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73–470 PDF 2012

A REVIEW OF INNOVATIVE FINANCING 

APPROACHES FOR COMMUNITY WATER 

INFRASTRUCTURE PROJECTS—PART II 

(112–76) 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

WATER RESOURCES AND ENVIRONMENT 

OF THE

COMMITTEE ON 

TRANSPORTATION AND 

INFRASTRUCTURE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

MARCH 21, 2012 

Printed for the use of the 

Committee on Transportation and Infrastructure 

( 

Available online at: http://www.gpo.gov/fdsys/browse/ 

committee.action?chamber=house&committee=transportation 

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE 

JOHN L. MICA, Florida, Chairman 

DON YOUNG, Alaska 

THOMAS E. PETRI, Wisconsin 

HOWARD COBLE, North Carolina 

JOHN J. DUNCAN, JR., Tennessee 

FRANK A. LOBIONDO, New Jersey 

GARY G. MILLER, California 

TIMOTHY V. JOHNSON, Illinois 

SAM GRAVES, Missouri 

BILL SHUSTER, Pennsylvania 

SHELLEY MOORE CAPITO, West Virginia 

JEAN SCHMIDT, Ohio 

CANDICE S. MILLER, Michigan 

DUNCAN HUNTER, California 

ANDY HARRIS, Maryland 

ERIC A. ‘‘RICK’’ CRAWFORD, Arkansas 

JAIME HERRERA BEUTLER, Washington 

FRANK C. GUINTA, New Hampshire 

RANDY HULTGREN, Illinois 

LOU BARLETTA, Pennsylvania 

CHIP CRAVAACK, Minnesota 

BLAKE FARENTHOLD, Texas 

LARRY BUCSHON, Indiana 

BILLY LONG, Missouri 

BOB GIBBS, Ohio 

PATRICK MEEHAN, Pennsylvania 

RICHARD L. HANNA, New York 

JEFFREY M. LANDRY, Louisiana 

STEVE SOUTHERLAND II, Florida 

JEFF DENHAM, California 

JAMES LANKFORD, Oklahoma 

REID J. RIBBLE, Wisconsin 

CHARLES J. ‘‘CHUCK’’ FLEISCHMANN, 

Tennessee 

NICK J. RAHALL II, West Virginia 

PETER A. DEFAZIO, Oregon 

JERRY F. COSTELLO, Illinois 

ELEANOR HOLMES NORTON, District of 

Columbia 

JERROLD NADLER, New York 

CORRINE BROWN, Florida 

BOB FILNER, California 

EDDIE BERNICE JOHNSON, Texas 

ELIJAH E. CUMMINGS, Maryland 

LEONARD L. BOSWELL, Iowa 

TIM HOLDEN, Pennsylvania 

RICK LARSEN, Washington 

MICHAEL E. CAPUANO, Massachusetts 

TIMOTHY H. BISHOP, New York 

MICHAEL H. MICHAUD, Maine 

RUSS CARNAHAN, Missouri 

GRACE F. NAPOLITANO, California 

DANIEL LIPINSKI, Illinois 

MAZIE K. HIRONO, Hawaii 

JASON ALTMIRE, Pennsylvania 

TIMOTHY J. WALZ, Minnesota 

HEATH SHULER, North Carolina 

STEVE COHEN, Tennessee 

LAURA RICHARDSON, California 

ALBIO SIRES, New Jersey 

DONNA F. EDWARDS, Maryland 

(II) 

SUBCOMMITTEE ON WATER RESOURCES AND ENVIRONMENT

BOB GIBBS, Ohio, Chairman 

DON YOUNG, Alaska 

JOHN J. DUNCAN, JR., Tennessee 

GARY G. MILLER, California 

TIMOTHY V. JOHNSON, Illinois 

BILL SHUSTER, Pennsylvania 

SHELLEY MOORE CAPITO, West Virginia 

CANDICE S. MILLER, Michigan 

DUNCAN HUNTER, California 

ANDY HARRIS, Maryland 

ERIC A. ‘‘RICK’’ CRAWFORD, Arkansas 

JAIME HERRERA BEUTLER, Washington, 

Vice Chair 

CHIP CRAVAACK, Minnesota 

LARRY BUCSHON, Indiana 

JEFFREY M. LANDRY, Louisiana 

JEFF DENHAM, California 

JAMES LANKFORD, Oklahoma 

REID J. RIBBLE, Wisconsin 

JOHN L. MICA, Florida (Ex Officio) 

TIMOTHY H. BISHOP, New York 

JERRY F. COSTELLO, Illinois 

ELEANOR HOLMES NORTON, District of 

Columbia 

RUSS CARNAHAN, Missouri 

DONNA F. EDWARDS, Maryland 

CORRINE BROWN, Florida 

BOB FILNER, California 

EDDIE BERNICE JOHNSON, Texas 

MICHAEL E. CAPUANO, Massachusetts 

GRACE F. NAPOLITANO, California 

JASON ALTMIRE, Pennsylvania 

STEVE COHEN, Tennessee 

LAURA RICHARDSON, California 

MAZIE K. HIRONO, Hawaii 

NICK J. RAHALL II, West Virginia 

(Ex Officio) 

(III) 

(V) 

CONTENTS Page 

Summary of Subject Matter and attachment: Discussion draft, H.R. lll, 

a Bill to provide financing assistance for qualified water infrastructure 

projects, and for other purposes, 112th Cong., 2012 ......................................... vii 

TESTIMONY 

Mayor Ronald A. Behm, City of Napoleon, Ohio ................................................... 14 

Karen Massey, Director, Missouri Environmental Improvement and Energy 

Resources Authority, testifying on behalf of the Council of Infrastructure 

Financing Authorities .......................................................................................... 14 

David Weihrauch, Water Treatment Plant Manager, city of Oxford, Ohio ........ 14 

Stephen E. Howard, Director, Infrastructure Project Finance, Barclays Capital ......................................................................................................................... 14 

David Dornbirer, Vice President, Energy and Water Services Division, 

CoBank .................................................................................................................. 14 

Benjamin H. Grumbles, President, Clean Water America Alliance .................... 14 

Ryan Schmitt, President, Petticoat-Schmitt Civil Contractors, Inc., and Chairman of the Board, NUCA, representing utility and excavation contractors, 

testifying on behalf of NUCA .............................................................................. 14 

Lynn Broaddus, Director, Environment Program, The Johnson Foundation 

at Wingspread ...................................................................................................... 14 

Richard Abelson, Executive Director of District Council 48, American Federation of State, County, and Municipal Employees (AFSCME) ........................... 14 

PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS 

Hon. Russ Carnahan, of Missouri .......................................................................... 73 

Hon. Dennis J. Kucinich, of Ohio ........................................................................... 74 

Hon. Thomas E. Petri, of Wisconsin, and Hon. Gwen Moore, of Wisconsin, 

joint statement ..................................................................................................... 75 

PREPARED STATEMENTS SUBMITTED BY WITNESSES 

Mayor Ronald A. Behm ........................................................................................... 77 

Karen Massey .......................................................................................................... 80 

David Weihrauch ..................................................................................................... 87 

Stephen E. Howard .................................................................................................. 91 

David Dornbirer ....................................................................................................... 106 

Benjamin H. Grumbles ............................................................................................ 128 

Ryan Schmitt ........................................................................................................... 134 

Lynn Broaddus ......................................................................................................... 139 

Richard Abelson ....................................................................................................... 147 

SUBMISSIONS FOR THE RECORD 

Hon. Timothy H. Bishop, a Representative in Congress from the State of 

New York, request to submit the following: 

Katherine Baer, Senior Director, Clean Water Program, American 

Rivers, letter to Hon. Bob Gibbs, a Representative in Congress 

from the State of Ohio, and to Hon. Timothy H. Bishop, a Representative in Congress from the State of New York, March 19, 

2012 ......................................................................................................... 5 

Diane VanDe Hei, Executive Director, Association of Metropolitan 

Water Agencies, letter to Hon. Bob Gibbs, a Representative in 

Congress from the State of Ohio, and to Hon. Timothy H. Bishop, 

a Representative in Congress from the State of New York, March 

21, 2012 .................................................................................................. 9 

Page

VI 

Hon. Timothy H. Bishop, a Representative in Congress from the State of 

New York, request to submit the following—Continued 

Hon. Timothy H. Bishop, a Representative in Congress from the 

State of New York; Hon. Steven C. LaTourette, a Representative 

in Congress from the State of Ohio; and Hon. Earl Blumenauer, 

a Representative in Congress from the State of Oregon, letter 

to Doug Elmendorf, Director, Congressional Budget Office, March 

16, 2012 .................................................................................................. 12 

Lynn Broaddus, Director, Environment Program, The Johnson Foundation 

at Wingspread, request to submit the following reports 1: 

The participants of The Johnson Foundation Freshwater Summit, 

‘‘Charting New Waters: A Call to Action to Address U.S. Freshwater Challenges,’’ September 2010 ..................................................... 35 

The Johnson Foundation at Wingspread, ‘‘Charting New Waters: Financing Sustainable Water Infrastructure,’’ convening report, January 2012 ................................................................................................ 43 

Richard Abelson, Executive Director of District Council 48, American Federation of State, County, and Municipal Employees (AFSCME), request to 

submit the following report: Food & Water Watch, ‘‘Mortgaging Milwaukee’s Future: Why Leasing the Water System is a Bad Deal for Consumers,’’ November 2009 ..................................................................................... 151 

Hon. Bob Gibbs, a Representative in Congress from the State of Ohio, request 

to submit the following: Richard G. Little, AICP, NAC, ‘‘ ‘Mortgaging Milwaukee’s Future: Why Leasing the Water System is a Bad Deal for Consumers’—A Critical Review’’ ............................................................................... 52 

David Weihrauch, Water Treatment Plant Manager, city of Oxford, Ohio, 

insert for the record ............................................................................................. 59 

Hon. Grace F. Napolitano, a Representative in Congress from the State of 

California, reference to the following article: Michael Hiltzik, Los Angeles 

Times, ‘‘Metropolitan Water District Wages Costly War with Nature and 

Age,’’ http://www.latimes.com/business/la-fi-hiltzik-20120318,0,1163346.column, March 18, 2012 ........................................................................................... 175 

Hon. Thomas E. Petri, of Wisconsin, and Hon. Gwen Moore, of Wisconsin, 

request in their joint statement to submit the following for the record: 

Kevin L. Shafer, P.E., Executive Director, Milwaukee Metropolitan Sewerage District, written statement ................................................................ 178 

Attachments: 

United States Government Accountability Office, ‘‘Clean Water Infrastructure: A Variety of Issues Need to Be Considered When Designing a Clean Water Trust Fund,’’ Report to congressional requesters, 

GAO–09–657, May 2009 2 ..................................................................... 181 

‘‘National Investments in American Clean Water Infrastructure: An 

American Clean Water Trust Fund to Support National Clean 

Water Goals,’’ March 2012 .................................................................... 183 

Water Environment Federation, ‘‘Financial Sustainability for Water 

Infrastructure,’’ adopted by WEF Board of Trustees, February 5, 

2010 ......................................................................................................... 189 

ADDITIONS TO THE RECORD 

Gretchen W. McClain, President and Chief Executive Officer, Xylem, Inc., 

letter and enclosure to Hon Bob Gibbs, a Representative in Congress from 

the State of Ohio, and to Hon. Timothy H. Bishop, a Representative in 

Congress from the State of New York, March 29, 2012 .................................... 192 

Robert Stewart, Executive Director, and Ari Neumann, Policy Director, Rural 

Community Assistance Partnership, joint written statement .......................... 200 

American Society of Civil Engineers, written statement ..................................... 204 

1These reports have been excerpted for this publication. They can be found 

in their entirety online at the Government Printing Office’s Federal Digital 

System (FDsys) at http://www.gpo.gov/fdsys/pkg/CPRT-112HPRT74562/pdf/ 

CPRT-112HPRT74562.pdf. Click on ‘‘Bookmarks’’ in the left-hand navigation panel to select either report. 2This report has been excerpted for this publication. It can be found in 

its entirety online at http://www.gao.gov/assets/300/291771.pdf. 

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(1) 

A REVIEW OF INNOVATIVE FINANCING 

APPROACHES FOR COMMUNITY WATER 

INFRASTRUCTURE PROJECTS—PART II 

WEDNESDAY, MARCH 21, 2012 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON WATER RESOURCES

AND ENVIRONMENT, 

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE, 

Washington, DC. 

The subcommittee met, pursuant to notice, at 10:05 a.m., in 

Room 2165, Rayburn House Office Building, Hon. Bob Gibbs 

(Chairman of the subcommittee) presiding. 

Mr. GIBBS. Welcome to the second hearing of the Water Resources and Environment Subcommittee on a review of innovative 

financing approaches for water infrastructure projects. I will start 

with an opening statement here, and then we will turn it over to 

my ranking member, and then we will turn it over to the panel. 

