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[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]

 
              HEARING TO REVIEW RURAL WATER INFRASTRUCTURE 

=======================================================================

                                HEARING

                               BEFORE THE

   SUBCOMMITTEE ON RURAL DEVELOPMENT, BIOTECHNOLOGY, SPECIALTY CROPS,
                        AND FOREIGN AGRICULTURE

                                 OF THE

                        COMMITTEE ON AGRICULTURE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 23, 2010

                               __________

                           Serial No. 111-45

          Printed for the use of the Committee on Agriculture
                         agriculture.house.gov
                               ----------
                         U.S. GOVERNMENT PRINTING OFFICE 

55-885 PDF                       WASHINGTON : 2010 

For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; 
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Washington, DC 20402-0001 

                        COMMITTEE ON AGRICULTURE

                COLLIN C. PETERSON, Minnesota, Chairman

TIM HOLDEN, Pennsylvania,            FRANK D. LUCAS, Oklahoma, Ranking 
    Vice Chairman                    Minority Member
MIKE McINTYRE, North Carolina        BOB GOODLATTE, Virginia
LEONARD L. BOSWELL, Iowa             JERRY MORAN, Kansas
JOE BACA, California                 TIMOTHY V. JOHNSON, Illinois
DENNIS A. CARDOZA, California        SAM GRAVES, Missouri
DAVID SCOTT, Georgia                 MIKE ROGERS, Alabama
JIM MARSHALL, Georgia                STEVE KING, Iowa
STEPHANIE HERSETH SANDLIN, South     RANDY NEUGEBAUER, Texas
Dakota                               K. MICHAEL CONAWAY, Texas
HENRY CUELLAR, Texas                 JEFF FORTENBERRY, Nebraska
JIM COSTA, California                JEAN SCHMIDT, Ohio
BRAD ELLSWORTH, Indiana              ADRIAN SMITH, Nebraska
TIMOTHY J. WALZ, Minnesota           ROBERT E. LATTA, Ohio
STEVE KAGEN, Wisconsin               DAVID P. ROE, Tennessee
KURT SCHRADER, Oregon                BLAINE LUETKEMEYER, Missouri
DEBORAH L. HALVORSON, Illinois       GLENN THOMPSON, Pennsylvania
KATHLEEN A. DAHLKEMPER,              BILL CASSIDY, Louisiana
Pennsylvania                         CYNTHIA M. LUMMIS, Wyoming
BOBBY BRIGHT, Alabama
BETSY MARKEY, Colorado
FRANK KRATOVIL, Jr., Maryland
MARK H. SCHAUER, Michigan
LARRY KISSELL, North Carolina
JOHN A. BOCCIERI, Ohio
SCOTT MURPHY, New York
EARL POMEROY, North Dakota
TRAVIS W. CHILDERS, Mississippi
WALT MINNICK, Idaho
------

                                 ______

                           Professional Staff

                    Robert L. Larew, Chief of Staff

                     Andrew W. Baker, Chief Counsel

                 April Slayton, Communications Director

                 Nicole Scott, Minority Staff Director

                                 ______

Subcommittee on Rural Development, Biotechnology, Specialty Crops, and 
                          Foreign Agriculture

                MIKE McINTYRE, North Carolina, Chairman

BOBBY BRIGHT, Alabama                K. MICHAEL CONAWAY, Texas, Ranking 
JIM MARSHALL, Georgia                Minority Member
HENRY CUELLAR, Texas                 DAVID P. ROE, Tennessee
LARRY KISSELL, North Carolina        GLENN THOMPSON, Pennsylvania
WALT MINNICK, Idaho                  BILL CASSIDY, Louisiana

             Scott Kuschmider, Subcommittee Staff Director

                                  (ii)

                             C O N T E N T S

                              ----------                              
                                                                   Page
Conaway, Hon. K. Michael, a Representative in Congress from 
  Texas, opening statement.......................................     3
    Prepared statement...........................................     4
McIntyre, Hon. Mike, a Representative in Congress from North 
  Carolina, opening statement....................................     1
    Prepared statement...........................................     2
Peterson, Hon. Collin C., a Representative in Congress from 
  Minnesota, prepared statement..................................     5
Walz, Hon. Timothy J., a Representative in Congress from 
  Minnesota, prepared statement..................................     5

                               Witnesses

Adelstein, Hon. Jonathan, Administrator, Rural Utilities Service, 
  U.S. Department of Agriculture, Washington, D.C................     6
    Prepared statement...........................................     8
    Supplementary material.......................................    49
    Submitted questions..........................................    49
Locklear, Rhonda, Water and Wastewater Director, Town of 
  Pembroke, North Carolina, Pembroke, NC; on behalf of National 
  Rural Water Association........................................    24
    Prepared statement...........................................    25
    Submitted question...........................................    52
Fierros, Christina, Chief Operations Officer, Midwest Assistance 
  Program, Rural Community Assistance Partnership, Savannah, MO..    27
    Prepared statement...........................................    29
Norton, J. Michael, Executive Director, Northwest Arkansas 
  Economic Development District; President, National Association 
  of Development Organizations, Harrison, AR; on behalf of 
  National Association of Counties...............................    31
    Prepared statement...........................................    32
Larson, Troy, Executive Director, Lewis & Clark Regional Water 
  System, Sioux Falls, SD........................................    37
    Prepared statement...........................................    39
Kahl, P.E., Paul F., Deputy Director of Public Works, Allegany 
  County, Maryland, Cumberland, MD...............................    40
    Prepared statement...........................................    42

              HEARING TO REVIEW RURAL WATER INFRASTRUCTURE

                              ----------                              

                        TUESDAY, MARCH 23, 2010

                  House of Representatives,
 Subcommittee on Rural Development, Biotechnology, 
          Specialty Crops, and Foreign Agriculture,
                                  Committee on Agriculture,
                                                   Washington, D.C.
    The Subcommittee met, pursuant to call, at 10:11 a.m., in 
Room 1300 of the Longworth House Office Building, Hon. Mike 
McIntyre [Chairman of the Subcommittee] presiding.
    Members present: Representatives McIntyre, Bright, Minnick, 
Conaway, Thompson, Cassidy, and Herseth Sandlin.
    Staff present: Claiborn Crain, Tyler Jameson, Scott 
Kuschmider, Clark Ogilvie, James Ryder, April Slayton, Patricia 
Barr, Mike Dunlap, Jamie Mitchell, and Sangina Wright.

 OPENING STATEMENT OF HON. MIKE McINTYRE, A REPRESENTATIVE IN 
                  CONGRESS FROM NORTH CAROLINA

    The Chairman. Good morning. Welcome to today's hearing to 
review the state of water and wastewater disposal 
infrastructure in rural communities and the needs and 
challenges that these communities face. I am Mike McIntyre from 
the State of North Carolina. Thank you for your indulgence this 
morning. We usually are very prompt on starting, and I 
apologize for the unusual delays I had today. But I want to 
thank you for your patience and will make up for the time. I 
will shorten my opening statement so we can get right back to 
where we would have been in terms of time today.
    I do want to welcome back to this Subcommittee Mr. Jonathan 
Adelstein of the Rural Utilities Service. RUS is one of the 
several Federal agencies that administers water and wastewater 
programs, and they are the only one whose funding is directed 
entirely to rural communities. I also want to extend a special 
welcome to Ms. Rhonda Locklear, who will be testifying on our 
second panel today. Ms. Locklear is the Water and Wastewater 
Director of the Town of Pembroke, North Carolina, in my home 
county of Robeson County. So, Rhonda, we especially welcome you 
to come up here and join us today here in Washington.
    We are here today to examine the infrastructure needs and 
investment in rural areas and the long-term health of our water 
systems, which are so important. With that, I will cut short 
the other 4 to 5 minutes of remarks to keep us on time, and I 
will call on the Ranking Member, Mr. Conaway.
    [The prepared statement of Mr. McIntyre follows:]

Prepared Statement of Hon. Mike McIntyre, a Representative in Congress 
                          from North Carolina
    Good morning, and welcome to today's hearing to review the state of 
water and waste disposal infrastructure in rural communities and the 
needs and challenges these communities must meet. As Chairman of the 
Subcommittee, I want to thank all of you for being here, and I want to 
especially thank our witnesses who will be testifying before us today.
    I want to welcome back to this Subcommittee Mr. Jonathan Adelstein 
of the Rural Utilities Service. RUS is one of several Federal agencies 
that administers water and wastewater programs, but they are the only 
one whose funding is directed entirely to rural communities. I also 
want to welcome Ms. Ronda Locklear, who will be testifying on our 
second panel today. Ms. Locklear is the Water and Wastewater Director 
of the Town of Pembroke, North Carolina, which is in my Congressional 
district.
    We are here today to examine the water infrastructure needs and 
investment in rural areas. The long-term health of water systems is 
important to those of us who represent rural constituencies since the 
overwhelming majority of community water systems in America serve 
populations of fewer than 10,000 people according to EPA statistics.
    Rural communities that fit in this category have the same 
responsibility to provide safe, sustainable and affordable public 
drinking water and wastewater services to their citizens as urban and 
suburban cities do. Yet many of these communities are challenged by a 
small tax base and limited or no ability to issue bonds to finance such 
services or make timely system improvements when they are needed. And 
some of these smaller systems serve areas of extreme poverty whose 
citizens are at great risk from not having access to safe and sanitary 
water, particularly in communities along the southern border.
    At the same time, they must meet the same regulatory requirements 
for safe and sanitary drinking water and wastewater treatment as 
larger, well-capitalized systems.
    There are a number of programs across several Federal agencies that 
are in place to help bridge this gap and allow small communities to 
benefit from new or refurbished water systems. USDA's Rural Utilities 
Service provides loans, grants, and loan guarantees to build and 
maintain systems, and provide technical assistance to meet water 
quality standards. Like many programs in Rural Development, RUS water 
and waste disposal funds fill the void that is not provided through 
private financing.
    RUS programs have been rated among the best in the Federal 
Government with regard to its low delinquency rate and overall 
effectiveness in serving its mission. RUS systems have been in 
existence for many years, with personnel in place both nationally and 
in the states to help provide effective oversight.
    The need for assistance in rural America is so great that they have 
dealt with a significant application backlog for many years. I am 
pleased that the Recovery Act provided $1.38 billion in grants and 
loans to reduce the backlog, and I look forward to hearing 
Administrator Adelstein's assessment of his agency's oversight of 
obligating Recovery Act funds alongside FY10 program dollars.
    Whether a rural community utilizes RUS to meet their water 
infrastructure needs or uses another tool in its financing toolbox, all 
of them know what having reliable water and waste systems mean to their 
standard of living. The availability of safe, clean water is the most 
basic of human needs, regardless of where you live. But in addition to 
that, I hope our second panel today can stress to this Committee the 
importance of these systems to the growth of their communities. The 
things many of us in Congress have prioritized when it comes to rural 
development: new housing, health and education facilities, the creation 
and growth of small businesses--none of that takes place without strong 
water infrastructure.
    I believe that all of us here want make sure the investments made 
in rural America return the highest value for every taxpayer dollar 
spent. Today's hearing is one more examination of the rural development 
funding that is our responsibility. I look forward to hearing from 
today's witnesses and get their perspective on how we can make sure 
that every dollar that is spent in rural America is one that improves 
the quality of life for rural citizens.

OPENING STATEMENT OF HON. K. MICHAEL CONAWAY, A REPRESENTATIVE 
                     IN CONGRESS FROM TEXAS

    Mr. Conaway. Thank you, Mr. Chairman. I too want to thank 
our witnesses today, and thank you for holding this hearing. 
There are 16 Federal agencies involved in administering more 
than 88 programs that target rural development. It is most 
important that we maintain a close watch on how the 
Administration implements these programs and safeguards 
taxpayer dollars. In particular, we want to know that the funds 
are helping rural localities comply with Federal mandates 
during one of the most significant economic downturns we have 
had. Almost 1 year ago, this Subcommittee received testimony 
addressing innovative approaches to rural development. Since 
that time, USDA has continued to implement the 2008 Farm Bill, 
as well as had the opportunity to begin disbursing the funds 
and implementing the new programs provided for in the stimulus 
bill.
    I was interested to hear Secretary Vilsack continue to talk 
about a Regional Innovation Initiative in Rural Development 
during his testimony before the Appropriations Committee last 
month. I hope that Mr. Adelstein will be able to provide 
additional details on this particular initiative. Specifically, 
the Committee would be interested to know who will lead the 
regional coordination efforts and how the USDA has embarked on 
a concerted effort to leverage resources from the many other 
agencies involved in rural development.
    Ensuring the coordination of the many agencies involved in 
rural development activities is important. It is the duty of 
our Committee to ensure that the Administration's efforts are 
additive and not duplicative. This morning we will be focusing 
on the acute infrastructure needs throughout small towns in the 
United States. As environmental regulations become more 
stringent and the cost of constructing facilities rise, small 
communities are finding it increasingly difficult to finance 
new systems. The enormous capital outlays needed to finance 
even modest water infrastructure projects are beyond the 
reaches of most rural communities. It is important to remember 
above all that these programs are not social programs or 
welfare programs but a tool to enable small communities to 
comply with costly Federal mandates.
    While the stimulus bill provided an additional $1.3 billion 
for water and wastewater projects, that funding came with 
strings attached. In response to questions from this 
Subcommittee last year, USDA confirmed that the Davis-Bacon 
provisions and the Buy American provisions mandated in the 
stimulus bill would add significant cost to any project funded 
with stimulus dollars. In fact, the USDA estimated that the 
stimulus projects would cost 10-20 percent more under the 
Davis-Bacon and Buy American programs than if we had not had 
those artificial restrictions in place.
    We are concerned that this will significantly slow USDA's 
progress in addressing the backlog in water and wastewater 
applications. Even though USDA has been obligating available 
funds according to the deadlines laid out in the stimulus bill, 
less than \1/2\ of 1 percent of the stimulus funds have 
actually gone out the door for water and wastewater projects. 
This includes both direct loans and grants listed in the latest 
activities report. I hope the testimony this morning will help 
the Subcommittee better understand how USDA's initiatives are 
prioritizing applications, when projects will be actually 
completed, and how much the backlog has been addressed. Again, 
I would like to thank our witnesses for taking the time to be 
with us today and giving us this update on how they are 
assisting rural communities in the ever-expanding list of 
mandates and requirements passed down from the ivory towers of 
Washington. Thank you, Mr. Chairman.
    [The prepared statement of Mr. Conaway follows:]

  Prepared Statement of Hon. K. Michael Conaway, a Representative in 
                          Congress from Texas
    I thank the Chairman for holding this hearing today.
    With 16 Federal agencies involved in administering more than 88 
programs that target rural development, it is important to maintain a 
close watch on how the Administration implements these programs and 
safeguards taxpayer dollars. In particular, we want to know that the 
funds are helping rural localities comply with Federal mandates during 
one of the most significant economic downturns we have had.
    Almost one year ago, this Subcommittee received testimony 
addressing innovative approaches to rural development. Since that time, 
USDA has continued to implement the 2008 Farm Bill, as well as had an 
opportunity to begin disbursing the funds and implementing the new 
programs provided for in the stimulus bill. I was interested to hear 
Secretary Vilsack continue to talk about a regional innovation 
initiative in rural development during his testimony before the 
Appropriations Committee last month. I hope that Mr. Adelstein will be 
able to provide additional details on this initiative.
    Specifically, the Committee would be interested to know who will 
lead the regional coordination efforts and how USDA has embarked on a 
concerted effort to leverage resources from the many other agencies 
involved in rural development. Ensuring the coordination of the many 
agencies involved in rural development activities is important. It is 
the duty of this Committee to ensure that the Administration's efforts 
are additive and not duplicative.
    This morning we will be focusing on the acute infrastructure needs 
throughout small towns in the United States. As environmental 
regulations become more stringent and the costs of constructing 
facilities rise, small communities are finding it increasingly 
difficult to finance new systems. The enormous capital outlays needed 
to finance even modest water infrastructure projects are beyond the 
reaches of most rural communities. It is important we remember above 
all, that these programs are not social programs or welfare programs, 
but a tool to enable small communities to comply with costly Federal 
mandates.
    While the stimulus bill provided an additional $1.3 billion for 
water and wastewater projects, that funding came with strings attached. 
In response to questions from this Subcommittee last year, USDA 
confirmed that the Davis-Bacon and Buy American provisions mandated in 
the stimulus would add significant costs to any project funded with 
stimulus dollars. In fact, the USDA estimated that stimulus projects 
would cost 10-20% more with Davis-Bacon and Buy American than without. 
We are concerned that this will significantly slow USDA's progress in 
addressing the backlog in water and wastewater applications.
    Even though USDA has begun obligating available funds according to 
the deadlines laid out in the stimulus bill, less than \1/2\ of one 
percent of the stimulus funds have actually gone out the door for water 
and wastewater projects. This includes both direct loans and grants 
listed in the latest activity report available. I hope that testimony 
this morning will help this Subcommittee better understand how USDA's 
initiatives are prioritizing applications, when projects will actually 
be completed, and how much of the backlog has been addressed.
    I would like to thank the witnesses for taking time to be with us 
today and give us an update on their work to assist rural communities 
in meeting the ever-expanding list of mandates and requirements passed 
down from Washington.
    Thank you Mr. Chairman.

    The Chairman. Thank you, Mr. Conaway. Indeed, the 
availability of safe clean water is the most basic of human 
needs, and so we do take this very seriously. We appreciate 
your work. It is easy to get caught up in the bureaucracy and 
the paperwork and the applications, but in the end we can't 
have good health clinics, schools, attract businesses, have a 
good economic development atmosphere or a good quality of life 
for families if we don't get in the clean water and get rid of 
the dirty water. It is that simple and basic and that much of a 
necessity in the daily routine of life. So thank you for coming 
to share how you are improving the quality of life today and, 
indeed, how what you do will make a difference in the quality 
of lives throughout this country.
    I would encourage witnesses to use the 5 minutes provided 
for their statement to highlight the most important parts of 
your statement, and if you need additional time to summarize, 
then please go ahead and prepare to do that at this moment. 
Your full written statement will be submitted in its entirety 
to the Committee record. Also, with regard to other statements 
that other members of the panel would like to give in terms of 
an opening, those can be submitted for the record and will be 
made part of the record. The chair would expect that any other 
Members that may come in may also be allowed to put forth their 
statements into the record as well.
    [The prepared statements of Mr. Peterson and Mr. Walz 
follow:]

  Prepared Statement of Hon. Collin C. Peterson, a Representative in 
                        Congress from Minnesota
    Thank you, Chairman McIntyre, for holding this hearing today to 
focus on efforts to ensure that rural communities can meet the water 
and waste disposal infrastructure needs for their citizens.
    Depending on where you live in the United States, the challenges 
facing water infrastructure systems vary greatly. While my colleagues 
from California are dealing with the impact of severe drought on their 
water systems, in my part of the world, the Red River often brings so 
much water that it threatens to inundate many of the communities along 
its banks. The river crested over the weekend, and it looks like it 
won't be as bad as it has been in past years, but the impact of the 
floods on our rural water systems can be overwhelming.
    USDA's Rural Utility Service provides a tremendous service, 
identifying and responding to the unique water needs of rural 
communities. Because many rural towns have low tax bases and limited 
resources to maintain and upgrade water systems, RUS is often the only 
option out there to help them get safe drinking water into their homes.
    These programs are some of the best in Rural Development, not only 
because safe and sanitary water is a basic need, but because these 
programs are generally managed well, with historically low default 
rates. As a result, RUS receives a large number of applications every 
year.
    The Recovery Act included significant funds to address the backlog 
of applications for RUS water and wastewater grants and loans. I hope 
that today, we will hear about the progress being made to address the 
backlog with that additional funding.
    Again, thank you Chairman McIntyre for holding this hearing today. 
I want to thank all of the witnesses for joining us, and I look forward 
to their testimony.
                                 ______
                                 
    Prepared Statement of Hon. Timothy J. Walz, a Representative in 
                        Congress from Minnesota
    Chairman McIntyre and Ranking Member Conaway:

    I understand that Mr. Troy Larson, Executive Director of the Lewis 
& Clark Regional Water System, will be testifying before you today. I 
would like to express my strong support for the Lewis & Clark Regional 
Water Project and my great appreciation for the work that Troy, 
Chairman Red Arndt and the many others involved with Lewis & Clark do.
    A region cannot grow without reliable access to safe and clean 
water. When completed, the Lewis & Clark Regional Water System will 
provide protected and reliable drinking water to over 300,000 people in 
Minnesota, South Dakota, and Iowa This vital pipeline will distribute 
safe water to members in a 5,000 square mile area; roughly the size of 
the State of Connecticut. The project will improve the quality of life 
of area residents by addressing water quality, supply and 
infrastructure problems.
    The system will also serve as a catalyst for regional economic 
growth in both the short and long terms. The economic impact to the 
region from construction of the project will be significant and will 
include the creation of 3,730 construction related jobs. The direct, 
indirect and induced impact of the operation and maintenance of the 
facilities after construction is estimated to be over $7 million 
annually for the region, creating 74 permanent positions.
    States and members of the project annually allocate 20% of the 
funding needed for completion of the project With the U.S. Government 
responsible for 80% of the project, Lewis & Clark is dependent upon 
Federal funding for the amount of construction it is able to complete 
each year. Currently the project is scheduled for completion in 2019, 
but the project received $27 million in FY 2009 only to have its 
appropriations cut to $10 million in FY 2010 At this level, cities in 
Minnesota will not be connected to the pipeline until 2030. The 
residents of our state should not have to wait this long for safe water 
and economic progress.
    In order to properly plan and achieve its objectives, for a project 
of this scale, the system needs a stable funding source which is 
allocated annually and according to its capability. I strongly support 
the important work that Lewis & Clark is doing to better the lives of 
those in rural communities.

