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American City & County
Copyright 2002 by Intertec Publishing Corporation, a PRIMEDIA Company. All
rights reserved.

Saturday, June 1, 2002

Volume 117; Number 8; ISSN Number 0149337

Who will pay the piper?
By Ron Schwarzwalder

The United States built its drinking water infrastructure in waves: first in the late 1800s, then in the 1920s, and finally in the post-World War II boom. The structures and materials used in those projects are reaching the end of, or are exceeding, their life expectancy. That fact, coupled with the population trends of the past century, has created an urgent need to repair and replace that infrastructure.

The estimated cost of overhauling the nation's water system is
astronomical. The U.S. Environmental Protection Agency (EPA) places
the cost of repairing and/or replacing water and wastewater
infrastructure between $745 billion and $1 trillion over the next
20 years. (That estimate does not include the cost of water system
security measures, which will require additional investments of
millions of dollars.)

Utilities are hard-pressed to make the necessary investments, as
much of their funding is dedicated to meeting federal mandates
under the Clean Water Act and the Safe Drinking Water Act. Last
year, the Washington, D.C.-based Water Infrastructure Network (WIN)
compared the amount of money being invested in water and wastewater
infrastructure to the amount of money needed to replace aging pipes
and meet federal mandates. (WIN is a coalition of local elected
officials, drinking water and wastewater professionals, state
environmental and health officials, engineers and
environmentalists.) Based on its study, the coalition estimated an
annual shortfall of $23 billion for the next 20 years.

Congress began recognizing the looming infrastructure challenge
in the late 1990s, and legislation has begun moving in the current
session. However, the bills stop short of dedicating dollars to
repair and replacement, or to water system security, meaning that
local governments must review their rate structures and asset
management plans to bridge the funding gap.

Bills lack specificity

The U.S. House of Representatives is addressing the
infrastructure issue primarily by increasing funding for --
and making administrative changes to -- the existing State
Revolving Loan Fund (SRF) programs. For example, in March, the
House Transportation and Infrastructure Committee (with
jurisdiction over wastewater issues) passed H.R. 3930, boosting
funding for wastewater SRF programs.

The bill expands eligibility for SRFs to include projects
related to stormwater runoff, facilities security, watershed
management, conservation, lake protection and decentralized
treatment systems. However, it gives priority to projects that
enhance water quality, and its applicability to infrastructure
repair and replacement is open to interpretation.

The House Ways and Means Committee completed its work on H.R.
3930 in April. At the same time, the House Energy and Commerce
Committee heard testimony on needs for drinking water
infrastructure, but it has yet to introduce legislation.

In the Senate, the Environment and Public Works Committee has
jurisdiction over matters related to both drinking water and
wastewater. Early this year, committee members Bob Graham, D-Fla.;
Michael Crapo, R-Idaho; James Jeffords, I-Vt.; and Robert Smith,
R-N.H., introduced S. 1961, the Water Investment Act of 2002.

The Senate legislation would do the following:

Authorize $35 billion over five years for capitalization grants
to the states, for use in SRF programs. Drinking water would get
$15 billion of that total, and wastewater would get the remaining
$20 billion.

Authorize a state to use up to 15 percent of its capitalization
grant in any year to give more favorable loan terms (including
forgiveness of principal) to any community. The community must
demonstrate that the financial benefit it receives will be directed
to disadvantaged individuals, as determined by income.

Require a community receiving an SRF loan to have an asset
management plan in place by the completion of the project. As a
condition of a loan, communities also would be required to have
rates (or a plan to adopt rates within a reasonable time) that
reflect the actual cost of service.

Authorize 10 pilot projects per year to demonstrate innovative
or alternative approaches to water supply or water quality
management.

Despite its potential benefits, the bill does not extend SRF
eligibility to repair or replacement of aging infrastructure, or to
security-related projects.

Rate reviews a must

The federal government should not be expected to cover 100
percent of the nation's water infrastructure needs; local
governments and utilities must be prepared to make much of the
investment and recover their costs through rate adjustments.
However, for many municipalities, those costs are creating an
affordability gap for local ratepayers. There is a growing
discrepancy in utilities' need to invest in facilities and the
public's ability or willingness to pay the higher bills necessary
to finance those investments.

