Drinking Water and Wastewater Infrastructure: Information on Identified Needs, Planning for Future Conditions, and Coordination of Project Funding
Published: 2017-09-20T00:00:00

Fast Facts:
EPA estimates that addressing the nation's water infrastructure needs will take about $655 billion over the next 20 years. We looked at programs in 8 federal agencies that help communities plan for these needs, or provide funding to help address them.
For example, the Bureau of Reclamation has helped some communities assess their future water supply and demand. And the EPA and the U.S. Department of Agriculture provided over $4 billion in grants and loans to help pay for water infrastructure projects in 2016.
Previously, we recommended that EPA and USDA coordinate to limit any duplicate efforts, and they have taken steps to do so.

Highlights:
section_title: Why GAO Did This Study
paragraphs: Events such as the discovery of lead in drinking water in Flint, Michigan, and the overflow and damage to the spillway at the Oroville Dam in California have drawn attention to the condition of the nation's drinking water and wastewater infrastructure. Conditions such as population growth or drought may further affect a community's needs and plans for such infrastructure.
GAO was asked to review federal programs that provide funding for drinking water and wastewater infrastructure. This report describes (1) how federal agencies and selected states identify drinking water and wastewater infrastructure needs; (2) how federal agencies have supported selected states' planning for future conditions that may affect needs; and (3) the extent to which federal and state agencies have coordinated in funding projects, and any challenges they faced. GAO reviewed eight federal agencies that provide assistance for drinking water and wastewater infrastructure and selected a nongeneralizable sample of six states—Alaska, California, New Mexico, New York, North Dakota, and Tennessee—on the basis of federal infrastructure funding amounts and geography. For the six states, GAO reviewed infrastructure planning and program documents and interviewed federal and state officials.
section_title: What GAO Found
paragraphs: The Environmental Protection Agency (EPA) and other federal and selected state agencies collect information to identify drinking water and wastewater infrastructure needs through surveys, the administration of agency programs, and studies. EPA's most recent surveys estimated approximately $655 billion of drinking water and wastewater infrastructure needs nationwide over the next 20 years. The seven other agencies GAO reviewed—the departments of Agriculture (USDA) and Housing and Urban Development (HUD) and the Economic Development Administration, Indian Health Service, Bureau of Reclamation, U.S. Army Corps of Engineers, and Federal Emergency Management Agency (FEMA)—collect information on these needs by administering their programs. For example, the Corps collects information on congressionally authorized water projects. Of the six states GAO selected for review, all but Alaska and California had collected data on their needs such as through surveys of communities. For example, North Dakota biennially collects information on drinking water projects from its communities.
The Corps, Reclamation, and FEMA provide technical assistance and funding to support efforts in the six selected states to plan for future conditions that may affect drinking water and wastewater infrastructure needs. For example, the Corps helped Minnewaukan, North Dakota, identify alternatives for reducing flood risks to the city's drinking water and wastewater infrastructure, and Reclamation worked with Santa Fe, New Mexico, to study its projected water supply and demand. The remaining five agencies have at times been involved in long-term planning but do not have established programs for such purposes.
Federal and state agencies in the six selected states have taken actions to coordinate funding for projects while facing several challenges. For example, agencies in most of the selected states had established interagency coordinating groups that reached out to communities needing funding for projects. In some cases, agencies developed written agreements for their coordinating groups, with such goals as simplifying the application process and encouraging agencies to fund projects together. However, agencies in the selected states faced challenges, such as difficulty in developing a set of specific projects that were ready for funding, despite having infrastructure needs. For example, in the six selected states, USDA did not have enough applicants with projects that were developed to the extent needed to receive funding; therefore, USDA did not loan a total of about $193 million in available loan funds for fiscal years 2012 through 2016 to communities in those states. GAO found that federal and state agencies within selected states had taken some actions to help address challenges they faced in funding projects; these actions included conducting joint outreach to develop a set of projects ready for funding. EPA and USDA also have taken actions. For example, in February 2017 in response to a GAO recommendation in a prior report, EPA and USDA issued a joint memorandum outlining five practices to help improve interagency collaboration at the state level on drinking water and wastewater infrastructure projects; these practices include using common application materials and conducting joint marketing or outreach.
section_title: What GAO Recommends
paragraphs: GAO is not making recommendations in this report. Federal agencies and states provided technical comments on a draft of this report that GAO incorporated as appropriate.

section_title: Letter
paragraphs: Recent events such as the discovery of lead in drinking water in Flint,  Michigan, the overflow and damage to the spillways at the Oroville Dam  in California, and frequent sewer overflows throughout the United States  have drawn attention to the condition of the nation’s drinking water and  wastewater infrastructure. Such infrastructure includes drinking water  treatment plants and distribution pipelines; wastewater treatment plants  and sewers; and a system of wells, dams, and reservoirs to hold the  water supply. Across the country, according to Environmental Protection  Agency (EPA) documents, there are about 52,000 community water  systems and 16,000 public wastewater treatment systems that provide  drinking water and wastewater services to the majority of the population.  In addition, the federal government owns a system of about 3,400 dams  to manage and supply water for communities across the country, among  other purposes. Local communities also own and manage their own dams  and reservoirs.
Local governments and their utilities plan investments to repair, replace,  and upgrade drinking water and wastewater infrastructure and pay the  majority of the costs, primarily by charging rates for drinking water and  wastewater services. Communities and utilities can receive funding and  planning assistance from the federal government and their respective  states to repair, replace, and upgrade their drinking water and wastewater  infrastructure. In 2014, the most recent year for which data were  available, state and local governments spent approximately $104.6 billion  on drinking water and wastewater infrastructure projects, and the federal  government spent $4.4 billion, according to 2015 Congressional Budget  Office data.
Federal funding and assistance are available for local drinking water and  wastewater infrastructure projects through programs administered by  eight federal agencies: EPA and the Departments of Agriculture (USDA),  Commerce, Defense, Health and Human Services (HHS), Homeland  Security, Housing and Urban Development (HUD), and the Interior. The  programs administered by these agencies have different purposes and  varying eligibility criteria that may focus funding or assistance to  communities on the basis of population size, economic conditions, or  geographic location. For example, USDA’s Rural Utilities Service provides  water and waste disposal grants and direct and guaranteed loans to rural  communities with populations of 10,000 or fewer, while EPA’s Drinking  Water and Clean Water State Revolving Fund (SRF) programs can  provide funding to communities of all sizes. The eligibility criteria can  focus on particular program goals or geographic areas. For example,  EPA’s Clean Water SRF program prioritizes funding on the basis of water  quality goals, and Commerce’s Economic Development Administration  has established formal nationwide criteria for selecting infrastructure  projects to fund, such as criteria that prioritize projects located in an  economically distressed area. In contrast, Interior’s Bureau of  Reclamation and Defense’s U.S. Army Corps of Engineers have not  historically had drinking water and wastewater infrastructure programs  with specific eligibility criteria; instead, they have generally provided  funding to water projects under specific congressional authorizations.  Similarly, the Department of Homeland Security’s Federal Emergency  Management Agency (FEMA) and EPA provide grant funding for projects  that improve the disaster resiliency of drinking water and wastewater  infrastructure.
Federal agencies can also provide assistance to local communities to  help them plan for future conditions that may affect drinking water and  wastewater infrastructure needs. Such conditions include changes in  population or land use, which can affect demand for services, or changes  in climate, which can cause droughts or flooding, among other things.
You asked us to review the federal programs that provide funding for  drinking water and wastewater infrastructure. This report describes (1)  how federal agencies and selected states identify drinking water and  wastewater infrastructure needs; (2) how federal agencies have  supported selected states in planning for future conditions that may affect  such needs; and (3) the extent to which federal and state agencies have  coordinated in funding drinking water and wastewater infrastructure  projects, and any challenges they face in funding these projects.
To address these objectives, we reviewed our previous reports to identify  the agencies that provide funding or planning assistance to states or  communities for drinking water and wastewater infrastructure and  identified eight agencies that do so: EPA, USDA, HUD, Commerce,  Interior, HHS, Defense, and the Department of Homeland Security. Our  review included interviews with officials from federal agencies’ regional or  state offices and state agencies responsible for overseeing and  administering these programs in a nonprobability sample of six states:  Alaska, California, New Mexico, New York, North Dakota, and  Tennessee. To obtain a diverse sample of states with a range of  coordination experience on drinking water and wastewater funding, we  selected these states on the basis of geographic diversity, number of  federal agencies that provided funding in the state for drinking water and  wastewater infrastructure projects, and the presence or absence of a  formal funding coordination group. State coordination groups were  identified in a 2015 report prepared on behalf of the Small Community  Water Infrastructure Exchange, a network of water funding officials. The  sample of states is not generalizable, and the results of our work do not  apply to all 50 states; however, they provide illustrative examples of state  infrastructure programs. We also interviewed federal and state officials  administering funding from congressionally authorized regional economic  development authorities such as the Appalachian Regional Commission,  Denali Commission, and Delta Regional Authority, as appropriate.
