER, North Dakota 

TIM WALBERG, Michigan 

MIMI WALTERS, California 

RYAN A. COSTELLO, Pennsylvania 

EARL L. ‘‘BUDDY’’ CARTER, Georgia 

FRANK PALLONE, JR., New Jersey 

Ranking Member 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

G.K. BUTTERFIELD, North Carolina 

DORIS O. MATSUI, California 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

PETER WELCH, Vermont 

BEN RAY LUJA ́ N, New Mexico 

PAUL TONKO, New York 

YVETTE D. CLARKE, New York 

DAVID LOEBSACK, Iowa 

KURT SCHRADER, Oregon 

JOSEPH P. KENNEDY, III, Massachusetts 

TONY CA ́ RDENAS, CaliforniaL RUIZ, 

California 

SCOTT H. PETERS, California 

DEBBIE DINGELL, Michigan 

SUBCOMMITTEE ON ENVIRONMENT

JOHN SHIMKUS, Illinois 

Chairman 

DAVID B. MCKINLEY, West Virginia 

Vice Chairman 

JOE BARTON, Texas 

TIM MURPHY, Pennsylvania 

MARSHA BLACKBURN, Tennessee 

GREGG HARPER, Mississippi 

PETE OLSON, Texas 

BILL JOHNSON, Ohio 

BILL FLORES, Texas 

RICHARD HUDSON, North Carolina 

KEVIN CRAMER, North Dakota 

TIM WALBERG, Michigan 

EARL L. ‘‘BUDDY’’ CARTER, Georgia 

GREG WALDEN, Oregon (ex officio) 

PAUL TONKO, New York 

Ranking Member 

RAUL RUIZ, California 

SCOTT H. PETERS, California 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

JERRY MCNERNEY, California 

TONY CA ́ RDENAS, California 

DEBBIE DINGELL, Michigan 

DORIS O. MATSUI, California 

FRANK PALLONE, JR., New Jersey (ex 

officio) 

(III) 

C O N T E N T S 

Page 

Hon. John Shimkus, a Representative in Congress from the State of Illinois, 

opening statement ................................................................................................ 1 

Prepared statement .......................................................................................... 3 

Hon. Paul Tonko, a Representative in Congress from the State of New York, 

opening statement ................................................................................................ 4 

Prepared statement .......................................................................................... 6 

Hon. Greg Walden, a Representative in Congress from the State of Oregon, 

prepared statement .............................................................................................. 120 

WITNESSES

Randy Ellingboe, Minnesota Department of Health, on behalf of the Association of State Drinking Water Administrators .................................................... 8 

Prepared statement .......................................................................................... 11 

Answers to submitted questions ...................................................................... 143 

John J. Donahue, CEO, North Park Public Water District in Machesney 

Park, Il, on behalf of the American Water Works Association ......................... 17 

Prepared statement .......................................................................................... 20 

Answers to submitted questions ...................................................................... 149 

Rudolph S. Chow, P.E., Director, Baltimore, MD Department of Public Works, 

on behalf of the American Municipal Water Association .................................. 32 

Prepared statement .......................................................................................... 34 

Answers to submitted questions ...................................................................... 165 

Gregory E. DiLoreto, Chairman, Committee for America’s Infrastructure, 

American Society of Civil Engineers .................................................................. 45 

Prepared statement .......................................................................................... 47 

Answers to submitted questions ...................................................................... 171 

Martin A. Kropelnicki, President and CEO, California Water Service Group, 

on behalf of the National Association of Water Companies ............................. 53 

Prepared statement .......................................................................................... 55 

Answers to submitted questions ...................................................................... 175 

Erik Olson, Director, Health & Environment Program, Natural Resources 

Defense Council .................................................................................................... 65 

Prepared statement .......................................................................................... 68 

SUBMITTED MATERIAL

Report entitled, ‘‘2017 Infrastructure Report Card,’’ from the American Society of Civil Engineers, submitted by Mr. DiLoreto ........................................... 121 

Statement of the National Ground Water Association, submitted by Mr. Shimkus ......................................................................................................................... 127 

Statement of Stephanie A. Miner, Mayor of Syracuse, New York, submitted 

by Mr. Tonko ........................................................................................................ 128 

Statement of American Rivers, submitted by Mr. Tonko ..................................... 131 

Article entitled, ‘‘In American Towns, Private Profits from Public Works, 

March 16, 2017, New York Times, submitted by Mr. Tonko ............................ 133 

(1) 

REINVESTMENT AND REHABILITATION OF 

OUR NATION’S SAFE DRINKING WATER DELIVERY SYSTEMS 

THURSDAY, MARCH 16, 2017 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON ENVIRONMENT, 

COMMITTEE ON ENERGY AND COMMERCE

Washington, DC. 

The subcommittee met, pursuant to call, at 10:00 a.m., in room 

2322 Rayburn House Office Building, Hon. John Shimkus (chairman of the subcommittee) presiding. 

Present: Representatives Shimkus, McKinley, Barton, Murphy, 

Blackburn, Harper, Olson, Flores, Hudson, Walberg, Carter, Tonko, 

Ruiz, Peters, Green, DeGette, McNerney, Cardenas, Dingell, and 

Matsui. 

Staff present: Grace Appelbe, Legislative Clerk; Mike 

Bloomquist, Deputy Staff Director; Jerry Couri, Deputy Chief Environmental Advisor; Wyatt Ellertson, Research Associate, Energy/ 

Environment; Adam Fromm, Director of Outreach and Coalitions; 

Giulia Giannangeli, Legislative Clerk, Digital Commerce and Consumer Protection/Environment; Tom Hassenboehler, Chief Counsel, 

Energy/Environment; A.T. Johnston, Senior Policy Advisor/Professional Staff, Energy/Environment; Alex Miller, Video Production 

Aide and Press Assistant; Chris Sarley, Policy Coordinator, Environment; Dan Schneider, Press Secretary; Jacqueline Cohen, Minority Senior Counsel; David Cwiertney, Minority Energy/Environment Fellow; Rick Kessler, Minority Senior Advisor and Staff Director, Energy and Environment; Alexander Ratner, Minority Policy Analyst; and Tuley Wright, Minority Energy and Environment 

Policy Advisor. 

OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS 

Mr. SHIMKUS. If I could ask all our guests today to please take 

their seats, and if we can get that door closed, the Committee on 

Environment will now come to order. The chair now recognizes 

himself for 5 minutes for an opening statement. 

Today’s hearing gives our panel a chance to look broadly at our 

nation’s drinking water infrastructure and examine questions 

about what is necessary for the federal government to do in the 

way of reinvestment and rehabilitation of these systems to meet future needs. 

2 

Currently, more than 51,000 community water systems treat 42 

billion gallons of water for use by 299 million Americans daily. 

This water, which is used for anything from cooking and bathing 

in homes, factories, or offices to firefighting is delivered by publicly 

and privately-owned water utilities stretching over 1 million miles 

of pipe. 

It is really a remarkable feat of engineering that demonstrates 

our nation’s commitment to public health and a high standard of 

living. 

For more than a decade, there have been concerns raised about 

this system and whether our nation is making the choices it needs 

to make in order to ensure effective and efficient delivery of safe 

drinking water in the future. 

Many of the pipes now in use were installed in the early and 

mid-20th century and have a projected lifespan of 75 to 100 years. In 2013, the EPA announced that a bit more than $384 million 

of investment was needed between 2010 and 2030 to improve 

drinking water infrastructure and ensure the provision of safe tap 

water. 

This report was not a suggestion that the federal government 

needed to provide all of that funding but it and other reports have 

served as a wake-up call to the threat facing these systems and 

begs the question as to whether Congress should be doing more. 

Before the Safe Drinking Water Act Amendments of 1996, to the 

extent that it was needed, Congress’ role in financing drinking 

water infrastructure was confined to line items for specific projects, 

a practice that has been substantially curtailed. 

In 1996, Congress, realizing the biggest economic problem facing 

drinking water systems was the cost of unfunded mandates, created a State Revolving Loan Fund program to provide low-interest 

loans that helped address compliance and public health needs. 

Last year, the Water Infrastructure Improvements for the Nation Act authorized $600 million between two new programs dedicated 

to tackling lead pipe replacement and aiding economically disadvantaged and underserved communities. 

In addition, this law tried to further invigorate loans not related 

to Drinking Water Act compliance through the Water Infrastructure Finance and Innovation Act program. 

While I think these are solid steps, we must also reauthorize 

funding for the Drinking Water Revolving Loan Fund program. 

This has been a very successful and important program whose purpose is synergistic in view of other infrastructure programs, having 

provided more than $20 billion in funding to over 12,400 projects 

since 1997. 

We must also explore other avenues that not only leverage investments in these utility infrastructures but also do it in a way 

that promotes American workers and protect consumers’ health 

and pocketbooks. 

We need to be smart about our investments. This is not going to 

be an easy discussion, but to be successful it is one we must have. 

I believe we must not be afraid to spend more federal money on 

this issue, but we must maintain local fees as the primary generator of funds for daily operation and maintenance of public water 

systems as well as their long-term capital investment needs. 

3 

That said, we must acknowledge that not only as a percentage 

of household income, U.S. households pay less for water and wastewater than other developed countries and that water rates have 

dropped 3 percent more recently. 

We also must remember that some systems have taken the very 

unpopular step of raising rates. 

But not everyone can do that, whether due to population contraction or local economic condition, because their rate bases aren’t 

able to handle capital improvements as well as others do. 

So long as we focus on trying to increase overall purchasing 

power for communities, our constituents can enjoy their drinking 

water for the next 75 to 100 years. 

Before I relinquish my time, I want to thank our witnesses for 

being here today, especially in view of the crazy weather and travel 

schedules that you and we have had. 

I also want to welcome the board members of the Association of 

State Drinking Water Administrators. We appreciate all the work 

you do and how important you are to the success of the Safe Drinking Water Act. 

[The prepared statement of Mr. Shimkus follows:] 

PREPARED STATEMENT OF HON. JOHN SHIMKUS

The Subcommittee will come to order. I recognize myself for 5 minutes for giving 

an opening statement. 

Today’s hearing gives our panel a chance to look broadly at our nation’s drinking 

water infrastructure and examine questions about what is necessary for the Federal 

government to do in the way of reinvestment and rehabilitation of these systems 

to meet future needs. 

Currently, more than 51,000 community water systems treat 42 billion gallons of 

water for use by 299 million Americans daily. This water—which is used for anything from cooking and bathing in homes, factories, or offices, to firefighting is delivered by publicly and privately owned water utilities stretching over one million 

miles of pipe. It is really a remarkable feat of engineering that demonstrates our 

nation’s commitment to public health and a higher standard of living. 

For more than a decade, there have been concerns raised about this system and 

whether our nation is making the choices it needs to make in order to ensure effective and efficient delivery of safe drinking water in the future. Many of the pipes 

now in use were installed in the early and mid-20th century and have a projected 

lifespan of 75 to 100 years. 

In 2013, the EPA announced that a bit more than $384 million of investment was 

needed between 2010 and 2030 to improve drinking water infrastructure and ensure 

the provision of safe tap water. This report was not a suggestion that the Federal 

government needed to provide all of that funding, but it and other reports have 

served as wake up calls to the threat facing these systems and begs the question 

of whether Congress should be doing more. 

Before the Safe Drinking Water Act Amendments of 1996, to the extent that it 

was needed, Congress’s role in financing drinking water infrastructure was confined 

to line items for specific projects—a practice that has been substantially curtailed. 

In 1996, Congress, realizing the biggest economic problem facing drinking water 

systems was the cost of unfunded mandates, created the State Revolving Loan Fund 

program to provide low-interest loans that helped address compliance and public 

health needs. 

Last year, the Water Infrastructure Improvements for the Nation Act authorized 

$600 million between two new programs dedicated to tackling lead pipe replacement 

and aiding economically disadvantaged and underserved communities. In addition, 

this law tried to further invigorate loans not related to drinking water act compliance through the Water Infrastructure Finance and Innovation Act (WIFIA) program. 

While I think these are solid steps, we must also reauthorize funding for the 

drinking water revolving loan fund program or DWSRF. The DWSRF has been a 

very successful and important program whose purpose is synergistic in view of other 

4 

infrastructure programs—having provided more than $20 billion in funding to over 

12,400 projects since 1997. 

We must also explore other avenues that not only leverage investments in these 

utilities’ infrastructure, but also do it in a way that promotes American workers and 

protects consumers’ health and pocketbooks. We need to be smart about our investments. 

This is not going to be an easy discussion, but to be successful; it is one we must 

have. 

I believe we must not be afraid to spend more Federal money on this issue, but 

we must maintain local fees as the primary generator of funds for daily operation 

and maintenance of public water systems, as well as their long-term capital investment needs. 

That said, we must acknowledge that not only as a percentage of household income, U.S. households pay less for water and wastewater than other developed 

countries and that water rates have dropped 3% more recently. 

We also must remember that some systems have taken the unpopular step of raising rates. But not everyone can do that, whether due to population contraction or 

local economic condition, because their rate bases aren’t able to handle capital improvements as well as others do. 

So long as we focus on trying to increase overall purchasing power for communities, our constituents can enjoy their drinking water for the next 75 to 100 years. 

Before I relinquish my time, I want to thank our witnesses for being here today, 

especially in view of the crazy weather and travel schedules you have. I also want 

to welcome the Board members of the Association of State Drinking Water Administrators—we appreciate all the work you do and how important you are to the success of the Safe Drinking Water Act. 

With that, I yield back the balance of my remaining time and recognize the Ranking Member of the Subcommittee for 5 minutes to give his opening statement. 

Mr. SHIMKUS. With that, I yield back the balance—well, I don’t 

want to do that yet. I’d like to yield one minute to my colleague, 

Congresswoman Blackburn, for 1 minute. 

Mrs. BLACKBURN. Thank you. I think that one of the things we 

can all agree on is that we are for clean air and we are for clean 

water. And as the chairman has said, we know that there are accountabilities that need to be met. 

There is money that is going to have to be expended. We want 

it to be done in the right way and we know that contaminated 

water is not acceptable. 

Of course, sometimes it can hit close to home, as it did right here 

on our campus with the Cannon Office Building and anybody that 

has worked there knows those stories. 

So, I just want to welcome you all. I want to thank you for being 

here and I want to thank you for working with us on this important issue, and I will yield back. 

Mr. SHIMKUS. Gentlelady yields back her time and I yield back 

my time. 

The chair now recognizes the ranking member, Mr. Tonko, for 5 

minutes, who has an interest in this issue. 

OPENING STATEMENT OF HON. PAUL TONKO, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW YORK 

Mr. TONKO. Thank you, Mr. Chair. Thank you, and Chair Walden for holding this hearing. 

I know I sound like a broken record requesting a drinking water 

hearing for the past 4 years but I am truly grateful to you for 

bringing us together today. 

I also want to thank our experts here for being in attendance. 

We will hear from all of them, from water utilities to engineers to 

5 

environmental stakeholders that our national drinking water infrastructure needs are immense. 

I also understand that they will present formally their report 

card on infrastructure. I can tell you, if I received a report card like 

that my parents would have had a response immediately. 

They would have had an improvement plan in place immediately. 

So let’s get going, nation. 

The facts are startling. We lose over 2 trillion gallons of treated 

water each year from leaking pipes. There are more than 240,000 

water main breaks each year, which causes service disruption and 

property damage. 

Nearly 100 mid-size cities across our great country are facing 

shrinking populations, meaning a smaller taxpayer base, to support 

repairs and to support maintenance. 

As Mr. DiLoreto will explain, the American Society of Civil Engineers recently released their report card and have given our systems a grade of D. 

It is clear we are not making the progress necessary to tackle 

this issue. If anything, we are going in the wrong direction. EPA 

has estimated some $384 billion is needed over the next 20 years 

to keep our systems running. 

And as we deal with aging systems, often with century-old pipes 

and an alarming number of unregulated and under regulated contaminants, this estimate can only be expected to grow. 

The bottom line is I do not see how the needs can be met without 

significantly greater federal investments. I feel the need to say that 

the proposed cuts to EPA outlined in President Trump’s budget are 

not only senseless, they are dangerous. 

While funding levels for the SRFs appear to be maintained, the 

status quo is simply not good enough. We need additional funding. 

For example, in my home state of New York, we receive a gen- erous allotment from the Drinking Water SRF—about $40 annually. That money is leveraged with state funds which may allow for 

about $700 million in projects this year. 

The problem is there were over $4 billion worth of projects requested, according to this year’s intended use plan. Projects that 

are not funded will continue to be deferred, putting more stress on 

already struggling systems. 

So even for a state that is committed to addressing this issue, 

there is still a tremendous gap between available funds and needs. 

We cannot fool ourselves into thinking local and state governments can do this on their own. There is a federal responsibility. 

This infrastructure is too important to continue to be neglected. 

And let us make no mistake, there are real consequences—health 

and economic—when these systems fail. Flint should have been a 

wake-up call to Congress that we must do more. 

The investments we can make now are minuscule when compared to the cost of inaction. And Flint is not alone. These problems lurk below the surface throughout our country. 

Here are just a few headlines from this past week. From NPR: 

Kentucky community hopes Trump infrastructure plan will fix 

water systems. From the Clarion Ledger: Weekend water emergency ripples across Jackson. From the Associated Press: Six Madison schools test positive for lead in drinking water. 

6 

This is a national issue, and had this hearing been delayed until 

next week I am sure we would have found plenty of new stories 

from different states. 

Last year’s water resources bill, the WIND bill, took a few steps 

to address this issue. It created two great programs, grant programs, one for lead-lined replacement and one for small and disadvantaged communities. 

Congress should fully fund these programs, but that is only the 

start. Members of this subcommittee have good ideas on how to update the Safe Drinking Water Act, which has not been significantly 

changed for some 20 years. 

Many of these ideas are supported by stakeholders from labor 

and the environmental community. The AQUA Act would reauthorize the drinking water SRF for the first time since its inception at 

significantly higher levels. 

Ranking Member Pallone’s bill, the SDWA amendments, incorporates a number of ideas from our members including mandating 

new standards for lead and other emerging contaminants while 

making it easier for EPA to set science and health-based limits and 

treatment techniques in the future. 

It also would give grants to schools to replace water fountains 

that contain lead. Mr. Peters is working on a bill to provide grants 

to systems for resiliency, security and source water protection in 

the face of hydraulic changes and other emerging threats. 

These are good bills that deserve consideration by this committee. Also, we must ensure water is included in any potential infrastructure package that will be considered by Congress. 

We can no longer ignore our hidden infrastructure. I would encourage all members of our committee to visit a water system in 

your district. Go speak to your mayors, your system managers, 

your departments of public works. 

It is likely you will hear what I heard in my district. This is a 

real and vastly overlooked issue and Congress can help provide relief for financially-burdened local governments and ratepayers. 

Every life in this country depends on access to safe drinking 

water. Every job in this country depends on access to safe drinking 

water. The needs are great and the cost of inaction is even greater. 

It’s immensely high. 

So I look forward to hearing from our witnesses on the role that 

our federal government should play to rebuild, maintain and protect this infrastructure which is vital to our constituents’ lives. 

With that, Mr. Chair, I yield back and again thank you for the 

opportunity of the hearing. 

[The prepared statement of Mr. Tonko follows:] 

PREPARED STATEMENT OF HON. PAUL TONKO

I want to thank Chairman Shimkus and Chairman Walden for holding this hearing. I know I have sounded like a broken record requesting a drinking water hearing for the past four years, but I am truly grateful to you for bringing us together 

today. 

I also want to thank our witnesses for being here. We will hear from all of themwater utilities, engineers, and environmental stakeholders- that our national drinking water infrastructure needs are immense. 

The facts are startling: 

7 

• We lose more than 2 trillion gallons of treated water each year from leaking 

pipes. 

•There are more than 240,000 water main breaks each year, which cause 

servicedisruption and property damage. 

• Nearly 100 mid-sized cities across the country are facing shrinking populations, 

meaning a smaller ratepayer base to support repairs and maintenance. 

As Mr. DiLoreto will explain, the American Society of Civil Engineer’s recently 

released report card has given our systems a grade of D. It is clear we are not making the progress necessary to tackle this issue, if anything we are going the wrong 

way. 

EPA has estimated $384 billion is needed over the next 20 years to keep our systems running. 

And as we deal with aging systems—often with century-old pipes—and an alarming number of unregulated and under regulated contaminants, this estimate can 

only be expected to grow. 

The bottom line is I do not see how the needs can be met without significantly 

greater federal investments. 

I feel the need to say that the proposed cuts to EPA outlined in President Trump’s 

budget are not only senseless—they are dangerous. 

While funding levels for the SRFs appear to be maintained, the status quo is simply not good enough. We need additional funding. 

For example, in my home state of New York, we receive a generous allotment 

from the Drinking Water SRF, about $40 million annually. That money is leveraged 

with State funds, which may allow for about $700 million in projects this year. The 

problem is there were over $4 billion in projects requested according to this year’s 

Intended Use Plan. 

Projects that are not funded will continue to be deferred, putting more stress on 

already struggling systems. So even for a state that is committed to addressing this 

issue, there is still a tremendous gap between available funds and needs. 

We cannot fool ourselves into thinking local and state governments can do this 

on their own. There is a federal responsibility. This infrastructure is too important 

to continue to be neglected. 

And let’s make no mistake, there are real consequences—health and economic— 

when these systems fail. 

Flint should have been a wakeup call to Congress that we must do more. The investments we can make now are miniscule when compared to the cost of inaction. 

And Flint is not alone. These problems lurk below the surface throughout the country. Here are just a few headlines from this past week: 

•From NPR, ‘‘Kentucky Community Hopes Trump Infrastructure Plan Will Fix 

Water System’’ 

•From The Clarion-Ledger, ‘‘Weekend water emergency ripples across Jackson’’ 

•From the Associated Press, ‘‘6 Madison schools test positive for lead in 

drinkingwater’’ 

This is a national issue. And had this hearing been delayed until next week, I 

am sure we would have found plenty of new stories from different cities. 

Last year’s water resources bill, the WIIN Act, took a few steps to address this 

issue. 

It created two grant programs—one for lead line replacement and one for small 

and disadvantaged communities. Congress should fully fund these programs, but 

that is only the start. 

Members of this Subcommittee have good ideas on how to update the Safe Drinking Water Act, which has not been significantly changed for 20 years. Many of these 

ideas are supported by stakeholders from industry, labor, and the environmental 

community. 

The AQUA Act would reauthorize the Drinking Water SRF for the first time since 

its inception at significantly higher levels. 

Mr. Pallone’s bill, the SDWA Amendments, incorporates a number of ideas from 

our Members, including mandating new standards for lead and other emerging contaminants while making it easier for EPA to set science- and health-based limits 

and treatment techniques in the future. It also would give grants to schools to replace water fountains that contain lead. 

Mr. Peters is working on a bill to provide grants to systems for resiliency, security, and source water protection in the face of hydraulic changes and other emerging threats. 

These are good bills that deserve consideration by this Committee. 

Also, we must ensure water is included in any potential infrastructure package 

considered by Congress. We can no longer ignore our hidden infrastructure. 

8 

I would encourage all Members of this Committee to visit a water system in your 

district. 

Go speak to your mayors, system managers, or departments of public works. It 

is likely you will hear what I heard in my district—this is a real and overlooked 

issue. And Congress can help provide relief to financially burdened local governments and ratepayers. 

Every life and every job in this country depends on access to safe drinking water. 

The needs are great, and the cost of inaction is high. 

So I look forward to hearing from our witnesses on the role the federal government should play to rebuild, maintain, and protect this infrastructure, which is vital 

to our constituents lives. 

With that, I yield back. 

Mr. SHIMKUS. Gentleman yields back his time. 

Chair now looks to the majority side to see if anybody wished to 

make an opening statement. Seeing none, anyone on the minority 

side? Seeing none, we will turn to our panel. 

So we appreciate you all being here. I’ll introduce you as you are 

prepared to make your statement. Otherwise, I’ll go through it and 

then I have to go through it again. 

So we want to first recognize Randy Ellingboe from the Minnesota Department of Health on behalf of the Association of State 

Drinking Water Administrators. Your full testimony has been submitted to the committee. You are recognized for 5 minutes. 

As you can see, this is an issue that we all find are very interested about and want to kind of move forward. So we are not going 

to be militant on time. But if I do hit the gavel, you have gone way 

over, OK. 

So you are recognized for 5 minutes. And I think you should 

press a button there in the middle and pull it, if you can, as close 

as you can. All right. 

STATEMENTS OF RANDY ELLINGBOE, MINNESOTA DEPARTMENT OF HEALTH, ON BEHALF OF THE ASSOCIATION OF 

STATE DRINKING WATER ADMINISTRATORS; JOHN J. 

DONAHUE, CEO, NORTH PARK PUBLIC WATER DISTRICT IN 

MACHESNEY PARK, IL, ON BEHALF OF THE AMERICAN 

WATER WORKS ASSOCIATION; RUDOLPH S. CHOW P.E., DIRECTOR, BALTIMORE, MD DEPARTMENT OF PUBLIC WORKS, 

ON BEHALF OF THE AMERICAN MUNICIPAL WATER ASSOCIATION; GREGORY E. DILORETO, CHAIRMAN, COMMITTEE 

FOR AMERICA’S INFRASTRUCTURE, AMERICAN SOCIETY OF 

CIVIL ENGINEERS; MARTIN A. KROPELNICKI, PRESIDENT 

AND CEO, CALIFORNIA WATER SERVICE GROUP, ON BEHALF 

OF THE NATIONAL ASSOCIATION OF WATER COMPANIES; 

ERIK OLSON, DIRECTOR, HEALTH & ENVIRONMENT PROGRAM, NATURAL RESOURCES DEFENSE COUNCIL 

STATEMENT OF RANDY ELLINGBOE 

Mr. ELLINGBOE. Good morning, Chairman Shimkus, Ranking 

Member Tonko and members of the subcommittee. 

Thank you for the opportunity to talk about our nation’s drinking 

water systems and how state drinking water systems support 

them. 

Again, my name is Randy Ellingboe and I am with the Minnesota Department of Health but I am also president of the Association of State Drinking Water Administrators whose members inVerDate Nov 24 2008 11:38 May 23, 2017 Jkt 037690 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 I:\MY DOCS\HEARINGS 115\HEARINGS\115-13 CHRIS
9 

clude the 50 state drinking water programs, five territorial programs, the District of Columbia and the Navajo Nation. 

Our members and their staff help all public water supply systems provide drinking water that meets all the Safe Drinking 

Water Act standards through monitoring of their water quality, financial and technical assistance to public water supply systems, 

and when needed, enforcement to help systems prioritize taking 

care of deficiencies and violations. 

Today I’d like to talk with you about how states play a role in 

public health protection and sustaining the economic health of communities by implementing three critical components of the Safe 

Drinking Water Act: the Public Water Systems Supervision, or 

PWSS program, the Drinking Water State Revolving Loan Fund 

program and the Revolving Loan Fund set asides. 

Sufficient federal funding for these components is essential for 

maintaining the safety of drinking water across the country. Under 

the Safe Drinking Water Act, states have accepted primary enforcement responsibility for federal drinking water standards and technical assistance efforts for over 151 public water systems. 

These regulations are for contaminants such as nitrate, bacteria, 

arsenic, lead, and many carcinogens. A person can go virtually anywhere in the country and drink water from a public water system 

and be confident that the water meets federal health standards because of the work that public water supply system operators do 

with the assistance and oversight of state and federal drinking 

water programs. 

However, since the Safe Drinking Water Act was passed in 1974, 

we have come to understand much more about drinking water contaminants and what it takes to manage and treat drinking water 

to prevent illness. 

This has led to increased challenges for both public water supplies and state and federal drinking water programs. But safe 

water is crucial for protecting people’s health and communities’ and 

businesses’ economic well-being. 

When we polled citizens in Minnesota about water resource 

issues, drinking water consistently rises to the top. Safe drinking 

water for all is one of the community conditions that supports 

health. 

However, state drinking water programs and many public water 

supplies are extremely hard pressed financially as costs and the 

funding gap continues to grow. 

With the advent of the Drinking Water State Revolving Fund in 

1996, states could provide low-cost loans to utilities to help them 

upgrade their treatment plants and water mains, install more protective technologies and improve their aging infrastructure. 

Many states have also used no-interest loans and principal forgiveness to assist disadvantaged communities with their infrastructure needs. 

Approximately $18 billion federal capitalization grants since 

1997 have been leveraged by states into over $29 billion infrastructure loans to communities across the country. 

Such investments are now being paid back and loaned out again 

and pay tremendous dividends both in supporting and growing our 

economy and in protecting our citizens’ health. 

10 

States have leveraged the federal dollars with state contributions 

to provide assistance to more than 10,000 projects to enhance and 

sustain public health protection for millions of Americans. 

However, the most recent drinking water infrastructure needs 

survey identified $384 billion in investment needed across the 

country in the next 20 years, as already noted. 

With that great need we would recommend expanding the Revolving Fund to help increase infrastructure investment. It has a 

track record for successfully funding a wide range of drinking 

water infrastructure projects critical for the economic well-being of 

communities as well as protecting public health. 

Set asides are unique to the drinking water program. States are 

allowed to set aside a portion of the Revolving Loan Fund for 

source water protection, program administration, small system 

technical assistance and water operator training and certification. 

Set asides are an essential source of funding for states’ core public health protection programs and these efforts work in tandem 

with infrastructure loans. These proactive strategies and initiatives 

increase the effectiveness of many state programs in their ability 

to support drinking water systems. 

In summary, sustaining or increasing the PWSS grants is critical, to protecting public health and our economy. Expanding the 

Revolving Fund will improve the nation’s infrastructure and create 

jobs, and the set asides are key resource to ensuring safe drinking 

water. 

Thank you for the opportunity to provide this testimony about 

these critical drinking water issues. 

[The prepared statement of Randy Ellingboe follows:] 

11 


25370.001

Testimony 

"Reinvestment and Rehabilitation of the Nation's Drinking Water Systems" 

Subcommittee on Environment 

House Energy and Commerce Committee 

Thursday, March 16, 2017 

By Randy Ellingboe 

Manager, Drinking Water Protection Section 

Minnesota Department of Health 

and President 

Association of State Drinking Water Administrators (ASDWA) 

Good Morning Chairman Shimkus and Members of the Subcommittee. Thank you for this 

opportunity to talk about our Nation's drinking water systems and how state drinking water 

programs support them. My name is Randy Ellingboe and I am the Manager of the 

Drinking Water Protection Section within the Minnesota Department of Health. I am also 

the President of the Association of State Drinking Water Administrators (ASDWA), whose 

57 members include the 50 state drinking water programs, five territorial programs, the 

District of Columbia and the Navajo Nation. Our members and their staff are on the front 

lines every day, ensuring safe drinking water and protecting public health. Their technical 

assistance and support, as well as oversight of the drinking water systems, are critical to 

providing safe drinking water and protecting public health. 

Today, I'd like to talk with you about three critical components of the Safe Drinking Water 

Act- the Public Water System Supervision (PWSS) program; the Drinking Water State 

Revolving Loan (DWSRF) program; and the DWSRF set-asides and how these three 

components are implemented in support of drinking water systems. Think of these 

components as a Venn diagram with public health protection at the core of the three 

interlocking circles of PWSS. DWSRF, and set-asides. No single component, taken alone, 

provides comprehensive public health protection ... but when taken together, the people of 

the United States know that they can have confidence in the availability and quality of the 

water they drink every day. Sufficient Federal funding associated with these components 

is essential for maintaining the safety of drinking water across the country. 

1401 \VILSO~ BLVD SUITE 1225 ARL!~GTO~. VA 22209 

PI !0:\E (703) 812-9505 !'AX (703) 812-9506 info@asdwa.org www.asdwa.org 
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2 

Overview 

For each of the 50 state drinking water programs, territorial programs, and the drinking 

water program of the Navajo Nation, our principal and enduring goal is public health 

protection. Vibrant and sustainable communities, their citizens, workforce, and businesses 

all depend on a safe, reliable, and adequate supply of drinking water. Economies only 

grow and sustain themselves when they have safe and reliable water supplies. Over 90% 

of the population receives water used for bathing, cooking, fire protection and drinking from 

a public water system - overseen by state drinking water program personnel. In addition, 

the availability of adequate supplies of safe water is often a critical factor in attracting new 

businesses to communities. Public water systems- as well as the cities, villages, schools, 

and businesses they support •· rely on state drinking water programs to ensure they are in 

compliance with all applicable Federal requirements and the water is safe to drink. 

The PWSS Program 

To meet the requirements of the Safe Drinking Water Act (SDWA), states have accepted 

primary enforcement responsibility for oversight of regulatory compliance and technical 

assistance efforts for over 151,000 public water systems to ensure that potential healthbased violations do not occur or are remedied in a timely manner. More than 90 

contaminants are regulated by Federal drinking water requirements and the complexity of 

these requirements has significantly increased in recent years. For example, enhanced 

treatment requirements for surface water systems now include separate filtration 

performance requirements. More recent regulatory requirements call for individual surface 

water system evaluations for Cryptosporidium inactivation and removal. The Groundwater 

Rule calls for individual disinfection determinations to be made. The Revised Total 

Coliform Rule uses a "find & fix" regulatory approach where the answer to the problem 

may not always be clear. These decisions are not made in isolation. These regulatory 

evaluations and resultant actions are generally made in consultation with the state drinking 

water program to ensure that the evaluations result in the best choice for the water system 

in terms of compliance, affordability, and efficiency. The primacy agencies accept these 

responsibilities as part of implementing the PWSS program. 

The federal regulations also require states to conduct top to bottom or full system 

inspections known as sanitary surveys on a regular basis. These inspections provide 

states with first-hand information as part of their oversight role for public water systems. 

Beyond the contaminants covered by Federal drinking water regulations, states are also 

implementing an array of proactive initiatives to protect public health from "source to tap." 

These include source water assessments and protections for communities and 

watersheds; training and technical assistance for water treatment plants and distribution 

systems for challenged utilities; and optimization of overall water system performance. 

States also are responsible for their operator certification programs, to ensure that the staff 

operating the treatment plants and the distribution systems are appropriately trained and 

have the adequate experience based on the complexities of the plant and the distribution 
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3 

system. These components, both regulatory and non-regulatory, are the responsibilities of 

state primacy agencies within the PWSS program. 

Well supported state drinking water programs are a good deal for America. 

1976 was the first fiscal year in which funds were appropriated for the PWSS program. 

That year, all 50 states shared $7.5 million- or roughly $150,000 per state to oversee 

implementation of slightly more than 25 contaminants. By 1996, 20 years later, the award 

had grown to $70.3 million for states- and averaged about $1.4 million per state to 

oversee regulation of around 70 contaminants. Now after another 20 years have passed 

and the additional responsibilities of the 1996 amendments to the SDWA are being 

implemented, the PWSS program received $101.96 million in 2016- an average 

distribution of $2 million per state but a jump of about 25 new contaminants and 

increasingly complex regulations to be overseen. 

While this may sound like a healthy increase in funding over the past 40 years, during that 

same period, the population of the United States grew from 222.6 million to 321.9 million 

and each of those individuals expected to be able to turn on their taps, wash their clothes, 

and bathe their children in water that is safe. At the same time, the number of regulated 

contaminants grew from around 26 to more than 90, and the regulations for these 

contaminants have grown increasingly complex. 

A success story? Definitely, as many substantial risks in drinking water have been 

reduced with the increased number of contaminants being regulated. A sustainable story? 

Not likely. State drinking water programs are extremely hard pressed financially and the 

funding gap continues to grow. States must accomplish all the above-described activities-

- and take on new responsibilities -- in the context of a challenging economic climate and 

increased expectations. 

Originally, Federal funding was intended to cover 75% of the costs for a state to implement 

the PWSS program. Over the years, that Federal contribution has decreased to slightly 

more than 60%. State funding has historically compensated for this decline, but state 

budgets have been less able to bridge this funding gap in recent years. State drinking 

water programs have often been expected to do more with less and states have always 

responded with commitment and integrity, but they are currently stretched to the breaking 

point. Federal funding support necessary to maintain compliance levels and meet 

expectations has been essentially "flat-lined" for the past several years. It is essential that 

the PWSS funding be increased to meet these increasing regulatory needs. Insufficient 

Federal support for this critical program increases the likelihood of contamination events 

that puts the public's health at risk. 

The OWSRF Program 

The 1996 SDWA Amendments opened new doors and provided exciting new opportunities 

for states to be able to support the infrastructure needs of their drinking water systems -

large and small. With the advent of the Drinking Water State Revolving Loan Fund 
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4 

(DWSRF), states could award project dollars to utilities to help them upgrade their 

treatment plants, rehabilitate their distribution systems, install more protective 

technologies, and generally improve their aging infrastructure. Many states have also 

used no-interest loans and principal forgiveness to assist disadvantaged communities with 

their infrastructure needs, but caution is needed in using these incentives due to potential 

long-term consequences in the ability of the DWSRF to revolve. In the core DWSRF 

program, approximately $18 billion in cumulative Federal capitalization grants since 1997 

have been leveraged by states into over $29 billion in infrastructure loans to small and 

large communities across the country. Such investments are now being paid back and 

being loaned out again and pay tremendous dividends -- both in supporting and growing 

our economy and in protecting our citizens' health. 

States have very effectively and efficiently leveraged Federal dollars with state 

contributions to provide assistance to more than 10,000 projects- all, once again, to 

enhance and sustain public health protection for millions of Americans. But the 

infrastructure funding needs are huge and more effort is needed to provide a wide range of 

tools for infrastructure financing. Last week, the American Society of Civil Engineers gave 

the nation's drinking water infrastructure a D grade (down from D+ last year) and EPA's 

most recent National Drinking Water Infrastructure Needs Survey (2011) indicated that 

drinking water system infrastructure needs total $384 billion over the next 20 years; $72.5 

billion of that total is needed to prevent contamination of 73,400 water systems. 

With that great need, the federal role needs to be increased, and we would recommend 

expanding the DWSRF as one of the tools to begin to address the great infrastructure gap. 

The DWSRF has the track record for successfully funding a wide range of drinking water 

infrastructure projects to promote the economic well-being of the community as well as 

protect public health. 

A potential complementary new funding approach for infrastructure financing has resulted 

from the Water Infrastructure Financing and Innovation Act (WIFIA). Both WIFIA and the 

DWSRF programs are useful in meeting drinking water infrastructure needs; however, it is 

important to understand that the programs serve different purposes and meet different 

needs. One cannot and should not be substituted for the other. To offer just a few 

examples, WIFIA loans are intended to support funding needs for primarily large scale 

water improvement projects. DWSRF loans are designed to meet public health protection 

needs and often extend beyond physical infrastructure to fund projects for source water 

protection and system interconnections. The DWSRF, through its set-asides, also funds 

programs to train and certify operators and help systems return to compliance. WIFIA 

offers an opportunity for smaller systems to bundle their project needs to be able to meet 

the $20 million minimum loan threshold; however, few small systems have the knowledge 

and wherewithal to collaborate on such an application and coordinate the timing of their 

funding needs. The states also do not have the capacity to bundle these small projects. 

As of 2016, of the over 12,000 DWSRF project agreements, 71% have been for 

communities serving less than 10,000 people. Additionally, the DWSRF provides loans to 

these smaller systems individually in increments as low as $3,500, as evidenced by a 2010 

project in my own state of Minnesota. The two funding programs are fundamentally 
15 


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5 

different. ASDWA sincerely hopes that these distinctions will inform Congressional funding 

decisions and that we never see a circumstance in which one program is funded at the 

expense of the other. 

Set-aside Program 

Set-asides are unique to the drinking water program. They allow states to reserve up to 31 

percent of DWSRF funds for specific purposes. There is a 4% reservation for state 

DWSRF program administration that supports state administration of the loans and 

oversight of the projects. A 2% small system technical assistance setaside helps train and 

assist operators of small water systems where it can be a challenge to meet all the 

drinking water requirements. States may reserve 10% of the DWSRF's capitalization grant 

in any year to support other PWSS program activities where there is an additional need. 

Additional uses include implementation of a capacity development program to support 

system needs for technical, managerial, and financial capabilities and training and 

certification for operators. This seta side also provides funding for states when adopting 

and managing the new rules while continuing to provide oversight for existing rules. 

Another setaside provision allows a reservation of 15% (of which any individual use may 

not exceed 10%) for: land acquisition/conservation easements; implementation of 

voluntary, incentive-based source water quality protection measures; expenditures to 

delineate or assess source water protection areas; and expenditures to establish and 

implement wellhead protection programs. This setaside also provides assistance for water 

systems through the state's capacity development strategy. 

Through these set-asides, states may offer training and technical assistance to 

communities in need; help identify source water protection initiatives; enhance operator 

training and certification; and further support traditional PWSS compliance initiatives. Setasides are thus an essential source of funding for states' core public health protection 

programs and these efforts work in tandem with infrastructure loans. Without the setasides, these proactive strategies and initiatives would not be possible, thus jeopardizing 

the effectiveness of many state programs in their ability to support drinking water systems. 

Looking Beyond Infrastructure 

Two other elements of the SDWA program support the above three key components. 

The Regulatory Process: Clearly, the DWSRF is critical to maintaining safe and reliable 

drinking water in the US. Through the direct loan program, its attendant set-asides, and 

the PWSS grant, Congress and EPA provide a foundation for the drinking water effort; 

however, this foundation must not remain static. We cannot be so focused on 

infrastructure and related funding needs that we neglect the science-based programs that 

also assure safe drinking water. Congress, in the 1996 Amendments to the SDWA, 

provided a robust, science-based process for identifying contaminants to be regulated. 

This also included actions that develop appropriate limits, monitoring frameworks, and 

treatment requirements. States agree that the bottom line for regulation should still be 
16 


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6 

whether there is a meaningful opportunity for health risk reduction. Having said that, state 

primacy agencies also support the need to be nimble in our approach to rule development. 

Using the experience gained through implementation of current rules and knowledge of 

local conditions, states can also provide input to rule language that will assure that the rule 

can be effectively implemented on the ground. That's a critical step to assuring 

compliance by water systems. 

Water System Security and Resiliency: Water systems and state primacy agencies 

worked together after the Bioterrorism Act of 2001 to conduct the mandated vulnerability 

assessments and the emergency response plans. Since those regulatory requirements 

were completed, water systems and states have continued to grow in their collective 

knowledge of system security and resilience, and to tackle new and emerging issues such 

as regional resilience and cybersecurity. Water is considered one of the "lifeline" sectors 

by the Department of Homeland Security (DHS), and, as such, needs to be considered as 

a high priority when assessing funding options for water system improvements. Between 

FYs 2001 and 2009, states received an annual $5 million grant to support their work with 

water systems in the areas of security, all hazards preparation, and overall resiliency. For 

example, states used those dollars to fund a "security coordinator," participate in mutual 

aid programs and initiatives, work with utilities to share information, provide training on 

new tools and strategies, support smaller systems with their efforts to enhance their 

security posture, and generally serve as a water security resource. That funding stream 

disappeared and states have had to significantly scale back their support activities for 

water systems. To enhance the capabilities of our Nation's water systems, those funds (or 

more) should be restored. 

Summary 

In summary, these three SDWA program elements- PWSS, DWSRF, and the Set-asides 

-and the supporting regulatory development and resiliency components, form an 

integrated and mutually supportive framework to achieve the principal goal of state 

drinking water programs- to protect public health. These three SDWA program elements, 

along with the dedicated State staff, form the foundation for the technical assistance and 

regulatory oversight that's necessary for safe drinking water. 

ASDWA recommends that 

• The PWSS funding be increased to meet increasing regulatory needs; 

• The DWSRF funding be increased; and 

• Set-asides are maintained as these funds are essential for states' core public health 

protection programs and these efforts work in tandem with infrastructure loans. 
17 

Mr. SHIMKUS. And the gentleman yields back his time and we 

appreciate those comments. 

Another thing I should have said the Chair would like to remind 

members that pursuant to committee rules all members’ opening 

statements could be placed into the record. 

And I also wanted to mention that you all are on the front lines 

of these battles. We do really appreciate you being here and your 

testimony, and I think as the questions will follow up to show because you’re really trying to deliver the goods. 

So I’d now like to recognize Mr. John Donahue, CEO of the 

North Park Public Water District in Machesney Park, Illinois, way 

far away from Collinsville, on behalf of the American Water Works 

Association. 

You’re recognized for 5 minutes. Thanks for being here. 

STATEMENT OF JOHN J. DONAHUE 

Mr. DONAHUE. Good morning, Chairman Shimkus, and members 

of the subcommittee. My name is John Donahue, the chief executive officer at North Park Public Water District in Machesney 

Park, Illinois, north of I–80. 

I am also the former president of the American Water Works Association on whose behalf I am speaking today. I appreciate this 

opportunity to offer AWWA’s input on reinvesting and rehabilitating our nation’s drinking water systems. 

As you will hear and see in my written testimony, building and 

maintaining sound water infrastructure includes addressing not 

only water infrastructure, which includes pipes and treatment 

plants, but addressing issues such as cybersecurity and the protection of source waters. 

One innovative tool to help address this is a new credit program 

known as a Water Infrastructure Finance and Innovation Act, or 

WIFIA. 

We are optimistic that once WIFIA really gets running and fully 

funded it could become a valuable tool for financing projects beyond 

the size and scope of those funded by other tools. 

Just as in the transportation program called TIFIA, Congress 

only has to appropriate funds for the risk factor to those loans. 

Based on calculations from OMB, WIFIA appropriations could be 

leveraged at a ratio of about 60 to 1. 

For example, if the WIFIA program were to receive the fully authorized $45 million for Fiscal Year 2018, it could provide more 

than $2 billion in loan money. 

