Water Infrastructure: Approaches and Issues for Financing Drinking Water and Wastewater Infrastructure
Published: 2013-03-13T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The nation faces costly upgrades to aging and deteriorating drinking water and wastewater infrastructure. Frequent and highly publicized incidents of combined sewer overflows into rivers and streams, as well as water main breaks in the nation's largest cities, are the most visible manifestations of this problem.
A variety of approaches have been proposed to help bridge the potential gap between projected infrastructure needs--estimated by EPA as almost $335 billion for drinking water infrastructure and $298 billion for wastewater infrastructure--and current funding. GAO has conducted recent work on three of these approaches. In addition, GAO's recent work has addressed rural water infrastructure funding and economic recovery, as well as utilities' use of asset management, an approach to planning for and managing infrastructure costs.
This testimony is based on a body of work from August 2002 through October 2012 and focuses on (1) EPA's Clean Water and Drinking Water State Revolving Fund programs; (2) stakeholders' views on creating a clean water trust fund, a national wastewater infrastructure bank, and public-private partnerships for wastewater infrastructure; and (3) issues in financing drinking water and wastewater infrastructure. GAO's testimony summarizes the results of issued reports.
GAO made recommendations in past reports to strengthen utilities' use of asset management and coordination of rural water infrastructure funding. EPA generally concurred with the recommendations, taking action on some and beginning action on others.
section_title: What GAO Found
paragraphs: The Environmental Protection Agency's (EPA) Clean Water and Drinking Water State Revolving Fund (SRF) programs are the largest sources of federal assistance to states and local communities for funding drinking water and wastewater infrastructure. In fiscal year 2012, EPA funded the Clean Water SRF program $1.5 billion and the Drinking Water SRF program $918 million from congressional appropriations. EPA grants capitalization funds to states, which in turn provide low- or no-interest loans to local communities or utilities to pay for water distribution pipelines, treatment plants, sewer lines, and other similar infrastructure.
GAO reviewed three of the approaches proposed to pay for the nation's drinking water and wastewater needs, each of which offers a different means to fund and finance projects. To understand these approaches as they apply to wastewater infrastructure, GAO surveyed stakeholders, including industry representatives and associations and federal, state, and local government officials. GAO's reports identified the following issues with each approach:
A clean water trust fund would provide a dedicated source of funding, such as an excise or other tax, for wastewater infrastructure. Stakeholders identified three main issues that would need to be addressed in setting one up: how a trust fund should be administered and used, what type of financial assistance should be provided, and what activities should be eligible to receive funding. A majority of stakeholders said that a trust fund should be administered through EPA in partnership with the states, but they differed in their views on how a trust fund should be used.
A national infrastructure bank would use public and/or private funds to finance infrastructure projects through a variety of loans, loan guarantees, and other mechanisms. A majority of stakeholders supported the creation of such a bank but also identified three issues that should be considered in designing a bank: mission and administrative structure, financing authorities, and project eligibility and prioritization.
Public-private partnerships encourage private investment in infrastructure projects. GAO identified seven municipalities that have entered into privately financed partnerships for wastewater infrastructure. Municipal and company officials identified advantages to these partnerships, such as having access to sources of financing other than traditional sources, but also identified challenges to using partnerships. Local opposition is one challenge, as is the complexity and difficulty of contracting involved.
GAO's work on asset management, among other things, highlights the importance of targeting federal funding to communities with the greatest need and spending funds efficiently. For example, in 2004, GAO identified opportunities for EPA to improve its promotion of asset management to utilities-- an approach that could give utilities the information and analytical tools they need to manage existing assets more effectively and to plan for the future. Since then, EPA has implemented GAO's recommendations on asset management by, among other things, holding workshops and coordinating initiatives to provide asset management information.

section_title: Letter
paragraphs: I am pleased to be here today as you consider the infrastructure needs  facing the nation’s drinking water and wastewater systems. As you know,  the nation’s water utilities face the task and costs of upgrading aging and  deteriorating infrastructure in both drinking water plants and wastewater  treatment systems, including collection systems, treatment plants, and  distribution systems. Frequent and highly publicized incidents of  combined sewer overflows into rivers and streams, as well as water main  breaks in the nation’s largest cities, have been perhaps the most visible  manifestations of this infrastructure problem. In its most recent needs  surveys, the Environmental Protection Agency (EPA) estimated that the  funding need for drinking water infrastructure totaled $335 billion (in 2007  dollars) and wastewater infrastructure needs totaled $298 billion (in 2008   These needs are made more daunting by the limited resources  dollars).and budgets facing all levels of government.