To describe how federal agencies and selected states identify drinking  water and wastewater infrastructure needs, we identified federal  requirements directing EPA and Indian Health Service to collect  information on needs and reviewed these agencies’ most recent reports  on needs, as well as any national, regional, or state reports on needs  issued over the last 10 years by the other six federal agencies and the six  selected states. We assessed the reliability of the data reported by EPA  and Indian Health Service by reviewing documentation on data collection  and interviewing agency officials. We determined the data on drinking  water and wastewater infrastructure needs from each of these sources  were reliable for the purposes of our reporting objectives.
To describe how the eight agencies supported selected states in planning  for future conditions that may affect drinking water and wastewater  infrastructure needs, we reviewed federal and selected state program and  planning documents. We interviewed officials or obtained written  responses from the federal agencies and from state agencies in the six  selected states. State agencies included state water boards and  commissions, infrastructure funding agencies, and emergency  management agencies as appropriate.
To describe the extent to which the eight federal agencies and selected  state agencies have coordinated to fund projects and any challenges they  face in doing so, we reviewed federal and state program documents,  interagency agreements, and project data. We then interviewed federal  and state agency officials on project funding and coordination, as well as  on challenges they face in funding projects. We also compared actions  the agencies took with key considerations for implementing interagency  collaborative mechanisms and practices to enhance and sustain  collaboration identified in our previous work. We reviewed a report by  EPA’s Office of Inspector General on the status of Drinking Water SRF  program funding. We obtained and analyzed fiscal year 2016 funding  data on drinking water and wastewater infrastructure from each of the  federal agencies and assessed the reliability of the data by obtaining  information from agency officials. In some cases, agencies provided  obligation data, while other agencies provided budget allocation data. We  determined the data were reliable for our purposes of reporting total  funding available by agency. Appendix I contains more information on our  objectives, scope, and methodology.
We conducted this performance audit from March 2016 to September  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: This section provides information on federal and state regulation of  drinking water and wastewater infrastructure; federal funding for drinking  water and wastewater infrastructure projects; and our prior work on  coordination of drinking water and wastewater infrastructure funding and  leading collaborative practices and key considerations for collaborative  mechanisms.
subsections: section_title: Federal and State Regulation of Drinking Water and Wastewater Utilities
paragraphs: The Safe Drinking Water Act and the Clean Water Act authorize EPA’s  Drinking Water SRF and Clean Water SRF programs, respectively, and  authorize EPA to regulate the quality of drinking water provided by  community water supply systems and the discharge of pollutants into the  nation’s waters. Under the Safe Drinking Water Act, EPA, among other  things, sets standards to protect the nation’s drinking water from  contaminants, such as lead and arsenic. The Clean Water Act generally  prohibits the discharge of pollutants from “point sources”—such as  discharge pipes from industrial facilities and wastewater treatment  plants—without a permit.
Under the acts, EPA may authorize states to carry out their own safe  drinking water and clean water programs in lieu of the federal program, as  long as the state programs are at least as stringent as the federal ones.  As a result, most states have primary responsibility for enforcing the  applicable requirements of the Safe Drinking Water Act and administering  the applicable requirements under the Clean Water Act. Specifically, for  drinking water utilities, all states except Wyoming and the District of  Columbia have primary permitting and enforcement authority under the  Safe Drinking Water Act. For wastewater utilities, all states except Idaho,  Massachusetts, New Hampshire, and New Mexico have full or partial  permitting and enforcement responsibility under the Clean Water Act.
Drinking water and wastewater systems are managed by utilities that may  be organized differently depending on the city or community they serve.  For example, drinking water service may be provided by one utility, and  wastewater service may be provided by a separate utility, or a single  utility may provide both services. Regardless of the configuration, a utility  can be owned and managed by a municipality, a county, an independent  district or authority, a private company, or a not-for-profit water  association, among others. Utilities may serve a city and neighboring  area, a county, or multiple counties. To pay for operations, maintenance,  repair, replacement, and upgrades of their infrastructure, drinking water  and wastewater utilities generally raise revenues by charging their  customers for the services they provide. Utilities generally identify  planned investments as part of their operating budgets and long-term  capital improvement plans.
Examples of key types of drinking water infrastructure include  groundwater wells, dams, reservoirs, facilities to treat water for drinking,  water storage tanks, laboratories to test the water, and drinking water  distribution pipelines and the service lines that connect them to buildings.  Examples of key wastewater infrastructure include sewer lines, tanks, and  facilities to treat wastewater. Individuals or properties not served by  utilities have private wells and septic systems (see fig. 1).
section_title: Federal Funding and Assistance for Drinking Water and Wastewater Infrastructure Projects
paragraphs: Eight federal agencies administer a number of programs that provide  access to funding and assistance for drinking water and wastewater  infrastructure. Some agencies’ programs allocate funds to state agencies  as grants, and the state agencies in turn use the funds to make loans or  award grants to local governments or to utilities for projects. EPA’s  Drinking Water and Clean Water SRF program, HUD’s Community  Development Block Grant Program, and FEMA’s Hazard Mitigation Grant  Program provide funds in this way. The other five agencies make loans,  award grants, or provide assistance directly to local communities or  utilities to fund water and wastewater infrastructure. The Corps,  Reclamation, Indian Health Service’s Sanitation Facilities Construction  Program, the Economic Development Administration, and USDA’s Rural  Utilities Service provide funds in this way. Additional details about the  programs are described below, in descending order by the amount of  their fiscal year 2016 funding:
EPA. EPA provides annual grants to states to help finance utility  drinking water and wastewater projects nationwide through the  Drinking Water and Clean Water State SRF programs. States use  this funding, and provide a required minimum 20 percent match, to  capitalize their SRFs. The states use the funds to provide low-cost  loans or other financial assistance to communities for, among other  things, a wide range of water infrastructure projects. Loan repayments  and interest payments, as appropriate, are returned to the SRFs and  are available for future loans. However, the ability to sustain the SRF  depends on the loans being fully repaid. In addition, EPA provides  funds from the Drinking Water and Clean Water SRF programs to  tribal nations throughout the United States for drinking water and  wastewater projects. In fiscal year 2016, EPA’s Drinking Water and  Clean Water SRF programs were funded at $863 million and $1.39  billion, respectively.
USDA. Under its Water and Waste Disposal Program, USDA’s Rural  Utilities Service provides grants and loans for drinking water and  wastewater projects in rural areas—defined by USDA as a city, town,  or unincorporated area that has a population of no more than 10,000  inhabitants. USDA can provide assistance for various activities, such  as construction of drinking water treatment and sewage collection  facilities, connection of single-family homes to drinking water  distribution or wastewater collection lines, and training for utility  operators. The Rural Utilities Service allocates program funds to  USDA offices in each state; these offices are required to loan or grant  their funds by 10 months into the year and return any unobligated  funds to USDA headquarters for reallocation to other states. Under  the program, a staff of engineers and loan specialists works with local  communities and their utilities to fund projects, and USDA also  provides funding for technical assistance to help utilities apply for  funding and operate and maintain their drinking water and wastewater  infrastructure. In fiscal year 2016, USDA provided $549 million in  grants and $1.21 billion in loans through its state offices.
HUD. HUD disburses grants to states and local governments through  its Community Development Block Grant program to fund housing,  infrastructure, and other community development activities. The  annual appropriation for the block grants is allocated according to  formulas so that, after setting aside specified amounts for Indian  tribes, insular areas, and special purposes, 70 percent is allocated  among participating metropolitan cities and urban counties and 30  percent among the states to serve cities with populations of fewer  than 50,000 and counties with populations of fewer than 200,000. In  addition, federal law requires that not less than 70 percent of the total  Community Development Block Grant funding be used for activities  that benefit low- and moderate-income persons. Historically,  according to HUD data, approximately 10 percent of total funding has  been used for drinking water and wastewater infrastructure. Total  Community Development Block Grant funding was $3.01 billion in  fiscal year 2016, and, according to HUD officials, at least $381.5  million was used to fund drinking water and wastewater infrastructure.
Indian Health Service. HHS’s Indian Health Service funds and  constructs drinking water and wastewater projects through its  Sanitation Facilities Construction program. This assistance is  available to tribal nations within the United States and includes  various projects such as distribution and collection lines, treatment  facilities, and home connections. Indian Health Service’s Sanitation  Facilities Construction Program was funded at $99.4 million in fiscal  year 2016.