Since a WIFIA loan will only support up to 49 percent of eligible 

project costs, this funding could result in more than $4 billion in 

infrastructure investment. 

Other key federal programs for infrastructure finance like the 

State Revolving Loan Fund programs, or SRFs, are also designed 

to provide water and wastewater systems access to lower cost financing for infrastructure projects, typically smaller than those 

that can be funded through WIFIA. 

While the SRFs are excellent programs, their efficiency could be 

improved by working with stakeholders to streamline those process. 

18 

We realize that this next issue is outside the jurisdiction of this 

committee but we need to mention and need to preserve the taxexempt status of municipal bonds as Congress considers comprehensive tax reform. More than 70 percent of U.S. water utilities 

use muni bonds to help finance infrastructure improvements. 

The decision to issue bonds is determined and approved by either 

the local residents, the referenda or by their elected officials. These 

bonds provide substantial savings for the cost of projects and consequently to the ratepayers. 

These are our recommendations to Congress regarding water infrastructure finance: provide fully authorized funding for WIFIA 

and at least $1.8 billion for the drinking water SRF program; preserve the tax-exempt status of muni bonds, reauthorize the safe 

drinking water SRF program and work with stakeholders to utilize 

the lessons learned since its creation to make it more efficient. 

Cybersecurity is an increasing component in upgrading and protecting infrastructure and our written testimony contains our 

thoughts on that issue. The protection of source waters are also 

critical to the mission of any drinking water utility. 

However, many drinking water systems have limited control over 

upstream activities that may present risks to water. The Revised 

Toxic Substances Control Act does contain provisions for requiring 

consideration of impacts on drinking water sources for certain substances. 

However, there are policy gaps in the form of inadequate information sharing policies and a lack of notification protocols to alert 

a utility of incidents that could impact a water supply. 

The chemical spill on the Elk River in West Virginia in 2014 illustrates the need for such notification and alerts. In addition, improved collaboration between agriculture producers and water providers can have measurable results in reducing sediment and nutrient pollution. 

Nutrients from agricultural runoff do impact drinking water 

quality, as we saw in Toledo, Ohio, in 2014 when the water system 

had to be shut down. 

The federal farm bill is a key vehicle for agricultural land conservation efforts. We recommend that Congress support the designation of drinking water utilities as first responders in various 

state and federal emergency response laws in regulation to facilitate information sharing. 

We also recommend that Congress sustain and expand conservation programs in the farm bill that support collaboration between 

agriculture producers and community water systems to improve 

source water quality. 

EPA’s 2012 integrated planning framework and related documents on affordability provided important new flexibilities for 

wastewater utilities to provide regulatory obligations and infrastructure investments. 

Representative Bob Gibbs’ Water Quality Improvement Act 

would help put the integrated planning framework in statute for 

clean water mandates. 

However, this legislation only deals with wastewater projects and 

does not allow for integrated planning to fully acknowledge the cost 

implication of drinking water mandates. 

19 

With that, I will conclude my remarks and look forward to your 

questions. 

[The prepared statement of John J. Donahue follows:] 

20 


25370.007

Reinvestment and Rehabilitation 

of Our Nation's Safe Drinking Water Delivery Systems 

Presented by 

John J. Donahue 

Chief Executive Officer 

North Park Public Water District 

Machesney Park, Illinois 

& 

Former President 

American Water Works Association 

Before the House Subcommittee on the Environment 

March 16, 2017 

Good morning, Chairman Shimkus and members of the subcommittee. My name is John 

Donahue, and I am Chief Executive Officer of the North Park Public Water District, based in 

Machesney Park, Illinois. I also served as President of the American Water Works Association 

in 2014, on whose behalf I am speaking today. I deeply appreciate this opportunity to offer 

AWWA's input on reinvesting and rehabilitating our nation's drinking water infrastructure. As you 

will hear, having sound water infrastructure requires not only what we traditionally think of as 

water infrastructure pipes and treatment plants but involves additional issues, such as 

cybersecurity, protection of source waters, effective use of resources. and similar issues. 

We have been among those leading the warnings that one of the most crucial challenges our 

country faces is renewal of our water systems and assuring high-quality drinking water for all 

Americans. As members of this subcommittee know, safe drinking water is vital to public health 
21 


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protection, fire prevention, economic prosperity and our quality of life. Without adequate 

supplies of safe and affordable water and well-maintained systems to deliver it, no country can 

promise a brighter future for its citizens. 

AWWA's 50,000 members represent the full spectrum of water utilities- small and large, rural 

and urban, municipal and investor-owned. From this diverse perspective, we would like to bring 

to the subcommittee's attention several issues, shared priorities and opportunities for 

collaboration. Working closely with Congress, we hope to stimulate reinvestment in water 

infrastructure, top-shelf cybersecurity, protection of source water, smart approaches to 

affordability, an efficient energy-water nexus and a focus on scientific integrity in our regulatory 

processes. 

Water Infrastructure Investment= Economic Prosperity 

The top priority facing our nation's drinking water and wastewater systems is financing the 

repairs, replacement and expansion necessary to support our communities and assure a vibrant 

economy. 

Water infrastructure protects public health and the environment, supports local businesses, 

protects us from fires, and brings us a high quality of life. The Bureau of Economic Analysis 

(BEA) at the US Department of Commerce estimates that for every dollar spent on water 

infrastructure, $2.63 is generated in the private economy. And for every job added in the water 

workforce, the BEA estimates that 3.68 jobs are added in the national economy. 

AWWA estimates that approximately $1 trillion dollars will be needed for the repair, replacement 

and expansion of existing drinking water distribution systems over the next two decades. This 

figure does not include the estimated $30 billion that would be required to replace every lead 

service line in the U.S. 
22 


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One innovative solution is a new credit program, the Water Infrastructure Finance and 

Innovation Act (WIFIA). We are hopeful that once it really gets running and fully funded, it can 

provide much-needed access to low-interest financing for larger water infrastructure projects or 

projects outside the scope of the state revolving funds. A WIFIA loan will support up to 49% of 

eligible project costs, which might also involve municipal bonds, cash financing, an SRF loan, 

and/or private capital. Just like in the already-successful transportation program called TIFIA, 

Congress only has to appropriate funds for the risk factor for loans. Historically, the default rate 

for water utilities nationwide is 0.04 percent. 

Based on calculations from the Office of Management and Budget, Congressional 

appropriations could be leveraged at a ratio of about 60:1. For example, if the WIFIA program 

were to receive the fully authorized $45 million for fiscal year 2018, it could provide well more 

than $2 billion in loan money, which would amount to more than $4 billion in infrastructure 

investment. This program provides an exceptional vehicle to stimulate the investments needed 

to sustain our nation's drinking water and wastewater infrastructure. 

To finance the remaining 51% of the costs for a project receiving WIFIA assistance, a utility has 

several options, including tax-exempt private activity bonds. Congress provides states an 

annual allocation of federal tax-exempt private activity bonds, based upon population. In 2015, 

the state allocation or volume cap was the greater of $100 per resident or $301.52 million. 

Historically, most of the tax-exempt bonds have been issued to short-term projects such as 

housing and education loans. 

The annual volume cap hinders the use of private activity bonds (PABs) for water and 

wastewater infrastructure, which are generally multi-year projects. On average, only 1% of 

exempt facility bonds are issued to water and wastewater projects annually. 

Existing federal programs such as the Drinking Water State Revolving Fund (DWSRF) and 

Clean Water State Revolving Fund (CWSRF) are designed to provide community water and 
23 


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wastewater systems access to lower-cost financing for infrastructure projects. We support 

robust funding for these very successful programs. Under the SRF programs, states make loans 

to a utility. The utility must repay this loan, and those funds are then lent to other communities, 

and so on. While the SRFs are excellent programs, their efficiency could be improved by 

working with stakeholders to streamline the approval process. 

We realize that this next issue is outside the jurisdiction of this committee, but we would be 

remiss if we did not mention the need to preserve the tax-exempt status of municipal bonds as 

Congress considers comprehensive tax reform. More than 70 percent of U.S. water utilities use 

municipal bonds to help finance infrastructure improvements. They are a very effective tool for 

implementing the infrastructure needs for different communities. The decision to issue bonds is 

determined and approved by either the local residents through referenda or by their elected 

officials. State and local governments on average save about two percentage points on 

municipal bonds, which translates to substantial savings on projects. We also note that 

variations of public-private partnerships often utilize municipal bonds. 

Recommendations for Congress 

1. Make reinvestment in America's water and wastewater infrastructure a top national 

priority. 

2. Provide fully authorized funding for the Water Infrastructure Finance Innovation Act 

(WIFIA) and at least $1.8 billion for the drinking water SRF program. 

3. Preserve the tax-exempt status of municipal bonds. 

4. Eliminate the cap on private-activity bonds for financing water infrastructure projects to 

further promote necessary investments. 
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5. Reauthorize the Safe Drinking Water SRF program and take advantage of the 

opportunity to utilize lessons learned since its creation to make it more efficient, by doing 

the following: 

a. Require quarterly instead of annual reports from states on the amount of 

unobligated SRF funds the states are holding. This would provide a clearer 

picture of how efficiently money is moving and which, if any, states need 

assistance in moving loans; 

b. Provide for the redirection of large sums of unobligated SRF funds after a 

specified time period; 

c. Make it clear in SRF authorization language that use of SRF loans for 

consolidation or regionalization of water systems to improve water service to a 

population does not violate the ban on the use of SRF assistance to 

accommodate growth; 

d. Direct EPA to provide guidance to states to help rnake applications scalable to 

the size and scope of the project under consideration; and 

e. Work with stakeholders to find areas in which administrative processes or 

requirements could be streamlined. 

Cybersecurity for Critical Infrastructure 

Continued advances in automation and information technologies have brought great economic 

advantages to many sectors. However, these capabilities have also introduced the specter of 

cyber- attacks, a new and faceless threat to individuals, businesses and the critical 

infrastructure upon which our economy depends. A punitive, compliance-based approach to 

cybersecurity that places the burden solely on prospective victims/targets of cybercrimes and 

attacks is ill-advised. 
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Responsibility for cybersecurity must be shared with technology providers to ensure that the 

systems to support infrastructure operations, to the extent possible, are not susceptible to 

attack. In addition, technical support programs are needed to help systems- particularly in 

small and medium-sized communities -- overcome the technical knowledge/skills gap 

associated with many of the security systems that have been deployed. 

AVVVVA has been proud to develop a cybersecurity resource designed to provide actionable 

information for utility owner/operators based on their use of process control systems. That is the 

purpose and objective of the "Process Control System Security Guidance for the Water Sector" 

and the supporting on-line "Use-Case Tool." Both are free to water providers on our website. 

These resources have been recognized by the Water Sector Coordinating Council and EPA as 

the foundation of a voluntary, sector-specific approach for adopting the National Institute of 

Standards and Technology's (NIST's) Cybersecurity Framework. 

The cyber threat requires ongoing public-private collaboration to develop solutions and mitigate 

risks facing critical infrastructure. 

Recommendations for Congress and the Administration 

1. Support a voluntary, collaborative approach to cybersecurity that recognizes the 

dynamic nature ofthe threats facing critical infrastructure, such as the existing work done 

with various sectors, including water, and NIST. 

2. Expand support for aggressive investigation and prosecution of cyber attackers. 

3. Enhance programs, such as the Industrial Control Systems Cyber Emergency Response 

Team (ICS-CERT), that can support and build the cyber risk management capacity of all 

critical infrastructure sectors and rapid information sharing for vulnerability mitigation 

protocols. 
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Source Water Protection 

Protection and management of source waters are critical to the mission of any drinking water 

utility and the communities it serves. In reality, however, many drinking water systems have 

limited control over upstream activities that may present risks to water quality. The revised Toxic 

Substances Control Act (TSCA) does contain provisions for requiring consideration of impacts 

on drinking water sources for certain substances. This is an important step in developing 

programs that place high value on source waters. However, there are critical policy gaps that 

impede water utility consideration of prospective risks to source waters. These gaps are due to 

inadequate information-sharing policies and a lack of notification protocols to alert a utility of 

incidents that could impact a water supply. The chemical spill on the Elk River in West Virginia 

in 2014 illustrates the need for such notification and alerts. 

In addition, improved collaboration between agriculture producers and water providers can have 

measurable results in reducing sediment and nutrient pollution. Nutrients from agricultural runoff 

do impact drinking water quality, as we saw in Toledo, Ohio, in 2014, when the water system 

had to be shut down. 

The federal Farm Bill contains the largest funding source for agricultural land conservation 

efforts. Not only is robust funding needed for such efforts, but they need to be focused where 

they are achieving the greatest public good. One program within the Farm Bill conservation title 

in particular has the greatest promise for helping farmers and ranchers undertake effective 

nutrient management practices in critical watersheds: the Regional Conservation Partnership 

Program, created in the 2014 Farm Bill. In this program, USDA's Natural Resources 

Conservation Service, state agencies and non-governmental entities provide financial aid and 

technical assistance to farmers and ranchers to implement conservation practices that address 

higher-priority natural resource concerns. The 2014 Farm Bill authorized $1.2 billion for RCPP 

over five years, but federal budget sequestrations are cutting into those authorized amounts. 
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25370.014

Jncentivizing upstream adoption of best management practices for nutrient management, along 

with structural and edge-of-field practices (e.g. riparian buffers, drainage water management, 

tile nutrient management), are important tools in managing source water quality. 

Recommendations for Congress 

1. Support the designation of drinking water utilities as "first responders" in various state 

and federal emergency response laws and regulations to facilitate information sharing 

with a clear "need-to-know" status. 

2. Sustain and expand targeted programs, particularly the conservation programs in the 

Farm Bill, that support collaboration between agriculture producers and community water 

systems to improve source water quality. We realize the Farm Bill itself is outside the 

jurisdiction of this committee, but we seek your support in working with the agriculture 

committees on the conservation title, to help provide the American public with the best 

water possible. 

Energy-Water Nexus 

Drinking water and wastewater utilities use nearly 2% of electricity nationwide. Ultimately, the 

water and energy sector are deeply co-dependent, with most energy production requiring water 

and all water production/treatment requiring energy. Improving energy efficiency, energy 

management, and deployment of renewables within the water sector lowers costs and improves 

system resilience. This frees up more resources for infrastructure renewal and other priorities, 

leads to lower emissions, and assists states in meeting their energy goals. Collaborations with 

the Department of Energy have provided the water sector with key resources needed to improve 

efficiency and energy management. 
28 


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Recommendations for Congress and the Administration 

1. Support voluntary Department of Energy programs designed to assist the water sector, 

including continued expansion of the Better Plants program.Support initiation of a 

Uniform Methods Project for water utility energy efficiency. 

2. Support the development of voluntary state energy programs for the water sector. 

Affordability 

The core mission of drinking water and wastewater systems is to protect public health and the 

environment. To accomplish this mission, these water systems must build and operate 

increasingly complex treatment systems to meet various statutory and regulatory requirements. 

These systems must also be built and operated in a manner that is affordable to the local 

ratepayer. 

Current affordability guidelines were developed in 1997 and are outdated. They rely on a single 

economic indicator median household income- and have not been revised and updated to 

account for current economic circumstances. This is a major problem when the Department of 

Justice seeks to place a public utility and its community under a federal enforcement order. 

EPA's guidelines must be revised to include new affordability criteria that evaluate a much 

broader range of community affordability factors. 

Studies done in collaboration with the U.S. Conference of Mayors have shown that some 

regulatory actions do not fully take into consideration the larger context of public health needs 

and benefits for a community. Since water and wastewater services are funded principally by 

local ratepayers, the collective burden from multiple regulatory actions should be considered in 

the whole, as they would be by the families and businesses that will be required to fund them. A 
29 


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lack of integrated planning redirects constrained funding to address issues that may not 

generate the greatest public health benefit. 

EPA's 2012 Integrated Planning Framework and related documents on affordability provided 

important new flexibilities for wastewater utilities to prioritize their regulatory obligations and 

infrastructure investments. However, more action is needed to institutionalize integrated 

planning in all aspects of EPA's interactions with water utilities, particularly in wastewater 

permitting. Integrated planning-based scheduling and sequencing must be available as an 

option for utilities to consider in all future National Pollutant Discharge Elimination System 

permits. However, integrated planning needs to be codified in the Clean Water Act (realizing this 

is outside the jurisdiction of this committee) and drinking water regulation needs to become a 

part of integrated planning as well. 

AWWA was pleased to see that Rep. Bob Gibbs' reintroduced the Water Quality Improvement 

Act, H.R. 465, in the 115'" Congress. Legislation like this bill would help put the integrated 

planning framework in statute for clean water mandates. However, this legislation only deals 

with clean water, and does not allow for integrated planning to fully acknowledge the cost 

implications of drinking water mandates. AWWA is committed to working with Mr. Gibbs, the 

House Subcommittee on Water Resources and Environment, and the Subcommittee on 

Environment to advance this legislation and eventually see it become law. 

Recommendations for Congress 

1. Integrated planning should account for the full cost placed on a community when 

considering drinking water and wastewater regulatory actions to ensure such decisions 

are not overly burdensome and thus undermine the very benefits sought. 

2. Codify in federal law integrated planning for clean water and drinking water regulation. 
30 


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Scientific Integrity and Transparency 

A core tenet of the Safe Drinking Water Act and AWWA is adherence to sound science. This 

tenet is essential to ensure the integrity of the decision-making process, which must include 

rigorous public review and comment. This process admittedly appears slow and there is 

concern it results in too many regulatory delays. However, sound science requires a thorough, 

methodical, science-based evaluation of potential risks. AWWA believes greater investment in 

the necessary fundamental scientific research would mitigate the concerns about the length of 

time required to address risks, expedite decision-making and benefit public health. 

In the absence of critical information, especially health effects data, agency actions can result in 

less-than-optimal decisions that may not serve the public interest. Decision-making based on 

limited information undermines the credibility of the process with the public and often results in 

costly diversions of limited financial resources. The absence of data and information can be 

overcome with appropriate budgetary support for research. 

Recommendations for Congress 

1. Support the deliberative, science-based regulatory processes outlined in the Safe 

Drinking Water Act to set health-protective standards for drinking water. 

2. Authorize and appropriate funding to assist EPA in its evaluation of potential 

contaminants. 

What is the American Water Works Association? 

The American Water Works Association (AWWA) is an international, nonprofit, scientific and 

educational society dedicated to providing total water solutions and assuring the effective 
31 


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management of water. Founded in 1881, the association is the largest organization of water 

professionals in the world. 

Our membership includes more than 3,900 utilities that supply roughly 80 percent of the nation's 

drinking water and treat almost half of the nation's wastewater. Our 50,000 members represent 

the full spectrum of the water community: public water and wastewater systems, environmental 

advocates, scientists, academicians, and others who hold a genuine interest in water, our most 

important resource. AVVVVA unites the diverse water community to advance public health, 

safety, the economy, and the environment. 

### 
32 

Mr. SHIMKUS. Gentleman yields back his time. 

Chair now recognizes Mr. Rudolph Chow, Professional Engineer, 

Director of the Baltimore, Maryland Department of Public Works 

on behalf of the American Municipal Water Association. 

Welcome. You’re recognized for 5 minutes. 

STATEMENT OF RUDOLPH S. CHOW, P.E. 

Mr. CHOW. Good morning, Chairman Shimkus and Ranking 

Member Tonko and honorable members of the Energy and Commerce Committee Environment Subcommittee. 

My name is Rudy Chow and I am the director of the Department 

of Public Works with Baltimore City. It is my honor to appear before you this morning. 

As director of the Baltimore City Department of Public Works, 

I’m responsible for safe delivery of the highest quality drinking 

water to 1.8 million people living and working in our metropolitan 

region. 

I have over 30 years of experience in the public water industry 

from the operational, engineering and administrative perspectives. 

It is a field I both love and respect. 

I’m here today to speak on behalf of the Association of Metropolitan Water Agencies, AMWA, an organization representing the nation’s largest public drinking water utilities which collectively serve 

more than 130 million Americans with quality drinking water. I 

serve on the AMWA board of directors with other dedicated professionals from all over the country. 

While our home jurisdiction may be different, I assure you that 

our challenges are not. We are all challenged by the effects of aging 

infrastructure and the costly capital projects that protect and improve the quality of water we deliver to our customers. 

It is a delicate balancing act we perform to prioritize and fund 

these expensive investments that are borne locally. But the time of 

kicking the can down the road is long over. 

Through organizations such as AMWA and serious discussion of 

these challenges in Congress through committees and subcommittees such as yours, we hope to seize the moment the momentum 

of this national conversation and forge a national commitment to 

protect our drinking water. 

The scale of this challenge cannot be done solely on our own. It 

is too important. We do not want communities forced to choose between investing in necessary infrastructure and the safety of their 

water. But here are the cold hard facts. 

The EPA’s most recent drinking water and clean water needs 

surveys identify more than $655 billion of needed water and wastewater infrastructure investments over the next 20 years just to 

maintain the status quo. 

AMWA and the National Association of Clean Water Agencies 

project that water and wastewater utilities could spend a similar 

amount over 40 years just to adapt to extreme droughts, more frequent and intense storms and rising sea levels. 

In my own city of Baltimore, my annual capital program for 

water and wastewater project can comprise 80 percent of the city’s 

total capital investments. My six-year capital program for just 

water infrastructure exceeds $2 billion. 

33 

The work of this subcommittee and Congress make a difference 

between our success or failure as a nation to protect our most basic 

need: clean safe drinking water. 

Congress passed the Water Infrastructure Improvements of the 

Nation Act last year. It created a new program in funding to remove and replace outdated lead service lines and help low-income 

customers absorb their share of replacement costs. 

We need more programs like this to help support affordable financing and assistance to communities in need. AMWA is asking 

to continue this momentum to support the following efforts in programming. 

We need to renew commitment in the Drinking Water State Revolving Fund, SRF. The Drinking Water SRF is an effective national funding mechanism providing critical funding assistance and 

that is a lifeline to many communities large or small struggling to 

fund their capital programs. We ask a doubling of SRF to $1.8 billion. 

The Water Infrastructure Innovation Act, or WIFIA, is a new 

federal pilot program that AMWA believes will provide innovative 

funding to help communities nationwide pay for large-scale water 

and wastewater projects. 

WIFIA will complement, not compete, with SRF funds and 

WIFIA can help communities with large-scale investment that 

some SRFs cannot provide. Support the use of tax exempt municipal bonds as they are the most prevalent water infrastructure financing mechanism with at least 70 percent of U.S. water utilities 

relying on them to pay for infrastructure improvements. 

By reauthorizing the Drinking Water SRF, Congress will have an 

opportunity to update and streamline the program. AMWA would 

like to codify water facility security enhancements as well as allowing a portion of the metropolitan service areas to qualify as a disadvantaged community use of these funds. 

AMWA also supports the framework of the Safe Drinking Water 

Act and its careful balance of public health protection and local cost 

and feasibility considerations. Congress should consider options for 

targeted low-income water rate assistance programs. They are 

greatly needed. 

Finally, AMWA believes water utilities should be recognized in 

providing preference under SRF for taking steps to improve efficiency and adopting best industry practices via sound water utility 

asset management plan or who formulate cooperative water utility 

partnerships. 

On behalf of AMWA, I appreciate the opportunity to testify on 

the importance of investing and rehabilitating our nation’s drinking water infrastructure. Thank you again, and I am happy to answer any question you might have. 

[The prepared statement of Rudolph S. Chow, P.E. follows:] 

34 


25370.019

METROPOliTAN 

~ WATER ENCIES 

Testimony of 

Rudolph S. Chow, P.E. 

Director, Department of Public Works 

City of Baltimore, Maryland 

On Behalf of the 

Association ofMetropolitan Water Agencies 

Before the 

U.S. House of Representatives 

Energy and Cmnmerce Committee 

Environment Subcorn1nittee 

Hearing on 

Reinvestment and Rehabilitation of Our Nation's 

Safe Drinking Water Delivery Syste1ns 

March 16, 2017 
35 


25370.020

Summary of the Testimony of Rudolph S. Chow 

Public drinking water utilities in the United States provide their customers with 

some of the best drinking water in the world, but according to U.S. EPA our 

nation's water and wastewater infrastructure requires more than $655 billion 

worth of investment over the coming decades to ensure current levels of service 

continue. 

In Baltimore, the Department of Public Works has launched a comprehensive, 

long-term strategy to replace or rehabilitate I ,500 miles of city-owned water 

mains that deliver safe and reliable drinking water to our 1.8 million residential 

and business customers. Cities and towns across the country are undertaking 

similar efforts to upgrade their water infrastructure. 

Federal financing assistance is a key component of nationwide efforts to 

rehabilitate water infrastructure. The Drinking Water State Revolving Fund is a 

well-established program that helps community water systems undertake projects 

and repairs that ensure continued public health protection. Since 1996 it has 

provided nearly 13,000 water infrastructure loans with an average value of about 

$2.5 million. 

The new Water Infrastructure Finance and Innovation Act (WIFIA) pilot program 

will deliver additional low-cost loans for major water infrastructure projects that 

may be too large to benefit from the DWSRF. EPA expects to leverage Congress' 

initial FY 17 appropriation of $17 million for WIFIA project funding into more 

than $1 billion worth of loans to communities. 

The federal tax code helps communities access low-cost infrastructure financing 

by making interest earned on municipal bonds exempt from federal income taxes. 

Without this exemption, AMW A estimates that water infrastructure financing 

costs would increase by approximately 25 percent as investors would demand 

higher interest rates on municipal bonds. This, in turn, could lead to higher water 

bills for communities and their ratepayers. 

The Association of Metropolitan Water Agencies stands ready to work with the 

subcommittee in support of these programs and other initiatives that will renew 

America's commitment to robust drinking water infrastructure. 

2 
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25370.021

Chaim1an Shimkus, Ranking Member Tonko, and members of the subcommittee: 

the Association of Metropolitan Water Agencies (AMW A) appreciates the opportunity to 

testify on the important topic of"Reinvestment and Rehabilitation of Our Nation's Safe 

Drinking Water Delivery Systems." We are glad that Congress is turning its attention to 

the state of our nation's water infrastructure. 

I am Rudy Chow, and I have served as Director of the Baltimore Department of 

Public Works since 2014. One of the top priorities of the Department is to safely and 

reliably deliver high quality drinking water to all 1.8 million of our residential and 

business customers in Baltimore and the surrounding region. To ensure success in this 

mission, the Department has launched a comprehensive, long-term strategy to replace or 

rehabilitate 1,500 miles of city-owned water mains. And on the wastewater side, we have 

initiated a program to comply with Baltimore's sanitary sewer consent decree by 

rebuilding hundreds of miles of sewer mains and by upgrading the capacity of our Back 

River Wastewater Treatment Plant. Clearly, Baltimore has made a priority of 

reinvestment in, and rehabilitation of~ our water infrastructure. 

I also serve as a member of AMW A's Board of Directors. AMW A is an 

organization representing the nation's largest publicly owned drinking water utilities, 

which collectively serve more than 130 million Americans with quality drinking water. 

Our members are well aware of the urgent need to upgrade our nation's water 

infrastructure, and we are eager to work with the subcommittee to develop components of 

any forthcoming infrastructure funding legislation that may help communities meet this 

objective. 

3 
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25370.022

It is beyond doubt that America's water and wastewater infrastructure is due for 

an upgrade. EPA's most recent Drinking Water and Clean Water Needs Surveys show 

that the nation's water and wastewater infrastructure requires more than $655 billion 

worth of investments over the next two decades just to maintain current levels of service, 

but even those estimates may be too modest. The American Water Works Association 

has estimated that it may cost drinking water systems alone approximately $1 trillion 

over the next 25 years just to upgrade and expand buried water infrastructure, and 

AMW A and the National Association of Clean Water Agencies have projected that water 

and wastewater utilities could spend a similar amount over 40 years as they adapt to 

changing hydrological conditions such as extreme drought, more frequent intense storms, 

and rising sea levels. 

Fortunately, Congress has begun to give this issue the attention it deserves. Last 

year's passage of the Water Infrastructure Improvements for the Nation Act authorized 

funding for a new program aimed at removing and replacing outdated lead service lines 

and helping low-income customers absorb their share of these replacement costs. The 

law also authorized assistance to help schools and child care centers test the quality of 

their drinking water. AMWA hopes to see each of these new programs receive 

appropriations in the next fiscal year. 

All of this represents good progress, but we know that much more remains to be 

done. And while we continue to believe that local water infrastructure should primarily 

be paid for through local water rates, there is an important role for the federal government 

to play in facilitating access to affordable financing and offering assistance to 

4 
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25370.023

communities in need. AMW A supports the following programs to strengthen and 

maintain our nation's drinking water infrastructure. 

The Drinking Water State Revolving Fund 

Authorized by Congress in 1996, the Drinking Water State Revolving Fund 

(DWSRF) is the most well established federal program to aid in the financing of drinking 

water infrastructure. Each year after Congress appropriates DWSRF funding, EPA 

distributes a share of the funds to each state, following a formula based on each state's 

identified drinking water infrastructure needs. States add a match of at least 20 percent to 

their share of funding, and then use the proceeds to provide loans and other assistance for 

eligible projects in their state, with a focus on addressing the most significant threats to 

public health. Historically, the DWSRF has tended to focus on small or rural 

communities that face water quality challenges. 

According to EPA, through 2016 the DWSRF had provided nearly $32.5 billion 

in funding assistance to communities nationwide through 12,827 individual assistance 

agreements an average of just over $2.5 million per project. Small communities 

serving 10,000 people or fewer have received 9,044 of these assistance agreements since 

the program's inception- about 70 percent of the total -while metropolitan water 

systems serving more than 100,000 people obtained 897 DWSRF loans through the end 

of2016. 

While the DWSRF has been a great success, the program also is in need of a 

renewed commitment from Congress. The DWSRF has never been reauthorized, and 

annual funding levels have steadily decreased since 2010. While House and Senate 

appropriators each approved FY 17 funding legislation that would provide more than $1 

5 
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25370.024

billion for the DWSRF, those proposals are currently on hold along with the rest of 

EPA's final FY17 budget. 

Looking ahead, we arc heartened that last year during the presidential campaign 

President Trump called for tripling annual SRF appropriations, but we are concerned that 

early reports about the White House's FY18 budget request may propose cutting overall 

EPA funding by as much as 25 percent. These two objectives arc simply incompatible. 

Rather than drastic cuts, AMW A would prefer to see the SRF programs put on a 

path toward sustained growth that will result in an eventual tripling of their 

appropriations, in line with the position of the president's campaign. To this end, 

AMW A and others in the water sector support an FY 18 Drinking Water SRF 

appropriation that doubles the program's FY16level, to $1.8 billion. Such an infusion of 

funds could also be delivered through a comprehensive infrastructure funding package 

that Congress may consider later this year. 

The Water Infrastructure Finance and Innovation Act 

The federal government's newest water infrastructure financing program was 

established three years ago with strong bipartisan and bicameral support. Enacted as part 

of the Water Resources Reform and Development Act of2014, the Water Infrastructure 

Finance and Innovation Act (WIFIA) pilot program is an innovative financing 

mechanism that will help communities nationwide pay for large-scale water and 

wastewater infrastructure projects. Through WIFIA, EPA will loan Treasury funds to 

cities and towns to carry out qualifying projects, but at a lower interest rate than the 

community would likely obtain on the bond market. All WIFIA loans will be paid back 

to the federal government with interest over the period of 35 years following substantial 

6 
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25370.025

completion of the project- thus providing affordability to local ratepayers and a return on 

investment to the U.S. Treasury. 

Importantly, WIFIA will complement, not compete with, the existing SRF 

programs. Unlike the DWSRF, which typically delivers modest-sized loans to help 

communities respond to public health risks, WIFIA is intended to help communities 

finance large-scale water infrastructure improvements that may not be positioned to 

benefit from SRF assistance. For example, because the DWSRF gives preference to 

projects that address the most serious risks to human health, a significant portion of 

DWSRF loans often flow to small communities that require help to improve drinking 

water quality. But other projects that are not directly tied to SDWA compliance or health 

protection - such as investments to replace or upgrade aging infrastructure or to enhance 

the reliability and security of water supplies, particularly in metropolitan areas- often 

struggle to obtain SRF assistance in amounts that will meaningfully reduce total project 

costs. 

A wide range of drinking water, wastewater, storm water, water reuse, recycling, 

and desalination projects expected to cost in excess of $20 million arc all eligible for 

WIFIA loan assistance- with WIFIA funding available to cover up to 49 percent of the 

total project costs. WIFIA also accommodates smaller communities faced with lowercost projects, as the program will offer loans to a project costing as little as $5 million in 

a community of 25,000 people or fewer. 

The next several months will mark an exciting time for WIFIA. Late last year 

Congress appropriated $20 million to support WIFIA loans in 2017 with $3 million 

reserved to cover administrative expenses at EPA. EPA expects to leverage the 

7 
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25370.026

remaining $17 million into more than $1 billion worth of loans to communities across the 

United States. In January EPA subsequently circulated its first notice of funding 

availability to begin the process of soliciting WIFIA funding applications, with an April 

I 0 deadline for communities to submit initial letters of interest that describe their 

potential WIFIA projects. This time frame could allow the first WIFIA loan funds to get 

out the door to chosen applicants by the end of the year. 

Looking ahead, WIFIA is authorized as a pilot program only through the 2019 

fiscal year. Should WIFIA's initial round of funding prove successful, AMW A will urge 

Congress to quickly reauthorize the program to build on and sustain this initial 

momentum. 

Tax-Exempt Municipal Bonds 

The most critical federal water infrastructure financing assistance mechanism is 

perhaps also the most overlooked during infrastructure policy discussions. And though 

decisions on the fate of this mechanism will ultimately be made outside of this committee, 

it is important for all members of Congress to be aware of its essential role in financing 

water infrastructure. 

Since the federal tax code was established in 1913 interest earned on municipal 

bonds has been exempt from federal income taxes. According to the Congressional 

Research Service, tax-exempt municipal bonds are the most prevalent water 

infrastructure financing mechanism, with at least 70 percent of U.S. water utilities relying 

on them to pay for infrastructure improvements. And a study completed last month by 

AMWA and the National Association of Clean Water Agencies found that in 2016 alone 

8 
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25370.027

communities across the United States issued nearly $38 billion in tax-exempt municipal 

bonds to finance water, sewer, and sanitation projects. 

Municipal bonds make infrastructure investments more affordable for 

communities because the lack of a federal tax on their interest payments leads investors 

to charge lower interest rates than they otherwise would. These lower interest rates 

directly translate to lower financing costs, and thus more affordability for local water and 

wastewater ratepayers. Without this tax benefit, water and wastewater utilities across the 

county would pay about 25 percent more in financing costs over their bond payback 

periods- essentially an additional tax on water infrastructure investment that would be 

borne by water utility ratepayers of all income levels. 

In Maryland alone, cities and towns across the state issued roughly $46.5 million 

worth of tax-exempt municipal bonds to support water and wastewater infrastructure 

projects in 2016. AMW A's data indicates that fully taxing municipal bond interest would 

increase local financing costs on this debt by nearly $20 million over the expected 

payback periods. Put another way, these increased financing costs represent about 42 

percent of the value of Drinking Water and Clean Water State Revolving Fund assistance 

delivered to Maryland in 2016. 

As Congress plans to consider a comprehensive tax reform proposal later this year, 

AMWA encourages members of this committee who prioritize affordable water 

infrastructure investments to stand up in support of tax-exempt municipal bond interest. 

Failing to maintain this effective and equitable subsidy would drastically increase the cost 

of water infrastructure financing and permanently reduce the affordability of water 

service to ratepayers in communities nationwide. 

9 
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25370.028

A Renewed Commitment to Water Infrastructure 

In addition to adequate funding, water infrastructure funding programs also 

require a renewed commitment from Congress. The Drinking Water State Revolving 

Fund should be reauthorized, giving Congress a chance to update and streamline the 

program to position it for continued success in the 21st Century. Some updates favored 

by AMW A include codifying water facility security enhancements as an eligible use of 

DWSRF funds, and allowing portions of metropolitan water utility service areas to 

qualify as a "disadvantaged community" that is able to receive additional subsidization. 

More broadly, AMWA supports the framework of the Safe Drinking Water Act, 

and its regulatory process that reflects a careful balance of public health protections and 

local cost and feasibility considerations. But new EPA mandates may still pose 

affordability challenges in many communities, particularly among low-income 

households, so we believe Congress should consider options for a targeted low-income 

water rate assistance program. 

Finally, AMWA believes water utilities should be recognized for taking steps to 

improve efficiency and adopting industry best practices. For example, communities that 

have completed water utility asset management plans should be awarded additional 

preference when applying for DWSRF assistance, and Congress should encourage the 

formulation of cooperative water utility partnerships that can improve the operations and 

management of water systems that have previously experienced compliance issues. 

Again, AMWA appreciates the opportunity to testify on the importance of 

reinvestment and rehabilitation of our nation's drinking water infrastructure. Continued 

10 
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25370.029

congressional support for the DWSRF, WIFIA, and tax-exempt municipal bond interest 

are all policies that will help our nation achieve this goal. 

Thank you again, and I am happy to answer any questions from the committee. 

11 
45 

Mr. SHIMKUS. Gentleman’s time has expired. We thank you for 

your testimony. 

The chair now recognizes Mr. Greg DiLoreto, Chairman of the 

Committee for America’s Infrastructure, American Society of Civil 

Engineers and nothing. 

So we will recognize you for 5 minutes. 

STATEMENT OF GREGORY E. DILORETO 

Mr. DILORETO. Thank you very much, Chairman Shimkus, Ranking Member Tonko and members of the subcommittee. 

Good morning. My name is Greg DiLoreto and I’m a past president of the American Society of Civil Engineers and the current 

chair of the ASCE Committee for America’s Infrastructure, responsible for the 2017 report card for infrastructure. 

Prior to my retirement, I served as the chief executive officer of 

the publicly-owned Tualatin Valley Water District in Portland, Oregon. It’s the second largest water utility in Oregon. 

I am honored to be here today to testify on behalf of ASCE on 

the state of America’s drinking water infrastructure as the subcommittee examines reinvestment and rehabilitation of our nation’s 

safe drinking water delivery systems. 

You’re hearing a recurring theme from the comments by the 

chair, by the comments from the ranking members as well as the 

four people that have testified before me. 

You’re hearing this theme that we need to invest in our infrastructure. Every four years since 1998, ASCE has published the report card for America’s infrastructure which grades the current 

state of 16 national infrastructure categories on a scale of A 

through F. 

Last week, we released our 2017 report card, which we’d like to 

have entered into the official record. In this report card—— 

Mr. SHIMKUS. Without objection, so ordered. 

[The information appears at the conclusion of the hearing.] 

Mr. DILORETO. Thank you. In this report card, we gave the nation’s drinking water infrastructure systems a grade of D. Unfortunately, that is the same grade it received in our 2013 report card. 

But the good news from this year’s report card is that water conservation efforts through wise use of water seem to have paid off. 

Municipal water consumption in the United States has declined 

by 5 percent this decade, marking the first time in nearly 40 years 

that water use at home has decreased. 

Total freshwater withdrawals this decade continue to decline in 

almost every sector including agriculture, industry, domestic and 

thermal electric. This is primarily due to efficiencies and the reduction in withdrawals from retired coal-fired plants. 

The bad news is that every day nearly 6 billion gallons of treated 

drinking water are lost due to leaking pipes with an estimated 

240,000 water main breaks per year occurring in this country. 

It’s estimated that these leaky pipes are wasting 14 to 18 percent 

of each day’s treated water, the amount of clean drinking water 

that could support 15 million households. 

To address these programs and bring the grade up to a B—good 

condition, which we recommend—EPA has estimated, as you’ve 

46 

heard, we need to invest, at a minimum, $384 billion over the next 

20 years from all levels of government. 

Importantly, EPA’s numbers do not account for population 

growth and an estimate is limited in its scope of projects so it could 

be higher. While drinking water infrastructure is funded primarily 

through a rate-based user system, the investment has been inadequate for decades and will continue to be underfunded without 

significant changes as the revenue generated will fall short of the 

needs grow and as water utilities strive to meet safe drinking 

water standards. 

Additionally, many U.S. cities are losing population. This poses 

a significant challenge to utility managers. Fewer ratepayers—a 

declining tax base—make it difficult to raise funds for capital investment plans. 

To respond, utilities must raise rates often in cities where jobs 

and pay have not kept pace with the economy, putting a burden 

on those who can least afford rate increases. 

Conversely, in areas of the country that are growing, such as the 

West and Southwest, utility managers must respond to an increased overall demand. 

So we’d like to offer the following recommendations. First, as 

you’ve heard from my colleagues, reinvigorate State Revolving 

Loan Fund program under the Safe Drinking Water Act through 

permanent reauthorization. And we are going bold, tripling the 

amount of the annual appropriation. This is the amount that the 

president has called for. 

Second, fully fund the Water Infrastructure Finance and Innovation Act. Three, as with my colleagues, preserve tax-exempt municipal bond financing. Low-cost access to capital keeps lending for 

water upgrades strong and accessible for communities large and 

small. 

And fourth, eliminate the state cap on private activity bonds for 

water infrastructure to bring an estimated $6 billion to $7 billion 

annually in new private investment. 

Finally, the federal government cannot be the bank of last resort. 

We understand and recognize that individual water utilities must 

consider the need to increase the price of water to local users. 

Water must be appropriately priced, however, to ensure investments to rebuild the infrastructure. 

Thank you, Mr. Chairman. That concludes our testimony and at 

the appropriate time I’d be happy to answer your questions. 

[The prepared statement of Gregory E. DiLoreto follows:] 

47 


25370.030

\lv'ashmgt0n OffJcc 

101 Consutul!on /\H', \\' 

Testimony Of 

The American Society of Civil Engineers 

to the 

U.S. House of Representatives 

Committee on Energy and Commerce 

Subcommittee on the Environment 

on 

Our Nation's Water Infrastructure: 

Challenges and Opportunities 

March 16, 2017 
48 


25370.031

ASCE Page -1 

Mr. Chairman Shimkus, Ranking Member Tonko, and Members of the Subcommittee: 

Good morning. My name is Gregory E. DiLoreto, and I am a past president of the 

American Society of Civil Engineers and the current Chair of the ASCE Committee 

for America's Infrastructure responsible for the 2017 Report Card for 

Infrastructure. Prior to my retirement, , I served as chief executive officer for the 

publicly owned Tualatin Valley Water District in the Portland, Oregon, metropolitan 

area. The District is the second largest water utility in Oregon, serving more than 

200,000 customers in the Portland area. I am a licensed Professional Engineer in 

the state of Oregon. 

I am honored to be here today to testify on behalf of ASCE on the state of America's 

drinking-water infrastructure as the Subcommittee examines ""Reinvestment and 

Rehabilitation of Our Nation's Safe Drinking Water Delivery Systems". 

The American Society of Civil Engineers is pleased to offer this testimonyas the 

Committee works to understand and improve the nations drinking water 

infrastructure. ASCE represents more than 150,00 civil engineers worldwide who 

plan, design, build, operate and maintain drinking water infrastructure across the 

country. 

Last week, ASCE's 2017 Report Card for Infrastructure graded the nation's drinking 

water infrastructure a "D" Unfortunately that is the same grade received in our 

2013 Report Card. 

The United States uses 42 billion gallons of water a day to support daily life from 

cooking and bathing in homes to use in factories and offices across the country. 

Around 80% of drinking water in the U.S. comes from surface waters such as rivers, 

lakes, reservoirs, and oceans, with the remaining 20% from groundwater aquifers. 

In total, there arc approximately 155,000 active public drinking water systems 

across the country. Most Americans- just under 300 million people- receive their 

drinking water from one of the nation's 51,356 community water systems. Of these, 

just 8,674 systems, or 5.5%, serve more than 92% of the total population, or 

approximately 272.6 million people. Small systems that serve the remaining 17.4% 

of the population frequently lack both economies of scale and financial, managerial, 

and technical capacity, which can lead to problems of meeting Safe Drinking Water 

Act standards. 

Drinking water is delivered via one million miles of pipes across the country. Many 

of those pipes were laid in the early to mid- 20th century with a life span of 75-100 

years. With utilities averaging a pipe replacement rate of 0.5% per year, it will take 

an estimated 200 years to replace the system- nearly double the useful life of the 

pipes. 
49 


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ASCE Page - 2 -

Because America's drinking water infrastructure provides a critical service, 

significant new investment and increased efficiencies are needed as filtration plants, 

pipes, and pumps age past their useful life. Every day, nearly six billion gallons of 

treated drinking water are lost due to leaking pipes, with an estimated 240,000 

water main breaks occurring each year. It is estimated that leaky, aging pipes are 

wasting 14 to 18 percent of each day's treated water; the amount of clean drinking 

water lost every day could support 15 million households. 

To address deteriorating water infrastructure, asset management provides utility 

managers and decision-makers with critical information on capital infrastructure 

assets and timing of investments. Some key steps for asset management include 

making an inventory of critical assets; evaluating their condition and performance; 

developing plans to maintain, repair, and replace assets; and funding these 

activities. 

While drinking water infrastructure is funded primarily through a rate-based user 

pay system, the investment has been inadequate for decades and will continue to be 

underfunded without significant changes as the revenue generated will fall short as 

needs grow. According to the American Water Works Association, upgrading 

existing water systems and to meeting the drinking water infrastructure needs of a 

growing population will require at least $1 trillion. 