GAO, Clean Water Infrastructure: A Variety of Issues Need To Be Considered When  Designing a Clean Water Trust Fund, GAO-09-657 (Washington, D.C.: May 29, 2009). asset management, and EPA’s existing programs to finance drinking  water and wastewater infrastructure (water and wastewater  infrastructure). These reports have generally been informational, and we  have not made recommendations to EPA, but in cases where we did and  EPA provided an opinion, it generally concurred with our  recommendations. My statement today is based on our prior work issued  from August 2002 through October 2012 and focuses on (1) EPA’s Clean  Water and Drinking Water State Revolving Fund (SRF) programs; (2)  views of stakeholders on creating a clean water trust fund, a national  infrastructure bank for wastewater, and public-private partnerships for   and (3) issues facing federal agencies, states,  wastewater infrastructure;local communities, and utilities in financing drinking water and wastewater  infrastructure. Detailed information about scope and methodology can be  found in our issued reports. We conducted this work in accordance with  generally accepted government auditing standards.
subsections: section_title: Background
paragraphs: Drinking water and wastewater infrastructure improvements are largely  paid for by communities or utilities and their ratepayers, through the water  and sewer rates they pay. Drinking water infrastructure involves treatment  plants, distribution pipelines, and other equipment needed to take water  from natural sources, such as rivers, lakes, and groundwater aquifers,  treat it, and then provide it to households, businesses, and others for  drinking and other uses. Wastewater infrastructure includes collection  systems, tanks, treatment equipment, and other related equipment that all  transport wastewater from homes, businesses, and other sources for  treatment and discharge, generally, into a nearby body of water.
A number of federal agencies provide funding to assist communities and  utilities in financing water and wastewater infrastructure construction and  rebuilding projects. In addition, the federal government subsidizes  infrastructure projects through the tax exemption for municipal bonds,  which reduces localities’ borrowing costs. Table 1 describes the  assistance provided by the different federal agencies.
The issue of how the federal government should help to finance the  nation’s water and wastewater infrastructure involves several  considerations. First, the entity to administer the assistance can include a  federal agency, a special-purpose entity, or a public-private partnership.  Special-purpose entities include government corporations and  government-sponsored enterprises.the nation’s infrastructure is the source of funding for the financial  assistance provided. Such funding can be public, such as appropriations  from the federal, state, or other governments, or private, such as private  investment or revenues and other income from the enterprise. Third, the  financing provided for infrastructure projects can come in a variety of  forms: grants, loans, loan guarantees, debt or equity purchases,  insurance for project costs, bonds, and others. And, finally, projects  eligible to receive financing can be public and/or private and can include  one or more aspects of a project, including design, capital construction,  and other support.
section_title: EPA’s Clean Water and Drinking Water State Revolving Funds Capitalize State- Managed Revolving Funds
paragraphs: EPA’s Clean Water and Drinking Water SRF programs are the largest  sources of federal assistance to states and local communities for funding  drinking water and wastewater infrastructure. EPA receives federal  appropriations that are then, in turn, granted to states to use in  conjunction with state funds to provide loans for improvements at  communities’ water and wastewater treatment systems. From fiscal years  2003 through 2012, appropriations for the Clean Water SRF averaged  about $1.2 billion annually and about $913 million annually for the  Drinking Water SRF. Figure 1 shows the total appropriations to EPA for  the two programs for fiscal years 2003 through 2012.
The Clean Water and Drinking Water SRF programs provide states and  local communities with an independent and sustainable source of  financial assistance by providing capital for state SRF funds. The states  are required to match 20 percent of the federal grant money. From  these federal and state funds, states then typically provide assistance in  the form of low- or no-interest loans to communities or utilities, repayment  of which replenishes the funds and provides the ability to fund future  loans for additional projects.
The Clean Water SRF was established in 1987 in amendments to the  Clean Water Act, which was enacted to protect the nation’s surface  waters, such as rivers, lakes, and coastal waters and to maintain and  restore the physical, chemical, and biological integrity of these waters.  Funds can be used to pay for projects such as constructing or upgrading  secondary or advanced wastewater treatment facilities, construction of  new sewers or storm sewers, and similar projects, among other things.
Clean Water SRF funds used for financial assistance for construction or upgrades of  treatment plants may be provided only to municipal, intermunicipal, and interstate  agencies.