Reclamation. Reclamation provides different types of assistance for  drinking water and wastewater infrastructure in the 17 western states,  as directed by Congress.
Reclamation received authorization, under the Rural Water Supply  Act of 2006, to establish a rural water supply program. Under the  program, Reclamation was authorized to work with rural  communities and Indian tribes to identify municipal and industrial  water needs and options to address such needs through appraisal  investigations and in some cases feasibility studies. The authority  for the program expired at the end of fiscal year 2016. Congress  must authorize construction of rural water projects before they can  begin. In fiscal year 2016, Reclamation received $83.5 million in  funding for six previously authorized rural water infrastructure  projects.
Reclamation also provides funding and assistance to states  through certain WaterSMART (Sustain and Manage America’s  Resources for Tomorrow) programs that promote the efficient use  of water, integrating water and energy policies to support the  sustainable use of all natural resources, and coordinating the  water conservation activities of Interior’s agencies. First,  Reclamation’s Title XVI program helps states and communities  create supplemental water supplies by investigating and  identifying opportunities for reclamation and reuse of municipal,  industrial, domestic, and agricultural wastewater, naturally  impaired ground and surface waters, and the program provides  funding for the design and construction of facilities to reclaim and  reuse wastewater. Further, Reclamation’s Basin Studies Program  partners with state and local governments to identify strategies to  address imbalances in water supply and demand, including the  development of adaptation and mitigation strategies to meet  current and future water demands. In fiscal year 2016, the Title  XVI program received $32.4 million and the Basin Studies  Program received $5.2 million in funding.
Corps. The Corps provides various types of assistance for drinking  water and wastewater projects in communities, as directed by  Congress.
Congress has authorized and appropriated funds for the Corps to  provide assistance projects that benefit rural communities in need  of water or wastewater infrastructure, among other things, through  the Corps’ Section 219 Environmental Infrastructure Program. In  fiscal year 2016, this program received $55 million in funding.
Under Section 14 of the U.S. Flood Control Act of 1946, the  Corps’ Emergency Streambank and Shoreline Protection program  can plan, design, and construct erosion control projects that  protect public infrastructure. In fiscal year 2016, this program  received $2 million in funding.
Under Section 22 of the Water Resources Development Act of  1974, the Corps’ Planning Assistance to States program can  assist states, local governments, and tribes with the preparation of  comprehensive plans for development and conservation of water  and related land resources. In fiscal year 2016, this program  received $6 million in funding.
Finally, the Corps manages about 140 reservoirs containing  approximately 10 million acre-feet of storage for municipal and  industrial water supply. Under the Water Supply Act of 1958, the  Corps enters into agreements with water users for water storage  within Corps reservoirs.
Economic Development Administration. Through its Public Works  and Economic Development Program, Commerce’s Economic  Development Administration provides grants to economically  distressed areas to help revitalize, expand, and upgrade their physical infrastructure, including public works investments such as drinking  water and wastewater infrastructure. In fiscal year 2016, the Public  Works and Economic Development program received $100 million in  funding, about $14.4 million of which was used for drinking water or  wastewater infrastructure projects, according to Economic  Development Administration estimates.
FEMA. Through its Hazard Mitigation Grant Program, FEMA may  provide funding for drinking water and wastewater infrastructure  projects in certain circumstances when the President has declared a  major disaster. States receive Hazard Mitigation Grant Program  funding if approved for them as part of a major disaster declaration,  and grant funding is competitively awarded by the states for projects  in local communities. Communities or their utilities can submit  applications to the state for projects for their water and wastewater  facilities that the state may choose to include in its Hazard Mitigation  grant application to FEMA. As of May 2017, FEMA’s 31  presidentially declared major disasters during fiscal year 2016 had  resulted in over $533 million in available funds for the Hazard  Mitigation Grant Program, $3.9 million of which was for drinking water  and wastewater projects.
Each of the eight federal agencies we reviewed has its own programs and  processes for providing funding and assistance for drinking water and  wastewater infrastructure projects. Communities or utilities have the  discretion to apply to one or more federal or state programs for funding. In some cases, federal and state agencies coordinate to jointly fund the  same project if the project is too large for one agency to fund or if joint  funding makes the project more affordable for the utility. In other cases,  programs may work together by separately funding different parts of a  large project or different phases of a multi-year project.
section_title: Prior GAO Work on Coordination on Drinking Water and Wastewater Infrastructure
paragraphs: Our previous work on federal drinking water and wastewater  infrastructure funding programs for rural areas has raised questions about  the sufficiency of coordination among programs. In December 2009, we  found that EPA, USDA, and other agencies that fund drinking water and  wastewater infrastructure for rural communities along the U.S.-Mexico  border did not have coordinated policies and processes. We suggested  that Congress consider establishing an interagency mechanism, such as  a task force on water and wastewater infrastructure, to evaluate the  degree to which gaps in water and wastewater infrastructure programs  exist in the U.S.-Mexico border region and the resources needed to  address them. In April 2014, EPA and USDA published a report  describing a joint effort to address the critical public health and  environmental challenges in the U.S.-Mexico border region. This effort  was created partly in response to our December 2009 report in an effort  to leverage collective resources to identify needs within the border region  and to implement compatible and coordinated policies and procedures.
Similarly, in October 2012, we found that federal funding for drinking  water and wastewater infrastructure is fragmented across multiple  agencies and programs. We also found that potentially duplicative  application requirements when applying to multiple federal or state  programs, including preliminary engineering reports and environmental  analyses, may make it more costly and time-consuming for communities  to complete the application process. We recommended that EPA and  USDA ensure the timely completion of an interagency effort to develop  guidelines to assist states in developing their own uniform preliminary  engineering reports to meet federal and state requirements. We also  recommended that the agencies work together and with state and  community officials to develop guidelines to assist states in developing uniform environmental analyses that could be used, to the extent  appropriate, to meet state and federal requirements for water and  wastewater infrastructure projects. EPA and USDA neither agreed nor  disagreed with these recommendations but have taken actions, along  with HUD and other agencies, to respond to these recommendations.  First, in 2015, EPA, USDA, HUD, and Indian Health Service adopted a  uniform preliminary engineering report template and associated guidance  for federal and state officials. Second, in February 2017, EPA and USDA  issued a joint memorandum identifying five practices for interagency  collaboration on drinking water and wastewater infrastructure projects,  including reducing the potential for duplication of effort during the  environmental review process.
Our September 2012 report on key considerations for implementing  interagency collaborative mechanisms discusses a variety of mechanisms  to implement interagency collaborative efforts and issues for federal and  state agencies to consider in implementing collaborative mechanisms.  Issues for consideration include the following, many of which are related  to practices to enhance and sustain collaboration identified in our  previous work: including all relevant participants, documenting written  guidance and agreements, sustaining leadership, clarifying roles and  responsibilities, bridging organizational cultures, identifying resources,  and defining outcomes and accountability.
section_title: Federal and Selected State Agencies Collect Information on Water Infrastructure Needs through Surveys, Program Administration, and Studies
paragraphs: The eight federal agencies and the six selected states identify drinking  water and wastewater infrastructure needs through surveys, the  administration of programs, and studies. More specifically, EPA collects  information on nationwide water infrastructure needs through surveys of  communities, and seven other federal agencies collect narrower data on  specific projects as part of their program administration. Four of the six  selected states collect information on projects in their respective states  through surveys of communities and statewide studies.
EPA collects and reports information on nationwide drinking water and  wastewater infrastructure needs. Specifically, the Safe Drinking Water Act  and the Clean Water Act direct EPA to collect information on drinking  water and wastewater projects that are eligible for the SRF programs.  EPA collects the information from a sample of utilities every 4 years, with  the assistance of states, through surveys of needs, and it publishes the  results in its Drinking Water Infrastructure Needs Survey and Assessment  and its Clean Watersheds Needs Survey. In these reports, EPA  estimated infrastructure needs, including the costs of capital improvement  projects to repair, replace, and upgrade existing drinking water and  wastewater infrastructure over the next 20 years. In 2013 and 2016, when  EPA published its most recent survey results, EPA estimated  approximately $655 billion in drinking water and wastewater infrastructure  needs nationwide. For the six states we selected to review, EPA  estimated a total of approximately $123 billion in drinking water and  wastewater infrastructure needs. EPA’s estimates include, for example,  the following types of projects:
Drinking water projects serving a range of community sizes. EPA  sends a questionnaire to all large utilities and a sample of medium  utilities in each state. The utilities complete the questionnaire,  provide documentation of projects, and send the questionnaire to their  state coordinator for review. The coordinator then provides the  information for EPA’s final review. The information provided includes  projects to repair or replace drinking water sources, transmission and  distribution pipelines, treatment facilities, and storage facilities. For  example, a transmission and distribution project could include  replacement or rehabilitation of pumping stations or distribution  pipelines due to age or deterioration, and treatment projects could  include the construction, expansion, and rehabilitation of infrastructure  to reduce contamination through various treatment processes. To  estimate the needs of small communities’ drinking water utilities  (defined by EPA as those serving 3,300 and fewer persons), EPA  used the results of its 2007 survey of utilities in these areas and  updated the costs using a model it developed for this purpose. In  addition, for selected years, EPA conducts surveys to estimate the  needs of water systems for American Indians and Alaska Native  villages.
