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73–103 PDF 2012

REVIEW OF INNOVATIVE FINANCING APPROACHES 

FOR COMMUNITY WATER INFRASTRUCTURE 

PROJECTS—PART I 

(112–73) 

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 

FEBRUARY 28, 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 Gregory A. Ballard, Indianapolis, Indiana, testifying on behalf of the 

U.S. Conference of Mayors/Mayors Water Council ........................................... 13 

David R. Williams, Director of Wastewater, East Bay Municipal Utility District, Oakland, California, testifying on behalf of the National Association 

of Clean Water Agencies (NACWA) .................................................................... 13 

Aurel M. Arndt, General Manager, Lehigh County Authority, Allentown, 

Pennsylvania, testifying on behalf of the American Water Works Association (AWWA) ......................................................................................................... 13 

Eric S. Petersen, Esq., Partner, Hawkins Delafield & Wood LLP ...................... 13 

Thaddeus R. Wilson, Vice President, M3 Capital Partners LLC ......................... 13 

Jeffry Sterba, President & CEO, American Water, testifying on behalf of 

the National Association of Water Companies (NAWC) ................................... 13 

Jeffrey A. Eger, Executive Director, Water Environment Federation ................. 13 

Steven A. Fangmann, P.E., BCEE, Executive Vice President, D & B Engineers and Architects, testifying on behalf of the American Council of Engineering Companies (ACEC) and the Water Infrastructure Network (WIN) ... 13 

PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS 

Hon. Earl Blumenauer, of Oregon .......................................................................... 49 

Hon. Eddie Bernice Johnson, of Texas ................................................................... 52 

Hon. Bill Pascrell, Jr., of New Jersey .................................................................... 54 

PREPARED STATEMENTS SUBMITTED BY WITNESSES 

Mayor Gregory A. Ballard ....................................................................................... 55 

David R. Williams .................................................................................................... 65 

Aurel M. Arndt ......................................................................................................... 73 

Eric S. Petersen, Esq. .............................................................................................. 77 

Thaddeus R. Wilson ................................................................................................. 84 

Jeffry Sterba ............................................................................................................. 102 

Jeffrey A. Eger ......................................................................................................... 110 

Steven A. Fangmann, P.E., BCEE ......................................................................... 117 

SUBMISSION FOR THE RECORD 

Hon. Timothy H. Bishop, Ranking Member, Subcommittee on Water Resources and Environment, request to submit statement of The Associated 

General Contractors of America ......................................................................... 5 

ADDITIONS TO THE RECORD 

Gregory M. Baird, Ex-Municipal Utility Chief Financial Officer having served 

in California and Colorado, written testimony .................................................. 124 

Robert A. Briant, Chairman, Clean Water Construction Coalition, written 

statement .............................................................................................................. 129 

Diane Linderman, P.E., PWLF, President, American Public Works Association, written statement ........................................................................................ 132 

Mark Policinski, Executive Director, Ohio-Kentucky-Indiana Regional Council 

of Government, and Vice President, National Association of Regional Councils, written testimony ......................................................................................... 137 

Page

VI 

Ryan Schmitt, Chairman, NUCA, letter to Hon. Bob Gibbs, Chairman, Subcommittee on Water Resources and Environment, February 28, 2012 ........... 143 

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(1) 

REVIEW OF INNOVATIVE FINANCING 

APPROACHES FOR COMMUNITY WATER 

INFRASTRUCTURE PROJECTS—PART I 

TUESDAY, FEBRUARY 28, 2012 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON WATER RESOURCES

AND ENVIRONMENT, 

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE, 

Washington, DC. 

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

Room 2167, Rayburn House Office Building, Hon. Bob Gibbs 

(Chairman of the subcommittee) presiding. 

Mr. GIBBS. The Subcommittee on Water Resources and Environment will come to order, and I would like to welcome everybody 

today. 

I do want to recognize a former Member, Mr. Ron Packard from 

California. Good to see you. Of course, I was not here when you 

were here, but I have heard good things about you. So welcome to 

the committee. 

I will start with my opening statement. We have got a great 

panel today, and we will recognize you in a few minutes. But first, 

again, I would like to welcome everybody to the hearing today on 

potential innovative financing approaches for community water infrastructure projects. This is the first portion of a two-part hearing. 

We will hold the second hearing on Wednesday, March 21st. 

We are all well aware that the needs for communities to address 

water and wastewater infrastructure are substantial, and these 

needs are growing. Our Nation’s water and wastewater infrastructure is aging, deteriorating, and in need of repair, replacement, and 

upgrading. This has resulted in frequent leaks, blockages, and inadequate treatment of pollutants. 

The needs are especially urgent for hundreds of cities and towns 

around the Nation as they are trying to remedy the problem of 

combined sewer overflows and sanitary sewer overflows for communities lacking sufficient independent financing ability. Many cities 

could end up spending as much as $1 billion to $5 billion each, or 

even more, to eliminate the combined sewer and sanitary sewer 

overflow issue. 

Numerous other regulatory priorities are placing additional burdens on communities. For example, many of our Nation’s wastewater utilities are being forced to install extremely expensive advanced waste treatment to remove the next increment of pollutants, including nutrients. In addition, EPA has initiated a conVerDate Aug 31 2005 10:49 May 30, 2012 Jkt 000000 PO 00000 Frm 00039 Fmt 6633 Sfmt 6633 P:\HEARINGS\112\WR\2-28-1~1\73103.TXT JEAN
2 

troversial national rulemaking that lead to communities facing the 

prospect of substantially increased costs for controlling pollutants 

from stormwater runoff. 

Moreover, many communities face increasing regulatory burdens 

under the Safe Drinking Water Act for their public drinking water 

systems. All these initiatives are adding additional layers of regulatory requirements and economic burdens that our communities 

are having to somehow deal with. 

According to studies by the EPA, the Congressional Budget Office, and others, the costs of addressing our Nation’s clean water 

infrastructure needs over the next 20 years could exceed $400 billion, roughly twice the current level of investment by all levels of 

Government. The needs for drinking water infrastructure drive this 

figure even higher. 

This is a staggering amount of money. A large portion of the Federal, not to mention State, regulatory mandates are going unfunded 

by Federal and State governments. Rather, our local governments 

are being forced to pay for more and more of their costs of these 

mandates, with the result that local communities and ratepayers 

are increasingly getting economically tapped out. 

Increased investment needs to take place, which leads to the 

question, where is the money going to come from? There is no simple answer to that question; rather, we need to make a variety of 

financing tools available for infrastructure financing, or the toolbox. This includes alternative financing approaches that would 

make more funds available. There is a tremendous amount of capital from the private sector and other sources potentially available 

for investment in our infrastructure. 

We have been hearing how in recent years, the financial markets 

have been discovering water and wastewater infrastructure, and 

how this is becoming a more popular asset class that is increasingly attracting billions of dollars in private investment capital. We 

have also been hearing that there are some barriers that have inhibited bringing private sector capital into the municipal water and 

wastewater markets, but with some restructuring and developing 

of innovative project financing mechanisms, we could start to overcome these barriers. 

There are a number of past and current legislative proposals that 

could provide additional means of 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. 

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 

will be entitled the Water Infrastructure Finance and Innovation 

Act, or WIFIA. This WIFIA proposal is in part modeled after the 

TIFIA program for the surface transportation projects and other 

credit programs governed by the Federal Credit Reform Act. 

And there are other proposals, including the Clean Water SRF 

Reauthorization legislation, that this subcommittee has advanced 

in past Congresses and it is included in the bill that the subVerDate Aug 31 2005 10:49 May 30, 2012 Jkt 000000 PO 00000 Frm 00040 Fmt 6633 Sfmt 6633 P:\HEARINGS\112\WR\2-28-1~1\73103.TXT JEAN
3 

committee Ranking Member, Mr. Bishop, has introduced this Congress. Also, a few weeks ago we did have a hearing on integrating 

the process, the permitting process, to address issues of costs and 

streamlining prioritized projects for municipalities as part of this 

total package. 

At today’s hearing we will hear from a variety of witnesses about 

these proposals and other potential ways we can encourage increased investment in infrastructure, including from private 

sources. 

Now I will recognize my Ranking Member, Mr. Bishop, for any 

remarks you may have. 

Mr. BISHOP. Thank you very much, Mr. Chairman. Thank you for 

holding today’s hearing on the importance of investing in our Nation’s crumbling wastewater infrastructure. 

As you know, over the past decade this subcommittee has held 

numerous hearings on State and local needs to repair and replace 

its wastewater infrastructure. According to EPA’s most recent 

Clean Watersheds Needs Survey, States have identified almost 

$300 billion in capital investment needs to meet their wastewater 

and stormwater treatment and collection needs over the next 20 

years. Other organizations, including the Congressional Budget Office and the Water Infrastructure Network Coalition, have identified annual funding gaps ranging from $3.2 billion to $11.1 billion 

in order to make up the shortfall between annual needs and the 

current expenditures from all sources. 

This subcommittee has also, under both Republican and Democratic majorities, taken significant steps to address these long-term 

infrastructure challenges, including passages of several bipartisan 

water infrastructure financing measures over the decades. These 

past measures highlighted 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. 

I am encouraged today that both sides of the aisle seem to be advocating for a renewed commitment to meeting our Nation’s wastewater infrastructure challenges, and have put forward proposals to 

do just that. 

All of the witnesses here today have been presented with a copy 

of the chairman’s discussion draft, the Water Infrastructure Finance and Innovation Act of 2012, as well as a copy of the bipartisan bill that I introduced, the Water Quality Protection and Job 

Creation Act of 2011, along with Ranking Member of the full committee, Mr. Rahall, and Congressmen LaTourette and Petri. 

Both bills include mechanisms modeled after the successful 

Transportation Infrastructure, Finance and Innovation Act, or 

TIFIA program, as it is known, authorized in TEA–21 to leverage 

additional capital for wastewater infrastructure investment. Although there are some differences in approach, my first imposition 

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. 

4 

The chairman’s draft also picks up language from the bipartisan 

bill introduced by a former member of this subcommittee, Mr. 

Pascrell of New Jersey, and his colleague on the Committee on 

Ways and Means, Mr. Davis of Kentucky, related to private activity 

bonds. 

In addition, H.R. 3145, the bill that I have offered, continues this 

committee’s efforts to reauthorize the Clean Water State Revolving 

Fund, a program that has not been successfully reauthorized in almost 25 years. 

Putting aside the question of the size of the reauthorization of 

appropriations for the Clean Water SRF, H.R. 3145 also includes 

several bipartisan changes to provide communities with greater 

flexibility and how the Clean Water SRF funds are up side to reduce the long-term costs of SRF loans to local communities and to 

provide greater technical assistance to small and rural communities that often do not have the internal technical or financial capacity to address water infrastructure challenges. 

In addition, H.R. 3145 continues to explore the possibility of creating a Clean Water Trust Fund, which could provide a dedicated, 

sustainable source of long-term revenue for addressing water quality challenges, akin to the Highway Trust Fund or the Aviation 

Trust Fund. 

Mr. Chairman, in my view, 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 compliment, duplicate, or conflict with existing law in meeting these 

future challenges will still need to be addressed. 

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

conversation. I am hopeful that on this issue of meeting our longterm water infrastructure challenges, we can find agreement and 

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

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

Mr. Chairman, before I yield back, I ask unanimous consent to 

insert into the record two things: one, a statement for the record 

from Representative Pascrell; and the second is a statement from 

The Associated General Contractors. 

Mr. GIBBS. So ordered. 

[The prepared statement of the Honorable Bill Pascrell, Jr., appears together with other Members’ statements. Please see the 

table of contents for ‘‘Prepared Statements Submitted by Members 

of Congress.’’ The statement from The Associated General Contractors follows:] 

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

the balance of my time. 

Mr. GIBBS. Mr. Cravaack, do you have a comment, opening statement? 

Mr. CRAVAACK. Thank you, Chairman Gibbs and Ranking Member Bishop, for holding this hearing, innovative financing for water 

infrastructure projects. This issue is vital to the continued health 

and vitality of our fellow citizens and economy, and needs to be addressed immediately. I would like to welcome today’s witnesses, 

and I would look for to hearing your testimony on this important 

issue regarding the future of our Nation’s water infrastructure. 

Our water infrastructure is the cornerstone for many parts of the 

country, from our national security to our economy to the health 

of our children. Our water and infrastructure needs to be protected 

and improved in order to keep us safe, healthy, and prosperous. 

Our current infrastructure is getting to the age that it is going 

to need to be significantly updated or completely replaced. I know 

the 8th District of Minnesota is facing the reality of aging water 

and infrastructure systems, and dizziness of cities and townships 

that I represent are looking for efficient and innovative solutions 

to this problem. 

For example, a facility in my district located in Chisholm, Minnesota is currently operating at or above design capacity and is in 

need of replacement due to its age and lack of operating consistency and the lack of availability to increase treatment capacity. 

This has led to a construction moratorium and inability to meet 

current and future stringent Lake Superior drainage basin effluent 

requirements. The deterioration is so severe that the potential of 

a catastrophic failure is not if but when. 

This is the situation facing many similar projects, and I hope we 

can discuss answers here today. I am very pleased to be discussing 

a way to pay for these much-needed improvements instead of just 

passing more debt on to future generations. 

I will be interested to hear any options or solutions of this very 

important situation because we need results, and I am sure both 

Democrats and Republicans can agree to the necessity of our success. 