The majority of funding for drinking water infrastructure comes from revenue 

generated by rate payers. In the nation's largest 50 cities, the rate users pay varies 

greatly; the lowest average monthly water bill is $14.74 in Memphis, while Seattle 

residents pay the most at $61.43. This large gap exemplifies the varied approaches 

to rate structure, as well as the contrast of need and investment across the country. 

While higher rates that reflect the true cost of service are important, public 

assistance programs should be considered for low income populations. Between 

2009 and 2014, state and local governments decreased capital spending for both 

drinking water and wastewater by 22%; at the same time, federal capital spending 

did not change significantly. 

The federal government offers financial support to local governments and utilities in 

the form of loans through the Drinking Water State Revolving Fund, which provides 

low-interest loans to state and local water infrastructure projects. The 

Environmental Protection Agency (EPA) provides an allotment of funding for each 

state, and each state provides a 20% match. Since the program's inception, $32.5 

billion of low-interest loans have been allocated. However, with needs far 

surpassing the program's budget, it is unable to meet all investment needs or fund 

every deserving project. 

In 2014, Congress authorized a new mechanism to fund primarily large water 

infrastructure projects over $20 million through the Water Infrastructure Finance 

and Innovation Act (WIFIA). In 2016 Congress appropriated $17 million in funds for 
50 


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ASCE Page- 3 -

the program. It is estimated that using WIFIA's full financial leveraging ability that a 

single dollar injected into the program can create $50 dollars for project lending. 

Under current appropriations, EPA estimates that current budget authority may 

provide more than $1 billion in credit assistance and may finance over $2 billion in 

water infrastructure investment. 

Municipal drinking water consumption in the United States has declined by 5% this 

decade, marking the first time in nearly 40 years that water use at home has 

decreased. Total freshwater withdrawals this decade continue to decline in almost 

every sector including agriculture, industrial, domestic, and thermoelectric. This is 

primarily due to increased efficiencies and the reduction in withdrawals for retired 

coal-fired power plants. 

Drinking water needed for public supply in the United States has been relatively flat 

since 1985 even as the population has increased by approximately 70 million people 

over the same period. Water conservation efforts, including water efficient fixtures, 

have had a significant impact in reducing per capita water usage. Importantly, while 

per capita demand has fallen, population trends have significantly challenged how 

cities manage water. For example, the Government Accountability Office estimates 

that 99 of 674 midsized cities in the U.S. are losing population. This poses 

significant challenges to utility managers; fewer rate payers and a declining tax base 

make it difficult to raise funds for capital infrastructure plans. To respond, utilities 

must raise rates, often in cities where jobs and pay have not kept pace with the 

economy, putting a burden on those who can least afford rate increases. Conversely, 

in areas of the country that are growing, such as the West and Southwest, water 

managers must respond to increased overall demand. 

Drinking water quality in the United Sates remains the safest in the world. The EPA 

sets legal limits for over 90 contaminants in drinking water. The Safe Drinking 

Water Act (SDWA) allows states to set and enforce their own drinking water 

standards as long as the standards meet or are better than EPA's minimum national 

standards. Smaller systems that serve under 10,000 people report that a lack of 

resources and personnel can limit the frequency of testing, monitoring, 

maintenance, and technical capability in their systems. With sufficient funding and 

proper oversight, these risks to water users can be mitigated and water quality can 

remain safe. 

America's drinking water infrastructure doesn't stop at pipe, reservoir, pump 

station, and treatment plant upgrades; many threats to drinking water 

infrastructure can be attributed to the sources of drinking water, such as polluted 

source water, depleted aquifers, and inadequate storage. As watersheds continue to 

be impacted by shifting migration patterns, land usc changes, consumption trends, 

and extreme weather, water infrastructure upgrades will be required to meet new 

demands. With proper planning, education, and conservation utilities are making 

strides to ensure demand is met for decades to come. Water conservation and 
51 


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ASCE Page 4-

improvements in water-use efficiency appear to have gained a general acceptance 

among water utilities as a sensible practice of water management. According to the 

American Water Works Association, a majority of utilities -74 percent- have a 

formal conservation program, and 86 percent consider conserved water as one of 

their water supply alternatives. Additionally, many communities that have separate 

drinking water and wastewater departments are beginning to work together or 

even consolidate, creating "one water" utilities that manage water more holistically. 

Recommendations: 

• Reinvigorate the State Revolving Loan Fund (SRF) program under the Safe 

Drinking Water Act through permanent reauthorization and tripling the 

amount of annual appropriations. 

• Fully fund the Water Infrastructure Finance and Innovation Act (WJFIA) at its 

authorized level. 

• Preserve tax exempt municipal bond financing. Low-cost access to capital 

helps keep lending for wastewater upgrades strong and accessible for 

communities large and small. 

• Establish a federal Water Infrastructure Trust Fund to finance the national 

shortfall in funding of infrastructure systems under the Clean Water Act. 

• Eliminate the state cap on private activity bonds for water infrastructure 

projects to bring an estimated $6 to $7 billion annually in new private 

financing. 

• Encourage utilities to take regional approaches for water delivery to take 

advantage of economies of scale. 

• Increase federal support and funding for green infrastructure, watershed 

permitting, and other programs that promote the concept of "one water" to 

protect source watersheds. 

• Encourage utilities to conduct revenue forecasting models to determine the 

necessary rate revenues over a period of time and then institute rates that 

reflect the true cost of supplying clean, reliable drinking water. 

• Encourage utilities to undertake asset management programs. 

• Increase federal and local support for vocational training in the drinking 

water sector as engineers, operators, and maintenance staff begin to retire in 
52 


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ASCE Page- 5-

large numbers. 

• Support and advance conservation ballot measures that protect source water 

through dedicated funding to land and water protection. 

• Utility managers must remain diligent to ensure science-based decisions 

control operations and facility function. While lead and other contaminants 

post significant health concerns when ignored, with proper funding safe and 

clean drinking water can be ensured. 
53 

Mr. SHIMKUS. Thank you very much, John. 

The chair now recognizes Mr. Martin Kropelnicki, President and 

CEO of the California Water Service Group on behalf of the National Association of Water Companies. 

You are recognized for 5 minutes. Thanks for being here. 

STATEMENT OF MARTIN A. KROPELNICKI 

Mr. KROPELNICKI. Good morning, Chairman Shimkus and Ranking Member Tonko and members of the subcommittee. 

As the chairman mentioned, I’m Marty Kropelnicki, President 

and CEO of California Water Service Group. We provide water 

service to approximately 2 million in the State of California, Hawaii, New Mexico and the State of Washington. 

I’m also the current sitting president for the National Association 

of Water Companies, or NAWC, which represents private water 

companies across the U.S. 

NAWC members have provided water utility services for well 

over 100 years and today serve nearly a quarter of the population. 

Before discussing how private water sector can help address the 

nation’s infrastructure challenges, I want to start with a story, a 

true story, of what happened in the state of California and what 

the possibilities can be. 

There are 400 residents in West Goshen, which is a small town 

in Tulare County. The residents of West Goshen had two small 

wells that had chronic water quality issues including nitrates and 

bacteria contamination. 

In 2012, the two wells failed. Then a portion of the their water 

system pipes actually collapsed and we had people in this small 

town that actually had sand flowing through their pipes instead of 

water. 

With the residents having to travel to nearby cities and towns to 

take showers in portable shower stands, a timely solution had to 

be found. 

CalWater worked with several nonprofits in the local area, the 

county and state to secure funding to connect the water system to 

our existing system, which was a mile down the road. 

Today, the residents are enjoying something they haven’t had in 

a long, long time—a supply of safe, reliable and high-quality water. 

This example illustrates how private water companies are already 

helping overcome water infrastructure challenges. 

NAWC estimates that its six largest members, of which we are 

one, will invest nearly $2.7 billion annually in our water systems. 

This is significant, given that the federal appropriations for the 

State Revolving Fund program is about $2 billion annually. It illustrates the shortfall. 

Federal funds alone will not fix the nation’s infrastructure problems, especially given that many are the result of poor decision 

making and not necessarily the absence of funding. 

Let me highlight for you several recommendations for Congress 

to consider. First, we must ensure that any federal dollars are effectively and efficiently deployed and used. NAWC and its members 

support EPA’s 10 attributes of effective utility management, which 

include things such as financial viability, infrastructure stability, 

and operational optimization. 

54 

Applicants for public dollars should demonstrate that they are 

managing their assets so that adequate repair, rehabilitation, and 

replacement are fully reflected in management decisions including 

water pricing. 

Second, failing systems that are seriously compliant with water 

quality standards must be held accountable. If a system is plagued 

with a history of serious noncompliance it should be given an option to pursue a partnership that will lead to compliance or to be 

consolidated with an operator or owner who can bring them into 

compliance. 

Finally, as Congress considers future funding of drinking water 

programs, NAWC recommends that the private water sector not 

only have equal access to federal funding but also that steps be 

taken to further enable and incentivize private water sectors’ involvement in solving the nation’s infrastructure problems. 

Apart from the obvious tax base measures, these incentives 

should include providing a safe harbor provision to shield wouldbe partners from legal and financial liabilities associated with serous noncompliant systems. 

Quite simply, private water companies like CalWater have the financial, managerial and technical expertise to help ensure that all 

Americans have safe, reliable and high-quality utility services. 

I sincerely appreciate your invitation to be here today. Along 

with my many colleagues in NAWC, I look forward to working with 

you to address the nation’s water infrastructure challenges. 

Thank you, and I’d be happen to respond to any questions that 

the committee may have. 

[The prepared statement of Martin A. Kropelnicki follows:] 

55 


25370.036

Testimony of Martin A. Kropelnicki 

President and CEO- California Water Service Group 

President- National Association of Water Companies 

Reinvestment and Rehabilitation of our Nation's Safe Drinking 

Water Delivery Systems 

Presented on behalf of the National Association of Water 

Companies 

House Energy and Commerce Committee 

Environment and the Economy Subcommittee 

March 16, 2017 
56 


25370.037

Good morning, Chairman Shimkus, Ranking Member Tonko, and Members of the 

Subcommittee. Thank you for the opportunity to discuss the water infrastructure 

challenges facing the country and the actions the federal government can take to 

unleash innovative and sustainable solutions to those challenges. 

I am Marty Kropelnicki, President and CEO of California Water Service Group (Cal 

Water), the third largest publicly traded water and wastewater utility company in the 

United States. I am also the President of the National Association of Water Companies 

(NAWC)- the association that represents the regulated private water utility service 

industry and professional water management companies. NAWC's core belief is that by 

embracing the powerful combination of public service and private enterprise, we can 

not only improve our nation's water infrastructure, but also ensure that future 

generations have access to safe, reliable, and high-quality water utility service. 

NAWC applauds you, Mr. Chairman, and this Subcommittee, for highlighting America's 

water infrastructure needs and the solutions that will best address them. Safe, reliable, 

and high-quality drinking water is critical to every person, community, and business in 

this country, and NAWC's members are proud to provide these services to our 

customers. 

NAWC members are located throughout the nation and range in size from large 

companies that own, operate or partner with hundreds of systems in multiple states to 

individual utilities serving a few hundred customers. Through NAWC's various innovative 

business models, private water and wastewater professionals serve more than 73 

million Americans, nearly a quarter of our country's population. 

Cal Water, for one, provides water and wastewater service to approximately two million 

people in California, Hawaii, New Mexico, and Washington. Every day, Cal Water treats 

and delivers more than 320 million gallons of water to our customers. For us, there is 

nothing more important than enhancing the quality of life for our customers by working 

each and every day to ensure they have safe, high-quality water each time they turn on 

the tap. 

Private Utility Role in Meeting the Nation's Drinking Water Needs 

Private water systems have existed in the United States for well over 100 years. Today, 

the private water utility sector is highly regulated by state public utility commissions 

(PUCs), which set water rates, the U.S. Environmental Protection Agency, which sets 

federal drinking water quality standards, and state agencies, which are also responsible 

for setting water quality standards. The private water utility sector focuses on longterm planning by making appropriate and necessary investments in our nation's 

communities. As a result, private water companies have a proven track record of 

consistently meeting the drinking water needs of consumers in many areas of the 

country. 

National Association of Water Companies Page 1 
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The private sector is already helping overcome water infrastructure challenges facing 

the country. Ensuring the high standard of quality that private water companies deliver 

requires extraordinary amounts of capital investment. NAWC estimates that its six 

largest members alone are collectively investing nearly $2.7 billion each year in their 

water systems- and these six companies provide service to about six percent of the U.S. 

population. In Cal Water's case, we are budgeting to invest about $1 billion in our water 

systems over the next five years. 

It is significant that six of NAWC's members are collectively investing more than $2 

billion in their water systems when one considers that the current total federal 

appropriation for the Clean Water and Drinking Water State Revolving Fund (SRF) 

programs is approximately $2 billion annually. 

One of the factors that enable the private water sector to undertake such significant 

levels of investment is outstanding credit ratings. In fact, the corporate credit ratings of 

some of NAWC's members are amongst the highest in the U.S. For example, Cal Water's 

first mortgage bonds are currently rated AA-, and Cal Water has the highest credit rating 

of any utility in the U.S., as rated by Standard & Poor's. 

In addition to helping to ensure our customers have safe, reliable, and high-quality 

water utility service, NAWC members provide significant economic benefits to the 

communities they serve. We pay federal and state income taxes, local property taxes, 

local pump taxes, and permit fees for projects, all of which provide much needed 

revenue to all levels of government in the county. We hire local employees, and provide 

them with good-paying jobs and competitive benefits. We procure local goods and 

services. And to help ensure our medium- and long-term financial stability, our 

employees' retirement benefits are fully funded. All of these things contribute to the 

economic multiplier effect that benefits the communities that we serve. 

Perhaps most importantly, NAWC's members work diligently with our state regulators 

to ensure that we meet federal and state water quality and customer service standards 

every day. For example, analysis of EPA data conducted by American Water Intelligence 

found that the "compliance record of major companies in the private water utility sector 

has remained nearly spotless." 1 NAWC's members are at the forefront of efforts to 

ensure the water we provide to our customers is safe. For example, Cal Water's 

Director of Water Quality was part of the national group of experts who developed the 

Lead Service Line Replacement Collaborative, which seeks to accelerate voluntary 

replacement of lead water service lines. Similarly, in 2016, J.D. Power ranked California 

Water Service, a subsidiary of Cal Water, and Illinois American Water, a subsidiary of 

American Water, "highest in water utility customer satisfaction in their respective 

1 American Water Intelligence, "Data Show IOUs a Cut Above in SDWA Compliance," October 2012, p. 10. 

National Association of Water Companies Page 2 
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regions." 2 

In summary, the private water utility sector stands able, ready, and willing to partner 

with local and state governments, as well as the federal government, to help meet the 

challenges our nation's water infrastructure will face in the coming years and decades. 

In addition to supplying necessary capital, private water companies can leverage 

decades of experience solving complex water challenges to help bring new water 

infrastructure projects online faster and cheaper. Two examples highlight the value 

private water companies bring to the table. 

• The wastewater system in Fairview Township, Pennsylvania serves 

approximately 4,000 customers. In late 2015, the Township sold its wastewater 

system to Pennsylvania American Water for $16.8 million. In order to help 

ensure residents have a wastewater system they can depend on, Pennsylvania 

American Water will be investing $13 million in capital improvements. In 

addition, the revenue from the sale has enabled the Township to pay off $21 

million in existing sewer debt, avoid addition debt of approximately $14 million, 

and reduce residents' property taxes by 50 percent. 

• West Basin Municipal Water District (West Basin) is a wholesale water supplier in 

Southern California. West Basin's Edward C. Little Water Recycling Facility is the 

largest water recycling facility of its kind in the U.S.; it produces approximately 

40 million gallons of useable water every day. Cal Water manages and operates 

the recycled water distribution system, which includes approximately 100 miles 

of pipeline that crosses multiple political subdivisions in Los Angeles County. Cal 

Water was able to utilize our experience working with West Basin to help form a 

partnership in northern California with the City of Sunnyvale, the Santa Clara 

Valley Water District, and Apple that will bring more than 150,000 gallons of 

recycled water per day to the new Apple 2 Campus in Cupertino. 

Water Infrastructure Today 

Our water infrastructure systems are the backbone upon which communities survive 

and thrive. Water service is a critical part of the physical platform of the U.S. economy. 

Not a single business in any community can survive, nor be established, without a 

sustainable water supply. Communities must have reliable and resilient water 

infrastructure systems to attract and retain industry, business, and qualified workers. 

Simply put, capital investment in water infrastructure means job creation across the 

country. 

2 J.D. Power, "Robust Water Infrastructure Is Essential to Customer Satisfaction; Water Quality and 

Reliability Are Critical, Says Inaugural J.D. Power Water Study," May 18, 2016, available at: 

http:/ /www.jdpower.com/press-releases/2016-water-utility-residential-customer-satisfaction-study. 

National Association of Water Companies Page 3 
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25370.040

Unfortunately, aging and deteriorating water systems threaten economic vitality and 

public health, and communities nationwide are faced with massive fiscal challenges to 

replace critical water and wastewater infrastructure and effectively manage their 

systems. The network of pipes that every American relies on for drinking water spans 

700,000 miles and is more than four times the length of the National Highway System. 

Some of these pipes originally intended to survive 50 to 75 years, have been in service 

for more than 100 years- well beyond their useful life. On average, there are 650 

water main breaks every day across the country and two trillion gallons of treated water 

is lost every year due to leaking pipes at an estimated cost of $2.6 billion. 

As will be discussed by my counterparts today, the estimates for maintaining, replacing, 

upgrading, and operating the nation's water infrastructure are staggering. Water 

related services require miles of underground systems and extensive treatment plants. 

The complex nature of the water industry makes it twice as capital-intensive as 

electricity and three times as capital-intensive as natural gas. The continued 

deterioration of the nation's water systems could lead to increased water service 

disruptions, more barriers to emergency response, impacts to other public 

infrastructure, as well as threats to public health for many Americans. 

Water systems are the most expensive asset for a community to maintain, and many 

municipally owned utilities simply cannot afford to improve their systems. They have a 

limited revenue base which must service all the needs of the community, not just water 

and wastewater services. In this context, the importance of bringing in private capital 

cannot be underestimated. 

On the other end of the spectrum, there are many instances where needed water 

system improvements are indefinitely deferred as a result of short-term political 

expediency. For example, during a recent trial in southern California, it was brought to 

light that one local water supplier is currently on a water pipeline replacement cycle of 

148,000 years.3 In other words, it will take the water utility 148,000 years to replace all 

of the water pipes in its system. Too frequently, these decisions are made in order to 

keep the cost of water service as low as possible. Yet, having low water rates is not, in 

and of itself, virtuous, especially considering how critical the nation's drinking water 

systems are to economic vitality and public health. 

Addressing these dramatic needs will require focused, dedicated and robust 

participation by both public and private sectors. Thus, it is important that the federal 

government look to all sources of capital and expertise- both public and private- to 

invest in water infrastructure. Federal funds alone will not bridge the growing 

investment gap. As Congress examines future funding for drinking water and 

3 Golden State Water Company, "Golden State's (Proposed) Findings of Fact and Supporting Evidence and 

Law," in City of Claremont v. Golden State Water Company, Superior Court of the State of California- Los 

Angeles County, Case Number BC566125, August 5, 2016, p. 35. 

National Association of Water Companies Page 4 
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25370.041

wastewater programs as part of any infrastructure initiative, NAWC recommends that 

all policies be examined to ensure that the private water industry is not disadvantaged, 

but rather, is incentivized to add additional resources to this effort. And just as 

important, we must ensure that any future federal funds are utilized to most effectively 

address the nation's vast water infrastructure needs. 

Effective Utility Management and Accountability 

NAWC and its members support EPA's ten attributes of effective utility management 

endorsed by all major water and wastewater associations, including the American Water 

Works Association (AWWA), National Association of Clean Water Agencies (NACWA). 

Water Environment Federation (WEF), Association of Metropolitan Water Agencies 

(AMWA), Association of Drinking Water Agencies (ASDWA), and the Association of Clean 

Water Administrators (ACWA). The attributes include things such as financial viability, 

infrastructure stability and operational resiliency, which reflect the basics of financial, 

technical and operational capacity of sustainable utility management. 

Failing and noncompliant water systems not only create a growing financial burden, but 

they pose significant risks to public health and the environment. According to EPA's 

compliance database, in 2016, there were over 1,500 community water systems in 

significant noncompliance.4 These rates of noncompliance are unacceptable and 

unsustainable. If we are to change the status quo, we must offer more "carrots and 

sticks" in the regulatory toolbox. 

As a good first step, and as a general rule, applicants for public dollars should 

demonstrate that they have fully accounted for the long-term costs of their projects, 

including any risks inherent in construction, operations, or maintenance, and have 

selected the delivery model that provides the best value. For a community to maintain 

and enhance the condition of its infrastructure long-term, water utilities should be 

expected, at a minimum, to manage their assets based on a process where adequate 

repair, rehabilitation, and replacement are fully reflected in management decisions, 

including water pricing. 

On this latter point, it is important to note one of the core differences between 

regulated private water utilities, like Cal Water, and some of our public counterparts. 

The water rates charged by regulated private water utilities are set by state public 

utilities commissions to ensure they reflect the actual cost of service, including the costs 

of operating, maintaining, and upgrading their water systems. We do not rely on other 

sources of revenue that are not related to the water system, such as sales or property 

tax revenue. Not only does this approach send an efficient price signal to customers, 

but it also helps to ensure that the utility remains financially stable. 

4 Brent Fewell, "Encouraging Greater Compliance Requires a Change in the Status Quo," Journal AWWA, 

September 2016. 

National Association of Water Companies Page 5 
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25370.042

As well, we would be wise to assess impediments to effective utility management 

resulting from local procurement processes. Public procurement today tends to 

overvalue low initial costs and undervalue future obligations, rewarding bidders who 

can build cheaply, rather than those who offer the best value over a project's lifecycle. 

This often increases the costs down the road- both higher operations and maintenance 

costs- and as repairs go unaddressed, infrastructure fails prematurely, requiring 

expensive rebuilds, etc. This is fiscally irresponsible. 

Partnerships and Consolidation 

Drinking water systems must be expected to maintain their assets and operations in 

compliance with health-based laws. If a system is unable to attain compliance and is 

plagued with a history of serious noncompliance, it should be given an option to pursue 

a partnership that will lead to a return to compliance or be compelled by the State to 

consolidate or transfer assets to an able owner/operator. In this regard, NAWC has 

been working closely with other water groups to promote legislation that would 

encourage partnerships, ranging from peer-to-peer support and public-private 

partnerships (P3s) to transfer and consolidation. We simply cannot continue to expect 

failing systems to change unless good decision-making is incentivized and, conversely, 

bad decision-making is discouraged. 

While NAWC and its members are mindful of the socioeconomic and financial 

complexities associated with our nation's growing water crisis, communities must be 

held accountable for failing systems. We should expect communities to proactively seek 

assistance and support or they should get out of the business of water provision. Year 

after year there is talk of the growing water crisis, yet little is done to actually stem this 

crisis. 

One option to help struggling systems that is currently under discussion is to encourage 

these systems to pursue partnerships in lieu of traditional enforcement or, alternatively, 

the State should compel the transfer of assets and/or operational control where a 

return to compliance is unlikely to occur. While traditional enforcement tools are not 

always appropriate or practicable where, for example, communities simply do not have 

adequate resources, these communities must be expected to do things differently. 

Cal Water's experience with the unincorporated community of West Goshen in Tulare 

County, California highlights the efficacy of an approach that focuses on partnerships 

and consolidation. For years, the 400 residents of the community dealt with ongoing 

water quality issues, including nitrate and bacteria contamination of their two water 

wells. To make matters worse, in 2012, West Goshen's wells began failing. The 

community received emergency funding from the State to replace the failing wells. 

Unfortunately, a short while after receiving this funding, a portion of the water system's 

pipes collapsed; instead of water, residents had sand flowing through their taps. 

Residents were forced to travel to nearby towns to shower, brush their teeth, and cook. 

National Association of Water Companies Page 6 
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Fortunately for the residents of West Goshen, one of Cal Water's service areas was only 

a little over a mile away. Cal Water worked with several non-profits, Tulare County, and 

the state to secure $3 million from the Safe Drinking Water State Revolving Fund to 

connect the community's water system to Cal Water's. As part of the project, Cal Water 

installed more than 8,500 feet of new water pipe from its existing system to West 

Goshen, and installed a number of new fire hydrants to improve fire protection in the 

area. Today, the residents of West Goshen are able enjoy something they did not have 

for years: safe, reliable, and high-quality water service. 

Suffice it to say that there are numerous opportunities for similar partnerships to be 

employed across the country. What is truly needed is the will to make them a reality. 

While many communities continue to clamor for more federal funding, more funding is 

not going to solve this growing crisis. In many cases, water system failures- be they 

related to water quality, reliability, or both- are not due to the absence of funding, but 

rather are directly attributable to the failure of proper governance and poor decisionmaking. 

This point notwithstanding, we recognize there are many small and rural communities 

where few, if any, viable partnership options exist due to the fact they are simply too 

small or too remote to would-be partners. In those cases, the federal government 

should increase and reprioritize federal funding and technical assistance to help support 

those communities. 

While public-private partnerships are in many cases an efficient and cost-effective 

solution, there are numerous impediments to more P3s, including the legal and financial 

liabilities of distressed systems. Such liabilities for past noncompliance, which can range 

in the hundreds of thousands and millions of dollars, can be a "poison pill" to a 

prospective new operator or owner. To solve this problem, Congress should consider 

providing a legal "safe harbor" to encourage more private sector participation, including 

investment. Without such liability relief, significant amounts of private capital and 

investment remains on the sideline. 

Specific Tax Issues 

While we recognize that tax issues are the jurisdiction of the Ways and Means 

Committee, NAWC has two priority tax issues that we want to highlight for you today. 

Private Activity Bonds (PABs) for Water Projects 

One of the most effective financing tools of the federal government for long-term, 

capital-intensive infrastructure projects is the private activity bond (PAB)-tax exempt 

financing granted to the private sector for public-purpose projects, like water. The PAB 

is a critical tool for drinking water and wastewater projects. PABs make infrastructure 

repair and construction more affordable for municipalities and ultimately for users or 

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customers. The use of PABs spurs capital investment in public projects during a time 

when governmental budgets are tight; and investors prefer PABs because interest 

accrues tax-free. 

While legislation has yet to be reintroduced this Congress, in past Congresses bills in the 

House and Senate have been introduced that would remove water projects from state 

volume caps for private activity bonds and thus spur increased private investment in 

systems throughout the country. A removal on volume caps for water projects will bring 

financing of this piece of the nation's critical infrastructure in line with airports, highspeed rail and solid waste disposal, all of which are currently exempt from existing caps. 

This legislation has received extraordinary bipartisan support in the past, garnering 101 

bipartisan co-sponsors spanning the full political ideological spectrum, and was 

supported by dozens of business and other groups from the Clean Water Council to the 

U.S. Chamber of Commerce to Operating Engineers and Laborers' Unions and the U.S. 

Conference of Mayors because of the measure's undeniable merit. We are hopeful that 

this legislation will be reintroduced in the near future. 

Clarify Internal Revenue Code for Public-Private Partnerships {P3} 

Most municipal infrastructure projects are financed by tax-exempt municipal bonds. As 

a general rule, the tax exemption on such bonds is lost if a private-sector business 

acquires a long-term interest in the project. However, the Internal Revenue Service has 

issued rules meant to give state and local governments a reasonable path for preserving 

the tax-exempt status of these bonds in such an event. Unfortunately, as currently 

drafted, these remedies are not practicable for water utility projects and, thereby, deter 

beneficial water P3 projects. We look forward to working with Congress and the U.S. 

Treasury Department to find a reasonable and narrowly tailored solution. 

Recommendations 

Our current water infrastructure crisis has been in the making for several decades, and it 

may take several decades to change the direction and right the ship. Today's dwindling 

resources and increasing demand for safe, sustainable water resources requires a 

fundamentally different approach than what we have taken over the last several 

decades. 

First, Congress should require as condition to eligibility for public funding, that water 

systems develop a plan based on life-cycle cost and sustainable materials. Recognizing 

that not every water system project is of sufficient size to make this level of screening 

cost-effective, Congress could establish a size or cost threshold below which these 

requirements would not apply. However, such a threshold should be set at a level, or 

otherwise be constructed, to encourage opportunities for partnerships or consolidation. 

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Second, failing systems that are seriously noncompliant with state and federal healthbased requirements must be held accountable with a return-to-compliance plan, which 

could include an option for partnership in lieu of a traditional enforcement approach. 

Third, Congress should provide more incentives for private-sector participation in the 

form of public private partnerships, remove barriers such as the PAB volume cap and 

resolve defeasance issues, and provide "safe harbor" to shield would-be partners from 

the legal and financial liabilities associated with seriously noncompliant systems. 

Conclusion 

I sincerely appreciate your invitation to appear before the Subcommittee today and, 

along with my many colleagues in the National Association of Water Companies, look 

forward to continuing our work with you to ensure that all Americans benefit from 

innovations in financing which improve the water infrastructure so essential to their 

quality of life. Thank you and I would be happy to respond to any questions you may 

have. 

National Association of Water Companies Page 9 
65 

Mr. SHIMKUS. Thank you very much. 

Chair now recognizes Mr. Erik Olson, director of the Health and 

Environment Program with the Natural Resources Defense Council, NRDC. You’re recognized for 5 minutes. 

STATEMENT OF ERIK D. OLSON 

Mr. E. OLSON. Thank you, Chairman Shimkus, and Ranking 

Member Tonko and members of the subcommittee. 

I think we all take for granted where this water that is sitting 

here comes from. It’s, in many cases, comes through water systems 

that have been there for over a century. 

For example, I’ve seen the DC original plans for the water supply 

in Washington, DC signed by guess which president? Pierce. Started to be built during the Lincoln administration. 

Mr. SHIMKUS. One of my favorites. 

[Laughter.] 

Mr. E. OLSON. We still get our water through lead pipes in much 

of the city through lead service lines. We still have a brick aqueduct that is used for some of the water that is delivered into the 

city. 

And DC is not unique. We have got I think a situation where we 

take for granted where our water is coming from and it is out of 

sight and out of mind. 

But I’d liken this very much to an old house that is 100-plus 

years old. It’s got a leaking roof. It’s got termites. It’s got a crumbling foundation. It’s got broken windows. It sort of reminds me 

maybe of the house that Jimmy Stewart had in ‘‘It’s a Wonderful 

Life’’ that was falling apart and about to collapse, and without 

some tender loving care and real investment, unfortunately, in a 

lot of cities and small towns across the country we are really at 

risk of collapse. 

It’s not just the small town in West Goshen, California. There 

are a lot of other cities and towns that have this problem. You 

know, and these have very real public health implications. 

So CDC estimated a few years back that about 19.5 million people per year get sick from drinking tap water from municipal water 

supplies in the U.S. 

Now, some of those people get really sick. There are deaths and 

some of them get over the illness. But if you’re elderly, if you have 

an immune system problem, if you’re on chemotherapy, they are 

very real, very serious health risks. 

And that is just from the microbiological risks. We are not talking about lead. We are not talking about some of the carcinogens 

and the other contaminants. 

I will say that the U.S. has made enormous strides in the last 

hundred years. Our water is a heck of a lot safer than it was before 

World War I. 

But, unfortunately, we haven’t made the kind of progress we 

need and we haven’t been investing to keep our water infrastructure up. 

I think we are sort of like ostriches with our head in the sand. 

We don’t want to think about this problem. It’s yet another problem to worry about. 

66 

But this s the one infrastructure issue that touches every American and their—and their health every single day. We take a shower in the morning. Do we give it a second thought what’s in that 

water? 

We drink it. We use it for our cooking. We use it for making our 

coffee in the morning. What’s in that water? We need to really be 

thinking about this and the deferred maintenance that we continue 

to see across the country, unfortunately, because of resource constraints is a very real problem that is affecting communities all 

over the U.S. 

And this has real implications. I was recently in Flint, Michigan, 

where we are representing the citizens and I know you heard from 

Melissa Mays about a month ago. She’s one of the citizens in Flint, 

and we visited with Melissa. 

We visited with other people in the community and you can 

imagine what it is like. What if you didn’t feel like you could bathe 

your kids in the water? 

What if you felt like the water coming out of your tap was unsafe 

and that you were being told for a long time that it was perfectly 

safe—don’t worry about it—and then it comes out that it wasn’t 

safe and you find out your kids are lead poisoned? How does that 

make you feel? 

It certainly erodes your confidence in government. It also erodes 

your confidence in water systems and I will say that a lot of people 

in Flint that we are working with I don’t they are ever going to 

feel confident about their water and I am very worried that as this 

problem escalates across the country we are going to see more and 

more of those kinds of situations where people are not confident in 

the water that is coming out of their tap. That’s a very real risk. 

Another example that I cite in my testimony is East Chicago, Indiana. We just filed a petition similar to the petition we filed in 

Flint months before it became a big issue in Flint. 

We recently filed a petition for East Chicago, Indiana. They’ve 

got serious lead contamination problems in their drinking water as 

well as in their soil. I cite a woman named Crystal that is one of 

the people that is affected by this. She’s got two kids under the age 

of 5 who are lead poisoned. 

What’s going to happen to that community? How are we going 

to restore confidence in the water supply in East Chicago and a lot 

of other communities across the country? 

So where do these problems come from? Well, certainly, first of 

all, there is a lack of investment in our infrastructure. There has 

been for decades. I don’t think this is a partisan issue. It’s something where we haven’t been putting the money we need to put 

into it and unless we take some action we have got a really serious 

problem. 

Secondly, we have had weak enforcement. We have deteriorating 

lead pipes in a lot of communities, a lack of source water protection, and I have to mention that the budget cuts that were announced last night I would call it a bloodbath budget. 

We are seeing huge cuts, although the state revolving fund is 

protected huge cuts in Superfund, huge cuts in enforcement, huge 

cuts in Great Lakes, Chesapeake Bay program, the water programs. 

67 

We are very concerned that the effect of this is going to be more 

problems, more health risks and it is not just EPA. I noticed also 

that U.S. Department of Agriculture’s entire program for rural 

drinking water and sewers is zeroed out—almost $500 million zeroed out. 

The HUD programs, a lot of which pay for drinking water and 

sewer—— 

Mr. SHIMKUS. I am being very kind. 

Mr. E. OLSON. That’s a serious problem. Thank you. 

[The prepared statement of Erik D. Olson follows:] 

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liPage 

NRDC 

TESTIMONY OF 

ERIK D. OLSON 

DIRECTOR, HEALTH AND ENVIRONMENT PROGRAM 

NATURAL RESOURCES DEFENSE COUNCIL 

BEFORE THE 

COMMITTEE ON ENERGY AND COMMERCE 

SUBCOMMITTEE ON ENVIRONMENT 

UNITED STATES HOUSE OF REPRESENTATIVES 

HEARING ENTITLED 

"REINVESTMENT AND REHABILITATION OF OUR NATION'S 

SAFE DRINKING WATER DELIVERY SYSTEMS" 

MARCH 16, 2017 
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SUMMARY 

The safe drinking water we all take for granted in the U.S cannot be considered a given. 

• Much of our nation's water infrastructure is like a century-old house with a leaking roof, 

crumbling foundation, termites, and broken windows. It's still standing, but unless we act 

soon and make the investments we need to fix it, there is a risk that it will collapse. 

• An estimated 19.5 million Americans are sickened every year by drinking pathogencontaminated tap water, and that doesn't include the impacts of lead or other toxics. Also, 

tens of millions arc served by water systems violating EPA's drinking water standards. 

We cannot be ostriches with our heads in the sand about the mounting drinking water 

crisis. Deferred maintenance of our drinking water systems is a ticking time bomb that 

harms public health, imposes enormous costs, and erodes public trust in government. 

This is having devastating impacts on people. Flint resident Melissa Mays testified here 

last month about the shattering effects on her family of the city's ongoing water 

contamination problems. And East Chicago, Indiana's "system-wide" lead in tap water 

problem has upended Krystle's family. Two of her kids under the age of five have been 

diagnosed with blood lead above the CDC reference level. She's distraught because lead 

may have seriously, perhaps permanently, harmed her young children. 

The health risks stem from: weak enforcement; outdated and inadequate drinking water 

treatment technology; deteriorating and often lead-laced water distribution pipes; 

inadequate protection of source waters; decaying and insufficient wastewater and storm 

water infrastructure. Often low-income areas lack any access to safe piped drinking water. 

• Infrastructure investment creates good jobs, 

Protecting water sources helps to safeguard health and reduces treatment costs. 

• There arc increasing challenges to water infrastructure from extreme weather, droughts. 

Recommendations: 

1. Fix Flint. 

2, Fix Our Lead in Water, Including the Lead & Copper Rule, and Lead in Schools. 

3. Fix the Standard-Setting Process Under the Safe Drinking Water Act 

4. Fix our National Water Infrastructure, Paying Special Attention to the Needs of Lower 

Income and Disproportionately-Affected Communities. 

5. Increase Federal Water Infrastructure Funding. 

6. Protect Source Water to Reduce Infrastructure Costs. 

7. Protect Water Infrastructure from Extreme Weather Events & Possible Terror Attacks. 

8. Invest in Advanced Water Technologies, Including Real-Time Monitoring. 

9. Let Citizens Act Immediately Against Imminent & Substantial Endangerment to Health. 

10. Vigorously Enforce the Safe Drinking Water Act. 

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Introduction 

Good morning Chairman Shimkus, Ranking Member Tonko and members of the 

Subcommittee. lam Erik D. Olson, Director of the Health and Environment Program at the 

Natural Resources Defense Council (NRDC). l have worked on Safe Drinking Water Act 

issues for over 30 years, beginning with my service as an attorney in the U.S. 

Environmental Protection Agency's Office of General Counsel in the 1980's, and continuing 

as a former member of the EPA's National Drinking Water Advisory Council and as a 

member of numerous EPA advisory committees relating to drinking water. I also served as 

an advisor to the Government Accountability Office's experts' assessment of how to 

improve water system security after 9/11.1 l appreciate the opportunity to testify today. 

As the drinking water crisis in Flint, Michigan, and more recently in East Chicago, Indiana 

and other communities have highlighted, the safe drinking water we all take for granted in 

the United States cannot he considered a given. 1\nd unfortunately, it's not just about lead. 

Much of our nation's water infrastructure is like a century-old house with a leaking roof, 

crumbling foundation, termites, and broken windows. It's still standing, but unless we act 

soon and make the investments we need to fix it, there is a risk that it will collapse. 

Deferred maintenance and the steady deterioration of the nation's water and wastewater 

infrastructure have been a serious challenge for decadcs.z Indeed, NRDC published a report 

23 years ago calling for the modernization of our aging and outdated drinking water 

treatment and distribution systems, noting that "Victorian water treatment" was "taking us 

into the 21st Ccntury.''3 Unfortunately, here we are in the 21" Century, and progress since 

our 1994 report has been slow. Similarly, we have long known that our wastewater and 

storm water treatment and collection systems badly need updating. 

Our inadequate drinking water infrastructure is posing very real health risks to millions of 

Americans. The Centers for Disease Control and Prevention (CDC) has noted that there are 

an estimated 19.5 million Americans who arc sickened every year by drinking pathogencontaminated tap water from community water systems.4 And that's just from 

microbiological threats-it doesn't include the devastating impacts of lead contamination, 

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25370.049

or from the numerous other cancer-causing and other toxics in our water supplies. NRDC 

published a report last june documenting that about 18 million Americans were served in 

2015 alone by community water systems violating EPA's Lead and Copper Rule, with 

violations including failing to treat their water to reduce lead levels, failing remove lead 

service lines, and not testing for lead or reporting lead levels as requircd.s We found about 

4 million Americans were served by systems that exceeded EPA's Lead Action Level in 

2015. And communities across the country arc dealing not only with lead contamination, 

but also problems with regulated and unregulated contaminants ranging from arsenic to 

dangerous pathogens. These problems require improvements to our system of funding our 

infrastructure, and of regulating and enforcing against violations. 

We cannot remain ostriches with our heads in the sand about the mounting drinking water 

crisis. Deferred maintenance of our drinking water systems is a ticking time bomb that 

harms public health, imposes enormous costs, and erodes public trust in government. 

The Human Costs of Our Inadequate Drinking Water Infrastructure 

For many of us, these infrastructure problems may be out of sight and out of mind, but they 

arc having devastating impacts on real people every day. As this subcommittee heard from 

Flint resident Melissa Mays in her moving testimony just one month ago today, that people 

of Flint still lack water that is safe to drink. This remains so over 1,000 days after stateappointed "emergency manager" made the fateful decision to save a few bucks by switching 

to the polluted and corrosive Flint River as the city's water source. That ill-advised 

decision, combined with deteriorating water infrastructure (including thousands of lead 

service lines in Flint}, failure to use corrosion control as required, and the lack of 

appropriate state and US EPA oversight led to the contamination of thousands of Flint 

citizens' tap water. It has been linked to elevated blood lead levels in many children across 

the city6 and reportedly to a Lcgionclla outbreak that killed a dozen people.? 

And Flint isn't the only town suffering; other water threats continually come to the fore. 

Another recent example is the lead-contaminated tap water in East Chicago Indiana, which 

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NRDC and our colleagues have recently petitioned EPA to address on behalf of local 

residents because it poses an "imminent and substantial endangerment" to public healthH 

EPA conducted a pilot water study in East Chicago, released in December, 2016, that 

revealed that lead levels in East Chicago's drinking water are well above the action level set 

by EPA that triggers corrective action by public water systems. The data showed a 

"system-wide" problem in the drinking water for this city of29,000. Similar to the water 

crisis in Flint, inadequate corrosion control and the existence oflead service lines resulted 

in elevated levels oflead in drinking water. 9 Unfortunately, there also is lead in the local 

soil from past industrial activity, and possibly from lead paint, posing cumulative lead risks 

to East Chicago's kids. 

One of the local residents is Krystlc, a mother of four children, aged ages 8, 6, 4, and 2. She 

lived in East Chicago, in the West Calumet Public Housing Complex from 2012 until July 

2016. In late 2015, Krystle's child- then two years old was diagnosed with an elevated 

blood lead level of 11 micrograms of lead per deciliter of blood (!lg/dL), more than double 

the level at which CDC recommends that action be taken to protect a child. Shortly after 

receiving this distressing news, Krystle reported this by providing a copy of her child's 

blood lead level results to the housing authority. She was not informed about the lead 

contamination that characterized homes in her building, and no steps were taken to 

provide her family a lead-free source of drinking water. 

In May 2016, Krystle's then one year-old son was also tested for lead. Her son's doctor said 

that he would likely test positive for elevated blood lead levels as a result of the "known" 

lead and environmental contamination in the area. When his results came back, her son 

was diagnosed with an elevated blood lead level of7 ~tg/dL. Like his sibling, his blood lead 

level also above the CDC reference level of S ugjdL. Krystle was distraught because she 

realized lead could be seriously and perhaps permanently harming her young children. 

Krystle moved out of the West Calumet Public Housing Complex in the middle of july to 

keep her children safe. As of September 2016, Krystlc and her children were living with a 

relative whose home is in foreclosure. 

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Widespread Health & Environmental Risks from Inadequate Water Infrastructure 

There are thousands of stories like this in East Chicago, Flint, and many other cities and 

towns across the country. Melissa Mays' and Krystle's experiences, and those of 

innumerable other Americans, illustrates the perils of failing to invest in solving our water 

infrastructure challenges. 

The health risks stem from several problems: 

• Often outdated and inadequate drinking water treatment technology. Most large 

drinking water systems still use basic coagulation, sedimentation, sand filtration, 

and chlorination as treatment. This technology has reduced waterborne disease and 

served us well since before World War I a century ago, but is not up to the task of 

removing many of today's contaminants like industrial chemicals, pesticides, 

nitrates and many other pollutants. The public health threat from our failure to 

invest in our water infrastructure is enormous. We remain at risk from lead, arsenic, 

bacteria and other pathogens, cancer-causing disinfection byproducts, the rocket 

fuel component perchlorate, and many other regulated and unregulated 

contaminants. America needs to switch to 21st Century water infrastructure. 

Treatment technology such as granular activated carbon, membranes, and 

ultraviolet light or ozone for disinfection, still has been installed by only small 

minority of water systems. Moreover, while some water systems are effectively 

using optimized corrosion control treatment, as Flint and East Chicago illustrate, 

many others arc not doing so, posing serious health risks. 

Deteriorating and often lead-laced water distribution pipes. Many of the 

underground pipes in our drinking water distribution systems arc 100 years old or 

more, often operating well beyond their design life. In addition, 6 to 10 million lead 

"service lines" connect the water main to residences of up to 22 million Americans. to 

There arc about 240,000 water main breaks a year due to crumbling pipes. 

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Inadequate Protection of Source Waters. The best and least expensive way to 

avoid drinking water contamination is to prevent pollution of the surface water or 

ground water used as a water source in the first place. Unfortunately, many water 

pollution sources still arc poorly controlled, such as runoff from large industrial 

farms, mining waste, and untreated or poorly-treated sewage. We anticipate that 

these problems could be made worse by proposed or enacted rollbacks of the 

Stream Protection Rule that was intended to protect communities from water 

contaminated by coal waste, and of EPA's Clean Water Rule. 

Decaying, outdated and insufficient wastewater and storm water infrastructure. 

Our wastewater and storm water collection and treatment systems are too often not 

up to the task Combined sewer overflows (CSOs) are common, when domestic 

sewage mixes with collected storm water in combined sewers and during 

precipitation events, causes raw or minimally treated sewage to flow into lakes and 

streams. CSOs are, according to EPA, "a major water pollution concern for the 

approximately 772 cities in the U.S. that have combined sewer systems." These 

CSOs and other shortcomings in our wastewater and storm water systems arc often 

causing sewage contamination of drinking water source waters, beaches, and 

sensitive ecosystems. 