Wastewater projects serving a range of community sizes. EPA  also surveys utilities on wastewater projects for a range of community  sizes and defines small communities in this survey as those with  populations of fewer than 10,000 people. States provide EPA with  documentation on utilities’ projects, and EPA performs a final review  of the information. The information provided includes projects related  to wastewater treatment, wastewater conveyance, combined sewer  overflows, stormwater management, recycled water distribution, and  decentralized wastewater treatment systems. For example, a  conveyance project could include replacement or repair of pipes, and  a combined sewer overflow project could include reconstructing  combined sewers to prevent overflows or repairing deteriorating  sewer lines.
EPA’s estimates are not required to be comprehensive estimates of all  drinking water and wastewater infrastructure needs, and they do not  include projects that address some existing and future drinking water and  wastewater infrastructure needs. Specifically, they do not include the  following types of projects:
Projects that are ineligible for SRF loan funding. The Drinking  Water SRF and the Clean Water SRF restrict funding for certain types  of projects. For example, the Drinking Water SRF does not allow  funding for (1) rehabilitation or replacement of water supply dams and  reservoirs, which may be the responsibility of the Corps, Reclamation,  or state or local entities; and (2) privately owned infrastructure such as  drinking water wells not part of a drinking water system. The Clean  Water SRF does not allow, for example, funding for (1) privately  owned wastewater facilities and (2) wastewater services for federal  facilities.
Projects about which states choose not to collect or submit  information. Under the Safe Drinking Water Act, EPA’s assessment  of drinking water needs is used to allocate funding to states from the  Drinking Water SRF program. However, under the Clean Water Act,  EPA’s allocation of funding to states from the Clean Water SRF  program is based on formulas established by the statute, not on  EPA’s assessment. According to EPA officials, because of this  statutory formula and the level of effort needed to complete the  assessment survey, some states may not always participate in the  Clean Watershed Needs survey or may limit their level of effort in  providing information on infrastructure needs. For example, South  Carolina did not participate in the 2012 assessment, and Alaska,  North Dakota, and Rhode Island did not participate in the 2008  assessment.
Projects submitted by utilities without proper documentation on  project scope and cost. According to EPA documents and officials  from two selected states, the survey results may underestimate the  needs of utilities because some communities lack the technical and  financial resources to complete the assessment for the survey. If  communities did not provide the necessary documentation, EPA did  not include their projects in the assessments. For example, according  to the 2011 Drinking Water Infrastructure Needs Survey and  Assessment, EPA rejected 15 percent of all submitted projects  because they either did not meet documentation criteria or appeared  to be ineligible.
Projects planned for more than 5 to 10 years from the date of the  assessment. According to EPA documents and officials from two  selected states, communities often do not have the strategic planning  capacity to anticipate their needs for the full 20 years covered by the  assessments. As a result, EPA’s most recent assessment of  wastewater infrastructure needs noted that nearly all projects included  are those that will be completed within 5 years. Similarly, an EPA  official told us that the typical planning time frame reflected in the  assessment of drinking water needs is 7 to 10 years.
The seven other federal agencies in our review collect more narrowly  focused information on drinking water and wastewater infrastructure  projects as part of administering their specific programs. These agencies  generally do not collect information on needs through recurring surveys  such as those conducted by EPA; instead, through the administration of  their programs, they receive the information through specific  assessments, congressional authorizations, and loan or grant project  funding proposals by state and local governments and communities.  Information collected by these agencies includes the following:
USDA. The agency collects information on drinking water and  wastewater infrastructure projects funded or partially funded through  its administration of the Rural Utilities Service’s Water and Waste  Disposal Loan and Grant Program. According to USDA officials, the  information is gathered through an online application system through  which applicants submit project information for program funding.  USDA uses this system to track funded projects and to collect and  track information on projects that were submitted but not funded. As of  fiscal year 2016, USDA officials we interviewed said they maintained  a backlog of $2.5 billion in projects that have not yet received funding  through the Water and Waste Disposal Program. In addition, in July  2015, the Rural Community Assistance Partnership—a contractor  hired by USDA—published a one-time assessment that described,  ranked, prioritized, and identified potential improvements to drinking  water and wastewater needs of 2,177 colonias in 35 border counties  in Arizona, California, New Mexico, and Texas. According to the  report, the assessment was the first colonias-level evaluation of  drinking water and wastewater needs along the U.S.-Mexico border;  the report did not estimate the cost or number of projects to address  the needs identified.
HUD. The agency collects information on projects it funds or partially  funds through its administration of the Community Development Block  Grant program, including drinking water and wastewater infrastructure  projects to support community development, primarily in low- and  moderate-income communities. HUD collects these data in its  Integrated Disbursement and Information System. HUD officials we  interviewed estimated they funded $66 million for drinking water and  wastewater infrastructure in the selected states in fiscal year 2016.
Indian Health Service. As required by the Indian Health Care  Improvement Act, Indian Health Service annually collects and reports  information on the drinking water and wastewater infrastructure needs  of Indian nations and native communities nationwide. In consultation  with tribes, the agency’s 12 area offices collect data on projects  designed to meet an immediate drinking water or wastewater need.  Projects are entered and tracked in the agency’s Sanitation Deficiency  System database. According to Indian Health Service documents, the  database is updated annually to account for inflation and changes in  federal and state regulations, to add projects designed to address  new needs, and to remove projects that have been completed. In  2015, the Indian Health Service database included an estimated cost  of more than $2.66 billion to upgrade all tribal communities’ drinking  water and wastewater infrastructure systems to comply with all  drinking water supply and water quality laws.
Corps. The Corps tracks congressionally authorized water projects  and studies, including drinking water and wastewater infrastructure  projects, in centralized databases. The agency also collects  information on the potential repair and upgrade of the dams it  manages, some of which impound reservoirs to be used as drinking  water sources. The Corps manages 715 dams nationwide and, based  on estimates it developed, has $24 billion in upgrades and repairs to  these facilities over the next 50 years.
Reclamation. The bureau collects some information on tribal and  nontribal drinking water infrastructure needs for congressionally  authorized projects through its administration of the Rural Water  Supply program and through projects and studies under the  WaterSMART Title XVI and Basin Studies programs. Under the Rural  Water Supply program, Reclamation collects information on water  supply needs—including drinking water supply needs—for  congressionally authorized rural water supply projects. The agency  also collects information on needs through feasibility studies  conducted for potential rural water supply projects, including studies  on drinking water supply needs. In addition, Reclamation collects  information on needs to modify dams for dam safety purposes.  Specifically, as of May 2017, Reclamation manages 492 dams and  has identified 15 dams as high- and significant-risk dams that are in  need of modification to reduce risk to communities below the dams, at  a cost of approximately $1.25 billion. According to Reclamation  officials we interviewed, the agency estimates an additional 6 to 10  dams will require modification for dam safety purposes within the next  3 to 4 years, but Reclamation has not developed the overall cost  estimate to address the safety modifications for these dams.
FEMA. The agency collects information on hazard mitigation projects  for drinking water and wastewater infrastructure from states where the  President has declared a major disaster. FEMA tracks funding  through a category system that may include general types of facilities  in each category, but the agency does not specifically track drinking  water and wastewater infrastructure projects.
Economic Development Administration. The Economic  Development Administration collects applications for drinking water  and wastewater infrastructure projects from distressed communities  for revitalization, expansion, or upgrade of drinking water and  wastewater infrastructure, among other projects. The agency collects  information on the drinking water and wastewater infrastructure  projects it funds in its Operations Planning and Control System.  According to agency officials, in fiscal year 2016, the Economic  Development Administration provided approximately $14.4 million in  funding for 10 drinking water and wastewater infrastructure projects  nationwide.