I look forward to hearing from our witnesses and their thoughts 

on the future financing of water infrastructure projects. Thank you 

again, and I will look forward to hearing your testimony. And I 

yield back. 

Mr. GIBBS. Representative Napolitano, do you have an opening 

statement? 

Mrs. NAPOLITANO. Thank you, Mr. Chairman. And thank you, 

Ranking Member Bishop, for holding this very critical and important hearing. 

Investing in our clean water infrastructure does create jobs and 

does protect the public’s health. Our Nation’s infrastructure—and 

we hear that in this subcommittee, and we hear it at home—they 

are deteriorating to the point that it is causing great angst for the 

local elected officials in many of my areas. They are in need of critical repair, and there is no way many of these communities can 

fund the necessary repair and replacement. 

12 

So we need long-term solutions that are going to be helpful in addressing this aging infrastructure to not only improve the water 

quality and the health of the environment but to create the jobs 

that come with it. We must continue to invest in improving our 

wastewater treatment because it will directly support clean water 

supply. And there is new technology that can be used and be able 

to possibly cut the cost of being able to do all this repair, needed 

infrastructure repair. 

I strongly support H.R. 3145, the Water Quality Protection and 

Job Creation Act of 2011, and congratulate both Ranking Member 

Bishop and Ranking Member Rahall on the full committee for introducing it. It provides $13.8 billion in a Clean Water State Revolving Fund over 5 years. What better than to have the States be 

able to help the communities? 

It is desperately needed to address these challenges facing our 

country’s communities. And our EPA’s most recent Clean Water 

Needs Survey found, as was stated by the Chair, $400 billion worth 

of wastewater system repairs over the next couple of decades. My 

figure stated $300 billion, Mr. Chairman. I am glad you are stating 

it a little higher because you may have better figures than I do. 

These treatment plants have the capacity for solar, wind, and 

biomethane energy production, and we must continue to look at 

what is feasible, less expensive, and be able to get the new evolving 

technology recognized and utilized. This bill will help some of our 

water challenges, and this is one of the major ones. 

So with that, Mr. Chair, I urge my colleagues to help us get this 

bill through and be able to support our communities. I yield back. 

Mr. GIBBS. Thank you. 

I welcome our panel again, and we will start with our first witness. He is the mayor of Indianapolis, Mr. Gregory Ballard. He is 

testifying on behalf of the U.S. Conference of Mayors. Welcome. 

The floor is yours. 

13 

TESTIMONY OF MAYOR GREGORY A. BALLARD, INDIANAPOLIS, 

INDIANA, TESTIFYING ON BEHALF OF THE U.S. CONFERENCE OF MAYORS/MAYORS WATER COUNCIL; DAVID R. 

WILLIAMS, DIRECTOR OF WASTEWATER, EAST BAY MUNICIPAL UTILITY DISTRICT, OAKLAND, CALIFORNIA, TESTIFYING ON BEHALF OF THE NATIONAL ASSOCIATION OF 

CLEAN WATER AGENCIES (NACWA); AUREL M. ARNDT, GENERAL MANAGER, LEHIGH COUNTY AUTHORITY, ALLENTOWN, PENNSYLVANIA, TESTIFYING ON BEHALF OF THE 

AMERICAN WATER WORKS ASSOCIATION (AWWA); ERIC S. 

PETERSEN, ESQ., PARTNER, HAWKINS DELAFIELD & WOOD 

LLP; THADDEUS R. WILSON, VICE PRESIDENT, M3 CAPITAL 

PARTNERS LLC; JEFFRY STERBA, PRESIDENT & CEO, AMERICAN WATER, TESTIFYING ON BEHALF OF THE NATIONAL 

ASSOCIATION OF WATER COMPANIES (NAWC); JEFFREY A. 

EGER, EXECUTIVE DIRECTOR, WATER ENVIRONMENT FEDERATION; AND STEVEN A. FANGMANN, P.E., BCEE, EXECUTIVE VICE PRESIDENT, D & B ENGINEERS AND ARCHITECTS, 

TESTIFYING ON BEHALF OF THE AMERICAN COUNCIL OF 

ENGINEERING COMPANIES (ACEC) AND THE WATER INFRASTRUCTURE NETWORK (WIN) 

Mr. BALLARD. Thank you, Chairman Gibbs and Ranking Member 

Bishop, and to the House Transportation and Infrastructure Committee’s Subcommittee on Water Resources and the Environment, 

for inviting me to testify. As mentioned, my name is Greg Ballard. 

I have been the mayor of Indianapolis since 2008. 

I am testifying on behalf of the U.S. Conference of Mayors, and 

I am here today to communicate the concern of our Nation’s mayors, and share about the rising costs of water and wastewater infrastructure, and to ask for a renewed partnership with Congress 

and the U.S. EPA to provide sensible relief to local governments as 

they work toward their clean water goals. 

It is important to recognize that everyone wants to do the right 

thing with regard to the environment. And as a mayor, it is my job 

to be a steward for my citizens. I want them to have the best and 

the safest water, and so do my peers around the country. So does 

EPA. So does Congress. We are all in agreement on this. In fact, 

the American cities provide some of the safest and cleanest water 

in the world. However, this comes at a hefty price. 

In the last decade, public spending on water and wastewater 

grew by 65 percent, to $855 billion. During that same time, local 

government long-term debt grew by 82 percent, so $1.6 trillion as 

of 2009, while local government revenues declined in the face of a 

struggling national economy. 

Clearly, this is an unsustainable problem. It is one reason the 

U.S. Conference of Mayors is calling on Congress to help us more 

sensibly and flexibly achieve our shared clean water goals. 

Congress has successfully partnered with local government on 

clean water goals in the past. In the 1970s and 1980s, Congress approved capital construction grants, while local governments shouldered the responsibilities—or the repercussions—or meeting or 

missing those goals. When these grants were replaced by the State 

Revolving Loan Fund program, it marked the beginning of a guideline retreat from shared responsibility. 

14 

Congress shed financial responsibility for clean water goals, but 

allowed the administration to continue to set aggressive rules. As 

a result, many local governments now shoulder significant longterm debt to finance water and wastewater plants that they have 

had little say in developing. These are unfunded mandates, pure 

and simple. 

Congress can provide immediate relief by passing legislation that 

increases financing flexibility at the local level—for example, the 

modification of the Tax Code to remove State caps on the use of 

private activity bonds for public water and wastewater infrastructure investment, as seen in House Bill 1802 and Senate Bill 939. 

We also support the Water Infrastructure Finance and Innovation Act that has been talked about, which can lower overall costs 

for large capital water projects by as much 16 percent, and that 

could happen with direct loans to cities. This will help address 

some of the most pressing debt challenges facing our cities as we 

strive to meet clean water goals. 

But the U.S. Conference of Mayors is also seeking a more sensible way forward. The proliferation of Federal regulatory mandates has drastically increased local water and wastewater spending requirements. Over 780 cities and water/wastewater utilities 

have or will experience sewer overflow enforcement actions by the 

EPA. 

We are calling on Congress to require EPA to set clean water priorities and reasonable expectations on affordability. This will give 

us the flexibility to find innovative and efficient solutions to our 

local water and wastewater challenges as we did in Indianapolis. 

Indianapolis originally faced $31⁄2 billion in expenses under a 

2006 consent decree. That figure quickly grew by $300 million more 

through cost overruns, and most certainly would have continued to 

balloon. 

In 2008, we reevaluated the steps necessary to resolve our clean 

water concerns with an eye towards better results at a lower cost. 

Though difficult, Indianapolis was able to amend its EPA consent 

agreement twice. In each case, the city reduced the overall price of 

the solution and got better environmental results. In fact, our residents will benefit from cleaner water 10 years sooner than under 

the original consent decree while saving $740 million. 

Indianapolis enjoyed forging a partnership with the EPA to find 

commonsense, less costly fixes to the challenges that we face. In 

fact, EPA called the renegotiation with my city as a win-win for everyone involved. It was a great example of governments working 

together. We demonstrated that flexibility, creativity, and government can go hand in hand. 

Unfortunately, the Indianapolis model is too often the exception 

to the rule. The U.S. Conference of Mayors urges the EPA and Congress to use the maximum flexibility allowed in the Clean Water 

Act and any future legislation to reduce the cost burden of reducing 

or eliminating sewer overflows. We also ask you to require EPA to 

prioritize mandates, and to allow flexibility and affordability to 

play a greater role in determining all clean water solutions at the 

local level. 

Thank you. 

15 

Mr. GIBBS. We will have questions and answers when the whole 

panel gets through their opening statements. 

I would like to welcome at this time Mr. David Williams, who is 

the elected board member of the Central Contra Costa Sanitary 

District Board of Directors in Central Contra Costa County, California. He is also a director of Wastewater at the East Bay Municipal Utility District in Oakland, California. He is also president of 

the National Association of Clean Water Agencies in Washington, 

DC. 

Welcome. The floor is yours. 

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

members of the subcommittee, I am David Williams, president of 

the National Association of Clean Water Agencies, and here testifying on behalf of NACWA this morning; also Director of Wastewater at the East Bay Municipal Utility District in Oakland, California, and elected board member of Central Contra Costa Sanitary 

District in Martinez, California. Thank you for inviting me. 

The Clean Water Act will be 40 in October. We have seen four 

decades of exceptional public utility leadership. In 1972, 90 percent 

of the Nation’s waterways were impaired due to pollution. EPA 

now estimates that at 45 percent. We have come a long ways; there 

is still a ways to go. 

We were certainly helped along the way with the clean water 

grant program, and later the SRF. Today the SRF provides approximately $5 billion in low-interest loans. In addition, municipalities expend nearly $100 billion on providing water and wastewater services. This supports millions of jobs and also exemplifies 

local commitments and leadership to ensure clean, safe water. 

These investments continue to be made under increasingly difficult circumstances such as the shrinking Federal financial support, increasing cost of regulatory requirements, and in the midst 

of a major economic downturn. 

Despite these challenges, utility leaders are transforming the 

way we do business through unprecedented innovation. This is exemplified by energy conservation and recovery efforts; water recycling; biosolids reuse; resource recovery from waste streams, such 

as extracting phosphorus from wastewater and using that for agricultural fertilizer; green infrastructure and low-impact development to lessen the impacts of stormwater. This is all in addition 

to maintaining the core infrastructure needed to collect and treat 

the wastewater. 

I will give you an example of my utility at East Bay Municipal 

Utility District. Ten years ago we started a resource recovery program. Under this program, we bring in liquid waste, such as fats, 

oil, and greases; food processing waste, such as cheese waste or 

beverage waste; animal processing waste from the chicken and beef 

industries; and recently, even solid materials such as commercial 

source-separated food scraps from grocery stores and restaurants. 

We take these organic wastes and put them in anaerobic digesters, where they are digested and stabilized. A by-product is methane gas. We capture the methane gas and generate green, renewable energy from these waste materials. We do this at our power 

generation station that uses clean burn engines and a turbine. 

Today we are meeting our 5 megawatt daily demand at our wasteVerDate Aug 31 2005 10:49 May 30, 2012 Jkt 000000 PO 00000 Frm 00053 Fmt 6633 Sfmt 6633 P:\HEARINGS\112\WR\2-28-1~1\73103.TXT JEAN
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water treatment plant solely from these wastes, plus we are providing 2 megawatts of green energy back to the grid. 

Today’s POTWs not only collect, treat, and dispose of municipal 

and industrial wastewater, but they are reimaging themselves as 

green factories. By becoming green factories, POTWs generate revenues that help keep rates low. There are recycling benefits to the 

environment. Revenue and energy generation free up capital for investment. That, of course, creates jobs. And jobs, of course, creates 

increased tax revenues. 

In pursuing all of these efforts, financing is a key ingredient. The 

types of innovative financing mechanisms being contemplated here, 

plus others yet to be identified, could be very helpful to continue 

the progress we have made today to promote the types of innovation I have described. 

Simply put, more money on the table is helpful, whether it comes 

from low guarantee loans such as WIFIA, exempting water and 

wastewater projects from the volume cap on private activity bonds, 

or other approaches. NACWA supports new additions to the municipal financing toolbox. 

Some important considerations, however. We want to make sure 

that new mechanisms do not negatively impact existing well-used 

funding mechanisms such as SRF. An example is that funding a 

new program should not increase public agency costs to access the 

existing bond markets or other capital markets. 

Funds from new financing tools should also be available to help 

clean water agencies fund innovative projects and new technologies. The budget constraints that make innovative financing a 

vital discussion today also demand we look at the other side of the 

coin—namely, we need to reassess the command and control structure of the Clean Water Act. 

I testified before this committee last year on NACWA’s money 

matters campaign. The theme of that campaign is: Smarter investment to advance clean water. Its intent is to shed light on growing 

financial and compliance challenges posed by the Clean Water Act 

regulations. 

NACWA has called for an integrated planning approach. This approach will serve to prioritize competing costs of requirements and 

help achieve maximum water quality benefits at a cost that will 

not break the bank, which is our ratepayers. EPA is working on 

their integrated planning and hope to have the framework finalized 

by March. 

Finally, if we find that under EPA’s integrated planning that the 

40-year-old Clean Water Act does not have the flexibility to accomplish the goals of cost-effective clean water, NACWA hopes that we 

can continue to work with this subcommittee to consider targeted 

changes to the Clean Water Act to effectively address 21st-century 

challenges and ensure another four decades of water quality improvements and unrivaled utility leadership. 