    The Chairman. We would like to welcome now the witness on 
our first panel to the table, Mr. Jonathan Adelstein, 
Administrator, Rural Utilities Service, U.S. Department of 
Agriculture. Thank you for your service, and please begin.

             STATEMENT OF HON. JONATHAN ADELSTEIN,
          ADMINISTRATOR, RURAL UTILITIES SERVICE, U.S.
          DEPARTMENT OF AGRICULTURE, WASHINGTON, D.C.

    Mr. Adelstein. Thank you, Mr. Chairman, for holding this 
critical hearing. Ranking Member Conaway and Members of the 
Subcommittee, thank you for the opportunity to testify. It is 
good to see my own Congresswoman is here, Congresswoman 
Stephanie Herseth Sandlin. Thank you for coming. We have, since 
1940 under the water program, worked steadily to help 
communities improve their environment and the quality of life 
for rural residents, as you said, Mr. Chairman. Our job is 
never done though. We thank you on the Subcommittee for your 
ongoing support of our water programs. This hearing really 
draws a critical highlight to such great work that we look 
forward to continuing to do together with this Subcommittee.
    For most of us, clean drinking water is available at the 
turn of the faucet, but for too many rural residents unsanitary 
drinking water, aging infrastructure, and daily trips to 
community wells are too often a grim reality. President Obama, 
Secretary Vilsack, our Under Secretary Dallas Tonsager, and I 
are committed to addressing this in every way we can. USDA is 
working to build a stronger, more sustainable rural America 
that is repopulating and thriving economically. Ensuring that 
rural communities are equipped with modern water and wastewater 
infrastructure is a fundamental necessity to making that 
possible.
    RUS is proud to be the vehicle through which rural 
communities can access affordable water services. In the past 8 
years, RUS has provided over $13 billion to rural communities 
for rural water and waste infrastructure. In Fiscal Year 2009 
additional funding through the Recovery Act helped us to reach 
a new milestone, investing a total of $2.5 billion in new and 
improved rural water systems. In Fiscal Year 2010 we continued 
to fund projects with the remaining Recovery Act funds, as well 
as the $1.3 billion provided through the Fiscal Year 2010 
appropriations. We do anticipate that we will be able to commit 
all those funds by the end of the fiscal year.
    Through ARRA our water program received $1.38 billion in 
budget authority, which we expect will translate into $3.3 
billion in investments in rural water projects. To date, we 
have announced over 642 ARRA projects across the country 
totaling more than $2.3 billion. Nearly \1/3\ of that has gone 
to communities with over ten percent unemployment, and over 
$230 million has gone to areas of persistent poverty.
    We are well on our way to obligating all ARRA funds by 
September 30, and there are three factors that have contributed 
to our success so far. First, our interest rates are at their 
lowest in program history. We offer three rate tiers: market, 
intermediate, and poverty rate. The farm bill assured that 
those rates fluctuated with the market rate.
    This change was especially beneficial to low-income 
communities that are facing very tight credit markets. Lower 
interest rates enable us to offer lower-cost loans to more 
communities and target our grant funding to communities that 
need it most. Second, we are partnering with other agencies to 
share in the funding of these projects. The $2.3 billion 
approved has been combined with $558 million contributed by 
other government agencies and by the applicants themselves. 
Third, we have leveraged the local relationships of our 
technical assistance providers, some of whom are represented 
here today. Through ARRA, RUS provided $14.2 million to 
supplement the existing RD Circuit Rider contract. This allowed 
the National Rural Water Association to increase its staff 
through 2010 to help communities identify their needs and to 
help them apply for ARRA funding.
    Further, we awarded a $5 million Technical Assistance and 
Training Grant to the Rural Community Assistance Partnership. 
Their field teams help us identify communities with needs, 
particularly those in persistent poverty areas. Recipients such 
as the Yuma County Improvement District have benefited from 
these kind of efforts. Through ARRA, the district received 
$18.2 million in funding to bring affordable sewer service to 
over 1,000 residences in their Colonias community, and 
leveraging funds from other agencies made this $23 million 
project a reality. The ARRA projects have funded to date a 
diverse array of projects; as diverse as rural America itself.
    For many communities the funding has provided an 
opportunity to replace aging infrastructure. In Union Springs, 
Alabama, for example, the local water authority couldn't afford 
the cost of repairing leaking, aging water lines. Thanks to a 
$1.7 million loan from RUS, upgrades to their water lines would 
mean increased water pressure and that will provide sufficient 
fire protection for the community. In other cases, funding 
allows the extension of service to previously unserved areas. 
In Wythe County, Virginia, RUS funding will extend public water 
service to 178 homes. Residents there are currently served by 
wells, many of which have tested positive for coliform, so the 
$5.3 million in funding means safe, clean water for county 
residents.
    ARRA funds are also cultivating regional initiatives all 
over the country. Consistent with the goals of the Recovery 
Act, these projects are currently creating urgently-needed 
jobs. Just as importantly they are providing the foundation for 
economic development and more jobs for years to come in rural 
communities. As we approach the 40th anniversary of Earth Day 
on April 22, our program stands out as an investment in a 
cleaner environment and needed infrastructure. Our ability to 
offer these critical programs is a result of your work, so it 
is an honor to work with you on behalf of the 50 million 
Americans in our rural communities. I certainly appreciate your 
continued oversight. I thank you for holding this hearing and 
look forward to your questions.
    [The prepared statement of Mr. Adelstein follows:]

  Prepared Statement of Hon. Jonathan Adelstein, Administrator, Rural 
  Utilities Service, U.S. Department of Agriculture, Washington, D.C.
    Chairman McIntyre, Ranking Member Conaway and distinguished Members 
of the Subcommittee, thank you for this opportunity to update you on 
the Water and Wastewater Disposal Loan and Grant Program of the Rural 
Utilities Service, part of the United States Department of 
Agriculture's (USDA) Rural Development Mission Area (RD).
    Many of us take for granted the ease with which we can turn on our 
faucets and access clean drinking water. But for many rural residents, 
unsanitary drinking water, aging or nonexistent infrastructure, and 
daily trips to a community well present a grim reality. President 
Obama, Secretary Vilsack, and Rural Development Under Secretary Dallas 
Tonsager are committed to building a stronger and more sustainable 
rural America that is repopulating and thriving economically. Ensuring 
that rural communities are equipped with modern, reliable water and 
wastewater infrastructure is a fundamental starting point.
    The challenge remains the same, providing service in rural areas 
that are relatively expensive to serve due to low population density or 
difficult terrain. Poverty rates in rural America remain much higher 
than national averages. While the recent economic downturn has 
dramatically impacted all segments of our population, much of rural 
America has been dealing with increasing unemployment and decreasing 
population for many years. In the current economy, these challenges 
have grown even more acute. Our rural residents are aging, and young 
people, who see no job opportunities for themselves in their rural 
hometowns, move to the nearest urban centers to seek employment. If we 
are going to give our young people who want to stay where they grew up 
that choice, basic water infrastructure is a prerequisite.
    Rural Development's RUS is proud to be the vehicle through which 
rural communities can provide improved access to affordable water and 
wastewater services to their residents. In just the last 8 years alone, 
more than $13 billion in loans and grants has been provided through RUS 
for rural water and waste infrastructure. In Fiscal Year (FY) 2009, 
thanks to additional funding made available through the American 
Recovery and Reinvestment Act (ARRA or Recovery Act), the Water and 
Waste Disposal Loan and Grant program reached a new milestone, 
investing a total of $2.5 billion in new and improved rural water and 
waste systems, higher than any other year in program history. More than 
\1/2\ of that funding was made possible by the Recovery Act. In FY 
2010, we continue our efforts to fund needed projects with the 
remaining ARRA funds, as well as the $1.6 billion provided to the 
Program through FY 2010 appropriations.
    More than 70 years ago, Congress saw a need for improved access to 
quality water in rural areas and created our program to address that 
need. Congress understood then, as we do now, that affordable and 
reliable water and wastewater infrastructure are the building blocks 
for a healthy and safe community.
    Water's impact stretches well beyond basic public health. Modern, 
reliable water and waste infrastructure also provides the foundation 
for economic growth for decades to come. Food producers, grocery 
stores, restaurants, manufacturing plants and even utilities providers 
rely on water and waste services to support their daily business 
operations. A rural community with these services can attract new 
businesses, creating jobs and opportunities for its rural residents, 
while a town or rural area lacking these essential services is clearly 
handicapped, both in its immediate quality of life and in its ability 
to build for the future.
    As we approach the 40th Anniversary of Earth Day on April 22nd, our 
Water Program funding stands out as an investment in a cleaner, more 
sustainable environment, as well as an important investment in basic 
rural infrastructure. Since 1940, USDA programs have been working 
steadily and quietly to transform communities and enhance the quality 
of life for rural residents. Still, our job is never done, and we look 
forward to continuing our work with this Subcommittee to advance our 
ongoing efforts. Your support has made a key difference in countless 
lives, and we at RD Rural Utilities Service (RUS) thank you for making 
it possible for us to establish basic infrastructure in so many parts 
of Rural America.
Recovery Act Update
    Through the ARRA, RD's Water and Environmental Program received 
$1.38 billion in budget authority, which we anticipate will translate 
to a total $3.3 billion \1\ investment in rural water infrastructure. 
The ARRA funds are being implemented through our existing Water and 
Waste Disposal program in the form of loans and grants to provide 
access to clean drinking water and sanitary sewer, solid waste and 
storm drainage facilities in communities of 10,000 or less. I am 
pleased to report that the program, to date, has announced over 642 
ARRA projects in 49 states and Guam, totaling more than $2.3 billion. 
With numerous project announcements lining up for our Earth Day events 
around the country, we are on track to fully obligate all ARRA funds by 
September 30th, 2010, as the statute requires.
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    \1\ A final figure will be determined by the final aggregate loan/
grant split, on a project-by-project basis.
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    Our RD offices in the states are working hard to ensure that this 
critical ARRA funding is reaching the communities that need it most. We 
are doing so at a pace that enables us to maintain the quality of 
underwriting that is the cornerstone of our program. Nearly \1/3\ of 
ARRA funding provided to date has gone to communities with unemployment 
above ten percent. Also, more than $230 million in ARRA funds has been 
provided for projects serving areas of persistent poverty. In addition 
to the dedicated efforts of RD staff in Washington, D.C., and across 
the country, three factors have contributed to our success to date.
    First, our interest rates are currently at their lowest in program 
history. Depending on a household's income and health risk, our program 
offers three tiers of interest rates: market, intermediate and poverty 
rate. The 2008 Farm Bill amended the interest rate structure to ensure 
that the poverty and intermediate rates fluctuate with the market rate 
by setting the poverty rate at 60 percent of the market rate and the 
intermediate rate at 80 percent of the market rate. The market interest 
rate is based on the 11 Bond Index, published by Bond Buyer for general 
obligation bonds. Currently, the market rate is four percent, 
intermediate is 3.25 percent and the poverty rate is 2.375 percent.
    The 2008 Farm Bill change in interest rate structure has been 
positively received by communities across rural America. It is 
particularly beneficial to communities working to recover from economic 
challenges and limited credit markets. As these communities seek to 
provide safe, affordable water and wastewater services to their 
residents, access to reasonable financing is critical. The lower 
interest rates allow us to offer lower cost loans to more communities 
and use grant funding only when necessary. In addition, it has allowed 
us to target our grant funding to the projects in economically 
challenged areas that need more grant funding than would be available 
in a typical funding year. The result is that we have been able to 
provide grants where needed and maintain a loan to grant ratio of 60 to 
40 percent in our ARRA implementation and 70 to 30 percent in our 
regular program.
    Second, we have continued our tradition of partnering with other 
agencies and organizations to share in the funding of these critical 
projects. The $2.3 billion approved has been combined with $558 million 
contributed by other Federal and state agencies and by the applicants 
themselves.
    Third, we have leveraged the strong community relationships of our 
technical assistance providers to implement the Recovery Act. In July 
2009, USDA announced $14.2 million to supplement the existing RD 
Circuit Rider Program contract in Fiscal Years 2009 and 2010. With this 
additional funding, the National Rural Water Association increased its 
capacity to help rural communities identify their water and waste 
infrastructure needs and prepare the documentation necessary to apply 
for RD ARRA funding. This much needed assistance is provided at no cost 
to small rural communities that may not have the resources or expertise 
to prepare a project proposal.
    On top of this, in early March 2010, we awarded a $5 million 
Technical Assistance and Training Grant, made possible by ARRA, to the 
Rural Community Assistance Partnership (RCAP). The RCAP's field teams 
will continue our efforts to identify communities with water and waste 
infrastructure needs, particular those in areas of persistent poverty. 
The technical assistance providers have been a tremendous resource for 
recipients of RUS funding for rural water and waste infrastructure. 
Although the funds are being processed through existing programs, the 
ARRA included reporting and other requirements new to our customers. 
With the help of circuit riders and other technical assistance 
providers, communities receiving funding are also offered a helping 
hand with these reporting requirements. As a result, program recipients 
have a very high reporting compliance rate.
    Recipients, such as the Yuma County Improvement District, have 
benefited from these factors. Through ARRA funding, the District was 
awarded a loan of $2 million and a grant of $16.2 million to bring 
public sewer service to more than 1,000 residences in Yuma, Arizona, a 
Colonia \2\ first established in 1900. We worked to bring together 
various funding partnerships that made this $23 million wastewater 
project a reality for the community. Partners included the Arizona 
Department of Environmental Quality, the Water Infrastructure Finance 
Authority of Arizona, the Border Environmental Cooperation Commission, 
the U.S. Environmental Protection Agency , and the North American 
Development Bank.
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    \2\ Colonias are small, unincorporated communities found in 
Arizona, California, New Mexico, and Texas and are generally within 150 
miles of the United States and Mexico border. Colonias generally have 
issues such as lack of a potable water supply, lack of adequate sewage 
systems, lack of decent, safe and sanitary housing, inadequate roads, 
and drainage.
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Community Impact
    The ARRA projects funded, to date, are as diverse as rural America 
itself. For many communities, the funding provided an opportunity to 
replace aging infrastructure and invest in a better future for their 
residents. For example, The Town of Rose Hill, North Carolina will use 
a $1.58 million loan and a $1.7 million grant to construct a new supply 
well to replace their current well, originally constructed in 1939. In 
addition, the town will no longer need to rely on their 60 year-old 
water tank to serve their 670 residents. Instead, the community will 
use ARRA funds to construct a new 300,000 gallon elevated storage tank 
and install new water lines and automated meter readers throughout the 
system.
    The Town of St. Johnsbury, Vermont received $15 million in funding 
to separate and upgrade its 75 year old water and sewer lines. The town 
is under a state order to separate the storm water from the sewer lines 
as raw sewage overflows into three rivers during rain events. Due to 
the age of the system, the town loses 759,000 gallons per day of water, 
more than it provides to customers. The modernization of the system 
will provide clean and safe water and sewer services and protect the 
environment.
    In Union Springs, Alabama, a new tank and upgrades to older, 
leaking water lines will mean increased water pressure to provide 
sufficient fire protection for the community. This area of Alabama has 
experienced severe drought conditions over the last several years, and 
the local water authority could not afford the high costs of repairing 
their aging, damaged water lines. Thanks to a low-interest, $1.75 
million loan from RUS, the community will have a reliable water source 
and sufficient water pressure to protect their residents from fires.
    In other cases, funding allows for the extension of service to 
previously unserved or underserved areas. In Wythe County, Virginia, 
RUS is providing funding to extend public water service to 178 homes. 
Residents in this community are currently served by private wells, 
springs, and cisterns. Many of the wells have become contaminated, 
testing positive for both total coliform and fecal coliform. A $5.4 
million loan-grant combination will help the county install new water 
lines, a new storage and a new pump station. In Hand County, South 
Dakota, the Mid-Dakota Rural Water system received a $12 million loan 
to improve their water system, increase the supply of treated water to 
meet growing demands, and add new users for the first time since 2006. 
In Hancock County, Tennessee, the 850 residents of Sneedville will soon 
have a permanent and reliable source of water, thanks to an $828,000 
loan-grant combination which will fund a water treatment system and a 
clearwell tank. This improved water system will also connect 25 new, 
unserved customers in the nearby community of Treadway.
    The ARRA funds are also cultivating regional initiatives to provide 
service to unserved and economically challenged areas. A good example 
is the Ozark Mountain Regional Water Project in Arkansas that was 
awarded $19.37 million loan and $36.36 million grant to construct an 
intake structure and water treatment plant on Bull Shoals Lake. The 
project will also include construction of five water storage tanks and 
over 100 miles of transmission line extending from northern Boone 
County to Newton and Searcy Counties in Arkansas. The new system will 
provide a dependable supply of quality water to 19 rural water systems, 
of which many are facing water quality and/or quantity problems with 
existing wells. Fifteen of these systems serve persistent poverty 
communities. Without ARRA funding, it likely would have taken several 
years to obtain the necessary funding for these much needed projects.
    These water and waste disposal projects, made possible by the ARRA, 
are creating urgently needed jobs building these systems now, and will 
provide the foundation for economic development and more jobs into the 
future for rural communities. The ARRA is putting people back to work, 
like individuals from Berlin, Maryland. The Town of Berlin received a 
$5.98 million loan and a $5.8 million grant to upgrade and expand the 
wastewater treatment system to comply with more stringent environmental 
regulations and to prepare the Town for expected growth and 
development. As a result of the ARRA-funded Berlin project, 65 
individuals have now returned to work/who had been let go due to the 
economy. In addition, the local Berlin economy, from hardware stores to 
lunch establishments, has benefited from this project. As with many of 
our projects, USDA partnered with the Maryland Department of the 
Environment, the Department of Housing and Community Development, and 
the town of Berlin to make this project happen.
    The ARRA water and waste projects are also spurring economic change 
and development. In Coopersville, Michigan, ARRA funds are being put to 
work to renovate and expand a wastewater treatment plant. The expansion 
will facilitate the conversion of an abandoned General Motors/Delphi 
automotive plant into a milk processing facility by Continental Dairy. 
Continental Dairy will invest more than $90 million in plant 
renovations and plans to create 60 new jobs at the plant initially.
    In the Town of Millport, Alabama, funds will be used to make needed 
repairs to the existing water treatment plant, construct a new well and 
provide a new storage tank. With these improvements, the system will 
provide better quality and quantity of water to 452 residences 
(approximately 1,160 individuals) and 44 large and commercial users in 
rural Lamar County, Alabama. As a result, a local industry, Steel Dust 
Recycling, will be able to expand its services, creating 20 new jobs.
    These are just some of the many examples of how rural communities 
are leveraging funds available through the ARRA to reinvest in critical 
infrastructure and improve the quality of life for current and future 
residents.
Looking Ahead
    Our priorities for the year ahead are clear. We will continue to 
seek out and fund critical rural water and waste projects with our 
remaining Recovery Act funds. We will also work with our borrowers to 
ensure that the systems funded move to construction quickly to help 
create jobs and revitalize the rural economy. Construction oversight 
and loan servicing will be more critical than ever to ensure that ARRA 
funds result in well-built, sustainable systems that provide quality 
water and waste services to rural communities for years to come.
    The need for clean, safe, reliable water remains high in rural 
America. After 70 years, even the communities that already were served 
in the past are coming back as their infrastructure ages and as they 
outgrow capacity predicted decades ago.
    That need is particularly amplified in areas such as the Colonias 
on our southern border. An estimated 400,000 people along the U.S.-
Mexico border lack in-home access to water and must haul water from 
central watering points or untreated sources. These households face an 
elevated risk of communicable diseases including Hepatitis A, 
shigellosis, and Impetigo due to limited hand-washing and bathing. In 
the months ahead, we will work to improve outreach, coordination and 
program delivery in the Colonias and other areas with unique needs.
    Our ability to offer programs to create economic opportunity and 
enhance the quality of life in rural America is a result of your work. 
It is an honor and privilege to work with you on behalf of the 50 
million Americans in our rural communities. We look forward to working 
closely with Congress and our Federal partners throughout the Obama 
Administration in improving the quantity and quality of affordable 
water and waste disposal services throughout rural America.
    Thank you again for inviting me here to testify and I will be glad 
to address any questions you have.