But first, welcome. As I said, this is the second panel on this subject. The first hearing we had was on February 28th. At that hearing, we heard that there is a tremendous amount of capital from 

the private sector and other sources potentially available for investment in our wastewater and drinking water infrastructure. 

We also heard that in recent years, the financial markers have 

been ‘‘discovering’’ water and wastewater infrastructure and how 

this is becoming a popular asset class that is increasingly attracting billions of dollars of private investment capital. This is important because we need to take a variety of financing tools available 

to the infrastructure financing in the toolbox, so to say. This includes both public and private funding and investment mechanisms. 

There are a number of past and current legislative proposals that 

could provide additional means for increasing investment in infrastructure. For example, there is legislation to remove the volume 

cap that restricts the amount of private activity bonds that States 

and localities may issue in any given year for water and wastewater facilities. This would remove a barrier that has long inhibited bringing private sector capital to municipal water and wastewater markets. 

In addition, the subcommittee is looking at a potential financing 

tool that would provide Federal credit assistance in the form of direct loans and loan guarantees to finance significant water and 

wastewater infrastructure projects. This draft legislative proposal 

would be entitled the Water Infrastructure Finance Innovation Act, 

2 

otherwise known as WIFIA. This WIFIA proposal is part of a model 

after the TIFIA program for surface transportation projects and 

other credit programs governed by the Federal Credit Reform Act. 

WIFIA is designed to complement, not to compete, with the 

Clean Water and Drinking Water State Revolving Fund programs, 

but being another variety of financing tool in the toolbox for infrastructure financing. There is plenty of room for SRF, WIFIA, and 

private activity bonds and other approaches to coexist and serve 

communities in infrastructure financing needs. 

Lastly, there are other proposals, including clean water SRF reauthorization legislation, that this subcommittee has advanced in 

past Congresses, and is included in a bill that the subcommittee 

ranking member, Mr. Bishop, has introduced in this Congress. 

Today we will build on the information we obtained in part one 

of this hearing and receive testimony from an excellent panel of 

witnesses about these proposals and other potential ways to encourage increased investment in water and wastewater infrastructure, including from private sources. 

Before I recognize the ranking member, I want to welcome two 

witnesses from Ohio, Ronald Behm, who is mayor of the city of Napoleon, and congratulations to the recently elected mayor of the 

city of Napoleon of northwestern Ohio, in Congressman Bob Latta’s 

district; and also David Weihrauch, who is the treatment plant 

manager for the drinking water utility serving the city of Oxford 

down in southwestern Ohio, which is part of Speaker Boehner’s district. 

So welcome, and at this time I will turn it over to Ranking Member Bishop for any comments you may have. 

Mr. BISHOP. Thank you very much, Mr. Chairman, and thank 

you for holding today’s hearing. This is the second part in a twopart series on the importance of investing in our Nation’s crumbling wastewater infrastructure. 

As I noted at our last hearing, this subcommittee has a long history of working across the aisle to renew the Federal commitment 

to wastewater infrastructure. Over the past decades, under both 

Republican and Democratic majorities, we have taken significant 

steps to address the long-term infrastructure challenges facing our 

States and communities, including passage of several bipartisan 

water infrastructure financing measures. 

These past measures highlight the best of what this subcommittee and this full committee is capable of doing, bridging any 

potential disagreements between the sides and moving forward on 

joint proposals that garner overwhelming support in committee and 

on the House floor, most recently, in the 111th Congress, by an almost 3 to 1 vote of support. 

Since our February 27th hearing, we have had failures of water 

pipes here in the Washington, DC, metro area, creating sinkholes 

in roads and disrupting traffic. In San Antonio, Texas, two sewage 

pipelines broke, spilling more than 200,000 gallons of untreated 

sewage into local water bodies. And in Delray Beach, Florida, tens 

of thousands of gallons of raw sewage poured from a ruptured pipe. 

Upon inspection, the water department found that sewer gases had 

disintegrated one-third of the 30-year-old pipe. 

3 

I draw reference to these three events as examples of the systemic problem that now faces our Nation. With aging infrastructure and increasing demand, we have to find solutions, not excuses. 

The traditional financing tools that we have used historically need 

revising and adjustment in the face of the public demands and expectations and the reality of our fiscal situations. 

Mr. Chairman, at last month’s hearing, you encouraged the witnesses to evaluate the two proposals that are currently before this 

subcommittee, your discussion draft entitled the Water Infrastructure Finance and Innovation Act of 2012, as well as a copy of the 

bipartisan bill that I have introduced with the ranking member of 

the full committee, Mr. Rahall, and Congressmen LaTourette and 

Petri, H.R. 3145, the Water Quality Improvement and Job Creation 

Act of 2011. I am happy to announce that since our last meeting, 

nearly a dozen additional House Members have cosponsored H.R. 

3145. 

Both bills include mechanisms modeled after the successful 

Transportation Infrastructure Finance and Innovation Act, or the 

TIFIA program, authorized in TEA–21 to leverage additional capital for wastewater infrastructure investment. Although there are 

some differences in approach, my first impression is that there are 

more similarities than differences between these two drafts on this 

point, and that should give us all reason to work more closely together. 

Last month’s hearing also gave us the opportunity to discuss several critical policy questions integral to our consideration of water 

infrastructure financing legislation, namely, who is better suited to 

decide which projects are funded and how a new water infrastructure financing authority would complement or potentially compete 

with the existing Clean Water State Revolving Fund. 

During the question-and-answer period, I want to further pursue 

these questions with our witnesses as well as questions on the potential impact of differing financing approaches, including private 

capital, on local communities and workforces. Similarly, in considering the economic challenges facing all levels of Government, I 

want to explore how we can target Federal resources to those who 

will benefit from it most, our local communities. 

I also do not want to lose sight of the fact that investing in our 

water infrastructure not only improves the pipes and pumps, the 

investment creates much-needed construction and engineering jobs 

and creates opportunities for America’s economy to step forward 

and build for the future. 

Mr. Chairman, as I noted earlier, the existing Clean Water Act 

has served this Nation well in meeting its water quality and water 

infrastructure concerns, and needs to be part of the long-term solution to addressing future challenges. The question of how some of 

these alternative financing approaches we will discuss today complement, duplicate, or conflict with existing law in meeting these 

challenges will still need to be addressed. 

Again, I welcome today’s hearing as an opportunity to further 

this conversation. I am hopeful that on this issue of meeting our 

long-term water infrastructure challenges, we can find agreement 

and move forward with one voice on an issue that greatly benefits 

4 

our communities, our economy, and our overall public health and 

the environment. 

And before I yield back, Mr. Chairman, I have three statements 

that I would like to submit for the record, with unanimous consent. 

The first is a statement from American Rivers endorsing—pardon 

me—that speaks to both the bill that I have filed and the draft bill 

that you are working on; also, a statement from the Association of 

Metropolitan Water Agencies; and finally, a copy of a letter that I, 

along with Congressman LaTourette and Congressman 

Blumenauer, sent to Doug Elmendorf, the director of the CBO, requesting that he begin to provide us with suggestions for how we 

would fund a clean water trust fund. 

Mr. GIBBS. So ordered. 

Mr. BISHOP. Thank you very much. I yield back the balance of 

my time. 

[The material referenced by Mr. Bishop follows:] 

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Mr. GIBBS. Thank you. 

At this time I want to introduce the rest of the panel, and then 

we will turn it over to our first panel witness. And what we will 

do, we will go through the whole lineup with your opening statements, and then we will do question and answers. 

As you can see, there are just the two of us here. Others might 

stroll in. There are a lot of other committees happening, a lot of 

conflicts, but I know there is a lot of interest in this subject area. 

But I already introduced the mayor. But then next to the mayor, 

we have Ms. Massey. She is the director of the Missouri Environmental Improvement and Energy Resources Authority; she is testifying on behalf of the Council of Infrastructure Financing Authorities. And I believe she really represents the State SRFs. 

Of course, Mr. Weihrauch from Ohio. Then we have Mr. Stephen 

Howard, Infrastructure Project Finance, Barclays Capital; I am 

really looking forward to the testimony on financing opportunities. 

We also have Mr. David Dornbirer, vice president of Energy and 

Water Services Division of the Cooperative Bank out in Colorado. 

Next to him is Mr. Benjamin Grumbles. He is president of the 

Clean Water America Alliance. And then Mr. Ryan Schmitt is 

president of Petticoat-Schmitt Civil Contractors. He is chairman of 

the board of NUCA, which is representing the utility and excavation contractors, testifying on behalf of NUCA today. 

Then we have Ms. Lynn Broaddus, director, Environment Program, The Johnson Foundation at Wingspread, Racine, Wisconsin—Racine, I guess. Racine. Mr. Richard Abelson; he is executive director of AFSCME, Council 48, Milwaukee, Wisconsin, testifying on behalf of the American Federation of State, County, and 

Municipal Employees. 

Welcome today, and we will start down here with the mayor from 

Napoleon, Ohio. The floor is yours. 

TESTIMONY OF MAYOR RONALD A. BEHM, CITY OF NAPOLEON, 

OHIO; KAREN MASSEY, DIRECTOR, MISSOURI ENVIRONMENTAL IMPROVEMENT AND ENERGY RESOURCES AUTHORITY, TESTIFYING ON BEHALF OF THE COUNCIL OF INFRASTRUCTURE FINANCING AUTHORITIES; DAVID WEIHRAUCH, 

WATER TREATMENT PLANT MANAGER, CITY OF OXFORD, 

OHIO; STEPHEN E. HOWARD, DIRECTOR, INFRASTRUCTURE 

PROJECT FINANCE, BARCLAYS CAPITAL; DAVID 

DORNBIRER, VICE PRESIDENT, ENERGY AND WATER SERVICES DIVISION, COBANK; BENJAMIN H. GRUMBLES, PRESIDENT, CLEAN WATER AMERICA ALLIANCE; RYAN SCHMITT, 

PRESIDENT, PETTICOAT-SCHMITT CIVIL CONTRACTORS, 

INC., AND CHAIRMAN OF THE BOARD, NUCA, REPRESENTING 

UTILITY AND EXCAVATION CONTRACTORS, TESTIFYING ON 

BEHALF OF NUCA; LYNN BROADDUS, DIRECTOR, ENVIRONMENT PROGRAM, THE JOHNSON FOUNDATION AT 

WINGSPREAD; AND RICHARD ABELSON, EXECUTIVE DIRECTOR OF DISTRICT COUNCIL 48, AMERICAN FEDERATION OF 

STATE, COUNTY, AND MUNICIPAL EMPLOYEES (AFSCME) 

Mr. BEHM. Good morning, Chairman Gibbs, Ranking Member 

Bishop, and members of the subcommittee. My name is Ronald 

Behm, and I am the mayor of the city of Napoleon, Ohio. 

15 

The city of Napoleon is located in northwest Ohio in Congressman Latta’s district along the Maumee River. It is your typical 

small town USA. We are facing challenges similar to others who 

live in the Midwest with high unemployment, lower salaries, decreasing property values, and rising costs. 

Using a 10-year comparison of the U.S. Census data, the city of 

Napoleon has lost nearly 600 residents over the past decade, and 

the median household income is roughly $2,000 lower than 10 

years ago. The median household income for a resident of our community is $35,762. This is significantly lower than the Ohio average of $47,318. 

Our city is facing other challenges in that we are under findings 

and orders for our SSOs and CSOs. In 2004, the city came to an 

agreement with the EPA for a 20-year plan, which requires the city 

to remove all SSOs from our system and reduce the CSOs to one. 

The plan was estimated to cost our city $35 million to complete, 

and contains 62 individual projects. 

As of 2012, the city of Napoleon is on schedule and we have com- pleted 22 of the 62 projects. So far we have spent more than $191⁄2

million. Our city engineer estimates that the total cost of all 62 

projects for the 20-year period will cost closer to $100 million. In 

addition, we now have to spend another $15 million to upgrade our 

water treatment plant to meet current and near-future EPA standards. So the total bill our community of 8,749 residents will receive 

due to the EPA is approximately $115 million. 

The city of Napoleon has made efforts to pay for the projects by 

raising the sewer and water rates. These increases have been 

added every year but one since 2003. This has doubled the water 

and sewer rates for our residents and businesses. Of the $191⁄2 million spent on this project so far, the city of Napoleon has issued 

debt for $19.4 million. Even though we have doubled our water 

rates, we are still only able to service the debt and pay for the normal water and sewer operations. 

Over the next 2 years, our city council has authorized two additional rate increases totaling 20 percent, as suggested by an independent consultant. In 3 years, when it is time to upgrade the 

water plant, it has been recommended that the city must raise the 

water rates by an additional 50 to 60 percent. 

The concern with increasing taxes and raising rates is that at 

some point in time you reach a breaking point, a point where the 

residents and businesses cannot afford to pay the rates but instead 

are forced to leave our city. I fear that our community is at that 

breaking point. The bottom line is that we simply cannot continue 

to proceed down this road, a road we have been forced to go down 

rather than pay fines imposed by the EPA. 