The cost-effective, innovative, green factory concepts that I have 

described are the underpinnings of NACWA’s 20/20 vision of the 

water resources utility of the future. In the coming months, 

NACWA is developing an advocacy agenda for specific legislative 

steps that will help ensure any roadblocks to this vision are removed and the needed tools and support are available for utilities. 

17 

And we look forward to working with this subcommittee to make 

the utility of the future a reality today. 

I thank you for the opportunity to testify. 

Mr. GIBBS. Thank you. 

At this time I would like to welcome our next witness, Mr. Arndt. 

He is the general manager of the Lehigh County Authority in Allentown, Pennsylvania. He is testifying on behalf of the American 

Water Works Association. 

Welcome. The floor is yours. 

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

Gibbs, Ranking Member Bishop, and members of the subcommittee. I am Aurel Arndt, general manager and chief financial 

officer of Lehigh County Authority, which provides water and 

wastewater service to more than 22,000 customers in Lehigh and 

Northampton Counties in eastern Pennsylvania. 

Throughout my career, including service on the executive board 

of the Government Finance Officers Association, the board of the 

Pennsylvania Infrastructure Finance Authority, also known as 

PENNVEST, and the Water Utility Council of the American Water 

Works Association, I have focused my efforts and interest on water 

infrastructure finance. 

I deeply appreciate this opportunity to speak today on behalf of 

AWWA and its more than 50,000 U.S. members on the need for innovative financial mechanisms to sustain and rejuvenate our country’s water infrastructure. 

Yesterday we released a report titled, ‘‘Buried No Longer: Confronting America’s Water Infrastructure Challenge.’’ We will be 

sure to provide copies of this report to the committee. This report 

reveals that replacing and expanding our buried drinking water infrastructure will cost at least $1 trillion over the next 25 years. 

During that time, the required annual investment will more than 

double, growing from $13 billion to almost $30 billion per year by 

the end of that period. I must emphasize that this $1 trillion is only for buried drinking 

water infrastructure, largely the pipes underground. Aboveground 

drinking water facilities, wastewater, stormwater, and other waterrelated needs are also very large and must be added to this forecast to reflect the true magnitude of the water investment before 

us. 

I would like to focus my remarks today on the new financing tool 

addressed in the draft legislation released last week, which would 

help American water utilities address this challenge. I must emphasize, however, that AWWA strongly believes the cornerstone of 

water infrastructure finance is and should remain local rates and 

charges. 

We have had a chance to review the draft legislation, the Water 

Infrastructure Finance and Innovation Act, or WIFIA, and we 

wholeheartedly endorse this approach. As described in the draft, 

WIFIA will fill a significant gap between what current water infrastructure tools can do and what needs to be done. 

We urge this subcommittee, the full committee, and the rest of 

Congress to enact this legislation, which is modeled after the highly successful Transportation Infrastructure Finance and Innovation 

Act, or TIFIA. 

18 

As we see WIFIA, it has three significant attributes that collectively cannot be matched by any other new water infrastructure financing tool. 

First, WIFIA would increase capital available to utilities for infrastructure investment. Water utilities already use a variety of approaches to finance their capital needs, including the State Revolving Loan Funds, municipal bonds, corporate bonds and equity, and 

private activity bonds, among others. Unfortunately, the investment need before us will push many utilities beyond the limits of 

those traditional financing sources and undermine the ability to set 

affordable customer rates. 

Second, WIFIA will provide a lower cost of financing for many 

utilities. We anticipate that WIFIA would access funds from the 

U.S. Treasury and use those funds to provide loans, loan guarantees, and other credit support for projects at rates at or close to 

Treasury rates. In most market conditions, Treasury rates are 

lower than the cost of capital on most other sources of water infrastructure financing. 

However, reducing the interest rate by just a few percentage 

points can amount to a significant savings. For example, lowering 

the cost of borrowing by 21⁄2 percent on a 30-year loan reduces the 

lifetime project cost by almost 26 percent, the same effect as a 26- 

percent grant. Moreover, the savings can significantly accelerate 

water infrastructure investment by making it more affordable for 

utilities and their customers. 

Third, and perhaps most importantly, WIFIA will have minimal 

cost to the Federal Government. All of us are well aware of the importance of controlling the Federal budget and the deficit. WIFIA 

is highly responsive to these concerns. Under the Federal Credit 

Reform Act, a Federal entity can provide credit assistance to the 

extent that Congress annually appropriates budget authority to 

cover the subsidy cost of the assistance—in other words, the net 

long-term cost to the Federal Government. 

Under WIFIA, that long-term cost is minimal, first because loans 

are repaid in full with interest to the WIFIA administrator, which 

in turn repays the Treasury, again with interest. 

In addition, there is minimal credit risk because virtually all 

water-related loans are repaid in full. 

That fact is highlighted by a Fitch rating report which determined that the historical default rate on water bonds is .04 percent—I repeat, .04 percent—putting water service providers among 

the best credits in the United States. Moreover, the leveraged SRF 

programs across the country have no history of defaults, also placing them among the strongest credits in the country. 

We note that TIFIA is able to leverage Federal funds at a ratio 

of 10 to 1. With the water sector’s strong credit ratings and history, 

the ratio for WIFIA should be even greater because the subsidy 

cost required by the Federal Credit Reform Act would be minimal. 

If the WIFIA leverage ratio is set at 25 to 1, which is actually 100 

times lower than the risk ratio of .04 percent, a $200 million appropriation will produce $5 billion in infrastructure investment. It is 

important that we are not advocating loan forgiveness or negative 

interest loans or other similar credit aspects that would increase 

the cost of the WIFIA program to the Federal Government. 

19 

In conclusion, WIFIA will allow us to do more with less—specifically, to build more water infrastructure at less cost, and to top 

that, our Nation will get a cleaner environment, better public 

health and safety, and a stronger foundation for our economy. 

We thank the subcommittee for its leadership in offering this important tool, WIFIA, to help address a significant need with our 

water infrastructure. We offer to work with the subcommittee in 

communicating the value of WIFIA to the rest of Congress and our 

respective publics. 

Thank you again for this opportunity to appear here today. I will 

be happy to answer any questions and to provide you with any 

other assistance I can now or in the coming months. Thank you. 

Mr. GIBBS. Thank you. 

At this time I would like to welcome Mr. Eric Petersen. He is a 

partner in the Hawkins Delafield & Wood law partnership in New 

York City. 

Welcome. The floor is yours. 

Mr. PETERSEN. Thank you, Mr. Chairman. 

Chairman Gibbs, Ranking Member Bishop, and members of the 

subcommittee, my name is Eric Petersen, and as was mentioned, 

I am a partner at Hawkins Delafield & Wood, a leading national 

law firm in the fields of public finance, public contracts, and publicprivate partnerships. I specialize in water projects, and represent 

the interests of municipal water and wastewater utilities. 

Hawkins has negotiated major water infrastructure contracts for 

Seattle, San Diego, Phoenix, Santa Fe, San Antonio, Washington, 

DC, New York City, and 75 other cities, counties, and authorities 

over the past 20 years. 

Federal financial support for water infrastructure, in my view, 

consists mostly of the tax exemption of interest on municipal bonds 

issued for water and wastewater projects. Proposals continue to 

surface in Congress and from the administration to raise revenue 

by curtailing, by any number of means, the tax exemption of interest on municipal bonds. Passage of any of these measures would 

only serve to tighten the financial vice on the water industry. 

Municipal water bonds are tax-exempt only if they are issued by 

the municipality itself, so-called governmental bonds. Bonds issued 

for water projects by private companies, known as private activity 

bonds, are not tax-exempt and thus carry the higher interest rates 

of corporate bonds. 

As a result, if a city wants to have a private firm design, build, 

finance, and operate a new project, known as a public-private partnership or P3 project, the private financing element causes the 

debt to be taxable and generally makes the overall project costs too 

expensive. 

The Internal Revenue Code does contain an exception to the provision that makes private activity bonds taxable. Water projects 

are part of a category of private activity bonds called exempt facility bonds. The total amount of exempt facility bonds that can be 

issued on a tax-exempt basis in each State, however, is tightly 

capped. 

Private financing of public water infrastructure has thus been effectively blocked. The planning process for large water projects 

takes years, and the uncertainty and unlikelihood as to the availVerDate Aug 31 2005 10:49 May 30, 2012 Jkt 000000 PO 00000 Frm 00057 Fmt 6633 Sfmt 6633 P:\HEARINGS\112\WR\2-28-1~1\73103.TXT JEAN
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ability of tax-exempt private activity bond volume cap for a proposed water project, as a practical matter, eliminates private financing and P3 approaches to project implementation. 

Unrestricted tax-exempt private financing of public water infrastructure is no cure-all. Most projects surely will continue to be 

municipally financed using traditional water revenue bonds. But I 

am convinced that certainty as to the availability of tax exemption 

for privately financed water projects could create a significant level 

of renewed interest from the private sector in providing innovative 

and flexible solutions to a wide variety of municipal water project 

challenges. 

This was indeed the case in 1986, when certainty as to the taxexempt private activity bond financing for municipal solid waste 

projects, which was provided by the Tax Reform Act of 1986, unleashed a wave of additional investment in waste to energy and 

other facilities needed in the municipal solid waste management 

field, totaling over $15 billion. 

To conclude with a real and current example in the water sector, 

the San Diego County Water Authority this year is going to contract for the purchase of water from an $800 million seawater desalination project in Carlsbad. It is a public-private partnership 

with Poseidon Resources which will design, build, finance, and operate the plant. 

Poseidon’s private financing makes the project bonds private activity bonds, but the company has secured volume cap allocation 

from the State. This is an unusual and fortunate occurrence, made 

possible only by the collapse in demand for private activity housing 

bonds in the present market. 

The price of water with tax-exempt interest rates is projected at 

approximately $1,850 per acre-foot. With taxable financing at interest rates about 100 to 150 basis points higher, the price would be 

over $2,000 per acre-foot, or around a 10-percent increase. It is 

quite possible that this key water resource project for California 

would not proceed had lower cost, tax-exempt financing not been 

secured by the private company. The value of assured tax exemption for water private activity bonds is thus quite plain. 

Thank you for this opportunity. I look forward to your comments 

and questions. 

Mr. GIBBS. Thank you. 

At this time I would like to welcome Mr. Thaddeus Wilson. He 

is vice president of M3 Capital Partners in Chicago. 

Welcome. The floor is yours. 

Mr. WILSON. Thank you, Mr. Chairman. Chairman Gibbs, Ranking Member Bishop, members of the subcommittee, it is an honor 

to be here today to discuss innovative financing approaches for 

community water infrastructure projects. My name is Thad Wilson, 

and I am a vice president with M3 Capital Partners, a management-owned investment and advisory firm based in Chicago, Illinois. 

Through an advisory affiliate, M3 currently manages equity commitments of $2.9 billion on behalf of a U.S. public pension plan, focused on long-term investments in real estate. 

21 

M3 is currently forming a North American water infrastructure 

fund that we anticipate will initially be capitalized by a U.S. public 

pension plan as the ‘‘cornerstone’’ sponsor. 

It is expected that the fund will focus primarily on offering an 

innovative design/build/operate/finance approach to municipal 

water infrastructure project delivery. We believe this approach offers a robust form of public-private partnership, or P3, to municipalities to capitalize their water infrastructure improvements. 

In the U.S. today, there is a significant and growing need for investment in our critical water infrastructure, as we have heard in 

detail this morning. Given State and local funding challenges, particularly in the current environment, accessing private capital 

through P3 structures may be a compelling option for municipalities. 

At the same time, public pension plans need long-term investments that can provide stable returns for their beneficiaries— 

teachers, firefighters, police, and other public employees. 

In my view, the primary benefits of water infrastructure P3s include the following. 

Because a P3 is not an outright sale or privatization, municipalities can retain long-term ownership and control of their water facilities. 

Municipalities can also accelerate the launch of new projects, 

which may help to meet compliance-driven deadlines and may generate near-term employment opportunities for the local economy. 

Municipalities can transfer key risks to the private partner. As 

a result, the private partner is well-aligned with the municipality 

and is putting its capital at risk, with a requirement to perform its 

obligations throughout the term of the P3. 

And finally, municipalities can potentially realize life-cycle cost 

savings as a fully integrated team takes on responsibility to effectively design, build, operate, and finance their water infrastructure 

projects. 

Potential measures to facilitate more water infrastructure P3s 

include the following. 

Encourage broader appreciation for the value of water and water 

infrastructure, supporting true cost pricing for water services, 

where appropriate. 

Increase awareness of the many social benefits from water infrastructure investment, such as conservation and reuse of water from 

water recycling initiatives. 

Increase awareness of the potential benefits of P3 structures, 

combined with efforts to implement regulations that facilitate the 

use of P3s. 

Help to lower the cost of debt financing for private partners in 

water facility P3s by removing the State volume cap on private activity bonds for such projects. 

And finally, specific to the Water Infrastructure Finance and Innovation Act legislation the subcommittee is currently preparing, 

in Section 104(b) on public-private partnerships, I would recommend amending the discussion draft to include ‘‘the private financing or development partner’’ as an additional ‘‘entity eligible 

for assistance.’’ 

22 

In summary, municipal obligations to provide quality water services align well with the increasing desire of public pension plans 

to invest in stable infrastructure assets. P3s utilizing public pension plan capital can help to meet water facility investment needs, 

and more municipalities should find it advantageous to explore this 

innovative financing approach. 

