Water Infrastructure Issues [1 ed.] 9781621003298, 9781612095141

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Copyright © 2011. Nova Science Publishers, Incorporated. All rights reserved. Water Infrastructure Issues, edited by James D. Haffner, and Elizabeth M. Gennady, Nova Science Publishers, Incorporated, 2011. ProQuest Ebook

Copyright © 2011. Nova Science Publishers, Incorporated. All rights reserved. Water Infrastructure Issues, edited by James D. Haffner, and Elizabeth M. Gennady, Nova Science Publishers, Incorporated, 2011. ProQuest Ebook

WATER RESOURCE PLANNING, DEVELOPMENT AND MANAGEMENT

Copyright © 2011. Nova Science Publishers, Incorporated. All rights reserved.

WATER INFRASTRUCTURE ISSUES

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Water Infrastructure Issues, edited by James D. Haffner, and Elizabeth M. Gennady, Nova Science Publishers, Incorporated, 2011. ProQuest Ebook

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Water Infrastructure Issues, edited by James D. Haffner, and Elizabeth M. Gennady, Nova Science Publishers, Incorporated, 2011. ProQuest Ebook

WATER RESOURCE PLANNING, DEVELOPMENT AND MANAGEMENT

WATER INFRASTRUCTURE ISSUES

JAMES D. HAFFNER AND

Copyright © 2011. Nova Science Publishers, Incorporated. All rights reserved.

ELISABETH M. GENNADY EDITORS

Nova Science Publishers, Inc. New York Water Infrastructure Issues, edited by James D. Haffner, and Elizabeth M. Gennady, Nova Science Publishers, Incorporated, 2011. ProQuest Ebook

Copyright © 2011 by Nova Science Publishers, Inc. All rights reserved. No part of this book may be reproduced, stored in a retrieval system or transmitted in any form or by any means: electronic, electrostatic, magnetic, tape, mechanical photocopying, recording or otherwise without the written permission of the Publisher. For permission to use material from this book please contact us: Telephone 631-231-7269; Fax 631-231-8175 Web Site: http://www.novapublishers.com

NOTICE TO THE READER The Publisher has taken reasonable care in the preparation of this book, but makes no expressed or implied warranty of any kind and assumes no responsibility for any errors or omissions. No liability is assumed for incidental or consequential damages in connection with or arising out of information contained in this book. The Publisher shall not be liable for any special, consequential, or exemplary damages resulting, in whole or in part, from the readers‘ use of, or reliance upon, this material. Any parts of this book based on government reports are so indicated and copyright is claimed for those parts to the extent applicable to compilations of such works.

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Independent verification should be sought for any data, advice or recommendations contained in this book. In addition, no responsibility is assumed by the publisher for any injury and/or damage to persons or property arising from any methods, products, instructions, ideas or otherwise contained in this publication. This publication is designed to provide accurate and authoritative information with regard to the subject matter covered herein. It is sold with the clear understanding that the Publisher is not engaged in rendering legal or any other professional services. If legal or any other expert assistance is required, the services of a competent person should be sought. FROM A DECLARATION OF PARTICIPANTS JOINTLY ADOPTED BY A COMMITTEE OF THE AMERICAN BAR ASSOCIATION AND A COMMITTEE OF PUBLISHERS. Additional color graphics may be available in the e-book version of this book. LIBRARY OF CONGRESS CATALOGING-IN-PUBLICATION DATA Water infrastructure issues / editors, James D. Haffner and Elizabeth M. Gennady. p. cm. Includes bibliographical references and index. ISBN H%RRN 1. Waterworks--Government policy--United States. 2. Waterworks--Finance--United States. 3. Water-supply, Rural--United States. I. Haffner, James D. II. Gennady, Elizabeth M. TD223.W29185 2011 363.6'10973--dc22 2011003993

Published by Nova Science Publishers, Inc. New York Water Infrastructure Issues, edited by James D. Haffner, and Elizabeth M. Gennady, Nova Science Publishers, Incorporated, 2011. ProQuest Ebook

CONTENTS Preface Chapter 1

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Chapter 2

vii Water Infrastructure Needs and Investment: Review and Analysis of Key Issues Claudia Copeland and Mary Tiemann Water Infrastructure Funding in the American Recovery and Reinvestment Act of 2009 Claudia Copeland, Megan Stubbs and Charles V. Stern

