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CLEAN WATER FUNDING . ,^ / Y 4, M 53; 103-1 ^^^q Clean Hater Fundinqi Serial No. 103 N ENVIRONMENT AND NATURAL RESOURCES OF THE COMMITTEE ON MERCHANT MARINE AND FISHERIES HOUSE OF REPRESENTATFOIS ONE HUNDRED THIRD CONGRESS FIRST SESSION ON ACHIEVING THE OBJECTIVES OF THE CLEAN WATER ACT FEBRUARY 18. 1993 Serial No. 103-1 Printed for the use of the Committee on Merchant Marine and Fisheries "*•Utf V !., JUL 2 ''"•m U.S. GOVERNMENT PRINTING OFFICE 67-9«:Jt. WASHINGTON 1993 : ForsalebytheU.S.GovernmentPrintingOffice SuperintendentofDocuments.CongressionalSalesOffice,Washington,DC 20402 ISBN 0-16-040928-4 CLEAN WATER FUNDING Y 4, H 53: 103-1 ^^^q THE Clean Hater Funding/ Serial Ho. 103 •* N ENVIRONMENT AND NATURAL RESOURCES OF THE COMMITTEE ON MERCHANT MAKINE AND FISHERIES HOUSE OF REPRESENTATIVES ONE HUNDRED THIRD CONGRESS FIRST SESSION ON ACHIEVING THE OBJECTIVES OF THE CLEAN WATER ACT FEBRUARY 18, 1993 Serial No. 103-1 Printed for the use of the Committee on Merchant Marine and Fisheries JH¥ '"^2 3 1993 U.S. GOVERNMENT PRINTING OFFICE 67-9H.J-. WASHINGTON : 1993 ForsalebytheU.S.GovernmentPrintingOffice SuperintendentofDocuments,CongressionalSalesOffice,Washington,DC 20402 ISBN 0-16-040928-4 COMMITTEE ON MERCHANT MARINE AND HSHERIES GERRY E. STUDDS. Massachusetts. Chairman WILLIAM J. HUGHES. New Jersey JACK nELDS. Texas EARL HUTTO, Florida DON YOUNG. Alaska WJ. (BILLYl TAUZIN. Louisiana HERBERT H BATEMAN. Virginia WILLIAM O. LIPINSKI. Illinois JIM SAXTON. New Jersey SOLOMON P ORTIZ, Texas HOWARD COBLE. North Carolina THOMAS J MANTON. New York CURT WELDON. Pennsylvania OWEN B. PICKETT. Virginia JAMES M. INHOFE. Oklahoma GEORGE J. HOCHBRUECKNER. New York ARTHUR RAVENEL. Jr.. South Carolina FRANK PALLONE. Jr.. New Jersey WAYNE T. GILCHREST. Maryland GREG LAUGHLIN. Texas RANDY "DUKE* CUNNINGHAM. California JOLENE UNSOELD. Washington JACK KINGSTON. Georgia GENE TAYLOR. Mississippi TILLIE K. FOWLER. Florida JACK REED. Rhode Island MICHAEL N. CASTLE. Delaware H. MARTIN LANCASTER. North Carolina PETER T. KING. New York THOMAS H. ANDREWS. Maine LINCOLN DIAZ^BALART. Florida ELIZABETH FURSE. Oregon RICHARD W. POMBO. California LYNN SCHENK. California GENE GREEN. Texas ALCEE L. HASTINGS. Florida DAN HAMBURG. California BLANCHE M. LAMBERT, Arkansas ANNA G. ESHOO. California THOMAS J BARLOW. III. Kentucky BART STUPAK, Michigan MARIA CANTWELL, Washington PETER DEUTSCH, Florida GARY L. ACKERMAN. New York JepfreyWR. Pike, StaffDirector WiixiAM SrELLE, ChiefCounsel Mary J. Fusco Krreos. ChiefClerk Harry F. Burroughs, MinorityStaffDirector Subcommittee on Environment and Natural Resources GERRY E. STUDDS, Massachusetts, Chairman GEORGE J. HOCHBRUECKNER, New York JIM SAXTON. New Jersey FRANK PALLONE. Jr.. New Jersey DON YOUNG. Alaska GREG LAUGHLIN. Texas CURT WELDON. Pennsylvania JOLENE UNSOELD. Washington ARTHUR RAVENEL. Jr.. South Carolina JACK REED. Rhode Island WAYNE T. GILCHREST. Maryland EDLAINZAHBAEMTBHURFUGR.SEC.aliOfroergnioan ; RMIACNHDAYEL"DNU.KCEA"STCLUEN,NDIeNlGawHaArMe. California BLANCHE M LAMBERT. Arkansas JACK FIELDS. Texas (ExOflicioi ANNA G. ESHOO. California EARL HUTTO. Florida W.J. (BILLY) TAUZIN. Louisiana SOLOMON P ORTIZ. Texas Dan Ashe, StaffDirector Lesue Grey. ProfessionalStaff Laurel Bryant, Minority ProfessionalStaff <n) CONTENTS Page Hearing held February 18. 1993 1 Statement of: American Forest and Paper Association (Prepared statement) 121 Cunningham, Hon. Duke, a U.S. Representative from California 8 Dorfman, Gerry, President, National UtilitiesContractors Association 18 Prepared statement 85 Fields, Hon. Jack, a U.S Representative from Texas 4 Furse, Hon. Elizabeth, a U.S. Representative from Oregon 5 Gilchrest, Hon. Wayne, a U.S. Representative from Maryland 6 Hamburg, Hon. Dan, a U.S. Representative from California 6 Prepared statement 7 Hart, Dennis. Administrator for Environmental Regulation, New Jersey Department ofEnvironmental Protection and Energy 15 Prepared statement 73 Hooker, Michael, President, University ofMassachusetts (Prepared statement) 181 Margerum, Sonya, Mayor, West Lafayette, Indiana, and vice chair. Na- tional League ofCities EENR Committee 11 Prepared statement 48 Myers, Gary D., President, The Fertilizer Institute(Prepared statement)... 