• Underserved, of~en low-income areas lacking access to safe piped drinking 

water. While most Americans take piped drinking water systems for granted, in 

many areas, particularly lower-income rural areas and Native American lands, lack 

access to safe and sufficient piped drinking water. Areas ranging from the Colonias 

in Texas ncar the border, to parts of the Central Valley of California, to rural Alaskan 

Native villages, to parts of Appalachia simply don't have access to safe and sufficient 

tap water. 

The Safe Drinking Water Act 

We need to improve the Safe Drinking Water Act to ensure the quality of our tap water. 

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The Safe Drinking Water Act requires the EPA to establish standards for drinking water 

safety. EPA is required to set a health-based Maximum Contaminant Level Goal (MCLG) for 

each regulated drinking water contaminant, at a level that is fully protective of health.ll 

The agency is then required to establish maximum allowable levels of the contaminant 

called Maximum Contaminant Level (MCL} as close to the MCLG as is feasible, considering 

technological limitations and costs. EPA has identified about 100 contaminants that pose 

health risks and are regulated in our drinking watcr.1 2 

If EPA finds that it is not feasible to ascertain the level of a contaminant in drinking water, 

the agency must establish a "treatment technique" instead of an MCL. A treatment 

technique sets required methods of treating the water to make it safe to drink.13 Public 

water systems arc responsible for meeting the requirements of an MCL or treatment 

technique, subject to the supervision of state drinking water officials, and ultimately the 

oversight oft he federal EPA. 

The Lead and Copper Rule 

In 1991, EPA established a complex treatment technique to control lead levels in tap water, 

known as the Lead and Copper Rule (LCR).l' Under the LCR, all large water systems 

(serving more than 50,000 people) must treat their water to optimize corrosion control, or 

demonstrate that they don't need to do so because their water isn't corrosive and they have 

no lead problems. The LCR also generally requires water systems to coutrol corrosion by 

adding chemicals, since corrosive water can cause the release of lead from pipes and 

fittings. Many systcn1s usc a corrosion inhibiter, such as orthophosphate, \Vhich coats the 

inside of the pipes with a thin film that can reduce the amount of lead that leaches into the 

water. 

All water systems also arc required to test a specified number of drinking water taps in 

high-risk areas (with lead service lines that bring water from the water main under the 

street to a residence, or areas with a lot of homes that arc likely to have lead in their 

household plumbing or fixtures). The bigger the system, the more taps must be tested. 

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Under the LCR, if more than 10 percent of the tested taps contain lead above an "action 

level" of 15 parts per billion, the water system must take measures to reduce lead levels. 

These measures include removing lead service lines over a specified time period. 

Unfortunately, under the LCR there are unintended but signifkant incentives for water 

systems to monitor the lead levels in ways that fail to detect lead problems (such as using 

monitoring techniques that arc less likely to find lead).l 5 In the wake of the Flint crisis, in 

late February 2016, EPA issued a guidance intended to discourage the tricks some utilities 

have used to avoid finding lead problems. 

Lead-contaminated drinking water remains a major problem around the country. The 

EPA's Lead and Copper Rule (LCR)-and the way states and EPA implement and enforce 

it-needs a major overhaul. 

EPA began developing long-term revisions to the LCR.ln 2014, the National Drinking Water 

Advisory Council (NDWAC) established a Working Group to address these revisions. 

Between March 2014 and june 2015, the Working Group met and discussed a set of 

recommendations for revising the LCR. EPA has indicated that it intends to propose 

revisions to the LCR in 2017. The Flint crisis provides a blueprint for the types of 

improvements that arc needed. 

It is critical that the revisions to the LCR, at a minimum, include the following: (1) a 

mandate to fully replace all !cad service lines; (2) improved corrosion control 

requirements; (3) robust monitoring requirements that fully and fairly monitor problems, 

and prohibit gaming the system to avoid detecting or reporting lead contamination 

problems; and ( 4) a mandate for clear, ongoing, and culturally appropriate public 

education and notification of lead problems. 

Full Lead Service Line Replacement 

No matter how optimally a corrosion control system is nm, there will always be lead 

contamination issues, as long as lead service lines arc in the ground. The problem of lead 

service lines is enormous and exists nationwide. While there is no comprehensive national 

inventory of all of the lead service lines in the country, experts have estimated that 6 to 10 

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million lead service lines arc being used in the United States, serving 15 to 22 million 

Americans. 16 Most were installed 50 or more years ago. So it is critical that the revised LCR 

contain an enforceable requirement to fully replace lead service lines on a strict timeline. It 

is also critical that the service lines be replaced fully; that is, replacement of the service line 

up to the customers' home or residential building, including on the homeowner's property. 

We applaud the American Water Works Association (AWWA), the nation's largest drinking 

water utility trade association, for its support for complete removal of lead service lines 

across the country, recently announced by its Board of Directors. 17 

Need for a Far More Robust Monitoring Program 

Under the current LCR, it is too easy to develop a monitoring program that avoids finding 

problems. Flint stands as a marked example of this ability to fly entirely under the radar, 

since the system reported no violations of the LCR, despite its disastrous lead 

contamination problems. EPA knows where these gaps exist and should ensure that the 

LCR is revised to close these gaps. At a minimum, EPA should codify its sampling protocol 

recommendations to stop the protocols that some utilities have used to "game the system." 

Specifically, states and water authorities should ensure that every test is valid by 

prohibiting water sampling instructions to: (a) remove aerators from faucets before 

testing, since they often capture particulate lead and can be responsible for substantial lead 

contamination of tap water; (b) pre-flush their tap water 6 hours before the testing, which 

can reduce the levels of lead detected; or (c) use narrow-necked bottles that make it 

difficult or impossible to test water rushing out of a faucet at high velocity (as consumers 

often do when pouring water for a drink or for cooking), when lead levels may be high due 

to shaking loose of particulate lead18 

In addition, the monitoring program should sample more frequently. It should retain and 

enforce the existing requirement that tap-water sampling target high-risk homes (e.g., 

those connected to lead service lines or where composition of service lines is unknown.) 

Improved Public Notification and Education 

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The revised LCR should require clear public education notices and notification provisions 

to ensure customers are aware of elevated levels of lead in the system's drinking water. 

This should include public education encouraging all homeowners to get their water tested, 

even if they are not part of the utility's sampling program. 

Widespread Violations of the Lead and Copper Rule Threaten Health 

NRDC published an extensive report in june 2016 that illustrates the extraordinary 

geographic scope of America's lead crisis. 19 We found that in 2015, 18 million people were 

served by water systems with lead violations. These violations were recorded because the 

systems were not doing everything that they are required to do to protect the public from 

lead issues, which could include failure to treat to reduce lead levels in the water (health 

violations}, failure to monitor the water for lead as required (monitoring violations), or 

failure to report lead results to the public or the government (reporting violations). About 

4 million people were served by systems exceeding EPA's Lead Action Level of 15 ppb. 

Even more surprising: Flint doesn't even show up as having violations for lead in the EPA 

database. This glaring omission illustrates the serious problem of undcrrcporting and 

gaming of the system by some water supplies to avoid finding lead problems, suggesting 

that our lead crisis could be even bigger. 

EPA Has Stalled on New Drinking Water Standards 

In the 20 years since the Safe Drinking Water Act was amended, EPA has not set one single 

new drinking water standard without an act of Congress. Rather than being an indication of 

the safety of the U.S.'s drinking water, this is an abject failure of the process and a 

demonstration of the numerous barriers to getting contaminants out of our water. 

Prior to the 1996 Amendments to the Safe Drinking Water Act, EPA established MCLs for 

about 100 contaminants. The amendments created a new process requiring EPA to develop 

a list of unregulated contaminants that arc known or anticipated to occur in public water 

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systems. This Candidate Contaminant List, or CCL, is published every five years. Once a CCL 

is finalized, EPA must make a "Regulatory Determination" whether or not to regulate five of 

the contaminants on the CCL every five years. A determination to set a drinking water 

standard for a contaminant is based on the following findings: 

(1) The contaminant may have an adverse effect on the health of persons; 

(2) The contaminant is known to occur or there is substantial likelihood the 

contaminant will occur in public water systems with a frequency and at levels of 

public health concern; 

(3) In the sole judgment of the Administrator, regulation of the contaminant presents a 

meaningful opportunity for health risk reductions for persons served by public 

water systems. 

Since 1998, EPA has published three CCLs and a draft CCL4, which all told include more 

than 100 chemicals and microbiological contaminants. Since 2003, EPA has made three 

preliminary determinations on 26 contaminants: the agency determined to take no action 

on 24 of them, delayed final determination on one (strontium), and determined to set a 

drinking water standard for only one: perchlorate. 

Perchlorate-a chemical commonly used in rocket fuel, fireworks, and explosives 

contaminates the drinking water of as many as 16 million Americans. Even at low levels, 

perchlorate contamination in drinking water may be harmful to human health. Exposure is 

particularly dangerous for infants, young children, and pregnant mothers, and may cause 

developmental delays, reduced growth, and impaired learning capabilities. 

In 2011, EPA determined that perchlorate met the three criteria under the SDWA for 

setting a national primary drinking water standard. The Act requires EPA to propose a 

drinking water standard within 24 months and publish a final standard within 18 months 

of the proposed rule. Despite the concerns about the impact of perchlorate on fetuses, it has 

been more than six years since EPA's determination to develop a standard for perchlorate, 

and EPA has not even proposed a standard. The agency recently agreed to propose a 

standard for perchlorate by 2018 and to issue a final standard in 2019-more than eight 

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years after it determined that a standard is needed, and 23 years after this subcommittee 

took the lead and helped to enact the 1996 Amendments. 

In fact, EPA identified during the CCL3 process more than 7,000 potential chemical and 

microbial contaminants- and still not one single drinking water standard has come out of 

this process. 

All the while, communities drink water contaminated with hexavalent chromium, 

pharmaceuticals, algal toxins, PFOA and PFOS, perchlorate, and many other widespread 

unregulated contaminants. As we continue to produce tens of thousands of industrial 

chemicals that can end up in our drinking water sources, we need our drinking water 

regulations to keep up. The system in place does not allow any standards for unregulated 

contaminants to develop in a timely way. 

Weak Enforcement of the Safe Drinking Water Act 

On the flip side, violations of regulated contaminants standards rarely lead to enforcement 

actions either by EPA or the states, States with primacy under the SDWA (all states except 

Wyoming) are supposed to carefully oversee drinking water systems to ensure that they 

are in compliance with any EPA requirements such as the LCR As part of this requirement, 

primacy states arc to regularly report violations and certain other information to EPA. 

Under the Act, if EPA finds that a water system is in violation in a state with primacy, EPA is 

to notify the water system and state of the violation. lfthe state fails to take enforcement 

action within 30 days, EPA is legally required to issue an administrative order or file an 

enforcement case in court against the violator. 20 EPA and states often ignore these 

important mandates in the law. 

Flint is but one example where neither state authorities nor EPA took enforcement action 

until literally years after the prohlem hcgan. But lack of enforcement in Flint was not 

anomalous. In fact, according to NRDC's june 2016 report analyzing EPA's enforcement 

data, states and the EPA took formal enforcement action against just 11.2 percent of the 

over 8,000 Lead and Copper Rule violations that occurred in 2015-leaving nearly 9 in 10 

violations free from any formal enforcement action. 2 l Formal enforcement actions were 

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taken against less than one in five health-based violations (17.6 percent). Furthermore, 

penalties were sought or assessed for only a tiny fraction (3 percent) of violations. This lack 

of accountability sends a clear message to water suppliers that knowingly violate the Lead 

and Copper Rule, with state and federal complicity: There is no cop on the beat 

Weaknesses in the Safe Drinking Water Act's Enforcement Provisions 

The Safe Drinking Water Act includes a provision authorizing EPA to immediately issue an 

administrative order or to hring a case in court if a contaminant "may present an imminent 

and substantial endangerment to the health of persons," even if no violation of the law is 

provcnn Unlike some other laws (like the Resource Conservation and Recovery Act23), 

however, the Safe Drinking Water Act docs not allow citizens to bring an action in such 

cases to protect their health from an imminent and substantial endangerment-a major 

shortcoming that should be rectified. 

The Safe Drinking Water Act does authorize citizens to sue public water systems that have 

violated the requirements of the Act, but only after providing 60 days advance notice to the 

violator, the state, and EPA Unfortunately, this can mean substantial delays while there is 

an ongoing health threat Moreover, unlike the citizen suit provisions in the Clean Water 

Act and Clean Air Act, under the drinking water law, no penalties are available, so there is 

little incentive for violators to come into compliance until ordered to do so by a court. In 

Flint, NRDC brought such an action on behalf of local citizens including Concerned Pastors 

for Social Action and other local residents. 

Regrettably, as we have noted, stories of contaminated water arc not limited to Flint and 

arc not limited to lead, Drinking water contamination incidents arc all too common. 

According to EPA's most recent annual compliance report for public water systems, there 

were 16,802 "significant violations" of EPA's drinking water standards.21 The most 

common of these more than 16,000 violations were: 

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• Total coliform bacteria contamination, representing 48 percent of the significant 

health standard violations; 

• Chemical contamination with synthetic organic, volatile organic, inorganic (except 

lead and copper) and radioactive contaminants, representing 22 percent of 

significant health standard violations; 

• Lead and copper treatment technique violations, representing 5 percent of the 

significant violations; 

• Disinfection byproduct contamination, representing 13 percent of the significant 

violations; 

• Surface water treatment requirements (to control pathogens like Cryptosporidium 

and Giardia), representing 7 percent of the significant violations; and 

• Ground water treatment requirements (to control for pathogens and fecal 

contaminants such as certain bacteria and viruses), which comprise 6 percent of the 

significant violations.zs 

Disproportionate Impacts oflnfrastructure Inadequacies in Low-Income 

Communities, and Communities of Color 

As is well-known, the Flint community is predominantly African American (57%} and has a 

high percentage of residents living at or below the poverty line (over 40%), or who arc 

working but struggling to make ends meet. State officials were "callous and dismissive" of 

the concerns these citizens raised about the water, according to the governor's 

independent Task Force on Flint. if' 

The obfuscation by government officials, and the denigration of community members and 

experts who raised concerns, illustrates a pressing nationwide problem. Low-income 

communities and communities of color all over this country often bear the hurden of 

environmental contamination and the resulting health problems. 

In recent years a series of peer-reviewed studies also have documented that unsafe 

drinking water often is disproportionately associated with lower-income communities of 

color Examples include nitrate and other contaminants in drinking water in California's 

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San joaquin Valley, contamination and substandard water infrastructure in U.S.-Mexico 

border Colonias and some minority communities in certain Southern rural areas, and 

bacteriological and chemical contamination on some Native American lands. 28 Balazs et al. 

have established that in areas of California "racejethnicity and socioeconomic class were 

correlated with exposure to nitrate and arsenic contamination and noncompliance with 

federal standards in community water systems." 29 

The Flint case is not an anomaly. There is a wide array of factors, including lack of access of 

lower-income communities of color to resources and government political attention, that 

help to create a disproportionate and "persistent drinking water burden" in these 

communities. :Jo In sum, researchers have found that "unequal access to infrastructure 

drives unequal access to safe drinking water."31 

There are clear challenges to ensuring that every American gets safe drinking water. We 

don't want to create a two-tiered system where the wealthy get water that is clean and safe 

for their families, and the less well-to-do get second-class water that poses risks to their 

health. 

Thus, we need to create an infrastructure investment and structuring system that ensures 

that communities that cannot afford to upgrade their water infrastructure get a helping 

hand. The National Drinking Water Advisory Council's Affordability Work Group report on 

how to address affordahility concerns provides an important resource. Among other 

ideas, the Work Group recommended the creation of a Low lncome Water Assistance 

Program (L!WAP), modeled after the Low Income Heating and Energy Assistance Program 

(LIHEAP), which would help lower-income people afford their water bills if needed. Thus, 

rather than providing substandard water, all consumers should get top quality tap water, 

with some assistance to low income people if necessary. Access to clean, safe, affordable 

drinking water should be available to everyone. 

The Backlog of Overdue Investments in Infrastructure 

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There is a huge b<Jcklog of overdue investments in the nation's water infrastructure. The 

American Society of Civil Engineers (ASCE} has been ringing the alarm bell about our water 

infrastructure since at least 2001 :n, with its troubling report cards giving our water and 

wastewater infrastructure a grade of "D" or worse every four years. 34 The engineers 

highlight serious problems that result from the lack of investment in our water 

infrastructure, noting that pipes and mains are often 100 years old and nearing the end of 

their useful life, causing frequent pipe failures and other problems. 

The evidence of these problems is widespread. For example, there are about 240,000 water 

main breaks per year due to deteriorating and poorly-maintained underground drinking 

water pipcs. 35 Even more water is lost to unseen leaks and breaks that never reach the 

surface. Water losses waste not only enormous amounts of this precious resource, but they 

also can cause serious damage to roads and property, they can pose significant public 

health risks. For example, particularly when water mains are close in proximity to sewer 

lines, fecal contamination can get into the drinking water after a rupture or pressure loss, 

posing a threat of causing a waterborne disease outbreak. 

In many cities, underground pipes arc often a century old or more, and in too many cases 

municipalities arc on track to take 200 years to replace their aging pipes. 

We routinely lose an average of 14 to 18 percent of our drinking water to leaking 

underground pipes,36 although this is just an estimate, since standardized auditing and 

reporting of water loses is not required in most statcsY In some cases, such as Flint, water 

Joss rates of 40 percent or more have been estimated. These leaks represent an enormous 

waste of water, energy, treatment chemicals, and money used to collect, treat, and pump 

the water. Moreover, points of leakage of any size can provide pathways for contaminants 

to enter the water system during short-term pressure fluctuations, known as "transients." 

Thus, leaks can cause water pressure losses, which can, much like catastrophic pressure 

failures from water main breaks, allow pathogens to get into the drinking water, posing 

health risks. Improved pressure management is an important component of both 

infrastructure stewardship and public health protection. 

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The American Water Works Association estimates that it will cost $1 trillion dollars to 

upgrade, repair, and maintain our drinking water infrastructure to serve the population as 

it grows over the next 25 years3H Unfortunately, funding for drinking water infrastructure 

is not keeping pace with the needs. In recent years, Congress has appropriated about $2.37 

billion a year for water and wastewater infrastructure combined, funding a tiny fraction of 

the work necded.:l9 While states and localities will need to bear much of the water 

infrastructure costs as they have for generations, the current federal investment is not 

making a dent in the problem. 

Infrastructure Investment Creates Good Jobs 

The good news is that investing in our water infrastructure not only helps to rebuild the 

base of the nation's economy, which is highly dependent upon reliable, safe drinking water 

and wastewater service. But major investment in water infrastructure also will create 

hundreds of thousands or even millions of good-paying jobs. 

For example, in passing the bipartisan Water Resources Development Act, the U.S. Senate 

found that for every one million dollars in state revolving loan fund spending, 16.5 jobs 

were created.4° Furthermore, $34.7 billion on federal capitalization grants for the DWSRF 

would create 506,000 jobs.41 

A more aggressive investment in water infrastructure would yield more jobs. For example, 

a recent study found that an investment of $188.4 billion in water infrastructure (an EPA 

estimate of wastewater-related infrastructure needs) spread equally over five years would 

generate $265.6 billion in economic activity and create close to 1.9 million jobs.42 The study 

found, based on the economics literature, that such infrastructure investments "create over 

16 percent more jobs dollar-for-dollar than a payroll tax holiday, nearly 40 percent more 

jobs than an across-the-board tax cut, and over five times as many jobs as temporary 

business tax cuts."'B 

Protecting Water Sources Helps to Protect Health and Reduces Treatment Costs 

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We need a greater focus on source water protection. Uncontrolled and poorly controlled 

source water pollution from polluters remains a serious problem. Unregulated or poorlycontrolled sources that can pose substantial pollution threats include agricultural runoff 

and factory farm pollution, groundwater and surface water pollution from oil and gas 

exploration and development, coal and mineral mining, certain industrial sources, and 

spills and leaks from above-ground hazardous substance tanks. State authorities and EPA 

could substantially reduce the public health and environmental threats from such polluters, 

and could reduce the costs of drinking water treatment, by better controlling these 

pollution sources. 

The experience of Des Moines Water Works, which serves 500,000 Iowans with their tap 

water, is illustrative of how state or EPA intervention to ensure that source water is 

protected from upstream agricultural pollution could help to keep rates more affordable. 

As a recent statement from Des Moines Water Works notes, 

Des Moines Water Works meets or exceeds regulatory requirements for 

drinking water established hy the United States Environmental Protection 

Agency .... However, the costs and risks in doing so are increasingly high as 

Iowa's surface waters demonstrate dangers levels of pollutants. 

The increase in river nitrate levels is attrihutable to upstream agricultural 

land uses, with the largest contribution made by application of fertilizer to 

row crops, intensified by unregulated discharge of nitrate into the rivers 

through artificial subsurface drainage systems. 

"Iowa's political leadership, with influence from industrial agriculture and 

commodity groups, continue to deny Iowa's water quality crisis," said Bill 

Stowe, CEO and General Manager, Des Moines Water Works. "Defending the 

status quo, avoiding regulation of any form, and offering the illusion of 

progress and collaboration places the public health of our water consumers 

at the mercy of upstream agriculture and continues to cost our customers 

millions of dollars." 

Des Moines Water Works seeks relief against upstream polluters and 

agricultural accountability for passing production costs downstream and 

endangering drinking water sources. In addition, Des Moines Water Works is 

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actively planning for capital investments of $80 million, a cost funded by 

ratepayers, for new denitrification technology in order to remove nitrate and 

continue to provide safe drinking water to a growing centrallowa. 44 

While Des Moines may be unusual for its candor, its problems with unregulated or poorlyregulated upstream pollution arc hardly so. Problems ranging from routine spills of 

industrial pollutants on the Ohio River that have led Cincinnati and Louisville to install 

advanced water treatment facilities at significant expense to ratepayers, are also 

illustrative. 

Similarly, EPA has failed to effectively regulate runoff of the widely used herbicide atrazine 

which has caused drinking water systems across the country to find the chemical in their 

water, often at levels in excess of EPA's standard during peak runoff season;15 ln light of 

EPA's and states' failure to control this problem, a large group of water suppliers sued 

Syngenta, the manufacturer of atrazine, because they were routinely being required to 

spend significant amounts to remove the chemical from their tap water. 46 They reportedly 

settled the case for $105 million dollars, and according to lawyers involved as many as 

3,000 water utilities may be eligible to recoup at least some of their treatment costs:17 

Another example was the spill/leak of toxic chemicals from a huge ahove-ground tank at 

Freedom Industries that contaminated the drinking water of 300,000 people in Charleston, 

West Virginia in january, 2014.48 EPA had been charged in the 1972 Clean Water Act with 

issuing rules to prevent spills and leaks from above-ground tanks storing hazardous 

substances, but has still not done so. Citizen organizations and NRDC recently entered into 

a consent decree with EPA to have the agency finally issue those long-overdue rules 49, 

though the list of hazardous substances required to be covered by such rules still has not 

hecn updated to include the chemicals that caused the Charleston disaster. 

Many other municipalities have been forced to quietly install treatment to remove or 

protect against potential contamination from other contaminants from upstream polluters, 

without recourse against the polluters. A far better approach would be for Congress, EPA 

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and states to crack down on uncontrolled or poorly regulated pollution sources such as 

agricultural runoff and factory farms, mining, and oil and gas activities, to save ratepayers 

the expense of cleaning up after the polluters. 

Protecting Waters of the United States Will Help Control Infrastructure Costs 

As a result of confusing court decisions, millions of miles of streams and tens of millions of 

acres of wetlands lacked clear protection under the Clean Water Act. As a result, water 

sources that feed drinking water supplies for 117 million Americans were vulnerable to 

pollution. So were wetlands that filter contaminants and recharge groundwater supplies, 

while also providing important flood protection and wildlife habitat. If these waters are not 

protected against pollution by the Clean Water Act, downstream drinking water systems 

will have a very heavy burden of cleaning up the water to remove the contaminants, costs 

that-as in the case of Des Moines and so many other utilities-will be borne by 

ratepayers rather than the polluters. 

EPA and the Army Corps of Engineers finalized the "Clean Water Rule" in May 2015, which 

helps to clarify which waters are protected under the act-about 60 percent of tbe nation's 

bodies of water. The new rule helps to protect a variety of streams, ponds, and wetlands, 

including those streams that one in three Americans relics on for drinking water. It is 

important that we continue to protect these waters for current and future generations. 

Unfortunately, President Trump recently issued an Executive Order on February 28, 2017 

requiring EPA and the Army Corps of Engineers to reconsider the rule. so 

Increasing Challenges to Water Infrastructure from Extreme Weather, Droughts 

With increasing challenges from extreme precipitation events, droughts, groundwater 

depletion, and saltwater intrusion in many coastal areas, our water infrastructure faces 

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new and often unprecedented risks. We see this in the impacts of the California and 

Midwestern droughts, the steady depletion of the Ogallala Aquifer, and the intrusion of 

saltwater into the wells used for drinking water in many coastal areas in Florida and 

California, for example. 

It has become crucial for water utilities to plan for these challenges by integrating their 

water and wastewater planning through approaches such as using "integrated water 

resources management" or IWRM. Some have referred to this approach as "sustainable 

integrated water management." IWRM is "a process which promotes the coordinated 

development and management of water, land and related resources, in order to maximize 

the resultant economic and social welfare in an equitable manner without compromising 

the sustainability of vital ecosystems."" 1 Such integrated planning will become crucial as 

the impacts of climate change and other challenges become increasingly serious. 

Recommendations 

There is an emerging bipartisan consensus that we need to increase our investment in 

infrastructure. NRDC has several recommendations for improving federal water 

infrastructure investments and controlling costs of such investments: 

1. Fix Flint. Flint's water infrastructure must be immediately repaired and replaced, 

and safe, reliable water (i.e. bottled water delivered to residents until tap water is 

fully confirmed as reliably safe) must be supplied in the meantime. The Water 

Resources Development Act, enacted in late 2016, will make some of the needed 

investments, hut clearly will not fully cover the full costs of all of the needed 

infrastructure upgrades in Flint. In addition, we support the recommendations of 

the independent Flint Water Advisory Task Force, including the recommendation 

that there be a tracking system to ensure ongoing health protection for those 

exposed and follow-up studies, treatment, and educational and nutritional 

intervention, among other important steps. 52 

2. Fix Our Lead in Water, Including the Lead & Copper Rule, and Lead in Schools. 

To help address our lead in drinking water crisis, we should: 

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Overhaul the EPA's Lead and Copper Rule (LCR)-and the way states and EPA 

implement and enforce it. At a minimum, the LCR should be fixed to: 

o Require all lead service lines to be fully replaced in a timely fashion; 

o Strengthen corrosion control requirements; 

o More fully and fairly monitor problems, and prohibit gaming the system 

to avoid detecting or reporting lead contamination problems; and 

o Require clear, ongoing, and culturally-appropriate public education and 

notification oflead problems. 

• Address Lead Problems in School Drinking Water. Tens of millions of children 

spend their days in school, often drinking from fountains that deliver leadcontaminated water. We need a national effort to ensure that lead tests arc 

conducted for school drinking water, that the results arc shared with parents 

and explained, and that swift remedial action is taken to ensure the protection of 

childreu from lead in school pipes, fountains and fixtures. 

3. Fix the Standard Setting Process Under the Safe Drinking Water Act. When 

criteria to set a drinking water standard has resulted in no new standards in 20 

years, despite the proliferation of drinking water contaminants, there is a problem. 

Revisions to the cost and feasibility analysis as well as the criteria could streamline 

the process and allow EPA to move in a timelier manner. 

1. Fix our National Water Infrastructure, Paying Special Attention to the Needs of 

Lower Income and Disproportionately-Affected Communities. We need major 

investment in our water infrastructure, including: 

211 Page 

• Accelerated replacement of deteriorating water distribution piping; 

• Improvements to the processes that utilities usc for treating our drinking 

\Vater; 

• Additional targeted funding for disadvantaged communities, including for 

restructuring or consolidation of troubled systems, which can help improve 

water quality and compliance, and reduce per capita costs; 
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Adoption of standardized water Joss auditing and reporting methods, as 

developed and endorsed hy the AWWAP to provide the foundation for costeffective loss reduction and repair strategies, 

5, Increase Federal Water Infrastructure Funding, Current Congressional funding 

of $2,37 billion dollars per year combined for Clean Water and Drinking Water 

infrastructure is paltry by comparison to the enormous need, As noted, we must 

invest in clean water infrastructure to better protect the source waters of our 

drinking water supplies, in addition to making investments in our drinking water 

infrastructure, These investments must be substantially increased, at least to the 

approximately $8 billion per year combined level funded under the American 

Recovery and Reinvestment Act of 2009, I note that Mr. Tonko has proposed 

legislation (HR 1653} that would more than triple Drinking Water and Clean Water 

SRF funding, a move we strongly support As part of the funding strategy, EPA and 

state agencies managing these investments should prioritize funding (including 

grants} for water infrastructure improvements in low-income communities and 

communities of color since they are so often most at risk and have the greatest 

problems affording new investments, In addition: 

As part of this reinvigoration of the federal infrastructure investment, more 

flexibility (grants, loan forgiveness} in the SRF is needed for communities 

that don't have the ability to meet the criteria to pay back the loans but have 

serious health threats, 

States and municipalities also must play a significant role and join in the 

investment, 

6. Protect Source Water to Reduce Infrastructure Costs. The better we prevent 

source water pollution from a wide array of sources ranging from agricultural 

runoff, to factory farm pollution from manure, to oil and gas-related pollution, the 

less ratepayers will need to pay to clean up their drinking water. As we have seen 

repeatedly in cases like Des Moines, the hundreds of water systems forced to sue the 

manufacturer of atrazine due to poor regulatory controls on runoff that caused 

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widespread water contamination, and many other examples, an ounce of prevention 

is worth a pound of cure. A strong Clean Water Rule to protect waters of the United 

States is an important component of this strategy. 

7. Protect Water Infrastructure from Extreme Weather Events and Possible 

Terror Attacks. Improved vulnerability assessments are needed, and actions 

required to protect our water systems from threats from extreme weather events 

that arc becoming more frequent with climate change, and to identify and address 

vulnerabilities to potential terror attacks. 

8. Invest in Advanced Water Technologies, Including Real-Time Monitoring. We 

need to invest in modernizing our treatment and monitoring technologies. For 

example, if real-time monitoring for contaminants could be perfected and widely 

deployed, it could lead to far more effective identification of problems before they 

become a public health crisis, could help to identify unforeseen problems, and could 

help citizens hold their water systems accountable if their water is subpar. 

9. Let Citizens Act Immediately in Cases of Imminent & Substantial 

Endangerment to Health and Provide for Penalties in Citizen Suits. In cases 

such as Flint, citizens whose drinking water may present an imminent and 

substantial endangerment to health should be authorized under section 1431 of the 

Safe Drinking Water Act to immediately bring an action for relief when the 

government has failed them. Moreover, the Act's citizen suit provision should 

provide for penalties like the Clean Water Act and Clean Air Act, to provide 

compliance incentives. 

10. Vigorously Enforce the Safe Drinking Water Act. States and the EPA should 

invest resources and staff to ensure far more robust enforcement of the SDWA. 

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NOTES 

1 General Accounting Office, Water: Experts' Views on I! ow Future Federal 

to Improve Security," 2003, available online 

for example American Society of Civil Engineers, 2001 Report 

Available online at http: 1/ascelibrary.org/doi/pdf /10.1061/97807844 78882 

3 Sec, e.g. Brian Cohen and Erik D. Olson, VICTORIAN WATER TREATMENT ENTERS THE 21" CENTURY: PUBLIC HEALTH 

TllREi\TS FR0!\1 Wi\TER UT!LlTlES' ANCIENT TREATMENT i\ND DJSTHJBUTlON SYSTEMS, NJ.tural Resources Defense Council, 

1994. 

MD, "Elevated Blood Lead Levels in Children Associated With the Flint 

of Risk and Public Health Response," February 2016, Amer. J. Pub. 

"CDC finds first genetic link between Legionnaires· outbreak, Flint water," February 16, 2017, 

online at 

10 Cornwell, David A; Brown, Richard A.; Via, Steve H., "National Survey of Lead Service Line Occurrence," 

April 2016, Journal of the American Water Works Association, vol. 108, no. 4, pages E182-E191, available 

online at http: //dx.doi.org/10.5942/jawwa.ZO J.6.l08.008.Q. 

Drinking Water Contaminants," available online at https: //www.cpa.gov /yourEPA Lead and Copper Rule, supra note 2. 

Marc Edwards ct a!., in the EPA Lead and Copper Rule That Can Allow For Gaming of Compliance: DC 

WASA 2003-2009 (Oct. 

16 Cornwell, David A.; Brown, Richard A.; Via, Steve I 1., "National Survey of Lead Service Line Occurrence," 

April 2016, journal of the American Water Works Association, val. 108, no. 4, pages E W2-E191, available 

online at http: f/dx.doi.or~ /10.5942/jawwa.2016.108.0086. 

lines,aspx 

Sec Peter C. Grcvatt, Director, EPA Office of Ground Water & 

Recommended Sampling Procedures for Purposes of the Lead 

proced urcs-lead -and -cop per-rul c 

24)Page 
94 


25370.072

Erik Olson and Kristi Pullen, "What's in Your Water? Flint and Beyond: Analysis of EPA Daya Rcbcals 

WiJlesn•w"i Lead Crisis Millions of Americans," available online at 

Act section 1431. 

Resource Conservation and Recovery Act section 7002(a)(J)(B), 42 U.S. C. section 6972(aj(l)(B), 

2' EPA, PROVIDING SAFE DRINKING WATER IN AMERICA: 2013 NATIONAL PUBLIC WATER SYSTEMS COMPLIANCE REPORT, 

june 2015, available online at !llJ.lli"-f_,i'fi_l:\'.Y\'&!li!,.!mY./Jilll'2.Lllttllill£IlilllilJ!L(;!;;_i,ill._'>.:: 

Ibid, 

Fnvirnnmr•nt.al justice Jmnn,rarJmJS 

sectional, cluster design examining 

llcalth.2012;11:B4, <>vailablc online 

29 Balazs, supra note B. 

Jo Ibid. 

Ibid. 

National Drinking Water Advisory Council, Affordability Work Group, RECOMMENDATIONS OF THE 

NATION,\L DRINKING WATER ADVISOHY COUNCIL TO !J,S, EPA ON !TS NATIONAL SMALL SYSTEMS AFFORDABILITY CRITERIA, 

2003, available online at 

American Society of Civil Engineers, "2013 Report Card for America's Infrastructure," 

http: //www.infrastructurereportcard.org 

31 1bid. 

See NRDC, "Cutting Our Losses," dedicated to 

losses of water from public water systems, h1tR/J;.~~nrlli;,QDW:\Ci!l&L!:':ti.iiliu:::lmicutlJ!lli:!iill1il:i!l· 

Js AWVvA, Buried No 

'"Congressional Research Service, "Funding for EPA Water Infrastructure: 

2SjPage 
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!\ Fact Sheet," (2015] htll2Jl!El!illn<1l<l!iilli':k~nter.org/wp-content /uploads/assets/crs/R43871 .pdf 

Sec §7002(b ), Water Resources Development Act of 2016, S. 2848, 114•h Cong., 2016. 41 Ibid. 

Emily Gordon, jeremy Ethan Pollack, Daniel Sanchez, and jason Walsh, "Water Works: Rebuilding 

Infrastructure, Creating Greening the Environment," produced hy Green for All, American Rivers, 

Institute, and Pacific Institute, 2011, at 1, available online at http:l/poci!lit&L\lLY>'ll: 

Des Moines Water Works, DES MOINES WATER WORKS' 2015 DENITHIFICATION RECOHD, january 4, 2016, 

available online at ~ww.dmww.com/about-us/news-releases/des-moines-water-works-20 15.:: 

dcnitrification~reconL~ 

See Mae Wu, Mayra Quirindongo, jennifer Sass, and Andrew Wetzler, POISONING THE WELl.: How TilE EPA IS 

IGNORING ATRAZINE CONTAMINATION IN SURFACE AND DRINKING WATER IN THE CENTRAL UNITED STATES, Natural 

Resources Defense Council, 2010, available online at https: //www.nrdc.org/sites/default!files/atrazine.pdf. 

25, 2012, Wall available online at 

4 " Sec e.g. Testimony of Erik D. Olson, NRDC, Before the Subcommittee on Water and Wildlife of the U.S. 

Senate Committee on Environment and Public VVorks, at the hearing entitled Examinatlon of the Safety and 

Security of Drinking Water Supplies the Central West Crisis, 4, 

2014, available online 

49 NRDC ct al., AFTER MORE THAN 40 YEt\RS, EPA Wn.LAC!' ON HAZARDOUS INDUSTRIAL SPILLS ,available online at 

hltps://www.nrdc.org/mcdia/2016/160217-0 

51' Remarks by President Trump at Signing of Waters of the United States (WOTUS) Executive Order, february 

28, 2017, 

26) Page 
96 

Mr. SHIMKUS. Thank you very much. I think we were getting 

your point. I would just add that since you mentioned the budget 

it includes $2.3 billion for the State Revolving Funds, a $4 million 

increase over the 2017 annualized level, the budget also provides 

$20 million for Water Infrastructure Finance Innovation program 

equal to the funding provided in 2017. 

So we will get to those points and we will have those debates. 

But let me now just recognize myself for 5 minutes for opening 

questions. 

And before I do that, Mr. DiLoreto, I was in Portland with Congressman Schrader two weekends ago and we were—all the cool 

things that this committee gets to do we were observing the Willamette Superfund site. 

So I was just interested, does the water systems there use the 

Willamette or they—they’ve got retaining ponds from the mountains or how do they—— 

Mr. DILORETO. The water system in Portland comes from the 

Bull Run. It was originated in 1895 under a grant by President 

Harrison and so it is up in the Mount Hood Forest. It has no 

human activities, no farmland activities. It’s completely protected. 

But it used to be the Willamette River in the 1870s and 80s and, 

of course, it wasn’t treated and people got sick. The joke is that the 

governor at the time, after they did Bull Run, said, ‘‘I am not 

drinking any water that I can’t see,’’ and so he objected to it. But 

the Bull Run is their source, not the—— 

Mr. SHIMKUS. Yes, it is interesting and I would encourage my 

colleagues—that is another issue I really look forward to working 

with in a bipartisan manner to start trying to bring some closure 

and movement on Superfund sites. So it was a great trip. 

Mr. Kropelnicki, you have mentioned the problem of fragmentation in the nation’s water industry. What recommendations can you 

give to this committee to address that problem you’ve identified? 

Mr. KROPELNICKI. Sure. There are approximately 52,000 to 

54,000 small rural water systems out there and just compare that 

to what you have on the electric and gas side. 

You have 4,000 electric producers in the U.S. You have 1,600 

natural gas producers in the U.S. and so enforcement with numbers of that size become very, very complicated. 

Mr. SHIMKUS. It’s very hard. I represent rural America and actually USDA rural water grant program has been very helpful. But 

you really have to talk to the local communities who are so small 

that they really can’t sustain their own water infrastructure and 

you have to really lovingly encourage them to get into a regional 

system and I think that is what you’re addressing, right? 

Mr. KROPELNICKI. Yes, absolutely, Chairman. One of the things 

we just did in the state of California is we have consolidated a couple districts where we took rural systems where you have a small 

number of people, where you have complex water supply issues and 

we merged them with larger districts. 

So essentially you spread that marginal cost over a larger base 

and the end result for the customers in the smaller district is a significant reduction in the water bill and our ability to go in and 

make and continue to make the capital improvements to keep them 

into compliance. 

97 

Mr. SHIMKUS. Staying with you, what is one obstacle in the 

water industry the federal government could remove that would 

draw in more private engagement and investment into industry? 

Mr. KROPELNICKI. Mr. Chairman, that is a great question. I mentioned the safe harbor provision. One of the problems being a private water company or an investor in a water company is when we 

fall out of compliance the fines we get are amazingly substantial, 

whether it is from the state health department, a local or regional 

water board or EPA. 

So we are held to a very, very high standard and I am very 

proud of the record. NAWC members have nearly a flawless record 

at compliance with water quality standards. 

However, when we take over a system that is challenged and out 

of compliance, we run the risk of getting fined right away. 

And so having a safe harbor provision or an amnesty period that 

allows us to ramp that system up to compliance would certainly go 

a long way in terms of incentivizing private water to come in and 

take over smaller systems. 

Mr. SHIMKUS. And I am sure this will be asked by my colleagues 

as we start talking about the Water Infrastructure Finance Innovation Act, which you’ve all testified about, and the Safe Drinking 

Water Act and how they may interact or how they may help or 

harm each other. 

So if we just go through the whole panel—should the Safe Drinking Water State Revolving Fund and the Water Infrastructure Finance Innovation Act—I hate acronyms so that is why—loan program not just coexist but also complement each other? 

And let’s just go Mr. Ellingboe and then we will just go down 

real quickly. 

Mr. ELLINGBOE. Thank you, Mr. Chair, and members of the committee. 

Yes, I think having them complement each other would provide 

additional resources needed in order to be able to sustain this infrastructure and I think that is really important, given the need 

across the country. And so both programs are important. 

Mr. SHIMKUS. Mr. Donahue. 

Mr. DONAHUE. They do complement each other, Mr. Chairman. 

The main differences from our perspective—— 

Mr. SHIMKUS. Someone might have—I think if you can turn your 

mic off once you’re done. 

Mr. DONAHUE. The main differences between SRF and WIFIA— 

sorry about the acronyms but WIFIA is designed to fund projects 

that are typically greater than $20 million where SRF is substantially less than that. 

And historically, when a large project needed low interest funding or desired low interest funding they might have to split that 

project into smaller pieces in order for it to fit into an SRF program, and that took away resources for the smaller projects. 

So low interest funding for large and small projects in the manner of SRF programs and WIFIA is a vital portion of our plan to 

move forward on infrastructure. 

The only other thing I would add is that with the larger projects 

through WIFIA the repayment opportunities for communities are 

98 

up to 35 years where typically in the SRF program you’re somewhere closer to 20. 

Mr. SHIMKUS. Thanks, and because of my colleagues and out of 

respect for them, we will just stop there. I am sure they will have 

questions and I’ll turn to the ranking member, Mr. Tonko, for 5 

minutes for his questions. 

Mr. TONKO. Thank you, Mr. Chair, and to the panelists again, 

thank you and thank you for reinforcing and strengthening the 

message of investment. 

Many of you discussed the needs estimates for the next few decades. Is it fair to say that there is agreement on this panel about 

the scale of need in this country? 

We can debate the precise remedy to meet that need—how much 

should come through the SRF, how much through tax-exempt 

bonds, how much through increased water rates and local government spending, et cetera. 

But does everyone agree that it is going to take more federal dollars to make any serious effort to bring down the national need if 

we that across the board? Need for new additional federal dollars? 

Mr. ELLINGBOE. Thank you, Ranking Member Tonko and members of the committee. Yes, we do need additional federal dollars. 

Mr. TONKO. OK. If I could just get a yes or no because I am on 

limited time here. So Mr. Donahue. 

Mr. DONAHUE. Yes. 

Mr. CHOW. Yes. 

Mr. DILORETO. Yes. 

Mr. KROPELNICKI. Yes. 

Mr. E. OLSON. Limited, yes. 

Mr. TONKO. OK. And Mr. Donahue, AWWA represents all types 

of water systems. Can you discuss the importance of the drinking 

water SRF for small and disadvantaged systems that may not have 

the credit rating, the ratepayer base or capacity to fix their systems 

or bring them into compliance with the law? 

Mr. DONAHUE. Thank you. That’s a great question. Small systems in particular—and I have experience in that regard where I’ve 

used SRF program money for a number of capital financing 

projects—the main advantage to smaller systems using SRF is the 

cost of money is much less. 

They have to go through higher hoops to get that money so we 

are hoping that we can make that process a little bit more efficient 

for the—especially for the smaller systems who have fewer technical staff to help them. I think that would be advantageous. 

I also think that using SRF money for smaller systems who have 

a little bit of a tough time with their credit rating, normally the 

conventional bond market is very good at supporting credit ratings 

and municipalities that are AA or AAA rated and some of those 

smaller systems that may not necessarily have such a high credit 

limit or credit rating would benefit from a little bit of an easier 

process through SRF. 

Mr. TONKO. Thank you. And there are obvious problems when 

dealing with so many pipes at the end of their useful lives. 

In my district alone there are pipes that go back to Rutherford 

B. Hayes, if we are going to cite administrations. Water main 

breaks disrupt service and the local economy. We saw some of 

99 

those coming at the worst weather moments of the year, the coldest 

weather. 

They also make the finances of these systems even more difficult. 

Mr. DiLoreto or any of our other witnesses, can you compare the 

cost of doing emergency repairs with planned replacement and how 

much more expensive is it to react? I know that a number of engineers have recommended or suggested it is 10 times more expensive at times to do these after they break than to have some sort 

of mechanism that pinpoints weakness. 

So Mr. DiLoreto. 

Mr. DILORETO. Well, I don’t have an exact number. That sounds 

approximate. You’re absolutely right. If we can do a maintenance 

program where we schedule it out, particularly using asset management, I know a number of colleagues here are introducing that 

into their water systems. 