Four of the six states we selected for review—New Mexico, New York,  North Dakota, and Tennessee—have collected data on drinking water  and wastewater infrastructure projects or needs through their own  surveys of communities or statewide studies, in addition to participating in  EPA’s assessments. New Mexico annually collects capital improvement  plans for water and wastewater infrastructure projects, as does  Tennessee. New York conducted a one-time statewide assessment of its  water needs for 2008 to 2028. North Dakota biennially surveys its  communities for their drinking water infrastructure projects but does not  collect wastewater infrastructure projects. The other two selected states— Alaska and California—participated in EPA’s assessment but did not  independently collect data on drinking water and wastewater  infrastructure needs. Appendix II provides more details of the four states’  efforts to collect information on their drinking water and wastewater  infrastructure needs.
section_title: Federal Agencies Provide Technical Assistance and Funding to Support State and Local Planning for Future Drinking Water and Wastewater Infrastructure Needs
paragraphs: Of the eight federal agencies we reviewed, three—the Corps,  Reclamation, and FEMA—provide technical assistance and funding to  support planning efforts in the selected states for future conditions that  may affect drinking water and wastewater infrastructure needs. The three  agencies’ efforts have usually involved developing or updating documents  such as state water plans, hazard mitigation plans, flood management  plans, or drought plans. The remaining five federal agencies have at  times been involved in long-term planning for such conditions and may  provide grant funding to help support such work, but they do not have  established programs that offer technical assistance or funding for such  purposes.
subsections: section_title: Corps Support for State Planning
paragraphs: expanded reservoirs to provide additional  drinking water supply and may also require  additional wastewater treatment capacity.
Drought can necessitate constructing new  pipelines to connect to additional sources  of water.
Flooding, sea level rise, and storm surges  may necessitate construction of flood walls  or other protective infrastructure to avert  damage to drinking water and wastewater  treatment plants and to prevent sewers  from overflowing and contaminating  drinking water sources. Wastewater  treatment plants are particularly susceptible  to flooding because they are generally built  in low-lying areas near bodies of water so  wastewater can be gravity fed from higher  elevations to lower elevations and so  treatment plants can easily discharge water  after treating it.
Land surface changes, including coastal  erosion or melting of permafrost (subsoil  that is normally permanently frozen, found  in about 85 percent of Alaska), may require  relocating facilities or reinforcing drinking  water or wastewater pipelines.
2007 and 2008, created its Water Resources Technical Advisory  Committee—which included officials from the Corps, Tennessee  Valley Authority, and the U.S. Geological Survey—to improve regional  water supply planning for future drought conditions and population  growth. The committee developed several state and regional water  resource management plans, updated the state-wide drought  contingency plan, and developed drought contingency plan guidance  for community drinking water and wastewater treatment systems in  Tennessee.
The City of Minnewaukan, North Dakota, received assistance in 2010  through the Corps’ Section 22 Planning Assistance to States program  to identify alternatives for flood risk reduction, including alternatives to  improve the resiliency of the city’s drinking water and wastewater  infrastructure because of flooding. The Corps recommended  relocating a portion of the city, including key drinking water and  wastewater infrastructure. According to North Dakota officials, the city  was then able to use funding from FEMA’s Hazard Mitigation Grant  program, Commerce’s Economic Development Administration, HUD’s  Community Development Block Grant program, and the North Dakota  Drinking Water SRF to implement the relocation.
In Alaska, in 2007, a state workgroup composed of state and federal  officials, including officials from the Corps and the Denali  Commission, was tasked to develop an action plan addressing the  effects of climate change on coastal and other vulnerable  communities in Alaska. The workgroup was part of a larger effort  created by the Governor in 2007 to lead the preparation and  implementation of an Alaska climate change strategy to respond to  risks to infrastructure, including water and wastewater infrastructure,  from permafrost degradation, erosion, and flooding. From 2005 to  2009, the Corps conducted a baseline erosion assessment to  determine the vulnerabilities of Alaskan communities to coastal  erosion that helped inform the workgroup’s action plan. The  assessment identified 26 communities whose viability was threatened  by erosion. As a result, in 2009, the workgroup recommended  developing a methodology to prioritize state and federal funding for  projects to protect existing infrastructure, including drinking water and  wastewater infrastructure, from risks due to permafrost degradation,  erosion, and flooding. To address the recommendation, as of March  2017, using funding provided by the Denali Commission, the Corps  was collaborating with the University of Alaska-Fairbanks to collect  additional data on erosion and flooding. The Corps and the  University of Alaska-Fairbanks plan to use the data to develop an  index for the aggregate risk of permafrost degradation, erosion, and  flooding on infrastructure, including drinking water and wastewater  infrastructure, in Alaskan communities by 2018.
After Superstorm Sandy in 2012, New York’s legislature passed the  Community Risk and Resiliency Act in 2014, directing state agencies  to consider risks from sea level rise, flooding, and storm surges in  their facility siting, permitting, and funding decisions, among other  things. The act applies to drinking water and wastewater infrastructure  projects, including those funded by the state’s Drinking Water and  Clean Water SRF programs. In implementing the act, New York  adopted regulations in February 2017 that established sea level rise  projections, and the state will require applicants for certain state  programs to demonstrate that they have taken sea level rise into  account for project planning. The Corps participated in a state study  that informed these projections and provided technical assistance.
section_title: Reclamation Support for State Planning
paragraphs: Reclamation has assisted selected states in planning for future conditions  that affect water and wastewater infrastructure, in part by conducting  studies such as an examination of future water supply and demand.
Examples of selected state and local planning with Reclamation  assistance include the following:  In California, Reclamation provided assistance to the state and to  several local communities to conduct basin studies examining future  water supply and demand in several river basins. For example,  Reclamation partnered with the state and several local authorities to  examine the impact of rising sea levels, drought, and increasing  population, among other conditions, on future water supply and water  quality in the Sacramento River Basin, the San Joaquin River Basin,  and the Tulare Lake Basin. The basins study completed in March  2016 found that the San Joaquin and Tulare Lake basins faced the  risk of future deficits in water supply, and that sea level rise would  pose a threat to municipal water supply and water quality. In addition,  Reclamation has helped fund planning, design, and construction of  local projects to reuse wastewater through its Title XVI program. For  example, Reclamation has provided $20 million to plan and construct  a water recycling effort by the City of Watsonville, California, and the  Pajaro Valley Water Management Agency. By providing recycled  water for irrigation, the project is intended to reduce overdrawing of  groundwater from aquifers, which can lead to contamination of the  aquifers if seawater intrudes into the groundwater. The recycled  water blends discharge from the city’s wastewater treatment plant with  higher-quality water and distributes it to irrigate a portion of more than  6,000 acres of farm land.
In New Mexico, Reclamation also assisted with several basin studies.  For example, the agency helped the City and County of Santa Fe in  New Mexico complete a basin study in 2015 to assess variations in  available water supply stemming from climate change and other  factors. The study found that the Santa Fe area’s population is  expected to increase by about 80 percent by 2055 and faces a water  shortfall if actions are not taken. The study also identified potential  adaptation strategies to help meet the projected demand for water  over the next 40 years. Following up on a project identified in the  basin study, Reclamation’s Title XVI program provided funding to the  City and County of Santa Fe for a 2016 study of the feasibility of  reusing wastewater as drinking water and for replenishing aquifers for  future water supply. In addition, Reclamation and USDA provided  technical assistance to the state and communities as they updated  New Mexico’s regional water plans. For example, Reclamation and  USDA officials served on the steering committees that helped develop  the 2016 updates for the San Juan Basin and Jemez Y Sangre  Regional Water Plans.
In North Dakota, Reclamation conducted a study in September 2012  and provided data that helped inform the state’s biennial state water  plan. The plan identifies drinking water infrastructure projects intended  to address both current and future water supply challenges, including  challenges posed by flooding and drought. As an example of its  contribution to the state’s water plan, in 2012, Reclamation estimated  the projected demand for water in 10 counties serviced by North  Dakota’s Northwest Area Water Supply Project between 2010 and  2060, including demand resulting from changes in population and  climate change.
section_title: FEMA Support for State Planning
paragraphs: FEMA has provided funding to reduce or eliminate long-term risks to  drinking water and wastewater infrastructure from natural disasters, as  well as technical assistance to communities to help them plan for disaster  resilience of drinking water and wastewater infrastructure. Examples of  selected state and local planning with FEMA assistance include the  following:
California’s 2013 hazard mitigation plan incorporates potential threats  to drinking water and wastewater infrastructure. FEMA’s Hazard  Mitigation Grant Program has provided funding for local projects in  California since 2013 to replace or reinforce water storage tanks to  mitigate wildfire or earthquake risks identified in the plan.