Drinking Water SRF program. The act, which was passed in February  2009, required that projects funded with Recovery Act program funds had  to be under contract within 1 year of the act’s passage, or February 17,  2010. We reported in June 2011 that states had awarded contracts and  obligated this funding, which they used to pay for major infrastructure  projects.
section_title: Stakeholders Identified Issues to Consider in Designing a Clean Water Trust Fund, a National Bank for Wastewater Infrastructure, and Public-Private Partnerships
paragraphs: A variety of approaches have been discussed to pay for the nation’s  water and wastewater infrastructure needs. In May 2009 and June 2010,  we reported on the views of stakeholders, including individuals and  groups from the wastewater industry and federal, state, and local  governments with knowledge of water and wastewater infrastructure  issues, of what is needed to create three of these financing approaches.
subsections: section_title: Clean Water Trust Fund
paragraphs: A clean water trust fund would provide a dedicated source of federal  funding for wastewater infrastructure, similar to federal trust funds such  as the Highway and Airport and Airways Trust Funds, which are used to  account for funds that are dedicated for spending on a specific purpose.  As authorized by law, the federal government may control a trust fund, as  well as its earnings, and raise or lower future trust fund collections and  payments or change the purposes for which the collections are used.  Stakeholders concluded that a number of issues need to be addressed in  creating a clean water trust fund.administration and use of the trust fund, (2) the type of financial  assistance that should be provided for projects, and (3) the activities  eligible for funding.
The issues identified were (1) the  Administration and use of a trust fund. Stakeholders told us that designing  a clean water trust fund would involve deciding what agency or entity  would administer the fund and whether the trust fund would be used to  fund the Clean Water SRF or a separate program. A majority of  stakeholders (15 of 20) expressed the view that a trust fund should be  administered through an EPA-state partnership like the current Clean  Water SRF program. Four of the remaining stakeholders thought that  another entity should administer the fund, and one had no opinion on the  matter.
Stakeholders had mixed views on how a trust fund should be used. About  one-third (7 of 20) thought that a trust fund should be used to only fund  the existing Clean Water SRF. These stakeholders said that they had an  interest in building on the success of the existing program, avoiding  redundant administrative costs associated with establishing a new  program, and providing a dedicated source of funding for the existing  program. Three of 20 stakeholders said that a trust fund should fund a  separate and distinct infrastructure program from the Clean Water SRF.  Some said that a separate program was needed because Clean Water  SRF loan amounts can sometimes be inadequate to fund needs in large  urban areas and that smaller communities may lack the administrative  capacity to go through the process. However, five of 20 stakeholders said  they favored using a trust fund to both fund the Clean Water SRF and to  fund a separate program. In contrast, other stakeholders (3 of 20)  opposed the creation of a trust fund because they said that utilities should  be self-sustaining through the rates they charge their customers and by  more efficiently managing their systems. The remaining stakeholders said  the fund should be used for other purposes.
Type of financial assistance. Another design issue that stakeholders  identified was specifying the type of assistance—grants or loans—that a  clean water trust fund would provide. More than half of the stakeholders  (13 of 21) favored distributing funding through a combination of grants  and loans. The type of assistance provided by a trust fund, according to  many stakeholders, should be tailored to the applicant’s needs and  capacity. Other stakeholders said that while loans impose discipline on  borrowers, grants may be needed for certain communities that cannot  make loan repayments, such as those with declining or low-income  populations. In contrast, a few stakeholders thought that either loans or  grants should be provided from a clean water trust fund.
Eligible activities. Stakeholders said that designing and implementing a  clean water trust fund would involve determining the type of wastewater  infrastructure activities that the fund would support. The majority of  stakeholders supported using funds to pay for planning and designing  wastewater projects (18 of 21) and for capital costs of projects (19 of 21),  similar to the Clean Water SRF.
Funding a Clean Water Trust Fund: Our May 2009 report identified  potential sources of revenues for a clean water trust fund, but each of  these faces obstacles to implement. A variety of options could be  enacted, including excise taxes on products that contribute to the waste  stream, additional taxes on corporate income, a water use tax, and an  industrial discharge tax. However, it may be difficult to raise substantial  sums for a clean water trust fund from any one source. Table 2  summarizes the options we identified and the implementation obstacles.
A national infrastructure bank could finance wastewater infrastructure  through a variety of mechanisms, such as directly loaning money to  eligible projects, guaranteeing municipal bonds to lower costs, and  pooling loans from numerous smaller municipalities to lower costs. The  majority of stakeholders responding to our questionnaire about creating a  national infrastructure bank to fund wastewater projects supported the  concept overall, but they identified three key areas that would need to be  considered in designing such a bank. stakeholders are similar to those raised in creating a clean water trust  fund: mission and administration, financing authorities, and project  eligibility.