    The Chairman. Thank you, sir. Thank you for your timely 
testimony, and in the interest of time I am going to restrict 
myself to just one question so our panel can go ahead and ask 
their questions. I just simply want to ask you, some people 
have raised the issue that after the Recovery Act addresses the 
application backlog, the program may become indeed even more 
popular than it has been. It could mean that you will end up 
with an even bigger backlog than when you started, which would 
be of concern to many more rural communities. Has the 
combination of the Recovery Act funds and the regular program 
funds cut into the backlog? What is the current status of the 
backlog?
    Mr. Adelstein. Well, ARRA and the regular appropriations 
this year, as I said, were unprecedented in their level, and 
they enabled us to provide a lot of funding to deal with that 
backlog. And, as you said, new projects and new proposals have 
poured in. With $2.5 billion in Fiscal Year 2009 alone it was a 
record level, but demand remains very high. As you know, the 
needs are extraordinary in rural communities and new 
applications are being received every day in our state offices. 
The rural communities really need this commitment, and they 
have noted the fact that this is an opportunity to reinvest. 
They have seized on that opportunity, so we currently have $3 
billion in requests pending and we are going to use our 
remaining ARRA and appropriations through the regular Fiscal 
Year 2010 appropriations to fund as many of those as we can.
    The Chairman. Thanks. Mr. Conaway.
    Mr. Conaway. Thank you, Mr. Chairman. Mr. Adelstein, we are 
going to vote on a bill tomorrow, H.R. 4899, that will rescind 
about $100 million in rural development programs. Can you give 
us a quick synopsis of what that would do to your programs--
$100 million for rural development programs will be rescinded 
tomorrow, money taken away from you that you thought you were 
going to have?
    Mr. Adelstein. I am not sure exactly where those 
rescissions would be. I am sorry. I could get back to you.
    Mr. Conaway. So your agency has not been consulted at all? 
This is just added-on to from on high that says they will take 
the money away from you, there is no planning on how that money 
will be taken away from you?
    Mr. Adelstein. Well, none of the rescissions, as far as I 
know, would affect the Rural Utilities Service that I 
administer.
    Mr. Conaway. You don't cover rural development programs?
    Mr. Adelstein. I really just administer the Rural Utilities 
Service program that in this case are not----
    Mr. Conaway. So to your knowledge no one on the--the 
sponsors of this bill have not contacted your agency to see 
what impact a $100 million rescission would have?
    Mr. Adelstein. Well, they haven't contacted RUS 
particularly, but I guess the $59 million in disaster funding, 
the budget team is working on this at Rural Development. 
Certainly, RUS is working on it, Under Secretary Dallas 
Tonsager, and the Secretary, but not RUS in particular. We are 
not affected.
    Mr. Conaway. All right. In your statement, you said we have 
$2.3 billion from USDA and it is combined with the $558 million 
from other Federal and state agencies. The farm bill authorized 
funds for nonprofit groups to help communities identify funding 
opportunities and prepare the applications. We would be 
interested in knowing USDA's specific role in seeking the $558 
million from other sources and what role applicants and 
assisting organizations played in securing the necessary funds. 
Could you elaborate on which other agencies contributed and 
exactly how USDA activities led to this collaboration?
    Mr. Adelstein. We would, particularly with the EPA, which 
has a large amount of funding under ARRA for State Revolving 
Funds that they provided funding to. So, we work very closely 
with the EPA, and also with HUD. CDBG grants are available for 
this purpose, and our state offices work closely with them to 
determine how we can share in certain projects. Sometimes EPA 
will fund a project and sometimes RUS will fund one. Sometimes 
we will share funding together in order to leverage all the 
different Federal resources that are out there, as well as 
state resources to make sure that we are meeting the needs and 
also effectively leveraging the funds that we have. We are not 
the sole source so that folks don't become overly reliant on 
us.
    Mr. Conaway. Was there any not-for-profit, non-
governmental, not-for-profit organizations that were able to 
pitch in on this too?
    Mr. Adelstein. There is a lot of help from NRWA and from 
RCAP that we provided funding to for the Circuit Rider and the 
technical assistance and training programs.
    Mr. Conaway. As the, your words, unprecedented level of 
funding in 2009, 2010, can you talk to us about how you relaxed 
the standards so that you could get more money out, or did you 
relax standards on your evaluation process? How did the flood 
of money--when money is scarce we make better decisions than 
when money is not scarce. Can you talk to us about how you 
protected the taxpayer dollars from the human nature of 
spending money that you might not otherwise have spent?
    Mr. Adelstein. We have not relaxed the standards at all. 
Congress, in its great wisdom provided three percent of the 
funding for administration of the program, and our state staff 
and our national staff have used that to hire additional folks. 
The people that we have have worked incredible hours to meet 
this demand. There are people in the states that really believe 
in this program and they have never had an opportunity like 
this. They have seen the unmet needs out in the field and they 
have always wanted an opportunity like this to deal with the 
backlog, to deal with the unmet needs, and they have worked 
very long hours. I think on September 30 a lot of folks are 
just going to collapse in exhaustion because they have never 
worked this hard. We have not relaxed the standards.
    Mr. Conaway. Okay. And the folks that you have hired, they 
will continue on once this funding is no longer there? If they 
collapse, will they continue on the taxpayer payrolls even 
though we don't have those huge funding levels?
    Mr. Adelstein. The temporary ones won't be able to continue 
on. Now there are ways we might find--because they are fully 
trained, we hate to lose them. We have some holes and openings 
coming up, and we are trying to find ways to get those people 
into existing holes or replace people that are retiring. Since 
they are trained and up and running, we don't want to lose all 
the skills that we have developed. But some of them we are 
going to lose because when that funding cuts off on September 
30 the temporaries have to leave.
    Mr. Conaway. I would certainly encourage you to keep the 
best and brightest for the retirees, but I would also encourage 
you that continuing to grow government and employee base while 
it looks like a jobs bill, it is not, so be judicious about 
your staff levels, and I yield back.
    The Chairman. Thank you, Mr. Conaway. Mr. Bright.
    Mr. Bright. Yes, sir. Thank you, Mr. Chairman, and, thank 
you, Mr. Adelstein, for joining us today as we discuss an issue 
that is of utmost importance to most, if not all, of the 
communities we represent here in Congress today. In my district 
water and wastewater infrastructure rehabilitation is needed in 
nearly every municipality, and I have 93 municipalities in my 
16 counties in Alabama and southeast Alabama. It is not 
uncommon in southeast Alabama for a community to experience 
water and wastewater infrastructure so debilitating that water 
outages are common and clean, uncontaminated drinking water is 
not always guaranteed. Two towns in my district, Repton and 
Louisville, which are both in rural areas, have been working on 
sewer and water rehabilitation projects for some time now.
    I have met with the mayors of these towns on multiple 
occasions to view their sewer infrastructure and can attest to 
their needs. Unfortunately, there is only so much we can do 
with STAG grants and the appropriations process. Programs like 
the water and wastewater disposal loan program at RUS are 
critical to meeting these needs, but many communities aren't 
getting help. Too many of the communities in my district are 
not getting sufficient help. For this reason, I am pleased to 
have you here testifying today and look forward to working with 
you and your agency at the local level to get funding for 
communities like the ones I have just named in my district. You 
mentioned one, and I do appreciate your help in Union Springs. 
That was much needed and very much appreciated by the people 
there, so thank you very much for working with us there.
    I only have one question, and that is I am sure you have 
been exposed to a number of projects similar to the ones I have 
just mentioned, and would like for you to talk more in detail 
about what types of projects qualify for funding through the 
water and waste water disposal loan program at RUS, if you 
could, this morning.
    Mr. Adelstein. We fund a wide array of projects including 
wastewater treatment, sewer, both sanitary and storm sewer 
projects. We fund the treatment of it. We fund an array of 
different projects. We also fund solid waste projects to make 
sure that they don't pollute the water resources in a community 
and to make sure that they are properly managed. So we are 
really broad in ranging from folks that really know how to work 
with water in the community and make sure that communities can 
have it treated properly to protect the environment, and also 
make sure that they have clean water for their own needs.
    Mr. Bright. Could you, in more detail, explain to me what 
we are doing to ensure the communities that we have just 
identified are taking advantage of these programs that you 
offer?
    Mr. Adelstein. Our state office works closely with the 
communities themselves. For example, our state office in 
Alabama has career professionals that do this work. We also 
have enormous help from our Circuit Rider program and our 
technical assistance and training grants which we are able to 
expand this year through the Recovery Act. The Circuit Riders, 
on a 5 year contract, will go out under NRWA and help folks to 
build operational, managerial, and financial capacity in all 50 
states. They really get out in the field and help folks. 
Technical assistance and training is also available to help 
multiple entities assist specified regions in helping folks to 
identify and evaluate water solutions in their communities, and 
to deal with problems they have for water and waste disposal 
problems.
    To prepare applications, they can help to improve the 
operation and maintenance of existing programs, so we really 
work in partnership with our contractors in RCAP and NRWA in 
the field. Our field staff working together with them will help 
communities identify solutions to problems they have and to 
craft applications that can be funded by us for loans and 
grants to deal with whatever problems they may be facing.
    Mr. Bright. Thank you very much, Mr. Adelstein. Mr. 
Chairman, I yield back the remainder of my time.
    The Chairman. Thank you, Mr. Bright. Mr. Thompson.
    Mr. Thompson. Thank you, Mr. Chairman, and Ranking Member. 
Mr. Adelstein, thank you so much for being with us today. RUS, 
I really appreciate you, what your agency does. I think you are 
uniquely positioned to observe the challenges of rural 
communities on these infrastructure questions related to aging 
infrastructure, but also on just trying to comply with the 
Federal mandates that many of these municipalities and 
authorities have to comply with. And we talked briefly about 
that before this session started. Compounded for those 
communities in my district is the fact that my municipalities, 
townships, boroughs, the authorities that they form to deal 
with these infrastructure issues were located in the Chesapeake 
Bay Watershed, and resources really are very limited to comply. 
And I want to thank you because your agency actually is one of 
the only hopes that those municipalities have those authorities 
to do that. But, we only have so many resources, especially, 
with all the other priorities that this Administration has 
showered upon us to fund.
    So the other side of it is dealing with how do we reduce 
those mandates or at least hold them in check, get some more 
time. Has RUS ever--because you have the documentation 
obviously. Your field workers are working with these 
communities all the time. You have the documentation, I would 
assume. Have you ever used that to weigh in with other parts of 
the Administration, the agencies, such as the EPA, to say, you 
know what, we are doing our best but these mandates are going 
to bankrupt these authorities, the townships, the boroughs. And 
I am not saying repeal mandates although I would support to 
have many of them, but have you ever weighed in to say how 
about a little more time, how about an extension? Give them a 
little more time in years to comply with these things. I think 
RUS is just uniquely positioned to be able to be an expert in 
terms of documenting and demonstrating that need to other parts 
of the Administration that actually administer these mandates.
    Mr. Adelstein. We work very closely with the EPA day in and 
day out on making sure folks can meet the standards. In my time 
there, I don't believe there have been any new requirements put 
on. A lot of them were pre-existing and we have not weighed in 
with them as far as I know. Our potential borrowers see all 
kinds of needs, as you said, to improve and upgrade their water 
treatment facilities to comply with regulations that are 
imposed on them. Our program can of course finance these 
projects, but, as you said, the applicant has to be eligible 
and we have to have funds available. There are a lot of demands 
to help folks meet those standards.
    Mr. Thompson. I am glad to hear that you do communicate 
with folks like EPA and any other agency that has oversight of 
those. Do they ever listen to what you have to say? Do they 
ever--is there any hope, that is what I am saying, I guess.
    Mr. Adelstein. They are the experts. We do discuss the 
impact of regulatory action on rural water systems and work 
with other agencies on the issue of health and the environment. 
We need to deal with the requirements they come up with, and of 
course the demands on our program are very large, in order to 
meet the compliance needs. But our expertise isn't so much on 
human health effects or knowing exactly what level of coliform 
might or might not be damaging or what level of----
    Mr. Thompson. And I understand. And I would just go on to 
my second question to you. I am just encouraged that where your 
expertise is, it is identifying how realistic it is that these 
communities are able to comply, as opposed to penalizing them 
with tremendous fines and penalties, providing extensions, 
giving more time for compliance. That buys them quite a bit 
when we can't provide them the resources to do that. You 
mentioned that a total of $2.5 billion in new rural water and 
waste systems came through the ARRA and the stimulus, and I 
agree that certainly those funds are very much needed in rural 
areas. While the funding no doubt is helpful to rural 
infrastructure projects, have you seen any kind of impact that 
the money has had on local jobs?
    Mr. Adelstein. Yes, we have seen that. When a project is 
obligated construction activities begin. Over 600 projects have 
been obligated so far, and the final design, bidding, and 
construction is ongoing as soon as they do that. We have held 
32 groundbreakings so far on ARRA projects. But we are really 
at the height of the bidding cycle now as spring is coming upon 
us, faster in some parts of the country than others. We see an 
increase in bidding and more construction is expected in the 
spring and summer. We have already seen some. We have already 
seen a lot of pre-construction activities begun on many of our 
projects.
    Mr. Thompson. Thank you, sir. Thank you, Mr. Chairman.
    The Chairman. Thank you very much. Mr. Cassidy.
    Mr. Cassidy. Thank you very much. Thank you. Mr. Adelstein 
has already identified himself as a man of rare sensitivities. 
He loves Cajun music so I appreciate that. A couple questions. 
I think staff may have answered one but I want to confirm. If 
you have a community with a population of less than 10,000 but 
wishes to build capacity because they anticipate growth to a 
population of 50,000 over the next decade, are they able to use 
this money not just for the capacity of where they are now, 
less than 10,000, but also with the capacity of which they 
anticipate being, which would be 50,000?
    Mr. Adelstein. We really try to keep folks reasonable in 
the scope of what they are doing. Communities who lack the 
capacity to complete engineering and environmental components 
can get help in several ways. We provide technical assistance 
and offer grants for planning activities. We look at their 
projections for growth and sometimes communities have very 
aggressive projections, and we don't necessarily want to use 
scarce Federal dollars for a projection that may or may not 
happen. We can't necessarily know what kind of growth there is 
going to be, so we tend to be fairly modest and conservative in 
saying that sometimes these communities that want to grow 
quickly and want to build huge water systems in anticipation of 
vast population growth, we try to restrain them somewhat and 
say what are these assumptions? Is this something that you 
really want to fund and can you finance it because the concern 
is if they are building a project for 50,000 or 10,000 and that 
level of population growth doesn't happen, they are not going 
to be able to pay us back because----
    Mr. Cassidy. So, in a sense you review their business plan?
    Mr. Adelstein. Yes, we do a business plan. Exactly. And we 
look at their assumptions for growth.
    Mr. Cassidy. So if you were on the outskirts of Houston, 
you would say, yes, it looks pretty good, and if you were on 
the outskirts of Ducayne Town, you would say think again.
    Mr. Adelstein. Yes, if they say they have a certain plant 
coming in and they know exactly what it is, and their level of 
certainty----
    Mr. Cassidy. That leads me to my next question. Sorry to 
cut you off but obviously we have limited time. What is your 
method--obviously, it is a competitive grant process, and many 
of the small towns in my community, frankly, don't have the 
resources in which to hire somebody to shepherd this through 
the process. What is your method, and I am sure that is a 
common problem----
    Mr. Adelstein. It is.
    Mr. Cassidy. What is your method of ranking in this 
competitive process? Which application or loan guarantee 
application takes precedence?
    Mr. Adelstein. We look at a couple different factors. 
First, in terms of the ARRA funds, we looked at the backlog and 
dealt with that, and then we mandated a priority for shovel-
ready projects. We wanted to get those going. And then we set 
aside ten percent for persistent poverty counties, and on top 
of that we then allocated according to our regular state 
allocation formula which takes into account the overall size of 
the rural population, level of rural unemployment, and level of 
rural poverty. And we are doing projects as soon as they come 
in. As soon as they are ready to roll, we are funding them as 
quickly as we can.
    Mr. Cassidy. And, again, going back to my small communities 
with the limited--they don't have engineers on staff, for 
example, so I kept on thinking that shovel-ready project 
criteria for the community which is most poverty-ridden is 
almost an oxymoron. They don't have the money to come up with 
the project, and yet they are the ones who need it the most, et 
cetera, et cetera, et cetera. Do you follow what I am saying?
    Mr. Adelstein. Yes. That is why we set aside ten percent of 
the ARRA funding for persistent poverty counties, and we have 
actually exceeded that. We have gotten 11 percent of the 
funding to persistent poverty counties. The way we deal with 
those is, first of all, our state staffs really concentrate on 
that. And, second, our technical assistance and training 
program has pre-planning grants to help, particularly, those 
very poverty stricken communities get funds to help prepare to 
do this. The technical assistance teams will actually help 
through our contract, help them to develop the application and 
flush out what it is they need because----
    Mr. Cassidy. So if my Congressional office then took your 
agent around to all the communities which meet the definition 
of high poverty, we could begin doing, I use the technical 
term, pre-planning application.
    Mr. Adelstein. You can get a grant for pre-planning through 
our technical assistance and training program, which is a 
program we have been operating for many years and it really----
    Mr. Cassidy. Now does this also include--because I am sure 
the Army Corps at times has to be involved and they have their 
own grant application process, which I think it is up to the 
communities to fund typically. Does this grant application also 
help fund the other agencies' environmental impact statement, 
et cetera?
    Mr. Adelstein. Yes, it helps with the overall planning, so 
it helps people with compliance with EPA requirements. It helps 
them meet state permitting. In other words, the plan is a 
comprehensive one. Our technical assistance helps people 
develop an overall application, which would include all the 
environmental work, all the state work, all of the engineering.
    Mr. Cassidy. And what is the typical size of these grants? 
The community back home just had a $500 thousand bill for an 
Army Corps study. They couldn't afford it. So what is the 
typical size of these planning grants?
    Mr. Adelstein. Well, in Fiscal Year 2009 we did grants to 
ten entities, for a total of $19.5 million, so these are 
regional entities. They help multiple communities. And on top 
of that we have the Circuit Riders as well that can help out in 
training----
    Mr. Cassidy. So, hard cash, roughly about $500 thousand per 
grant, $19 million divided by ten, something like $490 
thousand, correct?
    Mr. Adelstein. It would average around $2 million.
    Mr. Cassidy. Two million dollars?
    Mr. Adelstein. With about $20 million----
    Mr. Cassidy. I am sorry. You are right. Okay. Thank you 
very much, Mr. Chairman.
    The Chairman. Thank you, Mr. Cassidy. We welcome today our 
full Committee Member Stephanie Herseth Sandlin. I have 
consulted with Ranking Member Conaway, and we agree to have her 
sit in. Welcome and we are glad to have you ask any questions 
you would like.
    Ms. Herseth Sandlin. I appreciate that, Mr. Chairman. Thank 
you for allowing me to participate in the Subcommittee hearing 
today. Jonathan, welcome. It is a pleasure to have not just one 
but two South Dakotans testifying in today's hearing, and I 
think that that indicates how important rural water systems are 
and the projects that you administer under the RUS in states 
like South Dakota. Again, thank you, Mr. Chairman, for holding 
this hearing to highlight the importance of rural water 
systems. It is not only a true life line for citizens, 
residents, who live in rural communities across the country, 
but often play a crucial role in supporting local economic 
development. Jonathan, your written testimony notes that the 
Recovery Act allowed the water and waste disposal loan and 
grant program to achieve the highest ever 1 year total 
investment of $2.5 billion in new and improved rural water and 
wastewater systems.
    And your testimony notes that in Hand County, South Dakota 
the Mid-Dakota Rural Water system was allocated a $12 million 
loan to make improvements to the system, boost supply of 
treated water, and to take on new customers for the first time 
in 3 years. I would appreciate it if you and your office could 
forward to me the specifics of other South Dakota specific 
projects that has benefited from this loan and grant program. 
But if you could just summarize in your opinion the overall 
effect on rural communities of the USDA rural water and 
wastewater Recovery Act funding Congress approved last year, 
some of which have been distributed, others of which you are 
looking to obligate, just summarize what you believe the 
overall impact has been and is going to be for these rural 
communities over the course of the upcoming months and years.
    Mr. Adelstein. Thank you. We will get to the details on all 
the South Dakota projects. There have been quite a few because 
of the big needs in South Dakota for this, like the example you 
cited without having additional capacity new people can't move 
into town, new businesses can't move in. And we see this in 
community after community that without water resources many of 
these small rural systems are at capacity, so you can't get 
another home in there, you can't get another business in there. 
Rural development comes to a standstill without additional 
water capacity. That is why I said in my statement that this is 
really a foundational basis for economic development. Now that 
is one basis of it, but the other issue is that folks are often 
drinking water that is just not what we expect in this country.
    When I came on this job, I wasn't even aware of how bad the 
situation is in certain parts of the country, and how really 
unacceptable some of the conditions are, for example like the 
Colonias, and some of the more rural parts, the Indian 
Reservations. It is something that most Americans would object 
to if they knew--and there has been a series recently in the 
New York Times you might have seen about how bad it can be. 
This project is a critical project in rural areas that is 
actually helping these communities deal with urgent health 
needs that are, literally, making their people sick and their 
children sick. People are afraid to give their children water, 
and they can't afford to go out and buy it and treat it 
themselves. They expect their municipalities to do it, and 
without the help of the Federal Government, without the help of 
this program, we wouldn't be able to meet the needs of these 
communities and the health of our children are profoundly 
affected.
    On top of that there are environmental issues. I mentioned 
Earth Day is coming up. But it is incredible to see the way 
that some of these rural areas don't have adequate water 
treatment facilities or storm facilities. There is all kind of 
run-off into our critical estuaries, into our water systems, 
into our ground water, that is causing damage for future 
generations and that is sometimes rendering the water unusable. 
The reason people like to live in rural areas often is because 
of the pristine environment and because it is a wonderful place 
where there is fresh air, there is room. They prize their 
environment and they don't like to see what happens with the 
degradation of their environment, but without help their water 
systems are contributing to real problems for the wells in the 
area, the drinking water for the whole community.
    And we are helping people deal with open lagoons. We are 
helping them deal with areas that don't have sewer systems. We 
are helping them, for the first time, to really protect the 
environment in profound ways. We are helping the economic 
development, we are helping the immediate health care, and 
protecting the environment of our rural communities, so we 
appreciate your support for this program.
    Ms. Herseth Sandlin. Thank you. And I would just make the 
further point that this isn't just an investment in the people 
who currently reside in these communities. I am convinced that 
the investment in aging infrastructure in small rural 
communities across the country is an investment in the future 
of folks who are going to be looking to move to more rural 
areas as the other programs you administer with broadband make 
it increasingly likely that we can have small business and 
entrepreneurs moving and growing jobs in areas that don't 
suffer some of the congestion and quality of life issues of 
those living in urban areas. Thank you, Mr. Chairman.
    The Chairman. Thank you, ma'am. Mr. Adelstein, what is the 
ratio between loans and the loan/grant combinations for water 
and waste disposal systems, and if I can ask you also how do 
you decide what the break is between loans and grants?
    Mr. Adelstein. Well, the ratio is 70 percent to 30 percent 
in our regular program. We found it 60:40 in the ARRA program, 
and that is based on what kind of applications are coming in. 
It is kind of based on whether or not we are getting folks that 
are applying for more grants. We found, for example, when you 
set aside ten percent for persistent poverty that there is more 
of a need for grant funds than loan funds. And we are targeting 
funds to smaller, low-income communities. We are seeing larger 
projects in communities that were formerly held back due to 
funding not being available, so it is just a higher grant 
ratio. We held back a ten percent grant in the national office 
reserves to deal with that, so we are seeing slightly higher 
grant levels under ARRA than we did under the traditional 
program.
    The Chairman. Are there any projects that are funded 
entirely by grants?
    Mr. Adelstein. No. Everyone is required to provide a loan 
to some extent or another. We do provide much higher loan 
amounts for certain projects, but everybody is going to get 
some revenue, we presume, from these projects because we know 
they are going to have customers. We know they are going to get 
some revenues so we want them to be able to repay to make it a 
sustainable project.
    The Chairman. And who would be the point person in your 
agency, especially for smaller communities that can't afford to 
have grant writers, do you have somebody that can assist them 
or direct them in how best to make their applications?
    Mr. Adelstein. Yes. Our state office staff on the ground, 
usually the state director would be the first place for a 
Member of Congress to contact that would get you to the right 
person in the state that would be able to help. On top of that 
the technical assistance and training programs would be able to 
help a particular community. Our Circuit Rider program also can 
help communities to deal with their immediate needs, so I would 
recommend going through our state office staff to find out who 
could help that particular community.
    The Chairman. Thank you, sir. Mr. Conaway, do you have an 
additional question?
    Mr. Conaway. Just a couple things, very quickly. You caught 
my attention when you said you have held a ten percent national 
reserve. That is ten percent of what?
    Mr. Adelstein. Ten percent of the overall amount that was 
appropriated for the program under ARRA.
    Mr. Conaway. Okay, but those funds have to be obligated by 
September 30 of this year. Ten percent is a lot of money. It is 
what, a billion? How much does ten percent equal?
    Mr. Adelstein. Well, budget authority would be about $130 
million.
    Mr. Conaway. Okay. You have plans to either give that back 
to the taxpayer or spend it appropriately?
    Mr. Adelstein. We have plans to have all of the funds 
obligated by September 30. We traditionally do set aside a 
reserve of five to ten percent. This is pretty typical for a 
program to see where in the end we need to----
    Mr. Conaway. The persistent poverty definition, is that in 
law some place or is that something that you all developed?
    Mr. Adelstein. That is in regulation. I am not sure if it 
is in law.
    Mr. Conaway. Okay. So we know what that is. You must need 
the wisdom of Solomon. You mentioned Colonias and Indian 
Reservations as being some of the worst places. Did all of 
those get taken care of first? How do you make that decision 
between saying no to a community that is on the top of your 
list as being the worst water to saying yes to someone who is 
further down the list? How did you come to that?
    Mr. Adelstein. Well, as soon as we get a Colonia 
application in complete, we are funding it if it is eligible. 
None of them are being held up at all. We are kind of taking 
them as quickly as we can and getting those funds out the door.
    Mr. Conaway. Given the old adage from Tip O'Neill that all 
politics is local, we have a Concho Water Snake that is on the 
endangered species list. That snake is on the verge of getting 
off the list, and the problem right now is the bureaucracy at 
Fish and Wildlife and some lawyers someplace in the system. We 
have a community that wants to build a multi-million dollar 
project on cleaning the river, improving water flow, creating 
ripples, bank restoration and stabilization, all those projects 
are going on, which would mean better water for the folks 
downstream obviously. And yet we can't get anything done. Do 
you guys ever take positions for or against your sister 
agencies, in this instance, Fish and Wildlife? Do you ever 
venture boldly into that particular arena?
    Mr. Adelstein. We really don't. We wait for the 
environmental reviews to be approved before we fund the project 
so we are kind of at the mercy of the other agencies.
    Mr. Conaway. Yes, we have a $350,000 presence or absence 
study that has to be done on a snake that really is--we will go 
through that later. I yield back, Mr. Chairman. Thank you.
    The Chairman. Thank you. Mr. Bright, do you have an 
additional question?
    Mr. Bright. I do have a little follow-up, a statement of 
clarification, and hopefully assistance to my Ranking Member. I 
have a phobia of snakes so any way I can help you get around 
that, let me know. You have my vote. Administrator, one follow-
up question. You mentioned the ten percent that you set aside--
earmarked for these funds. How do you rank the projects within 
that tenth percentile? It is amazing to me because I have 93 
communities out there, and I have traveled through those 93 
over the last year, and I am going back to them, and they are 
continuously submitting to me requests for revenues or help for 
water systems out there. Out of the 93, I had 16 requests this 
year for me to help them with a water treatment plant within 
their community. And many of those, not all 16, would be very 
similar to what my colleague was describing as small rural 
communities, probably fewer than a couple thousand people, and 
they don't have the staff to administer or to even apply for 
these monies. How do you rank those communities within that 
tenth percentile?
    Mr. Adelstein. We are fortunate this year to have enough 
funds to fund all of the needed projects within that category. 
No projects have been denied so far that have been ready to go. 
I think you hit the nail on the head as far as what the issue 
is at getting those applications up and in position. And you 
hit on it as well that these low income communities are 
struggling to go through all the effort to do this. That is why 
we have the technical assistance and training. That is why our 
state staffs work with low income communities to do it. If they 
can get a project in front of us and get it ready to go with 
all the permits, we are funding them as they are coming in the 
door for all of our priority projects.
    Mr. Bright. Thank you very much. I yield back the time. Mr. 
Chairman. Thank you very much.
    The Chairman. Thank you. Any additional questions, Mr. 
Thompson?
    Mr. Thompson. I just want to touch briefly on energy. You 
talked about how RUS works with energy, and I want to see if 
you can elaborate on that.
    Mr. Adelstein. We have a $6.5 billion energy program 
financing energy projects in generation, transmission and 
distribution. We are really proud of a 75 year history of 
ensuring that rural areas have electricity at affordable rates. 
We are the old Rural Electrification Administration, and I am a 
historian by training, so the first thing I did when I got this 
job is read this book. And today we are still making sure, and 
there is an enormous demand, making sure that all of our rural 
electric co-ops have adequate financing at very reasonable 
rates at no cost to the taxpayer because they always pay us 
back. We do that $6.5 billion loan program for no budget 
authority because we are able to get paid back. We are very 
zealous in how we review these applications and we make sure 
that they are done in a way that is fiscally prudent and 
financially stable. So that is our energy program in a 
nutshell.
    Mr. Thompson. And just a quick follow-up to that. In my 
district we are home of the heart of the Marcellus Shale 
natural gas. Is there any money from the stimulus or perhaps 
within your funding that goes towards water treatment that is 
specific to dealing with that energy area in terms of the 
processing of frac water following use with drilling for 
natural gas?
    Mr. Adelstein. Not that I am aware of, no.
    Mr. Thompson. Okay. Thank you.
    The Chairman. Thank you very much, Mr. Thompson, and thank 
you so much, Mr. Adelstein. We will welcome the second panel to 
come forward. Mr. Adelstein, if you have additional comments.
    Mr. Adelstein. I just wanted to say something for the 
record. Apparently, the rescission legislation may affect RUS. 
I need to look at that. Our budget office has been aware of 
this and I need to follow up and respond in more detail on 
exactly what the impact may be, and I can follow up also for 
the record very quickly with your office as far as what the 
impact would be on Rural Development overall.
    Mr. Conaway. Okay. If you wouldn't mind doing that because 
this thing may be voted on tomorrow or the next day.
    Mr. Adelstein. We will get back to you today.
    Mr. Conaway. Thank you, sir.
    The Chairman. Thank you. And we have been joined by the 
Chairman of the overall Agriculture Committee, Mr. Peterson. 
Mr. Peterson, before we conclude this particular panel with Mr. 
Adelstein, do you have any comments or questions? All right. 
Well, thank you for joining us and thanks again to Ms. Herseth 
Sandlin for joining us. That will conclude this first panel. We 
will ask our second panel to please prepare to come to the 
table, and you will be introduced momentarily. Thank you, Mr. 
Adelstein.
    Mr. Adelstein. Thank you, Mr. Chairman.
    The Chairman. We would now like to welcome our second panel 
that has come before us today before the Subcommittee. Ms. 
Rhonda Locklear, Water and Wastewater Director of the Town of 
Pembroke, North Carolina, on behalf of the National Rural Water 
Association. Again, Rhonda, welcome, from our home county of 
Robeson County in North Carolina. It is good to have you here. 
Also, we welcome Ms. Christina Fierros, the Chief Operations 
Officer of the Midwest Assistance Program of the Rural 
Community Assistance Partnership in Savannah, Missouri. Mr. 
Michael North, President of the National Association of 
Development Organizations, an organization that we have long 
worked with and appreciate the good work that you do through 
the years in helping smaller communities. He is from Harrison, 
Arkansas on behalf of the National Association of Counties. We 
know the county commissioners were just in town in the last 
couple of weeks. Mr. Troy Larson, Executive Director of the 
Lewis & Clark Regional Water System of Sioux Falls, South 
Dakota. And we are glad to have you here today, and Ms. Herseth 
Sandlin, I know, has welcomed you as well. And Mr. Paul Kahl, 
the Deputy Director of Public Works for Allegany County in 
Cumberland, Maryland.
    Welcome to each of you. The chair would again like to 
remind Members that following the full Committee's chair's 
lead, they will be recognized for questioning in order of 
seniority. Visiting Members who are not full-time Members of 
the Subcommittee will be recognized for questioning after all 
Subcommittee Members have had a chance to do so. We appreciate 
the Members' understanding. So now we will begin the testimony 
from the panel. As you recall, you each have 5 minutes. Please 
highlight your testimony during that 5 minutes so we can make 
sure we can have your complete and accurate comments. Ms. 
Locklear, you may begin.