The Water Infrastructure Finance and Innovation Act, as I understand it, attempts to help communities receive funding. However, the city of Napoleon has not had a problem with receiving 

funds and issuing debt. Our problem is with raising money to pay 

the debt and the amount of time in which we have to pay. 

I am familiar with another bill, H.R. 1189, the Clean Water Affordability Act 2011, sponsored by Congressman Latta, which helps 

address the problems that the city of Napoleon and so many communities of similar size are facing. H.R. 1189 would help assist muVerDate Aug 31 2005 10:06 Jul 02, 2012 Jkt 000000 PO 00000 Frm 00053 Fmt 6633 Sfmt 6633 P:\HEARINGS\112\WR\3-21-1~1\73470.TXT JEAN
16 

nicipalities in funding projects for wastewater treatment and extent repayment periods to 30 years of the design life of the project. 

This would have been helpful with our equalization basin, which 

cost the city $8.85 million to build, has an estimated life of 30 to 

40 years, but we could only receive funding for 20 years. 

H.R. 1189 also requires States to put aside 15 percent of funds 

for assistance to municipalities of fewer than 10,000 residents that 

meet specified affordability criteria. It also requires States to establish affordability criteria to help identify those in greatest need. 

The city of Napoleon needs assistance if we are expected to continue to meet the mandates we have been saddled with. This is an 

issue that is shared by all residents, regardless of their political positions and beliefs. That is why I am hoping Congress will come to 

an agreement which will help cities in similar situations to that of 

the city of Napoleon. 

I appreciate the opportunity to provide the subcommittee with a 

local government perspective on this important issue, and thank 

you for your time today. 

Mr. GIBBS. Thank you. 

Ms. Massey, the floor is yours. Welcome. 

Ms. MASSEY. Thank you. My name is Karen Massey, and I am 

the director of the Missouri Environmental Improvement and Energy Resources Authority. Today I am here in my capacity as the 

president for the Council of Infrastructure Financing Authorities, 

representing State programs that run the State Revolving Funds. 

Thank you so much for allowing us to express our views here 

today. 

Sustained Federal funding is essential to realizing our Nation’s 

water quality needs. Clearly, the current level of funding provided 

is not enough to meet the escalating needs, and we welcome new 

approaches and tools to generate additional resources. We do believe, however, that the SRF partnership between Federal and 

State governments should continue as the primary means to assistance for communities in addressing their water quality problems. 

Few federally authorized programs have proven as effective in 

realizing their intended goals. State SRFs have provided a sustainable source of funding to protect and restore our Nation’s streams 

and rivers for over two decades. By using State match, loan repayments, interest earnings, and issuing bonds, the assistance made 

available to our communities is significantly greater than the initial Federal investment. 

The clean water SRF alone has committed over $90 billion for 

projects for local wastewater infrastructure. As the subcommittee 

weighs the future of the State SRF program as well as new initiatives, we hope you will keep in mind this record of success. 

As the State programs look forward, we have two primary areas 

of concern, funding and program flexibility. Our ability to meet 

water infrastructure needs is predicated on the continued funding 

of the SRF. We understand the need for budget restraint. We simply hope that not too great a share of that restraint is at the expense of the SRF programs. 

The success of this program also derives from flexibility. We are 

concerned about the imposition of new requirements and obligations that are not at the core of the SRF program goals. The SRF 

17 

provides loans, not grants. If an SRF loan becomes too weighed 

down with extraneous requirements, it will cease to be an attractive option for many communities, and clean water goals will suffer. 

We must be fully accountable. But excessive oversight or administrative control by EPA stifles innovation and our ability to respond to local needs. Efforts to mandate that a set percentage of 

funding be set aside for certain types of projects, or that require 

States to dedicate a set percentage for additional subsidization, fail 

to recognize that States are in the best position to decide their priority water quality needs. 

So what tools or innovations may help achieve clean water goals? 

As we learned from the Recovery Act, when communities can have 

access to free or very affordable money, water infrastructure gets 

built. Ideally, new approaches should provide additional funding at 

an attractive rate. With those traits, projects that are not being 

built due to funding constraints may be able to move forward. 

One such approach is WIFIA. It seeks to facilitate Federal credit 

assistance in the form of direct loans and loan guarantees for larger scale water and wastewater projects. 

The assistance made available through WIFIA would not approach the very low interest rates of a subsidized SRF loan and in 

many market conditions borrowing at the Treasury rate, the key 

benefit of WIFIA, will not provide any advantage over traditional 

tax-exempt financing which will remain attractive, both from the 

standpoint of competitive rates and the absence of Federal requirements and conditions likely to be imposed on a Federal loan guarantee. 

But there are circumstances in which WIFIA will be very useful. 

It offers an alternative for projects that are beyond the scope of 

available SRF funding and for which a Federal guarantee represents the optimal credit option. Viewed as a supplementary program to address specific situations and unique funding challenges, 

WIFIA should provide a valuable addition to the financing toolbox. 

The needs of most communities, however, will still be served most 

effectively by the State Revolving Fund programs. 

As the subcommittee explores legislative options, the States hope 

there will be a focus on a number of noncontroversial issues which 

will impact the future strength and development of the SRF programs, and those are listed in my written testimony for your consideration. 

We also encourage the subcommittee to consider whether proposals seeking to incorporate new goals within the SRF may undermine that core mission of maximizing sustainable financial assistance to communities to develop water infrastructure. 

For 25 years, States have successfully worked with their citizens 

to determine the best approaches to meet unique water quality 

needs. The recent trend toward additional requirements seems to 

signal a Federalization of this program. SRFs are being targeted to 

advance policy goals ranging from green infrastructure and smart 

growth to better asset management, full cross-pricing, and buy 

American. 

States are beginning to experience resistance from municipalities, especially our smaller communities, which now view an SRF 

18 

loan as too complex and too burdensome. A host of new requirements, however well-intentioned, will impede the effort to get communities with the most significant water quality issues moving forward to address those challenges. 

Another area of concern involves the corpus of the clean water 

SRF. Following the first use of capitalization grant funds, all repayments, interest earning, fee revenues, and bond proceeds have 

been treated as State, not Federal funds. After 25 years of this 

practice by all 51 clean water SRFs, now the issue is whether Federal controls should be placed upon that corpus. The implications 

really are significant. 

Will this new Federal control extend to and threaten our existing 

assistance agreements? Investments? And what about the use of 

State bond proceeds? Will it increase the cost of borrowing for our 

communities? 

These and many more important questions are raised by the expanded Federal control of the State SRF programs. The tremendous success of the clean water SRFs as State-run programs argues 

for a careful assessment of where this Federalization of the program will lead. We are fearful that the result may be an SRF program that is less productive and a less attractive source of financing in a time of escalating water infrastructure needs. 

Thank you for the opportunity to provide the views of the State 

SRF programs. We do look forward to working with the subcommittee as it continues its work to support water infrastructure 

development. 

Mr. GIBBS. Thank you. 

And Mr. Weihrauch, try to speak into the microphone as close as 

you can because I know it is hard to hear up here. And I do not 

know if people in the audience can hear or not. So do not hesitate 

to speak loudly. 

The floor is yours. Go ahead. 

Mr. WEIHRAUCH. Good morning, Chairman Gibbs and members 

of the subcommittee. My name is David Weihrauch, and I am the 

water treatment plant manager for the drinking water utility serving the city of Oxford, Ohio. I very much appreciate this opportunity to offer input on a draft bill the subcommittee is considering, 

the Water Infrastructure Finance and Innovation Act, commonly 

called WIFIA. 

I am here representing the American Water Works Association, 

which has done groundbreaking work to define the water infrastructure needs facing towns like Oxford, as well as helping to describe innovative financing tools like WIFIA. 

I want to reiterate that the American Water Works Association 

strongly supports the approach to WIFIA reflected in the draft bill 

which Chairman Gibbs circulated before the first hearing. We are 

very excited about such an innovative financing tool, and we urge 

the subcommittee to see this bill introduced and move through the 

legislative process as soon as possible on a bipartisan basis without 

changes that would dilute its value to the Nation’s water and 

wastewater systems. 

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19 

related needs, which total in excess of $2 trillion over the next 25 

years. 

I do not believe that any serious person disputes that the Nation 

faces immense water-related investment needs. Nor should anyone 

believe that simply putting off this investment offers a solution. In 

fact, as the recent AWWA analysis shows, any temptation to delay 

needed investment presents a stark choice: Make the investments 

on time or accept deteriorating levels of water service, along with 

sharply higher investments when the time comes at which the replacement of deteriorated assets simply cannot be put off any 

longer. 

I would be remiss if I did not take this opportunity to address 

a number of key questions raised in the first hearing. 

First, there was a question about whether WIFIA should be directed to or through the State Revolving Funds. The American 

Water Works Association believes that would be a very bad idea, 

for a number of reasons. Most importantly, WIFIA is designed to 

complement the SRF and to address the needs of very large 

projects that the SRFs simply cannot address. Running WIFIA 

through the SRFs defeats WIFIA’s whole purpose, in a very real 

sense. 

In addition, many States have either legislation or policy that 

prevents them from offering SRF support to very large projects, 

and about half the States have constitutional or legal restrictions 

against supporting investor-owned utilities through the SRFs. 

Large systems need a source of low-interest financing, and the customers of investor-owned utilities deserve to benefit from low-cost 

financing, just as other Americans do. Many SRFs cannot provide 

that. 

Equally important, tying WIFIA to the SRFs would reduce the 

amount of support available for these larger water projects. That 

is because each State would have to be guaranteed a share of the 

funding, causing the resources available to WIFIA to be systemically divided among the States. 

Rather than lending to large projects of national or regional significance, funds would be allocated based on criteria selected by the 

States, and without a doubt, States would need to take money off 

the top of WIFIA, as they do the SRFs, for administration and 

other purposes. 

The bottom line is that every hand that touches the WIFIA program will add a layer of administrative complexity and cost. All of 

that would reduce the amount of low-interest loans that could be 

delivered to water projects, and we cannot support it. 

Fortunately, the draft bill does provide for States and smaller 

water systems to directly benefit from the WIFIA program. States 

may aggregate a number of smaller projects into a WIFIA application. This has at least three noteworthy advantages. 

First, it essentially allows States to leverage their SRF capital 

base. Second, it allows smaller projects to benefit from low Treasury rates in the same way that larger projects do. And third, it allows States to move larger projects and pools of smaller projects 

out of the SRF applicant pool and into the WIFIA pool, thereby reducing competition for SRF funds. 

20 

A related question that arose at the last hearing concerned 

whether WIFIA would have the effect of taking money away from 

the established State Revolving Fund programs. The answer to 

that question is ultimately in your hands, but we think the answer 

should be a resounding no. WIFIA neither needs to be nor should 

be funded at the expense of the SRFs. 

As I noted a moment ago, WIFIA was explicitly designed to operate as a complement to the SRFs programs, which are highly effective and should be fully funded. WIFIA is designed to address a 

problem that the SRFs cannot effectively address, namely, the need 

for lower cost financing for larger projects of national or regional 

significance. What we need is a toolbox that includes both the SRF 

programs and WIFIA. Both need to be adequately funded. 

In summary, Mr. Chairman and members of the committee, the 

American Water Works Association strongly supports the draft bill 

as written. AWWA stands ready to help you in any way it can in 

securing the earliest possible passage of this legislation. 

Thank you for addressing this important issue. 

Mr. GIBBS. Thank you. 

Mr. Howard, welcome. The floor is yours. 

Mr. HOWARD. Good afternoon, Chairman Gibbs. I am going to be 

quickly going through the first part of my written testimony, and 

then walking through very quickly a presentation that I have 

brought with me. 

Good afternoon, Chairman Gibbs, Ranking Member Bishop, and 

members of the subcommittee. I thank you for the opportunity to 

testify today. My name is Steve Howard, and I am a director at 

Barclays Bank PLC, based in New York. I have more than 25 years 

of experience financing a broad range of infrastructure projects for 

public and private sector clients across the country. My project finance experience spans all sectors, including water, wastewater, 

solid waste, environmental transportation, and social infrastructure. 

Today we have been invited by the Chairman of the Subcommittee on Water Resources and Environment to testify on innovative financing approaches to community water infrastructure approaches. Our testimony today will focus on accommodation of public and private funding investment solutions, coupled together will 

foster local communities to provide ongoing financing for water 

projects. 

If we can go to the second slide in my presentation. You will note 

that we basically have three approaches to financing water infrastructure projects. At the top of the chart is tax-exempt bonds, and 

there are two subcategories there, governmental purpose bonds, 

which limit private participation, and tax-exempt private activity 

bonds, which allow private participation in equity investment 

alongside the issuance of tax-exempt bonds. 