We get all the data from all our water pipes we can then do a 

modeling that says here’s where we ought to be at certain times 

so that we can avoid the break. The cost is important. More importantly is your business shuts down. People have to get sent home. 

You lose wages, and that is the real effect you have on the customers and people. 

Mr. TONKO. Anyone else on that issue? 

OK. Oh, we do? Oh, Mr. Chow. I am sorry. 

Mr. CHOW. So I will comment on that. So running a city, a public 

works department, we often encounter emergencies rather than 

what we call the preventive maintenance work, and I would say 

the emergency calls is a heck of a lot more than if we program that 

out and go through a normal procurement process where we bid it 

and we certainly couldn’t get a much better favorable pricing compared to emergency calls. 

Mr. TONKO. Yes. Thank you. 

The problem is that many systems don’t have the necessary capital asset management practices to be proactive when operating on 

shoestring budgets. 

Therefore, a lot of that maintenance is reactive, which ends up 

costing local government and ratepayers more. 

Mr. Donahue, would you say that is a fair characterization for 

some of your AWWA members? 

Mr. DONAHUE. Absolutely, sir. 

Mr. TONKO. And the core mission of this statute is to protect 

public health. So Mr. Olson, I want to ask what it means for our 

country to achieve success with the safe drinking water law that 

talked about the lifelong impacts and I’d like to hear some of your 

assessments in that regard. 

Mr. E. OLSON. Well, I would say that both on the microbiological 

side I mentioned that there are over 19 million people that get sick 

a year. Addressing these problems could reduce that. 

In addition, the lead contamination problem we did a report recently that found very widespread contamination with lead across 

the country, something in the neighborhood of 4 million served by 

water systems that exceeded the lead action level, for example, and 

there are plenty of other contaminants out there. 

Mr. TONKO. Thank you very much. 

I yield back, Mr. Chair. 

100 

Mr. SHIMKUS. Gentleman yields back his time. 

Chair now recognizes the gentleman from Texas, Mr. Olson, for 

5 minutes. 

Mr. P. OLSON. I thank the chair for calling this very important 

hearing. 

Welcome to our witnesses, and a special welcome to you, Mr. 

Olson. You are one of the few, the proud, the rare Olson with two 

Os, not O-L-S-E-N. So get a welcome. 

Contaminated water has had national focus because of the tragedy that happened in Flint, Michigan. That was a failure of infrastructure. Lead leached out of the pipes and got in people’s drinking water. 

It was in the water they drank, they bathed in, they prepared 

food with, and only years will tell us the damage that is been done 

to bodies with that lead exposure. It will take a long time. 

But infrastructure doesn’t just fail over years. It can happen 

overnight in a flash. It happened in Corpus Christi, Texas, the 

week before Christmas this past year. 

They lost all their drinking water for 3 1⁄2 days because they had 

a spill. A chemical from an asphalt plant leaked into their water. 

Corpus Christi has a special place in my heart. I got my first 

hour flight time at Corpus Christi Naval Air Station. The first one 

was 1400 hours. I got my wings of gold there—a naval aviator. I 

know that town like the back of my hand. 

They have 320,000 residents. Flint had about 100,000. So three 

times bigger than Flint. The local grocery stores were swarmed 

buying bottles of water. Schools were shut down for the better part 

of a week. 

The mayor resigned after 37 days in office, just over one month. 

He beat a long-term mayor on the issue of water. During her reign, 

they had boiled water alerts three times in the last few years. 

Against that background, I’d like to open my questions and talk 

about my home, Fort Bend County, Texas 22. It’s about two-thirds 

suburban and one-third rural. 

It is exploding with growth. When a school opens, it is overcrowded on day one. They have trailers come in. That puts a huge 

burden on infrastructure and water. 

If you drive away from a house one mile, go on University Avenue, there is these big blue pipes probably 3 feet in diameter— 

water pipes, to try to get ahead of the growth we have to have. 

My first question is for you Mr. Chow. How with our existing resources can we help growing committees like Fort Bend County 

and Brazoria County and Harris County manage that growth and 

serve new customers in a cost-effective way with clean reliable 

drinking water? 

Mr. CHOW. Yes. Any cities undergoing growth are going to be facing the challenges, first of all, with the infrastructure in the current state it is and you’re talking about expansion and that is the 

reason why you got these above ground pipes trying to deliver the 

water the best they can. 

What I’ll call the planning in terms of the growth of the city or 

the township and so on, all that, the planning exercise is a lot more 

important in terms of forecasting, projecting the population growth 

101 

and that is where it really comes down to sound asset management 

that we mentioned earlier. 

Only through sound asset management you can project and from 

projection you can be one step ahead in terms of have the infrastructure in place in advance of the growth coming to your front 

door. I mean, that is something that you just have to anticipate 

through—— 

Mr. P. OLSON. Mr. Donahue, your comments on that issue, sir. 

Mr. DONAHUE. Certainly asset management is a key factor and 

when you’re trying to balance growth with failing infrastructure 

that you might already have it is a very challenging process for 

water managers to try to deal with. 

One of the things that AWWA is supporting is allowing the SRF 

program to be used for growth related issues. Right now it is limited only to reinvesting in the existing infrastructure and primarily 

those communities who have experienced some type of a compliance issue and being able to expand those programs to allow for 

growth to accommodate some of those needs. 

And I’ve had experiences with schools as well that are bursting 

at the seams in trailers in the playground. So it is a very challenging process to have. 

Mr. P. OLSON. Sounds like a job for Congress. I yield back. 

[Laughter.] 

Mr. SHIMKUS. Gentleman’s time is expired. 

Chair now recognizes the gentleman from California, Mr. McNerney, for 5 minutes. 

Mr. MCNERNEY. First, I want to thank the chairman and the 

ranking member for having this hearing. 

Mr. SHIMKUS. You’re welcome. 

Mr. MCNERNEY. It’s a good time. And I want to thank the panelists. All your testimony was very good and you came in here so I 

really appreciate that. 

My first question goes to all of you. A simple yes or no would be 

appreciated. 

Do you believe that the State Revolving Fund increases are needed and we need to enhance the ability of cities to get municipal 

bonds done for this project? 

Mr. DONAHUE. Yes. 

Mr. MCNERNEY. Starting with Mr. Ellingboe. 

Mr. ELLINGBOE. Yes. 

Mr. CHOW. Yes, sir. 

Mr. DILORETO. Yes, sir. 

Mr. KROPELNICKI. Absolutely. 

Mr. E. OLSON. Yes, sir. 

Mr. MCNERNEY. Mr. Chairman, I think we have unanimity here. 

Mr. SHIMKUS. Amazing. 

Mr. MCNERNEY. Mr. DiLoreto, you indicated improvements in 

water conservation. How can we continue to improve in that—in 

that way? 

Mr. DILORETO. Well, the fact of the matter is we kind of reached 

a point now, if you look at the replacement of fixtures in your 

homes, most of them have been turned down now so we have 

reached that point where we’ve got low flow toilets, low flush showers. 

102 

We have reached that point now where we have probably 

reached. There may be some little things we can do. Now we have 

got to move on to encouraging people in outdoor water conservation, as your state is well aware of—the kinds of materials we 

plant for our residence to make them natural to the area that we 

live in. 

Mr. MCNERNEY. So there is more room that can be—thank you. 

Also, you mentioned leakage. Could you elaborate a little bit on 

the technology detecting leaks? Are you the right one to ask? 

Mr. DONAHUE. Water loss control is a significant part of the municipal utilities action plan. There are a variety of options. Acoustical leak detection is available and it is traditional and it has been 

around for probably a good 15 years or so and it is very accurate. 

They can come out and pinpoint a leak. But there is also new 

technology that I am just becoming aware of where there are companies that can view via satellite your geographical region and 

have some level of accuracy in the determination of where leaks 

might be so that it focuses your energy and your money in going 

in to find those leaks. So I am encouraged by the technology. 

Mr. MCNERNEY. So we can invest more in developing that technology? 

Mr. DONAHUE. Absolutely. 

Mr. MCNERNEY. I will bite on your cybersecurity remarks. Could 

you elaborate on that a little bit? 

Mr. DONAHUE. Certainly. Cybersecurity is a growing concern for 

municipal agencies. I can tell you, as an example in my own town 

we were attacked and our utility billing system was frozen out by 

a cyberthreat from outside the country. 

We had to pay a ransom basically to get our computer system 

back. So one of the things that AWWA promotes is working not 

only with agencies that develop those computer tools for utilities. 

But working with the agencies that developed the software programs that prevent those threats from coming in I think a tremendous amount of investment is needed in that regard. 

Mr. MCNERNEY. That’s horrifying that you would be ransomed. 

Mr. DONAHUE. Well, we were just glad we could buy it back. 

Mr. MCNERNEY. Wow. Could you elaborate, Mr. Donahue, on 

some of the way the federal money is leveraged? 

Mr. DONAHUE. Oh, sure. So one of the things that has been spoken about quite a bit here this morning is the SRF programs and 

WIFIA as a new financing tool. 

And for every one dollar that is invested in the WIFIA program 

or is put in the president’s budget or in the Congress budget you 

could get $60 in loans for those utilities. 

So using low-interest money from the treasury and being able to 

leverage that is something that will be very valuable to utilities 

going forward as we continue with our infrastructure investment. 

Mr. MCNERNEY. Thank you. 

Mr. Olson, could you talk a little bit about the weak enforcement 

problem? 

Mr. E. OLSON. Sure. We have been concerned about this for some 

time and, frankly, the budget cuts are going to make it worse. The 

problem is that there are literally tens of thousands of violations 

every year of the Drinking Water Act and a lot of those are not 

103 

major violations but there are a lot of health standard violations, 

literally thousands of health standard violations ranging from lead 

to microbiological. 

And unfortunately a lot of those are never enforced against. 

There is no formal enforcement. We found that 3 percent of the violations actually faced any penalties. 

And we are not saying that every single violation requires a penalty or something like that. But what we do need is a cop on the 

beat, a clear signal that if there is a violation that there will be 

consequences, especially if it is an ongoing serious one and EPA’s 

own data shows that even the highest priority violations they are 

not getting around to enforcing nor are the states in many, many 

cases. 

Mr. MCNERNEY. Simple yes or no: do you think it is a matter of 

over regulation? 

Mr. DONAHUE. I think it is a matter of under regulation and 

under enforcement. 

Mr. MCNERNEY. Thank you. 

Mr. Chairman, I yield back. 

Mr. SHIMKUS. Gentleman yields back his time. 

Chair now recognizes the gentleman from West Virginia for 5 

minutes. 

Mr. MCKINLEY. Thank you, Mr. Chairman and DiLoreto. 

I was there speaking—I am a fellow of the American Society of 

Civil Engineers. Fifty years now I’ve been a member and—— 

Mr. SHIMKUS. How long? Can you say that again? How long? 

Mr. MCKINLEY. That’s 50 years. 

But anyway, having said all that, I am fascinated with a lot of 

this presentation and you all have done a great job on that. 

But I get into some other issues that I want to follow back up 

with the SRF program has been something that is been, you know, 

much dear to me and I know a few years ago, about three years 

ago the administration slashed that by half. They had to transfer 

that money to educational processes rather than—so I am glad we 

were able to get that restored. 

But the AGC is still putting out in its literature that Congress 

is still cutting back on the money to the SRF. So my question in 

part is if we can restore it and, Mr. Chow, I particularly like you 

saying double the amount of money goes to SRF. 

You don’t get objection from me on that. But my concern I would 

have and voiced over the years has been how do we do a better job 

allocating the SRF money to rural communities? 

Because when I go back to my area, I hear that time and time 

again it is the larger cities getting the money and everything we 

have been able to do confirms that. 

So what would be the steps we should take here in Congress to 

put our foot down a little harder on getting this SRF money to 

rural communities? 

Mr. CHOW. Well, certainly. The SRF fund, it’s really more focused on the smaller municipalities and I will answer it this way— 

that many of these rural areas or small towns and all that they are 

lacking what I call the technical assistance. So that means, unlike 

Baltimore City where we have a good number of engineers that—— 

104 

Mr. MCKINLEY. Isn’t that what we did just a couple years ago? 

We provided more technical assistance but we didn’t increase the 

budget. So all we did was put more people in the queue to get the 

same amount of money. 

Mr. CHOW. Right. But the thing is that I think we as utilities, 

as colleagues, and then I think there is a responsibility of us, 

meaning utilities—large utilities providing assistance to those 

smaller municipalities and smaller communities from the technical 

assistance perspective for experience, lessons learned. 

I think that will go a long way. I mean, if you don’t have a 

project plan designed, what good is SRF? You got to get to that 

stage so you can tap into that. 

Mr. MCKINLEY. Let me see how it goes. I’ve got a couple other 

quick questions as well. 

We know they’ve had the problem in the West and it’s been the 

lack of water in the West—the drought they’ve had for 4 to 5 years 

out there. 

I know it’s not quite your testimony that you all were talking 

about but is the AWWA or the ASCE—is anyone out there talking 

about ways that we could replenish the aquifers in the West? 

Is there anyone talking about that? Because I know there have 

been some reports in the past and we are ready to work on that 

if by putting some water lines out and just replenishing the 

aquifers in the West by using the Missouri or the Mississippi. 

Mr. KROPELNICKI. Yes. 

Mr. MCKINLEY. Thoughts, please. 

Mr. KROPELNICKI. Good question, Congressman. 

A couple thoughts on that. One, we have had a lot of rain this 

last year. It’s been actually one of the wettest and largest amount 

of snow possibly in the last four decades. 

The other thing I would say to when we talk about conservation, 

California’s done a great job with conservation. I know for our customers we reduced consumption 27 percent in about a 3-month period and then we have been able to maintain that. 

The real problem in California is the fact that you have a population of almost 40 million people and a backbone that the state 

owns was put in place in the ’50s and ’60s when the population was 

about 11 million people. 

So the drought highlighted the need for more storage. Right now 

in California the reservoirs so you have a lot of runoff happening 

where that water is running off into the ocean. 

So it’s really a long-term planning scenario. I think you’ve heard 

that theme about asset management. It’s the same thing I think 

with the state. 

California has taken some big steps in terms of ground water adjudication. What you—— 

Mr. MCKINLEY. OK. I’d like you, if you could—again, running out 

of time here—if you could get back I’d like to know more about it 

because I think the idea of replenishing aquifers could be very 

good—— 

Mr. KROPELNICKI. Yes. 

Mr. MCKINLEY [CONTINUING]. For other than California. The less 

California can get to all of them—is the desalinization. I know we 

just had a hearing yesterday about graphene is a product that 

105 

could very well be part of the solution in desalinization of water to 

give us more of a supply. Any of your associations dealing with the 

graphene as part of a filtration process? I am seeing no, it looks 

like, on that. 

I’ve got one more question. I’ll put it in the record. Thank you 

all very much. I appreciate it. 

Mr. SHIMKUS. I thank my colleague. Gentleman’s time has expired. 

Chair now recognizes the gentleman from California. I was looking at my list. We have got McNerney, Matsui, Peters, Ruiz—four 

Californians right in a row. 

So but it is Mr. Peters, and you’re recognized for 5 minutes. 

Mr. PETERS. Thank you, Mr. Chairman. 

First, I’d like to say thanks for having the hearing today. We 

have heard from witnesses about aging infrastructure, wasted 

water due to leaking pipes and water main breaks, overall risks to 

the quality of drinking water. 

We have seen that in Flint. I had the opportunity to travel there 

last year and see it up close. Near my district in San Ysidro, California, we saw similar types of lead, copper, metal contamination 

in the drinking water and a lot of concern in our communities. 

Actually, to help community water systems be better prepared to 

protect drinking water from a variety of threats, aging infrastructure, industrial activity, the effects climate change or security 

threats, I introduced a bill today with some of my colleagues on the 

committee, the Secure and Resilient Water Systems Act, and that 

bill will direct water systems to assess these kinds of threats with 

guidance from the EPA, then establish grants to provide communities who are at risk and develop more innovative solutions to use 

water more efficiently and to support the need to keep our community safe. 

Parenthetically, my own community is involved in a aggressive 

recycling effort to keep water from going into the ocean from our 

households. 

I want to ask Mr. DiLoreto, because in all of this we think very 

much about how we measure success, and you did a report card 

and gave us a bad mark. 

And we would like to know how do you think we should frame 

our remediation plan? How do you think we should—is there some 

sorts of priorities you have, measurements you have that would tell 

us we are doing well and also that would help us with accountability to our constituents? 

Mr. DILORETO. Right. Well, if you look at our report card we 

come out with these eight categories that we graded in. Part of it 

is funding and let’s be real, the biggest area is that we are under 

investing in our water system at all levels. 

Mr. PETERS. There seems to be a consensus about that here. 

Mr. DILORETO. So the fact is we need to invest greater, at your 

level, to things that we are going to do as a nation—— 

Mr. PETERS. Right. 

Mr. DILORETO [CONTINUING]. That cover whether you’re in Alaska or whether you’re in Florida. At our level, we need to do things 

that take care of the pipe system. 

106 

If you talk to one of our colleagues that runs the water system 

here, the first dollar he gets goes for water quality and if he has 

any money left over he replaces the pipes. 

Mr. PETERS. So thinking about that from a national standpoint, 

do we have sufficient information from water testing to know 

where risks are that we would have to address first? 

Mr. DILORETO. We have information from the contaminants that 

we know about through the EPA program. That’s how we provide 

safe drinking water. Emerging contaminants continue to occur and 

then we work through a way to do that. 

Right now, we meet—our goal to meet the Safe Drinking Water 

Act from EPA. 

Mr. PETERS. Do you believe that the testing part is sufficiently 

funded? 

Mr. DILORETO. Well, we do that at our own agency. So I can only 

speak for my own. 

Mr. PETERS. OK. 

Mr. DILORETO. And we believe that it was sufficiently funded to 

do the testing we were required to do and then some above and beyond that so we can ensure our customers—— 

Mr. PETERS. When we think about under funding, we are thinking mostly about pipes, it seems like. 

Mr. DILORETO. Well, yes, exactly. Our report card doesn’t look at 

the source water. It looks strictly at the physical infrastructure. So 

the underfunding that we report talks about underfunding in pipes, 

underfunding in any physical assets at a water treatment plant, 

pumps and so forth. 

Mr. SHIMKUS. Would my colleague, can I—— 

Mr. PETERS. Yes, sir. I’ll yield. 

Mr. SHIMKUS. Mr. DiLoreto is with the engineers. I think some 

of these questions are good questions to ask the operators—Mr. 

Donahue, Mr. Chow and Mr. Kropelnicki—because I think you’re 

onto a point. What other things need to be used, and so I just want 

to throw that in there. I am sorry for interrupting you. 

Mr. PETERS. Oh, no. Thank you, Mr. Chairman. 

I am thinking systemically from our perspective as a federal government. Suppose we gave these folks and their affiliates the 

money that they said they needed. I am not sure that will be easy. 

That only took two seconds to say. 

What would we expect to see? How would I measure in 5 years 

that the systems are doing the right things with the money? I am 

asking you, Mr. DiLoreto, because you’re the teacher. 

Mr. DILORETO. Well, clearly, what we would say is a grade of B 

means condition is good. OK. You don’t see the 240,000 water main 

breaks a year anymore. You’re going to see some. That’s inevitable. 

Mr. PETERS. Yes. 

Mr. DILORETO. But you’re not going to see that anymore. We 

start seeing our water quality and our pipe systems are both in 

that good condition. Condition’s good. Funding is good. Capacity is 

good. 

Mr. PETERS. So you’d look at the number of water main breaks, 

maybe miles—— 

Mr. DILORETO. Or measurement. 

Mr. PETERS [CONTINUING]. Miles of pipes replaced? 

107 

Mr. DILORETO. That’s right. We’d also be looking at the—we 

don’t make this data up in the report. We get published data. 

Mr. PETERS. Yes. 

Mr. DILORETO. It’s from somebody else. We analyze it. We would 

start seeing that number that EPA talks about going down. We 

know that we fund it. You’d see reports from these agencies that 

would say yes, I’ve got enough revenue. 

Mr. PETERS. How about numbers of people exposed to metal contamination? That would would seem like a priority, too. 

Mr. DILORETO. It would be, although we don’t measure that in 

our report—— 

Mr. PETERS. Oh, OK. 

Mr. DILORETO [CONTINUING]. Because, again, we are looking 

strictly at physical assets. 

Mr. PETERS. OK. So for me, we did a whole sewage and water 

replacement thing in San Diego when I was on the city council. 

We used miles of pipes. It seems to me that there has to be some 

sort of accounting for contamination and as a way to calculate 

where you’d start. 

I won’t take much more time, Mr. Chairman, but I would just 

say that when I went to Flint I think the thing that amazed me 

was the level of indifference to it from the Congress—I’ve dealt 

with a lot of contamination issues and some are worse than others 

but about the worst is metals and children—heavy metals in children under six is about the worst contamination you can have because it’s so deleterious and so permanent, and I would just suggest to my colleagues that starting with that kind of contamination 

would be the place where we’d start to focus on replacing pipes. 

And I thank you very much for being. 

Mr. SHIMKUS. Gentleman’s time has expired. Chair now recognizes the gentleman from Michigan, Mr. Walberg, for 5 minutes. 

Mr. WALBERG. I thank the chairman and thank the panel for 

being here. Mr. Ellingboe, let me ask you for your thoughts on how 

we incentivize integrated asset management across roads, drinking 

water, sewer, storm water management, streamline investments 

and ensure proper planning investment and maintenance over the 

life of infrastructure. 

Mr. ELLINGBOE. Thank you, Mr. Chair and member, for that 

question. I think one of the most critical aspects is supporting 

training for water systems and for water operators and that really 

is a critical part of the job. 

In Minnesota where we see difficulties with asset management 

it’s often the smallest systems, the medium-sized systems where 

water operators may have multiple duties even and having the 

time and attention to be able to think about asset management, 

think about what sorts of financial investments are needed, what 

sorts of technical changes might be needed to their system. 

OK. At any rate, that support for operators and systems to have 

the training needed to really identify and recognize what it takes 

to manage their systems adequately, financially and technically is 

crucial and that is where things like the set asides have been important for providing support to training efforts from rural water 

systems or associations for operators, et cetera, and where the 

108 

states can have the opportunity also to work with operators and 

provide technical assistance to help them with that. So—— 

Mr. WALBERG. Would there be any reason to make integrated 

asset management a requirement to receive funding? 

Mr. ELLINGBOE. I think the merits—certainly, that would not 

only promote it and provide interest for operators in doing that but 

it would provide the states with the backing, so to speak, to require 

that of the systems as they develop these plans. And so, certainly, 

this asset management piece is so important for the long-term life 

of the systems that that could be part of support for seeing that 

done. 

Mr. WALBERG. Thank you. 

Mr. Chow, how can we ensure transparency in rates and system 

needs in order to determine investments? 

Mr. CHOW. Well, thank you for the question. 

First of all, maybe I’ll circle back and address some of your first 

questions about integrated planning framework because that sort 

of threads into your second question. 

Mr. WALBERG. You’ve got the mic. I’ll take the answer. 

Mr. CHOW. Well, I think the integrated planning framework, first 

of all it’s understanding your assets to ensure that you are looking 

at things more holistically. 

You mentioned about water. You mentioned about the sewer. 

You mentioned about the storm water and so on, all that. 

And Baltimore is very fortunate. I am probably one of the first 

that actually came up with a EPA integrated planning framework 

document where we look across not only the sewer versus storm 

water under the current EPA, you know, integrated planning 

framework definition. 

We expanded that to water as well. So you got to look at things 

holistically. So when you talk about funding you got to make sure 

you provide the funding to the ones that yield the most benefits. 

And, clearly, you don’t have enough money to do all of it. You 

have to start from somewhere and one of the things we talk about 

how do we reduce the water main breaks over time is that you 

can’t just go out and start replacing water mains. You got to sort 

of identify where is the most vulnerable piece and then go after 

those. 

And through those sound asset management methodology and 

looking at things holistically you begin to have a good planning 

framework in terms of how do you attack this so-called infrastructure crisis that we are facing because you can’t bite on this elephant all at one time. You got to take one bit at a time. 

Mr. WALBERG. Thank you. Yield back. 

Mr. SHIMKUS. Gentleman yields back his time. 

The chair now recognizes the other gentleman from California, 

Dr. Ruiz, for 5 minutes. 

Mr. RUIZ. Thank you. Thank you, Chairman. 

I want to follow Mr. Peters and his concerns for the public’s 

health. As a physician, I understand the direct link between our 

nation’s drinking water quality and the health and well-being of 

the people that I serve and that we all serve. 

Water is a fundamental element that everyone regardless of political party, regardless of social status needs to survive. So improvVerDate Nov 24 2008 11:38 May 23, 2017 Jkt 037690 PO 00000 Frm 00112 Fmt 6633 Sfmt 6633 I:\MY DOCS\HEARINGS 115\HEARINGS\115-13 CHRIS
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ing our nation’s water delivery infrastructure is crucial to improving our nation’s health. 

In California, 85 percent of the community water systems tap 

groundwater sources to supplement their drinking water supply 

and deliver water to more than 30 million people. 

But many ground water basins throughout my state and across 

the country are contaminated, as we all know, by both naturally 

occurring toxins like arsenic and hexavalent chromium as well as 

human causes such as leaky septic systems. 

The State Revolving Fund, or SRF, is a critical tool that enables 

water agencies to build treatment systems or remove aging septic 

systems. 

In my district, the Mission Springs Water District has utilized more than $10 million in SRF funds for its groundwater protection 

project to remove more than 2,800 septic tanks and install more 

than 33 miles of sewer line. 

This project is critical to protecting the groundwater supplies 

across the Coachella Valley and may not have been possible without the SRF. 

But not all communities even have access to treated water systems. Families in many vulnerable and rural communities like 

Mecca and Thermal, which I represent, where I grew up, rely on 

private wells that can have levels of arsenic more than 10 times 

the national legal limit. 

These families are forced to buy bottled water because they can’t 

drink the water from the tap and this is simply unacceptable. 

So we owe the American people more than just debate on this 

critical issue. Clean drinkable water should be a priority for every 

community across America because it affects everyone regardless of 

your political party or politics. 

So we must act to ensure our water delivery infrastructure is not 

only up to date but also reaches every community in America. In 

terms of the public health, the septic tanks are above ground. 

With a little rain even in the desert where I live and represent 

and grow up, those septic tanks can overfill and overrun onto the 

unpaved dirt area where children and the elderly and everybody 

else play and walk and going to school. So you can imagine we 

have a lot of under developed areas in our nation all across rural 

America. 

This is for Mr. Olson. You mention in your testimony that deferred maintenance of our drinking water systems is a ticking time 

bomb that threatens the public’s health. 

So what are the health impacts of drinking water contaminants 

such as arsenic and chromium and can you elaborate on the reduced treatment costs for people if we protect water sources? 

Mr. E. OLSON. Yes. Well, there are several contaminants that are 

fairly common. You mentioned two of them—arsenic and chromium, especially chromium. Hexavalent chromium is one that we 

are worried about. 

Arsenic is fairly widespread. EPA reduced the standard down to 

10 parts per billion a little over a decade ago, I guess it was. 

It’s widespread in California and many other communities. The 

health impacts of a lot of these are cancer is one of the risks. We 

are, obviously, worried about lead being a widespread contaminant 

110 

that is affecting a lot of communities. It’s not just Flint or East 

Chicago, Indiana. There are many other communities that have a 

lead problem. And we believe that it’s really important to invest in 

this. 

You mentioned rural communities. We are seeing very significant 

proposed cuts to deal with rural community water. For example, a 

$500 million cut was proposed in this budget for the USDA rural 

water program. 

Mr. RUIZ. So those residents in the central part of America, in 

rural America, are going to feel the biggest burden of this budget—— 

Mr. E. OLSON. Exactly, and—— 

Mr. RUIZ [CONTINUING]. In terms of their drinking water? 

Mr. E. OLSON. That’s right, and then obviously they are also proposing cuts in the Mexico border program to zero that out for 

water. Also, the Alaska native village program, zeroing that out 

and many other programs. 

Mr. RUIZ. So rural communities are going to get duped once 

again? 

Mr. E. OLSON. We are very concerned. 

Mr. RUIZ. Yes. 

Mr. E. OLSON. Those are where the health risks often are worse. 

Mr. RUIZ. Yes. It’s unbelievable but it’s true and I see it in my 

rural communities as well. 

I got 10 seconds so I’ll refrain from asking another question and 

go ahead and give the mic back. 

Mr. SHIMKUS. I thank my colleague and Chair now recognizes 

the gentleman from Texas, Mr. Flores, for 5 minutes. 

Mr. FLORES. Thank you, Mr. Chairman, and I thank the gentlemen for joining us for this important hearing today. 

I’d like to start with Mr. Chow. Mr. McNerney started with a 

question for the entire panel where each of you said that municipal 

financing tax exemptions were very important. 

And so, Mr. Chow, I’d like to dig into that a little bit. A lot of 

us, at least on this side of the aisle, would like to see a comprehensive tax reform package passed this year and what I’d like to ask 

you is what tax reform components are important to drinking 

water infrastructure financing and why. 

Mr. CHOW. Well, I mean, certainly, maintaining the municipal 

bonds being tax exempt is going to go a long way. I mean, I mentioned in my testimony that our 6-year program is about $2 billion 

and most often is going to be funded by bond markets and we are 

going to have to go to the bond market and borrow that money. 

Now, we do get some SRF from our state. But in relatively comparing to the overall needs in the SRF it just doesn’t go far enough. 

Now, certainly, with the complement of WIFIA, it’s going to be 

another tool that we are exploring in terms of availability to us on 

larger projects. When we talk about the 1.8 million customers and 

so on all that, our projects generally are larger in nature and the 

WIFIA is going to go be very helpful from that perspective. 

Mr. FLORES. Thinking outside the box for a minute, We talked 

about muni finance and WIFIA and SRF. Just think outside the 

box for a minute. Is there anything else that would help? 

111 

Mr. CHOW. Well, certainly, no one has mentioned P3, which is 

public-private partnership. 

Mr. FLORES. I know where I am trying to go, yes. 

Mr. CHOW. That is an area that is a tool in our toolbox. So in 

terms of financing our infrastructure, we go for state grants. 

Then we go for SRF. Now WIFIA is available to us and, ultimately, leveraging the private dollars in terms of our infrastructure needs because the fact that we can’t continue to raise water 

rates at the pace that we have been raising water rates, particularly in Baltimore with the population 40 percent is under so-called 

the national meeting household income level. 

So leveraging the private dollars, negotiate terms more perhaps 

more favorable in terms of length of the payback periods, and so 

on and all that. Those are the out-of-the-box sort of thinking and 

has to be an avenue for us. 

Mr. FLORES. Thank you. That’s helpful. 

Mr. Kropelnicki—I hope I got close on that—ASCE has talked 

much about the true cost of water in past reports and we know 

that water rates generally not only pay for operation and maintenance but long-term upgrades and expansion of the water system, 

or at least they are intended to do that. How do you set your rates 

to cover all of those costs? 

Mr. KROPELNICKI. Sure. That’s a very good question, Congressman. Thank you. 

We practice full cost for service rate making. So our state regulator, the public utilities commission and our largest operations in 

California does a very good job where we basically put costs in the 

bucket. 

So you have operating costs—things that are expenses. You have 

investment costs—things that go into rate base. There is an authorized rate of return that we are allowed to earn those investments. 

So you add those things up. Cost of service plus your investment 

gives you a revenue requirement. That revenue requirement divided by your number of units sold gives you a price per unit. 

And the state regulator regulates those things that are in those 

buckets. So it allows us to forecast our costs and they come back 

and then check our costs. 

So all our capital is approved on a project by project basis. They 

review our health results. I am very proud to say our company for 

the last five years has met the primary standards, the secondary 

standards and all the UCMR, which is unrelated contaminants for 

the systems that we operate. 

And it’s all under the purview of our regulator who does a very, 

very good job at climbing through our drawers and seeing how we 

operate as a company. 

Mr. FLORES. How do your rates generally compare with others in 

your area? 

Mr. KROPELNICKI. That’s also a very good question and that is 

where it gets a little more complicated, and it does for the following 

reasons. 

One, each water source is different and each water source will 

have a different type of treatment requirement and the price of 

that treatment varies dramatically. 

112 

So that’ll cause variation in rates. The other thing that causes 

variation in rates are things like for a investor-owned utility we 

pay taxes. We don’t really rely on tax-exempt financing. 

We are required, under generally-accepted accounting practices, 

to fund our health and welfare plans, including our pension. So it’s 

really full absorption costing, wherein municipal systems they follow a government or a GASB standard for accounting, which is 

really different than ours. 

So when you normalize all those things out, our rates are very 

competitive. But when you don’t have them normalized out, they 

could sway dramatically. But it all starts with that water source 

and looking at what’s required for the treatment. 

Mr. FLORES. Thank you. Sorry I’ve gone over, Mr. Chairman. I 

will say as a CPA, our government accounting standards leave 

much to be desired. 

Mr. SHIMKUS. Texas and California. So now we will turn to the 

other Texan, Mr. Green, for 5 minutes. 

Mr. GREEN. Thank you, Mr. Chairman, and I have a lot of questions. I won’t have 5 minutes to do them all in but be glad to submit the questions. 

My first one is Mr. Olson. In your testimony you mentioned the 

need to pay special attention to the needs of lower income and disproportionately affected communities as part of your water infrastructure rebuilding program. 

I represent a district that has significant amount of unincorporated area. The city of Houston, we try to partner with these unincorporated areas. We have in Texas what we call municipal utility districts and this provides water to tax based on that. 

But we also have private water companies—I know someone on 

the panel represents those—who some of their rates are those in 

unincorporated are extremely high. 

So we try to partner with the state to pay the infrastructure 

costs and then they will hook up to the city of Houston’s systems 

and pay the monthly bills. Could you describe the characteristics 

of a disproportionately affected community? 

Mr. E. OLSON. Yes. It’s a big issue because we are seeing this 

across the country. Flint is not the only place that has this problem. There are a lot of small towns and rural areas that have the 

problem as you’re suggesting in your district, Mr. Green. 

There is a definition that is in the Safe Drinking Water Act for 

disadvantaged community. The states will then put a finer gloss on 

that as to what it means exactly. 

But, basically, if you’ve got a fairly low income community that 

is where you want to target those resources most because they can 

least afford it and as we have heard full cost accounting for water 

can cause rates to go up and that is where, I think, you want to 

make sure you’re dealing with the lower income folks and making 

sure that you’re targeting resources to them and to the infrastructure there. 

Mr. GREEN. Well, in this case, neighborhoods that are covered or 

maybe surrounded by the city of Houston and they will not annex 

them because, one, it would be such a drag because their property 

tax base is not near enough to pay for the infrastructure and that 

is one of our—and low income, which are throughout the country 

113 

including Houston, Harris County, it’s not as bad as some of the 

parts of Texas where we have colonias. People actually bought 

houses. There were no septic systems, no water systems and they 

ended up drilling their own wells and they become really a problem. South Texas and even parts of east Texas does that. Is the 

Safe Drinking Water Act something available for those type of communities? 

Mr. E. OLSON. Well, I actually mention the colonias in my testimony. It’s a serious concern in Texas and a lot of other areas but 

especially acute there. 

The Safe Drinking Water Act does actually have a colonias program that needs a lot more attention, a lot more resources. I think the cut in the rural utilities service budget of $500 million that was just proposed is really going to hurt efforts to try to 

deal with that as well the elimination of the Mexico border program that has been proposed in the EPA budget. 

Mr. GREEN. In your testimony you mention an idea of creating 

a low income water assistance program similar to LIHEAP, which 

also took a hit in the president’s budget. 

Can you go into greater detail on how this program would work 

and do we need to do authorizing legislation to do that? 

Mr. E. OLSON. A quick answer is—there are a couple ways you 

could do it. One is much like LIHEAP, which would be essentially 

federally funded with some state matching money. 

That would be a preferable way to do it. You would certainly 

need federal authorization for that. 

Local utilities have done this. EPA did a very interesting review 

of what some of the states and localities are doing. Some have been 

very progressive in dealing with these issues—the affordability 

issues—and I can provide that for the record if that would be of 

interest. 

Mr. GREEN. But, again, it would be a partnership similar to federal government, state government, even the local community 

pay—— 

Mr. E. OLSON. Exactly. 

Mr. GREEN [CONTINUING]. A share but pay something they can afford. 

Mr. E. OLSON. That’s right. 

Mr. GREEN. Mr. DiLoreto, I want to start with does your investment in drinking water infrastructure compare to the D? Is it safe 

to say that there are more projects in need of funding and what 

kinds of projects are these? 

Mr. DILORETO. Well, it’s absolutely true that there are more 

projects in need of funding. We look—it appears we have about 

one-third of the money that is needed to make—to bring our water 

system up to a grade of B. 

Now, we don’t look at individual projects. We are looking at the 

state of the industry. But throughout the industry we find city— 

the special district like I used to work for, every one of them, having water infrastructure projects that are not getting built with us. 

Water mains being replaced and repaired, whether it’s pump stations that aren’t getting repaired and replaced. We have about a 

third of the money between what we are getting now in SRF, between money we are generating as utilities to make that happen. 

114 

Mr. GREEN. Thank you, Mr. Chair, and thank you for holding 

these hearings. 

Mr. SHIMKUS. Yes, this hearing is making me thirsty so I have 

been drinking a lot of water. 

The chair now recognizes the gentleman from Georgia for 5 minutes. 

Mr. CARTER. Thank you, Mr. Chairman, and thank all of you for 

being here. I appreciate this very much. 

I have to share a personal story with you. I was a mayor of a 

city way back when and I was mayor from 1996 to 2004. I started 

when I was 10 years old. 

But anyway, fascinating. When I was in pharmacy school I never 

realized that I would know so much about water and sewer because 

when you’re the mayor of a growing city like I was—I refer to this 

as the nuts and bolts of municipal government and it is. 

For most people, they turn on the faucet and the water flows. 

They flush the toilet and the water goes away and that is all they 

know. 

But when you’re the mayor you got to know everything about it. 

In 1996, our population was 4,500. When I left in 2004, our population was 19,000. 

You can imagine the challenges that we had, and we did it—in 

hindsight I think it may have been easier for us in a sense because 

we had, if you will, a private-public partnership with the developers. 

We said yes, we will extend water and sewer lines and we will 

go through the state revolving fund and we will get that loan on 

the city but we need letters of credit from you to cover that. 

It was a win-win situation because we were able to get low rates 

that they took advantage of. We were able, a municipality, to be 

able to be assured we were going to get a return on it. Otherwise, 

we’d call in those letters of credit. 

And I was just wondering, have you tried any innovative ways 

like that? I suspect it’s going to be a lot different when you’re talking about repairing water and sewer lines because we were growing and we had a different set of challenges that we had to deal 

with. 

But that, in some ways, I think, was advantageous to us. I mean, 

that we could do. But when you’ve got existing infrastructure that 

seems to me like it would be more difficult. 

I want to ask you, Mr. Donahue, you represent kind of a smaller 

municipality. What challenges do you face there in getting the 

funding that you need in order to do these kind of projects? 

Mr. DONAHUE. That’s a very good question and thank you. It’s 

a rather loaded question too, I might say. As a small utility manager, trying to keep rates so that they are affordable to our lower 

income, lower socioeconomic customers and still provide the type of 

resources that we need to provide to maintain our capital is a difficult balance to try to maintain. 

Back in the day when I had extensive growth we had developers 

and we would put the burden on building that capital on the back 

of the developer and then they would turn that capital over to us. 

115 

But now, in trying to reinvest and rebuild that infrastructure, 

that falls solely on the backs of the ratepayers and trying to maintain rates so that they are manageable is a challenge. 

Now, water rates are still a bargain in most areas and I think 

most of us on the—on the dais here would be hard pressed to argue 

against that. 

But we can’t leave the low income folks behind and we have to 

come up with strategies that will help support them while we are 

still growing our infrastructure or maintaining our infrastructure. 

Mr. CARTER. OK. I’ve got limited time with so many questions. 

I’ve talked to some of the water managers, if you will, in my district and they are telling me a lot of their costs right there are with 

the unregulated contaminants, having to test for those. 

Are you all having that same experience? 

Mr. DONAHUE. We have a groundwater system where I am from 

and we test for unregulated contaminants every 2 or 3 years as required by our state agency. 

It’s not a real burden for us. We manage that pretty easily. Now, 

we are fortunate that we have good ground water but if we had 

contamination issues then it would be a significant cost burden for 

us. 

Mr. CARTER. I want to ask anyone who wants to jump on this 

and this is—I apologize, this may be off a little off of the beaten 

path. But one of the problems we have in my area is that we draw 

most of our water from the Florida aquifer. 

Well, we are right on the edge and we are having saltwater intrusions so we are having to use treated surface water. Aquifer 

storage and recovery—any opinions on that? 

Mr. DILORETO. The agency that I ran for 14 years uses aquifer 

storage and recovery and we would take water in the winter time 

and we were able to inject it into the ground there and then we 

pulled it out in the summer time. So it became another reservoir, 

if you will, for water in the summer time. 

Mr. CARTER. Any problems with it, though? It’s tough to get 

them to take that step to do it because you feel like they are going 

to contaminate our pure system. 

Mr. DILORETO. Right. It started out that way but I am from Oregon. So, we don’t have some of those problems that you have perhaps in other parts of the country. 

Mr. CARTER. Right. 

Mr. DILORETO. And so after we worked with our Department of 

Environmental Quality and Health Division we were able to actually do a pilot project that showed that it worked quite well in—— 

Mr. CARTER. OK. Can I have one last question real quick? 

Mr. SHIMKUS. No. 

Mr. CARTER. No. 

Mr. SHIMKUS. Yes. I mean—— 

Mr. CARTER. One last—seriously. 

Mr. SHIMKUS. Just a statement. We have got two colleagues that 

have been waiting for a long time. So why don’t we just no? You 

can submit it for the record. 

Mr. CARTER. OK. All right. I will. 

116 

Mr. SHIMKUS. Chair now recognizes the very patient gentlelady 

from Michigan, Ms. Dingell, who I know had some questions for 5 

minutes. 

Ms. DINGELL. Thank you, Mr. Chairman, and I thank you for 

holding this hearing because as somebody who comes from Michigan, the Flint water crisis obviously stays in everybody’s hearts 

and minds every single day. 

And I strongly support increased investment in our drinking 

water infrastructure. That should help our communities replace 

lead pipes and fixtures quickly and safely. 

I am actually even going to ask a question in a minute that is 

unscripted, God forbid we ever go unscripted in these hearings. 

But Mr. Olson, first, let me ask you how can federal infrastructure investments be used to protect communities from lead? 

Mr. E. OLSON. Well, there are a couple of urgent needs. One is 

there are about 6 to 10 million lead service lines across the country, according to industry estimates, and we are going to need to 

replace those. American Water Works Association and others have 

said we need to replace those. So that is a huge need. 

There are also needs for treatment in many communities that 

corrosion control treatment is not up to snuff and we need to address that as well. 

Ms. DINGELL. One of the issues that we really haven’t talked 

about but I am really seeing in our communities, and I want to 

build on the tax question of my colleague from the Republican side, 

is because I had an idea that I am wondering if it’s something we 

should pursue. 

Many homes still have lead pipes in my communities and nobody’s talking about that, and that isn’t the system’s responsibility. 

But until we get rid of those lead pipes that is going to continue 

to be a crisis and we are trying to map. 

Mr. Chow, I’ll ask you this. This is an unscripted question so 

staff’s probably having a heart attack behind me. But is there 

something we should be doing to help homeowners be able to replace these pipes as well? 

Mr. CHOW. Absolutely. On the public side we can have the best 

water bringing to the property lines and then once it gets into 

homes if they have contaminant pipes such as lead pipes and so on 

and all that it’s not going to be helpful in terms of water quality. 

So we have to think outside of the box. So, for example, I’ll just 

introduce an example that we have in Baltimore. So we have aging 

infrastructure just like everybody else and we recognize when we 

have aging infrastructure it’s likely the homes who are tapping into 

our system are equally aged. 

So we are actually looking at our extended warranty companies 

out there. They are looking at replacement of pipes when there is 

a failure or something like that. 

Low cost—in our case, we pay—our residents pay about less than 

$10 for water and sewer protection on a monthly basis. Now, that 

is an avenue. 

But then, now, if you sign up a whole community, recognizing 

there is lead pipe in there, again, these private companies are 

going to have to take on the risk. So, again, it’s become a business 

117 

decision they are going to have to make. But we, on the government side, certainly can bridge that conversation. 

Ms. DINGELL. And it’s real. Take Flint, for example, where there 

are many homes that have lead pipes and there is no money for 

those homeowners to replace it. 

They are walking away from their homes because they simply 

can’t afford to replace the pipes. So it’s a community issue. 

As we are talking about Flint there is also an issue of confidence 

by consumers. So we just had an incident down river, which is part 

of my community, where the water was brown and smelled and a 

thousand other things. So you can imagine in Michigan what any 

discolorization and foul smelling does to people and confidence in 

their water. 

And, quite frankly, the official communication was poor that left 

many questions unanswered and I ended up calling the head of 

Great Lakes Authority with all the mayors and saying, this is unacceptable and what happened wasn’t good enough. 

Mr. Ellingboe, what are states doing to provide more and better 

drinking water quality information to customers? 

Mr. ELLINGBOE. Thank you, Congresswoman. The communication 

part—I need to remember to sit back—the communication part is 

really—— 

Ms. DINGELL. I don’t either. I am always in trouble. 

Mr. ELLINGBOE [CONTINUING]. Is really a critical part of our job 

as state drinking water programs. And so—— 

Mr. SHIMKUS. Yes, why don’t we do this? Just turn yours off and 

use Mr. Donahue’s. 