142 National Council ofFarmerCooperatives(Prepared statement) 129 Ostler, Don, President, Association of State and Interstate Water Pollu- tion Control Administration 13 Prepared statement 53 Saxton, Hon. H. James, a U.S. Representative from NewJersey 4 Sheets,James A.. Mayor, city ofQuincy, Massachusetts 9 Spencer, John. Director, Water Pollution Control, Department for the Seattle Metropolitan Area. Association ofMetropolitan Sewerage Agen- cies 16 Prepared statement 76 Studds. Hon. Gerry E.. a U.S. Representative from Massachussetts 1 Prepared statement 2 Additional material supplied: Association of Metropolitan Sewerage Agencies: A National Survey of Municipal Wastewater Management Needs 189 National Utility Contractors Association: Report entitled, "A Report on Clean Water InvestmentandJobCreation" 194 Communicationssubmitted: Sanders, Edward G. and Beauchamp. Martha A. (Sanders International): LetterofFebruary 23, 1993, toCongressman Gerry E. Studds 218 Subcommittee staff: Memorandum of February 12, 1993, to Members of Subcommitteeon Clean Water Funding 39 (m) CLEAN WATER FUNDING THURSDAY, FEBRUARY 18, 1993 House of Representatives, Subcommittee on Environ- ment AND Natural Resources, Committee on Mer- chant Marine and Fisheries, Washington, DC. The subcommittee met, pursuant to call, at 10:10 a.m., in room 1334, Longworth House Office Building, Hon. Gerry Studds [chairman ofthe subcommittee] presiding. Present: Representatives Studds, Pallone, Unsoeld, Reed, Furse, Hamburg, Lambert, Saxton, Ravenel, Gilchrest, Cunningham, Castle. Staff Present: Leslie Grey, Will Stelle, Dan Ashe, Barbara Jeanne Polo, Sue Waldron, Gina DeFerrari, Marv Zeeb, Mary Kitsos, Robert Wharton, Cynthia Wilkinson, Lori Rosa, Jayneanne Rex, Laurel Bryant, Tom Melius, Judy Alvarez, Margherita Woods, Bill Wright. STATEMENT OF HON. GERRY STUDDS, A U.S. REPRESENTATIVE FROM MASSACHUSETTS, AND CHAIRMAN. SUBCOMMITTEE ON ENVIRONMENT AND NATURAL RESOURCES Mr. Studds. The subcommittee will come to order. We meet this morning to consider what is very aptly described as a crisis in clean water funding. As I am sure the witnesses will illustrate, our country today is about as far from achieving the objectives of the Federal Clean Water Act as we have ever been, and the reason, very simply put, is that we do not have the money to do the job. Increasing our commitment to fund clean water infrastructure is the most important clean water issue facing the country. We can talk about controlling combined sewer overflows, polluted runoff, storm water, and toxics, but we will be simply talking unless we find the money to do the job. Our cities and towns and our individ- ual ratepayers cannot shoulder this burden alone. There is also the larger issue of affordable water and sewer services. Simply put, it is an issue that cuts to the core ofwhat prosperity and economic development mean to municipal and family coffers across the nation. In my own district, which, unfortunately, is as telling an example of this as any, this year will mark the 8th anniversary of the Court-ordered Boston Harbor cleanup. I daresay there will not be any parades or celebrations to mark the occasion. In the city of Quincy, from whose mayor we will hear in a moment, sewer and water rates have risen by more than 400 per- cent in the interim, and they are projected to double very shortly again. It now costs more to run the tap than it does to educate (1) your child or to keep the streets safe. We have one of the highest rates in the nation, and, as I said, they are about to double again. What about economic development? The average industrial water and sewer bill in our region is $694,000 per year. In other cities, which, for obvious reasons, I will not name at the moment, it is about a sixth ofthat. Ifyou are going to start up a business, you have to be particularly attracted by the other advantages ofa loca- tion to move in our direction. Affordable water and sewer services cut to the core ofour prosperity; they are not a luxury. We must face two unpleasant facts. The first is that the last 12 years have witnessed the essential bankrupting ofthe Federal Gov- ernment, and the nation's cupboard is bare. We now have a Presi- dent who told us he intended to do something about it, and I think we now know that he is very serious indeed. The second fact is that we must increase Federal funding for water services. The current situation is unacceptable, and it is getting rapidly worse. These two stark realities led me three years ago to bring an effort to find new money for clean water because the only way we will increase Federal support is to identify a way and most likely a new way to pay for it. Hence, our proposal for an alternative financing