Chapter 3

Water Infrastructure Financing: History of EPA Appropriations Claudia Copeland

Chapter 4

Water Infrastructure Projects Designated in EPA Appropriations: Trends and Policy Implications Claudia Copeland

Chapter 5

Chapter 6

Rural Water Infrastructure: Improved Coordination and Funding Processes Could Enhance Federal Efforts to Meet Needs in the U.S.-Mexico Border Region United States Government Accountability Office Terrorism and Security Issues Facing the Water Infrastructure Sector Claudia Copeland

1

39 59

93

105

169

Chapter Sources

189

Index

191

Water Infrastructure Issues, edited by James D. Haffner, and Elizabeth M. Gennady, Nova Science Publishers, Incorporated, 2011. ProQuest Ebook

Copyright © 2011. Nova Science Publishers, Incorporated. All rights reserved. Water Infrastructure Issues, edited by James D. Haffner, and Elizabeth M. Gennady, Nova Science Publishers, Incorporated, 2011. ProQuest Ebook

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PREFACE Policymakers are giving increased attention to issues associated with financing and investing in the nation's drinking water and wastewater treatment systems, which take in water, treat it and distribute it to households and other customers, and later collect, treat and discharge water after use. The renewed attention is due to a combination of factors which include financial impacts on communities of meeting existing and anticipated regulatory requirements, the need to repair and replace existing infrastructure, concerns about paying for security-related projects and proposals to stimulate U.S. economic activity by building and rebuilding the nation's infrastructure. This new book identifies a number of issues that have received attention in connection with water infrastructure investment. Chapter 1- The federal government has a long history of involvement with wastewater and drinking water systems, with the Environmental Protection Agency (EPA) having the most significant role, both in terms of regulation and funding. The U.S. Department of Agriculture also plays an important role in rural communities through its water and wastewater loan and grant programs. These programs have been popular; however, states, local communities, and others have asserted that various program gaps and limitations may be diminishing their potential effectiveness. They also point to the emergence of new infrastructure needs and issues. Chapter 2- On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (P.L. 111-5, the ARRA, or Recovery Act). Among the purposes identified in the legislation are preservation and creation of jobs and promotion of U.S. economic recovery, and investment in transportation, environmental protection, and other infrastructure that will provide long-term economic benefits. This report identifies funding for water infrastructure programs and projects contained in the legislation. Chapter 3- The principal federal program to aid municipal wastewater treatment plant construction is authorized in the Clean Water Act (CWA). Established as a grant program in 1972, it now capitalizes state loan programs. Authorizations since 1972 have totaled $65 billion, while appropriations have totaled $85 billion. It has represented 25-30% of total funds appropriated to the Environmental Protection Agency (EPA) in recent years. Chapter 4- Congressional action to designate funds within appropriations legislation for specified projects or locations has been increasing in recent years as a way to help communities meet needs to build and upgrade water infrastructure systems, whose estimated future funding needs exceed $630 billion. Such legislative action has often been popularly referred to as earmarking. This report discusses appropriations for water infrastructure

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Preface

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programs of the Environmental Protection Agency (EPA), focusing on such designations in the account that funds these programs. Information on the programmatic history of EPA involvement in assisting wastewater treatment and drinking water projects is provided in two appendixes. Chapter 5- A serious problem for U.S. communities along the U.S.-Mexico border is the lack of access to safe drinking water and sanitation systems. Inadequate systems can pose risks to human health and the environment, including the risk of waterborne diseases. Numerous federal programs provide grants, loans, or other assistance to rural U.S. communities, including those in the border region, for drinking water and wastewater projects. GAO was asked to determine (1) the amount of federal funding provided to rural U.S. communities in the border region for drinking water and wastewater systems and (2) the effectiveness of federal efforts to meet the water and wastewater needs in the region. GAO analyzed agency financial data; reviewed statutes, regulations, policies, and procedures; and interviewed federal, state, local, and private sector officials. Chapter 6- Damage to or destruction of the nation‘s water supply and water quality infrastructure by terrorist attack or natural disaster could disrupt the delivery of vital human services in this country, threatening public health and the environment, or possibly causing loss of life. Interest in such problems has increased greatly since the September 11, 2001, terrorist attacks in the United States.