Mr. ELLINGBOE. OK. Thank you. 

Ms. DINGELL. It’s the mic. It’s not you. 

Mr. ELLINGBOE. All right. So thanks again. The question is what 

are state drinking water programs doing to help people understand 

some of the aspects or risks associated with their drinking water. 

Well, first of all, what’s really critical is that we work with our 

communities as they need information to provide to their citizens. 

For example, in the issue of lead, I think one of the major aspects is helping people understand what they might be able to do 

in their homes to avoid problems or provide filtration. 

We need to have the resources available that are important 

through the set asides from the State Revolving Fund in order to 

be able to provide that technical assistance to provide better information from the state level to have as a resource for utilities to be 

able to access. 

And so it’s an ongoing challenge to provide effective communications. 

Ms. DINGELL. And I am out of time. I would like to do more questions for the record because I think having just experiences there 

are a lot of issues. 

Mr. SHIMKUS. You are allowed to do that, without objection. So 

the chair now recognizes the gentlelady from Colorado, Ms. 

DeGette, for 5 minutes. 

Ms. DEGETTE. Thank you very much, Mr. Chairman. 

I am really pleased you are having this hearing and I hope we 

have more like this. Several of our colleagues on both sides of the 

aisle have pointed out that our constituents all just assume that 

118 

when they turn on the faucet that the water will come out and it 

will be safe and that it will—and that there won’t be a problem. 

And I think we all agree that you really can’t have stable communities without safe drinking water. We saw this in Flint when 

the whole system collapsed, when the drinking water collapsed. 

And this committee has a long and cherished tradition of making 

sure that safe drinking water is a reality for most Americans. 

And while the Safe Drinking Water Act is not perfect and we 

have to update it, it really has been a tremendous success over the 

years because it established national drinking water regulations for 

toxic contaminants. 

It funded urgent drinking water infrastructure projects in all 50 

states through the revolving fund and it set up a framework of federal-state collaboration to protect drinking water resources under 

the underground injection control program. 

So I think it’s really been a success. It has been a model for collaboration with the state and federal government, which I think 

has really been helpful. 

And I have got this bill called FRAC Act and what my bill would 

be to ensure that when we do hydraulic fracturing, which is a big 

issue in Colorado and many other states—that we also comply with 

the Safe Drinking Water Act to make sure that fracking is not contaminating our drinking water. That was, for some reason, in the 

Energy Act of 2005 exempted and I think that the Safe Drinking 

Water Act should cover everything. 

Now, having said that, I just want to ask you folks about a few 

of the elements of the Safe Drinking Water Act as we start to think 

about how we are going to update and modernize it, and most of 

these should involve yes or no answers. 

Do you support preauthorizing the Drinking Water State Revolving Fund, Mr. Ellingboe? 

Mr. ELLINGBOE. Yes. 

Ms. DEGETTE. Mr. Donahue? 

Mr. DONAHUE. Yes. 

Mr. CHOW. Yes. 

Mr. KROPELNICKI. Yes. 

Mr. E. OLSON. Yes. 

Ms. DEGETTE. Thanks. Do you think that, given what we have 

heard today at this hearing, do you think Congress should put 

greater focus on getting low income or small water systems into 

compliance? 

Mr. ELLINGBOE. Yes. 

Mr. DONAHUE. I agree with that as well. 

Mr. CHOW. I agree. 

Mr. DILORETO. Certainly. 

Mr. KROPELNICKI. Absolutely. 

Mr. E. OLSON. Yes. 

Ms. DEGETTE. Now, do you think Congress should provide more 

resources for water systems to improve resiliency and security from 

threats like climate change and terrorism? 

Mr. ELLINGBOE. Yes, absolutely. 

Mr. DONAHUE. Yes, ma’am. 

Mr. CHOW. Yes. 

Mr. DILORETO. Yes, it’s one of our solutions. 

119 

Mr. KROPELNICKI. Congresswoman, I go back to cost of service 

rate making and making sure costs are fully reflected in the rates 

and to the extent it’s an under privileged community that you use 

a rate support fund or other mechanism to help true that up but 

it—— 

Ms. DEGETTE. So is that yes? 

Mr. KROPELNICKI. It’s a conditional or a qualified yes. 

Ms. DEGETTE. OK. 

Mr. E. OLSON. Yes. 

Ms. DEGETTE. And do all of you support new financing options 

to leverage federal dollars and lower interest rates? 

Mr. ELLINGBOE. Yes. 

Mr. DONAHUE. Yes, I do. 

Mr. CHOW. Absolutely. 

Mr. DILORETO. Yes. 

Mr. KROPELNICKI. Yes. 

Mr. E. OLSON. Yes. 

Ms. DEGETTE. Thank you. Mr. Chairman, I know I could come 

up with some more provisions that we could all come to consensus 

around but I really think what this shows with this wonderful and 

diverse panel here is that we really can come to consensus around 

changes to the law so that the EPA can issue new and common 

sense standards for contaminants and we also need to work on 

ways to improve compliance versus effective enforcement. 

And so with that, I really want to thank all of you. I am cognizant that I am the last questioner so I’ll yield back. Thank you. 

Mr. SHIMKUS. The gentlelady yields back her time and I appreciate her comments. I would just caution be careful not to ask for 

too much. 

I do think there is a lot of areas in which we can agree and I 

am pretty excited. Great hearing. Appreciate your testimony. We 

will be submitting some additional questions to you. If you’d get 

those back we’d appreciate it. 

I ask unanimous consent to the following items being inserted 

into the record: a letter from the National Groundwater Association, a statement from the mayor of Syracuse, New York, Stephanie Miner, a letter from American Rivers and an article from the 

New York Times dated December 24th, 2016 on drinking water. 

Is there objection? Hearing none, so ordered. 

[The information appears at the conclusion of the hearing.] 

Mr. TONKO. Mr. Chair? 

Mr. SHIMKUS. Yes. 

Mr. TONKO. The letter submitted by the mayor of Syracuse is responding to some of the advice that was provided today by the 

panel including making use of predictive analytics models so as to 

best understand where the leaks may be, where the frequent reoccurrences have been so as to have a better master plan, and then 

sensors also that they are applying for their water leaks—a vibration system that then identifies. 

So I think they are doing innovative things in Syracuse and it’s 

the kind of message I think I heard here today—to be able to use 

those innovative concepts to be able to stretch the dollars required 

and to best manage with most efficiency as the outcome. 

So I thank you for entering it into the record. 

120 

Mr. SHIMKUS. Can the gentleman tell me whose congressional 

district that is in? 

Mr. TONKO. It is not mine. 

Mr. SHIMKUS. It is not? 

Mr. TONKO. No, it is in, I think, Mr. Katko’s. 

Mr. SHIMKUS. What a good guy. 

All right. So we appreciate you all attending and I will call the 

hearing adjourned. 

[Whereupon, at 11:59 a.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

PREPARED STATEMENT OF HON. GREG WALDEN

While last year’s drinking water crisis in Flint, Michigan drew the country’s attention to one community; we all have communities in our states that have discovered they, too, have issues with their water supply and distribution systems. Today, 

our committee begins a review of the financial needs of our entire nation’s drinking 

water infrastructure. Of course, we need to learn from Flint to make sure the same 

mistakes are never repeated, but it is important that we don’t simply confine our 

view to just a few solutions. We need to think broadly about all the things that can 

impact water affordability, reliability, and safety. 

The president strongly supports making newer and larger investments in our nation’s infrastructure and I agree that we need to protect these assets. But we must 

ensure wise investments and diversified efforts make sense and make us better prepared for our future. 

It is not enough to look at the latest water needs assessment issued by EPA— 

or any other group for that matter—and conclude the simple solution is directing 

more federal money at the problem. Moreover, the price of pipe or a new treatment 

facility is not the only cost driver—regulations are a significant cost and we know 

that poorly designed ones can contribute to cost problems. To the extent that existing and new regulations, as well as emerging contaminants are an issue, we should 

not diminish the importance of tools like the Drinking Water State Revolving Loan 

fund, which has helped many water utilities afford compliance with federal mandates. 

Obviously, these are serious issues and we must delve beneath the surface of 

these matters and ask hard questions, like where the line should be drawn between 

federal investment and local responsibility, what existing practices or resources can 

become used in new partnerships to solve these problems, and where can technology 

be applied in ways that make our systems smarter and not just newer. 

I know these are not easy questions, but I know together we can find the answers. 

I want to thank our witnesses for joining us today and I look forward to hearing 

their testimony. 

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Drinking water is delivered via one million miles of pipes across the country. Many of those pipes were 

laid in the early to mid-20th century with a lifespan of 75 to 100 years. The quality of drinking water in 

the United States remains high, but legacy and emerging contaminants continue to require close 

attention. While water consumption is down, there are still an estimated 240,000 water main breaks per 

year in the United States, wasting over two trillion gallons of treated drinking water. According to the 

American Water Works Association, an estimated $1 trillion is necessary to maintain and expand service 

to meet demands over the next 25 years. 

The United States uses 42 billion gallons of water a day to support daily life from cooking and bathing in 

homes to use in factories and offices across the country. Around 80% of drinking water in the U.S. comes 

from surface waters such as rivers, lakes, reservoirs, and oceans, with the remaining 20% from 

groundwater aquifers. In total, there are approximately 155,000 active public drinking water systems 

across the country. Most Americans- just under 300 million people- receive their drinking water from 

one of the nation's 51,356 community water systems. Of these, just 8,674 systems, or 5.5%, serve more 

than 92% of the total population, or approximately 272.6 million people. Small systems that serve the 

remaining 17.4% of the population frequently lack both economies of scale and financial, managerial, 

and technical capacity, which can lead to problems of meeting Safe Drinking Water Act standards. 

Drinking water is delivered via one million miles of pipes across the country. Many of those pipes were 

laid in the early to mid- 20th century with a lifespan of 75-100 years. With utilities averaging a pipe 

replacement rate of 0.5% per year, it will take an estimated 200 years to replace the system nearly 

double the useful life of the pipes. 
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Because America's drinking water infrastructure provides a critical service, significant new investment 

and increased efficiencies are needed as filtration plants, pipes, and pumps age past their useful life. 

Every day, nearly six billion gallons of treated drinking water are lost due to leaking pipes, with an 

estimated 240,000 water main breaks occurring each year. It is estimated that leaky, aging pipes are 

wasting 14 to 18% of each day's treated water; the amount of clean drinking water lost every day could 

support 15 million households. 

To address deteriorating water infrastructure, asset management provides utility managers and 

decision-makers with critical information on capital infrastructure assets and timing of investments. 

Some key steps for asset management include making an inventory of critical assets; evaluating their 

condition and performance; developing plans to maintain, repair, and replace assets; and funding these 

activities. 

While drinking water infrastructure is funded primarily through a rate-based system, the investment has 

been inadequate for decades and will continue to be underfunded without significant changes as the 

revenue generated will fall short as needs grow. According to the American Water Works Association, 

upgrading existing water systems and to meeting the drinking water infrastructure needs of a growing 

population will require at least $1 trillion. 

The majority of funding for drinking water infrastructure comes from revenue generated by rate payers. 

In the nation's largest 50 cities, the rate users pay varies greatly; the lowest average monthly water bill 

is $14.74 in Memphis, while Seattle residents pay the most at $61.43. This large gap exemplifies the 

varied approaches to rate structure, as well as the contrast of need and investment across the country. 

While higher rates that reflect the true cost of service are important, public assistance programs should 

be considered for low income populations. Between 2009 and 2014, state and local governments 

decreased capital spending for both drinking water and wastewater by 22%; at the same time, federal 

capital spending did not change significantly. 

The federal government offers financial support to local governments and utilities in the form of loans 

through the Drinking Water State Revolving Fund, which provides low-interest loans to state and local 

water infrastructure projects. The Environmental Protection Agency (EPA) provides an allotment of 

funding for each state, and each state provides a 20% match. Since the program's inception, $32.5 

billion of low-interest loans have been allocated. However, with needs far surpassing the program's 

budget, it is unable to meet all investment needs or fund every deserving project. 

In 2014, Congress authorized a new mechanism to fund primarily large water infrastructure projects 

over $20 million through the Water Infrastructure Finance and Innovation Act (WIFIA). In 2016 Congress 

appropriated $17 million in funds for the program. It is estimated that using WIFIA's full financial 

leveraging ability that a single dollar injected into the program can create $50 dollars for project lending. 

Under current appropriations, EPA estimates that current budget authority may provide more than $1 

billion in credit assistance and may finance over $2 billion in water infrastructure investment. 
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1 5 

1.0 

co 

2Ll03 

Municipal drinking water consumption in the United States has declined by 5% this decade, marking the 

first time in nearly 40 years that water use at home has decreased. Total freshwater withdrawals this 

decade continue to decline in almost every sector including agriculture, industrial, domestic, and 

thermoelectric. This is primarily due to increased efficiencies and the reduction in withdrawals for 

retired coal-fired power plants. 

Drinking water needed for public supply in the United States has been relatively flat since 1985 even as 

the population has increased by approximately 70 million people over the same period. Water 

conservation efforts, including through water efficient fixtures, have had a significant impact in reducing 

per capita water usage. Importantly, while per capita demand has fallen, population trends have 

significantly challenged how cities manage water. For example, the Government Accountability Office 

estimates that 99 of 674 mid sized cities in the U.S. are shrinking. This poses significant challenges to 

utility managers; fewer rate payers and a declining tax base make it difficult to raise funds for capital 

infrastructure plans. To respond, utilities must raise rates, often in cities where jobs and pay have not 

kept pace with the economy, putting a burden on those who can least afford rate increases. Conversely, 

in areas of the country that are growing, such as the West and Southwest, water managers must 

respond to increased overall demand. 

Drinking water quality in the United Sates remains the safest in the world. The EPA sets legal limits for 

over 90 contaminants in drinking water. The Safe Drinking Water Act (SDWA) allows states to set and 

enforce their own drinking water standards as long as the standards meet or exceed EPA's minimum 
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national standards. Smaller systems that serve under 10,000 people report that a lack of resources and 

personnel can limit the frequency of testing, monitoring, maintenance, and technical capability in their 

systems. With sufficient funding and proper oversight, these risks can be mitigated and water quality 

can remain safe. 

America's drinking water infrastructure doesn't stop at pipe, reservoir, pump station, and treatment 

plant upgrades; many threats to drinking water infrastructure can be attributed to the sources of 

drinking water, such as polluted water bodies, depleted aquifers, and inadequate storage. As 

watersheds continue to be impacted by shifting migration patterns, land use changes, consumption 

trends, and extreme weather, water infrastructure upgrades will be required to meet new demands. 

With proper planning, education, and conservation utilities are making strides to ensure demand is met 

for decades to come. Water conservation and improvements in water-use efficiency appear to have 

gained a general acceptance among water utilities as a sensible practice of water management. 

According to the American Water Works Association, a majority of utilities -74%- have a formal 

conservation program, and 86% consider conserved water as one of their water supply alternatives. 

Additionally, many communities that have separate drinking water and wastewater departments are 

beginning to work together or even consolidate, creating "one water" utilities that manage water more 

holistically. 

Reinvigorate the State Revolving Loan Fund (SRF) program under the Safe Drinking Water Act 

through permanent reauthorization and tripling the amount of ;mnual appropriations. 

Fully fund the Water Infrastructure Finance and Innovation Act (WIFIA) at its authorized level. 

Preserve tax exempt municipal bond financing. Low-cost access to capital helps keep lending for 

drinking water upgrades strong and accessible for communities large and small. 

Establish a federal Water Infrastructure Trust Fund to finance the national shortfall in funding of 

infrastructure systems under the Clean Water Act. 

Eliminate the state cap on private activity bonds for water infrastructure projects to bring an 

estimated $6 to $7 billion annually in new private financing. 

Encourage utilities to take regional approaches for water delivery to take advantage of 

economies of scale. 

Increase federal support and funding for green infrastructure, watershed permitting, and other 

programs that promote the concept of "one water" to protect source watersheds. 

Encourage utilities to conduct revenue forecasting models to determine the necessary rate 

revenues over a period oftime and then institute rates that reflect the true cost of supplying 

clean, reliable drinking water. 

Encourage utilities to undertake asset management programs. 

Increase federal and local support for vocational training in the drinking water sector as 

engineers, operators, and maintenance staff begin to retire in large numbers. 
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Support and advance conservation ballot measures that protect source water through dedicated 

funding to land and water protection. 

Utility managers must remain diligent to ensure science-based decisions control operations and 

facility function. While lead and other contaminants post significant health concerns when 

ignored, with proper funding safe and clean drinking water can be ensured. 

Non-community Water System is a public water system that is not a community water system and that 

regularly serves at least 25 of the same people over six months/year. These may include systems that 

provide water to schools, day care centers, government/military installations, manufacturers, hospitals 

or nursing homes, office buildings, and other facilities. 

American Water Works Association, Buried No Longer: Confronting Americas Water Infrastructure 

Challeng<;_, February 2012 

American Water Works Association, State of the Water Industry, March 2016 

Black and Veatch, 50 Largest City Water/Wastewater Utility Rate Su~. April 2013 

Congressional Budget Office, Public Spending on Transportation and Water Infrastructure, 1956 to 2014, 

March 2015 

Environmental Protection Agency, Drinking Water Infrastructure Needs Assessment, Fifth Report to 

Congress (2011). April 2013 

Environmental Protection Agency, Drinking Water Action Plan, US EPA, November 2016 

Center for Neighborhood Technology, The Case for Fixing the Leaks: Protecting people and saving water 

while supporting economic growth in the Great Lakes region, November 2013 

U.S. Geological Survey, Estimated Use of Water in the United States in 2010, November 2014 

http://water.usgs.gov/edu/wateruse-total.html 

Environmental Protection Agency, The Clean Water State Revolving Fund, 2015. 

htt ps: //www. epa. gov Is ites/p rod u ct io n/fi les/20 16-03 I documents/ cws rfi nfogra ph ic -030116. pdf 

Environmental Protection Agency, Investing in America's Water Infrastructure- Answering the "How to 

Pay" Question, July 26, 2016. https://blog.epa.gov/blog/2016/07 /investing-in-americas-water-

; nfra structure-a nswe ri ng-th e-h ow-to-pa y-q uestio n/ 

Environmental Protection Agency, EPA Launches New Program with $1 Billion in Loans Available for 

Water Infrastructure Projects, January 10,2017. https:(/www.epa.gov/newsreleases/epa-launches-newprog ram -1-bi II io n-1 oa ns-ava i Ia ble-w ate r-i nfrast ructu re-pro jects 
126 


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American Water Works Association, Successful Conservation Strategies Reveled, April14, 2016, 

http: II www, awwa ,o rg/pu b I icat ions/ connections/ connections-story/ article id /413 5/ s uccessfu 1-

co n se rvat ion -strategies-revealed, as px 

Environmental Protection Agency, Information About Public Water Systems, 

https://www,epa,gov/dwreginfo/information-about-public-water-systems 

University of North Carolina, Federal, State, and Local Government Spending on Water and Wastewater 

Utilities, 19556-2014, September 9, 2015, http:/!ekweb,unc.edu/2015/09/09/four-trends-governmentspending-water/ 
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March 15, 2017 

The Honorable John Shimkus 

Chairman 

Subcommittee on Environment 

House Energy & Commerce Committee 

Washington, DC 20515 

Re: Drinking Water Infrastructure Hearing 

Dear Chairman Shimkus and Ranking Member Tonka, 

The Honorable Paul Tonka 

Ranking Member 

Subcommittee on Environment 

House Energy & Commerce Committee 

Washington, DC 20515 

On behalf of the National Ground Water Association's (NGWA) thousands of members across the United States, 

we commend the attention your subcommittee is giving our nation's drinking water infrastructure during its 

March 16 hearing, "Reinvestment and Rehabilitation of Our Nation's Safe Drinking Water Delivery Systems," 

NGWA is the largest organization of groundwater professionals in the world, whose mission is to promote the 

responsible protection, management and use of groundwater, 

As Congress considers a major infrastructure bill, NGWA stands ready as a resource to help ensure groundwater 

remains a safe and reliable source of drinking water for over 40% of Americans, Nearly 20 billion gallons of 

groundwater are used each day to satisfy the demands of public water systems and individual, household wells, 

While much of the attention on drinking water needs is paid to large systems, we urge you during and beyond 

this hearing to also focus on the safety and reliability of water supplies in rural areas, The needs of small 

communities are often overlooked or are treated with a one-size-fits-all approach, Dedicated support to rural 

communities must be considered in any effort to rehabilitate our nation's drinking water infrastructure, 

Thank you for your attention to this important matter. Please contact Lauren Schapker, NGWA's Government 

Affairs Director, at lschapker@ngwa,org or 202,888,9151 with questions or if NGWA can be of assistance, 

Sincerely, 

Kevin McCray, CAE 

Chief Executive Officer 

National Ground Water Association 

cc: Members, House Committee on Energy & Commerce, Subcommittee on Environment 
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25370.081

OFFICE OF TI-lE MAYOR 

Hon. Stephanie A. !\'liner, Mayor 

Testimony of Mayor Stephanie A. Miner 

U.S. llousc of Representatives and Commerce Committee. Environment Subcommittee 

Hearing on Reinvestment and of our Nation's Safe Drinking \Vater Delivery Systems 

March 16.2017 

L Introduction 

Syracuse is a 

York, Syracuse educational including Syracuse 

University. Lc the St. Joseph's College of Nursing. and others. Syracuse 

nn>"Jcn>us firturc its thanks to the thousands of New Americans \\ho call this city home. The City 

the f\1urth-highcst rate of rcfirgcc in the nation. per capita. and these New Americans arc 

small businesses. rebuilding aging and active, involved public school parents. Syracuse 

a 1\\cnty-first century city on the move \Vith a bright future 

The City of Syracuse \vould not be on the today without a major of infrastructure: the Eric CanaL 

which celebrates its bicentenniulth!s Eric Canal served as primary to send 

from Atlantic to the growing of the Midwest Syracuse along \vith 

Rochester, and Utica-"" O\vcs our existence today to this prescient investment years ago. Begun in 1817 

and completed in 1825, the Eric Canal- constructed with the labor of Irish -·was the largest 

transportation infrastructure investment in our history and set the as manifest destiny 

gave our nation a new frontier that required nc\v of shipping goods and people from one place to 

another. 

As our nation 

in the shadow 

so did the of Syracuse. In the late 1800s, we saw another engineering marvel created 

Frie Canal: Syracuse water system. from a pure source. Skaneateles Lake, l,f 

miles 

just 

meeting 

n-om the our water comes to us through a built almost entirely by hand \\ith 

tools. This enabled the of Syracuse to clean water for over a century, 

needs of our citizens and 

NO\v. more than eve!\ it is 

clean water. We have seen 

to continue to have access to reliable. alTordablc, 

that no community can take its drinking \Vater for 

granted. It is critical that Congress and the Administration take measures to support our clean \Vater systems. 

203 CITY HALL • SYRACUSE, N.Y. 13202-1473 • (315) 448-8005 • FAX: (315) 448-8067 

\V'EBSITE: \VW\V.S)'tlfOV.net 
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II. Infrastructure Challenges 

Cities today are faced with a wide range of challenges facing their infrastructure systems. Syracuse, in 

particular, must address our major concern: the age of our infrastructure. Pipes were laid more than I 00 years 

ago in many parts of the City system. While the cast iron pipes have done an excellent job transporting water 

from our source to our City, they are showing their age. In 2016, the City experienced 322 water main breaks. 

In 2015 and 2014, we experienced 375 and 391, respectively. It was once the norm for water main breaks to 

happen only in winter, when the treeze-thaw cycle would heave ground and break mains; now it is 

commonplace for breaks to happen throughout the year. Already in 2017, the City has had 70 breaks. 

Part of the challenge Syracuse faces is directly related to climate change: with colder winters, warmer summers, 

and more dramatic freeze-thaw events happening both earlier and later in the season. This leads to more breaks 

happening more frequently. Our aging pipes cannot heave with the ground and, without fail, they break due to 

our weather conditions. 

Aging infrastructure is not the only source of struggle for America's water systems; ensuring the quality of a 

safe supply of clean, potable water is critical. In the cases of Hoosick Falls, New York and Flint, Michigan, we 

have seen government decisions put the bottom line before the people we are sworn to serve. It is critically 

important that the federal government support localities when they need to make decisions about water quality. 

Careful testing for contaminants in water sources is important and strict standards- while beneficial- must also 

come with support from the governments that require them. Mandates should come with financial assistance to 

help municipalities meet the rules, No community should ever be forced to make decisions about importing 

water for their residents from a system that has been contaminated and, with the right support from the federal 

government, no city will have to again. 

III. Innovation and Opportunity 

It is said that necessity is the mother of invention; if that is true, then public budgeting is the mother of 

innovation. Cities like Syracuse arc learning to do more with less and develop creative new solutions to 

addressing infrastructure challenges. 

In 2014, the City of Syracuse opened its Office of Innovation, made possible with a three-year, $1.35 million 

grant from Bloomberg Philanthropies. Syracuse was one of fourteen cities selected in 2014 as part of the 

Bloomberg Philanthropies' Innovation Teams (i-teams) program. The program aims to improve the capacity of 

City Halls to effectively design and implement new approaches that improve citizens' lives. Grant funds allow 

mayors to hire and fund i-teams for up to three years. These teams function as in-house innovation consultants, 

moving from one mayoral priority to the next. Using Bloomberg Philanthropies' tested Innovation Delivery 

approach, i-teams help agency leaders and staffs implement a data-driven process to assess problems, generate 

responsive new interventions, develop partnerships, and deliver measurable results. 

The first issue area our i-team was assigned was infrastructure. Through intensive study and collaborative 

partnerships with other organizations, including the Eric and Wendy Schmidt Data Science tor Social Good 

fellowship at the University of Chicago, the City has done remarkable work to bring new ideas to the forefront 

to serve our citizens and lead a national conversation on infrastructure. Syracuse has developed a predictive 

analytics model to determine where water main breaks arc most likely to occur based on the age of pipes and 

the frequency of breaks in the immediate area. Using that study, the City is better able to plan for preventative 

maintenance, rather than simply reactive repairs that leave customers out of water for hours. 
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Syracuse has also begun installing sensors on water valves to help detect system leaks. These sensors were first 

piloted in our Downtown neighborhood- which, after many years is now experiencing a renaissance of new 

construction, apartment living, and thriving nightlife all built upon aging infrastructure. They work by 

measuring small vibrations within the water mains. Should even a small leak occur, they transmit a radio signal 

to the Water Department's headquarters, notifying the appropriate staff who can schedule maintenance before a 

small leak becomes catastrophic. 

We are working on predictive technologies as part of a "Dig Once" philosophy. Repeated construction on the 

same blocks not only tears up roadways but has the potential to damage infrastructure, even after it is repaired. 

The City of Syracuse is working to coordinate infrastructure projects several years in advance with utility 

providers so improvements and preventative maintenance can occur simultaneously and roads can be sealed 

once and for all saving on expensive reconstruction costs. 

IV. Federal Actions 

a. Supporting Grant Programs to Localities 

The federal government needs to do more to provide funding for municipalities to address their ongoing water 

system challenges. Several streams of funding do exist now, principally through the Drinking Water State 

Revolving Fund (DWSRF), but it is not adequate for all purposes. First, it is a loan, not grant program, and does 

not add revenue to cash-strapped cities bottom lines. Additionally, with historically low interest rates, mid-size 

and large cities like Syracuse are able to perform their own borrowing at lower rates than most state DWSRFs 

are able to provide. The DWSRF is a critical support to smaller municipalities who do not have the bonding 

ability a city like Syracuse enjoys. 

Congress should examine additional ways to provide grant aid directly to municipalities to support clean water 

systems and other infrastructure programs. This investment helps create jobs and creates a level playing field on 

which businesses can grow, our economy can thrive, and jobs can be created. 

b. Addressing Climate Change 

We arc long overdue for an honest national dialogue on the impacts of climate change. The ongoing effects of 

climate change will continue to effect infrastructure systems across the nation. New temperature milestonesboth positive and negative wi II heave the ground, freezing and thawing pipes and conduits. Super Storms, a 

phenomenon New Yorkers know sadly all too well, will bring challenges to our electrical grids. Burying lines 

as part of a "Dig Once" policy, like Syracuse is pursuing, can be expensive but with the right incentives from 

the federal government would be possible. 

The debate on the causes of climate changes rages on but its impacts arc being felt in cities across the country. 

Leaders need to take action; begin the conversation today to prevent catastrophic system failures in the future. 
131 


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1101 

March 16.2017 

The I !onorablc Paul Tonko 

Ranking Member 

Subcommittee on the Environment 

and Commerce Committee 

House Office Building 

Washington, DC 20515 

American Rivers 

RE: Letter for the record Cor the I !caring: Reinvestment and Rehabilitation r~{Our 

.Vat ion's Sqfe Drinking Warcr De/iro~1 .'ly.-:tcms 

Dear Ranking Member Tonko: 

On behalf of American Rivers more than 200.000 members and across the 

!or!I.R. thcAQLJAAct 

Drinking Water Act 

Amendments will help to ensure safe 

be afl·aid to drink the 

There is an increasingly need for renewed investment in our communities' water 

infrastructure. This need is the unfortunate reality that for many decades. 

funding to maintain water systems ll1llcn short of the cost of providing safe drinking 

water. The result is or outdated infrastructure that cannot keep pace with 

Act'" ill provide authorization for an increase in funding 

\Vater State Revolving Fund so that states can get the resources the) 

need to provide communities with clean. potable water. 

Act a!so increases funding ft)r the removal or !cad 

health threat as demonstrated by the crisis 

is no safe level of lead exposure and it is to children as it can impair 

children's brain While control can help to the risk of 

lead !caching into water it should be viewed as a temporary and there should 

be continued cf'l(Jrt to replace the lead pipes. 

ln addition to t1xing our clean water crisis through much needed investment in our 

nation·s crumbling water infrastructure. American Rivers believes that every river in the 

should be safe as a water source. Rivers and streams provide critical 

infrastructure. Thus, restoration) and sustainable management of our 

\\'atcrsheds need to be a Vv'e believe that everyone should have access to safe 

drinking water in their homes and that starts at the source and continues through to our 

taps. 

NW 11,()0 fax 
132 


25370.085

American Rivers the Energy and Commerce Committee's Subcommittee on 

the Elnironment holding a bearing on how to better provide communities across the 

nation with safe drinking water, If you have any questions please reach out to i\1eghan 

Boian 202-243-703 7 nr mboian(??americanrivers,org. 

Sincerely, 

\1cghan 1VL lloian 

Associate Director for Policy & Government Relations 
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l!ibtNtllt!forklmmtll I https:/lnyti.ms/2hiaSsW 

BAYONNE, N.J. -Nicole Adamczyk's drinking water used to slosh through a snarl 

of pipes dating from the Coolidge administration- a rusty, rickety symbol of the 

nation's failing infrastructure. 

So, in 2012, this blue-collar port city cut a deal with a Wall Street investment 

firm to manage its municipal waterworks. 

Four years later, many of those crusty brown pipes have been replaced by 

shiny cobalt-blue ones, reflecting a broader infrastructure overhaul in Bayonne. 

But Ms. Adamczyk's water and sewer bill has jumped so much that she is thinking 

about moving out of town. 

"My reaction was, 'Oh, so I guess I'm screwed now?"' said Ms. Adamczyk, an 

accountant and mother of two who received a quarterly bill for almost $500 this 

year. She's not alone: Another resident's bill jumped 5 percent, despite the 

household's having used 11 percent less water. 

Even as Wall Street deals like the one with Bayonne help financially desperate 

municipalities to make much-needed repairs, they can come with a hefty price tag 

not just to pay for new pipes, but also to help the investors earn a nice return, a 

New York Times analysis has found. Often, these contracts guarantee a specific 

amount of revenue, The Times found, which can send water bills soaring. 

Water rates in Bayonne have risen nearly 28 percent since Kohlberg Kravis 

Roberts- one of Wall Street's most storied private equity firms- teamed up with 

another company to manage the city's water system, the Times analysis shows. City 

officials also promised residents a four-year rate freeze that never materialized. 

In one measure of residents' distress, people are falling so far behind on their 

bills that the city is placing more liens against their homes, which can eventually 

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lead to foreclosures. 

ln the typical private equity water deal, higher rates help the firms earn 

returns of anywhere from 8 to 18 percent, more than what a regular for-profit 

water company may expect. And to accelerate their returns, two of the firms have 

applied a common strategy from the private equity playbook: quickly flipping their 

investment to another firm. This includes K.K.R., which is said to be shopping its 

90 percent stake in the Bayonne venture, a partnership with the water company 

Suez. 

Rich Henning, a Suez spokesman, said that "Bayonne had chronically 

underinvested in their water and sewer infrastructure, which has certainly 

.Rinl'RlrM\~3 ~Mlt\?increases during the past few years." He added, "We 

~~~f~~ga~~~f~f1lg increases create stresses for ratepayers." 

~~~ibnald J. Trump has made the privatization of public works a .me · t_ategy to rebuild Anlerica's airports, bridges, tunnels and 

lfWfl~EMew~~!:ljs inner circle have sketched out a vision, including billions of 

db:blta<rllll'lfe.&Rlt~:for private investors willing to tackle big infrastructure 

]li¥6)&tti?IA'hd Mr. Trump himself promised in his victory speech "to rebuild our 

infrastructure, which will become, by the way, second to none." 

Private equity firms like K.K.R. have already presented themselves as a willing 

partner, and Bayonne provides an important case study. Its arrangement is one of 

a handful of deals across the country in the last few years in which private equity 

firms have managed public water systems. While these deals are a small corner of 

private equity's sprawling interests, they represent the leading edge of the 

industry's profound expansion into public services. 

For residents, the financial trade-offs from these water deals can be painful. 

The Times analyzed three deals in which private equity firms have recently 

run a community's water or sewer services through a long-term contract. In all 

three places - Bayonne, and two cities in California, Rialto and Santa Paula -

rates rose more quickly than in comparable towns, which included both publicly 

and privately run water systems. In Santa Paula, where Alinda Capital Partners 

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controlled the sewer plant, the city more than doubled the rates. A fourth 

municipality, Middletown, Pa., raised its rates before striking a deal. 

Now, some of these cities are trying to take back their water. Missoula, Mont., 

wrested away its water system, which had been owned by the Carlyle Group. Apple 

Valley, Calif., whose waterworks were also owned by Carlyle, has filed a similar 

lawsuit. Santa Paula bought its sewer plant from Alinda last year. 

Of course, there's a reason many communities look for private partners to 

begin with: Their water systems are in poor shape. Budget shortfalls and political 

mismanagement can represent a real threat to both infrastructure and citizens. 

For evidence, look no further than the crisis in Flint, Mich., where the drinking 

water became tainted with lead. 

"Keeping rates down may sound like the ultimate righteous good for 

ratepayers, but the truth is, not if you're failing to provide basic care and 

maintenance," said Megan Matson, a partner at Table Rock Capital, the boutique 

private equity firm that invested in Rialto's water and sewer system. She added 

that it helps for deals to "provide more obvious public benefits," noting that her 

firm partnered with Ullico, the nation's only labor-owned insurance and 

investment company. 

Proponents of the public-private partnerships, citing recent studies in Canada 

and Europe, argue that private businesses operate more efficiently than 

governments do and that this translates into cost savings for citizens. And private 

equity firms, lacking technical expertise in how to manage infrastructure, often 

team up with private water companies. 

Supporters also say that the deals require private equity to spend millions of 

dollars a year to fix things (money that towns may not spend on their own), and 

that the firms sometimes pay towns millions more up front. Bayonne, for instance, 

got $150 million up front from K.K.R.'s team, which the city used to pay off a pile 

of debt. 

In a statement, a K.K.R. spokeswoman said, "Our partnership has provided 

Bayonne residents with better service, modernized technology to detect leaks and 

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conserve water, improved infrastructure and safer conditions for workers- all 

without a tax increase or public expenditure." 

Desperate Measures 

In Bayonne, a city of about 65,000 on a peninsula in the shadow of the fallen 

twin towers, a crucial test for its private equity deal came in July 2012. By then, 

Bayonne had already spent nearly a year haggling with some ofK.K.R.'s top 

negotiators. 

Next, city officials presented the deal to a more skeptical crowd: their own 

residents. 

Bayonne's sales pitch to its citizens illustrates the bold steps town officials can 

take- including maldng promises that are at odds with the actual terms of the 

deal to attract private equity money. Private equity, in turn, can earn significant 

returns. 

At a public meeting in city hall, a lawyer for the city promised that, after an 

initial rate bump, there would be "a rate freeze for four years," according to a 

meeting transcript. Bayonne's mayor, Mark Smith, later reiterated the four-year 

freeze in a magazine article. 

That promise turned out to be fleeting. 

The contract allowed additional rate increases after only two years. There was 

no four-year freeze. 

I rr fact, rates rose even more than the Bayonne contract predicted- in part 

because K.K.R's team had to·make unexpected infrastructure upgrades, but also 

bA,a~el!ilf"tf l""f-~lf'rg less water than expected. The contract guarantees 

~!~ 'm!te-frrb-"~h than half a billion dollars over 40 years- so water 

ToWfi~ ;n part, to make up the difference. 

Thlf city said it saw the revenue requirement as a way for K.K.R.'s team to 

ePPtvatebut not a windfall. 

~· 

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P~fl'tSanalysis showed that Bayonne's water rates grew almost 28 

percent under the deal, growth that far exceeded that of three other municipalities tFrttmne has compared itself. 

D (D~lJVttn Abs, an associate professor at Rutgers University who specializes 

iCwhlrlrJ<.L~ent, said that a true apples-to-apples comparison of water rates 

if 'iiJ¥rent t~~ns was "extremely difficult" because of the different factors that 

c\6\fii@iJ?~S, including the size of the utility, the municipality's population, 

droughts and infrastructure investment- or lack thereof. The Times analysis for 

Bayonne did not include sewer rates.) 

Former Bayonne officials who had promised the four-year rate freeze said in 

interviews that they had not meant to mislead residents. They said they had 

earmarked some ofthe K.K.R. team's $150 million up-front payment to offset rate 

increases in the contract's early years. 

But then voters ousted Mayor Smith. And once he left office, the new 

administration put that money elsewhere. 

"I think we could have accomplished that four-year minimum," the former 

mayor said in an interview. The town's water rates, he said, are now "exorbitant." 

Tim Boyle, who took over Bayonne's utilities authority after Mr. Smith was 

voted out of office, said that various regulations required the city to use that money 

for property tax relief rather than to stabilize rates. He also blamed the previous 

administration for guaranteeing too much revenue to K.K.R.'s team in the early 

part of the deal, calling those figures "wildly optimistic." 

Bayonne Officials also stress the deal's benefits, including the up-front 

payment that let Bayonne pay off more than $100 million in old debts. Within 

three months, Moody's Investor Service revised the city's debt outlook from 

"negative" to "stable" for the first time in five years, and it has since upgraded the 

city's credit rating. 

K.K.R.'s team contributes about $2.5 million annually to pay for repairs to 

water infrastructure, plus $500,000 to the city itself. K.K.R. and Suez said they 

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have upgraded their safety equipment and replaced inoperable hydrants around 

town. 

They also installed sophisticated water meters that can detect leaks in people's 

homes, and sent nearly 2,000 letters to customers warning when such leaks 

occurred. As such, use has declined, according to Mr. Henning, who said Suez had 

received "many notes of thanks" for the warnings. 

But more-sensitive meters could lead to higher bills for some residents whose 

water use wasn't fully captured in the past. When negotiating the deal, K.K.R. 

called this process "meter uplift," according to emails obtained through records 

requests. 

"We gave away too much," said Gary La Pelusa Sr., a city councilman and 

former commissioner of Bayonne's utilities authority, which approved the deal 

over his objections. 

Bayonne originally promised residents that the city's utilities authority would 

oversee K.K.R. and Suez. But the City Council recently decided to shutter the 

agency and handle the oversight itself. 

Stephen Gallo, who headed that authority when the deal was struck, still 

believes that it benefits Bayonne. "But you've got to watch them, you've got to keep 

an eye on things," he said. "I don't know who's doing that now." 

In interviews with The Times, more than a dozen Bayonne residents, 

including Ms. Adamczyk, expressed dismay over the rate increases. One reason is 

that people who fall behind on payments face long-term risks: Unpaid water and 

sewer bills can be sold to investors who try to collect on that debt, a common 

practice across the country. Failure to pay can ultimately lead to foreclosure. 

In 2012, the year Bayonne struck its deal, water bill delinquencies led to 200 

government liens against local properties, tax records show. That figure more than 

tripled the next year, the first full year under K.K.R.'s team. In 2015, the most 

recent year with data available, the number remained elevated, at 465. 

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By oAFJi!ll!attlytprul;Jiishes its lien notices in the local newspaper and residents receive 

fflit!l~liffil'l:[liency letters. 

GRIFF 

PALrvfEllll,oobel:l4il reporter asked one Bayonne resident, Carlos Jimenez, about a 

~r and sewer bill lien that had been listed against his property, he expressed 

surprise, saying he wasn't aware of it. "I didn't know this could happen," Mr. 

Jimenez said. "It's a different ballgame." 

'There Is No "Free" Money' 

One of the few things Republicans and Democrats can agree on is that the 

nation faces an infrastructure crisis. 

In water infrastructure alone, the nation needs about $6oo billion over the 

next 20 years, according to federal estimates. And yet federal spending on water 

utilities has declined, prompting state and federal officials to try to play 

matchmaker, courting private investors to fix what needs fixing. 

For years, the Obama administration has been cheerieading public-private 

partnerships. In a statement, the White House said it backed them "when they are 

well structured, include strong labor standards, and when there is confidence that 

taxpayers are getting a good deal." 

During the presidential campaign, Mr. Trump's team outlined a new plan to 

incentivize private investors to take on large infrastructure projects. 

Wall Street hits responded to the call to action. There are now 84 active 

financial infrastructure funds, according to Pitch book, a private financial data 

platform, up 25 percent in just three years. Some belong to big banks like 

Goldman Sachs, but many are run by private equity firms. 

"Across our country, we need solutions for infrastructure deficiencies," said 

James Maloney, a spokesman for the American Investment Council, the private 

equity trade group. "Private equity serves as one of these solutions." 

Some critics are wary of expanding private investment in public 

infrastructure. Although cities may get cash up front in these deals, "there is no 

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'free' money" in public-private partnerships, says a :wo8 Government 

Accountability Office report. Using roads as an example, the report observed "it is 

likely'' that tolls will increase more on a privately operated highway than one run 

by the government. 

Ms. Matson, of Table Rock, who has attended White House meetings on 

infrastructure, has tried to dispel concerns about these deals. Table Rock is part of 

a team that finances and manages the water system in Rialto, Calif., a deal that 

provided the city about $41 million to improve the water and wastewater 

infrastructure, she said. 

Rialto residents have seen their water rates increase about 68 percent since the 

deal, according to the Times analysis, more than any other comparable city. But 

Table Rock said rates were artificially low after the city had declined to raise them 

for about a decade, giving it the lowest rates among those towns. And unlike in 

most other deals, Rialto residents had a say in the increases and ultimately 

approved them in a public vote, as required under state law. This year's rate 

increase was delayed. 

When the deal closed in 2012, all the public water utility employees kept their 

jobs. Everyone has since received raises. And Table Rock, like its partner Ullico, 

has committed to all 30 years of the arrangement. 

"We don't do flips, we invest for life," Ms. Matson said, meaning that Table 

Rock doesn't seek quick profits by unloading its investments. She also said that 

Table Rock declined to make deals that provided big up-front payments to towns 

without a sufficient commitment to infrastructure repairs. "Those deals give the 

rest of us a bad name," she said. 

Gaining Control, but Then What? 

In an upscale Washington, D.C., restaurant in 2012, an executive from the 

Carlyle Group, one of the world's largest private equity firms, put his arm around 

the mayor of Missoula, Mont. 

"Mayor," the executive said, "are you ready to buy a water system?" 

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Three years later, the comments by the executive, Robert Dove, were 

recounted from a witness stand in the Missoula County Courthouse. The city was 

suing Carlyle, which ultimately refused to sell to Missoula, to gain control of its 

water system. 

Missoula is one of several places in recent years that have tried getting back 

their water systems from a private company. But after waging costly battles, the 

towns cannot always guarantee the same services at lower rates. 

At the time of that dinner in Washington, Missoula was the only city in 

Montana that did not own its water system- and John Engen, Missoula's mayor, 

wanted to change that. So, months before, he had supported Carlyle's purchase of 

the regional water company (Park Water) that owned Missoula's local system 

(Mountain Water), believing that Carlyle would then sell Mountain Water back to 

his town. 

But the mayor's plans derailed. 

In October 2013, Missoula made an informal offer to buy its local system. 

Carlyle declined. Missoula made a formal offer. Carlyle declined again. 

Missoula then sued, and it won. But the court decided the system was worth 

$88.6 million, substantially more than what the city had offered. On top of that, 

the city must spend millions of dollars on legal and other fees and must also pay 

some of its opponents' costs, according to court records. 

Those costs included lawyers' fees, limo services and dinners at some of 

Missoula's finest restaurants. They also included at least one order of boneless 

chicken wings at Hooters, and one bottle of Metamucil. 

In a statement, a Carlyle spokesman said that the firm had considered the 

city's offers in good faith. "The city offered many millions less than the company 

was worth, and an independent panel agreed," the spokesman said. 

He also said that under Carlyle's watch, "capital expenditures more than 

doubled, leakage was reduced by 19 percent, water quality was excellent and 

employment was stable." 