Second major category is taxable bonds, which is unlimited for 

this infrastructure but tend to be higher cost. Then last but not 

least is private equity, which can be used in conjunction with taxexempt private activity bonds as well as taxable bonds. 

If we can then go to slide 5 in my presentation—keep going—so 

this slide, this shows just a high-level view of how a private project 

21 

financing can be structured in conjunction with a water purchase 

agreement with a public regional water authority. 

You see in the middle of the chart the private project company, 

and that is the basket into which all of the private contracts flow 

through. Lower left-hand corner is the private investors’ infrastructure funds; development companies, private equity investors, would 

fund equity into the private project company that would in turn 

enter into a water purchase agreement with the regional water authority you see in the left-hand box in the middle of the page. 

The key point here is that the regional water authority still 

maintains the interface with the ratepayers and controls the rates 

that the ratepayers pay. That regional water authority in turn negotiates the level of compensation that goes to the private company 

for operation and debt service on the project. 

If you go over to the right-hand side of the page where it says 

‘‘Issuer,’’ that is typically a governmental conduit issuer which 

serves as the issuer of the tax-exempt bonds through the trustee 

to the bondholders in the upper right-hand box in the middle of the 

page. 

The key thing here is that the tax-exempt private activity bonds 

flow through the trustee, a governmental conduit issuer; are loaned 

to the private company, who in turn provides a wholesale water delivery service to the governmental regional water authority that in 

turn controls the rates for the ratepayers. 

If we can go to the next slide, what I like to do is draw an analogy with the solid waste sector, municipal solid waste sector, that 

many of you know back in the 1980s faced a serious infrastructure 

investment deficit, where we were coming off of an era of smokebelching incinerators and leaking, open-burning dumps. 

The U.S. Congress in the late 1970s and early 1980s responded 

in part by providing for the availability of tax-exempt private activity bonds to help finance the new investment in state-of-the-art infrastructure across the country. As a consequence, about $20 billion 

of private activity bonds were issued, which represents about 40 

percent of the total debt that was issued for municipal solid waste 

infrastructure by both public and private entities over about a 30- 

year period. 

If you go to the next slide, you can see in this slide the blue bars 

represent tax-exempt governmental purpose bonds that were issued 

by cities, States, and local governments for publicly owned waste 

facilities. The red bars represent the issuance of tax-exempt private 

activity bonds. That is about 40 percent, as I said, of the total debt 

invested in the solid waste infrastructure over that period of time. 

And the red bars really represent the partnership between the 

public and the private sector through a variety of different contracting methods, ranging from design/build agreements to design/ 

build/operate, and design/build/operate and finance. 

I personally was involved in about $10 billion of public-private 

partnership investments through that era, and the good news is 

you do not hear about any of those projects today because they are 

all functioning properly and serving the purpose that they were 

originally intended to. 

Can we go to, then, several slides back? It will be slide 10, which 

shows what has happened in the water infrastructure. Keep going. 

22 

Keep going. No, you are going the wrong direction. And we will 

take a look compared to what is—keep going, several more—OK. 

This is what has gone on in the municipal water and wastewater 

sectors since the late 1980s. You see the blue, again, is governmental purpose bonds, and the red, which you can barely see at the 

bottom, is private activity bonds. And in this case, private activity 

bonds represent only 1 percent of the debt issued for municipal 

water and wastewater. 

Now, this is a much larger sector than solid waste, by multiples. 

It is like a 10 times larger investment in water and wastewater 

than in municipal solid waste. But the key thing is that the restriction on the use of private activity bonds in water and wastewater 

has represented a significant limitation to the ability of the private 

sector to partner with the public sector through a variety of different contracting arrangements to invest in water and wastewater 

projects. 

And it is our expectation that, over time, were the limit on private activity bonds to be reduced or eliminated entirely, that we 

would see the portion of this chart with the red bars would gradually increase. 

I think it is important for the committee to understand that currently there is an excess of private activity bond cap available 

across the country because the housing sector has basically shut 

down, where the bulk of private activity bonds cap has traditionally 

been allocated. We expect that this is a temporary phenomenon 

and will gradually, over time, revert to the situation that existed 

before 2008, where the availability of private activity bond cap for 

water projects will become severely limited. 

All of these projects, as you I am sure can appreciate, take a very 

long time to develop and implement. So there needs to be certainty 

over time with respect to the availability of these financing mechanisms. We do not expect that there will be any significant effort to 

pursue public-private partnerships in this sector until there is clarity about the availability of private activity cap in the future. 

Thank you very much. 

Mr. GIBBS. Quickly, before we go on, I just—that last chart up, 

can you bring that last chart back up? 

Mr. HOWARD. Sure. 

Mr. GIBBS. I just noticed on the—can you just comment where 

it says, ‘‘Taxable Build America Bonds’’? 

Mr. HOWARD. Yes. 

Mr. GIBBS. And it looks like there must have been a change 

made in 2009 or 2010. 

Mr. HOWARD. Yes. That is a good question. As you may know, 

in 2009 and 2010 there was a program set up under the Recovery 

Act to allow municipalities to issue taxable Build America Bonds. 

These were effectively taxable governmental purpose bonds with a 

direct Federal subsidy of 35 percent of the interest. They were not 

private activity bonds and did not allow for private investment or 

partnering. 

Mr. GIBBS. OK. So I am assuming that was temporary because 

it was stimulus funds? 

23 

Mr. HOWARD. That was temporary. That program has shut down. 

You will notice in—the chart is not clear, but none of those have 

been issued since 2011. 

Mr. GIBBS. Yes. I see. OK. Thank you. 

Mr. Dornbirer—did I say that right? 

Mr. DORNBIRER. Dornbirer. 

Mr. GIBBS. Dornbirer. OK. Welcome. 

Mr. DORNBIRER. Thank you. Good morning, Mr. Chairman, 

Ranking Member Bishop, members of the committee. As sector vice 

president of CoBank’s Energy and Water Services Division, I manage a portfolio of over $1 billion of water and solid waste loans. For 

simplicity, the terms ‘‘water’’ and ‘‘wastewater’’ are used interchangeably in my testimony. 

CoBank is a national cooperative bank serving vital industries 

across rural America, and it is the largest U.S. bank lender to the 

water utility industry. CoBank has over 23 years’ experience providing a variety of financing structures for water systems, including lending alongside State and Federal agencies and using Federal 

guarantees from the USDA. I was asked to testify this morning to 

provide a project finance 101 overview for the committee. 

To begin with, project finance is not the same thing as financing 

projects. When I talk about project finance, I am referring to the 

long-term financing of discrete assets of a water infrastructure 

owned by a single-purpose project company. This alternative takes 

into account the entire life cycle cost of the project, not just the 

short-term focus of its financing. 

If a water utility needs to update its system to achieve a compliance mandate or improve its infrastructure, project finance is an 

innovative way for water systems to access dependable funding to 

achieve its goals. The benefit of project finance lies in its flexibility 

in the proper allocation of the risks of that project among the 

project parties best suited to manage them. Project finance is used 

extensively in the international water sector, and in this country 

for energy, power, and transportation projects. 

Here I have a chart depicting a generic project finance structure. 

At the beginning stages of the deal, the municipality and the private equity sponsor form a public-private partnership. The project 

company then is formed to develop, build, and own the project. 

The project company can be wholly owned by one or more private 

equity sponsors, or the municipality could join in the direct ownership of the project. By forming a standalone project company, all 

the contract parties can look only to the project company for the 

enforcement of contracts. This limits the liability of the project 

sponsor as well as the municipality. 

From the point of formation of the project company, all the work 

begins with negotiating and executing the contracts that give the 

project life. Think of each contract or subset of the boxes in the 

chart as a piece of the puzzle, each one being integral to a complete 

project. 

The heart of a project finance deal is the DBOF agreement, 

which stands for design, build, operate, and finance, between the 

project company and the municipality. The DBOF lays out who is 

responsible for what, such as specifications of the plan, the delivery 

24 

schedule, revenues, permits, dispute process, design changes, feature expansion, and transfer of ownership. 

The project company’s revenues come from the user fees determined by the municipality’s rate-making process. In addition to 

rate-setting, the municipality may also agree to be responsible for 

those operating costs of the plant that it can control. 

If the DBOF is the heart of the project, rate-setting is the lifeblood. The source of project revenue should be transparent and easily modeled in order to obtain the most attractive financing terms 

benefitting the project, and subsequently, the ratepayers. 

The other major components of the project finance structure include the engineering construction contract, the operation and 

maintenance agreement, and the credit agreement, which is between the lenders and the project company. The lending group can 

include banks, bondholders, either taxable or tax-exempt, and/or 

Government agencies. 

The lender’s role is to underwrite the loan which, together with 

the sponsor’s equity dollars, fund the total costs of constructing and 

starting up the project. The lenders rely solely on the contracts executed by the project company and the cash flows generated by it. 

The various project contracts are designed to provide and protect 

those cash flows. The flexibility the project finance provides allows 

a water utility to accomplish its goal of upgrading the system in 

a timely fashion while ceding most of the risks of that undertaking 

to third parties. 

I hope my brief overview, combined with my written testimony, 

provides the committee with an understanding of how project finance works. CoBank recognizes the need for a variety of financing 

tools to update our Nation’s infrastructure. Project finance is just 

one viable tool that can tap private capital, and thereby leverage 

Government resources to accelerate the achievement of that important goal. 

I look forward to any questions you may have. Thank you. 

[The charts from Mr. Dornbirer’s overview follow:] 

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Mr. GIBBS. Thank you. 

Mr. Grumbles, welcome. The floor is yours. 

Mr. GRUMBLES. Thank you, Mr. Chairman. 

Like the NCAA Sweet Sixteen, this panel seems to be dominated 

by Ohio interests, and that is not necessarily a bad thing because 

I am hearing testimony that is insightful—— 

Mr. GIBBS. I think there are three teams from Ohio still in it. 

Right? 

Mr. GRUMBLES. Yes. That is right. And the perspectives I am 

hearing so far are all national perspectives, and this is a national 

issue. It is a national crisis and an opportunity. I want to thank 

the members, Mr. Chairman, Ranking Member Bishop, Congresswoman Napolitano, for your leadership in water over the years. 

This really is an important opportunity. It is great to be before you 

again. 

I am Ben Grumbles, president of Clean Water America Alliance. 

It is a 501(c)(3), an educational nonprofit, that was created 3 years 

ago that is unique in its membership and structure. It embodies 

drinking water, wastewater, stormwater, groundwater, source 

water protection, agriculture, energy interests, and everyone shares 

the bond of working together towards a more integrated and sustainable approach to national water policy. 

I cannot tell you a more pressing and urgent issue than the one 

you are focusing on today, and that is financing infrastructure to 

sustain America’s most precious liquid asset. Clean Water America 

Alliance does not have official positions on the bills before you. We 

have endorsed a green infrastructure principles statement. We also 

believe strongly in some key points and principles that are important to your deliberations. 

As you approach the financing issue, which is such an urgent 

one, Mr. Chairman, I would emphasize valuing water. I would emphasize partnering for water. I would emphasize greening, and 

meshing green with gray infrastructure. And finally, I would emphasize connecting all the dots. 

On the valuing of water, as was indicated in the extensive survey 

over a year ago by ITT Water (now Xylem), the Nation, the ratepayers, the citizens of the Nation, see water as an emerging national crisis. There are, every day in America, 650 water main 

breaks, as AWWA would tell you, 240,000 every year. 

You know the problem. The solutions have to start with helping 

America understand and using your congressional tools to launch 

this campaign on the value of water. And we think that is a critically important one. Moving towards full-cost pricing, which is a 

local issue, but also building the tools and the public sentiment to 

really move forward—the country deserves clean and safe water for 

the future. 

The second point I want to emphasize is the partnering. Mr. 

Chairman, water is not just simply a commodity. It is a lifeblood 

asset that all of us should have. It is very important that this public asset be maintained and sustained. 

And what I like to call as the public rust doctrine is my concern 

that these public assets, these public infrastructure systems, will 

fall into rust and decay if we do not use innovation and allow communities to bring in, when the communities want to do so, the priVerDate Aug 31 2005 10:06 Jul 02, 2012 Jkt 000000 PO 00000 Frm 00068 Fmt 6633 Sfmt 6633 P:\HEARINGS\112\WR\3-21-1~1\73470.TXT JEAN
31 

vate sector through financing, through operating, through managing—it is not always all or nothing about privatization and selling off of assets. 

And our organization believes strongly that private sector entrepreneurs and private sector involvement is important, that there be 

a partnership. The private activity bond legislation is a good example of progress. Your efforts in the WIFIA legislation to integrate 

more private sector perspectives is also an important one. 

The other aspect I want to emphasize is greening. Our organization, Clean Water America Alliance, truly believes that one of the 

ways to save money, beautify communities, save energy costs, is to 

look for greening infrastructure, greening using trees, parks, connecting with the land and water conservation fund, parks and 

recreation districts, and managing watersheds. As you know and as 

New York City just recently demonstrated this week, billions of 

dollars invested in green infrastructure will save even more money 

and help the community. 

