THE HONORABLE BRUCE TOBEY
MAYOR OF GLOUCESTER, MASSACHUSETTS
on behalf of
THE NATIONAL LEAGUE OF CITIES
TRANSPORTATION AND INFRASTRUCTURE COMMITTEE
SUBCOMMITTEE ON WATER RESROUCES AND THE ENVIRONMENT
UNITED STATES HOUSE OF REPRESENTATIVES
WATER AND WASTEWATER INFRASTRUCTURE NEEDS
March 28, 2001
Mr. Chairman, members of the Subcommittee: I am Bruce Tobey, Mayor of Gloucester,
Massachusetts and a member of the National League of Cities Board of Directors. I am here
today to testify on behalf of the 16,000 cities, towns and villages that NLC represents,
as well as on behalf of the Water Infrastructure Network1 (WIN) 1.
I am pleased to be here this morning to discuss the coalition's report - Water
Infrastructure NOW - which recommends a major new and revitalized federal commitment to
the nation's drinking water and wastewater infrastructure. It outlines the parameters of a
potential federal response to the $1 trillion gap between investments cities are making in
our local infrastructure and the $1 trillion additional needed to assure protection of
public health, the environment and our economy over the next generation.
Before outlining for you the parameters of the Report's recommendations, it would seem
appropriate to address some fundamental questions: First, why do we have a funding gap of
such enormous magnitude; Second, what have local governments been doing to address the
issue; and, Finally, why and how should the federal government help?
1. WHY IS THERE A WATER INFRASTRUCTURE FUNDING GAP?
A number of factors:
- the simultaneous expiration of the useful life of water infrastructure installed at
- population growth;
- implementation of new, more costly, and more complex federal mandates which, in effect,
substitute federal priorities for local priorities; and,
- a substantial decline in federal financial participation in meeting wastewater mandates.
The nation's water infrastructure represents more than a century of investment,
substantially funded by local ratepayers. A significant part of the nation's water
infrastructure dates from the late 19th century. More recent expansions of these systems
took place following the two world wars. All of which means the newest systems are over 50
years old. What is more, the newer the infrastructure, the more likely it is to be
deteriorating. Different materials, with increasingly shorter useful lives leave us in the
position where 100 year's worth of infrastructure is being exhausted all at once. As a
consequence, municipalities now face a confluence of deterioration of the underground
pipes, and, in some cases, the treatment facilities, that process the nation's drinking
water and sewerage.
Under no circumstances does this denigrate the substantial $96 billion investment and
commitment to wastewater made by federal and state governments in the l970's and '80's.
Without this assistance we would never have made such incredible progress in cleaning up
the nation's waterways. But, EPA cautions that unless we renew our joint commitment to
maintaining and upgrading our wastewater facilities, within 15 years our rivers, lakes and
streams will again resemble their condition 30 years ago.
Until passage of the 1996 Safe Drinking Water Amendments, local governments have not had a
federal financial commitment to the nation's drinking water systems. The fact that
drinking water in the United States is among the safest in the world is a significant
tribute to the local ratepayers that have financed these treatment facilities.
Another factor contributing to the current funding gap is that simultaneous with the aging
of local water and wastewater infrastructure, has come a significant increase in
population. According to the Association of Metropolitan Sewerage Agencies (AMSA),
municipal wastewater plants served 68.5 million people in 1990. By 1999, the number had
increased to 79 million people. And that 10 million person increase occurred in less than
one decade. Systems designed and built for the population at the time of their
construction are now serving two to three times as many people as their design capacity.
In fact, the Clean Water Act of 1972 precluded local governments from anticipating
population growth in designing wastewater treatment plants built with federal financial
assistance. The fact that local systems serve significantly more people than their design
anticipated contributes to some of their problems - combined sewer overflows, sanitary
sewer overflows - all of which need immediate and costly attention if we are to protect
public health and the environment. Congress recognized this problem in passing the wet
weather provisions in a fiscal 2001 appropriations measure last year, but, we do not yet
have any appropriations from this authorization and, in all honesty, the $1.5 billion, two
year authorization, is only a down payment on problems that alone are expected to cost
well over $120 billion.
A third contributing factor is the significant decline in federal financial assistance for
wastewater needs. While once the federal government appropriated $2.4 billion for grants
cover 75 percent of wastewater needs, we now see instead $1.35 billion annually for
repayable loans. Without even considering aging and deteriorating water infrastructure, $1
billion is what one city alone is spending on remediating its sanitary sewer overflows.