mechanism that is founded on the polluter-pays principle which would generate some $6 billion annually through a broadly based system oftaxes on polluting industries and activities. No one wants to be taxed, and no one particularly wants to talk about this issue. There is, however, no alternative whatsoever other than living with highly polluted water, and that is no alternative. It is time to face the facts and to get to work in solving an ex- traordinarily complex problem. I hope today's hearing will help us in that regard. Before going to our witnesses, I will recognize members if they wish, reminding them of them of the new rules of the committee which are hortatory in nature and which discourage the kind of statements I just gave. I think they except the Chair and the ranking member, however. [Statement ofMr. Studds follows:] StatementofHon. Gerry E. Studds, a U.S. Representativefrom Massachusetts. ANDChairman,Subcommitteeon Environmentand NaturalResources The Clinton infrastructure initiative presents an unprecedented opportunity to create millions ofjobs, improve water services that are essential for long-term economic growth, and make huge improvements in environmental quality nationwide. THEPROBLEM Nationwide, water and sewer bills are skyrocketing, as the costs of municipal sewage plants soar. The Reagan/Bush policy of withdrawing Federal support for clean water is bankrupting household and municipal budgets. Consider these facts. We have underinvested in clean water infrastructure. TTie Environmental Protec- tion Agency (EPA) estimates that it will cost $111.5 billion over the next 20years to build the infrastructure needed to comply with current Federal standards for wastewatertreatment alone. At current rates of investment, we are falling further and further behind every year. A recent report issued by the National Utility Contractors Association found that the annual shortfall in Federal, state and local funding for wastewater infrastructure isas high as $7.7 billion. Ifthe conviction is there, thejobsarethere. In February 1992, the EPAestimated that there are $12 billion in wastewater infrastructure projects which are "ready to go". Morecurrentestimatesare nowbeing prepared. Drinking water requirements are also draining local coffers. "Ready-to-go" drink- ingwater projectstop$14 billion—exceedingwastewater requirements. THESOLUTION A FEDERAL INVESTMENTOF $6 BILUON ANNUALLY IN PROTECTING WATERQUAUTY TREATMENT IS REQUIRED Theclean water infrastructure initiative should pursue twotrackssinriultaneously to achieve this objective. First, it should have an immediate appropriation tojump- start the clean water and drinking water program forjobs and productivity. Second, itshould phase in a permanent solution totheclean water fundingcrisis. THESHORTTERM The first year infrastructure proposal should serve as a br—idge to the long-term solution by appropriating $3.5 billion for clean water projects making a total 1993 investmentof$6billion. THE LONG TERM Accompanying the short-term stimulus package should be a long-term solution that phases in a self-financing mechanism and phases down the appropriation levels fordeficit reduction purposes. The long-term solution iscomprised oftwocoreelements: A "polluter pay" proposal to raise new revenues; and A substantial retooling of the existing state revolving fund system to encompass drinking water requirements and improve the SRF's ability to finance state and local clean water programs. The heartofthe proposal isthe "Polluter Pays" principle, shiftingagreatershare of water treatment costs away from town and household coffers and onto the sources of pollution. At my request, the Congressional Research Service (CRS) has issued a detailed reporton this major new source ofclean water funding. Through a combination of revenue sources, this proposal would provide a large infusion ofdol- lars intoexistingstate revolving funds(SRF's) to finance state and local clean water projects. REVENUES — A fee on the industrial discharge of toxic pollution expected revenue: $3.0 billion. A fee on industrial, com—mercial, and consumer products that are known to con- tribute towater pollution expected revenue: $2.0 billion. — An excise tax on the active ingredients ofpesticides and fertilizers expected revenue: $1.0billion. Total Annual Revenues: $6.0 billion DISBURSEMENTS TheNationalClean WaterInvestment Corporation Several principles should govern disbursements. Revenue should be dispersed through a National Clean