The three areas identified by  Mission and administration. A majority of stakeholders supported the  creation of a bank, but their views varied on its mission and administrative  structure. Of the 20 stakeholders who supported creation of a bank, about  two-thirds (13) said its mission should be to fund infrastructure in multiple  sectors, such as transportation, energy, water, and wastewater. The  reasons for their views included that it would allow for coordination across  sectors and that financial experts at such a bank would be able to apply  their expertise to a wide range of projects. In contrast, one-third of  stakeholders (7 of 20) said that the bank’s mission should be focused  only on water and/or wastewater infrastructure.
Stakeholders did not agree on whether a bank should be administered as  a new responsibility for an existing federal agency, structured as a  government corporation, or structured as a government-sponsored  enterprise. As we have previously reported, an entity’s administrative  structure affects the extent to which it is under federal control, how its  activities are reflected in the federal budget, and the risk of exposure of  U.S. taxpayers.
Type of financial assistance: Most stakeholders also agreed on some of  the mechanisms that a bank should offer for financing projects. In  particular, a majority of stakeholders said that a bank should issue direct  loans to projects (19 of 29) and loan guarantees (15 of 29) for projects.
Almost half of stakeholders (14 of 29) supported pooling loans for  infrastructure projects into a larger bond to lower borrowing costs.
Eligible projects. Stakeholders differed in their views of what projects to  fund through a national infrastructure bank but they agreed on how the  projects should be prioritized, such as whether a bank should be used  exclusively for large projects. Half of stakeholders (12 of 24) said projects  of all sizes should be eligible for bank financing, while a third (8 of 24)  noted that only large projects should be eligible. One reason for supporting larger projects for financing was that these are beyond the  capacity of the Clean Water SRF to fund. In addition, a majority of  stakeholders agreed that a bank should prioritize projects for funding that  address the greatest infrastructure need (18 of 29) and that generate the  greatest public health (17 of 29) and environmental benefits (15 of 29).
Stakeholders could select more than one mechanism that a bank could offer, and thus,  the total number of respondents selecting mechanisms may be greater than 29.
Funding. A majority of the stakeholders we surveyed agreed on the  financing authorities for a national infrastructure bank, including how it  should be funded and how it should finance projects. Specifically, most  stakeholders (20 of 22) agreed that the federal government should  provide all or some of the initial capital for a national infrastructure bank,  though four suggested that federal funds should be augmented by private  funds. Further, most stakeholders (21 of 23) agreed that a bank should be  authorized to generate its own funds for operating expenses and lending,  using multiple financing mechanisms (15 of 23). Some of these  stakeholders stressed the need for a bank to have access to low-cost  capital through borrowing from the Department of the Treasury and  issuing tax-exempt bonds. However, we noted that the Internal Revenue  Service said that these guaranteed bonds are not exempt, so a statutory  exemption to allow tax-exempt, guaranteed bonds would be needed to  accomplish this.
section_title: Public-Private Partnerships for Wastewater Infrastructure
paragraphs: A third approach for financing wastewater infrastructure is to encourage  private investment in projects, including through public-private  partnerships at the municipal level. A privately financed public-private  partnership, as defined in our June 2010 report, is a contractual  agreement in which the private partner invests funds in the wastewater  project, but the agreement does not include full privatization, in which the  municipality sells its wastewater infrastructure assets to a private  partner. In that report, we identified and reviewed only a few privately  funded public-private partnerships developed for wastewater since 1992,  concluding that the use of such approaches is still uncommon for  wastewater. Stakeholders from municipalities and private companies  engaged in such partnerships cited several advantages and challenges in  their use. The seven partnerships we identified and reviewed, the  parties administering the partnership, the eligible activities and assets,  and the form of financial assistance are described in table 3.
Officials from the municipalities and companies we interviewed reported  advantages of privately funded public-private partnerships, including  faster delivery of facilities or upgrades, access to alternative sources of  financing, cost and operational efficiencies, access to expertise and  technology solutions, up-front payments to municipalities, and increased  focus by local governments on their other functions. For example, two of  the municipalities we interviewed were facing regulatory deadlines that  required them to upgrade their facilities or pay fines. Company and  municipal officials said that private procurement may be faster because it  is more streamlined than public procurement. Other municipal officials  said that they could not access the bond market to pay for their project,  and another community official said that it was difficult to get the public to  approve their bonds, and the public-private partnership offered an  alternative source of financing.