While Congress recognized, in passing the Safe Drinking Water Act Amendments of 1996, the
need to provide similar assistance to municipal drinking water suppliers, this funding is
limited in its use for infrastructure repair and, for the most part, is available largely
And finally, federal drinking water and wastewater mandates have also played a role in
diverting local resources away from local needs and priorities and retargeting them to
federal priorities. When cities do manage to set aside funds to address a critical local
water infrastructure need, along comes a new unfunded - and usually costly - federal
mandate that is almost always accompanied by fines and penalties for non-compliance. And,
as you well know, we are not talking about an occasional new federal requirement. At the
local level there seem to be almost daily - or at least weekly - new burdens.
2. WHAT HAVE LOCAL GOVERNMENTS BEEN DOING TO HELP THEMSELVES?
- local governments - or rather local tax and ratepayers - invest $60 billion annually in
our drinking water and wastewater systems. Since the Clean Water Act was adopted in 1972,
local governments have invested over $117 billion in their wastewater infrastructure. We
have no similar figures for drinking water investments, but the 20 cities that have been
involved in recent asset management studies estimate the average per capita replacement
value of their systems at $2,400 per person.
- local water and sewer utility rates have been increasing to accommodate EPA's estimated
annual 6% increases in the costs of system operations and maintenance;
- new federal requirements developed by the Government Accounting Standards Board - on
which local government bond ratings are based - are moving local governments towards
managing their infrastructure assets in a more businesslike manner; and
- local governments are applying new management tools to assess and operate their systems
more effectively and efficiently.
While the funding allocated to local governments under the Clean Water Act has been of
invaluable assistance in helping municipalities meet federal requirements, Congress should
not lose sight of the fact that local governments have invested over $117 billion in our
wastewater infrastructure since the early 1970s. Until recently, our drinking water
infrastructure was entirely funded by local ratepayers. And, the deteriorating water
infrastructure that needs to be replaced because it has maximized its useful life over the
past 50 to 100 years was entirely completed at local expense.
In addition, municipal local rate structures generate the $60 billion annually we invest
in maintaining and operating these systems and cover 90 percent of our costs including
those for construction. In facing the enormous needs of the future, cities also expect to
finance - again through local ratepayers - $l trillion of the needs for repair,
rehabilitation and replacement of the aging and crumbling water infrastructure over the
next 20 years.
Municipalities have also been raising their water and sewer rates to accommodate increases
in their operating and maintenance costs, which, according to EPA, are rising at six
percent above inflation annually. Many cities require developers, and subsequently
homeowners, to finance the cost of new connections to municipal systems. My city is
directly billing homeowners who are newly connected to our wastewater system $20,000 per
home - to be paid over the next twenty years - to finance conversion from septic to
In addition, cities are improving their management practices. Local governments will soon
be required to comply with new rules promulgated by the Governmental Accounting Standards
Board in Statement 34 (GASB 34). These rules will require reporting of a municipality's
long-term financial position, quantifying resources and obligations more comprehensively.
The information cities will be required to provide will include an evaluation of the
condition of our municipal infrastructure. Bond rating services and others will be able to
evaluate whether we are "acquiring assets to benefit future fiscal years or if these
assets are being used but not replaced. 2 "The GASB 34
rule will, at a minimum, encourage local governments to evaluate their infrastructure in a
more systematic manner.
Other asset management tools, such as the "Nessie Study" are also being
implemented by cities to help identify when pipes and treatment plants were built, how
long they can be expected to last, when they will need to be replaced, and what the cost
is likely to be for such replacement. More efficient operations are also among the tools
used to provide more cost effective operations at the municipal level. As an example, a
1999 AMSA survey 3 documents the reduction in personnel from
6.8 employees per 10,000 population in 1990 to 4.7 in 1999. And, some local governments
are subjecting their system operations to competitive bidding to affect cost savings and
generate new and better efficiencies.
3. WHY SHOULD THE FEDERAL GOVERNMENT HELP?
- a sound infrastructure is the foundation of a sound economy;
- a sound infrastructure is essential to the protection of public health;
- federal assistance, as demonstrated by the success of the Clean Water Act, is the
catalyst that ensures environmental progress;
- water bodies, like air sheds, do not respect political boundaries;
- infrastructure assistance will benefit the people whose money created the federal
surplus - another way of giving them the refund they deserve;
- at 6%, the interest on $2 trillion in debt is $120 billion; the Water Infrastructure
Network seeks less than half of the interest avoided in a single year, spread over five
The Water Infrastructure NOW report made an eloquent case for a renewed federal
financial partnership in water infrastructure. It says:
The case for federal investment is compelling. Needs are large and unprecedented; in
many locations, local sources cannot be expected to meet this challenge alone; and because
waters are shared across local and state boundaries, the benefits of federal help will
accrue to the entire nation. Clean and safe water is no less a national priority than are
national defense, an adequate system of interstate highways, or a safe and efficient
aviation system. These latter infrastructure programs enjoy sustainable, long-term federal
grant programs; under current policy, water and wastewater infrastructure do not.