I thank you for your time today and for your consideration of this 

issue. 

Mr. GIBBS. Thank you. 

At this time I would like to welcome Mr. Jeffry Sterba. He is 

president and CEO of the American Water Company, and he is also 

testifying on behalf of the National Association of Water Companies. 

Welcome. 

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

Bishop, members of the committee—I will turn that on to make 

that better. Now you can hear me. Most people hear me so loud 

they would just rather I lowered my voice. 

I appreciate the invitation to appear before you today. I am Jeff 

Sterba, president and CEO of American Water, which is the largest 

publicly traded water and wastewater company operating in the 

United States. We have over 7,000 employees who serve more than 

15 million customers in 30 States of the United States and a couple 

of Provinces in Canada. 

I am testifying on behalf of American Water and the National 

Association of Water Companies, which represents numerous companies in the private water sector. 

This committee has heard from many about the disturbing status 

of our country’s water and wastewater infrastructure, and I applaud your commitment to do something about it. The primary 

point that I will make in my testimony is that in this era of very 

tight Federal, State, and local municipal budgets, private capital is, 

and can be made more, available to help address our crumbling infrastructure and the economic harm that it causes. This can be 

done without changing the fundamental nature of public ownership 

of water because we are talking about the infrastructure that 

treats and delivers it, not the ownership of it. 

American Water serves roughly 41⁄2 to 5 percent of the United States, and we invest roughly $1 billion per year in upgrading the 

infrastructure, which is about 71⁄2 percent of the total investment 

that is made. 

If we couple that with the investments made by other private 

water companies, which are roughly also about $1 billion, that is 

$2 billion, which is roughly equivalent to the amount that the U.S. 

Government invests through the two revolving fund mechanisms 

for both clean drinking water and under the Clean Water Act. 

So, while there is substantial private capital at work today, it is 

not sufficient. Ranking Member Bishop, you mentioned the $3 to 

$10 billion annual shortfall. So we have got to find another set of 

ways to create more capital for sustainable water management 

projects. So let me touch on four ways fairly quickly. 

First, three of the four proposals are legislative in nature, but 

the first can largely be accomplished through a policy shift. Right 

now, if a community is going to partner with a private water comVerDate Aug 31 2005 10:49 May 30, 2012 Jkt 000000 PO 00000 Frm 00060 Fmt 6633 Sfmt 6633 P:\HEARINGS\112\WR\2-28-1~1\73103.TXT JEAN
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pany to improve or expand its infrastructure, its customers will 

likely have to pay a large penalty to remove existing municipal 

debt because of the way the IRS interprets some of its rules. 

This penalty can drive a 15- to 25-percent increase in interest 

cost with no real benefit, and that 15- to 25-percent increase in interest cost is paid for by customers. The penalty comes from having 

to retire existing low-cost debt, pay issuance costs for replacement 

debt, and possibly having to prefund amounts greater than the 

amount of debt to be paid off. 

Now, we are not talking about changing the ownership structure. 

We are talking about a long-term lease. There is nothing gained 

that I can tell by this defeasance requirement except higher cost 

to customers. There is no cost to the Federal Treasury to make this 

change, and it would enable access to new capital to repair and upgrade water and wastewater systems, adding to the economy and 

creating jobs. So let’s not enable financial barriers for local governments. Instead, let’s rewrite the rules that hinder these win-win 

public-private partnerships. 

The second tool has already been touched on, and that is to create greater access to private activity bonds for all public purpose 

drinking water and wastewater projects. H.R. 1802, the Sustainable Water Infrastructure Investment Act, would do that by removing the water projects from State volume caps. Experts have stated that this would generate at least $2 billion 

in new investment each year, an amount which, using U.S. Conference of Mayors’ analysis, would translate into some 60,000 jobs. 

We appreciate the inclusion of similar language in the draft WIFIA 

legislation. 

Frankly, the WIFIA legislation is the third idea I would like to 

mention. It primarily seeks to lower the financing cost of infrastructure investments. NAWC commends the organizations which 

have put this forward, and we generally support the principles of 

WIFIA. 

It is not clear, though, how much WIFIA will really increase the 

total amount of capital investment rather than just substitute for 

municipal debt or State Revolving Fund leveraging that would otherwise occur. While lowering the cost of debt through a Federal 

subsidy is a worthy goal, the real priority is to increase the amount 

of capital that can flow into this needed infrastructure. 

Finally, as part of the WIFIA proposal, we strongly encourage 

the subcommittee to redress an unfortunate oversight in the Clean 

Water Act. Currently, private water utilities are not eligible to participate in the Clean Water State Revolving Fund. Moreover, while 

the Safe Drinking Water Act gives States the option to make private water utilities eligible for the Drinking Water State Revolving 

Fund, only about half the States have done so. 

The part of WIFIA that helps leverage State Revolving Funds 

would provide little benefit to the millions of American taxpayers 

who are customers of NAWC member companies. Existing Federal 

programs such as the State Revolving Funds and any new Federal 

programs such as WIFIA should benefit all taxpayers, including 

customers of private water companies. 

Now, in the end, we know intellectually and we have to understand that the cost of water and wastewater infrastructure upVerDate Aug 31 2005 10:49 May 30, 2012 Jkt 000000 PO 00000 Frm 00061 Fmt 6633 Sfmt 6633 P:\HEARINGS\112\WR\2-28-1~1\73103.TXT JEAN
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grades will put upward pressure on rates. Multiple surveys have 

found that American voters are willing to pay more to help ensure 

appropriate infrastructure and service. However, we must bring 

operational efficiency and low-cost capital to the table to minimize 

this impact. 

Private water companies are integral to doing so, and we stand 

ready to help the committee on this important challenge. Thanks, 

and we will take any questions you have. 

Mr. GIBBS. Thank you. 

At this time I would like to welcome Mr. Jeffrey Eger. He is the 

executive director of the Water Environment Federation in Alexandria, Virginia. 

Welcome. The floor is yours. 

Mr. EGER. Thank you, Mr. Chairman and Ranking Member 

Bishop and members of the subcommittee. I join this distinguished 

panel in thanking you for hosting this very important hearing. 

My name is Jeff Eger. I serve as the executive director of the 

Water Environment Federation, WEF. It is an 84-year-old professional and technical organization with 36,000 members, including 

scientists, engineers, and others working for clean water in North 

America and around the globe. 

We are the sponsors of WEFTEC, the largest annual water conference in the world, and our peer-reviewed publications serve as 

the benchmark for best practice in wastewater treatment, 

stormwater management, and water quality. 

The majority of our members, including those of the Ohio Water 

Environment Association, work in and for municipal government, 

so the topic of financing for publicly owned treatment facilities is 

a very important one for us. 

Prior to coming to WEF, I served for 18 years as the executive 

director of Sanitation District 1, the second-largest public utility in 

Kentucky. SD–1 maintains $1 billion in physical assets, including 

1600 miles of sewer lines, 143 wastewater pumping stations, and 

3 major treatment plants. Two of those plants were designed and 

constructed during my tenure, and to help with this, we secured 

more than $80 in low-interest loans through the State Revolving 

Loan program. Federal financial assistance was an important component of our overall financing package. 

I am also proud that during my time at SD–1, we tried to be 

proactive in identifying our capital needs and working with local 

leaders, including elected officials in the business community, to 

obtain support for rate increases, having enacted double-digit rate 

increases seen out of the last 10 years. 

We also worked with our State and the U.S. EPA to implement 

a holistic watershed-based approach to protect water quality that 

reduced cost and enabled us to assure that ratepayers saw that 

their money was being spent cost-effectively. 

This experience led us to our working with Mayor Ballard’s organization, the U.S. Conference of Mayors, to bring the issues of affordability and priority-setting forward as a national issue. Mr. 

Chairman, we appreciate the attention that you provided to this 

issue during the subcommittee hearing late last year. 

As other witnesses have noted, local governments are facing the 

worst financial circumstances in more than a generation. If we are 

25 

going to continue to provide essential services and make progress 

in water quality, it is time to reimagine the way we provide local 

water services. 

We need to encourage innovation—innovative technologies, innovative management approaches, and innovative financing. As you 

heard from my associate, Mr. Williams, we believe that we are on 

the cusp of transforming from a waste treatment industry to a resource production industry. Funds for research and implementation 

have never been more important and critical in this regard. 

We are approaching the 40th anniversary of the Clean Water 

Act. The Clean Water Act contained a number of innovations, including a grants program to help cities meet the ambitious national 

requirements. Fifteen years later, the 1987 amendments phased 

out grants in favor of another innovation, the State Revolving Loan 

program. 

WEF was an early supporter of the SRF program, and as I noted 

earlier, the Clean Water SRF has been remarkably successful. We 

fully support the continuation of the SRF, and we want to thank 

Congressman Bishop for including reauthorization of the SRF in 

his legislation introduced last October. 

But now, 25 years later, it is time to innovate once again. The 

WIFIA concept, discussed earlier and proposed in draft legislation, 

is one opportunity for Congress to assist local communities with 

their water infrastructure needs in a way that makes sense today. 

WIFIA would provide much-needed low-interest funding in a manner that compliments the SRF and leverages the available Federal 

dollars. 

As has been mentioned, reduction of just 1 percentage point in 

a long-term loan could mean savings of millions of dollars over the 

life of that loan. These savings mean that available public funds 

will go further in addressing our critical infrastructure needs. 

Mr. Chairman, subcommittee members, we know that this Congress in particular is facing some serious issues, including concern 

about Federal spending and deficit reduction. It can be challenging 

to see a clear path forward, even on an issue like clean water, 

which enjoys widespread public support and where there is a 

strong history of bipartisanship. 

Innovative financing legislation provides an opportunity to demonstrate once again that clean water is a national priority, and 

that leaders here in Washington are sympathetic to the needs of 

local governments. 

In a few weeks, WEF will be launching a major new public 

awareness campaign, ‘‘Water Is Worth It.’’ We have already gone 

public with an electronic billboard in Times Square, and over time, 

will be working with the other organizations here at this table, and 

we hope with you, to reinforce the value of water. 

We see introduction and eventual passage of new water infrastructure financing legislation as a very important step in supporting the value of water and our essential water infrastructure. 

We stand ready to work with you and your staffs to perfect this 

legislation and move it forward. 

Thank you for your time. 

Mr. GIBBS. Thank you. 

26 

At this time I would like to welcome Mr. Steven Fangmann. He 

is the executive vice president of D & B Engineers and Architects 

in Woodbury, New York. He is testifying on behalf of the American 

Council of Engineering Companies and the Water Infrastructure 

Network Coalition. 

Welcome. 

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

Bishop, and the distinguished members of the Water Resources and 

Environment Committee. 

My name is Steve Fangmann. I am executive vice president of 

D & B Engineers and Architects, a Long Island based firm with 

over 45 years of expertise in environmental engineering and 

ranked by Engineering News Record as one of the top 200 environmental design firms. 

During my career I have worked for many communities on 

wastewater management and water supply services, and formerly 

served as the Deputy Commissioner of Public Works for the Nassau 

County DPW where I was responsible for the overall water and 

wastewater management of the department, which included two 

major wastewater facilities and a $400 million upgrade of both. 

I was also responsible for water management, planning for Nassau’s sole source groundwater aquifer system, as well as 3,000 

miles of a separate sewer collection system. 

Engineering firms who work closely with local government officials have a considerable appreciation of the difficulty municipalities and utility districts face in balancing their constituents’ demands, public safety, and environmental protection, all in the context of extremely limited funding options. 

I am testifying this morning on behalf of the Water Infrastructure Network and the American Council of Engineering Companies. 

WIN is a broad-based coalition of the Nation’s leading construction, 

engineering, labor, conservation and municipal water and wastewater treatment providers. ACEC is the business association of 

America’s engineering industry with thousands of firms that specialize in water and wastewater design and consulting. 

We commend the subcommittee for the timeliness of this hearing 

today. There are few Members of Congress who are not aware that 

the country is facing a water infrastructure funding crisis. The 

question is what can we do to solve it. We know that we must solve 

it because without safe and clean water for our communities, not 

only is public safety at risk, but also water dependent industries 

such as agriculture, commercial fishing and tourism would be at 

risk and would be unable to contribute the hundreds of billions of 

dollars annually that they currently provide to our economy. We 

simply cannot afford to postpone the solution. 

We think the answer is not just one silver bullet. What communities need is a comprehensive toolbox of water infrastructure financing options. The water infrastructure financing challenges we 

face have been a century in the making and will take all of the best 

ideas that have been presented today to the subcommittee, as well 

as many that have yet to have been developed, to meet this challenge. 

For today’s hearing, we would like to focus on just four proposals 

of the many that have been discussed. The development of a TIFIA 

27 

Program for water infrastructure, as championed by Chairman 

Gibbs, and the innovative finance tools in the Water Quality Protection and Job Creation Act, as introduced by Congressman 

Bishop, all must be tools in the toolbox. 

In addition, we commend Chairman Gibbs for including H.R. 

1802 in his draft water infrastructure finance bill. The Sustainable 

Water Infrastructure Investment Act, which has strong bipartisan 

support, provides an exemption from private activity bond State 

volume caps for all water and wastewater projects. 

We also support a dedicated source of funding for water infrastructure, as well as reauthorizing the State Revolving Funds for 

water and wastewater projects. 

Regarding TIFIA, WIN and ACEC believe that the development 

of a TIFIA-like program for water infrastructure makes eminent 

sense, and we are pleased that water infrastructure funding legislation being advanced by Chairman Gibbs and Congressman 

Bishop has embraced this financing concept. 