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And under Missoula's watch, water rates may rise anyway. Further costly 

repairs are still needed, for one thing. 

For Carlyle, the deal was a financial success. The firm sold Park Water in 

January to another private company for $327 million, more than double what 

Carlyle had paid. 

Missoula is not the only city seeking control over its infrastructure. Last year, 

Santa Paula bought its wastewater recycling plant for about $70 million from 

Alinda Capital Partners. 

Alinda, which specializes in infrastructure investing, had teamed up with a 

private water recycling company to finance, design, build and operate the plant 

after the city awarded them the contract in 2008. The new facility, Alinda noted, 

replaced an old plant owned by Santa Paula that had been violating state 

environmental regulations, saving the city from paying fines. 

But after years of raising sewer rates, partly to pay "service fees" to Alinda, 

Santa Paula's thinking changed: It would be better for Santa Paula to issue its own 

debt to purchase the plant than to saddle citizens with annual rate increases. Now 

the town- at the urging of its city manager, Jaime Fontes, and several council 

members, including Ginger Gherardi- has started issuing rebates to citizens. 

Still, there will be bumps along the road. Mter all, cities like Missoula and 

Santa Paula are now responsible for running an important, and occasionally 

messy, public service. 

Soon after Santa Paula regained control of its sewer plant, an equipment 

failnre Jet partly treated wastewater pour from the plant. The discharge turned a 

pond green and flowed onto a nearby organic farm. 

And wastewater, Mr. Fontes said, is "not the kind of organic yon want." 

Rachel Abrams contributed reporting from Los Angeles. Kitty Bennett, Susan Beachy 

and Alain Delaqueriere contributed research. 

A ~.ersion of this article appears in print on December 25, 2016, on Page A1 of the New York edition with the 

headline: In American Towns. Pumping Private Profit From Public Works. 

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GREG WALDEN, OREGON 

CHAIRMAN 

ONE HUNDRED FIFTEENTH CONGRESS 

FRANK PALLONE, JR., NEW JERSEY 

RANKING MEMBER 

<!Congress of tbe Wntteb $tates 

f!>ouse of 3aepresentatibes 

COMMITTEE ON ENERGY AND COMMERCE 

2125 RAYBURN HousE OFFICE BuiLDING 

WASHINGTON, DC 20515-6115 

Mr, Randy Ellingboe 

Manager 

Drinking Water Protection Section 

Minnesota Department of Health 

P,O, Box 64975 

St. Paul, MN 55164-0975 

Dear Mr, Ellingboe, 

Majority (202/ 225-·2927 

Minonty {202) 225~3641 

Apri13, 2017 

Thank you for appearing before the Subcommittee on Environment on March 16, 2017, to testifY 

at the hearing entitled "Reinvestment and Rehabilitation of Our Nation's Safe Drinking Water Delivery 

Systems,'' 

Pursuant to the Rules of the Committee on Energy and Commerce, the hearing record remains open 

for ten business days to permit Members to submit additional questions for the record, which are attached. 

The format of your responses to these questions should be as follows: {I) the name of the Member whose 

question you are addressing, (2) the complete text of the question you are addressing in bold, and (3) your 

answer to that question in plain text. 

To facilitate the printing of the hearing record, please respond to these questions by the close of 

business on Tuesday, April 18, 2017, Your responses should be mailed to Grace Appe1be, Legislative 

Clerk, Committee on Energy and Commerce, 2125 Rayburn House Office Building, Washington, DC 

20515 and e-mailed in Word format to Grace,Appelbe@maiLhouse,gov, 

Thank you again for your time and effort preparing and delivering testimony before the 

Subcommittee, 

sm~"'l_~ 

John s~l~u~ Chairman 

Subcommittee on Environment 

cc: The Honorable Paul Tonko, Ranking Member, Subcommittee on Environment 

Attachment 
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25370.097

Association of State Drinking 

Water Administrators 

Grace Appel be 

Legislative Clerk 

Committee on Energy and Commerce 

2125 Rayburn House Office Building 

Washington, DC 20515 

Dear Ms. Appelbe: 

April18, 2017 

As requested, please find below my responses, as President of the Association of State Drinking 

Water Administrators (ASDWA), to questions posed by Chairman Shimkus in your letter of April 

18, 2017. The questions relate to my testimony before the Subcommittee on Environment 

during the March 16'h hearing titled "Reinvestment and Rehabilitation of Our Nation's Safe 

Drinking Water Delivery Systems." Our thanks to Chairman Shimkus and the Subcommittee for 

the opportunity to testify and provide additional information 

From The Honorable John Shimkus 

1. Currently, the Safe Drinking Water Act's Revolving loan Fund requires the States to 

match Federal capitalization grants with 20 percent of their own funding. 

a. At what amount of Federal capitalization spending, would the state match 

requirement become a burden that the States could not meet? 

States range in their ability to meet the current state match requirement. For some 

states, meeting any match requirement has been a burden, while for others, this 

funding need has become a typical budget request over the 20 years of the Safe 

Drinking Water Act Revolving Loan Fund. State funding has remained flat or declined in 

recent years, and state's budget prospects are no brighter in the immediate future. Any 

increase in match percentages would be problematic for most state drinking water 

programs. 

For Minnesota, our state match request is always part of our state infrastructure 

bonding request, and is small in comparison to the total bonding request. We have 

been able to make a compelling case that the state gets a lot of leverage from the State 

Revolving Fund (SRF) loan program and it has typically been approved without much 

debate. Of course, the Minnesota legislature and the governor both must approve the 

bonding proposal. If that is not approved, then the match (and the use of Federal 

Capitalization Grant itself) are not available for use in the Minnesota SRF. 

1401 WILSON BLVD- SUITE 1225 ·ARLINGTON, VA 22209 

PHONE (703) 812-9505 ·FAX [703] 812-9506 · info@asdwa.org · www.asdwa.org 
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25370.098

2. Aside from the issue of asset management, what are some of the lessons learned 

about what has worked well in incentivizing systems to make solid investments and 

upgrades and what have you seen work as disincentives? 

States have found that targeted training and support for smaller water systems on 

issues beyond compliance such as basic business planning are very effective. Training 

and education of basic business practices such as creating a business plan, how to set 

appropriate rates, learning how to communicate both challenges and successes to 

decision makers, and understanding the value the water system brings to the 

community from both a public health an~ economic sustainability can make the 

difference between a failing system and one that takes the next step forward to better 

meet Federal and state requirements and successfully serve the community. 

Even with robust business planning, afford ability of water and sewer rates can be a 

significant problem for many small systems, primarily due to local economic conditions. 

Partial grant assistance that is combined with SRF loans can be a powerful incentive to 

get a community to make needed investments in its infrastructure. This funding needs 

to be available in a steady and consistent manner and part of a process that technical, 

financial, and managerial support to give the community confidence to make the local 

investments and decisions to get a project ready and ultimately, get construction 

completed. On the other hand, inconsistent funding that comes in fits and starts works 

as a disincentive that can cause a community to delay project planning and wait to see if 

a "better deal" will be available in the future. 

3. What kind of contributions do States make in encouraging the rehabilitation and 

redevelopment of drinking water delivery systems? 

On the funding side, Minnesota, as well as many other states, works to establish a clear 

and consistent funding process and an objective and transparent Project 

Priority/Intended Use Plan process to identify fundable projects. The Governor of 

Minnesota has proposed a state grant program to address drinking water affordability 

needs. Many states are using a variety of funding sources for drinking water 

infrastructure improvements. 

Through the sanitary survey process conducted by district engineers, deficiencies in 

public water systems are identified and a plan developed to remedy these deficiencies. 

Some of the "fixes" for these deficiencies are more procedural in nature and don't 

require any capital investments. If these deficiencies include infrastructure 

improvements, the district engineers are familiar with the funding programs and will 

assist the water system through the funding process 

4. The EPA distributes funds to each Drinking Water State Revolving Fund following a 

formula based on each state's identified drinking water infrastructure needs. 

a. Is the funding formula for how the EPA allocates money to the states 

sufficiently transparent? 

Yes, the funding formula is sufficiently transparent, and it seems that the only fair way 

of allocating funds is based on the needs of the states. There is some concern that 

guidelines for completing EPA's Drinking Water Needs Survey may result in an 

underestimate ofthe national drinking water needs. One example is the limitation of 
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water main replacement to 10% over 20 years, which amounts to a 200-year 

replacement schedule, well beyond the design life of any water main. 

b. Do you think the allocation formula is working as Congress intended it to be? 

Yes, the allocation formula is generally working as intended. This formula should also be 

used in situations like Flint, where all states have a similar need to work on minimizing 

lead exposure from drinking water, rather than direct appropriations to a certain city or 

state. Additionally, some consideration for the allocation formula should be given to 

the number of systems in a state, somewhat like the calculation for the funding for the 

Public Water Supply Supervision (PWSS) program. While any potential change in the 

allocation formula would need careful study, the number of systems in the state may 

need to be included as part of the calculation along with results of the needs survey. 

c. Generally speaking, how long does it take for a State to allocate the annual 

State Revolving Loan capitalization funding provided to it by the Federal 

Government? 

States vary for the timeframe to allocate and disburse the capitalization funding, but all 

states strive to keep the timeframe to a minimum. In Minnesota, the annual Federal 

funds are allocated (obligated) to loans within 6-9 months, and all Federal funds are 

drawn and disbursed in less than two years. Many other states have similar timeframes. 

If necessary, ASDWA could survey its membership and provide more detailed 

information on the states' timeframes to allocate and disburse the capitalization 

funding. 

5. The Drinking Water State Revolving Funds are designed, as the name suggests, to 

revolve, meaning that the money received from repayment of outstanding loans is to 

be used to make additional loans. 

a. From your experience, are Drinking Water State Revolving Funds working as 

intended? Meaning, is the money being paid back into the loan allowing for 

additional loans to be made? 

Yes, the DWSRF loans are working as intended- the loans finance high priority drinking 

water projects at below-market interest rates. In Minnesota, the cities repay the loans 

on established repayment schedules and have a record of zero defaults. The revolving 

nature of the program makes the federal appropriations a long-term investment that 

provides a permanent source of low-cost capital for drinking water infrastructure 

projects. To date in Minnesota, each federal dollar has generated over $2.25 in project 

construction, a leveraging ratio that continues to grow as the funds continue to revolve. 

Loans are currently beginning to be fully repaid as the loans were set up for a 20-year 

repayment schedule and 2017 is the 20'h anniversary of the Drinking Water State 

Revolving Fund (DWSRF). For example, Pennvest closed the first DWSRF loan on March 

22, 1997 with the Williamsburg Municipal Authority of Blair County for system-wide 

improvements that included a booster pumping station, a 210,000 gallon storage tank, 

over eight miles of water mains, and replacement of every water meter in the system. 

Construction began later in 1997 and was completed in 1998 and the loan was 

completely repaid on March 1, 2017. 
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6. An important component of the Drinking Water State Revolving Fund is the set-aside 

program, which allows states to use a portion of the State Revolving Funds for 

programs and activities to ensure safe drinking water. 

a. Can you give a few examples of how States are using set-asides? 

The administrative set-aside provides funding for state staff, which not only allows for 

program administration but allows staff to work with communities and assist them 

through the funding and construction process. 

The wellhead protection set-aside has helped many communities develop wellhead 

protection plans to ensure the safe and reliability of their water source. 

The capacity development set-aside has allowed all states to establish a capacity 

development program that works to help systems attain, and then maintain, their 

technical, financial, and managerial capabilities. These safety nets have helped many 

systems avoid failure and continue to meet their water quality and quantity 

responsibilities. 

All states have established operator certification programs that ensure that operators 

work from a common baseline and have the necessary education and experience 

commensurate with the complexity of their public water system. 

States have used the technical assistance set-asides to provide additional support, 

frequently to small or rural areas, to help them with water quality and quantity 

concerns. States often use this set-aside to contract with assistance providers such as 

state Rural Water Associations or state Rural Community Assistance Partnership 

organizations for specific training and technical assistance needs. For example, 

Minnesota Rural Water Association (MRWA) created an easy-to-use asset management 

spreadsheet intended for communities with population under 1,000 people. 

b. Do you think the current set-aside provisions and requirements are successful 

and working as Congress intended? 

Yes, the set-aside provisions are very successful and are needed by the states to meet 

the ever-growing challenges associated with providing safe drinking water using aging 

infrastructure. 

7. You testified that you support a mandatory requirement being added to the Safe 

Drinking Water Act that asset management be done by entities obtaining Drinking 

Water State Revolving Fund loans. Is this view the formal position of ASDWA? Does 

ASDWA support making such a move mandatory as opposed to otherwise encouraging 

it? 

Effective Asset Management (AM) is critical for long-term sustainability of a water 

system, and state drinking water programs support and encourage its use. However, 

making it a mandatory requirement for these loan funds may make it more difficult for 

the systems to apply for SRF funds, ironically penalizing those systems that need the 

most assistance. Every additional requirement for these loan funds added to the 

existing requirements such as American Iron and Steel, Davis-Bacon wage rates, etc., 

provides a disincentive to use this loan program. Between the additional costs added to 
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the project and the "hassle factor" from these requirements, water systems are less 

inclined to be proactive and instead, may wait until an emergency occurs or violations 

occur to construct the necessary improvements. 

My response to the question during the hearing were meant to show my strong support 

for public water systems developing AM plans to ensure that they have the financial and 

managerial resources needed to manage a public water system in perpetuity. The vast 

majority of cities and water systems recognize the value inherent in AM but the 

pressures of the day-to-day operations can make it very difficult to implement a robust 

AM program, and a mandatory requirement could make it more difficult for 

communities to implement sorely needed infrastructure improvements. If AM plans 

were mandated, it's possible that they could be a one-time AM plan that would be stuck 

on a shelf to complete the requirements of the mandate. 

The critical issue is getting buy-in from the water system to have an AM plan that is 

actually implemented and maintained in the future. A better approach might be to 

provide technical assistance to support, encourage and assist communities in 

developing and maintaining AM programs. Minnesota has contracted with the 

Minnesota Rural Water Association (MRWA) to develop an AM template and then work 

one-on-one with pilot cities to fill out the template and implement an AM program. 

Minnesota Rural Water Association (MRWA) used DWSRF funds through the 2% 

technical assistance set-aside, showing the importance of these set-asides for drinking 

water programs. MRWA also has received a grant directly from EPA for small 

wastewater system training and assistance. MWRA used both funding sources to do the 

AM pilots with several cities over the past two years and to develop the Excel-based 

asset AM template that is downloadable for any water system to use. 

Thank you again for inviting us to provide additional information on the issues outlined above. 

If you have additional questions, please feel free to contact me altt==========: 

or you can contact Alan Roberson, ASDWA Executive Director at 1 

Sincerely, 

Randy Ellingboe 

President, Assoc. of State Drinking Water 

Administrators 

Cc: The Honorable Paul Tonko, Ranking Member, Subcommittee on Environment 
149 


25370.102

GREG WALDEN, OREGON 

CHAIRMAN 

Mr. John Donahue 

CEO 

ONE HUNDRED FIFTEENTH CONGRESS 

FRANK PALLONE, JR., NEW JERSEY 

RANKING MEMBER 

<!tongre%% of tue Wnitd'l .i>tates ~ouse of ~epresentatibes 

COMMITTEE ON ENERGY AND COMMERCE 

2125 RAYBURN HousE OFFICE BuiLDING 

WASHINGTON, DC 20515-6115 (20:?)22\J-2977 

{202)225-3641 

April 3, 2017 

North Park Public Water District 

1350 Turret Drive 

Machesney Park, IL 61115-1419 

Dear Mr. Donahue, 

Thank you for appearing before the Subcommittee on Environment on March 16,2017, to testify 

at the hearing entitled "Reinvestment and Rehabilitation of Our Nation's Safe Drinking Water Delivery 

Systems." 

Pursuant to the Rules ofthe Committee on Energy and Commerce, the hearing record remains open 

for ten business days to penn it Members to submit additional questions for the record, which are attached. 

The format of your responses to these questions should be as follows: ( 1) the name of the Member whose 

question you are addressing, (2) the complete text of the question you are addressing in bold, and (3) your 

answer to that question in plain text. 

To facilitate the printing of the hearing record, please respond to these questions by the close of 

business on Tuesday, April 18, 2017. Your responses should be mailed to Grace Appelbe, Legislative 

Clerk, Committee on Energy and Commerce, 2125 Rayburn House Office Building, Washington, DC 

20515 and e-mailed in Word format to Grace.Appelbe@mail.house.gov. 

Thank you again for your time and effort preparing and delivering testimony before the 

Subcommittee. 

Sincerely 

Chairman 

JohnS~ Subcommittee on Environment 

cc: The Honorable Paul Tonka, Ranking Member, Subcommittee on Environment 

Attachment 
150 


25370.103

April 18, 2017 

The Honorable John Shimkus 

Chair 

House Subcommittee on Environment 

2125 Rayburn House Office Building 

U.S. House of Representatives 

Washington, DC 20515-6115 

Dear Chairman Shimkus, 

Once again, I thank you for the opportunity to testify before your subcommittee on reinvestment and 

rehabilitation of our nation's water infrastructure on March 16. I have received your written follow-up 

questions and am submitting answers with this letter. The questions and answers are below. 

L Your written testimony mentions concerns about consolidation efforts, including the SRF not 

encouraging sprawl. 

a. Can you speak to how this limitation impacts efforts to create better functioning 

public water systems? 

Answer: The authorizing language for the state revolving loan fund prohibits the use of an SRF loan to 

"finance the expansion of any public water system in anticipation of future population growth." This 

effectively prohibits accessing an SRF loan until after a community has already grown. The rapid growth 

of communities in suburbs, the Sun belt, the West and even some city centers, makes keeping up with 

infrastructure needs a challenge already. Drinking water and wastewater pipes, as well as roadways and 

sidewalks, must be built as a community is growing or is being rehabilitated. We understand that the 

original intent of the language was to prohibit use of the SRF from encouraging reckless sprawl. 

However, population trends make this provision obsolete in certain parts of the country. 

In addition, it some circumstances, it may be desirable for water systems to consolidate either physically 

or under some form of joint management and engineering. If they are to physically consolidate, some of 

the construction work would fall into a hazy area regarding anticipating future growth. The law could be 

improved by making it clear that using the SRF for consolidation for efficiency of operations and 

regulatory compliance does not violate the anti-sprawl provision. It should also give more leeway to 

utilities that dearly see future growth in certain areas near their current service areas. 
151 


25370.104

2. What features about the Water Infrastructure Finance and Innovation Act program makes it 

attractive as a source of funding? 

Answer: Lowering the cost of borrowing by just a few percentage points saves water utilities- and 

ultimately their customers- tremendous amounts of money over the long run, particularly in a multimillion-dollar loan. WIFIA provides loans of $20 million or more for drinking water, wastewater and 

stormwater infrastructure projects at long-term U.S. Treasury rates. The payback period is up to 35 

years, giving communities even more flexibility in repaying it. WIFIA loans can finance projects beyond 

the scope of SRF loans, which must be prioritized to utilities in which there is the most immediate threat 

to public health. WIFIA can help a utility prevent becoming one of those dire cases. In addition, the 

average drinking water SRF loan is about $2.6 million historically. Some states do provide much larger 

loans, but this is the nationwide average. Replacing water mains costs, on average, about $1 million a 

mile. Therefore, medium-sized or even small utilities with large geographic footprints could conceivably 

make use of WI FlA. Small systems are not ignored in WI FlA. For communities serving less than 25,000, 

the minimum level for a WIFIA loan is $5 million. 

WIFIA is also attractive from the government's standpoint in that Congress only has to appropriate for 

the risk factor. WIFIA appropriations are leveraged according to the Federal Credit Reform Act. Given 

the historic default rate of water utilities, than means on average, for every dollar Congress appropriates 

for WIFIA, up to $65 may be loaned out. 

3. Your testimony dedicates some attention to water affordability, including the criteria issued 

by EPA. 

a. Could you explain your concerns further for me? 

Answer: We have two primary concerns here. First, the U.S. Environmental Protection Agency has relied 

on the same affordability guidelines since 1997, and they are based on median household income. It is a 

flawed tool. In addition, the afford ability of drinking water and wastewater regulations are considered in 

separate silos. I am attaching a copy of a joint study done by AWWA, the Water Environment Federation 

and the U.S. Conference of Mayors on this very topic, which goes into much more detail on this. 

4. What is the role of asset management in achieving a technically, managerially, and financially 

strong water utility? 

a. Does AWWA believe this should be a mandatory requirement for water systems? 

Answer: All utilities manage their assets, but the practice we now formally call asset management is 

more scientific and focused. It can be defined as "A continuous process-improvement strategy for 

improving the availability, safety, reliability, and longevity of plant assets, i.e., systems, facilities, 

equipment, and processes." ("What is asset management and where do we start?" Journal AWWA, 

October 2007). It helps a utility understand what assets it has, their location, their condition at any given 

time, their design criteria, and then how to develop an asset care plan and how to optimize the 

performance of those assets. It maximizes the useful life of an asset and lets the utility manager know 

when it will likely need to be replace. This knowledge helps utilities get the most out of the dollars they 

spend and minimize disruptions of service. 
152 


25370.105

We do not believe it should be mandated because that would put Congress or a regulatory agency in the 

business of defining asset management and trying to make that definition fit for a wide range of utilities 

that can vary greatly in size, types of assets, types of water treatment and distribution, etc. Professional 

organizations such as AWWA are making education in asset management an ongoing part of our 

educational efforts for members. 

5. The EPA is supposed to be coming out with a final update to the lead and copper rule this 

year. 

a. Does the pace of the update to the lead and copper rule surprise you at all? 

Answer: No, it does not. After all, lead is unique among water contaminants. It is not in source waters 

and it is not in the water leaving a treatment facility. It is leached from lead service lines or from 

household plumbing fixtures or lead solder if the water has certain characteristics. That is why practicing 

optimized corrosion control is used to prevent such leaching of lead. Monitoring and treating for lead 

contamination are complicated tasks. Furthermore, even if every lead service line in the country were to 

be removed, we would still need to monitor for lead contamination from household plumbing fixtures 

installed before current lead content rules for such fixtures were implemented. There is also a large 

public communications challenge with lead. The lead action level in the rule is not a human health 

standard, but a trigger for certain control measures by a utility. That fact is a communications challenge. 

Another challenge is the fact that typically, a portion of a lead service line is on public right of way and a 

portion is on private property. Local statutes and even in some cases property owner consent can 

complicate complete removal of a lead service line. The financial challenge is obvious when you consider 

that an AWWA study last year estimated that there are more than 6.1 million lead service lines in the 

United States. The average cost of replacing such a line is $3,000 to $6,000. Some utilities are finding 

creative ways to help homeowners help finance replacement and some utilities are footing the bill 

themselves, but that is difficult for most, and in the long run, it will fall on customers. Ultimately, all lead 

service lines will need to be removed. Given the time that will take and the financial costs, optimized 

corrosion control will remain a key tool in protecting the public from lead. 

6. Congress provides states an annual allocation of federal tax-exempt private activity bonds 

that are subject to a volume cap based upon population. In your testimony you state that the 

volume cap hinders the use of private activity bonds for water and wastewater infrastructure. 

a. Will you elaborate on how altering or removing the volume cap on tax-exempt private 

activity bonds would spur investment for drinking water infrastructure? 

Answer: Water infrastructure projects are typically multi-year projects, whether we are talking about 

replacing water mains and service lines or installing or upgrading a treatment plant. With annual volume 

caps, there is a degree of unpredictability to the availability of private activity bonds that can discourage 

potential private-sector partners from using them. We constantly hear that there is a lot of private 

sector money interested in investing in water, and private activity bonds can make public-private 

partnerships more attractive to all parties. 

7. In your testimony, you discuss how the efficiency of the State Revolving loan Fund programs 

could be improved by streamlining the approval process. 

a. Do you have any specific ideas for how the approval process could be streamlined? 
153 


25370.106

Answers: Indeed, a complicated, lengthy application process results in a utility paying fees to a 

consultant just to put together an application, driving the costs of project even further up. It also 

delays initiation of projects or can drive a community away from the SRF. Here is a list of 

suggestions: 

1. SRF applications should be scalable to the size and scope of a project. 

2. To help scale an application, forms should be tailored to the type of project, such as 

a. Consolidation/regionalization of water systems 

b. Addressing source water needs or problems 

c. Upgrades or additions to treatment works 

d. Distribution infrastructure 

3. The paperwork burdens and potential penalties for non-compliance make certification of 

compliance with Davis-Bacon, American Iron and Steel content rules and with "cross-cutter" 

environmental statutes a disincentive for applying for SRF assistance. Removal, simplification or 

elimination of redundancies would make the program more attractive, particularly for small 

water systems. It addition, it would streamline work for state administrators. 

Some earlier attempts at reauthorizing the SRF have included provisions mandating a study by 

EPA of how the SRF is administered in different states. EPA may have already done some of this. 

Information from past and future studies could be used to develop an improved application 

process model, with input from the Association of State Drinking Water Administrators and 

knowledge derived from Government Accountability Office studies. A comparison with USDA's 

Rural Development water system loan program could provide insight as well. 

Thank you for the opportunity to provide additional insight on the issues we explored in the March 

hearing. I and the other members and staff of the American Water Works Association look forward to 

continuing to work with your committee on water challenges. 

Sincerely, 

John Donahue 

CEO North Park Public Water District 

and 

Former President, American Water Works Association 

Cc: The Honorable Paul Tonka, Ranking Member, Subcommittee on Environment 
154 


25370.107
155 


25370.108

Prepared for 

The United States Conference of Mayors, 

the American Water Works Association, 

and the Water Environment Federation 

by Stratus Consulting, Boulder, Colorado 

Copyright 2013, U.S. Conference of Mayors (USCM), 

American Water Works Assoeiation (AWWA), 

and Water Environment Federation (WEF). 

All rights reserved. 
156 


25370.109

Assessing the Affordability of Federal Water Mandates 

Communities and the water agencies that serve them have 

limited resources, so the investments they make need to 

address the most important risks to public health and the 

environment and deliver maximum benefits at affordable 

cost. This issue brief summarizes the U.S. Environmental 

Protection Agency's (EPA's) methods for analyzing the 

affordability of federal mandates stemming from the 

Clean Water Act and Safe Drinking Water Act. The paper 

describes the Agencts current policies, offers a critique~ 

and identifies a number of alternatives that might be 

more suitable for analyzing the affordability of water and 

wastewater mandates on American communities. Finally) 

the paper notes the importance of weighing the benefits 

as well as the costs of federal mandates while considering 

their affordahility. 

This paper is the result of a collaborative effort by the 

United States Conference of Mayors (USCM), the 

American Water Works Association (AWWA), and the 

Water Environment Federation (WEF). Its purpose is to 

raise issues and provoke discussion. It does not represent 

the official policy of these organizations or their members. The three associations also offer to their members, 

separately, an affordability assessment tool that allows 

communities to directly assess the affordability of water 

and wastewater mandates after considering the issues 

raised in this paper. Unless otherwise noted, the term 

"water'' is used throughout this paper to mean drinking 

water, wastewater, and stormwater. 

Background 

Investment to meet federal water and wastewater requirements can impose significant financial hardships on 

households1 businesses, and the broader communities in 

which they are located. When communities face largeand sometimes multiple-federal water mandates, the 

combined impact of the required expenditures can be 

extremely expensive for everyone in that community who 

pays a water or wastewater bill (most consumers get one 

combined bill for water and wastewater services). For the 

utility\ the cumulative suite of required investments not 

only strains fiscal capacity but may also displace other important investments1 including critical but nonmandatory 

capital improvement and infrastructure renewal projects. 

For the greater community1 mandatory investments may 

also squeeze out other important priorities! such as social 

safety net programs and economic development efforts. 

For the residents and businesses in affected cities1 the 

capital and operating expenses associated with federal 

mandates are often reflected in water and wastewater 

bills that must grow faster than household incomes and 

the general rate of inflation. Very significant affordability 

challenges are often created, particularly for lower-income households. 

With the intention of providing a mechanism for relieving 

undue economic stress in the face of water mandates, EPA 

has developed "affordabiliti' criteria to indicate when 

such mandates would cause substantial and widespread 

economic distress in the community. In those cases, the 

Agency might be willing to exercise some flexibility in the 

mandate, such as allowing a longer timeframe to achieve 

compliance with wastewater and stormwater requirements. The aftordability of drinking water requirements 

is handled differently and can-at least in theory and 

case-by-case-affect the kind of technology that must he 

deployed in some small communities. 

If EPA affordahility criteria functioned properly, the 

economic hardship imposed on lower-income households 

might be alleviated in many communities by relaxing 

compliance requirements or stretching them out over 

a longer time frame. Unfortunately, there are several 

critical limitations to how EPA defines affordability and 

applies its assessment criteria. This is due in part to EPA's 

reliance on metrics such as median household income 

(MHI), which is highly misleading as an indicator of a 

community's ability to pay. As a result~ regulatory relief is 

not provided in many communities where substantial and 

widespread economic hardships are indeed being created. 

©Copyright 2013 USCM, A\VWA, & WEF 1 
157 


25370.110

EPA's Two-level Affordability Screening Analysis for Wastewater 

and Combined Sewer Overflow (CSO) Controls 

In 1995, EPA published its first sol of affordabilityrelated guidelines: The Interim Economic Guidance for 

Water Quality Standards. The 1995 Guidance contains a 

detailed discussion of the analyses a municipality should 

undertake to evaluate the economic impact of complying 

with water quality standards (WQS) under the Clean 

Water Act (CWA). In 1997, EPA published Guidance for 

Financial Capability Assessment and Schedule Development using a nearly identical approach to assess whether 

an extended compliance schedule might be granted to a 

community facing affordability problems. The analyses 

put forth in these guidance documents arc divided into 

two parts: 

1. The '

1

preliminary screen" examines affordability using 

a factor called the Residential Indicator (RI). The 

Rl weighs the average per household cost of wastewater 

bills relative to median household income in the service 

area. Ultimately, an RI of 2% or greater is deemed to 

signal a Hlarge economic impacfl on residents1 

meaning that the community is likely to experience 

economic hardship in complying with federal water 

quality standards. 

2. A !(secondary screen11 examines metrics related to the 

financial capability of the impacted community. The< 

screen applies a Financial Capability Indicator (FCI) 

reflecting the average of six economic indicators. Those 

indicators include the community's bond rating, its net 

debt, its median household income, the local unemployment rate, the service area's property tax burden, 

and its property tax collection rate. Each indicator is 

assigned a score of I to 3, based on EPA-established 

benchmarks. Lower FCI scores imply weaker economic 

conditions and thus an increased likelihood the mandate would cause substantial and widespread economic 

impact on the community or service area. 

The results of the Rl and the FCI are ultimately combined 

into an overall rating based on EPA's Financial Capability 

Matrix. This rating is intended to demonstrate the overall 

level of financial burden imposed on a community by 

compliance with CJean Water Act mandates. 

EPA's Assessment of Affordability for Drinking Water Regulations 

Whereas EPA's consideration of affordability for wastewater and CSO compliance is aimed at assessing an 

individual community's ability to comply with regulatory 

mandates and schedules, EPA's consideration of affordability in the context of potable water supply is limited to 

assessing the national-level ajfordability qfregulatory 

options for small communities. EPA does not consider 

the afford ability of drinking water requirements in any 

manner that pertains to individual utilities (oven small 

ones), or to the category of medium and large utilities. 

EPA has stated that it would consider a National Primary 

Drinking Water Regulation lobe unaffordable to small 

communities (those with populations under 10,000) if 

the standard would result in a household drinking water 

bill in excess of 2.5% of the national average Mlll in such 

communities. To date, EPA has never made this finding. 

If EPA were to make such a finding, it would be required 

to identify technologies for small systems that might not 

result in meeting particular drinking water standards but 

are found to protect public health. Then, on a case-by-case 

basis, states may approve the use of such affordable small 

system technologies (called a variance) or approve an 

extended deadline for compliance (called an exemption). 

©Copyright 2013 USCM1 AWWA) & WEF 

States cannot approve both a variance and an exemption 

for the same standard in the same community. Variances 

are subject to review and approval by EPA. States have 

allowed very few variances and exemptions because they 

can be difficult and expensive to issue. 

EPA's stated view on potable water-that it is affordable 

if it costs less than 2.5% of small community MHI-inftuences the perceived affordability of combined water 

and wastewater hills. Specifically, it is inferred that EPA 

would consider a combined annual water and wastewater 

bill of less than 4.5% of MHI to be affordable (2.5% for 

water, plus 2% for wastewater services and CSO controls). 
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25370.111

Limitations of EPA's Preliminary Screening Approach 

A central issue in assessing affordability of federal water 

mandates is the reasonableness of community-wide MHI 

as a primary yardstick_ MHI can be a highly misleading indicator of a community1

s ability to pay for several reasons. 

• MHI is a poor indicator of economic distress 

and bears little relation.•hip to poverty or otlwr 

measures of economic need within a community. 

For example, consider an analysis of MHI and poverty 

data for the 100 largest cities in the United States. It 

shows that for 21 cities identified as having an MH! 

within $3,000 of the 2010 national MHI ($50,046), there 

is no discernible relationship between MHI and the 

incidence of poverty. Statistical analysis confirms that 

the correlation between MHI and poverty among these 

cities is not meaningful, with a correlation coefficient 

(r) of 0_024_ Indeed, within these 21 cities, the poverty 

rate ranges from a low of 14.1% to a high of 23.3%. 

e Mill does not capture impacts across diverse 

populations. In many cities, income levels are not 

clustered around the median, but are spread over a 

wide income range or concentrated at either end of 

the income spectrum. This tendency for the income 

distribution to spread away from the middle has been 

increasing and may well continue to increase in the 

future~ making MHI an even less meaningful metric. 

In addition1 income distribution and other economic 

measures can vary widely across different districts and 

neighborhoods within a city. Thus, the economic hardship associated with increasing water and wastewater 

bills can be concentrated in a few lower-income neighborhoods- This will compound the economic hardship 

within the community and may raise issues of environmental justice (EJ)_ These impacts are not captured 

with the use of service area MHI as a sole indicator. 

• MHJ provides a "snapshot" that does not account 

for the historical and fature trends of a community's economic, demographic, and/or social condi~ 

tions. This is particularly relevant in areas that may 

be experiencing economic declines or population losses 

(which will result in the costs of water and wastewater 

programs being spread across fewer residents). Without 

consideration of these and other economic and demo· 

graphic trends, the affordability determination will 

overestimate the ability of residents to tolerate rate 

increases over time, 

e Mill does not capture impacts to landlords and 

public housing agencies. Many renters do not 

receive water bills because water and wastewater 

service is included in the cost of rent. The same is 

true of many residents in public housing. In cities with 

a high percentage of renters and/or public housing 

residents, use of Mlll and RI does not capture impacts 

to landlords and public housing agencies, which must 

often absorb the cost of increased water and wastewater bills. In many cases, higher water bills mean that 

public housing authorities will be required to reduce 

the number of needy renters they serve1 unless there 

can be offsetting increases in public housing budgets. 

• The RI does not fully capture household economic 

burdens. Economic burdens are commonly measured 

by comparing the costs of particular necessities to 

available household income. The Rl is such a measure 

in that it is used to evaluate the economic burden from 

water bills by comparing those bills to MHI. However, 

there can he situations where the economic burdens 

in a community are substantially different from those 

typically associated with its Rl. For example, a community may experience unusually high costs of basic 

necessities or may have a distribution of household 

income that differs significantly from that in most com· 

munities. In these cases, the standard application of 

EPA's RI would he insufficient on its own to distinguish 

between higher and lower levels of economic impact. 

©Copyright 2013 USCM, ATI.~VA, & \VEF 3 
159 


25370.112

Alternative Household Affordability Metrics: 

Moving Beyond EPA's Criteria 

Ginm the lirnitarions of the RL and in particular tlw u::;e 

of MHI as a primary indicator ofhowwholrl affordability, 

it ls important to consider the usc of alternative metrics 

to gauge the affonlability of federal \Vater mandates, For 

example, imparts on customer bills ean be assessN! as 

fo!lmvs: 

® Acro.9s the income distribution. Gin:n the relatively 

large percentage of housrholds in the lower portions 

oft he income distribution in many citirs, it is important. tn examine the effect of rising water bills across 

thP cn1 ire income distribution-and cspt>clally at the 

lmver end--·rather than simply at the nwdian. For 

{'Xample, a key indicator could include the analysis 

of ;we rage \Vater and \~'aste\Yater bills borne by each 

income quintile as a percentage ofHw average income 

fan hat quintilr.. Ttw percentage of honseholds be!mv 

spcdfie income thresholds ean also be used to examine 

household impacts. Figure ! illustrates this point. 

EPA's ,:GuidanC'e for Prrparing Economk Analyses'' 

(2-JO-R-00-00~l) recognizes the legitimacy of assessing 

impat'ts to all housd1olds across the income distribu~ 

tion, thongh EPA has not provided information on how 

such analyses have lwen condudt'd in the past or used 

in enforeemcnt actions. 

® Across household types. Averag{~ water and vvasto-

\vater bills can be examined as a percentage of income 

for potentially vulnerable populations (e.g, renters and 

elderly households), 

Across neighborhood,r.; or similar g\~ographk units! 

such as Census tractsl or Public Csc Microdata Areas. 

1\m:rty rates and households located in poverty areas 

can Ue considered to identify portion~ of communities 

that are economically at risk Alternative measures 

of poverty! such as the Snpp!('montal Poverty i\·Ieasurc 

(SP\1) recently devdoiWd by the U.S. Census Burean 1 

can lw especially ust'ful in this respect The analysis 

could captun~ affordalJility lssues in particular parts of 

a community or serviet> area that may he masked when 

looking at 1 he area as a whole, 

11 Other indicatorH of eeonomie need and widespread 

impacts can also be considered for the community or 

parts of the community2. These might include: 

';'1 The UlH'mploymf'nt rate, 

1fu1 The percentage of households recei"ring public 

assistance such as food stamps or living below the 

poverty level. 

lti The pcrcrntage of households meeting Home Energy 

Asslstanee Program requirements. 

percentage of customrrs pligiblc for water 

affordab!lity programs. 

il2 Tht percentage ofhonseholds payi-ng high housing 

costs-for example the percentage of households with 

housing costs in cxress of 85% of income. 

LV OihN household cost burdens such as 

nondiserdionary spending as a pen:ent.age of 

household income for households within each 

income quintik (Hubin 200;3). 

Upper Limits in Atlimta, Georgia and tlte 

United States (2011$) 

ahm includiug 

I"""'"'"'I'" J'""'"'J''" "'''"''' among othtrs. 
160 


25370.113

EPA's Secondary Screening Analysis: 

Limitations and Alternative Indicators 

,Just as the HI falls short of its intPnded pnrpoSt\ so too 

dol's 1 he Financial Capability Indicator (FCI). The FCI 

that makes up EPA's 

not adequately rcfkrt a community's 

investments associatC'd 'With federal \Vater mandates. 

This measme fails to fully capturt' financial capability 

because; 

!@ EPA usPs property tax re\Tnucs as a pen•entagc of full 

market property value (FMPV) as its sole measure of 

local tax t'filwt. Focusing solely on property raxesvdlite ignoring inconw, sah•s, business taxes, and us0r 

fees typically charged for tit;; scrviccs--~incvitably 

understates the tax effort in cities that rely on multiple 

forms of taxation. As an alternative, f:PA should allO\v 

municipalities to use total/om! ta:r anrlfrH' revenues 

as a percentage of gross taxable resources. This would 

!H'Ovid(' a better measure oft he extent to which a municipality is alrt>ady using the full range of its taxable 

l'PSOUlTeS. 

The sceondaQ' screening analysis includes measures 

of locall\llli and uurmplo:ymt:nt tevcls compared to the 

national average. By focusing on how these measurrs 

compare \Yith national levels) EPA fails to acknmvledgc 

the profound impact of the absolute lcYels themselves. 

For example,. if the national unemployment rate isH%, 

a community with an unemployment rate of 10% is 

considered by EPA as having only a ;'mid"rangen unemploynwnt problem. In fact 1 a community with a 10% unemployment rate all-but -certain to be experiencing 

signifkant distrcss 1 regardless of the national avC>ragc, 

(as 

consider a metrk 

compares a municipality's currrnt unemployment 

rate wiTh the long-tt'rm statP and {the 

national an~ rage \vas 5.8% between 1991 and 

rst' of the long ·term state and national aYeragt's as a 

benchmark \vould. provide· a more insightful socioeconomic indicator than a single current number. A tommunity1s long-term mwmploymcnt rate {for examp!t\ 

the share of the labor force continuously uw:mp!oye(i for 

one-half year or more) could also be evaluated. 

® The FCI docs not take into aceoum any deterioration 

of a local government's ability to finance major capital 

improvements 1 as evideneed in municipal capital 

markets. EPA shoulrl cousirier adding a measure of 

local government revenue gnnvth or dedine to the 

FCI matrix1 with a decline in real revenuPs over some 

period taken as a sigu of weakened financial capacity. 

financial capabilities takes iuto 

burden, hut it does not consider what for many cities is 

an even grPatcr liability: unfund0d pension and health 

care commitments to retin~0s. Ttwsr arc generally not 

reflected in formal dPht. 

il Community or utility rewnues are not considered in 

the creal es a 

significant we a knrss, tha! arc 

expcrit~ncing t.wonomk difficulties, delinquency in 

water and wastewater paymt-nts1 declining \VatPr 

usage\ shrinking revenues. or a growing number of 

old0r customers on fix1~d or declining inconws. EPA 

should consider the addition of more appropriate 

measures of revenue collection, such as current 

delinquency ratcs 1 the agcncy1

s ability to enforce 

collection1 anrl its likelihood of reeoveriug these costs, 

® EPA's secondary screening analysis does not take into 

account the fact that many communities. haYe a legal 

drbt ceiling. Debt limitations haYe the potential to 

severely limit a community's ability to finance 

unfunded mandates absent an extended schedule. 

Finally, fiPA dors not consider the longer-term needs 

facing many municipaliti{'S for rPinYPstmt'nt and 

renewal of water ami vv-astcwater infrastructure due to 

the current system's age and condition. As documented 

by rhe American Water Works Association's 21H2 

Buried No Longer: Confronting America's lhtter 

Infrastructure Challrngr report 

drinking water infrastructure these needs add 

np to at least .$1 trillion OYer the next 2!) years. Wastewater needs are at least as greatl not counting CSO 

costs. The need for this investment is real and urgent. 

€! Copyright 20U CSC:\L AWWA1 & WEF 
161 


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Weighing the Benefits of Additional Mandate-Driven Expenditures 

FP<leral Clean Water APt and Safe Drinking Water Act 

mandates are intended to provide better public health 

prut cction, \Vater qualit:y ('!lhancements 1 and other 

benefits. Howevcr1 not all driuking water and wa~te'l'ralcr 

mandatPs are thP same. Some provide gn'atm' benefits 

lhan ot lwrs 1 or provide benefits St)on(~r than otht•rs, or 

gt>t\Natc benefits 1 o different groHps of people or 

eeos~'stems than others. 

\Vhcn communities face expensive \Vater mandates 

and a.ssodated deadlincs 1 the impact of the required 

expenditure~ can be extrmncly difficult for all who pay 

water hllls, but particularly for those \Yith lower inconws. 

In such communities, the expectt~d benefits oft he 

mandate should be carefully weighed against: 

Compliance deadlines (which might be amended). 

® Permit limits (which might be adjusted). 

~ OHwr factors that influence the magnitude and timing 

of required investments. 

When the costs of meeting a regulatory maJHJate are 

high, the affordability implications and tlw bcneflt of 

the aetiYity should each be evaluated in concert with 

one another. The must impmtant questions include: 

1. Arc the added lwnefits of more rapid and/or stringent 

mandates ;,varramed given the addt•d costs and adwrsc 

imparl s on affbrdahHity1 when compared to less 

stringent 1 p('rhaps less cxpensin~ alternatin:s? 

Arc projec1 s with lower public health or environmental 

bend its driving out projrcts that be of greater 

value to the communit,v or the 

;3. Will those \Vho will realize most oft he benefits be 

different than those who hear most oft he costs'? 

4. Are those bearing the greatf'st burdC>n economically 

disadvantaged and thns worthy of environm.Pntal 

justice consideration? 

() s; Copyright ZOB L"SC\1, AWW,\ 1 &. WEF 

EPA's proposed Integrated Planning and Pen11it Policy 

(!PPP) costs 

addressed. The IPPP proctss could be usPd to set 

priorities) make adjustmPnts in requirements, and 

set reasonable timetablE~s. Sueh adjustments would 

lwlp ensure that local resources are used w sc'curc tlw 

grratcst public health and cnYironmental benefits at. an 

affordable cost. Moving the IPPP process fonrard as 

suggested offers important potential advantages: 

Comparing the enYironnwntal. social) aud tl11anda.l 

hcncf\t.s of all wat rr-rdatcd obligations ;,vou!d allow 

municipalitins to devPlop priorities that reflect thn 

! otality of trade-offs and commitments facing the 

community, 

• Considering all ;,vater· related obligations 

togethn) and assessing financial capability in light 

of total water-related obligations 1 \Yould focus local 

resources where the community \Vill get the greatest 

total environmental) public health, and other benefits. 