Water Investment Corporation and channeled to state revolving loan funds(SRF's)that would be retooled to reflect the following: Project Eligibilities. Project eligibilities would be expanded beyond sewer projects to include a broader array ofclean water needs, including combined seweroverflow, stormwater controls, other capital costs associated with implementing state non- point source control programs, local drinking water requirements and other state flriu locAi (?l^&fi wst^f* n^^CiS Broader FinancingTools. The State Revolving Funds(SRF's) must be revamped to authorize a broader array offinancing tools, like zero and negative interest loans to helpsmall and financially strapped communities(a negative interest loan is another form for a direct grant insofar as it buys down the outstanding principle ofa loan); Revise the Allocation Formula. The current Clean Water Act allocation formula must be revised to reflect actual state needs. THE RETURN ON INVESTMENT Jobs for the Environment. The National Utility Contractors Association estimates that every $1 billion investment in water and sewer projects generates from 34,200 to 57,400 injobs for American workers. Therefore, EPA's total 20-year need estimate represents as many as 6,402,060 American jobs. More importantly, the EPA estimate that there are $12 billion in projects—"ready togo" (completed design and engi- neering phases and ready to go to bid) meaning that a short-term initiative in clean water investment will generate as many as 614,180 American jobs over the nextsix years. LongTerm Productivity Increases. Job creation isthe most rapid andobviousben- efit but this investment pays other dividends as well. A cleaner environment pro- motes health and safety and contributes to employee productivity; public investment in water treatment capacity isa demonstrated stimulus to private investment; a national polluter pays feesystem will promotecompetitiveness by eveningtheeco- nomic playing field between statesand citiesand create market incentives for pollution reduction and innovativetechnologies. The result is productivity, competitiveness, economic stimulus,jobs, and a cleaner environment. Mr. Studds. Are there opening statements on this side? The gen- tleman from South Carolina. Mr. Ravenel. Mr. Chairman, I have no opening statement, but I have a statement here by Mr. Fields from Texas which I would like to enter into the record. Mr. Studds. Without objection. [Statement ofMr. Fields follows:] StatementofHon. Jack Fields, a U.S. Representative from Texas, and Ranking Minority Member,Committeeon MerchantMarine and Fisheries Mr. Chairman, it is a pleasure today tojoin you as theSubcommittee on Environ- ment and Natural Resourcesconsiders national needs for fundingclean water infrastructure projects. Mr. Chairman, in my opinion, considerable progress has been made over the past two decades in meeting the ambitious and highly laudable goals set out in the Fed- eral Clean Water Act and the Safe Drinking Water Act. Progress is notjeopardized by a lack of public concern for environmental or health issues; rather, lack of progress is due to a severe shortage of funds for the construction of clean water projectsacrossourcountry. The hearing today will provide an opportunity to receive testimony from the En- vironmental Protection Agency, State water pollution control administrators, and representatives of water utilities, to identify long-term national needs for clean water financing. This need can be translated into billions of dollars in capital investment. This investment iscrucial tothe protection ofenvironment, fisheries, and wildlife. It isalso necessary tosupportagrowingand sustainableeconomy. I look forward to the testimony that we will receive today for it will help assess the need for more Federal funding and explore ways to generate additional dollars to meetthose needs. Thank you, Mr. Chairman. Mr. Ravenel. Also one by Mr. Saxton. I would like to say on behalf of Mr. Saxton that he will be here a little later, that he wanted me to welcome Mr. Dennis Hart of the New Jersey Depart- ment of Environmental Protection and Energy. Thanks for coming today, and we look forward to your testimony. Thank you, Mr. Chairman. Mr. Studds. Thank you, sir. [Statement ofMr. Saxton follows:] StatementofHon. H. JamesSaxton, a U.S. Representative from NewJersey I would like to welcome Mr. Dennis Hart ofthe New Jersey Department ofEnvi- ronmental Protection and Energy. Thank you for coming today. I look forward to