Engineering firms who specialize in highway transportation 

projects are great proponents of leveraging potential of TIFIA, but 

its usefulness is sometimes limited because of the revenues required, such as toll roads or fees. The TIFIA concept is better suited for financing water infrastructure projects. Municipal water and 

wastewater projects have a built in system of customer user fees 

or volume rates collected on a regular schedule and dedicated only 

to water services and infrastructure. These fees guarantee that 

bonds can be paid back and offer minimal risk to the lender, as 

others have stated here. We estimate that 90 percent of the water 

projects would fit in this category. 

We also think that some important modifications would make 

WIFIA proposals more effective, streamlined and transparent. We 

have outlined these in detail in our written testimony. In particular, we would urge that the existing State Revolving Fund programs be used to the maximum extent practicable to distribute 

WIFIA loans. The States already have a 25-year mechanism in 

place for distributing SRF loans, a mechanism that selects projects 

based on an objective ranking system that is publicized and available for review. 

In addition, it would be far more cost effective for the Department of Treasury to oversee approximately 50 loan agreements 

with the State SRF financing authorities instead of hundreds or potentially thousands of loans to individual communities. We think 

that limiting access to WIFIA to only $20 million or larger projects 

could restrict its usefulness to many medium size and smaller 

States. 

A direct loan program of State SRF financing authorities would 

allow the States to use their existing ranking systems to issue the 

loans. 

We also hope that the WIFIA proposal would incorporate the improvements to the SRF Program, such as extended loan repayments and expanded project eligibilities that are part of the SRF 

reauthorization bills passed by the House. 

And finally, we would strongly resist efforts to have WIFIA funding supplant existing SRF funding to the States. 

28 

I will just quickly touch on private activity bonds. They will have 

an important role to play and should be definitely a part of the 

toolbox. Currently each State is limited, as stated by others, by the 

volume cap. What happens with water and wastewater projects, 

our projects are out of sight, out of mind, meaning underground 

structures do not get the public’s attention. So the private activity 

bonds are not used for those types of projects with a volume cap. 

It is not a new idea. The Federal Government lifted some lowvolume caps when the Nation was facing a financial crisis with respect to the development of adequate solid waste disposal facilities, 

as testified before me. 

Regarding the Clean Water Trust Fund, WIN and ACEC continue to believe that a long-term, deficit neutral, dedicated funding 

source for water infrastructure must be one of the tools in the toolbox. Though not perfect, dedicated trust funds have financed the 

majority of our Nation’s highway and airport infrastructure construction, and as general funds become scarcer, we must consider 

the concept. 

We remain committed to working with the committee to identify 

viable funding sources for a Clean Water Trust Fund. 

Again, on the SRF, we are strongly supportive of reauthorization, 

and in conclusion, we are extremely encouraged by the subcommittee’s efforts to develop the next generation of water infrastructure 

financing tools. The House Transportation and Infrastructure Committee and this subcommittee, in particular, have a long history of 

developing water infrastructure funding legislation that earns 

broad bipartisan support. 

We look forward to working with the bipartisan leadership of 

this subcommittee to perfect the innovative water infrastructure financing tools discussed at today’s hearing and deliver a bill to the 

President’s desk this year. 

Thank you for the hearing. 

Mr. GIBBS. I will start off the go-round of questions here, but just 

a couple of comments. You have probably noticed in the draft legislation we are working on it is left blank the dollars that will be 

put in. That is because we are trying to figure out how we are 

going to pay for it, at least the exposure to the taxpayers, and so 

we are working through that. 

I think the overall theme versus the support here, there is obviously a need for more financing, but I guess I will open it up to 

the panel starting off. We heard a little bit about doing some new 

innovative thinking with like the WIFIA and not be in conflict with 

other programs because we do not want to have unintended consequences. So kind of along that line you may want to maybe discuss a little bit to make sure that we are not going to do something 

that is going to cause problems for the current SRF or some of our 

other financing programs. 

Then also I think you could probably touch a little bit maybe on 

what impediments you might see, either Federal, State or local, 

that could be challenges that we need to try to work through in the 

legislation. 

So whoever wants to address that. Mr. Arndt. 

Mr. ARNDT. Thank you, Mr. Chairman. 

29 

As we see it, WIFIA is really a complement to the other tools 

that are already in place. I know there has been some discussion 

of does it become a substitute for other programs. I will focus on 

the SRF. 

When you look at what the SRF does, it really helps those utilities that in many cases cannot fund their infrastructure on their 

own, and as a result, you see things like grants. You also see very 

low-interest loans and that sort of thing. So we are not looking to 

essentially replace that capability which comes forward from the 

SRF. 

Likewise those entities, particularly the higher credit rated utilities that are out there, can access the bond markets quite readily, 

and again WIFIA is not meant to substitute for that access to the 

bond market. It is a supplement to that. 

In summary my comment would be that it is one more tool in 

that toolbox that we need to fill the gap and, in particular, where 

we see the increasing needs in areas such as the infrastructure replacement and renewal expenditures which are unprecedented and 

just emerging at this point in time, to fill that gap that is going 

to grow progressively as time passes. 

Mr. GIBBS. Maybe just to follow up now with Mr. Petersen because your testimony I thought was excellent. In your experience 

working with private-public partnerships, how do you see to, you 

know, bring that money in under a WIFIA concept? 

Mr. PETERSEN. Thank you, Mr. Chairman. 

Yes, our experience tends to be at the planning stages of these 

projects, and if you can put yourself in the shoes of an administrator of a water or wastewater public authority and they have a 

large capital need, let’s say a CSO Program or a replacement 

wastewater plant or a new water treatment plant, something like 

that. They will engage a team of consultants. They will us their 

own internal resources, and they will look at all of the options that 

are available to them. They will try to plan for the optimal technical solution. They will project costs. They will have a plan of financing for the project. They will have a financial advisor advising 

them on current market interest rate conditions, and so forth. 

And then they will turn to the question of how are they going 

to actually deliver the project. Are they going to deliver it using 

traditional design-build with the municipal operations and municipal bond financing? Are they going to try something a little more 

innovative like the design-build contracting two contracts in one for 

efficiency and more expedited delivery; maybe even include private 

operations in the mix? 

Then they will turn to the question of should I consider private 

financing in this mix of potential ways of delivering this project. 

And as I was trying to say in my testimony, that is where they always stumble. 

We went through a business case exercise considering different 

project delivery methods for a major wastewater treatment plant in 

Pima County, for example, in the Tucson area, a million people. 

They need to replace an old plant, and they went through this 

whole kind of analysis that I just summarized and they attempted 

to ascertain the risk adjusted net present value of life-cycle costs 

30 

of the project under all of these different approaches of delivering 

it and financing it. 

And the conclusion was they picked a design-build-operate, one 

contract with three elements, with public financing traditionally. 

They would have picked design-build-finance-operation, a P3 type 

of project with private financing but for the uncertainty as to the 

availability of tax exempt financing. That is where the rubber 

meets the road. 

As I indicated and as I think you all know from discussing this 

in the past, private financing is obtainable for water projects if you 

get wide cap allocations, but you can never be sure. And the legislation you are considering will take that uncertainty away. 

And I think in the case of the example I just gave in Pima County, they might well have selected private financing to get the debt 

off their own balance sheet, put it in the balance sheet of the private project company that would develop it if they had some assurance that they could count on the taxes and financing that they 

would benefit from through the terms of the contract. 

Mr. GIBBS. Just to follow up, we know that with the proposal the 

risk is really on the taxpayers, and of course that helps bring in 

this private equity. Also, you know, you have a good stream, a good 

track record because of the ratepayers’ fees. 

I guess to conclude here in my first round of questions is one 

question that comes up, and I think I know the answer, but I want 

to make sure it is on the public record, what historically would be 

the default rate on water-sewer type projects that maybe we should 

be looking at for when I have to defend or argue what the cost and 

what the risk is to taxpayers. What kind of default rate would 

there be for this kind of operation? 

Does anybody want to take a stab at that? 

Mr. PETERSEN. I will answer that if I might. Our firm does a lot 

of bond counsel work, bond counsel to public agencies, and works 

with rating agencies. Most all of the data is rated by the investment rating agencies, and in general as several of us have said 

here on the panel, municipal water and sewer revenue debt that 

is secured by pledged rates and charges is very secure. The default 

rate is near zero, and that is why most have very strong investment grade credit ratings, in many cases stronger than even tax 

secured general obligation debts, which is subject to, you know, the 

vicissitudes of the economy. This is just straightforward rates and 

charges for water and sewer, very strong credit. 

Mr. GIBBS. Yes, Mr. Sterba. 

Mr. STERBA. Mr. Chairman, if I could answer your question 

about whether there are conflicts that exist between what is being 

proposed and other existing financing mechanisms. From our perspective we do not see conflicts so much as we do see opportunities 

for leveraging. 

So, for example, one of the mechanisms in WIFIA that can bring 

new capital to the table, as opposed to just lowering the cost of capital, is direct loans. But if you leverage that by requiring private 

capital to be brought to the table in order to qualify for a loan, then 

you are effectively getting double value. So you are bringing a loan 

to the table and then encouraging another source of capital to come 

along with it. 

31 

That is something that has not necessarily been required, but 

there is a provision in WIFIA that says the Administrator can take 

into account whether or not other private sources of funding or 

other sources of funding are brought to the table. So I would encourage the committee to utilize that because it can enhance the 

pool of overall funding. 

The other comment goes back to one of the things that I mentioned about something that could be done administratively. It is 

very similar to what Mr. Petersen referenced, except it deals with 

existing assets. Say you have a municipally owned system that was 

built some time ago and financed with tax exempt debt. It has not 

been invested in, has not been kept up, and it also has growth and 

renewal obligations that the municipality cannot meet on its own. 

So it turns to an entity that provides expertise in that. 

Today, the debt that is currently outstanding must be either repaid or defeased, increasing the cost to customers without adding 

value. And this issue, I think, may be able to be tackled solely administratively working with the IRS. It would help bring new capital, some of which may come through WIFIA, some of which may 

come through a private purpose entity that is going to fund the 

new capital additions, but without adding the burden on the existing capital that is already financing assets built 5, 10, 15 years 

ago. 

Mr. GIBBS. That is an excellent point. My time is up. 

Mr. Bishop. 

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

you to the panel. It has been very, very helpful testimony. 

We have a lot of commonality here. We have agreement that we 

clearly have a problem that we have to address. We have an agreement that we cannot address it sufficiently with the amounts of 

money that are currently on the table, and we have before us in 

effect two different proposals which are, I think, complementary as 

opposed to contradictory with respect to how we go about trying to 

fund this or what role the Federal Government would play in funding these water infrastructure needs. 

The draft bill that the Chairman proposes takes basically a 

WIFIA approach. The bill that I filed along with Ranking Member 

Rahall and with Members LaTourette and Petri takes sort of an 

approach in which it creates a suite of activities, a more robustly 

funded SRF, the creation of a trust fund, and then a WIFIA approach. 

Two differences that I would like to explore and get your guidance on. One is in the bill that I filed. The WIFIA approach type 

funding would continue to flow through the SRF and judgments 

would be made by whatever entity the State has set up allocate 

SRF funds. In New York State, it is the Environmental Facilities 

Corporation. There are analogues all over the country. 

In the Chairman’s draft, it seems as if decisionmaking with respect to what projects would be funded would be vested with the 

Administrator of the Environmental Protection Agency. 

And so my question is you are the stakeholders. You are the guys 

who are on the ground. Is it better to have the decisions made by 

a body that is State-based or is it better to have the decisions made 

32 

by a Federal or is it better to have the decisions made by a Federal 

body? 

So, Mr. Fangmann, let me start with you. 

Mr. FANGMANN. Well, having a lot of experience with EFC in 

New York, one of what I believe are the best run SRF programs 

on the wastewater side, I think going through that model is the 

best way. I testified to that effect on behalf of WIN and ACEC. 

The idea there is they broke it down into priority groups 

throughout the State so that the most popular city is guaranteed 

some bulk of money, but as well as the local communities 

downstate and upstate so that the money is spread through the 

State on an equitable basis based on need and priority. You know, 

what will probably benefit from the projects? 

So that is all built into the existing program. So I see additional 

funding come through a loan to that same program would be an efficient way of moving financing. 

Mr. BISHOP. Other members? Mr. Arndt. 

Mr. ARNDT. Perhaps a bit of correction. In the draft legislation 

as we see it, the EPA Administrator would effectively be charged 

with allocating the funds. There are actually two different mechanisms that are made available in that legislation. In the case of 

large projects they would have the ability to directly access with 

the funding via an application, I presume to the Administrator. In 

the case of the remaining systems who are not eligible for that 

large project or large utility status, they could in turn work 

through their SRFs. So it is not an all or a nothing type of approach in that regard. 

I would comment that I think the SRFs have an advantage in 

that they are an established organization. They have criteria. They 

have had the history of working in that funding arena for now 20- 

some years, and as a result, I think there is a working relationship 

that has been developed. Those agencies tend not to be regulatory 

agencies. They tend to be financial organizations which I think is 

an important aspect, that the primary focus be to finance, not as 

a regulatory approach. 

In that regard, some of our earlier discussions related to WIFIA 

actually called for the establishment of an authority of some sort 

to provide the funding as opposed to working through EPA, which 

is still, we believe, workable. However, we recognize the advantages of working through an established agency as well. 