            STATEMENT OF RHONDA LOCKLEAR, WATER AND
    WASTEWATER DIRECTOR, TOWN OF PEMBROKE, NORTH CAROLINA, 
  PEMBROKE, NC; ON BEHALF OF NATIONAL RURAL WATER ASSOCIATION

    Ms. Locklear. Thank you, Chairman McIntyre, Ranking Member 
Conaway for allowing me the opportunity to testify before this 
Committee. I want to specifically explain how USDA investments 
have enhanced the quality of life in my hometown of Pembroke, 
North Carolina. I am Rhonda Locklear, a native of Robeson 
County, and a member of the Lumbee Tribe. I am currently the 
Water and Wastewater Director for the Town of Pembroke. I am a 
graduate of Pembroke State University, now known as the 
University of North Carolina at Pembroke, and I am also a proud 
member of the North Carolina Rural Water Association.
    USDA investments have drastically improved the economic and 
public health of Pembroke. We were paralyzed because of the 
inadequacies of our water and wastewater treatment facility. 
Excessive inflows and infiltration washed all the 
microorganisms out of the wastewater treatment plant and into 
the Lumber River. Essentially no treatment occurred until this 
population could be re-grown. The Division of Water Quality 
issued a special order of consent which stopped any and all 
additional flow into the wastewater system. This action halted 
the growth of our community. Pembroke's economic growth and 
development catalyzed in 1992 when USDA loaned $1.4 million to 
upgrade the wastewater treatment facility. The 5,000 gallon a 
day facility went to 1.3 million and it included a wastewater 
certified laboratory.
    Storm water is still an issue but the difference is we 
remove 94 percent of the pollutants. Replacing aged water and 
sewer lines, as I heard earlier, is a great endeavor and would 
correct the problem. Small communities like Pembroke would need 
the continued support and assistance of USDA to accomplish 
these goals. Due to expanded capacity of the wastewater 
treatment facility, we have now the fastest growing university 
in the UNC system. Their population in 1992 was roughly 1,700. 
It has jumped to 6,800 in 2010. They are the largest employer 
and the largest water and sewer user in the Town of Pembroke. 
With property values escalating from $30 million to $140 
million it is easy to see the impact USDA has had on our 
community.
    Pembroke once again sought to improve infrastructure by 
increasing their water capacity and improve water quality. 
State and USDA assistance enabled us to build a new water 
treatment facility and add a fourth elevated water storage 
tank. We then met minimum water pressure requirements for fire 
suppression which kept insurance rates down. It decreased the 
potential health hazards and also supplied water for new homes 
and businesses in Pembroke. Thousands of jobs have been created 
since businesses like Wal-Mart, True Value, McDonald's, and a 
multitude of health care units have located in Pembroke.
    The Lumbee Tribe is building 100 homes. They have plans to 
build 400 more new homes. Their new tribal complex sits to the 
right of our 32 acre recreational park, and we also support a 
600 acre commerce and technology center. We also have a new 
hotel that opened in December to accommodate overnight visits 
in Pembroke, which we hadn't had for quite some time. All these 
great accomplishments are because of God, sincere officials 
like yourself, and USDA programs. While USDA has provided 
funding for rural communities the North Carolina Rural Water 
Association has provided the training, the financial 
management, and the on-site technical support to ensure 
facilities operate at the highest level. Experienced 
professionals empower operators, board members, and communities 
with the knowledge to understand their system. They also save 
millions of dollars that are intended for infrastructure so we 
don't have to pay expensive consultants.
    They also help assist us with aging staff and taking that 
knowledge into the future. Small communities lack the resources 
to address large issues that would go without assistance if it 
were not for USDA programs. Federal and state programs would 
like to serve large affluent communities, but the USDA Rural 
Development staff ensures persistent poverty counties like 
Robeson can prosper. Thank you, Chairman McIntyre, and Ranking 
Member Conaway and this Committee for your support. And I will 
be glad to answer any questions that you have.
    [The prepared statement of Ms. Locklear follows:]

 Prepared Statement of Rhonda Locklear, Water and Wastewater Director, 
 Town of Pembroke, North Carolina, Pembroke, NC; on Behalf of National 
                        Rural Water Association
    Thank you Chairman McIntyre and Ranking Member Conaway for allowing 
me the opportunity to testify before this Committee. I want to 
specifically speak from a holistic point of view to explain how USDA 
investments in infrastructure have enhanced the quality of life in my 
hometown of Pembroke, North Carolina.
    I am Rhonda Locklear and I am a native of Robeson County and a 
member of one of the largest American Indian tribes, known as the 
Lumbee. I am presently the Water and Wastewater Director for the Town 
of Pembroke. I am a graduate of Pembroke State University, a university 
that is drenched in local roots that is now known as the University of 
North Carolina at Pembroke. I am also a proud member of the North 
Carolina Rural Water Association, an association committed to providing 
the highest quality support to the systems across the state through 
training and on-site technical assistance.
    The USDA investments in the Town of Pembroke have delivered 
tremendous results for both the economic and public health of the 
entire community. Prior to these investments, the economic growth was 
paralyzed due to inadequate drinking and wastewater treatment and 
capacity limitations. Any amount of rain water caused excessive inflows 
and infiltrations into our wastewater treatment facility which washed 
all microorganisms needed for wastewater treatment into the Lumber 
River. Essentially no treatment occurred for a period of at least 10 
days after a significant rain, which is the time required for a 
community of microorganisms to be re-grown. This scenario was 
constantly repeated, requiring the North Carolina Department of 
Environment and Natural Resources Division of Water Quality to issue a 
Special Order of Consent permit. Facilities with this type of permit 
cannot accept any additional flow until the facility has been upgraded. 
This action essentially halted the economic growth of our community.
    Existing homes, businesses, and institutions could not expand 
without the basic services of water and sewer. New businesses would not 
entertain locating in an area without these services. Our community's 
economic growth and development catalyzed in 1992 when USDA loaned $1.4 
million to the Town of Pembroke. With this loan, the wastewater 
treatment facility was upgraded from 500,000 gallons per day to 1.3 
million gallons per day. The upgraded facility also included a fully 
certified laboratory, which is one of two municipal labs in Robeson 
County. I began my career in the water industry serving as the first 
Chemist in this lab.
    Storm water is still an issue, entering the wastewater facility 
through an aged collection system of pipes and manholes, yet the plant 
is consistently removing 94 percent of the pollutants. Repairing and 
replacing water and sewer lines would eliminate this problem but it is 
a great endeavor and must be accomplished over a number of years. 
Pembroke is representative of small rural communities and systems 
across the nation that will continue to need USDA support and 
assistance in the future.
    Now I would like to address the direct benefits of these 
investments. Due to the expanded capacity of the wastewater treatment 
facility, the University of North Carolina at Pembroke (UNCP) was able 
to expand to become the fastest growing university in the UNC system. 
The student body was approximately 1,723 in 1992, increasing to 6,433 
as of spring 2010. Beginning in 2006, UNCP entered their largest 
expansion; five new buildings are underway totaling $33 million in 
construction cost and the creation of numerous jobs. UNCP Pembroke is 
currently the largest employer in the Town of Pembroke with 287 
instructors and 307 functional staff. With property values escalating 
from $30 million in 1992 to $140 million in 2009, it's easy to see the 
direct positive financial impact these investments continue to have on 
our community.
    Following that initial investment, Pembroke once again sought to 
increase their water capacity as well as improve its quality. State and 
USDA assistance enabled us to build a new water treatment plant. Two 
new wells supply water to one treatment unit. Prior to this, Pembroke 
could not remove iron or effectively add chemicals that enhanced water 
quality and usages. A fourth elevated water storage tank was also added 
to our distribution system to increase the system's water pressure. 
This allowed Pembroke to meet the minimum water pressure requirements 
for fire regulations necessary to keep insurance rates down. At the 
same time we looped together water lines that were formally dead ends. 
This prevented iron and other debris from accumulating in dead zones, 
avoiding potential health hazards.
    Combined, water and wastewater are the single most important 
service required for community health and economic growth. Businesses 
like Wal-Mart, Pembroke True Value Hardware, various corporate and 
local restaurants, and a multitude of professional and health care 
related facilities are now constructed and operating because of this 
infrastructure development. The majority of these investments were from 
USDA. All of this growth has contributed to the creation of thousands 
of jobs.
    The Lumbee Tribe has built new homes in this area and at the end of 
this construction phase, 101 homes will have reached completion with 
plans to build 400 more in the future. This activity will improve the 
living conditions of this impoverished community. The Lumbee's continue 
to grow with the development of a new Tribal Complex and Boys and Girls 
Club, which debuted in December of 2009. Next to the Tribal Complex is 
a 32 acre recreational park that was erected in 2008. The Town embarked 
on a program that will promote healthy activities for kids, teens, and 
parents, in an effort to improve the quality of life and health for our 
community.
    As of December 2009, a new hotel was constructed allowing for the 
first time the ability to accommodate overnight visits for athletic 
events, visitors, and business activities. This same infrastructure 
supports COMtech, a 600 acre commerce and technology center, currently 
housing and supporting various business and industry. It is a managed 
professional complex that promotes economic development through 
instructional, industrial, and private growth. The goal of Robeson, 
Hoke, Scotland, and Columbus Counties is to attract pharmaceutical 
industries with an educated and trained work force, while putting our 
displaced textile laborers and construction contractors back to work. 
All of these opportunities are available only because adequate water 
and wastewater infrastructure exists due to USDA funding.
    While USDA has provided funding for rural communities, the North 
Carolina Rural Water Association has provided the training, energy 
audits, certification, financial management, environmental compliance, 
governance and on-site technical assistance necessary to ensure that 
facilities operate at the highest level possible. This assistance 
actually saves money and protects the community and government's 
investments by ensuring efficient and sustainable practices are 
followed. This is truly a great combination. I can't say enough about 
these experienced professionals that empower operators, board members, 
elected officials and communities with the support and knowledge they 
need to understand every aspect of their systems and facilities. 
Because of the important services provided to systems by Rural Water, 
millions of dollars meant for infrastructure and equipment are actually 
used for their intended purpose instead of paying for expensive 
consultants.
    All communities have leaders. Some are elected; others are just 
concerned citizens that want to improve the quality of life in their 
community. These elected officials and citizens have a vital partner. 
The USDA Rural Development staff is always there to help--whether it's 
by providing critical infrastructure, securing affordable housing, 
providing broadband, securing business assistance or helping obtain 
essential community facilities. Their field structure and experienced 
staff are unique. The staff and offices are located throughout these 
rural communities across the nation which allows them to serve 
communities that are both small and remote. In many cases communities 
that lack the capacity and resources to address many of their large 
issues would go without assistance if it were not for these USDA 
programs and the employees that make them work. Federal and state 
agencies would have it much easier if they just served larger and more 
affluent communities, but the Rural Development mission is different--
they are there to ensure rural America is not left behind and that 
these communities prosper. Robeson County is a perfect example. This 
county, unfortunately, is listed as a county with persistent poverty. 
With USDA as our partner and the continued local leadership and vision, 
we will soon leave that designation behind. We are on track. I would 
like to thank this Committee and my friends in the Rural Development 
offices across the State of North Carolina for your continued support.
    In summary, the face of Pembroke has significantly improved due to 
USDA's involvement. Our citizens have a better quality of life because 
of USDA's investment in our town. Men and women can acquire jobs in 
retail, construction, health fields, and industry to support their 
families. UNCP is offering even more educational opportunities to 
prepare us for tomorrow. We exemplify the fact that no community can 
grow and improve without the sustaining resources of water and 
wastewater services.
    Thank you Chairman McIntyre and Ranking Member Conaway for allowing 
me to testify and I would be happy to answers any questions that you 
may have at this time.