Water Infrastructure Issues, edited by James D. Haffner, and Elizabeth M. Gennady, Nova Science Publishers, Incorporated, 2011. ProQuest Ebook

In: Water Infrastructure Issues Editors: James D. Haffner and Elizabeth M. Gennady

ISBN: 978-1-61209-514-1 © 2011 Nova Science Publishers, Inc.

Chapter 1

WATER INFRASTRUCTURE NEEDS AND INVESTMENT: REVIEW AND ANALYSIS OF KEY ISSUES Claudia Copeland and Mary Tiemann

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SUMMARY Policymakers are giving increased attention to issues associated with financing and investing in the nation‘s drinking water and wastewater treatment systems, which take in water, treat it, and distribute it to households and other customers, and later collect, treat, and discharge water after use. The renewed attention is due to a combination of factors. These include financial impacts on communities of meeting existing and anticipated regulatory requirements, the need to repair and replace existing infrastructure, concerns about paying for security-related projects, and proposals to stimulate U.S. economic activity by building and rebuilding the nation‘s infrastructure. The federal government has a long history of involvement with wastewater and drinking water systems, with the Environmental Protection Agency (EPA) having the most significant role, both in terms of regulation and funding. The U.S. Department of Agriculture also plays an important role in rural communities through its water and wastewater loan and grant programs. These programs have been popular; however, states, local communities, and others have asserted that various program gaps and limitations may be diminishing their potential effectiveness. They also point to the emergence of new infrastructure needs and issues. A number of interest groups and coalitions have issued reports on infrastructure funding needs and related policy issues, as have EPA and the Congressional Budget Office (CBO). They present a range of estimates and scenarios of future investment costs and gaps between current spending and future costs. EPA and CBO, in particular, caution that projections of future costs are highly uncertain, and that funding gaps are not inevitable. Increased investment, sought by many stakeholders, is one way to shrink the spending gaps, but so, too, are other strategies such as asset management, more efficient pricing, and better technology. Congressional interest in these issues has grown for some. In each Congress since the 107th, House and Senate committees acted on legislation to reauthorize and modify

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Claudia Copeland and Mary Tiemann

infrastructure financing programs in the Clean Water Act and Safe Drinking Water Act, but no bills were enacted. The Bush Administration addressed water infrastructure in a number of general ways, but did not offer legislative proposals of its own. EPA‘s principal initiative has been to support strategies intended to ensure that infrastructure investment needs are met in an efficient, timely, and equitable manner. The Obama Administration has focused attention on providing increased federal budgetary resources for water infrastructure investments. This report identifies a number of issues that have received attention in connection with water infrastructure investment. It begins with a review of federal involvement, describes the debate about needs, and then examines key issues, including what is the nature of the problems to be solved; who will pay, and what is the federal role; and questions about mechanisms for delivering federal support, including state-by-state allotment of federal funds. Congressional and Administration activity on these issues from the 107th to the 110th Congresses also is reviewed. (For information on legislative activity in the 111th Congress, see CRS Report R40098, Water Quality Issues in the 111th Congress: Oversight and Implementation, and CRS Report RS22037, Drinking Water State Revolving Fund (DWSRF): Program Overview and Issues.)

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INTRODUCTION Drinking water and wastewater treatment systems treat and safeguard the nation‘s water resources. Drinking water utilities have the task of supplying safe potable water to customers in both the proper quantity and quality. Wastewater utilities operate facilities that clean the flow of used water from a community. The federal government has had significant involvement with these systems for many years, both through setting standards to protect public health and the environment and through funding to assist them in meeting standards. While funding of water infrastructure programs has been addressed annually through the congressional appropriations process, authorizing legislation affecting policy and program issues was last enacted in 1996 (for drinking water infrastructure) and 1987 (for wastewater infrastructure).1 More recently, water infrastructure issues have been receiving increased attention by policymakers and legislators. The renewed attention is due to a combination of several factors. 