So I think there is perhaps some more consideration that could 

be given on that point. 

Mr. BISHOP. Are you saying that it is a jump ball? 

Mr. ARNDT. I think what is included with the draft, I think, is 

workable and that we would support. However, perhaps it could be 

refined. Perhaps the Administrator could delegate that authority to 

an authority type organization which has more of a financial focus. 

Mr. BISHOP. I would just say I appreciate that. When we were 

drafting our bill, our original draft was the direct approach, and 

the stakeholders told us no. The stakeholders told us to say with 

the established mechanism, which is the SRF for the reasons that 

you just cited. People are familiar with it. It works. There is an established criterion, and that it is something that entities are comfortable with. 

33 

My time has expired. I have another question, but I will defer. 

Thank you very much, Mr. Chairman. 

Mr. GIBBS. All right. Anybody down here? Just raise your hand. 

Representative Napolitano, go ahead. 

Mrs. NAPOLITANO. Thank you again, Mr. Chairman. 

In listening to the individuals talk about all of the needs that our 

communities have, as a past mayor of a small city I understand exactly some of the issues that affect our local communities. 

Mr. Ballard, you talked about EPA prioritizing and some of the 

mandates that affect the ability for some of the communities to be 

able to meet those requirements, and you stress the need of flexibility. 

We have been able to in our local area to bring the Regional Director to talk to the Councils of Government to be able to have direct input from them as to how they are affected or not affected by 

the mandates in our area. I am not sure if anything of that nature 

is going on and you could suggest to the Conference of Mayors that 

this is something that is available to them. It has been made available to us. 

The new concepts, Mr. Williams that you talk about, is the utilization of new technology, of the green technology, of being able to 

convert methane gas into electricity to run a lot of stuff, but there 

is a lot of other technology coming out. 

How much of that is being used and being incorporated into longterm plans? And are we actively looking at a way to reduce the energy usage in planning for further need as we move forward in upgrading or maintaining or structuring new areas? 

Mr. WILLIAMS. So for years, publicly owned treatment works 

have been looking at their energy demand inside their plants, and 

they do energy audits and that type of thing to reduce the energy 

demand, put in more efficient mechanical equipment, lighting, that 

type of thing. 

What I was talking about was actually going beyond that, and 

that is actually generating more energy by bringing in waste material, waste material that currently goes to landfills or in some cases 

actually have energy put into it in order to help the disposal process. So what I am finding in California is that 10 or so years ago 

not too many plants were doing that, but more and more plants are 

beginning to do it. 

One thing you are seeing a lot of, is plants beginning to take in 

fats, oil and greases which are very digestible and create a huge 

amount of energy and using that to power their treatment plants. 

Mrs. NAPOLITANO. How is this—I am sorry. My time is running 

out—how is this being able to increase the participation of the 

three Ps, the public-private partnerships? 

Mr. WILLIAMS. Some of these things take additional capital. So 

if you were able to partner with the public sector on that and bring 

in capital to actually build the facilities needed to do this, that 

would be very beneficial. 

Mrs. NAPOLITANO. And does this affect a lot of the smaller communities that may not be able to afford to be able to find out where 

these partnerships can be formulated or how they can obtain some 

of the assistance they are going to need to upgrade and maintain? 

34 

Mr. WILLIAMS. It would definitely help smaller communities because smaller communities oftentimes just do not have the wherewithal to build facilities that are needed to produce the green energy. 

Mrs. NAPOLITANO. Well, as you know, Government does move 

very slowly in being able to move forward, and we want to be sure 

that we have those new concepts made known so that we can continue to advocate, whether it is with the Department of Energy or 

with EPA and other agencies. 

Mr. Arndt, you talk about doing more for less. The Federal debt 

currently precludes thoughtful necessary action. We have to go on 

the current trend, which is no earmarks, no pork, pay for, et cetera. 

So how would that be able to increase the participation of the public-private partnerships? And how do we make this more available 

to communities that have no idea where to go? 

Mr. ARNDT. Like a lot of things, no simple answer, but one of the 

things that has been included in our written comments and others 

have alluded to that here is that—— 

Mrs. NAPOLITANO. Would you move the mic up please? 

Mr. ARNDT. Yes. One of the things that is included in our testimony is the fact that WIFIA should be allowed to take a subordinate position on financings which we believe would then leverage 

or encourage private investment and essentially act as an incentive 

for that purposes. 

Beyond that, fundamentally, if you have a lower cost source of 

capital, which effectively is one of the attributes of WIFIA, what it 

does is increases affordability to the ratepayers. It increases the 

certainty that the debt would be repaid with interest as it becomes 

due, and also it increases the capacity of the utility to do more 

projects. 

I think when you put all of those things together, you end up 

with a net improvement beyond where we are today. 

Mrs. NAPOLITANO. Understood. My time has run out, but with 

the indulgence of the Chair, I will ask one more question and I will 

be done, and that is are any of you proposing to any of your cities, 

communities or the partnerships that you have to look into the future because of the increase in population and the demand it is 

going to create on the infrastructure itself, one? 

And two, what are you doing to educate the general public about 

the need to increase the rates, whether it is incrementally or generally saying that these needs are going to be vital to the delivery 

of clean, potable water? 

Thank you, Mr. Chairman. 

Gentlemen? 

Mr. BALLARD. Congresswoman, thank you for that question. 

As you probably know as a former mayor, you have to always 

educate your constituency on the rates. We were facing large rate 

increases, and that is why we had to do what we had to do, by negotiating with the EPA and coming up with creative financing and 

all that we could with creating infrastructure and all that we possibly could at the local level. 

I think mayors across the country are generally doing that. They 

are looking for new solutions like WIFIA. They are looking at all 

sorts of financing opportunities. They are looking at being more 

35 

creative with technology, all while telling their constituency that 

rates are probably going to go up regardless of what we do. And 

I think they understand that, and as you know, that is a delicate 

balance as you move forward. 

Mrs. NAPOLITANO. Thank you for your indulgence, Mr. Chair. 

Mr. GIBBS. Mr. Duncan. 

Mr. DUNCAN. Thank you, Mr. Chairman. 

Mayor Ballard, I am sorry I did not get to hear your testimony. 

I was in another meeting, but I was here when we had the Mayor 

of Omaha here, I guess, a few months ago who told all of the problems he had with EPA. I notice you mentioned him in your testimony. 

But in your testimony you talk about that you were under this consent decree that had a potential cost of $3.5 billion, and then 

it ballooned up even from that another $300 million, but you say 

that you were able to renegotiate that and reduce the overall price 

and get a better environmental result. 

How much money were you able to save, and how did you do 

that? I mean, what better things were you able to do after this renegotiation? 

Mr. BALLARD. Well, it was a difficult process, Congressman, and 

thank you for your question. It took a while to get there, to be honest with you. It did balloon up to $3.8 billion by the time we had 

entered office. We knew that that was a huge number that directly 

was going to go to ratepayers. No question about that. 

I was lucky enough to hire some rather brilliant people to work 

for the city. They had run water companies before actually, and 

they went to the EPA and said, ‘‘We need to relook at this. We 

think we have a better solution.’’ 

That is what we did. We told them we thought we had a better 

solution, and we thought we could make it greener. We thought we 

could make it faster, and we thought we could make it cheaper. To 

be frank with you, initially that did not matter very much. 

Mr. DUNCAN. Do you mean that did not matter to the EPA? Is 

that what you mean? 

Mr. BALLARD. Right, and so we had to essentially negotiate for 

well over a year, especially on the second amendment and we told 

them that we had that combination of gray and green infrastructure, which we thought would be more environmentally sound and 

a lot cheaper for the citizens of Indianapolis, and it took over a 

year of negotiation. We were very happy that we got that done, and 

everybody came out in saying that was a win-win solution. 

But I would tell you, as I said in my oral testimony today, we 

are the exception to the rule. Mayors across the country, and you 

just have to spend a couple hours at any Water Council meeting 

that are dotted throughout the country to sense the frustration 

that mayors are going through regarding this. It is palpable. It is 

hurting them, and frankly, you can see on their faces that they are 

very, very worried, and that’s why whenever I talk about it I ask 

for more flexibility, more reasonableness, and as you may know, 

mayors, they just have to get things done. 

I mean, as I say, at the city level a buck is a buck, and you have 

to get things done at the city level. And so there are creative solutions out there, and the mayors and other municipalities, maybe 

36 

even smaller, are working their tail off to be creative to work with 

the mandates that are thrown upon us and to make sure that we 

can do it in an affordable manner, and that is why we talk about 

prioritizing mandates, and that is why we talk about being flexible 

with the EPA. 

Mr. DUNCAN. Well, my dad was Mayor of Knoxville from the time 

I was 11 until I was 17, and so I have great sympathy for any 

mayor. I found out that everybody and his brother wanted to be a 

fireman or a policeman, and the way after they went on the force 

they wanted a promotion and a raise, and certain other problems. 

Knoxville has had to spend a tremendous amount of money over 

the last few years, and so I have heard some of these things. 

I am going to run out of time. I will say this. When you said that 

the EPA did not seem to care about the cost, that is really a sad 

statement because too often people in Government do not worry 

about the cost because it is not money coming out of their pockets, 

but they forget that there are a lot of poor and lower income people 

that have trouble paying some of these things. 

Mr. Williams, let me very quickly ask you. I know you expressed 

concern about the exploding costs on these things, too, in your testimony, but you say that in this subcommittee the best way we 

could help is to give maximum flexibility to the local water agencies. Do you feel like the Clean Water Act as it is now is not giving 

enough flexibility? Is that what caused you to put that in your testimony? 

Do you have an example? 

Mr. WILLIAMS. The short answer is yes. I testified here last year 

on the integrated permitting and planning that EPA is proposing, 

and they are going to be finalizing that framework in March. One 

of the things the clean water community is very anxious to see is 

what does this actually look like. 

We have looked at the framework, but it is hard to tell from the 

framework how it is actually going to play out on the ground. So 

we are interested in actually test cases so that you can take a difficult situation where there is a number of regulations and see how 

this actually plays out, see how they are prioritized, and what flexibility is there. 

And we would like to look at that holistically as the entire clean 

water community in the Nation and just see what happens. If it 

does not play out as we would like to see it play out where you do 

get the flexibility, then we would like to work with the subcommittee in terms of introducing legislation that will provide that 

flexibility. 

Mr. DUNCAN. All right. My time is up, but let me just express 

one other major concern I have. Mr. Fangmann just a minute ago 

talked about the distribution of funds. I represent, you know, primarily an urban-suburban district in and around Knoxville, but I 

also have some small towns and some rural areas, and I have 

heard and read that while the problems of the bigger cities are getting the most publicity and the most attention, that there are a lot 

of even more problems in some of these small towns and rural 

areas, and even more so because many people in those areas do not 

have quite as much income as people in the cities do. 

37 

So that is something that I think deserves a little bit more attention than it has been getting. I see somebody on the panel might 

want to say something about that. I see a couple of people nodding 

their heads, but if any of you want to say something about that, 

certainly feel free to do so. 

Mr. Arndt. 

Mr. ARNDT. Thank you for that question. 

The Buried No Longer Infrastructure Report that I mentioned 

earlier looks at the infrastructure replacement and expansion 

needs across the country, and they slice that both on a regional 

basis and in terms of the system size, and one of the things that 

is very revealing in that regard is when you look, in particular, at 

small and very small systems on a per customer basis, their costs 

of keeping pace with those replacement and expansion, more replacement than expansion, are much more costly and in some cases 

actually would lead to a tripling of the user rates that are necessary to fund that kind of investment. 

That is not to diminish the impact, the concerns related to urban 

areas. In particular, when you look at it from the standpoint of the 

regional approach, when you look at the Northeast and the Midwestern States, because they tend to have the older cities their 

costs are quite significant and are rising more quickly than what 

would happen in other parts of the country. 

So there is no individual group that comes out with a clean slate 

as it were. Every category has its difficulties to deal with, and so 

I would say that the needs are universal. They are not limited to 

one area or one size system. 

Mr. DUNCAN. We have been having a couple of examples of small 

towns or cities around the country surrendering their charters because they just could not meet all of the mandates and the expenses of Federal requirements. 

Yes. 

Mr. STERBA. Congressman Duncan, just a thought. While we 

serve 15 million people, we predominantly serve fairly rural areas. 

A lot of those areas do not have the capacity to test for emerging 

contaminants and comply with all the other new regulations that 

come along. It puts an increasing burden on small systems, but the 

big thing that we have found is they lack purchasing power. 

We are working with a community right now where when we 

compare what they are paying for pipe, meters, and valves to what 

comes through our supply chain, it was over a 35-percent savings 

because a small community just does not have the capacity to access some of these economies of scale. 

Those are the kinds of things that can be done by attacking the 

other end of the cost equation. Financing is part of it, but how do 

we get efficient on the operating costs and on how much you have 

to spend for capital? 

Mr. DUNCAN. Thank you. Thank you, Mr. Chairman. 

Mr. GIBBS. Ms. Edwards. 

Ms. EDWARDS. Thank you, Mr. Chairman. 

I would like permission to enter into the record a statement from 

Congresswoman Eddie Bernice Johnson. She could not join us 

today, without objection. 

Mr. GIBBS. So ordered. 

38 

[The Honorable Eddie Bernice Johnson’s prepared statement appears together with other Members’ statements. Please see the 

table of contents for ‘‘Prepared Statements Submitted by Members 

of Congress.’’] 