The other point I want to emphasize, Mr. Chairman, is that 

WIFIA has very good elements to it. It is important to be part of 

the toolbox on the table. It is also very important to work through 

the logistics, the specifics, so as not to undermine a program that 

this committee was very instrumental in in 1986 and 1987, the 

State Revolving Fund. So that is a key part of it. 

Regarding Congressman Bishop’s legislation, which has broad 

support from many other Members, it is a very important step forward. It includes needed elements of the debate in financing legislation. 

On the infrastructure trust fund approach, our organization believes that dedicated, sustainable funding is absolutely necessary. 

I personally would say that we need a national strategy on dedicated funding. We recognize that it is a recipe for disaster if some 

type of new fund is set up that leads to a Federal tax and decisions 

are made about local spending in Washington, DC. But it really is 

important, as your bill does, to keep that debate going about funding dedicated towards local water and wastewater infrastructure. 

Mr. Chairman, thank you for bringing together so many experts 

and tackling this issue like you are. 

Mr. GIBBS. Thank you. 

Mr. Schmitt, welcome, and the floor is yours. 

Mr. SCHMITT. Chairman Gibbs, Ranking Member Bishop, and 

members of the subcommittee, my name is Ryan Schmitt. I am the 

owner and president of Petticoat-Schmitt Civil Contractors in Jacksonville, Florida, and I am the current chairman of the board at 

NUCA. We are the Nation’s largest association representing utility 

and excavation contractors. We are the men and women that fix 

those water breaks and prevent those water failures that Mr. 

Grumbles spoke about. 

According to the EPA, hundreds of billions of dollars are needed 

to repair America’s underground infrastructure, yet the lack of 

available public dollars has obstructed significant progress to address these needs. I can tell you that in my State of Florida, our 

company struggles for work, while many water systems are clogged 

with tuberculation and desperately need replacement. 

32 

The water infrastructure market and companies working in it 

are also in serious trouble. In addition to the cuts in Federal funding, State budgets have been hit hard due to lowered revenue from 

property taxes. The lack of public dollars has kept the construction 

industry on the sidelines. In my State, almost half the construction 

workforce continues to be out of work. 

Although water and wastewater projects are generally recognized 

for their effectiveness in enhancing public health and environmental protection, the economic benefits that result from this work 

are often overlooked. In a 2009 Clean Water Council study, it 

showed that a billion-dollar investment in water and wastewater 

infrastructure resulted in the creation of up to 27,000 jobs, $3.46 

billion in demand for products and services in other industries, and 

$1 billion in generation of household income. Importantly, each billion invested also generates approximately $82.4 million in local 

and State tax revenue. 

When our company does land a project, I see the ripple effect 

firsthand. The positive economic impact affects the financial health 

of our company, our employees, our vendors, and all related companies all the way down to the burger stand next to the job site. 

NUCA supports a wide range of legislative solutions to address 

America’s infrastructure challenges. But because of the reduced 

Federal dollars available over the past several years, our association has recently focused on opportunities for more private investment and public-private partnerships. The Sustainable Water Infrastructure Investment Act would lift water and wastewater 

projects from the State volume cap on private activity bonds, thereby encouraging us each of more public-private partnerships in this 

market. 

Private activity bonds use private capital in lieu of public debt, 

and shift the risk and long-term debt from the municipality to the 

private owner. The tax-exempt status of the bond provides lower 

cost financing for investors, which translates to lower costs for local 

governments. Lifting the cap that fund these projects would generate an estimated $5 billion in annual private investment at a 

very low cost to the Federal Government. 

NUCA has also been a long supporter of the EPA’s State Revolving Fund, or SRF programs. Therefore, we appreciate the introduction of the Water Quality Protection and Job Creation Act of 2011. 

The bill, authored by Congressman Bishop, would authorize $13.8 

billion over the next 5 years for EPA’s Clean Water State Revolving 

Fund, and $2.5 billion for combined sewer overflows. 

NUCA also supports the introduction of other legislation pending 

in this subcommittee, known as WIFIA, that will offer credit assistance through the use of loans and loan guarantees to complement 

traditional financing programs for water and wastewater projects. 

Establishing a national infrastructure bank to finance wastewater projects should also be evaluated. Levels of Government 

oversight, structure of the bank, revenue sources, and opportunities 

for private sector participation are all issues that must be addressed while considering establishment for such an entity. 

While there continues to be a growing national conversation 

about the establishment of a dedicated source of revenue through 

33 

a new clean water trust fund, NUCA is supportive of the concept 

in the long term after many issues are fully vetted and addressed. 

To sum up, there are several alternatives that, if crafted appropriately, could put the underground utility and excavation industry 

back to work, create scores of jobs in countless American industries, and expand local tax, bases while repairing and rebuilding 

the Nation’s crumbling infrastructure. 

NUCA believes the congressional agenda should specifically address removing the State volume cap on private activity bonds, reauthorizing the SRF program, and establishing new options for 

loans and loan guarantees through WIFIA. 

Thank you for the opportunity to testify before the subcommittee 

today, and I look forward to answering any questions you might 

have. 

Mr. GIBBS. Thank you. 

Ms. Broaddus, you are welcome, and the floor is yours. 

Ms. BROADDUS. Good morning, Chairman Gibbs, Ranking Member Bishop, and distinguished members of the Water Resources and 

Environment Subcommittee. Thank you for inviting me to testify 

today. 

I am Lynn Broaddus, and I direct the environment program at 

the Johnson Foundation at Wingspread in Racine, Wisconsin. The 

Johnson Foundation’s mission is to be a catalyst for positive and 

lasting change through leading edge convening to create healthier 

environments and communities. 

I am here today to testify about a report released by the Johnson 

Foundation titled, ‘‘Financing Sustainable Water Infrastructure.’’ 

This report lays out a road map for innovative ways to finance our 

Nation’s water infrastructure for the 21st century and beyond. 

It brought together a group of experts from water utility managers, the investment community, NGOs, and other stakeholders. 

This effort was conducted in collaboration with American Rivers 

and Ceres as part of the Johnson Foundation’s ongoing freshwater 

initiative known as ‘‘Charting New Waters.’’ 

The ‘‘Financing Sustainable Water Infrastructure’’ report examines the operational, institutional, and market-related challenges 

that our water and wastewater utilities need to overcome if they 

are going to continue to support our people and industries into the 

next century. I would like to highlight three points from the report. 

First, the water utility business model is changing. Historically, 

water and wastewater utilities have functioned as monopolies. Now 

there are innovative technologies that give customers more options. 

For example, Google is recycling gray water to cool its data center 

outside of Atlanta, eliminating the demand for millions of gallons 

of treated drinking water. 

The second point I would like to make is that we are likely to 

see more consolidation in the industry. In the future, we will see 

wastewater, water supply, stormwater, and flood waters managed 

as one system rather than as separate systems that often have conflicting goals. 

And my third point is that these changes will drive the need to 

consider a number of innovative financing strategies, including: expanding the pool of water service funding to include nontraditional 

revenue sources, such as energy capture and nutrient recycling; 

34 

avoiding future costs by incorporating water sustainability into 

other forms of infrastructure, such as our roads and buildings; and 

accounting and paying for ecosystem services to expand utilities’ 

debt capacity, and link payments to watersheds as lower cost alternatives. 

Many of these recommendations are encapsulated in the bills put 

forward by both Chairman Gibbs’ WIFIA legislation and Ranking 

Member Bishop’s H.R. 3145. While the Johnson Foundation cannot 

offer any specific positions on legislation, I can tell you generally 

about how these proposals fit into our report’s recommendations. 

Generally, I think the two bills, while certainly different, share 

a lot of common and important ground. Both the chairman’s and 

the ranking member’s bills cover many of the necessary recommendations contained in the ‘‘Financing Sustainable Water Infrastructure’’ report. 

However, our report also emphasizes the importance of flexibility, recognition of new technologies, and changing conditions in 

the water business in order to maximize the impact and effectiveness of new financing mechanisms. 

With regard to WIFIA, we need to make sure that any program 

allows for the ability to finance smaller, more incremental projects, 

especially for smaller communities. If financing mechanisms are 

available only for mega-projects, then that is what we will get, even 

when a smaller solution may have been the more cost-efficient one. 

Regarding Congressman Bishop’s bill, we are pleased to see that 

it recognizes the inherent benefits of smaller projects and new technologies. Developing smaller solutions that are tightly focused can 

avoid some of the problems we currently see, where communities 

can no longer afford to maintain larger facilities because of population shifts, reductions in per capita water use, and other factors. 

I would like to note, however, that the experts we convened felt 

that if there is grant funding for water infrastructure, it should be 

done in a way that does not hide the true costs of water and wastewater services. 

In closing, I believe that we can bring about a more cost-efficient 

and effective system for the long term if we tackle not only how to 

maintain the existing system, but how to improve it so we can 

more effectively meet the needs of our shifting population and 

water resources relative to the environmental, technological, social, 

and demographic changes we are expecting. 

I would also like to ask unanimous consent to enter the ‘‘Charting New Waters’’ report and the ‘‘Financing Sustainable Water Infrastructure’’ report into the record. 

Mr. GIBBS. So ordered. 

[The preamble to ‘‘Charting New Waters’’ and the executive summary to ‘‘Financing Sustainable Water Infrastructure’’ follow. 

These reports can be found in their entirety online at the Government Printing Office’s Federal Digital System (FDsys) at http:// 

www.gpo.gov/fdsys/pkg/CPRT-112HPRT74562/pdf/CPRT112HPRT74562.pdf. Click on ‘‘Bookmarks’’ in the left-hand navigation panel to select either report.] 

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Ms. BROADDUS. Thank you for your attention to these issues, and 

I would be very happy to take any questions. 

Mr. GIBBS. Thank you. 

Mr. Abelson, welcome. The floor is yours. 

Mr. ABELSON. Thank you, Chairman Gibbs, Ranking Member 

Bishop, and members of the subcommittee. My name is Richard 

Abelson. I am the Executive Director of the American Federation 

of State, County and Municipal Employees, AFSCME, District 

Council 48 in Wisconsin. 

It is an honor to be here today to share with you AFSCME’s experience with the privatization of water and wastewater systems, 

particularly in Milwaukee, Wisconsin. 

AFSCME’s 1.6 million members are primarily public employees 

who work in areas such as health care, education, social services, 

transportation, law enforcement, and of course, water and wastewater treatment across the country. 

We have a broad range of experience and knowledge of the impact that privatization of public services had on communities and 

the public at large. 

Faced with rising financial challenges, the controller for the city 

of Milwaukee in 2008 proposed the long-term lease of the city’s 

water works. 

The Controller proposed a lease of 75 to 99 years, something that 

was unheard of in a city the size of Milwaukee. This proposal initiated a period of intense debate that lasted for about a year. 

A major coalition of community groups and individual citizens 

came together to examine the impact this proposal would have on 

the city of Milwaukee. 

We found several negative consequences for the residents of 

other Wisconsin cities that we desperately wanted to avoid. 

We discovered that customers of privatized water systems in 

Wisconsin pay 59 percent more for service than those who receive 

water from a publicly run system. 

We also discovered the customers in Wisconsin whose drinking 

water systems are privatized encounter more water quality issues 

and poor service problems. 

In the end, the plan to turn over the city’s water drinking system 

to a private company in return for an upfront payment was abandoned. 

I would like to submit for the record an extensive report that was 

done by Food & Water Watch entitled ‘‘Mortgaging Milwaukee’s 

Future: Why Leasing the Water System is a Bad Deal for Consumers.’’ 

[Please see page 151 for ‘‘Mortgaging Milwaukee’s Future: Why 

Leasing the Water System is a Bad Deal for Consumers,’’ which 

Mr. Abelson attached to the end of his written statement.] 

In this extensive report, Food & Water Watch took a close look 

at the Milwaukee water utility’s financial statements and proved 

how a long-term lease would actually cost the city millions of dollars a year, and customers would see a huge jump in their bills, 

suggesting that a lease of the water utility was not in the best economic interest of the city or its residents. 

The report concluded that the city would undoubtedly experience 

higher rates and poor service, leaving citizens with little recourse. 

51 

The report is attached to my written statement. 

Unfortunately, unlike our water works, our wastewater system 

has been privatized, and it has been a less than successful effort, 

to say the least. 

Our environmental concerns have in fact become a reality. 

We believe that the private sector does have a role to play in the 

provision of certain public services, but it is not in operating or 

managing public drinking and wastewater facilities. That should be 

the responsibility of local governments. 

The private sector can use its vast resources to find innovative 

solutions to the water crisis and create innovative technologies for 

more efficient treatment plants. 

We have to ask ourselves, is water a basic public resource or a 

product that is sold for profit. 