FEMA, along with other agencies, provided technical assistance for a  2013 study conducted by New York State that reviewed the resiliency  of wastewater infrastructure on Long Island. The study made  recommendations to improve and expand critical wastewater  infrastructure in Nassau and Suffolk Counties to make infrastructure  more resilient to storms and flood events.
section_title: Agencies Have Taken Certain Actions to Coordinate Project Funding While Facing Some Challenges
paragraphs: Federal and state agencies in the six selected states have taken certain  actions to coordinate funding for drinking water and wastewater  infrastructure projects. Yet, the federal and state agencies face  challenges that make it difficult for federal and state agencies to use all  available federal funds. Federal agencies have also taken some actions  to help them address some of the challenges they faced in funding  projects. For example, in 2017, EPA and USDA issued a joint  memorandum that identified practices to improve state-level coordination  on drinking water and wastewater infrastructure that is intended to help  improve collaboration among federal and state agencies.
subsections: section_title: Federal and State Agencies Have Taken Certain Actions to Coordinate Funding for Drinking Water and Wastewater Infrastructure Projects
paragraphs: In the selected states, federal and state agencies took some actions to  coordinate funding for drinking water and wastewater infrastructure  projects. We identified several types of coordination actions that some  federal and state agencies had undertaken since 2011 in some selected  states. These actions are consistent with key considerations for  implementing interagency collaborative mechanisms and practices to  enhance and sustain collaboration that we have identified in our previous  work. Examples of coordination actions taken by the six selected states  and various federal agencies include the following:  Including all relevant participants. Participation by all relevant  participants in an interagency coordinating group is one of the key  considerations we have identified for implementing such a  collaborative mechanism. With the exception of Tennessee, five of  the selected states had coordinating groups. Certain federal and state  agencies have participated in interagency coordinating groups that  met at least once annually. For example, California’s group meets  quarterly, according to federal and state officials, and includes officials  from USDA, Reclamation, the state’s SRF and Community  Development Block Grant programs, the state’s Department of Water  Resources, and other state programs. Alaska’s group focuses on  funding programs for small communities (those with less than 1,000  people), which are primarily tribal funding programs for Alaska Native  villages. The group meets monthly, according to federal and state  officials, and includes USDA, Indian Health Service, EPA, the Alaska  Native Tribal Health Consortium—a statewide tribal organization that  manages most of the design and construction of sanitation facilities in  rural Alaska—and Alaska’s Department of Environmental  Conservation, which also manages the SRF program.
Documenting written agreements between the agencies. Having  written guidance and agreements documenting how agencies will  collaborate is a key consideration of interagency collaborative  mechanisms identified in our prior work. In three of the selected  states—California, New York, and North Dakota—federal and state  agencies developed written agreements for their coordinating groups.  For example, the 1998 agreement between federal and state  agencies in California sought to encourage more efficient use of funds  and reduce administrative costs for the agencies and their funding  recipients. Federal and state agencies agreed to, among other things,  provide staff and leadership to form the state’s coordinating group,  meet regularly to foster cooperation in project funding, remove as  many barriers as possible in program regulations, and jointly fund  projects when feasible and efficient. Similarly, New York’s 2003  agreement between federal and state agencies sought to simplify the  application process and formalize coordination of jointly funded  drinking water and wastewater activities. Among other things, the  participating agencies agreed to establish an interagency coordinating  group to meet regularly, facilitate exchange of information among  agencies, jointly fund projects when feasible and appropriate, and  provide outreach on funding programs to potential recipients.  Agencies in North Dakota signed a memorandum of understanding  with federal agencies in 1997 with the purpose of establishing greater  communication and coordination on water supply development  funding in the state. The memorandum stated that the agencies would  meet at least biannually but did not include other agreements about  how they would coordinate.
Sustaining leadership for the group. Sustaining leadership is  another key consideration of interagency collaborative mechanisms  we previously identified. According to agency documents and officials,  federal and state agencies had established leadership for the  interagency coordinating groups in three of the selected states— California, New Mexico, and New York. According to federal and state  officials, a state agency provided leadership for North Dakota’s  coordinating efforts.
Bridging organizational cultures. Bridging organizational cultures is  a key consideration of interagency collaborative mechanisms we  identified. One way agencies can bridge organizational cultures is to  adopt common application requirements or procedures. Federal and  state agencies in five states—Alaska, California, New Mexico, New  York, and Tennessee—had taken at least one action toward adopting  common application requirements or procedures. For example, in  California and New York, agencies developed a common income  survey for determining funding eligibility.
Identifying resources. Identifying the resources needed to initiate or  sustain the collaborative effort is a key consideration of interagency  collaborative mechanisms we identified. Some agencies in the  selected states took actions consistent with this key consideration. For  example, federal and state agencies conducted joint marketing and  outreach to communities and utilities about the agencies’ funding  opportunities in five of the states—Alaska, California, New Mexico,  New York, and North Dakota. In addition, officials from federal and  state agencies in all of the selected states said they shared some  information among themselves on infrastructure project applications  that were funded or being considered for funding, either through their  coordinating groups or informally between individual programs. For  example, agencies in Alaska shared information on projects for small  Alaska villages, and in California agencies shared information on  jointly funded projects. In New Mexico, USDA and the state’s  Community Development Block Grant programs began sharing  information when they joined the state’s coordinating group in 2014  and 2017, respectively. Furthermore, agencies in some selected  states jointly funded projects with other federal or state agencies. For  example, according to federal and state officials in New York,  agencies often worked together to make projects more affordable to  communities by combining grant and loan funds from multiple  agencies. In Tennessee, USDA and the SRF programs have jointly  funded projects with the state’s Community Development Block Grant  program, but state and federal officials said their agencies generally  try to fully fund projects, or phases of them, themselves.
Not all federal and state agencies in selected states took action to  coordinate for various reasons, such as timing and resources, according  to federal and state agency officials. For example, some of the federal  agencies that provide funding for drinking water and wastewater  infrastructure did not participate in all state coordinating groups.  Reclamation officials, for instance, did not participate in New Mexico’s  coordinating group because the state coordinating group was in the  process of being organized and Reclamation had not been asked to  participate, according to agency officials. In another example, the Indian  Health Service did not participate in California’s coordinating group  because the group primarily identifies and addresses needs in nontribal  communities, according to agency officials. The Economic Development  Administration, state agencies managing FEMA Hazard Mitigation Grant  program funds, and the Corps also did not participate in any of the  groups, in part because they have limited roles or funding for drinking  water or wastewater infrastructure. In addition, some selected states did  not develop formal written agreements for their coordinating groups or  use common procedures or surveys. For example, New Mexico was in  the process of organizing its coordinating group and planned to consider  a written agreement once the group was established, according to state  officials. In addition, while some states had developed common  procedures or surveys, not all agencies used them. For example, state  officials said that California’s common income survey was not used by the  state’s Community Development Block Grant program because of  differences in survey requirements and the Community Development  Block Grant’s definition of low- and moderate-income persons.
section_title: Several Challenges to Funding Projects Make It Difficult for Agencies to Provide All Available Federal Funds in Selected States
paragraphs: In the selected states, four key challenges can make it difficult for federal  and state agencies to provide all federal funds available for drinking water  and wastewater infrastructure projects: limited community demand for  loan funding, limited technical or financial capacity of some communities,  differing requirements among federal and state funding programs, and  difficulty developing a set of projects ready for funding.
Federal and state officials face the following key challenges to funding  projects.
Limited community demand for loan funding. USDA officials we  interviewed in all of the selected states, as well as state program  officials in five of the selected states, said that communities prefer  grants, which do not need to be repaid, and are reluctant to take on  loans and pay interest on them. Because the USDA Water and Waste  Disposal loan and grant program and state SRF programs do not  usually fund projects entirely with grants, finding applicants for state  and federal programs can be difficult. In addition, USDA officials in  New Mexico, New York, and California cited competition from state- funded grant programs as a challenge for federal and state agencies  to use available loan and grant funding. For example, according to  USDA funding data and a USDA official in New York, USDA’s New  York state office did not obligate $3.5 million of the grant funds  available in 2015 and 2016 because a state program provided grants  to four communities that had already been funded with a combination  of USDA loan and grant funds.
Communities’ limited technical or financial capacity. In five of the  selected states, some of the federal and state officials said that some  communities have limited technical or financial expertise or capacity  for loans, which is a challenge for agencies because it can prevent  communities from identifying projects or applying to state and federal  agencies for project funding. For example, state SRF program officials  in New Mexico and state Community Development Block Grant  program officials in New York noted that many small communities do  not have the technical capacity to evaluate their drinking water or  wastewater systems and to plan projects. State SRF program officials  in Tennessee also said that many communities do not have the  financial capacity to repay loans and therefore may not qualify for  federal and state loan programs.
Differing requirements among funding programs. In five of the  selected states, federal or state officials said that differing application  requirements and processes among funding programs are a  challenge. For example, differing requirements can make it difficult for  federal and state agencies to jointly fund projects or for applicants to  apply to multiple programs for funding. A USDA official in New  Mexico, for example, noted that differing requirements for applicants’  preliminary engineering reports have been a challenge, as did officials  from the Alaska Native Tribal Health Consortium, which administers  parts of Indian Health Service’s program in Alaska. In addition, an  Indian Health Service official in North Dakota and state Community  Development Block Grant program officials in California and  Tennessee described challenges with agencies’ differing  requirements for environmental reviews. They each identified projects  they funded between fiscal years 2011 and 2016 that involved some  duplication of environmental analysis—either an additional  environmental review or additions to other programs’ environmental  reviews; this duplication can increase the length and cost of projects,  according to officials.