Meeting Regulatory Requirements. Financial impacts of meeting regulatory requirements—some new, some long-standing—are a continuing issue for many communities. In the case of drinking water systems, the most pressing rules are new, either recently issued or pending, as the result of standard-setting by the Environmental Protection Agency (EPA) to implement the Safe Drinking Water Act Amendments of 1996. (Many of these rulemakings were initiated under amendments passed in 1986.) These rules impose new or stricter drinking water limits on numerous contaminants, including arsenic, radioactive contaminants, and microbials and disinfection byproducts, among others. For wastewater systems, principal regulatory requirements mandated by the Clean Water Act have not changed since 1972, and the majority of communities have achieved or are in the process of achieving compliance. The newer issue for wastewater systems is the cost of controls

Water Infrastructure Issues, edited by James D. Haffner, and Elizabeth M. Gennady, Nova Science Publishers, Incorporated, 2011. ProQuest Ebook

Water Infrastructure Needs and Investment: Review and Analysis of Key Issues

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3

and practices to manage what are termed wet weather pollution problems, such as urban stormwater runoff and overflows from municipal sewers. These requirements are old in the sense that most wastewater utilities have not addressed long-standing wet weather problems, but they also are new because in many communities, specific measures and how to pay for them are only now being identified. Financing Infrastructure Repair or Replacement. A more recent focus by stakeholders is on the need to repair and replace infrastructure that has been in place for decades and will soon fail, many believe. According to the American Water Works Association (AWWA), ―We stand at the dawn of the replacement era ... replacement needs are large and on the way. There will be a growing conflict between the need to replace worn-out infrastructure and the need to invest in compliance with new regulatory standards.‖2 Over the long term, these stakeholders say, a higher level of investment than is occurring today is required. For both wastewater and drinking water systems, a key concern is that EPA‘s funding programs, the largest sources of federal assistance, do not, in the main, support repair and replacement; their focus is upgrades and new construction needed to achieve wastewater and drinking water standards. Security. Beyond the traditional infrastructure needs related to regulatory compliance and system repair and expansion, the terrorist attacks of September 11, 2001, generated new investment needs for drinking water and wastewater systems. The national costs of addressing water and wastewater security needs have not been quantified; however, the AWWA estimated that municipal water systems would have to spend more than $1.6 billion just to ensure control of access to critical water system assets.3 This estimate does not include the capital costs of upgrades to address vulnerabilities that water system managers have identified in vulnerability assessments, or the costs facing wastewater systems and smaller drinking water systems. Although EPA has identified a range of security measures that are eligible for funding through traditional infrastructure assistance programs, competition already is severe for these funds, which are primarily used for projects needed to meet regulatory requirements. Problems That Do Not Fit Existing Solutions. For some, an interest in water infrastructure legislation derives from concern that traditional federal programs and financing approaches do not fit well with some current types of needs. Points at issue vary, but the common thread is that certain needs are not being well met by programmatic solutions that now exist. In some cases (metropolitan drinking water systems, for example), there is a perception that EPA‘s programs are more geared to aiding small systems than large ones. In other cases, the concern is how to fund types of projects that include mixed elements (e.g., developing new community water supplies and treating that water, especially in rural areas) that do not meet traditional program definitions, or are seemingly spread across jurisdictions of multiple federal agencies. Still others believe that expanding program eligibility to include water conservation projects could reduce overall needs for capital investment. Another concern arises in small, dispersed communities where on-site treatment systems may be preferable to centralized facilities; however on-site treatment generally is not eligible for federal aid. At issue for Congress is whether to modify existing programs