Challenges that municipal and company officials reported included public  and political opposition, higher costs to borrow with private financing,  difficulties with combining public and private financing, loss of municipal  control over a project, lack of experience with public-private partnerships,  costly and difficult contracting, and legal issues.
The challenge most often cited by municipal and company officials  was public and political opposition. The public is often concerned  about the possibility that a company would not be as responsive to  ratepayers as a municipal government; other public concerns are  about job losses and sewer rate increases. For example, one  community we reviewed terminated its agreement in 2002 because, in  part, of a public reaction to rate increases. In another case, public  opposition derailed the development of a partnership.
Financing challenges include the fact that private financing generally  costs more than public financing and that combining public and  private financing is difficult. In our June 2010 report, we cited a  National Research Council study that said private financing may be 20  to 40 percent more expensive than public financing, although officials  said that tax rules allowed companies to depreciate capital and find  cost savings over the long term. In addition, the public entity must  follow Internal Revenue Service tax rules to avoid changing the status  of existing tax-exempt municipal bonds to taxable bonds, and may  have difficulty meeting the requirements to issue tax-exempt bonds in  the future.
Several municipal and company officials told us that they had  concerns with losing control over their facilities and rates. For  example, officials in Santa Paula, California, told us they experienced  a loss of control over plant design, choice of equipment, and  construction costs after entering into their design-build-finance- operate agreement. The terms of this kind of agreement determine  the extent to which a municipality may retain control in a public-private  partnership.
Municipal and company officials also said that they lack experience  with developing partnerships and that this might limit development of  any such partnerships. Related to this is costly and difficult  contracting, another challenge cited by municipal and company  officials. Finally, state and federal laws may raise difficulties in  entering into public-private partnerships. For example, EPA officials  stated that prior to accepting private financing, municipalities must  repay any remaining federal investment for facilities built under the  construction grants program of the 1970s and 1980s, as well as any  other federal grants.
section_title: Issues with Efficiently Financing Water Infrastructure
paragraphs: As the nation faces limited budgets and funding for federal programs, the  importance of targeting federal funds to communities with the greatest  need and spending funds efficiently increases. Part of this effort, as our  work and that of EPA’s Inspector General shows, is determining which  communities and utilities have the greatest need for funding and targeting  federal funds to help these communities. One way to target funds is to  provide them to communities that are economically disadvantaged. The  Drinking Water SRF program requires states to consider household  affordability, among other factors, in prioritizing drinking water projects,  and it also allows states to provide extra subsidies to disadvantaged  communities, under some conditions (the Clean Water SRF allows states  to consider community financial need in prioritizing funds for projects, but  does not require it). As we reported in June 2011, however, EPA has  limited information about how states target disadvantaged communities  for SRF funding. Furthermore, while the Recovery Act did not require  states to provide funding to disadvantaged communities, it did require  them to provide a portion of Recovery Act Clean Water and Drinking  Water SRF funds to communities without the requirement to repay the  funds—a concept called principal forgiveness—and states targeted this  principal forgiveness to entities that they determined were economically  disadvantaged. While some states had data, according to an April 2011  EPA Inspector General report, EPA did not have the overall data to  ensure that Recovery Act SRF funds were targeted to the disadvantaged  communities.
Our October 2012 report on rural water infrastructure funding shows the  potential for greater efficiency in federal funding. One group of  communities that has a difficult time paying for infrastructure  improvements is small, often rural, communities that have 10,000 or  fewer residents. Unlike large communities, which can spread costs across  a broader public, small, rural communities often cannot pay for  infrastructure improvements through rate increases because they have a  low number of ratepayers to bear the costs. Rural communities also often  lack access to bond markets and cannot, therefore, raise their own capital  to pay for projects. As a result, they are more dependent on federal  financial assistance to help pay for their projects.
In October 2012, we reported on the three largest sources of federal  funding for rural water infrastructure and identified opportunities for these  programs to coordinate and lower the costs to communities applying for  funding from more than one program and agency. Our analysis showed  that program overlap among EPA’s Clean Water and Drinking Water SRF  programs and the Department of Agriculture’s Rural Utilities Service  Water and Waste Disposal program, which provides funding for both  drinking water and wastewater projects in low-income rural communities  of 10,000 or less, can result in potential duplication of communities’  efforts to prepare funding applications and related documents, including  preliminary engineering reports and environmental analyses. Engineers  we interviewed estimated that preparing additional engineering reports  could cost anywhere from $5,000 to $50,000 and that the cost of an  environmental analysis could add as little as $500 to a community’s costs  or as much as $15,000. The additional time and resources add costs to  projects.