Difficulty developing a set of projects ready for funding. Federal  and state officials we interviewed in four states noted that even  though communities in those states may have drinking water or  wastewater infrastructure needs, they may not have identified specific  projects or developed them to the extent needed to apply for funding.
For example, state SRF program officials in California and Alaska and  USDA officials in Tennessee said that it is hard for communities to put  together the plans they need to get a project ready for funding, and  that this can be more difficult than construction of the project.  Similarly, Indian Health Service officials in California noted that it is  challenging for communities to develop projects that Indian Health  Service or other agencies are likely to fund. For example, tribal  projects may be constrained by the need to obtain easements across  nontribal lands, as well as concerns about water rights.
These challenges can make it difficult for federal and state agencies to  provide all funds available for loans and grants to communities. For  example, USDA state offices in the selected states did not have enough  applicants with projects that were ready to fund, and the offices did not  lend a total of about $193 million in loan funding available for drinking  water and wastewater infrastructure projects from fiscal years 2012  through 2016 to communities in those states. Specifically, in fiscal year  2016, USDA’s state office for California was unable to lend about $21  million in available USDA loan funding to communities. USDA’s state  offices for New Mexico, New York, and Tennessee each were unable to  lend about $10 million to $11 million in available USDA loan funding, and  Alaska was unable to lend about $6 million in loan funding. North  Dakota’s state office, however, lent all of its available loan funding to  communities, as well as an additional $7 million for loans in fiscal year  2016. Unlike other programs we reviewed that allocate funding directly to  states, such as EPA’s SRF and HUD’s Community Development Block  Grant programs, USDA’s Water and Waste Disposal Program allocates  funding to its state offices, which in turn loan or grant funding for projects  in local communities. The state offices must return funds that are not  obligated by August to the agency’s headquarters for reallocation to other  state offices. According to USDA officials, the purpose of this process is  to ensure funds are used nationwide in an effective, timely, and efficient  manner for projects that are ready to receive funding, and the program  maintains a nationwide backlog of applications at any given time. USDA  headquarters officials said that in general, state offices return funds in  part because there are not enough projects in a state that are ready to be  funded in that fiscal year and not because of lack of need for the funding.
Two of the selected states also had difficulties using all available SRF  program funding in recent years. In a 2014 report, EPA’s Office of  Inspector General found that in California and New Mexico—two of the  five states the Office of Inspector General reviewed—23 percent and 26  percent, respectively, of the programs’ cumulative federal funding  remained unspent or unliquidated as of September 2013. According to  the report, EPA considers any state with a balance above 13 percent to  have a high unliquidated obligation balance. California’s and New  Mexico’s programs had $401 million in obligated funds that remained  unspent—$358 million and $43 million, respectively, in unliquidated  obligations—according to the report. Among other challenges, according  to the report, the Inspector General indicated that unliquidated obligations  result from states not having projects that are ready for loan execution or  from states funding projects that are not ready to proceed. Staff in all five  states reviewed indicated that they had had difficulty in the past getting  projects from applicants that were ready to proceed for funding. In  addition, EPA’s Office of Inspector General cited the availability of other,  more attractive funding options for potential applicants as a reason for the  difficulties issuing loans in these states. The Office of Inspector General  also found that when loans are not issued and hundreds of millions of  SRF dollars remain idle, states miss opportunities for improvements to  their communities’ drinking water infrastructure.
USDA and EPA have taken some steps at the national level to increase  the use of their funds within states. For example, USDA officials told us  that the agency offered training in 2016 for several USDA state offices  that were not using their full allocations, and USDA has started working  with EPA’s national SRF program staff to improve coordination in states  that are not using their full USDA allocations. The officials also said that  they are planning further outreach to additional USDA state offices in  2017 and plan to work with some EPA regional offices. In 2014, EPA  issued a national strategy for reducing unliquidated obligations under the  Drinking Water SRF. The strategy outlined six practices for states to use  to help liquidate past years’ funds and maintain lower levels of  unliquidated obligations in future years. The practices include focusing on  projects that are ready to proceed. EPA’s strategy also emphasized the  importance of states’ (1) solicitations of water infrastructure projects to  protect public health, (2) proactive efforts to help get projects ready to  proceed to financing, and (3) efforts to ensure that water systems within  their jurisdictions are well informed of the financing opportunities available  through the Drinking Water SRF. In 2016, EPA reported that California’s  Drinking Water SRF program had made substantial progress in its effort  to quickly and efficiently expend funds; however, EPA remained  concerned about the extent of unliquidated obligations for New Mexico’s  Drinking Water SRF.
Federal and state agencies within selected states have also taken some  actions to help address some of the challenges they face in funding  projects. For example, in New York, agencies have helped address  communities’ preferences for grant funding and limited financial capacity  for loans by coordinating to jointly fund projects with a combination of  grant and loan funds from different agencies. In addition, agencies have  worked together through coordinating groups to help address  communities’ limited technical capacity. For example, EPA and USDA  have jointly funded training and technical assistance in Alaska to address  the technical capacity of rural drinking water and wastewater utilities.
Furthermore, agencies have developed common application requirements  or procedures to help them address the challenge of differing  requirements among funding programs. For example, California’s  coordinating group uses a common funding inquiry form, which a USDA  official said is one of the group’s most effective actions and saves  applicants time. Finally, agencies have shared information and conducted  joint outreach to help address difficulties with developing a set of projects  ready for funding. For example, North Dakota’s State Water Commission  takes the lead on conducting outreach to communities to identify drinking  water infrastructure projects in the state. The Commission then shares its  prioritized list of drinking water projects with other agencies, which work  together informally to discuss funding and projects. According to USDA  program officials we interviewed in North Dakota, these actions have  helped them identify and prioritize projects and provide nearly all of their  available funding to communities.
Most recently, to help improve state-level coordination between state SRF  programs and USDA state offices on drinking water and wastewater  infrastructure project funding, EPA and USDA issued a joint  memorandum in February 2017 that outlined five coordination practices  that states’ SRF programs and USDA state offices are encouraged to  use. These practices include participating in a statewide coordinating  group, conducting joint marketing or outreach, adopting common  application materials, adopting a common environmental review process,  and periodically reexamining internal processes to identify opportunities  for streamlining and increasing coordination.
section_title: Agency Comments and Third-Party Views
paragraphs: We provided a draft of this product to all eight agencies for comment.  Seven of the agencies, EPA, USDA, HUD, Indian Health Service, the  Corps, Reclamation, and FEMA provided technical comments that we  incorporated as appropriate. One agency, the Economic Development  Agency, did not have any comments.
We also provided appropriate portions of the product to the six states that  we reviewed. New Mexico had technical comments that we incorporated  as appropriate. Tennessee did not have any comments. The remaining  four states did not provide comments.
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If you or your staff have any questions about this report, please contact J.  Alfredo Gómez at (202) 512-3841 or gomezj@gao.gov or Anne-Marie  Fennell at (202) 512-3841 or fennella@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: The objectives of our review were to describe (1) how federal agencies  and selected states identify drinking water and wastewater infrastructure  needs; (2) how federal agencies have supported selected states in  planning for future conditions that may affect such needs; and (3) the  extent to which federal and state agencies have coordinated in funding  drinking water and wastewater infrastructure projects, and any challenges  they face in funding these projects.
To address these objectives, we reviewed federal programs in eight  agencies, as shown in table 1. We reviewed our previous reports to  identify the agencies that provide funding or planning assistance to states  or communities for drinking water and wastewater infrastructure and  identified eight agencies: the Environmental Protection Agency (EPA), the  Department of Agriculture’s (USDA) Rural Utilities Service, the  Department of Commerce’s Economic Development Administration, the  Department of Defense’s Army Corps of Engineers, the Department of  Health and Human Services’ Indian Health Service, the Department of  Homeland Security’s Federal Emergency Management Agency, the  Department of Housing and Urban Development (HUD), and the  Department of the Interior’s Bureau of Reclamation. The programs  provide funding or planning assistance to states or communities for  drinking water and wastewater infrastructure.