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to address such needs, or to address them in legislation individually and case-bycase.4 Other Legislative Models and Activity. Legislative approaches for other types of infrastructure—especially surface transportation and aviation—have suggested possible models for water infrastructure financing. The federal highway and mass transit and aviation programs are supported by trust funds derived from fees and taxes paid by users of those systems and facilities. Some proponents of water infrastructure spending, concerned about a gap between needs and available funds, believe that an initiative based on a federal water trust fund would conceptually be a logical follow-on to the surface transportation and aviation programs. According to that view, passage of those measures could give momentum to enacting new budget authority for water infrastructure spending, as well. Still, differences are apparent, especially the fact that, unlike surface transportation and aviation, there is no comparable dedicated trust fund for water infrastructure, or easily identifiable revenue source for a trust fund. While surface transportation and aviation may offer ideas and momentum, they also may be imperfect models for water, unless dedicated revenue sources for a water trust fund can be identified. Changed Dynamics at the Federal Level about “Who Should and Can Pay.” For many years, a focus on federal deficit reduction restrained the federal government from making major new investments in water infrastructure or other new programs. Early in this decade, forecasts of budgetary surplus encouraged a variety of interests to advocate increasing the federal commitment to water infrastructure. But, beginning in 2001, estimates of surplus changed to large federal deficits, especially associated with spending on the nation‘s heightened priorities of defense and homeland security following the September 11 terrorist attacks. By mid-2007, the Congressional Budget Office (CBO) and others observed that the federal budgetary situation was improving, but CBO cautioned that the United States continues to face severe long-term budgetary challenges. Throughout this period, the nation‘s fiscal environment has severely constrained arguments by proponents of greater federal investment and larger federal expenditures for water infrastructure. By mid-2008, conditions encouraging more federal investment in infrastructure facilities (water, transportation, and other types) appeared to emerge—not due to a strengthened U.S. economy, but rather as a result of a widespread economic slowdown, which led many to advocate infrastructure spending as one component of programs to stimulate economic activity and create jobs. While many academic and government studies have found that the impact of infrastructure spending on economic activity is modest and long in coming, pressure for economic stimulus combined with the issues described above (and discussed in this report) to draw greater attention to infrastructure investment. In February 2009 Congress enacted the American Recovery and Reinvestment Act (P.L. 111-5), legislation providing extensive discretionary spending, mandatory spending, and revenue provisions intended to boost economic activity that includes more than $7 billion in funds for wastewater and drinking water projects.5

This report identifies a number of issues receiving attention in connection with water infrastructure. It begins with a brief review of federal involvement, describes the debate about Water Infrastructure Issues, edited by James D. Haffner, and Elizabeth M. Gennady, Nova Science Publishers, Incorporated, 2011. ProQuest Ebook

Water Infrastructure Needs and Investment: Review and Analysis of Key Issues

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funding needs, and then examines key issues, including what is the nature of the problems to be solved; who will pay, and what is the federal role; and questions about mechanisms for delivering federal support, including state-by-state allotment. Recent congressional and Administration activity on these issues also is reviewed.6

BACKGROUND: HISTORY OF FEDERAL INVOLVEMENT The federal government has a lengthy history of involvement with wastewater and drinking water systems. The history of financial assistance is longer for wastewater than for drinking water, however. EPA has the most significant role, both in terms of regulation and funding.

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Wastewater The Water Pollution Control Act of 1948 (P.L. 80-845) was the first comprehensive statement of federal interest in clean water programs. While it contained no federally required goals, limits, or even guidelines, it started the trickle of federal aid to municipal wastewater treatment authorities that grew in subsequent years. It established a grant program to assist localities with planning and design work, and authorized loans for treatment plant construction, capped at $250,000 or one- third of construction costs, whichever was less. With each successive statute in the 1950s and 1960s, federal assistance to municipal treatment agencies increased. A construction grant program replaced the loan program; the amount of authorized funding went up; the percentage of total costs covered by federal funds was raised; and the types of project costs deemed grant-eligible were expanded. In the Federal Water Pollution Control Act Amendments of 1972 (P.L. 92-500, popularly known as the Clean Water Act, 33 U.S.C. 1251 et seq.), Congress totally revised the existing federal clean water law, including with regard to wastewater systems. At the time, there was widespread recognition of water quality problems nationwide and frustration over the slow pace of industrial and municipal cleanup efforts under existing programs. In the 1972 law, Congress strengthened the federal role in clean water and established national standards for treatment, mandating that all publicly owned treatment works achieve a minimum of secondary treatment (defined in EPA regulations as removing 85% of incoming wastes), or more stringent treatment where necessary to meet local water quality standards, and set a July 1, 1977, deadline for meeting secondary treatment. A number of new conditions were attached to projects constructed with grants. In exchange, federal funds increased dramatically. The federal share was raised from 55% to 75%, and annual authorizations were $5 billion in FY1 973, $6 billion in FY1974, and $7 billion in FY1975. In 1977, the grant program was reauthorized through FY1982; annual authorizations were $5 billion for each of the last four years covered by that act (P.L. 95-217). Some restrictions were imposed, including requirements that states set aside a portion of funds for innovative and alternative technology projects and for projects in rural areas. In addition, the types of eligible projects were limited in order to focus use of federal funds on projects with environmental benefits in preference to projects aiding community growth. When the