Further, we found that inefficiencies in funding projects arose when state- level programs did not cooperate in funding projects. Specifically, the  officials with the Rural Utilities Service in Colorado and North Carolina  reported needing, or expecting, to deobligate more than $20 million that  they had committed to fully fund projects because they were unaware that  the state SRF programs had also committed to fully fund the same  projects. The two Rural Utilities Service state offices could not meet  internal agency deadlines to fully obligate their available funds and, as a  result, had to return these funds to a central headquarters pool for  reallocation. We recommended several actions to improve coordination  among the agencies and programs, such as completing an effort to  develop guidelines to assist states in developing their own uniform  preliminary engineering reports to meet federal and state requirements  and starting an effort to create uniform guidelines for environmental  analyses that could be used, to the extent appropriate, to meet state and  federal requirements. EPA and USDA neither agreed nor disagreed with  these recommendations, but they have implemented one action and have  begun to take steps on the others.
Part of the effort to efficiently finance water and wastewater infrastructure  funds is managing existing infrastructure efficiently to manage costs of  repair and replacement. As we reported in March 2004, comprehensive  asset management is an approach that could give utilities the information  and analytical tools they need to manage existing assets more effectively   Using asset management concepts, utilities  and to plan for the future.and other organizations responsible for managing capital infrastructure  can minimize the total costs of designing, acquiring, operating,  maintaining, replacing and disposing of capital assets over their useful  lives. The steps involved, as we cited in our March 2004 report, include  the following:
Collecting and organizing detailed information on assets. Collecting  basic information about capital assets helps managers identify their  infrastructure needs and make informed decisions about assets. An  inventory includes descriptive information about assets, an  assessment of the assets’ condition, and information on the assets’  value.
Analyzing data to set priorities and make better decisions about  assets. Under asset management, managers apply analytical  techniques to identify significant patterns or trends in the data they  have collected on capital assets, help assess risks and set priorities,  and optimize decisions on maintenance, repair, and replacement of  assets. This can include a life-cycle cost analysis or risk assessment.
Integrating data and decision making across the organization.  Managers ensure that the information collected within an organization  is consistent and organized for the people who need it.
Linking strategy for addressing infrastructure needs to service goals,  operating budgets, and capital improvement plans.
Our 2004 report recommended various actions that EPA could take to  promote asset management, and EPA has taken those actions, including  holding workshops for utilities and coordinating its ongoing initiatives. In  addition, in its SRF sustainability policy, EPA supports asset management  as an approach to increase the longevity of infrastructure. The last time  we reviewed utilities’ use of asset management was in 2002.time, we found that, of large utilities (i.e., those with over 10,000 users),  one-quarter did not have asset management plans. We have not updated  this work and do not know the extent to which more utilities, including  smaller utilities, now have plans. Those utilities that did have asset  management plans reported benefits such as being able to better justify  rate increases and bond ratings. In addition, utility officials believed that  such plans would slow the rate of growth of their costs for capital,  operations, and maintenance.
In conclusion, Mr. Chairman, the funding needs for upgrading the nation’s  drinking water and wastewater infrastructure require attention. Much of  this burden will be borne by local communities and utilities and the  ratepayers using the services provided. Given the magnitude of our  projected infrastructure needs nationwide, it is important that utilities  adopt a strategy to manage the repair and replacement of key assets as  cost-effectively as possible, as well as a plan to sustain their  infrastructure in the long term. The states and federal government have  played a long-time role in assisting local communities and utilities, and  will likely continue to do so. In considering approaches for providing  continued federal assistance, it is helpful to consider how an entity  providing assistance will be administered and funded, how it will finance  projects, and what projects will be eligible. It will also be important to  consider how to target funds to those with the greatest needs and to  spend funds efficiently.
This concludes my prepared statement, Chairman Simpson, Ranking  Member Moran, and Members of the Subcommittee. I would be pleased  to answer any questions you have at this time.
section_title: GAO Contact and Staff Acknowledgments
paragraphs: For further information about this testimony, please contact me at (202)  512-3841 or gomezj@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this testimony. Susan Iott (Assistant Director), Liz Beardsley, Mark  Braza, Cindy Gilbert, Scott Heacock, Rich Johnson, Micah McMillan,  Janice Poling, and MaryLynn Sergent made key contributions to this  testimony.
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