In light of the staggering costs of maintaining, operating, rehabilitating, and
replacing our water and wastewater system infrastructure to serve our citizens and the
environment effectively, the Clean Water Act partnership of the 1970-80's needs to be
re-established. It is in our interest as a nation, since virtually all of us live
downstream from someone else, for all levels of government to participate in assuring that
our drinking water and wastewater infrastructure is sound, reliable, protective of human
health and the environment, and affordable.
4. HOW CAN THE FEDERAL GOVERNMENT HELP?
- Re-establish the partnership in the Clean Water Act of 1972 for wastewater
infrastructure and establish one for drinking water infrastructure;
- Provide more flexibility in the types of assistance available to municipalities to
include grants as well as loans;
- Restore earlier investments in research and technology development;
- Establish a mechanism to develop a long-term and secure financial partnership for water
The Water Infrastructure Network has developed and agreed on the outlines of a
legislative proposal to revitalize (in the case of wastewater) or enhance (for drinking
water) the federal financial commitment to water infrastructure needs. The proposal
recommends a five-year, $57 billion authorization beginning in fiscal 2003 for loans,
grants, loan subsidies and credit assistance for basic water infrastructure needs. These
funds would be allocated to states to capitalize state-administered grant and loan
The WIN recommendations propose the creation of Water and Wastewater Infrastructure
Financing Authorities (WWIFAs) in each state to replace the two current State Revolving
Loan Funds (SRF) for drinking water and clean water. As with the SRFs, States would be
required to provide a 20 percent match for any federal revenues.
While half the funds would be targeted to wastewater and half to drinking water needs,
States would have the flexibility to shift up to an additional 15 percent from one purpose
to the other. This flexibility would be available so long as such a transfer did not
adversely affect any project on the state's priority list that was "ready to
WIN recommends that Congress require the new state funding authorities to provide 25 to 50
percent of each year's allocation as grants that would fund up to 55 percent of project
costs. Up to 75 percent of project costs would be eligible for grant funding in
economically distressed communities. Loans and loan subsidies would include interest rate
discounts, zero interest rate loans, principal forgiveness and negative interest rate
The report proposes an additional $4 billion in resources for State governments to help
them meet their drinking water and wastewater responsibilities. WIN also recommends
funding for development of innovative technology and management techniques to assist local
governments in providing clean and safe water more effectively and efficiently in the
future. And finally, the WIN report recommends that Congress "establish a formal
process to evaluate alternatives for, and recommend the structure of, a longer-term and
sustainable financing approach to meet America's water and wastewater infrastructure
\1\ The Water Infrastructure Network is a coalition of
state, local, environmental, professional, and labor organizations comprised of 29 diverse
groups including: American Coal Ash Association; American Concrete Pressure Pipe
Association; American Consulting Engineers Council; American Public Works Association;
American Society of Civil Engineers; American Water Works Association; Associated General
Contractors; Association of California Water Agencies; Association of Metropolitan
Sewerage Agencies; Association of Metropolitan Water Agencies; California Rebuild America
Coalition; Clean Water Action; Environmental and Energy Study Institute; Environmental
Business Action Coalition; International Union of Operating Engineers, AFL-CIO; National
Association of Counties; National Association of Flood and Stormwater Management Agencies;
National Association of Towns and Townships; National League of Cities; National Rural
Water Association; National Society of Professional Engineers; National Urban Agriculture
Council; Prestressed/Precast Concrete Institute; Rural Community Assistance Program, Inc.;
Water Environment Federation; WateReuse Association; and Western Coalition of Arid States.
\2\ "GASB 34: What Implementation Means to the
Rating Process," Hyman C. Grossman and LaVerne Thomas, Public Finance, p. 2, Sept.
20, 1999, Standard and Poor's.
\3\ AMSA 1999 Financial Survey of Municipal Wastewater
Management Financing and Trends, Association of Metropolitan Sewerage Agencies.