Ms. EDWARDS. Thank you. 

Mr. Chairman and Ranking Member Bishop, I really do appreciate this discussion, and to our witnesses, as always, I either am 

forced to rethink some things that I thought I knew or learn something differently. So I appreciate that. 

You know, there is probably not one of us who cannot tell stories 

about aging and failing infrastructure wherever it is that we live. 

I happen to represent a district that is right outside of Washington, 

DC. We have a couple million people serviced by one water agency, 

and the challenges are really great. 

A few weeks ago I jumped into the Potomac River, something 

completely unrelated, but it occurred to me that I did that, and I 

felt perfectly comfortable that the water I was jumping into was 

going to be clean because we were not having sewage runoffs into 

the river. The river, in fact, was warmer than it is in this room, 

but it reminds me of how much we do not think about the water 

until something happens, a boil water restriction, a water main 

break, any number of failures. 

And so I appreciate that we all understand what the gravity of 

the problem is. The question that I have first for Mr. Wilson, I am 

intrigued by this discussion of the benefits and value of using public pension funds to make investments, especially in an economic 

and financial environment in which the kinds of plans that you 

would not want to put at risk in the general market, investing in 

water infrastructure is stable by comparison. 

But one of the things that I am confused about as I look at your 

testimony is the recommended change in the chairman’s draft that 

is part of today’s discussion. In your testimony, you recommend 

that private investors like pension funds also have direct access to 

the U.S. Treasury funds at subsidized rates. And so I am curious 

as to why because it seems to me that that would mean then competing with the State Revolving Funds or other mechanisms for 

low-cost financing, which seems at odds given that the argument 

begins with public pension funds having, you know, sort of a lot to 

invest, and it is important to invest, and there are benefits like accelerated project funding, et cetera. 

So how would it be in the interest of the 27 or so municipalities 

that I represent to have you investing by borrowing capital funds 

from the Treasury only to then reloan the funds to the community? 

Help me understand that. 

Mr. WILSON. Yes, thank you for your question. 

Congresswoman, I was viewing that in the same vein as the ability to access private activity bonds that are tax exempt. So the private entity that would be set up to manage the design, build, operate, finance of the new project, would utilize primarily equity capital that may come from a public pension plan. They may also want 

to utilize some debt financing. So you have a total financing package, debt and equity. They may access taxable debt for that. It 

could be bonds. It could be bank financing, project financing. 

39 

The lower the cost of that debt financing that that private entity 

puts together, the lower overall cost for the community and for the 

project. So whether it is accessing private activity bonds that are 

tax exempt or accessing other forms of tax-exempt debt, it should 

help to lower the cost for the project and should be able to be 

passed through to the community. 

Ms. EDWARDS. But is there not some burden shifting that goes 

on there? Because I would worry about that. I mean, if a municipality already has access to the SRF to do, you know, other kinds 

of projects, they may also want to engage in a partnership using 

the private equity, but would not necessarily want to shift the risk 

to the Federal taxpayer or to the local community because it is private activity. 

I mean, you get a long-term sort of deal to make the most that 

you can out of there, but also meeting the objectives of delivering 

water in the system. So I would hate it if we get into a situation 

where our taxpayers, either Federal or our ratepayers locally, 

would then end up acquiring a burden for this kind of private investment activity. 

Mr. WILSON. I was thinking of it as the burden or the risk would 

be taken on by the private entity, and the private equity would be 

first at risk, as if they were financing it. They were putting together the debt and the equity for the project. They would take on 

the risk to deliver the project on time, on budget, to make sure that 

it operates according to regulations throughout the PPP term. 

So the financing would team up with the service provider that 

would offer design, build, operate services. They would form one integrated team that would be financed with debt and equity. They 

would be obligated to repay that debt, that private entity. So that 

private entity would be at risk for the repayment of that debt. 

And my view was toward lowering the cost of the overall capital 

that was pulled together for a new project such that those costs 

could be passed on to the community. 

Ms. EDWARDS. Thank you. 

Mr. Chairman, if I could just have one more question I would appreciate it, and I appreciate your indulgence. 

I just wanted to direct this question actually to Mr. Williams. 

You raised a point, and I appreciate the partnership that we have 

had with NACWA. I have learned so much from NACWA. But you 

talked about green infrastructures being one of the tools in the 

toolkit to lower cost for communities and also provide the benefits 

that you can get in addition to doing your traditional kind of infrastructure. I wonder if you could speak to that as well as to the 

availability for municipalities of those kind of investments. 

I mean, I have introduced with your help H.R. 2030, a clean infrastructure bill, and I just think we have got to incorporate more 

of those techniques to offer something else to local communities 

that is an option for them rather than the tremendous amounts of 

money that they have just spent in traditional infrastructure. 

Mr. WILLIAMS. Yes. Whenever you are trying to meet regulations, 

I think that a community needs to have a balance, look at the overall cost, and compare the cost of the typical gray infrastructure 

with the green infrastructure. So any kind of innovative financing 

40 

that goes forward should definitely be able to fund things like 

green infrastructure if those things appear to be cost effective. 

Mr. GIBBS. Mr. Capuano. 

Mr. CAPUANO. Thank you, Mr. Chairman. 

Gentlemen, thank you for coming. I think we are having a discussion about how to best finance something that we all seem to 

agree needs to be done. The problem that I have is that the American people do not understand this. 

We are fighting every day here about a big transportation bill on 

infrastructure that people can see and feel and touch, and we are 

losing the argument on that. This is something, as I think Mr. 

Fangmann said, out of sight, out of mind. 

Now, I will tell you that if I tell people, ‘‘Do you want some clean 

water? Here you go, $6,’’ no one complains and they take it and 

they drink it and they give it to their kids. But if I say for that 

same six bucks, ‘‘Fix this,’’ no one knows what it is. Everybody here 

knows what it is. Mr. Mayor, I know you know what it is. I got 

this when I was mayor. 

And for the people at home who do not know what this is, this 

is a 6-inch water main that is about 80 years old when it was 

taken out of the ground, and what is in the middle here? That is 

sediment, folks, normal, everyday, average gravity. Every night 

when every American goes to bed, we shut off our water. When we 

do, there is water in these pipes. It settles. We turn on the taps 

in the morning. Anyone who drinks the first drink in the water, especially in the older areas, you had better let it run. 

Anyone who has lived near a place where a fire department has 

come down and opened up a fire hydrant, you all know what happens. What happens is the fire hydrant opens up this sediment, 

blasts it through, and you get this, and we drink it. The problem 

is the American people never see this. 

This has been on my desk for 20 years. Every single person who 

comes in my office says, ‘‘What in the heck is that?’’ And when I 

tell them that is your water pipe that you will find in any American city, anywhere you live, they are all amazed. 

Gentlemen, if you want to win the hearts and minds of the 

American public, give one of these to every mayor, every city counselor, every county executive, and make them put them on their 

desk. Give it to every Member of Congress so that when we go back 

and say we need billions to provide you clean water at a lot cheaper rate, we now have a nice, easy visual. 

Now, granted, I do not want you to give me a sewer pipe. 

[Laughter.] 

Mr. CAPUANO. I have seen those, too, but those are a little bit 

more difficult to explain. 

The reason I do this is because I think too many of us forget. Everyone here knows exactly what you are talking about. Mr. Mayor, 

you know what I am talking about. Every day we get hit, schools, 

police, fire, and they are right. We want to do more. 

The argument is not that. The argument is when you have to 

make a decision, every mayor, every Governor, every President, 

every Member of Congress makes the decision. I have got to do it 

all, cannot do it all, what can be seen? 

41 

When it comes to infrastructure, we do bridges fast. A bridge 

falls down. We fix it. A sewer collapses. We fix it. This can take 

80 years to build up, but not one of us wants our children to drink 

it. Not one of us wants our mother to drink this. Not one of us 

wants to fix our own pipes to make sure that they do not get 

clogged up with this, and yet it is in every single American community, and nobody knows it. 

So what I really want to plead for you to do is, yes, we will have 

this debate on how to finance fixing these things, but please help 

me educate the American public so they can engage in this and 

they know what they get when we go back to them and say, yes, 

it is expensive, but here is what you get. 

As the richest country in the history of the world, we should not 

have undrinkable water in any corner of this country, and yet we 

do. At home because my State has chosen to put billions of dollars 

into cleaning the water, I just turn the tap on unfiltered, drink it 

all day long, not early in the morning. In most parts of this country 

you cannot. This is what you do. This is what you do. 

And I am not against this. This is fine. It is nice and convenient 

for here. I cannot have a tap right here today, but I do not want 

you to have to spend a buck and a half to have a drink with lunch, 

and I know you do not either. 

So as this whole discussion goes through and we are talking 

about the intricacies of finances, that is the important way to do 

it. But if we do not win the hearts and minds of the American public, we are going to be talking to ourselves now and forever more. 

Thank you, gentlemen. 

Mr. GIBBS. Ms. Eleanor Holmes Norton, do you have a question? 

Ms. NORTON. Thank you, Mr. Chairman. I apologize. I had another hearing and could not hear all of this testimony. This issue 

is of great importance to the public and to me personally. 

First of all, I want to thank the National Association of Clean 

Water Agencies who helped me get a bill through here when the 

GAO came forward with the opinion that Federal agencies should 

not have to pay their stormwater fees because it was a tax here 

in the District of Columbia, and of course the Federal Government 

cannot tax. Of course, it was a fee for the homeowners. It was a 

fee for the businesses, and ultimately the Congress agreed it was 

a fee, and so the Federal Government is paying its share as well. 

I do want to speak about the visibility issue that my colleagues 

have raised. It is certainly true that the surface transportation bill 

which had to be pulled even though people do express real interest 

in roads and transit, it had to be pulled here and hopefully will 

come back, but the invisibility of public works underground surely 

has something to do with the problem we face here, and that arousing the public is important. 

Let me suggest that when there is a problem, it is not hard to 

arouse the public on clean water. We had a lead in the water scare 

here, right here in the Nation’s capital. It aroused the public a lot. 

We had hearings here. As you are aware, lead or traces of lead in 

the water and its effect on children, on pregnant women, and then 

people began to distrust the water, and my colleague who says, 

well, this is an alternative. This is America. The whole notion that 

we have come to the point where some people believe you have to 

42 

pay for water in order to have clean water is a step way back in 

the extraordinary progress our Nation has made. 

So let me put it this way. We have at least 33 States at last 

count who were in the same position that the District of Columbia 

that I represent is in, where the water comes from a single source, 

a combined sewer system. That was the way to do it when these 

older systems were built. 

So we have two problems. One is containing the water when 

there is excessive rainfall so that you get the water contaminating 

the river and everything around it, and we have two extra ordinary 

rivers here, one of which is very important for our water supply, 

the Potomac River, and then you have a problem that increasingly 

I believe we are not dealing with and do not know how to deal 

with. It is one thing to force the agencies to make sure there is not 

lead in the water and there is not arsenic in the water. But now 

we have reports of substances in the water that we have never had 

before, such as antibiotics. 

No one has to my satisfaction at least said to me that when these 

antibiotics are in the water because of natural waste, particular in 

stormwater overflow systems; that no one has assured me that the 

water I am drinking is not contaminated with some of these newer 

substances. I would simply like to get your views on whether we 

are informing the public in the right way. 

We are going to talk about pipes underground and even the very 

important issues here, and I thank the chairman for this committee about how to finance them because that is about the how, 

not just the what. As long as we are talking about something that 

the public cannot see, feel, visualize, feels strongly about, I am not 

convinced we are going to get anywhere on this subject. 

So I raise the issue that makes us an advanced Nation, the notion that you can draw your water supply and be assured that it 

is safe separates us from developing nations, something that the 

public assumes. How we can raise the level of visibility of clean 

water and not simply what it takes for the water to go through, 

which gets fairly technical, I would like to hear all that you may 

have to say on how we can talk about what is really at issue, what 

the public really cares about, which is what comes out the pipes, 

not the pipes and the infrastructure that delivers it. 

Yes, sir. 

Mr. EGER. Thank you, ma’am. 

We could not agree with you more, the Water Environment Federation. As a matter of fact, just within the past month the board 

of trustees of the Water Environment Federation has pledged a 

half million dollars to drive a messaging campaign that we are calling Water’s Worth, and we have invited many of our associates 

here at the table and many of those in the water industry to join 

us as well. 

We have an advantage, as does many of the associations here, 

where we have what we call a ground game. We have member associations, our sectionals that represent States that are involved in 

local communities that, quite frankly, have been underutilized by 

many of us in the association world, but are just as anxious and 

hungry as you are driving this message and getting the concern 

that we need to make this investment. 

43 

We are looking at a 3- to 5-year commitment to this messaging. 

I mentioned earlier in my testimony that we launched it with our 

research foundation and New York Water Group. We are now having a billboard in Times Square that talks about the value of water 

and what it’s worth, and on March 22nd, which is World Water 

Day, we will be launching this initiative with our member associations, but we hear you. 

I spent 20 years in this business, many of those as Utility Director, and I am frustrated as well with the under appreciation, and 

we have got to take the cover off of it, and we have to talk about 

it more. Hopefully you will see more from all of us in this industry 

to do that. 

Ms. NORTON. Yes. I thank you for that effort, I must say. 

Mr. ARNDT. Congresswoman, many of your comments address 

the issue of drinking water, and I would start with the statement 

that there is no safer water in the world than the water that we 

have here in the United States. That said, it is a continuing quest 

to maintain that quality. 