To keep water affordable while meeting the need for investments
in infrastructure, security and health-related compliance, the
nation needs a substantial new commitment to water infrastructure.
The American Water Works Association has testified before the House
and Senate regarding infrastructure issues, and it has made the
following recommendations.

Congress should expand and reform the Drinking Water State
Revolving Fund to provide at least $15 billion over the next five
years.

Congress should make repair and replacement of aging
infrastructure, as well as security-related projects, explicitly
eligible for SRFs.

SRF guidance must make the eligibility of investor-owned
utilities explicit. Congress has said that the program includes
investor-owned utilities, but the law does not specify their
inclusion; as a result, some states exclude investor-owned
utilities from the program.

Congress should ensure that large utilities have a guaranteed
share of SRF funding equal to the share already reserved in current
law for small systems, assuming there is a sufficient number of
eligible projects to fund.

Congress should minimize the red tape involved for utilities
that are participating, or wish to participate, in SRF
programs.

This being an election year, there are more than a few issues
-- including the federal budget deficit and the war on
terrorism -- competing for legislative attention and federal
funding. Consequently, local communities will likely have to wait
for a significant infrastructure bill.

In the meantime, infrastructure repair, replacement and security
cannot wait. Utilities must review their rates and establish plans
to self-finance through their rates. They also should develop asset
management plans, spelling out exactly how they will maintain their
water infrastructure and establishing schedules for replacing it
over a set period of time.

Ron Schwarzwalder is president of the American Water Works
Association, based in Denver.

Cities aid one another with reverse flow
project

Situated on the banks of the Maumee River in northwest Ohio,
Napoleon owns and operates its own surface water treatment plant.
The river provides a virtually limitless supply of raw water to the
city, but it also presents a problem: Each year, the river is
contaminated by agricultural runoff. As a result, the city's
finished drinking water periodically has had high nitrate levels,
prompting the city to issue advisories to its 9,300 residents.

Ten miles north, the 7,100 residents of Wauseon face a different
problem: The water provided by its surface water treatment plant is
not enough to sustain the community during times of drought.
(Wauseon collects water in two roadside ditches and stores it in
two above-ground reservoirs.)

With construction of dual-purpose, 24-inch water main joining
their treatment facilities, the two cities have overcome their
long-standing water problems. The $4.3 million project, completed
last year, allows each city to supply its neighbor with
high-quality raw water throughout the year.

Designed by Toledo, Ohio-based Finkbeiner, Pettis & Strout,
the pipeline extends 50,000 lineal feet across Henry and Fulton
counties, home to Napoleon and Wauseon, respectively. Each day,
Napoleon pumps raw water from the river to Wauseon reservoirs,
eliminating the potential for a water shortage in Wauseon. In the
spring and early summer, when nitrate levels in the river exceed
allowable standards, Napoleon stops pumping; the flow in the water
main is reversed, sending clean, settled, raw water from Wauseon
back to Napoleon.

As part of the project, Wauseon constructed or upgraded inlet,
outlet and overflow structures in its reservoirs to allow plant
operators to fill and draw from the reservoirs as needed. At the
same time, Napoleon installed a 3,500 gpm pump at its intake
facility to convey raw water to Wauseon. Both cities installed new
pipes and valves at their facilities to accommodate the reverse
flow. (The flow from Wauseon to Napoleon is accomplished with
gravity, but Wauseon maintains two pump stations for emergency
backup.)

The Wauseon to Napoleon Raw Water Supply Improvements project
was many years in the making. In addition to creating a cooperative
agreement, the cities worked with the design consultant to obtain
planning and design approvals from local governments, local
utilities, state regulatory agencies and private property
owners.

Napoleon paid $1 million of the project's capital costs, while
Wauseon paid the difference, with local funds. Over the next 25
years, Napoleon will assume the costs associated with pumping one
million gallons of water per day to Wauseon.