    The Chairman. Thank you, Ms. Locklear, and thank you for 
your timely testimony. Ms. Christina Fierros.

        STATEMENT OF CHRISTINA FIERROS, CHIEF OPERATIONS
           OFFICER, MIDWEST ASSISTANCE PROGRAM, RURAL
         COMMUNITY ASSISTANCE PARTNERSHIP, SAVANNAH, MO

    Ms. Fierros. Thank you, Chairman McIntyre, and Ranking 
Member Conaway for the opportunity to address the Subcommittee. 
USDA Rural Development programs play a vital role in rural 
America and the RCAP network appreciates your efforts to ensure 
that they are working as intended, particularly in today's 
economically challenging times. My name is Christina Fierros. I 
am the COO for the Midwest Assistance Program based in 
Minnesota and serving nine upper Midwest states. MAP is part of 
the national RCAP network which helps small rural communities 
address their water, wastewater, and other community 
development needs. We provide technical assistance and training 
that build the capacity and sustainability of small water and 
wastewater systems, and we assist them with development of 
needed facilities.
    Each year we serve more than 800 communities with funding 
provided through USDA's water and waste disposal program. For 
example, the Town of Laporte is a small town of 150 people in 
north central Minnesota. A number of years ago, the local 
officials discovered the septic tanks and systems were failing 
and polluting individual water wells. About that same time, 
they found a number of the wells were also contaminated with 
petroleum. The town faced two expensive infrastructure problems 
at the same time. Local officials contacted MAP for assistance. 
We worked with them to hire an engineer who would design an 
affordable community system, prepared funding applications, and 
completed numerous related requirements and followed the 
projects to completion of a new community water and wastewater 
system.
    In a town of 150 people, it is rare that the local 
residents have the time or the capacity to manage this process 
without assistance. Much of rural America's water and 
wastewater infrastructure is at or near the end of its useful 
life. According to the most recent EPA needs assessment 
surveys, small rural systems need more than $100 billion for 
water and wastewater infrastructure improvements over the next 
20 years just to maintain their current service levels. 
Complicating this need is the fact that small utilities have 
even fewer customers among whom to spread those costs, making 
it difficult to achieve the economies of scale found in larger 
systems. As a result, their customers on average pay three 
times more for water and wastewater services then do urban 
customers.
    In order to make most infrastructure projects affordable, 
Rural Development provides grant and loan funds. Without them, 
public health, the environment, and the prospects for future 
development would suffer. Rural Development staff on the ground 
does a tremendous job working with the communities that have 
these water and wastewater funding needs. They provide guidance 
on funding requirements, process applications, service loans, 
and steer communities to technical assistance providers such as 
RCAP when needed. Under the American Recovery and Reinvestment 
Act, Rural Development is providing more than $3 billion in 
additional water and wastewater infrastructure funding. Along 
with technical assistance to help communities access the 
funding, Rural Development staff at all levels have worked 
diligently to make more than 600 funding awards to date, and as 
we enter the 2010 construction year many rural communities will 
see the impact of that investment.
    One example of this impact is Priest River, Idaho, a 
community of 2,000 people that needed to upgrade its water 
system. However, the $6 million project would have resulted in 
unaffordable user rates for residents without Federal 
assistance. Another RCAP partner, the Rural Community 
Assistance Corporation, worked with Priest River officials to 
adopt reasonable rates that would cover debt service for the 
project. As a result, Rural Development awarded $4.3 million in 
Recovery Act funding, and other monies were secured through the 
state to complete the project financing package. When the 
project is complete, Priest River will have adequate water 
pressure and fire flows, reduce operating cost and a 
distribution system that will serve them for decades.
    Projects like this one show the impact of rural development 
programs in small town rural America. While most of its people 
don't think about water that comes out of their tap or what 
happens to the water that goes down the drain, Rural 
Development and local officials are working to ensure that 
their drinking water is safe and that their wastewater doesn't 
pollute the lakes and streams for wildlife in downstream 
communities. Therefore, we urge you to support robust grant and 
loan funding for Rural Development's water and wastewater 
disposal program so that infrastructure projects will be 
affordable for the communities they are intended to benefit. 
Thank you for inviting me to testify, and I welcome your 
questions.
    [The prepared statement of Ms. Fierros follows:]

   Prepared Statement of Christina Fierros, Chief Operations Officer,
  Midwest Assistance Program, Rural Community Assistance Partnership, 
                              Savannah, MO
    Thank you, Chairman McIntyre and Ranking Member Conaway, for the 
opportunity to address the Committee. USDA Rural Development programs 
play a vital role in rural America, and we applaud your efforts to 
ensure that they are working as intended and having an impact, 
particularly in today's economically challenging times.
    My name is Christina Fierros. I am the Chief Operations Officer of 
the Midwest Assistance Program (MAP), based in Minnesota and serving 
the States of Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, 
North Dakota, South Dakota, and Wyoming. MAP is part of the national 
RCAP network, whose regional service providers help small, typically 
low-income, rural communities address water, wastewater, and other 
community development needs. The RCAP network provides technical 
assistance and training that build the capacity and sustainability of 
small systems and assist them with the development of needed 
facilities. The RCAP network serves more than 800 communities every 
year with funding provided by USDA's Technical Assistance and Training 
Grant Program under its Water and Waste Disposal Program.
    The RCAP regional partners also make use of other Rural Development 
programs to support comprehensive community development. As such, we 
work with Rural Development programs and staff on a daily basis.
    The technical assistance that RCAP provides serves as a bridge 
between Rural Development and communities. RCAP assists not only with 
funding applications and every phase of the project development 
process, but also provides training and technical assistance after 
construction is complete, helping communities understand how to 
properly manage and operate their system in a financially sustainable 
manner.
    One example is Laporte, Minnesota, a town of 150 people, where 
local officials discovered that septic systems were failing and 
contaminating individual water wells, and that some of their wells were 
also contaminated with petroleum. They faced two potentially expensive 
infrastructure projects simultaneously. The town contacted Midwest 
Assistance Program for assistance. MAP staff worked with them over a 
number of years to evaluate alternatives, find an engineer to design an 
affordable system, prepare funding applications and fulfill the related 
requirements, and follow the project to completion of new water and 
sewer systems.
Rural Infrastructure Needs
    The infrastructure needs of rural America are staggering. The most 
recent needs surveys by EPA estimate small systems and rural areas need 
$34 billion for drinking water and $69 billion for wastewater over the 
next 20 years.
    Nationwide, small systems constitute over 80 percent of all public 
drinking water systems and 75 percent of public wastewater facilities, 
though they account for a much smaller share of the total population 
served. Small utilities face distinct challenges in operating and 
improving their facilities; they have fewer customers among whom to 
spread costs--including fewer large volume users--making it difficult 
to achieve economies of scale found in larger systems. As a result, 
customers in small systems pay, on average, three times more than their 
urban counterparts for water and wastewater services, according to EPA 
data.
    RCAP is committed to educating local officials about the importance 
of sustainability and asset management--maintaining infrastructure 
investments, encouraging local responsibility, and ensuring that 
residents pay their fair share for services. RCAP provides training to 
utility boards and staff on topics such as budgeting, rate-setting, and 
system management. However, there is a point at which an infrastructure 
project is simply not affordable without Federal assistance. Without 
grants and subsidized long-term loans, most projects in rural America--
many of which are only marginally affordable even with these funds--are 
simply not feasible.
    Consider the case of West Odessa, Texas, an unincorporated area 
outside Odessa where individual wells have extremely limited production 
combined with high levels of contaminant from oil field by-products. 
With the help of Community Resource Group, the Southern RCAP, residents 
formed a legal district to tackle the problem and developed a plan to 
construct a community system and purchase water from a nearby system. 
The West Odessa Water Supply Corporation secured funding from USDA, but 
construction bids came in more than double the estimated cost, so they 
have struggled to obtain additional funding and keep the project 
affordable for residents.
USDA Rural Development
    USDA Rural Development, through the Water and Waste Disposal Loan 
and Grant Program, is the ``lender of last resort'' for rural water and 
sewer systems. The program enables communities to complete 
infrastructure projects that are critical to public health, the 
environment, and future development.
    Rural Development staff on the ground do a tremendous job working 
with communities and unincorporated areas that have water or wastewater 
funding needs. They provide guidance on application and funding 
requirements, process applications, service loans, and steer 
communities to technical assistance providers such as RCAP, when 
needed. Together, these services provide crucial support to rural 
communities constrained by limited resources.
The American Recovery and Reinvestment Act
    USDA's ARRA funding has provided a vital boost to rural America to 
meet infrastructure needs. Over $3 billion is being made available 
under the Water and Waste Disposal Program alone. Rural Development 
staff has worked diligently to process applications and award loans and 
grants, and as we enter the 2010 construction year, many rural 
communities will see the positive impact of that investment.
    For example, Priest River, Idaho, with a population of about 2,000, 
was working to upgrade its water system, including new distribution 
lines, an elevated storage tank, and drilling a well to eventually 
replace a surface water source. However, the nearly $6 million project 
would result in unaffordable user rates for residents unless Federal 
assistance was provided. Rural Community Assistance Corporation, the 
Western RCAP, worked with local officials to establish water rates that 
would be reasonable, yet cover debt service for the project. As a 
result, USDA Rural Development awarded $4.3 million in ARRA grant and 
loan funds and the state committed $600,000 of CDBG monies to complete 
the project. When the new system is operational, Priest River will have 
adequate fire flows and water pressure, reduced operating costs 
(because ground water is cheaper to treat than surface water), and a 
distribution system that will serve them for decades.
Recommendations
    Solving the problems facing rural communities requires a multi-
pronged approach that includes adequate funding, along with steps to 
ensure that grant funding is available only to the neediest communities 
and that technical assistance is available to ensure that the funds are 
distributed where they are most needed. Specifically, RCAP offers the 
following recommendations:

    (1) Increase annual appropriations for Rural Development programs. 
        Since 2003, funding has been reduced by 25% for the Water and 
        Waste Disposal Program (excluding ARRA). While it may be 
        unrealistic to annually fund programs at ARRA levels, funding 
        should be restored to pre-2003 levels.

    (2) Improve the grant-to-loan ratio in the Water and Waste Disposal 
        Program. Grant funding for water and sewer projects, as a 
        percentage of the overall allocation, declined from 39% in 2003 
        to 26% as of 2006. As previously noted, grant funds are 
        critical to help defray the enormous infrastructure costs for 
        the smallest and lowest-income communities. The 2008 Farm Bill 
        authorized lower interest rates, which helps make projects more 
        affordable for communities. However, the additional loan 
        subsidy further reduces available grant funding, and many low-
        income communities simply cannot develop feasible projects 
        without grants. If the trend of reducing the grant-to-loan 
        ratio continues, the program will cease to be a viable option 
        for most small communities, especially those serving low-income 
        populations.

    (3) Increase technical assistance funding to allow RCAP and other 
        providers to keep pace with growing demand. There is far more 
        demand for assistance than can be met with existing funding. 
        These projects tend to be time and labor-intensive, as they are 
        typically the smallest and, hence, the most difficult to fund, 
        communities.

    In addition, stagnant administrative budget levels in recent years 
have resulted in fewer Rural Development field staff. Though the agency 
has done an impressive job in compensating for these losses, it has 
done so, in part, by relying more heavily on technical assistance 
providers to work with applicants to complete the myriad paperwork and 
other funding requirements.
    Thank you for considering my testimony on Rural Development water 
programs and the ARRA and thank you for your commitment to meeting the 
needs of rural America's communities.

    The Chairman. Thank you so much. Mr. Norton.

 STATEMENT OF J. MICHAEL NORTON, EXECUTIVE DIRECTOR, NORTHWEST 
                 ARKANSAS ECONOMIC DEVELOPMENT
          DISTRICT; PRESIDENT, NATIONAL ASSOCIATION OF
          DEVELOPMENT ORGANIZATIONS, HARRISON, AR; ON
           BEHALF OF NATIONAL ASSOCIATION OF COUNTIES

    Mr. Norton. Good morning, Chairman McIntyre, Ranking Member 
Conaway, and Members of the Subcommittee. My name is Michael 
Norton. I currently serve as the President of the National 
Association of Development Organizations and Executive Director 
of the Northwest Arkansas Economic Development District located 
in Harrison, Arkansas. Today, I have the opportunity to 
represent NADO, as well as the National Association of 
Counties. I thank you for the opportunity to testify on the 
status of rural water infrastructure programs operated by the 
U.S. Department of Agriculture, and the status of the American 
Recovery and Reinvestment Act funds for these programs. This 
morning I will limit my remarks to three main points. First, 
Recovery Act funding coupled with the yearly appropriations for 
USDA's vital water and sewer infrastructure programs through 
the Rural Utilities Service have been essential resources for 
rural communities as they strive to create economic 
opportunities to improve the quality of life for their 
citizens.
    One example of access to safe, reliable sources of water 
being an essential catalyst for economic development is taking 
place in my state and region. The Ozark Mountain Regional 
Public Water Authority in north central Arkansas will receive 
$55.7 million in grant and loan funding from USDA Recovery Act 
dollars to develop and build a long-term regional water supply 
in four counties in rural Arkansas. USDA funds will be used to 
build a new water treatment facility to deliver treated water 
to approximately 20 water associations in some of the most 
rugged and difficult terrain in north central Arkansas. 
Ultimately, the project will provide a safe and reliable source 
of water for 22,000 local residents. The project will also 
facilitate economic growth in the region. Due to unsafe and 
limited water supply two counties have never had the 
opportunity to solicit or obtain industry or commercial 
development.
    This project aims to reverse that trend and attract much 
needed economic opportunity to this rural region of our state. 
Without USDA Recovery Act investments, the project would remain 
unrealized. Second, Mr. Chairman, the lack of adequate water 
and wastewater infrastructure remains one of the most 
significant roadblocks to economic development in a small town 
in rural America. USDA Rural Development is effective at 
helping communities overcome rural water and wastewater 
infrastructure challenges, but additional resources will be 
needed in the coming years to meet the mounting demand for 
these programs.
    While state and local governments are making major 
contributions to public infrastructure enhancement efforts this 
immense job will never be completed without the resources of 
the Federal Government. Basic public infrastructure facilities 
are the core of sustaining existing business, nurturing new 
companies, and improving the quality of life in rural counties 
and communities. The private sector expects that counties and 
local communities provide and maintain these services and 
infrastructures. Businesses and industries will locate wherever 
these critical facilities exist be it here in the United States 
or abroad. Finally, Mr. Chairman, the Administration's proposed 
Rural Innovation Initiative will make USDA's infrastructure 
investment more effective and efficient by rewarding regional 
approaches to rural development.
    The Initiative will allocate funds competitively among 
innovative regional economic development projects tailored to 
local needs and opportunities. The Initiative's new approach 
will lead to increased efficiency as rural communities' 
capacity is enhanced through greater coordination and 
leveraging of regional funding. NADO and NACo support the goal 
of moving Rural Development toward a commitment to regional 
strategies designated by local leaders. We urge the 
Subcommittee to support the promising Initiative. Mr. Chairman, 
and Members of the Committee, thank you again for the 
opportunity to testify today. I will be more than happy to 
answer any questions or comments.
    [The prepared statement of Mr. Norton follows:]

Prepared Statement of J. Michael Norton, Executive Director, Northwest 
Arkansas Economic Development District; President, National Association 
   of Development Organizations, Harrison, AR; on Behalf of National
                        Association of Counties
    Thank you, Chairman McIntyre, Ranking Member Conaway and Members of 
the Subcommittee for the opportunity to testify today on the status of 
rural water infrastructure programs operated by the U.S. Department of 
Agriculture (USDA) and the status of American Recovery and Reinvestment 
Act (the Recovery Act) funds for these programs. Most importantly, I 
want to thank you, Mr. Chairman, for your leadership in ensuring that 
USDA Rural Development funding was included in the Recovery Act. The 
roundtable you held during the Recovery Act debate was instrumental in 
educating Members of Congress and their staff about the vital role USDA 
Rural Development programs could play and are now playing in our 
nation's recovery efforts.
    My name is Michael Norton. I am Executive Director of the Northwest 
Arkansas Economic Development District, headquartered in Harrison. I 
also currently serve as President of the National Association of 
Development Organizations (NADO). My professional background includes 
more than 3 decades in regional and local community and economic 
development, including 20 years in my current position.
    Today, I have the opportunity to represent NADO as well as the 
National Association of Counties (NACo).
    My goal today in covering this important topic is to offer some 
concrete examples about the effectiveness of USDA's rural water 
infrastructure programs and to provide suggestions as you look toward 
the next farm bill. As debate begins on the rewrite of the farm bill, I 
strongly encourage Members of this Subcommittee to make rural water 
infrastructure and rural development programs in general, a central 
theme of the proposal. These programs are critical to economic 
expansion in rural America and are needed more than ever as our nation 
struggles to recover from the recent economic downturn.
About the National Association of Development Organizations
    The National Association of Development Organizations (NADO) 
provides advocacy, education, research and training for a national 
network of 520 regional development organizations. NADO members--known 
locally as councils of governments, economic development districts, 
local development districts, planning and development districts, 
regional councils and regional planning commissions--are focused on 
strengthening local government, communities and economies through 
regional solutions, partnerships and strategies.
About the National Association of Counties
    The National Association of Counties (NACo) is the only national 
organization that represents county governments in the United States. 
Founded in 1935, NACo provides essential services to the nation's 3,068 
counties. NACo advances issues with a unified voice before the Federal 
Government, improves the public's understanding of county government, 
assists counties in finding and sharing innovative solutions through 
education and research, and provides value-added services to save 
counties and taxpayers money. NACo's membership totals more than 2,000 
counties, representing over 85 percent of the nation's population.
    This morning, I would like to focus my remarks on three key points.

    1. Recovery Act funding, coupled with yearly appropriations for 
        USDA's vital water and sewer infrastructure programs through 
        the Rural Utilities Service, have been essential resources for 
        rural communities as they strive to create economic 
        opportunities and improve the quality of life for their 
        citizens.

    2. The lack of adequate water and wastewater infrastructure still 
        remains one of the most significant roadblocks to economic 
        development in small town and rural America. USDA Rural 
        Development is effective at helping communities overcome rural 
        water and wastewater infrastructure challenges. However, the 
        mission area still needs additional resources, especially grant 
        funding, in the coming fiscal years to meet the mounting 
        demands for these programs.

    3. The Administration's newly proposed Rural Innovation Initiative 
        will make USDA's infrastructure investments more efficient and 
        effective by rewarding regional strategic approaches to rural 
        development. This reflects the reality of today's marketplace 
        where rural counties and communities are not only competing 
        statewide and nationally, but more likely, internationally. The 
        Rural Innovation Initiative will provide incentives and 
        resources for the enrichment of rural development strategies on 
        a regional and local basis to implement area wide priority 
        projects and initiatives. NADO and NACo urge the Subcommittee 
        to support this promising Initiative.