What we found in Milwaukee is not unique. Private investors or 

public-private partnerships, whether in water and wastewater, 

highways or other capital assets, typically demand a high rate of 

return, and such provisions as lengthy contract terms, anti-compete 

clauses, or guaranteed payments, which are not in the public interest. 

We believe that infrastructure is more appropriately financed 

through vehicles with fixed income instruments than to private equity with long-term stable returns. 

Given that interest rates are at historic lows and many public 

entities have latitude to issue debt, bond financing is the best way 

to achieve this goal. 

Renewal of the Build America Bonds Program could save the 

Federal Government money, help put Americans back to work, and 

revitalize the infrastructure that is critical to the United States’ 

economic competitiveness. 

By providing access to tax exempt investors, such as pension 

funds, solvent wealth funds, and life insurance companies, Build 

America Bonds bring new sources of capital to State and local governments. 

We should work together beyond considering these options. 

AFSCME and other labor unions are collaborating to explore financing structures in which a public pension fund or group of public pension funds hold majority control in an infrastructure asset 

providing stable returns to the retirement system, as well as providing an influx of badly needed investment in public infrastructure. 

I appreciate the opportunity to appear before the Subcommittee 

today, and I would be pleased to answer any questions which you 

may have. 

Mr. GIBBS. Thank you. Before we move on to questions, I have 

a draft report from Richard Little dealing with the Food & Water 

Watch analysis of the Milwaukee situation. 

I would ask for unanimous consent it be added to the record. So 

ordered. 

[The information follows:] 

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Mr. GIBBS. I want to go back to this end of the panel to start. 

This is a large panel. A lot of information was covered here. I think 

we will have some good discussion here. 

Ms. Massey, you raised some concerns, I think, about funding of 

SRFs and WIFIA. We heard from other panelists that—in my opinion, we want to make sure that we do fund the SRF programs, and 

it is a complementary program and not compete with it. 

You did talk a little bit about some things in the SRF that may 

need to be fixed or adjusted. I do not know if you want to expound 

a little bit, maybe something we should try to address in the legislation to actually strengthen the SRF program, and hopefully with 

a WIFIA type and other financing mechanisms, so they all interact 

together and accomplish what we need to get done. 

Ms. MASSEY. I think the base where the Council of Infrastructure 

Financing Authorities will come down, it does come down to flexibility. 

Just a few things. I will give you a couple of examples. As I give 

you these examples, I do not want to lead you to believe that the 

States are opposed to the base concept on some of these because 

we are not. 

Let’s talk about green infrastructure. That is one that comes to 

mind. 

States are supportive of green infrastructure. There is no question about that. What we do have an issue with is having a dedicated set percentage of funds or projects that have to be green infrastructure projects. 

What we are finding is that not all States can meet the percentages that are being set. Sometimes they just simply do not get the 

projects in to meet the percentage. 

Other times, what they are finding is the projects they are getting in do not touch water quality to any significant degree, so they 

are having to give up the higher water quality benefit projects. 

That does become a problem. 

I think it is when we lose flexibility by having—‘‘arbitrary’’ might 

be the right word—arbitrary percentages of certain types of things 

we have to do, then that becomes a problem. 

The same thing, I discussed additional subsidization. That is a 

great tool, having the ability to either provide zero interest or negative interest loans to disadvantaged communities. That is a wonderful tool to have on behalf of the States. 

Requiring a certain percentage again does become problematic, 

when your applications that come through the process simply do 

not get you to that percentage level. It does become a problem. 

Those would be two off the top of my head. 

Mr. GIBBS. OK. Thank you. To the whole panel, is there anything 

that we should be looking at, impediments, either at the Federal, 

State or local levels, to successfully implement a different array of 

financing? 

Does anybody have an opinion on things that are out there that 

really need to be addressed to make WIFIA work or get the cap off 

the volume? Is there something at any level of Government that is 

an impediment that you can envision that maybe we should try to 

address? 

Anyone want to respond? 

59 

Mr. DORNBIRER. Mr. Chairman, your memorandum actually did 

a good job, I think, listing out some of the impediments to considering other alternatives. 

I think the largest thing, given that we have tens of thousands 

of public utilities in the country, it is just a painstaking process to 

educate each group of civil leaders that there are alternatives. 

I do not know how you would tie that in to a program other than 

some sort of mandatory education process, that when you are considering a loan, you are considering SRF funding or something 

under WIFIA, that you are educated on all your alternatives in 

case you do not qualify for one of those programs. 

Mr. GIBBS. OK. Yes, Ms. Broaddus? 

Ms. BROADDUS. I do not know that this is something that would 

necessarily be addressed within WIFIA, but one of the issues that 

was identified in our gathering and in our report are GASB rules. 

The Government Accountability Standards Board does not allow for 

accounting of natural assets or natural capital. A lot of utilities 

around the country are using watersheds to filter their water and 

protect their water supply, but the accounting rules do not allow 

them to include that in their assets. 

I presume that would in some ways enter into some of the bond 

activities and that sort of thing, and maybe something to address 

outside of WIFIA. 

Mr. GIBBS. Would that also include other programs like some 

new programs that have taken off that I have been involved in, the 

nutrient trading programs? 

Ms. BROADDUS. Most probably so; yes. 

Mr. GIBBS. OK. Back to Mr. Weihrauch. Can you talk a little bit 

as to WIFIA and the SRF, expound a little bit about how you think 

it complements it and not conflict, and how you see it playing out? 

Mr. WEIHRAUCH. The strength of WIFIA is it revolves around the 

largest of projects. Projects that may be multistate. 

For example, in Ohio, the Greater Cincinnati Water Works 

serves the Cincinnati area, many counties, and portions of Northern Kentucky. 

Because of a posture, well thought out, of regionalization and efficiencies inherent with regionalization, this practice is going to 

tend to continue to grow. 

To find synergy between the State of Kentucky’s SRF program 

and the State of Ohio’s for funding improvements to those water 

systems would tend to be quite difficult. 

[Insert for the record from witness David Weihrauch follows:] 

The realities in both Kentucky and Ohio make it extremely 

unlikely that either State would fund a project in the other 

State, even if that project would benefit its own citizens. 

For example, it is extremely unlikely that Kentucky would 

fund upgrades to the treatment plant in Ohio, even if Cincinnati Water Works’ customers in Kentucky would directly benefit. And it is extremely unlikely that Ohio would 

fund infrastructure replacement in Kentucky even if that 

was improtant to the overall integrity of the regional system, including the customers in Ohio. 

60 

I want to be clear that I’m not picking on Ohio and Kentucky. The same conditions hold true in most States if not 

all of them. And many if not most States have political 

issues surrounding ‘‘upstate vs. downstate’’ or ‘‘big systems 

vs. small systems’’ that act to deny SRF funding to their 

largest cities and to projects that are truly regional or national in scope. WIFIA is designed to address those compelling needs, to ultimately benefit the customers served 

by large projects. 

That’s why the American Water Works Association strongly supports running WIFIA through EPA and not through 

the States. 

On the other hand, Section 105, subsection 8 of the proposed 

WIFIA bill, allows SRF managers to bundle projects, come into 

WIFIA, pick them up, and as long as the interest climate is good, 

there is some real potential there. 

For example, in the latest round of SRF projects in the State of 

Ohio, among the 258 which were not funded, 49 were scored at 

standard long-term interest rates. They are not going to receive a 

great benefit in their interest or principal forgiveness. 

Those types of projects could be bundled, and all 49 of them 

could be taken care of, and the net interest rate to the project 

would be about the same as it would be through the typical SRF 

structure, and the OEPA and the Ohio Water Development Authority would each get their fees on top of that, and still maintain a 

reasonable interest rate structure at today’s terms. 

These are benefits, and part of the innovation of WIFIA. 

Mr. GIBBS. Thank you. We are going to move on to Ranking 

Member Bishop. Go ahead. 

Mr. BISHOP. Thank you very much, Mr. Chairman. I want to stay 

on this issue of the two approaches, funding through the SRF 

versus having the EPA make the decisions and sort of bypass the 

SRF. 

In the conversations that I and others have had about this bill, 

it appears as if the clean water people want to continue the process 

of working through the SRF, and the drinking water people want 

to work around the SRF, as I say, at the risk of over generalizing. 

Let me frame the issue for you in this way. Mr. Weihrauch, I 

think you said it best. You said it is up to us as to whether or not 

this process might possibly undermine the SRF. 

Here is my concern. My background is higher education. I was 

a college administrator for 29 years before I came here. 

In the late 1950s, in the wake of the Sputnik, the Federal Government created something called the ‘‘National Defense Student 

Loan.’’ Some of you may have borrowed a National Defense Student 

Loan or something called the ‘‘National Direct Student Loan.’’ 

It was a revolving loan fund where the Federal Government provided money to participating colleges. Colleges loaned that money. 

Students paid the money back to the colleges. The colleges would 

re-loan the money. In other words, the higher education version of 

the SRF. 

61 

It has not received a Federal capital contribution now since 2000 

or 2001, I think, and under current law, it is now called the ‘‘Perkins Loan Program,’’ it is the same program, and will go away. 

In 2014, current law requires whatever balances exist in the loan 

fund to be returned to the Federal Government and the loan program will go away. 

That is my concern. My concern is if we have a work around, in 

a climate in which appropriators are going to have to make really, 

really tough choices, and I think it is reasonable to assume that climate is going to continue for a while, this is an easy one. 

Hey, we got this WIFIA. Let’s do WIFIA. We do not have to fund 

the SRF any more. 

That is my concern about a structure that would create what appears to be a complement but could result in a conflict. 

Mr. Grumbles, first off, welcome back to this committee room 

where I am sure you have spent more hours than you care to 

count. It is good to have you back. 

I thought you said it very well in your testimony. You said, and 

I am quoting, ‘‘It is critical to ensure that what is intended as a 

supplemental tool does not become the one and only tool or in some 

way, undermine the success of the SRFs.’’ 

I think you have said it very well. Would you care to comment 

on the concern that I just raised, and Mr. Schmitt, you have raised 

similar concerns, if I could hear from each of you, I would appreciate it. Thank you. 

Mr. GRUMBLES. In 1986, when there was a massive agreement 

between the Executive Branch, the President and the Congress to 

move away from the construction grants’ era of the Clean Water 

Act, which led to enormous success, but based on fiscal and philosophical perspectives, the decision then was to move away clearly 

to a new model, the SRF model. 

It was structured after much, much debate that it would be a 

phased transition, and that transition has never fully occurred. 

There are still some specific grants, although far fewer, but the 

SRF capitalization grants did not end as was envisioned by Congress in 1987 and by the Executive Branch. 

Here, I think the situation is different where there seems to be 

a willingness—the WIFIA legislation that I have read, the draft, it 

is clearly the intent of the drafters to keep the SRF going. 

It is a political and budgetary decision on the implementation of 

that. I would say as a former State infrastructure finance authority 

official, it is realistic to see that the big decisions made on Capitol 

Hill will lead to far less or much earlier total phase out of the State 

Revolving Fund. 

There have to be safeguards built into that. For me, it really does 

make sense, while some are concerned about the use of the word 

‘‘flexibility,’’ when Federal dollars are scarcer and scarcer, and 

when State programs are showing how mature they have developed 

over the last several decades, both under the Clean Water Act and 

the drinking water program, it does mean there needs to be greater 

flexibility given to the State and local fund managers and the officials, who can then do innovative things with integrating source 

water and clean water. 

62 

I think there has to be real clear safeguards and a mechanism 

to enforce that philosophy that it is not meant to undermine the 

SRF. 

I think your hearings are just going to lead to more and more 

ideas about how to do that. 

Mr. BISHOP. Mr. Chairman, if you would indulge me, if we could 

let Mr. Schmitt answer as well. Thank you, Mr. Grumbles. 

Mr. SCHMITT. NUCA has been a long time supporter of the SRF, 

not only as a financing mechanism but the fact that the States can 

utilize their project priority lists and their intended use plans to 

determine where those funds can best be used. 

In our industry, the needs of water and wastewater spending can 

be pretty specific and pretty critical, and can shift pretty abruptly. 

In my home town of Jacksonville, we are doing a project now 

where we are pulling out the water mains where 8-inch mains have 

about 2 inches of flow because of excessive tuberculation. 

While that is addressed by a priority, there also might be another instance where you have excessive overflows due to high 

water tables that are in need of some immediate attention. 

I know our utility struggles to try to prioritize what projects need 

to get funded and what projects need to be put in a place at what 

time. 

The State is much closer than the Federal level, with all due respect, on addressing those needs, and putting our industry to work 

in evaluating and fixing those needs. 

Mr. BISHOP. Thank you very much. I yield back, Mr. Chairman. 

Mr. GIBBS. Representative Napolitano? 

Mrs. NAPOLITANO. Thank you, Mr. Chair. Yes, it is good to see 

you, Mr. Grumbles. Long time, no see. 

Having come from local government and taking a look at how 

they have to deal with all the emergencies and having sat on a 

sanitation board for years, I have a little understanding of some of 

the trials and tribulations. 