We reviewed these programs in a nonprobability sample of 6 states— Alaska, California, New Mexico, New York, North Dakota, and  Tennessee. We selected these states based on the number of federal  agencies that provided funding in the state for drinking water and  wastewater infrastructure projects, presence or absence of a formal  coordination group, and geographic diversity. Specifically, we determined  whether four federal agencies—Reclamation, Corps, Indian Health  Service, and Economic Development Administration—funded drinking  water and wastewater projects in each of the 50 states from fiscal years  2011 through 2015. We chose these agencies for our selection process  because EPA and USDA provide funding in all 50 states and the Federal  Emergency Management Agency and HUD could not provide state-level  data for drinking water and wastewater infrastructure projects. We then  identified whether states had coordinating groups. To obtain a sample of  states with geographic diversity, we sorted states by the four regions of  the United States as defined by the U.S. Census Bureau. We then  selected states that either had the most federal agencies that provided  funding for projects or did not have a coordinating group, and we selected  at least 1 state from each Census region.
The sample of states is not generalizable, and the results of our work do  not apply to all 50 states; however, they provide illustrative examples of  state infrastructure programs. Some of these federal programs are  administered directly by the federal agencies through their regional or  state offices, while others are administered by state agencies. Therefore,  our review included the federal offices and state agencies responsible for  overseeing and administering these programs. We conducted site visits to  interview federal and state officials in Alaska, California, New Mexico, and  Tennessee, and held teleconferences to interview officials in North  Dakota and New York. In addition, we interviewed federal officials from  the Denali Commission, as well as selected state officials administering  federal funds from the Appalachian Regional Commission and Delta  Regional Authority.
To describe how federal agencies and selected states identify drinking  water and wastewater infrastructure needs, we identified federal  requirements directing EPA and Indian Health Service to collect  information on drinking water and wastewater infrastructure needs,  reviewed these agencies’ most recent reports on needs, and interviewed  EPA and Indian Health Service officials about these efforts. We also  reviewed any national, regional, or state reports on needs issued over the  last 10 years by the other six federal agencies and the six selected states.  Specifically, we reviewed the report of a joint USDA-EPA effort to identify  the drinking water and wastewater infrastructure needs of certain  communities in the U.S.-Mexico border region, as well as reports on  needs issued by 4 of the selected states: New Mexico, New York,   North Dakota, and Tennessee. To conduct this work, we did not define  the concept of need or conduct an independent review of the studies that  identify needs for drinking water and wastewater infrastructure, and we  did not evaluate the legitimacy of the claims. We assessed the reliability  of data in EPA’s reports by reviewing documentation on data collection  and interviewing agency officials. We determined that the data were  sufficiently reliable for the purpose of estimating national needs for  drinking water and wastewater infrastructure projects that fall within the  scope of EPA’s reports. We also assessed the reliability of data from the  Indian Health Service’s report by interviewing agency officials about the  data. We determined the data were reliable for our purposes of reporting  total needs.
To describe how the eight federal agencies have supported the selected  states in planning for future conditions that may affect drinking water and  wastewater infrastructure needs, we reviewed federal and selected state  program and planning documents, including basin studies, erosion and  sea-level rise studies, and flooding and drought response plans, and we  conducted semi-structured interviews with or obtained written responses  from federal officials and selected state officials. State agencies included  state water boards and commissions, infrastructure funding agencies, and  emergency management agencies as appropriate. We used these  documents and interviews to identify examples where federal agencies  have assisted selected states and local communities in planning for future  conditions that might affect their drinking water and wastewater  infrastructure needs.
To describe the extent to which the eight federal agencies and selected  states have coordinated in funding projects and any challenges they face,  we reviewed federal and state program documents, interagency  agreements, and project data and interviewed federal and state agency  officials on project funding and coordination, as well as on challenges  they face in funding projects. We used this information to (1) assess  whether and how federal and state agencies have implemented leading  collaboration practices and key considerations for collaborative  mechanisms in the selected states, (2) examine whether coordination has  helped agencies efficiently use available federal funding for projects, and  (3) identify challenges to funding projects. We used key considerations  from our previous work on interagency collaborative mechanisms:  including all relevant participants, documenting written guidance and  agreements, sustaining leadership, clarifying roles and responsibilities,  bridging organizational cultures, identifying resources, and defining  outcomes and accountability. We identified actions that agencies had  taken consistent with these key considerations. We also used leading  collaboration practices from our previous work, such as identifying and  addressing needs by leveraging resources, as appropriate. To examine  whether coordination has helped agencies use available federal funding  for projects efficiently, we looked for and analyzed examples of projects  jointly funded by multiple federal programs and unfunded or delayed  projects. We obtained and analyzed funding data for fiscal year 2016 for  the eight agencies and assessed the reliability of the data by obtaining  information from agency officials. In some cases, agencies provided  obligation data, while other agencies provided budget allocation data. We  determined the data were reliable for our purposes of reporting total  funding available by agency. We reviewed a report by EPA’s Office of  Inspector General on the unliquidated obligations in five state Drinking  Water SRFs.
We conducted this performance audit from March 2016 to September  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
section_title: Appendix II: Selected States’ Assessments of Their Drinking Water and Wastewater Infrastructure Needs
paragraphs: Four of the six states that we selected for review developed assessments  of their drinking water and wastewater infrastructure needs. The details  of their assessments are included below.
New Mexico. The New Mexico Department of Finance and  Administration annually collects 5-year capital improvement plans  from local governments and tribes through a web-based process. The  purpose of collecting these plans is to establish planning priorities for  anticipated capital projects and encourage entities to plan for, fund,  and develop infrastructure at a pace that sustains their activities. The  plans include time frames, estimated costs, and the details of each  proposed capital improvement project for drinking water or  wastewater infrastructure, including repair or replacement of existing  infrastructure and the development of new infrastructure. The plans  also include projects for dams and water infrastructure for agriculture,  which are excluded from the Environmental Protection Agency’s  (EPA) assessments. The state lists the projects on its Infrastructure  Capital Improvement Plan website. In 2016, the New Mexico  Legislative Finance Committee analyzed the state and local  infrastructure capital improvement plans for 2017 to 2022 and  identified $3.2 billion in drinking water and wastewater infrastructure  projects.
New York. In 2008, New York’s Departments of Health and  Environmental Conservation conducted one-time assessments of the  state’s drinking water and wastewater infrastructure needs over the  next 20 years. The departments conducted the drinking water study  because EPA’s drinking water needs survey underreported valid  projects, and they conducted the wastewater study because of the  need to develop a sustainable infrastructure funding program at the  federal, state, and local levels. The assessments included needs that  were part of EPA’s drinking water and wastewater assessments. They  also included estimates of the costs of certain other needs that EPA  excludes because they are not eligible for the EPA’s State Revolving  Fund program; these include the costs to repair and replace dams  and private wells. Specifically, New York’s drinking water needs  assessment estimated a cost of $533.6 million to rehabilitate the  state’s approximately 511 dams used for water supply purposes, as  well as a cost of $1.8 billion to replace or rehabilitate almost all of the  state’s 1.5 million private drinking water wells over the next 20 years.  In addition, the state’s wastewater needs assessment estimated a  cost of $693 million to replace faulty residential septic systems in 150  municipalities with community wastewater treatment systems.  Together, the state’s assessments estimated a total of $74.9 billion to  repair, replace, and update New York’s existing drinking water and  wastewater infrastructure over the next 20 years.
North Dakota. North Dakota’s State Water Commission surveys  communities on their planned drinking water infrastructure projects for  the commission’s biennial State Water Plan. The purpose of the  survey is to provide the commission with an updated inventory of  water projects and programs that become part of the commission’s  budget request to North Dakota’s governor and legislature. The  commission prioritizes the projects and publishes the rankings. The  inventory does not include drinking water or wastewater infrastructure  replacement needs but contains drinking water infrastructure projects  not included in EPA’s assessments, such as repair or rehabilitation of  dams and reservoirs. In the state’s most recent assessment, the  commission estimated a cost of $645 million to address the drinking  water infrastructure projects identified in the state.
Tennessee. As required by state statute, the Tennessee Advisory  Commission on Intergovernmental Relations annually surveys local  officials on their infrastructure projects, including drinking water and  wastewater infrastructure, with a capital cost of at least $50,000. The  purpose of the assessment is to identify projects necessary to help  local communities with economic development opportunities. To be  included in the Commission’s report, projects must be in the  conceptual, planning and design, or construction phase at some time  during the next 5 years and need to be either started or completed  during that period. In 2016, the commission estimated $3.3 billion of  drinking water and wastewater infrastructure needs for July 2014  through June 2019.
section_title: Appendix III: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts:
section_title: Staff Acknowledgments
paragraphs: In addition to the contacts named above, Susan Iott (Assistant Director),  Krista Breen Anderson, Rodney Bacigalupo, Carolyn Blocker, Kevin Bray,  Mark Braza, Rich Johnson, Elizabeth Luke, Jeff Malcolm, Micah  McMillan, Jon Melhus, Cynthia Norris, Leslie Pollock, Max Sawicky, and  Sarah Veale made key contributions to this report.