    First, Mr. Chairman, Recovery Act funding, coupled with yearly 
appropriations for USDA's vital water and sewer infrastructure programs 
through the Rural Utilities Service, have been an essential resource 
for rural communities as they strive to create economic opportunities 
and improve the quality of life for their citizens. 

    For many small communities with aging, substandard water supply 
systems that are expensive to maintain or communities with no or 
limited public water supply systems, USDA Rural Development is an 
invaluable partner.
    One example of access to safe and reliable sources of water being 
an essential catalyst for economic development, job creation and 
business development is taking place in my state and region. The Ozark 
Mountain Regional Public Water Authority (Diamond City, Arkansas) will 
receive $55.7 million in grant and loan funding from USDA Recovery Act 
dollars to develop and build a long-term regional water supply for four 
counties in rural Arkansas.
    Currently, the citizens of Newton, Searcy, and portions of Boone 
and Marion counties have limited water resources available. Lack of 
water is a constant concern for these communities. According to the 
Arkansas Department of Health, the water that is available to residents 
contains excessive and dangerous levels of Radium 226, Radium 228, 
Fluoride and Hydrogen Sulfide. The U.S. Environmental Protection Agency 
(EPA) has certified that many of these water sources are unsafe for 
human consumption.
    USDA funds will be used to build a water treatment facility, 
drainage basin and intake structure to deliver treated water via 
transmission lines, a booster pumping station and water storage tanks 
to approximately 20 water systems in some of the most rugged and 
difficult terrain in North Central Arkansas. Ultimately, the project 
will provide a safe and reliable source of water for 22,000 local 
residents.
    It will also provide a plentiful source of water for the region in 
order to facilitate economic growth. Due to the unsafe and limited 
water supply available from existing springs, these counties have never 
had the opportunity to solicit or obtain industrial or commercial 
development. A contributing factor to low income levels in state. This 
project, which has been in the making for 25 years, aims to reverse 
that trend and attract much needed economic opportunities to this very 
rural region of our state.
    Without USDA Recovery Act investments, this project would remain 
unrealized, and the citizens of the region would continue to struggle 
with unsafe water and little hope for future job creation and business 
development.
    But, my region is not the only one benefiting from USDA's critical 
assistance.
    Commissioner F.D. Rivenbark of Pender County, North Carolina 
testified before this Subcommittee in June 2009 on behalf of NACo 
regarding USDA Recovery Act projects and has a very positive update on 
the success of USDA Rural Development funding in his county. The 
original Pender County Water Treatment Plant Project, mentioned in his 
testimony, was not going to be cost effective as the region's high 
population growth would render the plant obsolete in just a few years. 
USDA worked with local leaders to allow the construction of a larger 
project, thus saving millions down the road for facility upgrades.
    The project cost of $32.3 million was made up of $22.5 million in 
low interest loans, $7.6 million in grant funding and $2.3 million in 
local funds. The plant and transmission facility is on target to bid in 
the next 90 days. This plant will provide water for a new industrial 
park, and a major industrial corridor where there is no development at 
this time. Industrial client interest is increasing significantly at 
this site due to the plant coming online soon.
    Due to the new water treatment plant, a new business is considering 
investing $80 million and creating 1,200 jobs at the new industrial 
park. With over 11 percent unemployment in Pender County, this would be 
a tremendous boost to the local economy. The project would not have 
been possible without the funding and excellent technical assistance 
from USDA field staff in North Carolina. Without the grant funds in 
particular, which represent 23 percent of the total project cost, 
Pender County and its water users would struggle to make the plant 
financially viable.
    As part of the regional water strategy provided by the Greenville 
Utilities Commission (Greenville, North Carolina) to help local water 
providers meet the mandated reduction of groundwater withdrawal, USDA 
Rural Development provided $17.4 million in combined loan and grant 
funding for a joint transmission line and internal improvements to 
serve the Pitt and Greene County water systems. This investment will 
help water systems reduce the volume of water they withdraw by a total 
of 75 percent by 2018.
    The Lower Jackson River Regional Wastewater Treatment Plant in 
Alleghany County, Virginia is an antiquated facility that overflows at 
several points in the county. USDA provided a $2.5 million loan and a 
$2 million grant towards construction of a new regional wastewater 
treatment plant that will serve Alleghany County and the Towns of 
Clifton Forge and Iron Gate. Once completed, the plant will bring the 
county wastewater treatment efforts back into compliance with 
environmental regulations and will open all of Eastern Alleghany County 
for economic development, resulting in an untold number of new jobs.
    The Sandy Township Municipal Authority (DuBois, Pennsylvania) 
received a $5.8 million Rural Development loan to extend its present 
water system. The extension of the system's water lines will allow the 
authority to supply additional water and fire protection to 260 new 
users in the area. The funds were made available through the Recovery 
Act.
    The Northeastern Vermont Development Association (St. Johnsbury, 
Vermont) provided technical assistance to help several communities in 
its region access Rural Development water and sewer funding. Because of 
this assistance, the Towns of Troy and Jay were awarded more than $1.1 
million in grant funds and $1.4 million in loan funding to expand their 
wastewater treatment center and install larger waste water collection 
lines. The funds will allow these two communities to meet the expansion 
needs of a nearby ski resort in this tourist dependent region and to 
pursue other economic development opportunities.

    Second, Mr. Chairman, the lack of adequate water and wastewater 
infrastructure still remains one of the most significant roadblocks to 
economic development in small town and rural America. 

    Despite the dramatic gains made with funding provided in the 
Recovery Act for USDA rural water and wastewater infrastructure 
programs, the nationwide funding backlog remains significant. USDA 
Rural Development is effective at helping communities overcome rural 
water and wastewater infrastructure challenges, but additional 
resources will be needed in the coming years to meet the mounting 
demand for these programs.
    According to a 2009 report by the American Society of Civil 
Engineers (ASCE), of the nearly 53,000 community water systems, 
approximately 83 percent serve 3,300 or fewer people. These smaller 
systems face huge financial, technological, and managerial challenges 
in meeting a growing number of Federal drinking-water regulations. 
Overall, ASCE estimates that nearly $1 trillion in critical drinking 
water and wastewater investments will be needed over the next 2 decades 
across the United States. Not meeting the investment needs of the next 
20 years, risks reversing public health, environmental and economic 
gains of the past 3 decades.
    While state and local governments, industry and nonprofit 
organizations are making major contributions to our public 
infrastructure enhancement efforts, this immense job will never be 
completed without sustained aggressive leadership, participation and 
resources of the Federal Government. More than 98 percent of the 
nation's investment in water infrastructure has been made at the local 
level, according to the American Water Works Association. Local 
governments stand ready to be a key partner in economic recovery and 
are willing to pay our fair share for infrastructure needs, but we will 
not be able to afford all the needed investments needed without an 
enhanced Federal partnership.
    In addition to the health and social benefits of this long-term and 
on-going process, infrastructure development is vital to the nation's 
ability to maintain and sustain a world-class economy. This will be 
particularly critical as the nation works to expand the renewable fuels 
industry. The transport of raw and finished products is already placing 
new and growing demands on our infrastructure and transportation 
systems.
    As proven by USDA Rural Development investments over the years, the 
role of basic public infrastructure and facilities are at the core of 
both sustaining existing businesses, nurturing new companies and 
improving the quality of life in rural counties and communities. The 
private sector relies, expects and demands that counties and local 
communities provide and maintain these services and infrastructure. 
Business and industry will locate wherever these critical facilities 
exist. Be it here in the United States, or more often, abroad.
    As the Subcommittee works to evaluate USDA rural water and 
wastewater infrastructure programs, we encourage you to help make the 
application process for new and existing programs more user-friendly 
and streamlined. Navigating the extensive USDA program portfolio and 
application process can be a burdensome and time consuming endeavor. 
This is especially important considering that over 33,000 of the 
nation's 39,000 units of local government have populations below 3,000 
and 11,500 employ no full-time professional employees, according to 
U.S. Census Bureau data. We support USDA Rural Development's stated 
goal of implementing a community development component specifically 
geared toward smaller communities that lack have sufficient capacity. 
One way to assist localities with limited resources will be to increase 
USDA field staff's knowledge about community development and ensure 
that regional development organizations remain eligible to help plan 
and implement projects similar to those outlined earlier in my 
testimony.

    Finally, Mr. Chairman, the Administration's proposed Rural 
Innovation Initiative will make USDA's infrastructure investments more 
efficient and effective by rewarding regional approaches to rural 
development. 

    The Rural Innovation Initiative is designed to provide a new 
framework for USDA to promote economic development and job creation in 
rural communities. To support this regionally-based, locally-driven 
approach, USDA requested a set-aside in the FY 2011 Budget of more than 
$280 million of existing program funds, roughly five percent of the 
funding from approximately 20 existing USDA programs, including USDA's 
Water and Waste Program.
    The Initiative will allocate funds competitively among innovative 
regional economic development projects tailored to local needs and 
opportunities. We encourage Congress to adopt provisions included in 
the President's FY 2011 Budget request, which will give USDA authority 
to set aside funding needed to begin this Initiative.
    The Initiative's new approach will lead to increased efficiency as 
rural community capacity is enhanced through greater coordination and 
leveraging of regional funding. We strongly support the goal of moving 
rural development towards a commitment to regional rural development 
strategies designed by local leaders. The Initiative will help address 
one of the most important but under-funded parts of rural community and 
economic development-rural development strategies and institutional 
capacity to implement priorities.
    Most rural local governments simply lack the financial resources to 
hire professional economic development practitioners and few Federal 
programs are specifically designed for their needs. Our rural regions 
are lagging behind in economic development, job creation and growth, 
but not because they lack the assets or willingness needed to 
strengthen their communities. Whether through the timber, agricultural, 
natural resources, energy or manufacturing industries, rural regions 
truly are key drivers of America's economic and national security. What 
they lack are the resources to successfully leverage those assets into 
economic growth opportunities for their own citizens.
    The Rural Innovation Initiative will provide these regions with 
resources and a framework to examine their strengths, move beyond 
current program stovepipes, and develop a structure leveraging those 
assets to addresses challenges in their local economies. The Initiative 
also recognizes the value of working regionally. No community will have 
to ``go it alone'' but by the same account, no community can thrive 
alone. In order to benefit from this new Initiative, communities will 
have to work together to address their common priorities and goals.
    Ultimately, the Initiative will provide rural regions with the 
resources necessary to build their workforce and strengthen their 
existing community infrastructure, creating prosperous rural 
communities where people want to live and raise families.
    We see examples of the Rural Innovation Initiative being 
implemented throughout the country. Recognizing that his state's 
economic development efforts focused on competition for business and 
jobs among its own cities, towns and regions instead of focusing on how 
the state as a whole could better compete in the global economy, 
Governor John Baldacci announced the creation of a new statewide 
economic development effort: Mobilize Maine. The initiative changed the 
model for rural economic development in Maine by addressing a 
disconnected, fragmented and, often times, ineffective system to 
improve the personal income of Maine workers.
    Facilitated and coordinated by Maine's six Economic Development 
Districts (EDDs), Mobilize Maine creates a framework to identify and 
develop strategies addressing Maine's unique assets that have market-
leverage in the global economy, but may not have been previously 
recognized. The plan also sets concrete actions, timelines and 
benchmarks to utilize those assets to transform Maine's regional 
economies and business climate. In the long term, Mobilize Maine is 
self sustaining as its strategies for growth are designed to span 
successive state Administrations and be sustained by local, private, 
public and nonprofit sector leaders and citizen volunteers.
    On a nationwide scale, the Rural Innovation Initiative will provide 
much needed incentives and resources for the enrichment and 
implementation of regional rural development strategies. NADO and NACo 
urge the Subcommittee to support this promising initiative.
    In closing, I commend you for supporting USDA Rural Development 
programs, especially the vital water and sewer infrastructure programs 
of the Rural Utilities Service. The additional funding provided in the 
Recovery Act is spurring economic development in communities across 
rural America. I also urge you to support enhanced funding for USDA 
Rural Development programs in the next farm bill and increased emphasis 
on regional development strategies through initiatives such as the 
Rural Innovation Initiative.
    Thank you again, Mr. Chairman and Members of the Subcommittee for 
the opportunity to testify today on the views of NADO, NACo and our 
members. I welcome any questions.

    The Chairman. Thank you so much. And it is the Chairman's 
prerogative, Ms. Herseth Sandlin, would you like to introduce 
our next panelist?
    Ms. Herseth Sandlin. I appreciate it, Mr. Chairman. Troy 
Larson, I have known Troy for many years. Both of us were 
graduates in the 1980's. I won't go any further. That is the 
same high school in northeastern South Dakota, Groton High 
School. He has served a Member of our Congressional delegation, 
Senator Thune, when he was here in the House on the Agriculture 
Committee, and has been working with the Lewis & Clark Regional 
Water System for so many years now. We have watched the ground 
being broken, the pipes being laid, the jobs it has created, 
and servicing the communities across three states who have 
become a partner on that effort. The states that they have 
obligated, the communities that they have obligated, and the 
annual challenges and fights we have had regardless of 
Administration of making sure that the funding is available to 
move this important project for economic development in 
southeastern South Dakota and again Minnesota and Iowa as well.
    I have been pleased to work with colleagues on this 
Committee, Mr. Walz of Minnesota, Mr. King of Iowa, working 
closely with Troy Larson and his board of directors. I am very 
pleased that you included him in today's hearing. While a 
project not a part of the RUS authority, a very important 
project that identifies what you have articulated in terms of 
the importance of this hearing and the types of water projects 
that serve communities and in this case three different states. 
So I appreciate the opportunity to introduce Troy Larson to 
you, Mr. Chairman, to our Ranking Member, and to my colleagues 
on the Subcommittee.
    The Chairman. Thank you. Thank you so much. Mr. Larson, you 
may proceed.

  STATEMENT OF TROY LARSON, EXECUTIVE DIRECTOR, LEWIS & CLARK 
             REGIONAL WATER SYSTEM, SIOUX FALLS, SD

    Mr. Larson. Congresswoman Herseth Sandlin, thank you very 
much for that introduction. It is always good to see a Groton 
Tiger alumnus. Mr. Chairman, Ranking Member Conaway, Members of 
the Subcommittee, my name is Troy Larson. For the last 7 years, 
I have served as Executive Director of the Lewis & Clark 
Regional Water System, and thank you very much for the 
opportunity to share with you the critical importance of rural 
water to sustaining and expanding economic development, 
particularly in rural America. First, some brief background on 
the Lewis & Clark Regional Water System. Lewis & Clark consists 
of 20 member-cities and rural water systems in southeastern 
South Dakota, northwestern Iowa, and southwestern Minnesota. 
The project represents a unique regional approach involving the 
Federal Government, three states, and 29 local members to 
address common water problems, common problems with area water 
resources in a more effective and cost efficient way than each 
member could do alone.
    Regional water problems include shallow wells and aquifers 
prone to contamination and drought, compliance with new Federal 
drinking water standards, population and economic growth 
stifled due to inadequate water supplies, and insufficient 
resources to replace aging facilities. When completed, Lewis & 
Clark will provide a desperately needed reliable source of 
quality drinking water to over 300,000 people in South Dakota, 
Iowa, and Minnesota in a service area the size of Connecticut. 
The source of water will be a series of wells along the banks 
of the Missouri River. Lewis & Clark was authorized by Congress 
in 2000 and construction began in earnest in 2004. The project 
is currently in its 7th year of construction. Roughly half of 
the construction is completed or under contract.
    The system is scheduled to begin operation in 2012, and 
depending on Federal funding levels all 20 members should be 
connected some time between 2017 and 2020. Having access to 
quality, reliable water is critically important to the tri-
state region from both a quality of life standpoint and 
economic development. Water truly is the backbone of economic 
development. Talking about water may not be flashy, but it is 
the first factor considered when it comes to attracting new 
businesses or industries or expanding existing ones.
    Here are a few examples. The JBS Swift pork processing 
plant in Worthington, Minnesota is one of the largest pork 
processors in the nation. It is a very important value-added 
industry. However, it is also very water intensive. For several 
years, Swift, which currently employs over 2,000 workers, has 
wanted to expand production. However, their plans are always 
hindered because the City of Worthington is not able to provide 
them with additional water. The first question Worthington's 
economic development director asks when a prospective business 
reaches out to him is whether they need any water to process 
their product. If the answer is yes, the director tells them 
they will unfortunately need to look elsewhere.
    In other examples, both Worthington and Lincoln-Pipestone 
Rural Water System, which is in Chairman Peterson's district, 
who was here earlier, in southwestern Minnesota have turned 
away prospective ethanol plants because they do not have enough 
water. Rock County Rural Water District, also in southwestern 
Minnesota, has turned down requests to open dairy operations 
because they do not have enough water. The lost economic value 
to the farmers and regional economy is immeasurable. A prime 
example of the positive economic impact water can have in rural 
areas has happened in Hull, Iowa. In 2008, a cheese factory 
opened in the small town of Hull, Iowa, a town of just over 
2,000 people. This was not a plant that relocated from 
somewhere else, it is a brand new venture that produces bulk 
cheese that is delivered to Wisconsin and sold throughout the 
nation. The plant uses 300,000 gallons of milk a day, which is 
purchased from dairies in the area.
    Without the water Lewis & Clark is providing to Hull in the 
short-term by buying it from another community and running it 
through our pipes, as well as the promise of a permanent water 
source from Lewis & Clark when the System is completed, city 
officials have indicated there is no way the plant could have 
located in Hull. The plant, which created approximately 85 jobs 
when it first opened, has recently expanded its staff and 
currently employs 90 people. It plans to double its cheese 
production by early next year, which will increase the number 
of jobs to around 130. For the economy of this town of just 
over 2,000 people, as well as the dairy farmers in the area, it 
is not difficult to see the obvious and direct benefit of 
reliable water when it comes to rural development. The addition 
of this cheese plant has been like a direct injection of 
adrenaline into the system.
    When it comes to infrastructure, it cannot get more basic 
than water. For those trying to plan for and expand access to 
rural water throughout the nation it is hoped that the Federal 
Government can appreciate the necessary and regional approach 
played by water resources, of which Lewis & Clark is an example 
in terms of both need and a solution. As water becomes more and 
more scarce in both rural areas and urban areas of our country, 
a new motto has emerged, water is the new oil. Although it is 
often taken for granted, water truly is the oil that runs the 
engine of economic development. To help ensure the 
sustainability of rural America and remain competitive in the 
industrial market, access to quality, reliable water is job 
number one. Thank you again for the opportunity to reinforce to 
you the critical importance of rural water to economic 
development. I welcome any questions you may have.
    [The prepared statement of Mr. Larson follows:]

 Prepared Statement of Troy Larson, Executive Director, Lewis & Clark 
                 Regional Water System, Sioux Falls, SD
    Mr. Chairman, Ranking Member Conaway and Members of the 
Subcommittee,

    My name is Troy Larson. For the last 7 years I have served as 
Executive Director of the Lewis & Clark Regional Water System. Thank 
you for the opportunity to share with you the critical importance of 
rural water to sustaining and expanding economic development, 
particularly in rural America.
    First, some brief background on the Lewis & Clark Regional Water 
System. Lewis & Clark consists of 20 member-cities and rural water 
systems in southeastern South Dakota, northwestern Iowa and 
southwestern Minnesota. The project represents a unique regional 
approach involving the Federal Government, three states and 20 local 
members to address common problems with area water resources in a more 
effective and cost-efficient way than each member could do alone. 
Regional water problems include shallow wells and aquifers prone to 
contamination and drought, compliance with new Federal drinking water 
standards, population and economic growth stifled due to inadequate 
water supplies, and insufficient resources to replace aging facilities. 
When completed, Lewis & Clark will provide a desperately needed 
reliable source of quality drinking water to over 300,000 people in 
South Dakota, Iowa and Minnesota, in a service area the size of 
Connecticut. The source of water will be a series of wells along the 
banks of the Missouri River.
    Lewis & Clark was authorized by Congress in 2000 and construction 
began in earnest in 2004. The project is currently in its seventh year 
of construction. Roughly half of the construction is completed or under 
contract. The System is scheduled to begin operating in 2012, and 
depending on Federal funding levels all 20 members should be connected 
sometime between 2017 and 2020.
    Having access to quality, reliable water is critically important to 
the tri-state region from both a quality of life and economic 
development standpoint. Water truly is the backbone of economic 
development. Talking about water may not be flashy, but it is the first 
factor considered when it comes to attracting new businesses or 
industries or expanding existing ones.
    Here are a few examples. The JBS Swift Pork Processing plant in 
Worthington, Minnesota is one of the largest pork processors in the 
nation. It is a very important value-added industry. However, it is 
also very water intensive. For several years, Swift, which employs over 
2,000 workers, has wanted to expand production. However, their plans 
are always hindered because the City of Worthington is not able to 
provide them with additional water. The first question Worthington's 
economic development director asks when a prospective business reaches 
out to him is whether they need any water to process their product. If 
the answer is yes, the director tells them they will unfortunately need 
to look elsewhere.
    In other examples, both Worthington and Lincoln-Pipestone Rural 
Water System in southwestern Minnesota have turned away prospective 
ethanol plants because they do not have enough water. Rock County Rural 
Water District, also in southwestern Minnesota, has turned down 
requests to open dairy operations because they do not have enough 
water. The lost economic value to the farmers and regional economy is 
immeasurable.
    A prime example of the positive economic impact water can have in 
rural areas has happened in Hull, Iowa. In 2008, a cheese factory 
opened in the small town of Hull, Iowa, a town of just over 2,000 
people. This was not a plant that relocated from somewhere else, it is 
a brand new venture that produces bulk cheese that is delivered to 
Wisconsin and sold throughout the nation. The plant uses 300,000 
gallons of milk a day, which is purchased from dairies in the area.
    Without the water Lewis & Clark is providing to Hull in the short-
term by buying it from another community and running it through our 
pipes, as well as the promise of a permanent water source from Lewis & 
Clark when the System is operational, City officials have indicated 
there is no way the plant could have located in Hull. The plant, which 
created approximately 85 jobs when it first opened, has recently 
expanded its staff and currently employs 90 people. It plans to double 
its cheese production by early next year, which will increase the 
number of jobs to around 130. For the economy of this town of just over 
2,000 people, as well as the dairy farmers in the area, it is not 
difficult to see the obvious and direct benefit of reliable water when 
it comes to rural development. The addition of this cheese plant has 
been like a direct injection of adrenaline into the system.
    When it comes to infrastructure, it cannot get more basic than 
water. For those trying to plan for and expand access to rural water 
throughout the nation it is hoped that the Federal Government can 
appreciate the necessary and regional role played by water resources, 
of which Lewis & Clark is an example in terms of both need and a 
solution.
    As water becomes more and more scarce in both rural and urban areas 
of the country, a new motto has emerged--``water is the new oil.'' 
Although it is often taken for granted, water truly is the oil that 
runs the engine of economic development. To help ensure the 
sustainability of rural America and remain competitive in the 
industrial market, access to quality, reliable water is job number one.
    Thank you again for the opportunity to reinforce to you the 
critical importance of rural water to economic development. I welcome 
any questions you may have.