As I served at the State level, I heard from other cities about 

their inability to be able to fund innovative and new research and 

expansion of their wastewater treatment, and how that affects 

them. 

California has such a long shore line that you have releases of 

wastewater into the beaches that prevents people from getting into 

the ocean. 

There are all kinds of things that have happened. One of the 

things that you have not touched upon, and I would like to find out 

from any and all witnesses who can answer this, how and to what 

extent is green energy technology being incorporated into long-term 

infrastructure planning, and are you actively pursuing ways to reduce energy usage while planning for future wastewater infrastructure needs? 

I tell you that because we are working with IBW and NETECH 

to green buildings and being able to recycle the methane gas from 

the landfills, et cetera. 

There is a lot of new technology. How is that playing a role in 

what you are doing or going to be doing? Anybody? 

Mr. GRUMBLES. I will just go first very briefly, Congresswoman, 

to say that you have really touched on one of the key paradigm 

63 

shifts that this country, this committee and others must usher in, 

and that is viewing in particular wastewater treatment facilities 

not as treat and discharge plants, but as centers of regeneration. 

I can tell you just from our organization’s perspective the leading 

green city utilities who are members of Clean Water America Alliance are all integrating more green energy, biogas recovery, methane management issues, to put that to work, recognizing that there 

is no such thing as wastewater, just wasted water. 

There is a tremendous amount of energy from it and money, profit. 

The research agenda still needs a lot more investment, but I 

think the will is growing. Utilities really want to put that to use. 

Mrs. NAPOLITANO. Coming from not only the ranking member of 

the Subcommittee on Water and Power, I am very concerned about 

recycled water and the stigma attached to wastewater. We need to 

start calling it something else so that the general public can accept 

the recycled tertiary treated water that is included in your 

aquifers, et cetera. 

Yes, ma’am? 

Ms. BROADDUS. I wanted to also address your question about 

green energy. Of course, all water is recycled at one level or another. We may have a hard time accepting that. 

In terms of green energy and the ability to reduce the energy impacts of water and wastewater treatment and movement, the 

Water Environment Federation, who I believe was present at the 

last panel, the February panel, had issued a statement, I think 

back in the fall, that they believe that all wastewater treatment 

can become energy neutral if not energy generating. 

I think one of the things we want to be sure is incorporated into 

the legislation, is the recognition that is where we need to go. That 

is where we can go. The technology is in the works, and in some 

cases, already there. 

So any financing mechanism needs to not only have the flexibility to allow that but also to encourage that. 

Mrs. NAPOLITANO. Mr. Howard, do you have a comment on that? 

How is the business end of it looking? 

Mr. HOWARD. I think that is one of the experiences that we have 

had in the municipal solid waste sector, where we had a fair 

amount of innovative technology that has been developed in that 

sector, in partnership with the private sector. 

We would expect that same experience would apply in water and 

wastewater. 

Mrs. NAPOLITANO. Are you taking that in consideration as you 

are looking at the funding mechanisms? 

Mr. HOWARD. Yes, definitely. It has to be commercially proven 

technology, I might add, to be acceptable to the financing markets. 

As long as it is commercially proven technology and viable, it is 

a very active part of our financing programs. 

Mrs. NAPOLITANO. Anybody else? 

Mr. WEIHRAUCH. Yes. The American Water Works Association is 

a strong supporter of innovation and forward looking technologies. 

I would submit there is no greener action that can be taken than 

reducing the infiltration problem on our clean water side and reVerDate Aug 31 2005 10:06 Jul 02, 2012 Jkt 000000 PO 00000 Frm 00101 Fmt 6633 Sfmt 6633 P:\HEARINGS\112\WR\3-21-1~1\73470.TXT JEAN
64 

solving the water loss statistics for our community water systems, 

which can be greater than 40 percent for some communities. 

These are easily identifiable, and the only thing standing between taking care of them and not taking care of them are adequate and responsible funding sources. 

Mrs. NAPOLITANO. Ms. Massey? 

Ms. MASSEY. From the States’ perspectives, I believe what we are 

seeing now is energy efficiency has just become part of our standard dialogue. 

We, some States, hardly consider that green infrastructure any 

longer, because now I think everybody pretty much has bought into 

it. It makes great operational sense, and it really should be included in the designs, which is now giving us the opportunity to 

look even further out into those new innovative technologies. 

Mrs. NAPOLITANO. Thank you, Mr. Chair. I look forward to the 

second round. 

Mr. GIBBS. Thank you. I just want to make a quick comment. I 

am very supportive of this concept of innovative technologies. I appreciate Mr. Howard’s comments and Ms. Broaddus’, because for 

energy generation and nutrient recapture, there has to be a revenue source. 

We do have the innovative part in the WIFIA draft. We are very 

supportive to make that work, and we will try to look at that and 

maybe make it stronger. 

Ms. Johnson? 

Ms. JOHNSON. Thank you very much. Let me also welcome Mr. 

Grumbles back here. He is a staple around here. I should have 

known you would never give up water as a career. 

My question does not have to do so much with the funding right 

now. I know that will be ongoing for a while. 

I had a constituent who approached me on an interstate water 

redistribution system, which seems almost impossible to think 

about right now, but the concept being that where there are floods, 

there could be some type of piping that would shift that water to 

another area where it is needed. It would be shifted by technology, 

whether the little flap is open or not. 

I would like to hear some of you that are water experts on the 

idea of something of that sort. 

Ms. BROADDUS. Without knowing the specifics of it, I guess I will 

take a first crack. I think one should approach anything like that 

with caution. 

Based on what we have heard from the people we have met with, 

one of the sort of long-term goals is not only to look at the longterm impacts and life cycle costs of something like that, including 

the energy costs associated, but there is a concept of keeping water 

local and trying to mimic the natural systems as best as possible. 

Again, without knowing the specifics of that situation, before 

looking to that kind of a technological solution, go back and look 

at the underlying problem with why the flooding is occurring. 

It may be there is actually—it is part of a bigger systemic problem, and there may be by restoration of natural ecosystems a way 

to kind of stem the flooding and restore the hydrological cycle locally. 

65 

Ms. JOHNSON. Yes. It came right after we had a great deal of 

flooding in the east last year or year before. At the other end of 

the spectrum, there was a lot of drought. 

The idea came up as why cannot we not move this water through 

some system to another area for agriculture or whatever. I just 

thought that since many of you were water experts, maybe you 

thought about something like that. 

Mr. GRUMBLES. Congresswoman, I know this committee has for 

decades looked at some of these regional and interstate water quality, water quantity issues. 

I think it is complex because of the laws that overlay the management of water, particularly when you have water quantity and 

water quality issues involved. 

I know the goal for our organization is a ‘‘one water’’ management perspective that creates the forums to bring together the 

flood and stormwater managers with the water quality permitting 

agencies, and also the water rights, particularly in our western 

water States, that definitely has an impact. 

Many people would say the future may be more interstate compacts, blessed by Congress through the Constitution, but more 

interstate compact arrangements involving multistates, but as 

Lynn Broaddus said, when you think beyond local terms and move 

water across watersheds, it can become complex, even though it 

may well be the cheapest engineering solution. 

It may prove very costly due to the laws and the political debates 

surrounding it, and the long-term ecosystem damage, if you are 

moving water, putting it where it would not normally be. 

Ms. JOHNSON. Thank you. Thank you very much, Mr. Chairman. 

Mr. GIBBS. Ms. Norton? 

Ms. NORTON. Thank you, Mr. Chairman. I do want to thank you 

and commend you and the ranking member for your concentration 

on these series of hearings on ways to get financing for our water 

structure through innovations perhaps. 

I want only to mention that there are a large group of Members 

of the House who are very, very concerned, so much so that we are 

circulating a letter that is addressed both to the leadership of the 

Senate and the House. 

I am in the process of circulating this letter now. It is going to 

be signed, among others, by Ranking Member Rahall, Ranking 

Member Bishop, Ms. Johnson, and I am sure many other members 

of this committee. 

We are very concerned, but I have to be candid, that in light of 

the difficulty we are having in getting a bill through here, which 

is generally the most popular bill to come through the House because of its visible benefits to every district in the United States, 

the Service Transportation Bill, it is hard for me to be optimistic 

about a water infrastructure bill which the public is not nearly as 

aware of as they need to be, and I think these hearings may help 

to encourage. 

We are really dealing with a structural change here that I am 

not sure how to grapple. 

If we look at only 35 years ago, the Federal Government covered 

almost 80 percent of water system funding for capital projects. 

66 

That should not be surprising. That is about what we cover for 

transportation projects with some funding, of course, the rest of the 

funding by States and localities. 

Today, the Federal Government has gone from almost 80 percent 

to 3 percent. That is not just a reduction. That is a change that 

structurally transfers the capital costs to States and cities in my 

own jurisdiction. 

I represent the District of Columbia. We are in the process of replacing one of the oldest stormwater overflow systems in the country. It was built by the Corps of Engineers before the District of 

Columbia even had home rule. 

We are replacing it not by replacing the system, but by using 

huge tunnels which will store the water as it overflows, and then 

send it to be treated. 

This is being paid for almost entirely by ratepayers. We do get 

some funding in the appropriation bill from the Federal Government. I think this year it was $11 million. 

The reason we get that is the Federal Government is a ratepayer. The Federal Government built the system. Or else we would 

get nothing and it would be entirely on the ratepayers. 

This is a very aggressive green jurisdiction, so the authorities 

here in the District of Columbia have written the EPA for permission to do a pilot project to see how much of this could be—recognizing it would not be anywhere near—most of it could be absorbed 

through green infrastructure because the city itself is a very green 

city. I think it may be number one in the United States. 

We are having to seek permission to do that, and to do a pilot 

project, of course, I do not think anyone knows through data or 

through actual experience how much green infrastructure can be 

done. 

One would think we would want to be launching a matter of experiments to find out what that means. 

I am sorry I was not here to hear most of your questions. I was 

in another hearing. I did want to say the Subcommittee is doing 

exactly the right thing, to keep attention focused on this issue. It 

is not going to go away. The Federal Government has decided it 

simply is not in the game any more. 

Unless the consciousness is raised of people who drink the water, 

who increasingly buy the water, and now we see do not buy that 

water, you do not need to buy that water, you should not buy that 

water. 

In our city, we are trying to say to people do not buy the water. 

You are only making things worse. 

Unless you see raising of consciousness in your own jurisdictions, 

you are going to see what has been the collapse of Federal participation, just going to zero. That is where it almost is now. 

I thank you very much, Mr. Chairman, for all of your hard work 

and hearings that I think are putting a spotlight on this very important issue. 

Mr. GIBBS. Thank you. Mr. Weihrauch, I have a question. We 

have heard testimony from some of the panelists and I think the 

ranking member’s concern about WIFIA should be ran through the 

States, administered by the States. 

67 

In your testimony, you strongly recommend against that. Can 

you give us maybe an example of why you think that is not good 

to run it through the States? 

Mr. WEIHRAUCH. The pure and simple answer is that States do 

not have the authority that the U.S. Treasury has, WIFIA being 

modeled after TIFIA, would be a direct conduit of funds from the 

Treasury, and extremely efficient, as it is outlined in the bill. 

Everybody that handles funding must cover their overhead, and 

the temptation, of course, is always there to take a little bit more 

for a noble program, and there are many good projects underway 

within environmental management programs throughout the 

States. 

The efficiency is the hallmark of the WIFIA concept. 

Mr. GIBBS. Also, to reiterate, the American Water Works Association and the Water Environment Federation, the two primary professional membership organizations of the water and clean water 

industry, are of one mind on the thought of efficiency through the 

WIFIA program for these large projects. 

Neither organization wants to see additional layers of management built into that funding structure. Of course, that is large 

projects, but also in our proposed legislation, smaller projects can 

aggregate, and actually the State would administer that part. Is 

that correct? 

Mr. WEIHRAUCH. That is correct. The draft bill is structured in 

SRFs can utilize it for bundles, $20 million and up, and there is 

no ceiling there. 

Mr. GIBBS. Thank you. Mr. Howard and Mr. Dornbirer, what advantages would municipalities have by using private activity bonds 

versus governmental bonds? 

Mr. HOWARD. I think the point I made earlier about the partnership with the private sector and the flexibility that would provide 

under a variety of different contracting structures, ranging from 

just a design/build approach with public operation with innovative 

technology, all the way to design/build, operate, finance, and owned 

by the private sector under some sort of contractual, wholesale contractual arrangement with the public sector. 

I think our experience again in the solid waste industry, and to 

a certain extent in the water industry, but to a much more limited 

degree, is that what happens is you attract large international private companies domestically based or internationally based that 

have extensive capability and knowledge around innovative technologies that have been applied elsewhere that can be brought to 

bear to local jurisdictions. 

We are involved in a number of public-private sector arrangements across the country right now, and in a couple of cases, dealing with very small municipalities that are under a tremendous 

amount of strain budget wise, and just simply do not have the local 

expertise to manage their systems. 