County enlists neighbors for unified water
system

Genesee County, N.Y., was a community divided by multiple water
systems and sources, many of which battled problems with water
quality and quantity. But that began to change in 1998, when the
county spearheaded efforts to create a countywide water system,
ultimately garnering the cooperation of one city, 13 towns, six
villages, two water authorities and three neighboring counties.

Genesee County is home to approximately 60,000 residents, and
its population is expected to grow 12 percent over the next 20
years. Prior to implementation of the countywide water system,
several of the county's municipalities were facing water-related
problems that, even without the anticipated growth, needed
attention.

For example, Oakfield's municipal well supply was situated close
to a Superfund site, presenting health concerns to residents and
resulting in several water-related health warnings. In Darien, home
to a Six Flags theme park, water was imported daily to accommodate
demands at the park and nearby hotel. And in Batavia, the city's
75-year-old water plant needed replacement or, at the very least,
major process renovations.

In its 1997 Comprehensive Plan, the Genesee County Legislature
identified high-quality public water as its "most significant
utility need." The plan's goal was to "ensure that
safe, efficient and affordable utilities are maintained and/or
extended in Genesee County to support appropriate land uses, meet
basic needs of residents and enhance economic growth."

The county legislature created the Genesee County Water
Resources Agency (GCWRA) -- consisting of local business
owners, farmers, local government officials and residents --
to identify strategies for meeting that goal. Considering a variety
of alternatives, including the option of having each municipality
address its own problems individually, the group chose to develop a
unified system. Its strategy involved the temporary use (five to 10
years) of local water treatment plants in Genesee County, as well
as extensions of the water supply systems in Monroe and Erie
counties.

Assisted by Rochester, N.Y.-based Clark Patterson Associates,
Genesee County and the Monroe County Water Authority (MCWA)
advanced stakeholder cooperation by meeting one-on-one with
concerned land and business owners, and by conducting public
hearings. "We met with so many people at every level, sharing
the same information and ideas," says John Stanwix, MCWA's
executive director. "Consistent communication was the key to
success."

Each town and village had four options to consider:

It could continue to use its current water system and allow the
county to connect to that system;

It could purchase water wholesale from MCWA yet retain
responsibility for its own distribution and administration;

It could lease its water system to MCWA and allow residents to
become MCWA customers; or

It could opt out of the unified system altogether.

Obtaining full stakeholder participation took more than two
years, and, in the end, the group had finalized more than 25
inter-municipal agreements. Additionally, MCWA had obtained
approval from the state legislature to extend, own and operate its
system in Genesee County.

Phase I of the Genesee County Water Program got under way in
Spring 2001 with construction of approximately 35 miles of water
main in Genesee, Monroe and Erie counties. Three pump stations and
three water storage tanks also were added throughout the
system.

As a result of the initial phase, the unified system supplies
water to 11 jurisdictions -- and supplemental service to two
more jurisdictions -- in Genesee County. It also provides
water to two towns in Monroe County; a town in Erie County; and
portions of a town in Livingston County. (Connections between a
Genesee County village and the Six Flags theme park will
accommodate new water demands resulting from park expansions.)

Phase I cost approximately $30 million and was financed
primarily by MCWA. (The agency's debt will be paid, in part, by a
$0.60 per 1,000 gallons surcharge on county residents' water
bills.) Genesee County has contributed approximately $6 million in
state and federal grants.

Phase II of the project, which depends on availability of
funding, will add 30 miles of water main in Genesee and Monroe
counties to allow extensions to two more towns and two more
villages in Genesee County. Estimated to cost up to $25 million,
the second phase also will provide new supplies to Batavia and Le
Roy from MCWA.

With the countywide water system, Genesee County is meeting its
goal of providing high-quality drinking water to its residents and
major water users. The system is providing long-term benefits as
well. For example, Batavia, which is at the heart of the system,
will save hundreds of thousands of dollars annually through a sales
tax agreement, which it made with the county as part of the
program. Additionally, towns and villages will have the resources
needed for managed growth, and, with adequate water supply, the
county is positioned for increased economic development.

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