    The Chairman. Thank you, sir. Mr. Kahl.

  STATEMENT OF PAUL F. KAHL, P.E., DEPUTY DIRECTOR OF PUBLIC 
               WORKS, ALLEGANY COUNTY, MARYLAND,
                         CUMBERLAND, MD

    Mr. Kahl. Thank you, Chairman McIntyre, Ranking Member 
Conaway, and Members of the Subcommittee for allowing me to 
testify today. Based on your previous comments, I feel like I 
am talking to friends that understand our problem that we have 
in rural communities, and it is refreshing to hear your 
comments. I think you foresee a lot of the problems we are 
facing in rural development. My name is Paul Kahl, and I am the 
Deputy Director of Public Works for Allegany County, Maryland. 
It is a small county of 75,000 people, about 2\1/2\ hours from 
here. Similar to many rural areas in the United States, many of 
our communities have old and inadequate infrastructure with a 
limited number of people to pay for the improvements.
    With the assistance from USDA Rural Development, we have 
been able to provide drinking water to our communities. 
Providing safe drinking water to the communities in our area 
provides probably the most personal satisfaction to me besides 
my family. We have been able to improve sewage systems, improve 
the quality of streams by reducing sewer overflows, build a new 
high school, stimulate economic growth, and plan for new 
projects. I will provide a brief description of our problems, 
but first I would like to point out two important facts. For 
each of the projects we have done with USDA Rural Development 
money alone is a component of that project. What that means is 
our community is making a commitment towards that project.
    Usually what we see is small communities that are paying 
little or nothing for water. We are shooting for $550 to $600 a 
year for the average user. The medium household income in 
Allegany County is around $35,000 so you see it is a 
significant part of our income. Second, we have not received 
funding from one project that is not currently still in use, 
and I point that out. Earlier, you had talked about future and 
longevity. When we build a project, it is there to stay, and 
USDA has worked with us to make sure these projects are viable 
and sustainable. They do not allow us to build a project that 
we are not going to be able to provide. We show the rate 
structure. We are showing that that system will remain forever 
and the county--what has occurred with us is Allegany County is 
an older community, and what has occurred, we had a lot of 
private water companies.
    Allegany County goes back to Revolutionary War days. A lot 
of these communities develop from coal towns, and what happened 
was they developed a small water system. A lot of these water 
systems, we still have a couple of them but they are run by 
private water companies, and when I say a private water 
company, I mean like a volunteer organization like Little 
League. What happens is with all the regulations it is 
impossible for them to keep up with what is going on. They 
can't provide the proper water. They can't keep up with today's 
requirements.
    So what happens when we take over these water systems, 
Allegany County takes over these water systems, and we do not 
go in there and tell the people we are going to take them over. 
They want us because they are not getting the proper water 
pressure and water quality. So when these problems are solved, 
Allegany County takes over these systems, and we have a 
utilities division that runs water and wastewater in Allegany 
County, so it is an important point to realize that when we 
take over these communities with private water companies and/or 
wells that people have bad water, we are there to stay. 
Generally, when we solve the water problems we don't have to go 
back into that community and hopefully we will never have to go 
back in that community for years to come. And USDA has worked 
with us to make sure we have enough money to keep that system 
going. That is a very important component when working with 
USDA.
    We talked earlier about what is more important than 
providing water, a basic human need, to the public, and it is 
one of our main goals in Allegany County. Another big problem 
we are facing is we have sewer systems that were built in the 
1960s, and currently we have six of our jurisdictions working 
around consent orders, and what they require us to do is to 
solve the problem to prevent the sewer overflows, and, more 
importantly, what they are doing is they are limiting growth in 
those areas. Essentially, each consent order allows us 5,000 
gallons per day for the next 10 years until we solve the 
problem.
    So what happens if we have development that occurs in that 
area, we can only pick off a small development. If we had an 
industry in that area, we cannot build it unless we have the 
problem solved. I will mention it is not part of USDA--it is 
USDA but the loan isn't--we did build our first new high school 
in Allegany County in over 15 years with a loan from USDA. It 
was a low interest loan that allowed us to afford to be able to 
do that. We built an industrial park and within 2 months after 
the industrial park was built, we brought in an industry that 
hires about 200 or 300 people and we helped to fill the 
remaining part of that park. We talked about the preliminary 
planning grants, and they are a very important component 
because what they allow us to do, the engineers in my 
department, we run operations. I am Deputy Director of Public 
Works. We run our transit and water, sewer, roads, bridges, so 
what we do is 90 percent of our time is spent on operations, so 
these planning grants allow us to get a consultant to do some 
of the planning so we can foresee ahead.
    I see I am getting short on time here, but I would like to 
mention, you had mentioned earlier, Mr. Conaway, about the 
requirements. The requirements didn't change for USDA. They 
require an environmental assessment, and they also require a 
preliminary engineering report. It involved a tremendous 
investment on the time of my staff to get these projects done. 
We worked a lot of overtime, a lot of evenings. But I would 
like to thank USDA because I know that they turned around in 
the same time. We currently have four applications in there, 
and we have been on the phone with them, I would say, or e-mail 
probably at least two or three times a week. So I would really 
like to thank them for all the support. And I know that every 
day you guys are facing decisions, facing funding problems, but 
I would like to point out we are solving basic human needs, and 
I would invite you, being 2\1/2\ hours from Washington, to 
visit our communities and see exactly what your money is doing. 
Thank you very much.
    [The prepared statement of Mr. Kahl follows:]

  Prepared Statement of Paul F. Kahl, P.E., Deputy Director of Public 
            Works, Allegany County, Maryland, Cumberland, MD
    Thank you, Chairman McIntyre, Ranking Member Conaway, and Members 
of the Subcommittee for providing me the opportunity to testify today 
on USDA Rural Development programs. I shudder to think of the impact on 
our County, without the assistance we have received from USDA Rural 
Development. USDA Rural Development has been the most significant 
funding partner in helping us solve our basic infrastructure problems.
    My name is Paul Kahl, and I am the Deputy Director of Public Works 
for Allegany County, Maryland. Allegany County is a small, rural county 
in western Maryland with a population of approximately 75,000 people. 
Similar to many rural areas in the United States, many of our 
communities have old and inadequate infrastructure, with a limited 
amount of people to pay for improvements. With assistance from USDA 
Rural Development, we have been able to:

   Provide safe drinking water.

   Improve sewage systems.

   Improve the quality of streams, by reducing sewer overflows.

   Build a new high school.

   Stimulate economic growth.

   Plan for new projects.

    I will provide a brief description of the problems we are 
attempting to solve with USDA Rural Development assistance, but before 
I do, I would like to point out two very important facts:

    1. For each of our projects for which we have received USDA Rural 
        Development funding, a component of the funding is a USDA loan, 
        and sometimes the funding is all loan. I point this out to show 
        that a substantial commitment is required from our County for 
        every project.

    2. Second, we have not received funding for one project from USDA 
        that is not currently still in use.

    Allegany County experiences two problem areas regarding drinking 
water. The first is, many communities are served by private water 
companies, who provide unfiltered water and experience periods without 
water. The second area of concern, is in communities that have private 
wells that are contaminated and/or suffer times without water. 
Providing adequate, safe drinking water to our citizens has been one of 
the main priorities of our County and with USDA Rural Development 
assistance, many of residents are now drinking safe, reliable, water. 
We continue the task to provide safe drinking water, a fundamental 
human need, to the remaining problem areas in our County. We will be 
unable to complete this task without USDA Rural Development assistance.
    Most of Allegany County's sewage systems were built in the 1960s, 
and these aging systems are experiencing large amounts of infiltration 
and inflow, thereby causing these systems to overflow into our streams. 
Allegany County is currently under six (6) Consent Orders that require 
us to eliminate our sewer overflows, and limit the amount of 
development in these systems, until the problem is corrected. We are 
currently working with USDA Rural Development to replace/rehabilitate a 
number of these areas to eliminate sewer overflows into our streams, 
and to provide reliable sewer service to our residents.
    Recently, through a number funding sources, including USDA Rural 
Development, Allegany County was able to build the first new high 
school in our County in fifty years. The project required Allegany 
County to commit $10 million in local funding. USDA Rural Development 
provided a 40 year low interest loan, thereby making the project 
affordable for us.
    With a USDA Rural Development loan, Allegany County was able to 
construct a new water line to new Industrial Park. Soon after the park 
was built, we were able bring in a new industry to our County. We hope 
to fill the remaining areas in the park in the near future.
    Another important USDA Rural Development Program that our County 
has utilized is the Preliminary Planning Grant Program. With funding 
from this program, we have been able to determine the cost and hurdles 
we will encounter to solve some of our existing water and sewer 
problems and to plan for economic development. This program, which 
utilizes consultant services, allows us to complete planning to solve 
longer range problems, and allows our staff to concentrate on solving 
current problems.
    Rural Development funding has resulted in the employment of 
hundreds of construction workers and the facilities constructed have 
not only served a public need, but also provide permanent employment of 
dozens of operations personnel in the County.
    I can not adequately express my appreciation for the cooperation 
and hard work that USDA Rural Development personnel provide to Allegany 
County. Allegany County has a close partnership with them that enables 
us to work in a very productive manner. I have worked with many 
organizations, and I considered none equal to USDA Rural Development in 
their effectiveness. The only improvement that we would request, is for 
the funding to increase, so Allegany County, along with other rural 
communities, can continue to solve rural problems.
    I know that everyday, you face decisions regarding what funding 
programs, should be provided by the Federal Government and to one 
degree or another, every person that appears before you, has legitimate 
needs. However, I want to take this last opportunity to point out, the 
programs that USDA Rural Development provides Allegany County and 
others, are helping us to provide basic human needs. Thank you for the 
opportunity to testify today and being located only 2\1/2\ hours from 
Washington, we would welcome you to our County anytime to view the 
positive effects of USDA Rural Development.

    The Chairman. Thank you, sir. Ms. Locklear, thank you for 
your very direct and specific testimony. Can you talk to us 
about the approximate length of time it takes to put a water or 
waste project application together?
    Ms. Locklear. Yes, sir. It takes roughly about 11 months, 
and I can testify to rural communities having some difficulty 
in doing that. We have to gather the resources and Pembroke is 
using the North Carolina Rural Water Association to help build 
that material, and then we have to come up with the funds to do 
the engineering assessments. Rural communities usually don't 
have in-house engineers and we have to assume that cost until 
it can be refunded later.
    The Chairman. You mentioned the North Carolina Rural Water 
Association and the technical assistance that it provides in 
other small community rural water projects. Can you tell us 
exactly what kind of help they provide in the operation of the 
system?
    Ms. Locklear. Yes, sir. We recently put together an 
application in 2009, and we were not able to submit the 
application without meeting the draft bill provisions, and they 
assisted us with the working of that and the lending of 
equipment. That required about $15,000 of detection equipment 
that we did not have and was not budgeted for and would not use 
on a regular basis, so that allowed us to submit the 
application and meet the requirements for the application.
    The Chairman. Thank you, ma'am. Mr. Conaway.
    Mr. Conaway. Thank you, Mr. Chairman. And, panelists, thank 
you all for coming to D.C. to visit with us. Ms. Fierros, you 
mentioned West Odessa, which is west of my hometown of Odessa, 
Texas, and their water issues, they received a grant or I guess 
whatever the grant or combination of grant and loans, but that 
the construction costs that were estimated in the loan 
processing when they actually bid it out for construction--the 
construction costs came in at double what they had thought it 
was going to be. How did that happen and what has been the 
result?
    Ms. Fierros. Mr. Conaway, I am sorry, but that is actually 
one of my sister organization's projects with Community 
Resource Group. It is part of the national RCAP. I don't know 
that I have the specifics on exactly what caused----
    Mr. Conaway. Okay. Would you mind for the record asking 
your sister organization to give us a paper on that as to what 
happened and why?
    Ms. Fierros. Yes.
    Mr. Conaway. And how they are struggling to make that work 
out if it has, but thank you very much. Mr. Norton, how many 
communities in your organization have applications pending and 
how long have they been pending, any sense of that?
    Mr. Norton. Well, we collected for the American Recovery 
and Reinvestment Act about 14 various projects that we 
considered that were shovel-ready projects that we collected. 
This project and the one I mentioned, the Ozark Mountain 
Regional Public Water Authority, was of course the largest. It 
collected 20 different water associations together so it was 
the biggest one by far.
    Mr. Conaway. But applications still pending, any sense of 
applications that are still pending at USDA?
    Mr. Norton. We have some that are still pending, yes.
    Mr. Conaway. How many of those? Any sense of how many?
    Mr. Norton. About a half dozen.
    Mr. Conaway. And how long have they been pending?
    Mr. Norton. Just 4 or 5 years probably in this particular 
case. Trying to get, as I think everyone on this panel has 
mentioned, trying to get the engineering reports where small 
rural communities can't afford, to get those engineering 
reports to a position where those projects are ready to go is a 
real stumbling block for all of us.
    Mr. Conaway. All right. Mr. Larson, the regional program 
that you put in place, where is the crossover in your analysis 
between where it makes sense to continue to regionalize like 
that versus Iowa building its own facility and being able to 
afford that? Is there an economic crossover where that happens?
    Mr. Larson. That is a good question. When each member 
joined Lewis & Clark, they had to analyze both economically and 
politically, and other considerations, what was the best way 
for them to address their water needs. Each community has their 
own tipping point. For Hull, the wells needed to be capped. The 
water was so poor they really had no other choice but to look 
elsewhere. And so each member has essentially analyzed on their 
own what is the most economic way to pursue this to address 
their water needs. In the 20 members case, they chose Lewis & 
Clark as their cheapest and most efficient way to address their 
water needs.
    Mr. Conaway. Where is your source water for Lewis & Clark?
    Mr. Larson. It is the Missouri River, a series of wells. We 
don't actually pull out of the Missouri River directly but a 
series of wells adjacent to the Missouri River.
    Mr. Conaway. And were these wells contributed by the 
members or how--somebody had rights to that water. How did you 
get----
    Mr. Larson. The water rights are through the State of South 
Dakota. It actually goes back to the Oglala--the Pick-Sloan 
irrigation project way back in the 1950s that irrigation was 
supposed to be the result of damming the Missouri River. 
Irrigation never really happened and so rural water is the 
spin-off of the Pick-Sloan project.
    Mr. Conaway. Thank you. Mr. Kahl, you mentioned thanking us 
for the money that we spend. Actually it is the taxpayers' 
money that we need to come to your community and see how it is 
being spent well. Those of us on this panel anyway, we never 
forget that it is not our money. It is the taxpayers' money, 
and so thank you for that comment and the invitation. With 
that, Mr. Chairman, I yield back.
    Mr. Kahl. I can assure you when we do our projects, we are 
very cognizant of that fact and we make sure that taxpayers 
monies are put to good use.
    The Chairman. Thank you. Mr. Minnick.
    Mr. Minnick. I come from the rural State of Idaho and it is 
full of communities like yours. I apologize for the quality of 
my voice, Mr. Chairman. The bulk of their water projects are as 
a result of EPA requirements which are by any objective 
analysis very marginal and extreme, but nevertheless these 
small communities have to come up with very large amounts of 
money in order to--if they don't have tax base in order to come 
up with projects to meet these EPA standards. I am going to 
have a panel of community leaders like you from these 
communities who have projects pending mostly for RUS funding 
that we will be talking to the EPA about.
    I want to ask each of you, what would be the one single 
thing in the RUS' approval process that would make it easier or 
cheaper and faster for you to get through their process to come 
up with projects which would help meet EPA or other third party 
water quality standards. What one thing could the RUS change 
that would most help you get through the kind of process my 
communities are having to go through as we speak? Maybe, to 
start with--maybe a few seconds from each of our five 
panelists.
    Ms. Locklear. Sir, I would say time. We do want to protect 
the water and the environment, so if we had time to get the 
plan in, this is our plan, we are going to need a little bit 
more time to budget these monies if they were not included. So, 
time would be a great effort as I have heard earlier as long as 
we have the plan in place to meet those regulations because 
they all come with some type of money attached with them 
whether it be a staff or analysis or assessments. They all do 
come with some funding requirements.
    Mr. Minnick. Thank you.
    Ms. Fierros. I guess the one thing that would make it 
easier is if they all--if USDA had the regulations in place to 
streamline the funding process. A lot of the communities that 
we work with in the upper Midwest, they have a tendency to have 
to go to two or three different places to put the funding 
package together that makes it affordable. They all have 
different requirements. Some forms don't transfer over to the 
other ones, those kind of things. If it was just one 
application process, it would help tremendously.
    Mr. Minnick. Mr. Norton.
    Mr. Norton. I think the Rural Innovation Initiative would 
help because it would allow us to plan ahead of time and 
develop and get some of it out of the way. The more you can get 
done prior to the project being awarded the less time it 
restricts and takes away from the development of the project.
    Mr. Minnick. Mr. Larson.
    Mr. Larson. Mr. Congressman, we are a little different 
animal in that our funding is through the Bureau of 
Reclamation, and so we do not utilize the loan programs through 
Rural Development, so I cannot speak to that question.
    Mr. Minnick. Mr. Kahl.
    Mr. Kahl. One of the biggest things, Mr. Thompson has 
mentioned, I think the process works very well and they work 
very--the best agency we work with bar none is state or Federal 
agency. Mr. Thompson mentioned that EPA may be working with 
Rural Utilities Service. Our biggest problem right now is sewer 
overflows, and we are given deadlines that we can't possibly 
meet. We have two jurisdictions with 1,000 people, sanitary 
districts, each of them with 1,000 people, and the estimate to 
repair the problem is $30 million so you do the math. So you do 
the math, 1,000 people, 1,000 users for $30 million, so if EPA 
would work with Rural Utilities Service and try to extend our 
deadlines, we most certainly will invest and we will try to 
protect the environment, but it is just too much too quick. But 
Rural Utilities Service, Rural Development is a great agency to 
work with, and the process seemed to work pretty well for us.
    Mr. Minnick. Thank you. I yield back.
    The Chairman. Thank you, Mr. Minnick. Clarification, Mr. 
Kahl, you said sewer overflows?
    Mr. Kahl. Yes, sanitary sewer overflows are the biggest--I 
know Baltimore City has a problem and the City of Cumberland 
has a problem in our jurisdiction.
    The Chairman. Okay. I just wanted to understand the word 
sewer.
    Mr. Kahl. Yes, it is sanitary sewer. What happens is when 
we get a lot of rain we put sewage into streams.
    The Chairman. Okay. Thank you for clarifying. Mr. Thompson.
    Mr. Thompson. Thank you, Mr. Chairman. I also want to 
encourage my really good friend from Idaho to go see a doctor 
before the Senate finishes their work on this health care bill. 
We need you on this Committee. Actually if we can just stick 
with that theme a little bit and ask all the panel, those who 
kind of reflected on the need for extensions, which is kind of 
what I have in mind. I mean I would like to see repeal on some 
of these mandates, the unfunded ones, but let us just make it 
realistic and say extensions, more time to be able to cope and 
adjust. What specific current regs do you see that you need 
extensions for that would be helpful for--I made a list. I have 
sanitary overflows starting that list out. Are there other 
specific--I just open that up to any of the panel that has 
input.
    Ms. Locklear. There is also leakages. Trying to find those 
leakages requires water audits to be done. You also have to 
change out water meters and specifically the wastewater 
treatment plant is a user because we do clean the water up, but 
we do need fresh water to do analysis or clean water. So we 
have to put in vaults and meters, huge meters that cost like 
$3,000 not including the contractor, and the vault itself, so 
those type issues.
    Mr. Thompson. That is very helpful. Any other ones from any 
other panel member that you have identified that if we could 
achieve an extension somehow?
    Mr. Kahl. Again, I go back to my original concern. What 
happens is we are spending probably millions of dollars to 
solve the sanitary sewer. It is a big issue with us because we 
have three or four communities that are not drinking safe 
drinking water. They are drinking unfiltered drinking water 
that basically comes straight from the reservoir into their 
systems without any filter or anything. Basically they just get 
some chlorine. And we have to spend millions of dollars trying 
to solve some sanitary overflows that are going to the streams 
that we don't consider as significant and we need to solve 
them, but we would most certainly like to solve our water 
problems first and then go to that next step.
    Mr. Thompson. And the order of priorities, obviously there 
is----
    Mr. Kahl. Absolutely. What happens is sanitary overflow bad 
and most certainly they are, but we consider it a priority to 
serve drinking water to our public before we solve these other 
problems.
    Mr. Thompson. I appreciate you having that perspective on 
it. Any others before I move on to another question?
    Ms. Locklear. Mr. Thompson, I have one other comment. Just 
in the month of February due to the snow and the rainfall, we 
exceeded permitted flows, not exceeding any other thing other 
than permits, other pollutant parameters, and you do get fined 
for those type of things even though the pollutants are not 
significant. If the pollutants were not even there it is just 
overflow due to dilution, but they still see that as over the 
permitted limit. Things like that would be helpful if there was 
no monetary fines associated with those type things, along with 
the sanitary sewer overflows.
    Mr. Thompson. Okay. Thank you. Mr. Kahl, you highlighted 
development of a business park and what it means to your 
county. With economic development from the industrial park you 
mentioned in your statement how much additional residential 
load did that development bring to the systems that you built? 
I am assuming this is a situation where you build it and they 
will come.
    Mr. Kahl. What occurred was we actually knew we were 
building an industrial park so one of the industries said to 
get the industrial park we were on a tight time limit. We will 
come into it. It was a wood cabinet business, and they came in 
right away. Soon thereafter, a developer bought approximately 
200 acres across from the industrial park because we had the 
water capacity. They have developed, both water and sewer and 
roads. They have only sold a couple lots. Unfortunately the 
economy in the last--this occurred 2 years ago, so they have 
sold some lots, and we think it will rebound soon but the 
economy has kind of slowed things down. But you are absolutely 
right. Every place that we have put a water line and sewer 
line, we provided that service in our county, and in most 
cases, a very high percentage, we got development soon 
thereafter.
    Mr. Thompson. And just to follow up, in your view then how 
should communities manage future ratcheting up of demand for 
services?
    Mr. Kahl. I am not sure I understand.
    Mr. Thompson. In terms of demand for that type of growth of 
preparing for the water infrastructure to having the 
infrastructure in place to meet those demands for new 
development.
    Mr. Kahl. Unfortunately, that is not a problem--I haven't 
had to deal with that problem. Our county has 75,000 people. We 
used to have over 100,000 people, so what has happened is we 
haven't had to deal with that problem. Unlike Maryland, 
Montgomery County, Howard County, Anne Arundel County, they 
have to deal with that problem you are talking about. We have 
not had to deal with that problem. We welcome development into 
our areas that we have water and sewer right now.
    Mr. Thompson. Okay. I just want to thank the panel for all 
of your input today. And I am out of time. Thanks, Mr. 
Chairman.
    The Chairman. Thank you. One additional question. Ms. 
Locklear, if you can tell us how you came to work in the water 
and wastewater industry. As we know, there is an expected 
shortfall in staffing levels, and it is often hard to be able 
to attract younger folks to come into this type of career or 
position. How do you think we can attract a young, diverse 
workforce to the water and wastewater industry?
    Ms. Locklear. Yes, sir. I came to Pembroke in its expansion 
as their chemist, their certified laboratory chemist, so that 
is how I entered in. And most of our staff or 50 percent of our 
staff either have 30 years in, 37 years in, and they can 
actually retire at any time, so we are trying to get their 
knowledge; either it is mapping the water and sewer lines and 
all those problems associated with infrastructure through new 
people. We don't have the money as some facilities do that are 
paying for engineers to kind of bridge that gap, and we are 
using rural water to help us to do that.
    The Chairman. Thank you. Any other questions from the 
panelists? If not, I would like to thank all of you for your 
attendance today at this important hearing. Under the rules of 
the Committee, the record of today's hearing will remain open 
for 10 calendar days to receive additional material and 
supplementary written responses from the witnesses to any 
question posed by a Member. This hearing of the Subcommittee on 
Rural Development, Biotechnology, Specialty Crops, and Foreign 
Agriculture is now adjourned. God bless you. Thank you, and I 
hope you travel safely.
    [Whereupon, at 11:47 a.m., the Subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]
 Supplementary Material Submitted by the U.S. Department of Agriculture
Insert 1
          Mr. Thompson. I am glad to hear that you do communicate with 
        folks like EPA and any other agency that has oversight of 
        those. Do they ever listen to what you have to say? Do they 
        ever--is there any hope, that is what I am saying, I guess.