They are reaching out to the private sector to help them. Right 

now, we have plenty of tax exempt bonds to tap into, but we do 

not expect that to last very long. 

Mr. GIBBS. I think that is a very interesting point. You are saying with that private investment capital coming in, you also are 

going to get the expertise and the consultants. 

68 

Mr. HOWARD. That is the real benefit of the public-private partnership model. What it forces the parties to do is to sit down at 

the table and plan for a 30- or 40-year contract that shifts a fair 

amount of risk to the private sector to manage the system efficiently. 

It is something that small jurisdictions very much benefits from. 

Mr. GIBBS. Thanks. I appreciate that. 

Mr. DORNBIRER. I would just like to add that we finance the 

water recycling plant in Santa Paula, California, along with DZ 

Bank. 

There, the private equity sponsor brought in an engineering design firm and operating firm all in one. They designed the plant 

and built the plant, knowing they were going to have to operate the 

plant for the next 30 years. You have a much more holistic approach to incorporating the new technologies. 

Like Steve said before, we want commercially proven technologies, but also technologies to actually provide an asset from 

these plants. The effluent coming out of the plant is now available 

for irrigating golf courses, and you can directly inject it back into 

the aquifer because it is cleaned to such a standard. 

Mr. GIBBS. I do want to ask the Mayor from Napoleon, Mayor 

Behm, since you are the only local elected official here, administrator, can you comment on what you see as a medium sized to 

small municipality, the challenges you have to access capital and 

what hoops you have to go through, working with the EPA or whoever? 

Can you maybe elaborate on what you see some of your challenges are, being a new Mayor? 

Mr. BEHM. Sure. The challenges, as I stated earlier, we really 

have not had a problem necessarily getting funding. Some of the 

challenges is on the length of the funds, such as our equalization 

basin, which costs $8.85 million. We were able to receive a low-interest loan through the EPA. 

That, however, was only for 20 years, when actually the equalization basin is going to be a lifetime expectancy of 30 to 40 years. 

Something in that regard would be much more beneficial for the 

city to pay over a longer time. 

As far as receiving any kind of funds, it has not necessarily been 

the problem. The problem again is generating the revenue to—— 

Mr. GIBBS. Another thing this committee has been working on 

with the EPA, and we are going to ask them to come back later 

this Spring, because they are working on a pilot program to integrate and prioritize the permitting process to hopefully streamline 

things, so you can move forward and address immediate needs, 

which might be different than a need in another municipality, but 

give the ability through the permitting process of flexibility, and 

hopefully that is something you can see as a benefit. 

Mr. BEHM. That would be definitely beneficial. 

Mr. GIBBS. I will yield to the ranking member. 

Mr. BISHOP. Thank you very much, Mr. Chairman. I have three 

things which I will try to move through quickly. 

Mr. Howard, Chart 10, I think it is, I just want to revisit that. 

If I am reading it correctly, in 2010 and 2011, there were some $25 

69 

billion worth of taxable Build America Bonds. Am I reading that 

right? 

Mr. HOWARD. That is correct, approximately; yes. 

Mr. BISHOP. Approximately. Those were used to construct and/or 

renovate/rehab water and wastewater systems? 

Mr. HOWARD. Yes, but under a traditional governmental purpose 

bond financing structure. In order to issue taxable Build America 

Bonds, the project that you finance had to qualify as a governmental purpose—— 

Mr. BISHOP. My question is a little different. I am assuming 

these are projects that employed one or two people. Is this correct? 

Mr. HOWARD. No. These were projects—all different types of 

projects. 

Mr. BISHOP. My point is these are projects that this is funding 

that supported construction and/or rehab of water and wastewater 

projects? 

Mr. HOWARD. That is correct. 

Mr. BISHOP. Some people actually worked on these projects? 

Mr. HOWARD. Yes. 

Mr. BISHOP. The Recovery Act did in fact—— 

Mr. HOWARD. Oh, definitely. 

Mr. BISHOP. Put people to work? 

Mr. HOWARD. Definitely. Had a huge impact. 

Mr. BISHOP. Thank you very much for that, sir. I appreciate that. 

On the issue of private activity bonds, let me say that this committee on a bipartisan basis four Congresses ago passed legislation 

that would lift the cap on private activity bonds. 

I think we are in full agreement. We also have another legislative mechanism before us today, the Senate Highway Bill, which 

passed last week. It is called ‘‘MAP–21.’’ It includes a provision 

that would lift the cap for 5 years on private activity bonds. 

I introduced that bill in the House this morning in an effort to 

jump start a process that seems to have ground to a halt, and I 

do not want to put words in any of your mouths, but it seems the 

consensus of the testimony that we have heard thus far is you 

would encourage us to get that provision passed. 

Am I right about that? 

Right now, the only legislative mechanism before us to do that 

is MAP–21, the Senate Highway Bill, which passed by a huge bipartisan majority that I have now introduced in the House, and 

hopefully, we can generate similar bipartisan support. 

Lastly, Ms. Massey, I do not wish to be argumentative, but I just 

want to make sure we have the same set of facts. 

You talked about the green infrastructure requirement, the set 

aside, as being a bit of an impediment. 

It is our understanding that at least as it relates to the clean 

water SRFs, all the States have reported to us they had more than 

sufficient number of projects to meet the set aside. 

By the way, the green infrastructure set aside was established in 

the Recovery Act. It has now been carried forward in the last couple of appropriation bills. 

The appropriation bills have each included language that eliminated the reserve or the set aside if the State did not have sufficient projects. 

70 

My question is given the fact that we have States saying we have 

no problem, we have plenty of projects that meet, and we also have 

a provision that says if you do not have projects that meet the requirement, we will waive it, on what basis is it still viewed as an 

impediment? 

Ms. MASSEY. I believe we can certainly live with the current language the way it is. There are sufficient applications. 

What we are seeing is there are a dwindling number of applications coming in, so I think we are looking toward the future, and 

we have that concern, but we absolutely can live with the language 

the way it currently is. 

Mr. BISHOP. If we were to continue to have language that provides an exemption, if there are insufficient projects, that would 

allow the administrators of the State SRFs to go forward in a fashion that is productive? 

Ms. MASSEY. Yes, we can live with that language. 

Mr. BISHOP. Thank you very much. I thank you all for your testimony. Thank you, Mr. Chairman. 

Mr. GIBBS. Ms. Napolitano? 

Mrs. NAPOLITANO. Thank you, Mr. Chair. 

I have a little bit of an introduction of a news release for the 

record, if you would. It has to do with one of my providers in Los 

Angeles. 

It is reflecting an increase of rates of 60 percent associated with 

the O&M, operations and maintenance. They also include in that 

this water distribution and treatment, an example of the increases 

we are seeing nationally. 

Costs are shifting from construction of projects to the O&M, to 

operations and maintenance. 

I would like to just quote part of the release. Of course, in 1990, 

this agency, Metropolitan, went from $30 million in maintenance to 

currently somewhere in the vicinity of $275 million a year, costs. 

How do we then begin to look at cutting the O&M if we do not 

upgrade the maintenance, if we do not replace, if we do not take 

care of what ails our aging infrastructure? 

Two questions for the panel. At the last hearing, one of the witnesses suggested that private equity firms should have direct access to a new water infrastructure and financing authority to borrow at the same subsidized rates that would be available to municipalities and communities. 

The CRS, Congressional Research Service, told us that providing 

this access to private equity firms could result in a situation where 

they re-loan this federally subsidized funding to local communities, 

and arguably, make a profit off acting as a middle man of Federal 

financing. 

Does that make sense, that we should be using federally subsidized firms to increase profit margins of private equity firms, especially if this comes at the expense of local communities’ ability 

to address their local infrastructure needs? 

Mr. GRUMBLES. I will just say, Congresswoman, that my firm belief is the era of cheap water is over. As AWWA said, years ago, 

we were entering the age of replacement, where all the aging infrastructure systems need to be replaced and upgraded. 

71 

The most sustainable way to deal with that challenge and to 

manage your assets is through the local rate making process, which 

is a difficult one. 

I think that is the fundamental first step, making sure the rates 

reflect the true value of the service of the infrastructure, not just 

putting it in the ground, but maintaining it and upgrading it over 

time. 

In terms of additional infusions of dollars, whether it is State 

dollars or Federal dollars, the dollars beyond what is coming from 

the ratepayers themselves, that is where you need to look for opportunities to further engage the private sector, because there will 

be efficiencies, and that will help reduce that cost which has to be 

paid in order for the system to be maintained. 

The last point is the fundamental paradigm shift that is occurring in places across the country, re-looking at the systems and 

centralized water and wastewater treatment, and trying to find 

ways, deploying the right technologies to treat and reuse closer onsite, so you do not have the long miles of leaking pipes and that 

type of problem. 

I think the more you can structure a financing relationship 

where the private sector can come in without selling the assets to 

the private entity, I think that will help reduce the costs on the 

burdened ratepayers. 

Mrs. NAPOLITANO. Anybody else? 

Ms. BROADDUS. I would like to address, Congresswoman 

Napolitano, the first part of your question, and that is yes, we do 

have a growing burden of the cost of repairing and replacing this 

infrastructure that we have in place, both on the clean water and 

the drinking water side. 

Rates need to reflect that cost. They can be shaped in a way that 

still protects those who are least able to pay, but we want to make 

sure that in total, the full cost is recovered. 

There also needs to be the flexibility to examine. There may be 

times and it would be a case by case scenario, but there may be 

times where it makes more sense to put in place some kind of new 

technology. 

During our meetings, we definitely heard about times where it 

makes more sense to go ‘‘off grid,’’ if you will, a term that is used 

more in energy than it is in water, but there are opportunities to 

do that with water as well. 

One needs the flexibility to figure out what makes the most 

sense for that particular situation. 

Mrs. NAPOLITANO. Yes, sir? 

Mr. WEIHRAUCH. Yes, ma’am. I would just like to attempt to add 

some clarity to part of the WIFIA approach and about the P–3s, 

the partnerships. 

The utility is sponsoring the loan, and this limits what happens 

to that money. It is going to the direct benefit developed within 

that contract, it is not creating a mechanism where someone could 

take advantage of the availability of Federal money by virtue of 

their access. 

It would be established prior to the project being underway, and 

would be limited within a very defined scope and controlled 

through that mechanism. 

72 

Mrs. NAPOLITANO. That could well be. Yes, sir? Go ahead. 

Mr. HOWARD. I was just going to comment that one of the many 

hats I wear in infrastructure is financing transportation projects. 

We have been involved in several projects that include the TIFIA 

program. 

To your point, the benefit of the TIFIA program and the flexibility and cost of funding for the TIFIA program passes through ultimately to the public ratepayers in the form of a lower cost of financing, and in some cases, whether the project can be financed at 

all. 

A lot of the projects that TIFIA supports in the transportation 

sector would not get funded were it not for the availability of the 

program. 

Mrs. NAPOLITANO. It also begs the question, and I beg your indulgence, Mr. Chair, the length of the loan also. Will that run with 

the new maintenance and operation, the age of the loan? 

Which one comes first? Then what happens after that? Should we 

protect aging infrastructure public subsidy with private equity financing firms? 

Mr. HOWARD. I would say the contracts that are typically set up, 

the long-term contracts that are set up for infrastructure 

projects—— 

Mrs. NAPOLITANO. How long, normally? 

Mr. HOWARD. For new construction projects, typically 30 to 40 

years. There is what we call a hand back requirement, where the 

condition of the infrastructure has to meet certain minimum standards before the asset is transferred back to the public sector at the 

end of the agreement. 

Mrs. NAPOLITANO. Thank you, Mr. Chair. 

Mr. GIBBS. I want to thank everybody for coming. I think during 

this and the last hearing on this issue, it has brought some more 

insight to some of the things, that we can make some tweaks to 

the proposed legislation. 

Also, I want to mention as you all know, this is really a jobs bill 

to put people to work on building infrastructure that we have to 

have. 

I just want to comment on the Build America, it is unfortunate 

that only 5 or 6 percent of the total Recovery Act money went for 

infrastructure, a very small percentage. 

Mrs. NAPOLITANO. Mr. Chair, would you yield for a second? 

Mr. GIBBS. Yes, go ahead. 

Mrs. NAPOLITANO. You touched on an important point that I did 

not get to ask, and that is if any of the agencies here have begun 

to estimate the impact on wastewater infrastructure improvements 

and projects on local job creation, and I yield back to you. 

Mr. GIBBS. OK. Obviously, there is some job creation. This is a 

jobs bill, as I say. Of course, I am always in favor, that the private 

sector creates more jobs than the public sector, but these are issues 

on infrastructure, and I think there is a role in the public sector. 

Thank you again for being here. We look forward to working with 

you as we hopefully move this legislation forward. 

That concludes this hearing. Thank you. 

[Whereupon, at 12:02 p.m., the Subcommittee was adjourned.] 

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