Ms. NORTON. You really think the water in the United States is 

safer, for example, than the water in some other advanced countries in the world? 

What do you say about antibiotics in the water? 

Mr. ARNDT. Well, one of the things that I need to point to is that 

every year every water supplier sends out something called the 

consumer confidence report, which provides the details on what the 

quality of the water is in that particular community. Unfortunately, those documents get very little readership, and there are 

actually proposals under consideration right now to change the 

method in which those consumer confidence reports are distributed. 

We unfortunately suffer under the circumstance that what is out 

of sight is also very often out of mind, and the only time it becomes 

obvious is when there is a problem or a failure, and unfortunately 

that does nothing but undermine the confidence of the public and 

just as you have indicated. 

One of the things that we need to do as an industry, and I am 

sure all of the associations at the table here have some level of effort going forward to do just that; we need to make sure that we 

reach out to every group of stakeholders out there that have a benefit or a role to play in our water supply, whether it is manufacturing that needs our water, whether it is the general public that 

needs the water for drinking and sanitation, and that is something 

that we need to do day in and day out, and it just as important 

as financing our infrastructure because ultimately we can invest in 

the best infrastructure in the world, but if the public will not use 

it, it has become a wasted expenditure. 

And I think that is the message you presented here and the prior 

Congressman. Sometimes we need to be a little bit more dramatic 

about it to make sure that the public understands what the challenge is before us. There is no silver bullet. We just need to keep 

working at it. 

Ms. NORTON. I appreciate what you are saying. I do not think we 

should undermine confidence in our water supply. I mean, when I 

got into restaurants, I say, ‘‘Give me DC water.’’ We have a terrific 

waterworks. They call themselves water. They no longer put the 

44 

word ‘‘sewer’’ in their name. It used to be call the Washington 

Sewer Authority or something, but they call themselves water, and 

they try to sell the notion that the water is safe, and I do drink 

the water. 

On the other hand, you and I agree that as long as people simply 

have confidence, do not read the reports that you are speaking 

about, they apparently are not awakened to the issue sufficiently 

to pay for cleaner water, and you see certainly Congress is not. 

So the notion that the gentleman indicated about raising the consciousness is very important, not to say, by the way, that we had 

lead in the water here. We did not say everybody panic. We indicated though that you had to be careful about young children. 

I drink the water even though I do not know if there are antibiotics in it, but I am not sure that my new 1-month-old grandchild 

should have anything to do with this water, even though I believe 

it is safe for me. We are finding things in children, cancers of the 

kind that were not heard of when I was a child. I do not know 

what the cause is. I know a lot of people just do not want to take 

chances, and since the one ingredient that we all share is water, 

I think the people who are going to buy this, first and foremost, 

are people who have children under 18, because they do not want 

to be responsible for exposing very young bodies to what they may 

be more vulnerable to than we are. 

So I think this is a narrow issue, Mr. Chairman, and I appreciate 

your indulgence. I just want to make this point because I am very 

pleased that you raised it. I know that there are countries that do 

a better job in finding antibiotics, for example. I certainly do not 

want to undermine the confidence of the American people in their 

water supply. 

At the same time I do believe that the posters and the messaging 

that is going up in Times Square and around the country will help 

people to understand that this is not all for free and that we all 

have to pitch in. 

Thank you, Mr. Chairman. 

Mr. GIBBS. Thank you. 

What we are going to do I have a quick question or comment, 

and I do not know if anybody wants to respond. Then Mr. Bishop 

has the last question and we are going to wrap it up. 

But I wanted to go back to a little bit of the discussion and give 

you what my thinking is. We were talking about the SRF and the 

EPA and what is the vehicle to administer like the WIFIA Program 

for an example. Now, my thoughts are and my understanding the 

way how things work now in the SRF is that the EPA, through a 

very complicated formula process, capitalizes Federal dollars to the 

SRF to the States. 

Now, the reason in the draft bill, and it is one of the reasons we 

are having this hearing, is we are trying to figure out the best way 

to go. As we all know, the SRFs are smaller projects, and this draft 

legislation gives us the ability for them to aggregate and use the 

WIFIA concept, the bigger dollars. But the reason we at this point 

have the EPA administering that or being the vehicle is because 

these are bigger projects, and we are trying to allocate, as we all 

know, a limited amount of dollars. 

45 

And so if you think it, and this is how you will probably want 

to respond, how the SRF is capitalized, and we are talking bigger 

dollars, the question is the SRF. It has got to be holistic and look 

at the whole country. That is kind of our thinking right now, our 

rationale. 

So I would love to hear what your thoughts are. You know, what 

is the best way to administer the program? Yes, Mayor Ballard. 

Mr. BALLARD. Mr. Chairman, thank you. 

Of course, I would tell you from the U.S. Conference of Mayors’ 

perspective, we like local. We like as close as you can. So that is 

what we are really just on record for that. 

Mr. GIBBS. Well, I obviously believe in federalism and think that 

local is better, too. But I guess what I am thinking is we have to 

have some mechanism. We could be talking, you know, hundreds 

of millions of dollars for these big projects, and who is going to decide, you know, if it should go to New York City or if it should go 

somewhere else. 

Mr. BALLARD. I understand that. But as much local input as possible, and I realize that you are talking State at this point. I understand that. 

Mr. GIBBS. Yes. 

Mr. BALLARD. But we would like that. 

Mr. GIBBS. Yes, Mr. Williams. 

Mr. WILLIAMS. I would just offer that each State has big dollar 

projects that they could utilize innovative financing for, and I 

would support Mr. Ballard in terms of local is better. I would, 

being from California, also urge that the allocation formula for distributing funds to the States be updated. There are plenty of big 

dollar projects within all of the States, so it is not just New York 

City or Chicago that would benefit. It is nationwide. 

Mr. GIBBS. Mr. Arndt. 

Mr. ARNDT. To clarify my earlier comments, one of the dynamics 

that we faced with the SRFs is that they are largely unable to finance the large projects. I will not say that it never happens, but 

it is very rare to find projects, for example, exceeding $20 million 

that are financed by the SRFs, and it seems to me that one of the 

things that we need to overcome and can overcome, as has been included in this with the draft legislation, is to allow the large 

projects to go for direct funding because there are certainly economies and efficiencies of doing that. 

The SRFs clearly have a relationship with the smaller and 

midsize utilities, and that is why I believe the bill is drafted as it 

is, to allow the SRF to be an intermediary for that particular purpose. So I do not think that the SRF is perhaps best equipped to 

deal with those larger utilities, and that is why we endorse the bill 

as it has been presented. 

Mr. GIBBS. Mr. Petersen. 

Mr. PETERSEN. It may be another dimension here. Our experience with the SRF administrators in various States is that they are 

not always receptive to alternative approaches to project delivery. 

We have run into several State SRFs who actually oppose designbuild contracting, for example, as opposed to traditional design-bidbuild, and when you expand that to design-build-operate or the full 

P3 as we have discussed, the design-build-finance-operate, there is 

46 

actually institutional opposition to that degree of private sector involvement, long-term operations, private financings, some of the 

complexities that Mr. Wilson talked about with private equity capital. 

So if you run this through the States you may well find yourself 

in many circumstances running into that kind of almost ideological 

opposition to that degree of private sector involve in public water 

infrastructure. 

Mr. GIBBS. OK, great. Yes, Mr. Petersen. 

Mr. PETERSEN. Yes, as I stated before, the States, especially, I 

believe, New York, have a system in place where they are able to 

divide the monies up for the larger projects as well as the smaller 

projects, and maybe there might be some tweaking of the SRF, you 

know, some of the things that have been in previous bills and 

would be in this bill to help the States better manage the funds so 

that the larger projects as well as the small projects can get the 

funds. 

The WIFIA legislation would allow some of the larger projects to 

get that funding, but would also help on the bottom end of it for 

them to go further down the list with their existing SRF funding 

to reach the smaller projects. So I think it is a win-win through the 

States. 

Mr. GIBBS. Great. Thanks. 

One just quick question, Mr. Williams. I have to comment because I am always impressed when I hear people doing what you 

said you are doing out there with the biodigester. Is there a lot of 

that starting to happen in the municipalities? Are you kind of leading the charge? 

Mr. WILLIAMS. I believe that my utility is the first that actually 

is powering its entire treatment plant solely from wastes that come 

in. However, I will say that that is something is getting a lot of 

attention. You can hardly open any kind of an industry journal and 

not read about the advances that are being made across the country in terms of utilization of biogas and bringing in high-strength 

waste, fats, oil, and grease to digest and produce biogas. It is these 

types of things that are very common in communities. 

So I think it is certainly catching fire across the country. 

Mr. GIBBS. Yes, Mr. Petersen. 

Mr. PETERSEN. I would say on this point and just for your information, there is a major contracting signing happening this afternoon at DC Water, as Representative Norton indicated for a design-build-operate biogas cogeneration facility right down here 8 

miles south of here at Blue Plains Waste Water Treatment Plant. 

They are taking biogas from a new set of digesters they are going 

to build, and they are going to produce a lot less sludge; take that 

energy and build a cogeneration facility to run the biosolid treatment plant and reduce the electric bill at DC Water. They might 

have even gone P3 with that project had tax exempt financing been 

available for the private DBO firm. 

Mr. GIBBS. I have always been a strong proponent. We have got 

some digesters in my area of the country, not municipalities, but 

they are involved in it because it is a private entity, and they are 

moving the sludge from a sewage treatment plant, and they are digesting. Of course, as you all know, it does two things. It produces 

47 

energy, but it also is less stuff going into the landfill and it is great 

for the environment. 

You do not hear a whole lot about that because maybe it is not 

as glamorous as some of the other things, but it is a real good program. 

Mr. Wilson, would you like to comment quickly? 

Mr. WILSON. I would just add that from the public-private partnership standpoint projects like biogas generators, also water recycling facilities that can generate revenues for a municipality, we 

can help to implement those projects and then monetize the value 

of the future revenues coming off of those projects as a way to reduce the cost for the municipality. So that can be part of the P3 

package. 

Mr. GIBBS. Great. Mr. Bishop. 

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

I am sort of back to where I was a little while ago. As I indicated, we chose when we did our bill to route the WIFIA type funding through the SRF in part because we heard from the stakeholders that that was a process they were familiar with and though 

that worked and we should keep. 

The second concern that I had was that if we create a separate 

funding mechanism that does not go through the SRF, that ultimately the SRF withers away. I will tell you what my frame of reference is. My background before coming to Congress was higher 

education. I was a college administrator for 29 years. 

I should point out I am not a snob, and I should also point out 

that I have somehow maintained my faith. 

[Laughter.] 

Mr. BISHOP. But there is a Revolving Loan Fund in higher education called the Perkins Revolving Loan Fund. You all may remember it was the National Defense Student Loan Fund or the National Direct Student Loan Fund. That has not received a new Federal capital contribution since, I think, 2000 or 2001, and under 

current law, it is slated to go out of existence in 2014. So I am concerned that if we create a separate funding stream that is apart 

from the SRF with the pressure that appropriators are under, that 

it will be an easy call to stop the Federal capital contribution to 

the SRF, and that over time we will see the SRF suffer the same 

fate as the Perkins Loan Fund I think is about to suffer, although 

I hope we can fight that off. 

So I guess I want to, again, put to you as the stakeholders and 

the practitioners: is that a concern that you share? Am I worst casing it? 

Someone, please. Yes, Mr. Williams. 

Mr. WILLIAMS. That is definitely a very significant concern of 

NACWA, the concern being that Congress has all kinds of pressures, and there are all kinds of demands for money and financing, 

and to the extent that if you have something out there separate, 

it is like, well, did we not address that and they got their money, 

and you move on. 

So the SRF has been a mainstay for 25 years, and NACWA 

would certainly like to see that continue. So it is a concern, and 

that was part of our testimony that it should not be to the detriment of the SRF with something like the WIFIA. 

48 

Mr. BISHOP. Thank you very much. 

Anyone else care to comment? 

Mr. ARNDT. I guess I would just reemphasize what I said earlier, 

that WIFIA and the SRF program are not in competition with one 

another. They are dealing with two different sets of clients, as it 

were, in that the SRFs are very much providing funding for those 

that do not have the ability to access funding at all under highly 

subsidized circumstances typical. 

WIFIA does not address that need. WIFIA basically provides 

money at the margin at the lowest possible cost for those that need 

to do projects. 

Mr. BISHOP. And I think I heard you say before that you think 

that that would be more for the larger project, and the SRF would 

be more for the smaller project. Is that what I heard you say before? 

Mr. ARNDT. No. If I did, I did not intend to say that. 

Mr. BISHOP. OK. 

Mr. ARNDT. Certainly the direct access for the larger projects is 

there, but the SRFs also have access where they can essentially 

put together a pool of projects which may be smaller. 

Mr. BISHOP. So what I think you are saying is that if we were 

to go this separate route, it would be incumbent upon all of us to 

make sure that we protect the SRF, that one does not fall away because we are pursuing another avenue. I would hope that that is 

something that we would all agree on. 

Mr. Chairman, thank you very much and thank you all very 

much. 

Mr. GIBBS. Thank you very much, and like I said, we will have 

our second panel on March 21st, I believe it is, on this issue. So 

thank you for coming, and this adjourns the committee. 

[Whereupon, at 12:19 p.m., the subcommittee was adjourned.] 

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