    Rural Development does discuss the impact of regulatory action on 
rural water systems with its counterparts in EPA. Rural Development 
also works with other agencies on a project-specific basis to address 
environmental concerns and try to find resolutions that allow critical 
infrastructure projects to be constructed and the environment 
protected.
Insert 2
          Mr. Cassidy. And, again, going back to my small communities 
        with the limited--they don't have engineers on staff, for 
        example, so I kept on thinking that shovel-ready project 
        criteria for the community which is most poverty-ridden is 
        almost an oxymoron. They don't have the money to come up with 
        the project, and yet they are the ones who need it the most, et 
        cetera, et cetera, et cetera. Do you follow what I am saying?

    Communities who lack the capacity to complete engineering and 
environmental components of RUS applications can get assistance in 
several ways. First, communities may seek assistance from RUS-funded 
Circuit Riders and technical assistance providers. These resources are 
available across the country and can be located by contacting the local 
Rural Development Office. In addition, the RUS Water and Waste Loan and 
Grant Program does have limited grant funding available for planning 
activities, such as preparation of engineering and environmental 
reports. The pre-planning grants are limited to $25,000 and can only be 
used to fund up to 75% of the proposed cost of the eligible activities. 
For more information, communities should contact their local Rural 
Development Office (www.rurdev.usda.gov) Finally, other funders, such 
as the Community Development Block Grant (CDBG) program, Economic 
Development Agency (EDA) and state governments may have funds available 
to rural communities for these activities.
                                 ______
                                 
                          Submitted Questions
Response from Hon. Jonathan Adelstein, Administrator, Rural Utilities 
        Service, U.S. Department of Agriculture
Question Submitted by Hon. David P. Roe, a Representative in Congress 
        from Tennessee
    Question 1. Mr. Adelstein, can you describe the loan protection 
afforded Rural Development under 7 U.S.C.  1926(b)?
    Answer. Seven U.S.C.  1926(b) safeguards a loan secured through 
the Rural Utilities Service to an eligible rural water system by 
protecting the rural water system from the expansion of nearby cities 
and towns during the term of such loan. This protection ensures the 
viability and financial security of rural water systems by encouraging 
rural water development, expanding the number of potential users of 
such systems, and, in so doing, decreasing the per-user cost.

    Question 1a. If 7 U.S.C.  1926(b) is amended to allow 
municipalities to serve customers inside a rural utility district's 
area during the term of a loan secured through USDA, what affect might 
this have on the district's ability to repay the loan and what impact 
might it have on USDA's ability to lend in the future?
    Answer. In areas where a borrower is currently providing service, a 
change in 1926(b) that would allow municipalities to serve customers 
inside a rural utility district's area could lead to a loss of revenue, 
depending on the number of users lost, and impact that borrower's 
ability to repay its debt to USDA and operate in the long-term. It 
could also lead to increased risk of default and potentially impact the 
program's subsidy rate and program level, potentially reducing USDA's 
ability to provide assistance in the future to many rural communities.
Question Submitted by Hon. Bill Cassidy, a Representative in Congress 
        from Louisiana
    Question. Mr. Adelstein, you mentioned in your testimony that ten 
technical assistance grants worth $20 million has been awarded to 
assist communities plan and apply for funding for water and wastewater 
systems. Can you provide for the Subcommittee how many applications 
were made under those technical assistance grants, and how many of 
those applications were ultimately funded for construction?
    Answer. Technical Assistance and Training (TAT) Grants are awarded 
to private, nonprofit organizations to assist rural communities in 
identifying and evaluating solutions to water and waste disposal 
problems in rural areas, preparing applications for water and waste 
loans and grants and improving operation and maintenance of existing 
water and waste disposal facilities in rural areas. These are 1 year 
grants. In FY 2009, the program awarded a total of $19.5 million in TAT 
grants to ten entities. The grants were issued for a variety of 
purposes. A full listing of grantees and the grant purposes is attached 
to this response. Although the grants can be used for the purpose of 
assisting with application preparation, the grants issued in 2009 were 
for other purposes.
    The agency did award Recovery Act funds, separate from the TAT 
grants funded with regular appropriated funds, for the purpose of 
assisting applicants with application preparation and reporting 
compliance under the Recovery Act. In 2009, $4.1 million in Recovery 
Act funds were obligated toward the Water and Waste Circuit Rider 
contract. In 2010, $10.2 million was obligated to this contract. 
Information on the number of applications submitted and funded as a 
result of assistance provided by circuit riders funded through the 
Recovery Act is currently being compiled and will be available in May.
    In March 2010, $5 million in Recovery Act funds were awarded to 
Rural Community Assistance Partnership, LLS in the form of a TAT grant 
to provide additional assistance to rural communities on applying for 
and complying with the Recovery Act funding. As the grant was recently 
awarded, no information is available at this time on the number of 
applications resulting from the assistance.
FY 2009 Technical Assistance and Training Grant Recipients
Alaska Forum Inc. (AK)
$175,000
    Alaska Forum Inc. will provide targeted technical assistance to 
reduce health risks in communities of extreme need; provide small 
equipment and supplies for Villages to implement solid waste best 
management practices; provide collaborative opportunities among solid 
waste providers; and participate in statewide environmental 
conferences.
Missouri InuTech Foundation (MO)
$80,000
    The proposed project is to provide technical assistance and 
training to improve management, operation and maintenance of water and 
waste facilities. The project will also provide technical assistance 
and training to reduce the solid waste stream through reduction, 
recycling and reuse.
National Rural Water Association (OK)
$9,100,000
    National Rural Water Association will provide training and on-site 
technical assistance to wastewater systems in the contiguous 48 states, 
Alaska, Puerto Rico, and Hawaii. The training provided will help to 
reduce exposure to waste related health and safety hazards and enhance 
the sustainability of wastewater systems in rural and small 
communities.
National Tribal Environmental Council (NM)
$850,000
    NTEC will enhance and expand the drinking water technical 
assistance and training program designed to assist tribes in the safe 
and effective operation and maintenance of their community drinking 
water systems.
Native American Water Association (NV)
$280,000
    Native American Water Association will: (1) develop and deliver 
instructional training course workshops to Tribal Drinking water and 
wastewater systems; (2) build a Tribal Water and Wastewater systems 
network group coalition; and (3) provide on-site Tribal Water and 
Wastewater training program follow-up activities.
Rural Community Assistance Partnership (D.C.)
$7,000,000
    RCAP will continue to address the growing infrastructure needs and 
federally mandated security requirements for rural communities. The 
combination of these factors has resulted in a greater demand for 
vulnerability assessments (VAs) and emergency response plans (ERPs) for 
Rural Utility borrowers. The proposed Technitrain project will provide 
on-site technical assistance and community specific training to address 
water and waste disposal issues in eligible, rural areas in 48 to 50 
states and Puerto Rico during the 12 month period from September 1, 
2009, through August 31, 2010. A total of approximately 800 communities 
or projects will be served under Technitrain. Within the number of 
projects proposed, RCAP will also continue to provide technical 
assistance to Native American communities.
Syracuse University (NY)
$190,000
    Syracuse University will facilitate partnerships and collaborations 
among the technical assistance community; provide public outreach and 
education for projects that lead to environmental improvements; and 
provide training to local government officials, operators, engineers, 
and technical assistance providers.
Tanana Chiefs Conference (AK)
$150,000
    Tanana Chiefs Conference will provide technical assistance and 
training project aimed at developing the capacity of villages in 
interior Alaska and rural communities throughout Alaska to operate and 
maintain village water treatment and wastewater disposal facilities.
West Virginia University_NDWC (WV)
$1,207,828
    West Virginia University will continue the National Drinking Water 
Clearinghouse program. The program provides quality information for 
regulatory compliance; information for sustainable water services; and 
information for improving small system security and emergency response 
plans.
Question Submitted by Hon. Henry Cuellar, a Representative in Congress 
        from Texas
    Question 1. Mr. Adelstein, in your testimony, you mention the 
Colonia project in Yuma, Arizona, and your experience partnering with 
five different agencies and organizations to make the project possible. 
However, a recent GAO report on rural water infrastructure in this 
region concludes that a lack of coordination between agencies is a 
reason why border regions suffer from lack of access to clean water. Do 
you agree with this assessment?
    Answer. No. Border regions suffer from lack of access to clean 
water because of the development patterns that have occurred along the 
U.S. and Mexico border.

    Question 2. Could you elaborate on some of your work in Colonias 
along the U.S.-Mexico border, and what steps you might be taking to 
improve our service to these areas?
    Answer. USDA obligated $23,383,934 in grants in Fiscal Year 2008 
and $24,246,968 in grants in Fiscal Year 2009 to eligible entities 
proposing to provide water or waste disposal services to the residents 
of rural subdivisions in the region along the U.S. and Mexico border. 
Steps to improve service in the border region being explored by USDA 
include technical assistance and training, outreach, and collaboration 
with local governments. USDA is deeply committed to addressing the 
urgent water needs of Colonias.

    Question 3. Some Members have introduced a bill to implement GAO's 
recommendations by creating a Southwest Border Region Water Task Force, 
which would involve USDA. What are your thoughts on this legislation?
    Answer. The legislation addresses an important issue to the Members 
who have introduced the proposed bill and represent districts that are 
located along the U.S. and Mexico border. It signals to us the priority 
its sponsors place on addressing the pressing needs in the Colonias 
region.
Response from Rhonda Locklear, Water and Wastewater Director, Town of 
        Pembroke, North Carolina, Pembroke, NC; on behalf of National 
        Rural Water Association
Question Submitted by Hon. David P. Roe, a Representative in Congress 
        from Tennessee
    Question. Ms. Locklear, in your view what would be the effect of 
amending 7 U.S.C.  1926(b) to allow municipalities the ability to 
serve customers inside a rural utility district, and what impact might 
that have on the utility district's ability to fulfill its obligations?
    Answer. I have never had any experience with 7 U.S.C.  1926(b) in 
my current position as the Water and Wastewater Director for the Town 
of Pembroke and I don't feel I can adequately answer the question. As a 
member of the North Carolina Rural Water Association which is a member 
of the National Rural Water Association, I have asked for their 
position on this matter which is as follows:
    To ensure that small and rural communities would be able to repay 
loans, Congress included a provision [7 U.S.C.  1926(b)] in the 
Consolidated Farm and Rural Development Act. The purpose of 7 U.S.C.  
1926(b) is to protect the integrity of the federal government's 
outstanding loans by preventing any portion of a water system to be 
``forcibly'' annexed or ``cherry picked'' by another system or 
municipality. Such annexation would result in the remaining customers 
being solely responsible for repayment of the loan, with fewer 
customers to share the burden--resulting in a higher cost (hardship) 
per customer and greater risk of default. This dilemma is of special 
concern because USDA loans are only made available to low and moderate-
income rural communities based on household per capita income that 
cannot obtain commercial credit. It is also important to remember that 
USDA provides both loan and grant to systems based on their financial 
situation and proposed rate structure at the time the application is 
processed. Any loss of projected revenue caused by loss of territory 
jeopardizes this carefully constructed financial arrangement. The 7 
U.S.C.  1926(b) provision is an essential stabilizing element and is 
one of the reasons that the program works so well. It assures loan 
repayment, it protects the results of the hard work of rural 
communities in creating and operating rural systems, and it protects 
the national priority of providing safe drinking water to all of rural 
America--especially in our most economically vulnerable areas. These 
rural water systems provide service to areas when others will not and 
assume the risk associated with servicing the debt and maintaining the 
system. To allow others to then take customers from the most desirable 
portions of the system provides a disincentive for rural systems to 
continue to reach out to the most unserved areas. The USDA program 
respects all state planning laws. Every rural water system plan is 
filed with the state authority and every USDA rural water system is 
prohibited from unilaterally crossing any state's political 
subdivisions. Rural water systems were initially built in the outlying 
rural areas that no public system wanted to serve. When municipalities 
and large private water systems attempt to lay water lines parallel or 
lay lines in an area already served by the USDA water system there is 
always a discussion on who should serve the area. At stake is the 
alignment of the most profitable area of the USDA system--that is 
generally why the larger system now wants to take over after many years 
of sustained disinterest. 7 U.S.C.  1926(b) requires the predatory 
system to work out an arrangement of mutual interest to both water 
systems as well as for the customers. The alternative would be to allow 
larger systems to unilaterally move into the low cost/high revenue 
portion of the USDA system and jeopardize the viability and future 
growth of the rural system.
7 U.S.C.  1926(b) Should Be the Solution of Last Resort
    Most systems are working constructively and cooperatively to 
resolve local conflicts. Some states have legislation requiring 
equitable payment agreements and methods of determining the actual 
value of annexed populations. Numerous neighboring water systems have 
worked out ``good neighbor'' relationships through cooperative 
agreement that provide the highest quality of service to all customers. 
Rural water systems should only utilize 7 U.S.C.  1926(b) in extreme 
cases where expanding systems attempt to unilaterally, without 
discussion, acquire service areas. Often old political disagreements 
and local rivalries fuel these arguments. 7 U.S.C.  1926(b) has 
allowed these disagreements to be resolved.
Court History
    In the mid-1980's the City of Madison, Mississippi tried to acquire 
land and facilities from Bear Creek Water Association (rural water 
utility) through eminent domain proceedings (condemnation). Bear Creek 
counter-sued to restrain Madison. The Court in City of Madison, Miss v. 
Bear Creek Water Assn, Inc., 816 F.2d 1057 (5th. Cir.1987) created the 
``bright line rule'' that ``prohibits condemnation through the FmHA 
loan term''. Madison had hoped to defeat 1926(b) protection. The Court 
responded: ``To read a loophole into this absolute prohibition, as 
Madison would have us do, and allow the city to do via condemnation 
what is forbidden by other means would render nugatory the clear 
purpose of 1926(b)''. The 5th Circuit showed great insight into the 
underlying purpose in Madison's attempt to gain territory, facilities, 
and money from customers. The Court of Appeals stated:

        ``The case at bar exemplifies the evil Congress wished to 
        avoid. Bear Creek's affidavits showed that Madison desired to 
        condemn 60% of its facilities and 40% of its customers, 
        including the most densely populated (and thus most profitable) 
        territory now served by Bear Creek. Even if fair value is paid 
        for the lost facilities, such an action would inevitably have 
        an adverse effect on the remaining customers of Bear Creek, in 
        the form of lost economies of scale and resulting higher per-
        user costs. To allow expanding municipalities to `skim the 
        cream' by annexing and condemning those parts of a water 
        association with the highest population density (and thus the 
        lowest per-user cost) would undermine Congress's purpose of 
        facilitating inexpensive water supplies for farmers and other 
        rural residents and protecting those associations' ability to 
        repay their FmHA debts.''

    In the 1996 decision of North Alamo Water Supply Corporation v. 
City of San Juan, Texas, 90 F.3d 910, (5th Cir.1996), the Court held 
``the service area of a federally indebted water association is 
sacrosanct''--``the law gives the Utility (water district) the 
exclusive right to provide water service to and within the disputed 
areas.'' The court ordered the facilities constructed inside the water 
district's territory surrendered to the water district for the reasons 
stated by the Court: ``The infrastructures are indispensable to 
providing water service to the residents of the subdivision now that 
the development is complete. Thus, unless the infrastructures are 
transferred, the Utility (water district) would not be able to provide 
efficient and economical water service, and the rights of the Utility 
that are validated here would be useless.''
    In conclusion, the North Carolina Rural Water Association as a 
member of the National Rural Water Association supports the existing 
1926(b) protection and believes changes to repeal or weaken this 
provision will create higher utility fees, reduce a rural district's 
ability to serve more remote and lower-income individuals and 
jeopardize the district's ability to operate and debt service USDA 
loans.

                                  
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