It should be noted that EPA does not include drinking 

\Vater mandates in the Integrated l\Iunieipal Stonmvater 

and Wastewater Planning process 1 ewn though drinking 

water investments must be earried on the same customer 

bill as investments nt•et1ed to comply \Vith wast mvater 

and CSO mandates. The CSC~L AI\'\ lA and \H~F have 

recommended that gpA include consideration of drinking 

\Vater investments in the Integrated Planning and Permit 

Program. The program should also consider necessary but 

nonmandatory investmrms in the on~going rehabilitation 

of water and wastewater infrastructure. 
162 


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Conclusion 

EPA is to be commended for addressing affordability concerns. However, the continued application of 

EPA's current approach is inadequate. With respect to considering the impact of rising water bills on 

households, a basic problem is over-reliance on median household income (MHI). Rather than focusing 

on MHI alone, EPA should focus on households at the lower end of the income spectrum. This 

examination could include households with incomes below a certain threshold; households with the 

lowest income levels (such as the lowest quintile or decile); households with housing costs above a 

certain threshold (such as 35% of income); or households experiencing other types of financial distress 

(such as households living in areas of high poverty or unemployment). Moreover, the trend in changing 

household incomes, water and wastewater consumption, employment and demographics (such as 

population changes) should be taken into account in evaluating how household economic burdens 

are likely to change over time. 

With respect to assessing a community's financial capability, EPA does not consider a number 

of important realities facing many communities today. Alternative metrics need to be considered as 

part of the financial capability assessment to better account for several highly relevant factors. These 

include the liabilities associated with unfunded municipal pension obligations and other long-term 

contractual commitments. Finally, the long-term need to reinvest in aging water and wastewater 

infrastructure to ensure systems are sound and resilient also should be considered. 

Including in EPA's analysis a number of additional and alternative measures as described in this paper 

would significantly improve the Agency's understanding of the affordability of federal water mandates 

in American communities, 

Finally, although this paper focuses on EPA's analysis of residential affordability, it has to be noted 

that affordability impacts on other customer classes-such as commercial and industrial customerscan be dramatic. In turn, those impacts can significantly affect the economic health and vitality of a 

community now and into the future. 

©Copyright 2013 USCM, AWWA, & WEF 7 
163 


25370.116

Affordability Assessment Tool 

The United States Conference of Mayors, the American Water Works Association, and the 

Water Environment Federation have collaborated in the development of an Affordability 

Assessment Tool that allows our members to consider many of the alternative factors 

discussed in this paper and better understand the full range of affordability implications 

for the federal water mandates they face. To access this tool, visit usmayors.org, awwa.org, 

orwef.org. 

References 

Boushey, H., C. Brocht, B. Gundersen, and J. Bernstein. 2001. Hardships in America: 

The Real Story of Working Families. Economic Policy Institute, Washington, DC. 

CRA Infrastructure & Engineering. 2011. Financial Capability Assessment for the 

Draft Long Term Control Plan. Prepared for Buffalo Sewer Authority, Buffalo, New York 

by CRA Infrastructure & Engineering, Inc. 

NDWAC. 2003. Recommendations of the National Drinking Water Advisory Council to 

U.S. EPA on Its National Small Systems Affordability Criteria. US EPA National Drinking 

Water Advisory Council. 

Rubin, S.J. 2001. Affordability of Water Service. Issue Brief, National Rural Water 

Association. 

Rubin, S.J. 2003. Update of Affordability Database. Issue Brief, National Rural 

Water Association. 

Stavins, R., G. Long, and J. Jaffe. 2004. Assessment of the Economic Impact of 

Additional Combined Sewer Overflow Controls in the Massachusetts Water 

Resources Authority Service Area. 

U.S. EPA. 2002. Affordability Criteria for Small Drinking Water Systems: An EPA 

Science Advisory Board Report. EPA-SAB-EEAC-03-004. U.S. Environmental 

Protection Agency, Washington, DC. 

U.S. EPA. 2006. Small Drinking Water Systems Variances- Revision of Existing 

National-Level Affordability Methodology and Methodology to Identify Variance 

Technologies that are Protective of Public Health. EPA·HQ-OW-2005-0005; 

FRL-8035-7. Federal Register 71(41). March 2. Washington, DC. 

8 ©Copyright 2013 USCM, AWWA, & WEF 
164 


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165 


25370.119

GREG WALDEN, OREGON 

CHAIRMAN 

ONE HUNDRED FIFTEENTH CONGRESS 

FRANK PALLONE, JR., NEW JERSEY 

RANKING MEMBER 

(!tongrrgg of tbe Wniteb ~tateg 

~ouile of l\epregentatibeil 

COMMITIEE ON ENERGY AND COMMERCE 

2125 RAYBURN HousE OFFICE BuiLDING 

WASHINGTON, DC 20515-6115 

April3, 2017 

Mr. Rudolph S. Chow 

Director 

Baltimore City Department of Public Works 

200 Holiday Street; Room 600 

Baltimore, MD 21202 

Dear Mr. Chow, 

Thank you for appearing before the Subcommittee on Environment on March 16, 2017, to testifY 

at the hearing entitled "Reinvestment and Rehabilitation of Our Nation's Safe Drinking Water Delivery 

Systems." 

Pursuant to the Rules of the Committee on Energy and Commerce, the hearing record remains open 

for ten business days to permit Members to submit additional questions for the record, which are attached. 

The format of your responses to these questions should be as follows;(!) the name of the Member whose 

question you are addressing, (2) the complete text of the question you are addressing in bold, and (3) your 

answer to that question in plain text. 

To facilitate the printing of the hearing record, please respond to these questions by the close of 

business on Tuesday, April 18, 2017. Your responses should be mailed to Grace Appelbe, Legislative 

Clerk, Committee on Energy and Commerce, 2125 Rayburn House Office Building, Washington, DC 

20515 and e-mailed in Word format to Grace.Appelbe@mail.house.gov. 

Thank you again for your time and effort preparing and delivering testimony before the 

Subcommittee. 

Sincerely, 

Chairman 

JohnSht~ Subcommittee on Environment 

cc: The Honorable Paul Tonka, Ranking Member, Subcommittee on Environment 

Attachment 
166 


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Response to Questions Submitted to: 

Rudolph S. Chow 

Director 

Baltimore City Department of Public Works 

Testifying on the behalf of Association of Metropolitan Water Agencies (AMWA) 

Regarding 

Hearing on Reinvestment and Rehabilitation of Our Nation's 

Safe Drinking Water Delivery Systems 

March 16,2017 

The Honorable John Shimkus 

l. How much money does it cost to perform an asset management assessment? 

AMW A defines asset management as "an integrated set of processes to minimize 

the life-cycle costs of infrastructure assets, at an acceptable level of risk, while 

continuously delivering established levels of service." Effective asset 

management therefore functions as a continuous business practice that informs 

capital investments and operations and maintenance protocols over time. As such, 

we would expect there to be considerable variability in the costs a community 

water system may incur to conduct asset management planning at its own utility. 

The costs associated with performing an asset management assessment depends 

on a number of factors, starting with the degree of rigor and preciseness of results 

the community water system hopes to achieve. The community water system's 

ultimate objectives on this point will inform subsequent decisions regarding the 

number of utility staff or professional consultants to be involved and whether 

software will be used, both of which will affect the cost. Finally, the size ofthe 

utility and the age and location of its infrastructure assets will also contribute to 

the ultimate cost expectation of asset management planning. 

In general, one might expect that the cost of a robust, multi-point assessment at a 

large water system could be substantial, while a less comprehensive asset 

management review at a smaller utility would likely cost much less. But 

ultimately the cost will vary. 

The Baltimore City Department of Public Works (DPW) has an established Asset 

Management division, referred to as the Office of Asset Management (OAM), that is 

responsible for the inventory and maintenance of our assets and infrastructure of our 

water, stormwater and wastewater systems (see Water Infrastructure chart, below). 
167 


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Water Wastewater Stormwater 

Water sources: 3 

reservoir 

Water bodies impoundments & N/A 40 miles of streams & 

Susquehanna River open channels in 

City; Baltimore 

Harbor 

3 filtration plants 2 treatment plants 

Treatment plants 

producing up to 225 capable of treating 

mgd* N/A ofpotable up to 250 mgd of 

water wastewater 

3,800 miles of water 1,146 miles of storm 

mains in Baltimore drains; 27,561 storm 

Pipes City & County; 1,400 miles of drain manholes; 

9, I 00 fire hydrants sanitary sewers in 52,438 inlets & 1709 

in City, 13,750 in City outfalls 

County 

Pumping stations 24 pumping stations, 8 major pumping 4 major pumping 

& other 6 elevated tanks & 3 stations & 10 minor stations; 5 large 

structures reservoirs; 2 major installations debris collectors; 350 

chlorinators & 16 Best Management 

remote chlorinators Practices 

Remediation of 20% 

N/A N/A 

of impervious area by Impervious area 2018 (4,291 acres) 

*mgd million gallons per day 

Recognizing the value of an Asset Management program, we have increased our budget 

from $8.2 million in Fiscal Year 2017 to $15.9 million in Fiscal Year 2018 supported by 

31 staff members. The program began with the City's underground infrastructure, but is 

expanding to include other asset classes, including above ground facilities, above- and 

below-ground storm water infrastructure, as well as solid waste and energy assets. 

OAM is comprised of three divisions: 

• Planning and Analysis- engineering personnel manage risk-based programs, 

including asset prioritizing for renewal and replacement; projects and programs 

associated with asset condition, capacity analysis, and enhancing service levels 

and reliability; recommends asset maintenance, renewal, and replacement 

strategies. 

2 
168 


25370.122

• Data Geographic Information Systems (GIS) and other data 

systems and business analysts manage operational data. spatial and 

model analysis, and operational field data analysis; program management data. 

system risk profiles, and project updates; recommends overall technology 

resources and investments needed to fully support operational and engineering 

decisions. 

• Preventative Maintenance- focuses on preventative and predictive maintenance 

minimizes reactive !allures. maintains regulatory compliance, extends 

useful life of assets through proactive maintenance; conducts asset tlcld 

inspections and routine maintenance to keep assets in serviceable condition. 

We believe that the structure above helps us to achieve our Six Key Components to 

which we attribute our success: (I) Complete Asset Inventory Record, (2) Identification 

of Critical Assets, (3) Level ofServiec Required as Established by Management, (4) Life 

Cycle Costs, (5) Usc and Employment of Technology, and (6) Immediate and Long-Term 

Financing. Collectively these components provide the basis for how we plan, prioritize, 

fund, and manage our assets during their operation, acquisition, rehabilitation and 

eventual disposal. 

Like many other municipalities. Baltimore has aging infrastructure that did not receive 

the investment it needed in the past to maintain its viability, thus the function and suppon 

of our Asset Management program becomes evident. Tbe limited availability of funds 

alone places a huge responsibility on our OAM as they arc critical in getting our assets on 

a proactive scbcdule of maintenance and repair/replacement to ensure system and asset 

reliability throughout their life cycles. By understanding asset condition and failure risk, 

investments in (lUI' assds arc targeted on projects that will have the most significant 

impact on improving service level and reliahilily while ensuring sustainable fl.mding. 

One example of how the Office of Asset Management integrates the six 

mentioned above is exempli lied by our Distribution Main Risk Model shown 

This risk-based approach addresses asset renewal planning f(Jr our 1.500 miles of aging 

\Vater mains. We implemented a I 5 mile per year water main renewal using the 

Model to help select which assets arc targeted for maintenance or renewal 

Failure Modes 

Analysis 

3 
169 


25370.123

a. Does AMW A believe these types of tests be mandated in order to 

receive federal funding? 

AMW A believes it is a best practice for community water systems to carry 

out asset management planning, and that such planning should be 

encouraged. But we do not favor imposing additional "cross-cutting" 

requirements on federal infrastructure programs like the DWSRF, and we 

do not believe that the completion of a particular defined aspect of asset 

management planning should be a mandated prerequisite condition of 

receiving DWSRF assistance. 

2. Beyond financing, what opportunities exist for the Federal Government to 

provide greater assistance in improving drinking water infrastructure? 

Aside from adequately funding financing assistance programs like the DWSRF 

and WIFIA, preserving the federal tax-exempt status of municipal bond interest is 

the single greatest step Congress can take to promote affordable investments that 

will yield improvements in drinking water infrastructure. AMW A recently 

calculated that communities nationwide issued roughly $38 billion worth of 

municipal bonds to fund water and wastewater infrastructure projects in 2016. In 

contrast, total SRF funding appropriated by Congress in the 2016 fiscal year 

totaled about $2.3 billion. 

Preserving tax-exempt municipal bond interest is particularly important as 

Congress considers comprehensive tax reform options, as any effort to roll back 

or eliminate the exemption would directly lead to higher infrastructure financing 

costs for communities. Today, because municipal bond interest income is not 

subject to federal income tax, investors charge lower interest rates than they 

otherwise would on municipal bonds -lower rates that directly benefit 

communities that are issuing bonds to finance water infrastructure projects. 

Imposing a new tax on interest income earned by these investors would lead them 

to respond by passing the cost on to bond issuers in the form of higher interest 

charges. Ultimately, local ratepayers would pay for these higher financing costs 

through increased water rates. AMW A has estimated that fully taxing municipal 

bond interest would increase water and wastewater infrastructure financing costs 

by about 25 percent- which would essentially serve as a new tax on water system 

ratepayers. 

In Maryland, communities across the state issued roughly $46.5 million worth of 

municipal bonds to fund water and wastewater projects in 2016. Fully taxing 

municipal bond interest would increase these financing costs by about $20 million 

4 
170 


25370.124

over the bonds' payback periods. In Baltimore we are preparing for our 2017 

Series Bond sales that will produce $157 million in new money for water 

infrastructure and $1 03 million in new money for wastewater infrastructure. 

The federal government should also explore opportunities to reduce regulatory 

burdens on community water systems, or to modernize regulations that are in 

place. For example, as a result of a regulatory review carried out in 2012, EPA 

amended its interpretation of the Safe Drinking Water Act's requirement that 

community water systems provide their customers with a consumer confidence 

report each year. Under EPA's new interpretation, community water systems 

were given the option to deliver these reports to customers electronically, such as 

by posting the reports publicly online and notifying customers of their availability 

via notices on water bills. 

While Baltimore docs post its CCR on its website, we continue to mail paper 

copies of these reports to our customers each year to ensure that all customers 

have access to the information. Many other AMW A members have successfully 

transitioned to an electronic delivery model. Based on a 20 16 survey of AMW A 

members, 80 percent of responding utilities used electronic CCR delivery last 

year. These utilities reported avoiding printing an average of more than I 38,000 

paper CCRs, and saved an average of$44,205 in printing and postage costs. 

These savings represent additional resources that communities are able to devote 

to infrastructure investment. 

Because these savings are the result of EPA's reinterpretation of Safe Drinking 

Water Act requirements, EPA could reverse its interpretation at any time. 

AMW A therefore supports congressional action that would codify in the Safe 

Drinking Water Act the ability of community water systems to utilize similar 

electronic distribution methods to share consumer confidence reports with the 

public. 

5 
171 


25370.125

GREG WALDEN, OREGON 

CHAIRMAN 

Mr. Greg DiLoreto 

President 

ONE HUNDRED FIFTEENTH CONGRESS 

FRANK PALLONE, JR., NEW JERSEY 

RANKING MEMBER 

C!tongress of tbe Wniteb $tates 

l!}ou!le of l\cprmntatibc!l 

COMMITTEE ON ENERGY AND COMMERCE 

2125 RAYBURN HousE OFFicE BuiLDING 

WASHINGTON, DC 20515-6115 (207):?75-2927 

(202) 225~3641 

April3, 2017 

ASCE Foundation 

1900 Sunburst Terrace 

West Linn, OR 97068 

Dear Mr. DiLoreto, 

Thank you for appearing before the Subcommittee on Environment on March 16, 2017, to testifY 

at the hearing entitled "Reinvestment and Rehabilitation of Our Nation's Safe Drinking Water Delivery 

Systems," 

Pursuant to the Rules of the Committee on Energy and Commerce, the hearing record remains open 

for ten business days to permit Members to submit additional questions for the record, which are attached. 

The format of your responses to these questions should be as follows: (1) the name of the Member whose 

question you are addressing, (2) the complete text of the question you are addressing in bold, and (3) your 

answer to that question in plain text. 

To facilitate the printing of the hearing record, please respond to these questions by the close of 

business on Tuesday, April 18, 2017. Your responses should be mailed to Grace Appelbe, Legislative 

Clerk, Committee on Energy and Commerce, 2125 Rayburn House Office Building, Washington, DC 

20515 and e-mailed in Word format to Grace.Appelbe@mail.house.gov. 

Thank you again for your time and effort preparing and delivering testimony before the 

Subcommittee. 

::~~~ Chai!~~n> Subcommittee on Environment 

cc: The Honorable Paul Tonka, Ranking Member, Subcommittee on Environment 

Attachment 
172 


25370.126

April13, 2017 

The Honorable John Shimkus 

Chairman 

House Energy and Commerce Committee 

Subcommittee on the Environment 

2125 Rayburn House Office Building 

Washington DC, 20515 

Dear Chair Shimkus: 

Thank you for the opportunity to appear before your Subcommittee on the 

Environment on March 16, 2017 to testify on reinvesting and rehabilitating our nation's 

safe drinking water delivery systems. 

As requested in your April 3, 2017 letter to me, enclosed are my responses to the 

questions asked. Should you have additional questions or would like more information 

on this important topic, please do not hesitate to contact me. 

Sincerely, 

Greg Diloreto. P E , P LS , D WRE , Pres. 13, ASCE 

Chair, ASCE Committee on America's Infrastructure 
173 


25370.127

Response to Questions For the Record 

The Honorable John Shimkus 

l. In ASCE's 2013 Infrastructure Report Card on drinking water, it stated that the financial 

impact of meeting regulatory requirements were a continuing issue for many communities 

and one that encouraged deferred maintenance-- $7 billion over 20 years. What was the 

financial impact of meeting regulatory requirements that ASCE found as part of its 2017 

Report Card? 

In our 2017 Report Card, we did not break out the financial impact of meeting regulatory 

requirements. The amounts we obtain from EPA are combined for both regulatory and 

infrastructure needs. 

2. In the 2013 Infrastructure Report Card, ASCE recommends higher water rates to reflect the 

"true cost of water." The ASCE recommendations in its 2017 Report Card are much softer 

with regard to the need for rate increases, instead placing a heavier reliance on Federal 

funding. What changed over the last four years? 

Both the 2013 and 2017 Report Cards call for investment through rates at the local level. In 

2013 we stated, "Current water rates do not reflect the true cost of supplying clean, reliable 

drinking water. Replacing the nation's antiquated pipes will require significant local 

investment, including higher water rates." In 2017 we state, "Encourage utilities to conduct 

revenue forecasting models to determine necessary rate revenues over a period of time and 

then institute rates that reflect the true cost of supplying clean rei iable drinking water. 

Further, one of the 2017 Report Card's overall solutions, not just those in water categories, 

reads, "Infrastructure owners and operators must charge, and Americans must be willing to 

pay, rates and fees that reflect the true cost of using, maintaining, and improving all 

infrastructure, including our water, waste, transportation, and energy services." 

And the five financial solutions listed in the 2017 Report Card are also contained in the 2013 

Report Card. The five financial solutions in the 2017 Report Card are: 

Reauthorize both the Clean Water and Drinking Water state revolving funds (SRF) and 

triple the amount of annual appropriations. 

Fully fund the Water Infrastructure Finance and Innovation Act (WIFIA) at its authorized 

level. 

Preserve tax exempt municipal bond financing. Low-cost access to capital helps keep 

lending for drinking water upgrades strong and accessible for communities large and 

small. 

Establish a federal Water Infrastructure Trust Fund to finance the national shortfall in 

funding of infrastructure systems under the Clean Water Act. 

Encourage utilities to conduct revenue forecasting models to determine the necessary rate 

revenues over a period of time and then institute rates that reflect the true cost of 

supplying clean, reliable drinking water. 
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The only difference in these financial solutions between 2013 and 2017 is that in 2013 

WIFIA had not yet passed, and so the recommendation in 2013 called for its passage. Since 

2013, it has passed and authorization approved; appropriations are needed to move the 

program forward. 

Our recommendations make clear that it will take a partnership of investment at the Federal, 

State, Local and private sector levels to improve the condition of our drinking water systems 

in this country; no one level of government will be able to do it all. Yet at the end of the day, 

the cost of this investment will be borne by the users of drinking water systems. 

3. ASCE's 2017 "Failure to Act" document states that not making the investments called for in 

your report will lower income; a result of an economic restructuring away from the 

technology/export sectors towards lower paying, less productive services. Have you quantified 

how much this drop in income and employment would translate to lost revenues in the Federal 

treasury for drinking water? 

We have not quantified the impact of the loss of income and employment would have in lost 

revenues in the Federal treasury. In the Failure to Act report it is important to note that it 

states a loss to American families in disposable income. Absent of other economic impacts 

this loss is not in total income but rather this income will not be spent on discretionary 

activities and will be spent on things that compensate for the poor infrastructure, such as car 

repairs, purchasing bottled water, time wasted in traffic, and an increase cost in goods 

because of the impacts on businesses due to poor infrastructure. After time, the loss of2.5 

million jobs in 2025 may have an impact on taxes paid, but what most likely will happen is 

those 2.5 million jobs will be replaced with lower paying jobs or an increase in jobs in the 

repair sector. What happens though is that our quality of lite suffers. 
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GREG WALDEN, OREGON 

CHAIRMAN 

ONE HUNDRED FIFTEENTH CONGRESS 

FRANK PALLONE, JR., NEW JERSEY 

RANKING MEMBER 

C!Congrc~~ of tbe llntteb ~tate~ 

j!)omic of l\epw~cntatihcs 

COMMITTEE ON ENERGY AND COMMERCE 

2125 RAYBURN HousE OFFICE BuiLDING 

WASHINGTON, DC 20515-6115 

Mr. Martin A. Kropelnicki 

President and CEO 

California Water Service Group 

1720 North First Street 

San Jose, CA 95112-4598 

Dear Mr. Kropelnicki, 

(202)2252927 

(:20:2):225-3641 

April3, 2017 

Thank you for appearing before the Subcommittee on Environment on March 16, 2017, to testifY 

at the hearing entitled "Reinvestment and Rehabilitation of Our Nation's Safe Drinking Water Delivery 

Systems." 

Pursuant to the Rules of the Committee on Energy and Commerce, the hearing record remains open 

for ten business days to penni! Members to submit additional questions for the record, which are attached. 

The format of your responses to these questions should be as follows: (I) the name of the Member whose 

question you are addressing, (2) the complete text of the question you are addressing in bold, and (3) your 

answer to that question in plain text 

To facilitate the printing of the hearing record, please respond to these questions by the close of 

business on Tuesday, April 18,2017. Your responses should be mailed to Grace Appe1be, Legislative 

Clerk, Committee on Energy and Commerce, 2125 Rayburn House Office Building, Washington, DC 

20515 and e-mailed in Word format to Grace.Appelbe@maiLhouse.gov. 

Thank you again for your time and effort preparing and delivering testimony before the 

Subcommittee. 

Sincerely, 

Chairman 

JohnSht~ Subcommittee on Environment 

cc: The Honorable Paul Tonko, Ranking Member, Subcommittee on Environment 

Attachment 
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CAUFORN!A WATER SERVICE 

I 

1/20 North First Street 

San Jose, CA 95112-4598 

April17, 2017 

The Honorable John Shimkus 

Chair, Subcommittee on Environment 

cjo Grace Appelbe 

(408) 367-8200 

legislative Clerk, Committee on Energy and Commerce 

2125 Rayburn House Office Building 

Washington, DC 20515 

Re: Questions for the Record fo!lowing Hearing on Nation's Drinking Water Infrastructure 

Dear Chair Shimkus: 

Thank you for inviting me and the National Association of Water Companies (NAWC) to testify 

before the Subcommittee on Environment during its March 16, 2017 heJring entitled, 

"Reinvestment and Rehabilitation of Our Nation's SC!fe Drinking Water Delivery Systems." 

We commend you and the Subcommittee for highlighting the challenges facing the country's 

drinking water systems and the solutions that will help ensure all Americans have safe, reliable, 

and high-quality water utility service for generations to come. California Water Service (Cal 

Water} and NAWC's other member companies stand ready, able, and willing to work with a!! 

levels of government to help overcome these challenges. 

Enclosed you will find NAWC's responses to the additional questions for the record you 

submitted. If you have any questions, please do not hesitate to reach out to us. Likewise, it 

would be an honor to further <Jssist the Subcommittee and Congress as you continue to work on 

the critical issues associated with the nation's water infrastructure. 

President & CEO 

Enclosure 

Qua1it1r Service. Value. 

ca!water.com 
177 


25370.131

Answers to Questions for the Record Following a Hearing on the 

Nation's Drinking Water Infrastructure Conducted by the Subcommittee on Environment, 

House Energy and Commerce Committee 

On March 16,2017, the Subcommittee on Environment of the House Committee on Energy and 

Commerce convened a hearing entitled "Reinvestment and Rehabilitation of Our Nation's Safe Drinking 

Water Delivery Systems," at which Martin A. Kropelnicki, President & CEO of California Water Service 

Group and President of the National Association of Water Companies (NAWC), test'1fied on behalf of 

NAWC about the ways the private water sector can help address the nation's drinking water 

infrastructure challenges. Chairman Shimkus submitted further questions for the record, and this 

document provides NAWC's responses. 

The Honorable John Shimkus, Chairman Subcommittee on the Environment 

Question: You mention in your testimony that "If we are to change the status quo, we must offer 

more "carrots and sticks" in the regulatory toolbox." The Safe Drinking Water Act already has 

provisions in it related to consolidation of systems. What do you think needs to change and can you 

give me a practical example of what you mean? 

Since at least 1992, the U.S. Environmental Protection Agency (EPA) has discussed the concept of 

consolidation in the water utility sector. 1 Several decades later, there are still more than 50,000 

community water systems in the U.S. and, according to the EPA's compliance database, in 2016, more 

than 1,500 of them were in significant noncompliance with the Safe Drinking Water Act-' 

It is without question that these rates of noncompliance are unacceptable and unsustainable, especially 

considering that hundreds of billions of dollars will be needed over the next several decades to maintain 

and upgrade the nation's drinking water systems. 3 Doing more to encourage the consolidation of failing 

and noncompliant water systems is an important means to overcome both of these interrelated 

challenges. 4 

1 Enviro!"Jmental Protection Agency, "Helping Small Systems Comply with the Safe Drinking Water Act: The Role of 

Restructuring," September 1992, available at: http://bit.ly/2pfyOcG. 

J Brent Fewell, "Encouraging Greater Compliance Requires a Change in the Status Quo," Journal AWWA, 

September 2016, p. 26, available at: http://bit.ly/2oc0XqJ. 3 American Water Works Association, 1

'Buried No Longer: Confronting America's Water Infrastructure Challenge," 

2012, p. 3, available at: http:/ /bit.ly/1xSHwAS. 4 As used herein, "consolidat'lon" refers to a process under which two or more water suppliers are combined under 

a single ownership and/or management structure. In those instances where a smaller water system is 

consolidated with a larger system1 the marginal cost of water utility service is shared by a larger total customer 

base, which is likely to result in reduced water utility rates in the smaller water system. 
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Answers to Qucst:oPs for the Record April 18. 2017 

Too frequently, though, consolidation is not prioritized, but rather viewed as a last resort. The situation 

faced by the community of West Goshen in Tulare County, California is a case in point. For years, the 

community dealt with ongoing water quality issues, including nitrate and bacteriJI contamination, In 

2012, the community's wells failed. Even though one of NAWC's largest members, Callfornla Water 

Service (Ca! Water), owns and operates a water system a little more than one mile away, the state 

provided emergency funding to fix the community's wells. Unfortunately, a short while after the 

emergency funding was received, a portion of the water system's pipes collapsed, and the residents 

were again without water. It was not until residents had sand flowing through their taps and were 

traveling to nearby towns to shower that the possibility of simply connecting the community to Cal 

Water's existing system was explored and ultimately chosen as the best solution. Cal Water worked 

with several non-profits, Tulare County1 and the state to secure funding to install more than 8,500 feet 

of new water pipe from its existing system to West Goshen. Today, the residents enjoy safe, reliable, 

and high-quality water utl!lty service. Had this option been pursued before the community's wells had 

collapsed- when it was only dealing with ongoing water quality issues- the residents of West Goshen 

would have avoided being without water for an extended period of time. 

In addition to taking steps to ensure that consolidation or other partnership Jrrangements are being 

prioritized, Congress should consider providing legal 'safe harbor' for utlllties that assume responsibility 

for failing and noncompliant water systems. The possibility of being held legally responsible for past 

noncompliance often serves as a poison pill to prospective new owners or operators, especially when 

the legal liabilities can range from the hundreds of thousands to millions of dollars, Ensuring that new 

owners or operators are not held liable for the misdeeds of others would do much to expand the use of 

consolldation and other partnership arrangements. 

Finally, Congress should explore the possibility of creJting a tax-based incentive for private water 

companies that enter into consolidation or partnership arrangements with noncompliant systems, !n 

those cases where the noncompllant system is publicly owned, the federal government is already not 

receiving any income tax revenue from the water system. It may make sense to extend that income tax 

benefit to a private water company that assumes responsiblllty for the noncompliant system, either for 

a certain number of years or untl! the failing system ls brought into compliance. In the short~term, such 

an incentive would be revenue neutral, and over the medium- and long-term, it would be a revenue 

enhancer, ln addition to creating an incentive for more partnerships and consolidations, this approach 

would help to address some short-term affordabi!ity questions and free up additional capital to be 

invested into the water systems. 

Question: How can Congress incentivize innovative solutions to drinking water infrastructure and 

treatment problems? Can you give some examples? 

There are a number of things that Congress can and should do to further incent!vize innovative solutions 

to the country's water infrastructure challenges. Quite simply, we cannot expect more money to fix the 

problem, as we know firsthand the consequences of simply putting Band~Aids on failing water systems 

with financial subsidies without doing or requiring more. 

Most importantly, water systems need to be held accountable. It should not be acceptable to anyone 

that there are hundreds, if not thousands, of water systems across the country that do not have the 

i 2 
179 


25370.133

/\nswers to Question~ for th~ R.ecord Subcormr\l:le-t' on ::nv1ronrnent. House E'1ergy & Cornnerce Comrn,ttee 

financiat technical, and managerial capabilities to ensure their customers receive reliable, high-quality 

service. !t should not be acceptable to anyone that there are hundreds, if not thousands, of water 

systems across the country that are allowing their infrastructure to deteriorate, intentionally or not. 

And it certainly should not be acceptable to anyone that, there are thousands of reported 

health-based violations of the nation's drinking 

All water systems should be held accountable to ensure federal subsidies are used efficiently and cost~ 

effectively. As a genera! rule, we should expect communities to abide by principles of effective utility 

management as a condition of federal funding. Those systems that are unable or unwi!!ing to abide by 

these principles should be encouraged if not required- to pursue consolidation or partnership 

arrangements with owners or operators who can and do effectively manage and operate their 

respective water systems. 

Unfortunately, a double-standard appears to exist when it comes to the enforcement of the nation's 

water quality regulations. Recent research indicates that government-owned water supp!lers not only 

violate the Safe Drinking Water Act significantly more their private counterparts, but 

also that they are less likely to be penalized for those Ensuring that a !I water supplierspublic or private-~ are held to the same standards would do much to help ensure that a!! Americans 

have access to safe, reliable, and high-quality water utility service. 

Apart from simply holding all water systems accountable, we must encourage more public-private 

partnerships <.1nd risk-sharing, where the private sector can assume some of the risks of jointly pursuing 

innovative solutions with communities. As discussed previously, conso!ldat!on and partnerships should 

not be viewed as a 'last resort,' but rather as an effective and efficient tool to help solve the nation's 

drinking water challenges. In terms of project financing, Congress should remove water projects from 

state volume caps for private activity bonds, bringing this piece of the nation's critical infrastructure in 

line with airports, high-speed rail, and solid waste disposal, all of which are currently exempt from 

existing caps. Finally, Congress should consider providing a tax incentive to private water companies 

that assume the responsibility of operating failing water systems, which would help to level the playing 

field between public and private water utilities. 

Question: How do you quantify and address affordability for the consumer? 

Given the challenges faced by the nation's drinking water systems- be it the current investment gap or 

serious noncompliance with water quality standards, 'affordability' cannot be assumed to be 

synonymous with 'cheap/ Instead, affordabi!ity should be viewed through the lens of 'value,' which 

takes into account the quality of the product and service customers are receiving. !n short, having low 

water utility rates is not, in and of itself, virtuous. 

lt is relatively easy for a water supplier to have 'cheap' water utllity rates by simply neglecting its 

infrastructure and the needs of its customers, For example, one government-owned water utility with 

"Environmental Protection Agency, "Providing Safe Drinking Water in America: 2013 National Public Water 

Compliance Report," p. 3, available http://bit.ly/2oRf080. 

David Konisky and Manuel Teodoro, "When Governments Regulate Governments," American Journal o[Politicaf 

Science, July 1, 2015, available at: http://bit.ly/2ntb5z6. 

jl 
180 


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Answ('rS to Quest1o:<s for the Record i\pn! 18,2017 

'cheap' rates had deferred maintenance on its water system to the point that it "did not meet either fire 

suppression standards ... or norma! operating standards." 7 A separate government-owned water 

supplier is currently on a 148,000-year water main replacement cycle. Stated differently, it wl!l take this 

utility 148,000 years to replace a!! of the water mains in its system. 8 As is the case with serious 

noncompliance with water quality standards, neglecting a water system in this way is unacceptable and 

unsustainable. 

Generally speaking, water utility rates should reflect the actual, true cost of water service, including the 

costs of operating, maintaining, and upgrading the water system. This standard, which is employed by 

NAWC's members, is important for several reasons. First, it sends an accurate price signal to the 

consumer, resulting in a more efficient use of the resource. 9 Second, having rates that reflect the actual 

cost of service helps to ensure the financial stabllity and viability of the utility, the benefits of which are 

discussed in detail below. 

The importance of having water utility rates that reflect the actual cost of service notwithstanding, there 

are several steps that can and should be taken to help ensure that water utility service remains 

affordable. Perhaps most importantly, the consolidation of smaller water systems that have significant 

infrastructure needs and water quality challenges will create superior economies of scale that provide 

better value propositions to customers. Increasing the number of customers that share the costs of 

operating, maintaining, and upgrading a water system reduces the proportion of those costs for which 

any individual customer is responsible. 

With service areas that already span numerous political subdivisions, NAWC's members are uniquely 

positioned to help make further consolidation a reality for small water systems across the country. For 

example, Cal Water was recently able to implement regional cost~sharing between its Lucerne service 

area in Lake County, California and its service area in the San Francisco area. The Lucerne service area is 

relatively small, with only about 1,400 service connections, but has significant infrastructure and water 

quality needs. Given this, water utility rates had been relatively high in thls severely disadvantaged 

community. After the implementation of regional cost-sharing, typical customers in the lucerne service 

area have seen their monthly water bl!!s decrease by nearly 30%. 

Second, water utilities should implement programs that support those customers facing economic 

hardship, Many of NAWC's members have low-income rate support programs that provide customers a 

discount on their monthly water bllls. For example, Cal Water's low-Income Rate Assistance program 

provides customers with a SO% discount on their monthly service charge. Several of NAWC's members, 

including Cal Water and American Water, have gone even further by establishing shareholder-funded 

grant programs that are designed to assist customers facing short-term economic or other hardships. 

7 City of Tulare, "2015/16 Adopted Budget," June 2, 2015, p. 15, available at: http://bit.ly/2o0v8HF. 8 Golden State Water Company, "Golden State's (Proposed) Findings of Fact and Supporting Evidence and Law," in 

City of Claremont v. Golden State Water Company, Superior Court of the State of California -los Angeles County, 

Case Number BC566125, August 5, 2016, p. 35. 9 James lauglin, "Full Cost Pricing Key to Sustainabiiity," Water World, January 2013, available at: 

http://bit.iy/2ocyOlr. 
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Ar'SWL'rs to Ques\tons for the Reco~d Subcornm:Hee O'l Fnv:ronment, House Energy & Commerce Comrn•ttee 

Additionally, adjusting water rate structures and the balance between a utHity's fixed and quantity 

charges may provide benefit to !ow-income customers. For example, a utility with a larger number of 

!ow-income customers could decrease the proportion of their revenue requirement collected through 

fixed monthly service charges and increase the proportion collected through quantity charges. This 

could provide the customer with more control over their monthly water bills. However, this strategy 

must be managed locally and based on the unique circumstances of individual water suppliers. 

Finally, there should be consideration for providing direct relief to challenged and low-income 

customers. Currently, federal funds flow directly to water utilities, which enables them to charge !ower 

rates to a!! of their customers, including those that are not facing any type of economic hardship. A 

more efficient approach may be to transfer funds directly to challenged and low-income customers, 

similar to the Low Income Home Energy Assistance Program for gas and electric customers. 

Question: How hospitable is the private capital market to financing investments in drinking water 

infrastructure? 

What, if anything, can Congress do to encourage greater receptivity? 

Historically, the capital markets have been very receptive to financing investments in water 

infrastructure, for the pub!Jc and private sector a !ike. The fact that water utilities provide an essential 

service and experience l1mited financial volatility have made them attractive investments. 

The continued receptivity of capita! markets to financing water infrastructure investments is dependent 

on water utilities being effectively managed. For instance, NAWC estimates that its six largest members 

alone are collectively investing nearly $2.7 billion each year in their water systems. This level of 

investment is possible because the corporate credit ratings of NAWC's members are among the highest 

in the U.S. 

On the other hand, we have seen the markets downgrade the credit ratings of some municipal water 

and wastewater suppliers over the last several years, For example, in 2016, Moody's downgraded the 

City of Jackson, water and sewer bonds, partly as a result of a deterioration of the utility's 

financial In many cases, these types of downgrades occur because a utility's rates are 

not keeping pace with the actual cost of water utllity serv!ce. 11 Too frequently, needed water system 

improvements are indefinitely deferred as a result of the short-term political interest in keeping water 

rates as !ow as possible, which only serves to create the need for more significant rate increases in the 

Moody's, "Moody's Downgrades to Baaa3 the City of Jackson's (MS) Water & Sewer Revenue Debt," August 17, 

2016, available at: http://bit.ly/2nWC4PO. 

11 Sharlene leurig, "Water Ripples: Expanding Risks for U.S. Water Providers," A Ceres Report, December 2012, 

("Since 2010, by far the most common cause of credit downgrades in the water sector has been failure to increase 

Is 
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25370.136

future.v The importance of these factors to market receptivity is l!lustrated by the fact that 35% of 

Moody's rating of municipal utility debt is based on a uti!lty's financi;:ll strength, 13 

Apri! 113,2017 

!n short, capita! markets react to risks; the higher the perceived risk, the less receptive they wi!l be to 

financing an investment without a commensurate increase in return. Given this, the issue Is less about 

the receptivity of the markets to financing water infrastructure investments, and more about whether 

water utlllties are being managed and operated well. As is discussed in several of NAWC's other 

responses to the Questions for the Record, this is, indeed, something Congress can help ensure. 

Question: You make the point in your testimony that in many instances, water system failures are not 

due to the absence of funding, but rather are attributable to poor management and decision making. 

From your perspective, what metrics should be used to assess what drinking water problems are 

caused by a lack of funding and what drinking water problems are caused by poor management? 

The performance of all water systems should be measured based on the quality and consistency of 

water and services each provides to its customers. NAWC believes that the 10 attributes of effective 

utility managcment, 11\ endorsed by the EPA and each of the major water industry associations, including 

NAWC, provide the framework for measuring sound water utility management decision-making. These 

attributes include: 

Product Quality 

Employee and Leadership Development 

Financial Viability 

Operational Resiliency 

Water Resource Adequacy 

Customer Satisfaction 

Operational Optimization 

Infrastructure Stability 

Community Sustainability 

Stakeholder Understanding and Support 

These attributes consist of both leading and lagging indicators of overall water system performance. 

Financial viability is one of the most important leading metrics, but particularly the use of full-cost 

pricing or life-cycle tlna1ysis. Additionally, there is a strong correlation between financial viability and 

regulatory compliance, which is a key lagging indicator. 

It is important to recognize that a lack of funding for needed water system improvements is not always 

an indicator that additional federal or state resources are needed. Unfortunately, many times water 

utilities would be able to raise the capitn! needed to finance an important water system improvement by 

"

2 California-Nevada Section of the American Water Works Assoclation, "2015 California-Nevada Water and 

Wastewater Rate Survey," 2015, p. 3, available at: http://biUy/2nsK6mr. 

13 Moody's, "U.S, Municipal Utility Revenue Debt," july 30, 2014, p. 13, available at: http://biUy/2oUet20. 14 EUM Utility leadership Group, "Effective Utility Management: A Primer for Water and Wastewater Utilities," 

January 2017, available at: http://bit.ly/2p6MAXC. 
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Ane:,wers to Questions for the Record Subcornr:1ittee on Env1ronn-;cnt. House Energy & Commerce Corrtn1ttce 

adjusting water rates, but are simply unwilling to do so. 1n these cases, water system improvements 

that are needed to ensure long-term system safety and reliability give way to short-term political 

expediency. 15 This practice of intentionally underpricing water utility service does not benefit the 

public, and should nat serve as a justification far additional federal or state funding: 

Ultimately, this resistance to higher water rates often results in utilities exhibiting less~ 

than-optimal system maintenance and neglecting long-term needs until a crisis forces them 

to act. At that paint, a rate increase can be justified as a response to pending system 

failures. Ultimately the artiflcia! suppression of water rates can defeat the very intention of 

keeping water affordable. Financing system improvements in response to crisis can force 

systems to go to market when their weak financial condition demands a higher rate of 

return. Ratepayers then end up paying more for system repairs in the form of higher 

interest payments and may be paying for poorer services. Perversely, this crisis-response 

mode can make utilities eligible for emergency funding available from state or federal 

government that is offered at a lower cost than market, which perpetuates the problem of 

reactive system management and persistent underpricing. 16 

At the other end of the spectrum, there are certainly cases where water suppliers are unable, not 

unwilling, to raise the capital needed to finance an important water system improvement by adjusting 

water rates. Consider a rural water system with 500 customers in a disadvantaged community that 

needs to construct a new $10 million water treatment facility to comply with water quality regulations. 

Each of the utility's customers would have to pay more than $20,000 for this project. Assuming the 

plant has a 50-year lifespan and the utility is ab!e to finance the project interest-free, each customer 

would end up paying more than $33 per month just for the new treatment facility, which may very weH 

be too much of a burden for a disadvantaged community. !n this instance, the first question that should 

be asked is whether there is an opportunity for consolidation or a partnership arrangement that would 

allow the costs of the new plant to be spread over a larger customer base. Only after considering this 

option should federal and state funding be considered. 

!n short, federal and state funding needs to be used more efficiently. As a general rule, applicants for 

federal and state funding should demonstrate that they have fully accounted for the long-term costs of 

their projects, including any risks inherent in construction, operations, or maintenance, and have 

selected the delivery model that provides the best value. For a community to maintain and enhance the 

condition of its infrastructure long-term, water utilities should be expected, at a minimum, to manage 

their assets based on a process where adequate repair1 rehabilitation, and replacement are fully 

reflected in management decisions, including water pricing. 

~ Table Rock Capital, "Alternative rlnancing Mechanisms to Restore, Rebuild, and Adapt U.S. Water & Wastewater 

lnfrastructme: Assessing the Potential for Publlc··Private Innovation to Reinvest in Municipal Infrastructure," 

August 2014, p. 8, available at: http://bit.ly/2p6YaiL 

15 The Johnson Foundation, "Financing Sustainable Water lnfrastructure," January 2012, p. 18, available at: 

http://bit.ly/lTQmjEM. 

17 
184 

Æ 


25370.138

/\nswer·s to Quesuor's for the Record Apnl18 201/ 

Question: In your testimony~ you discuss how partnerships and consolidation can be used to help 

water systems attain compliance with drinking water standards. What barriers are preventing the 

formation of peer-to-peer partnerships or public private partnerships? 

The most significant barrier to the consolidation of systems and other partnership arrangements is that 

many failing water utilities simply are not being held accountable, AI! WiJter utilities must be expected 

to maintain their systems and operations in compliance with health-based laws, If a utillty is unable to 

attain and maintain compliance or is plagued with a history of non-compliance, it is unlikely that simply 

providing it with additional funds is going to solve the problem. In these instances, consolidation and 

other partnership arrangements should be prioritized, if not required, as they are likely to be the most 

efficient and cost-effective means of ensuring the water system's customers have access to safe, 

reHab!e, and high-quality water utility service. 

Second1 the possibility the~t a new owner or operator of a failing water system can be held legally 

responsible for past noncompliance can create a significant barrier to consolidation or other partnership 

arrangements. The prospect of hundreds of thousands or even millions of dollars of fines and penalties 

serves as a poison pilL Establishing a !ega! 'safe harbor' for utilities that assume the responsibility of 

operating fai!lng and noncompliant water systems would do much to increase the willingness of superior 

water utilities to enter into consolidation or other partnership arrangements. 

Finally, most municipal infrastructure projects <Jre financed by tax-exempt municipal bonds. Generally, 

the tax-exempt status of these bonds is lost if a private entity acquires long-term interest in the 

project. While the Internal Revenue Service has issued rules designed to give state and local 

governments a means to preserve the tax-exempt status of these bonds when they enter into a 

partnership with a private entity, as currently drafted, these remedies are not practicable for water 

infrastructure projects, which deters many otherwise beneficia! public~private partnerships. Here again, 

a reasonable and narrowly taHored solution to this issue would go a long way to increasing the use of 

consolidation and other partnerships in the water ut11ity sector, 

Page i 8