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program was again reauthorized in 1981 (P.L. 97-117), Congress and the Administration agreed to significant restrictions, out of concern that the program‘s wide scope was not properly focused on key goals. Budgetary pressures and a desire to reduce federal spending also were concerns. Annual authorizations under this act were $2.4 billion, the federal share was reduced to 55%, and project eligibilities were limited further. The 1972 law required a ―needs survey‖ every two years to adjust the statutory allotment formula by which grant funds were divided among the states. In this survey, EPA compiles state data to estimate capital costs for water quality projects and other activities eligible for support under the Clean Water Act. From an initial estimate of $63 billion in 1973, the survey figure went to a high of $342 billion in 1974, dropped to $96 billion in 1976, rose to $106 billion in 1978, $120 billion in 1980, declined to $80 billion in 1990, was assessed at $139.5 billion in 1996, and rose to $202.5 billion in 2004, the most recent survey. Inconsistencies and variations have been ascribed to several factors, including the lack of precision with which needs for some project categories could be assessed (especially in the early years) and the desire of state estimators to use the needs survey as a way of keeping their share of the federal allotment as high as possible.7 However, EPA believes that recent surveys produce credible data, because of the requirement that needs must be justified by project-specific documentation. By the mid-1980s there was considerable policy debate between Congress and the Administration over the future of the construction grants program and, in particular, the appropriate federal role. Through FY1984, Congress had appropriated nearly $41 billion under this program, representing the largest nonmilitary public works programs since the Interstate Highway System. The grants program was a target of the Reagan Administration‘s budget cutters, who sought to redirect budget priorities and establish what they viewed as the appropriate governmental roles in a number of domestic policy areas, including water pollution control. Thus, for budgetary reasons and the belief that the backlog of wastewater projects identified in 1972 had largely been completed, the Reagan Administration sought a phase-out of the act‘s construction grants program by 1990. Many states and localities, which continued to support the act‘s water quality goals and programs, did support the idea of phasing out the grants program, since many were critical of what they viewed as burdensome rules and regulations that accompanied the receipt of federal grant money. However, they sought a longer transition and ample flexibility to set up long-term financing to promote state and local self-sufficiency. Congress‘s response to this debate was contained in 1987 amendments to the act (P.L. 100-4). It authorized $18 billion over a nine-year period for sewage treatment plant construction, through a combination of the traditional grant program and a new State Water Pollution Control Revolving Funds (SRF) program. Under the new program, federal capitalization grants would be provided as seed money for state-administered loans to build sewage treatment plants and, eventually, other water quality projects. Cities, in turn, would repay loans to the state, enabling a phaseout of federal involvement while the state built up a source of capital for future investments. Allotment of the SRF capitalization grants among states continues to be governed by a statutory formula, which Congress revised in 1987 (see discussion below, ―Allotment of Funds‖). Under the amendments, the SRF program was phased in beginning in FY1989 and entirely replaced the previous grant program in FY1 991. The intention was that states would have greater flexibility to set priorities and administer funding, while federal aid would end after FY1994.

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Municipalities have made substantial progress towards meeting the goals and requirements of the act, yet state water quality reports continue to indicate that discharges from wastewater treatment plants are a significant source of water quality impairments nationwide. In the 2000 National Water Quality Inventory report, states reported that municipal wastewater treatment plants contribute to water quality impairments of rivers, streams and lakes and are the most widespread source of pollution affecting estuarine waters. The authorizations provided in the 1987 amendments expired in FY1994, but pressure to extend federal funding has continued, in part because estimated needs remain so high. Thus, Congress has continued to appropriate funds, and the anticipated shift to full state responsibility has not yet occurred. Cumulatively through FY2009, Congress has appropriated $83 billion in Clean Water Act assistance, including $31 billion in SRF capitalization grants (including $4.0 billion under the American Recovery and Reinvestment Act, P.L. 111-5).

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Drinking Water Public water systems are regulated under the Safe Drinking Water Act (SDWA) of 1974 (P.L. 93- 523), as amended (42 U.S.C. 300f-300j). Congress enacted the SDWA after nationwide studies of community water systems revealed widespread water quality problems and health risks resulting from poor operating procedures, inadequate facilities, and uneven management of public water supplies in communities of all sizes. The 1974 law gave EPA substantial discretionary authority to regulate contaminants that occur in public drinking water supplies, and authorized EPA to delegate primary implementation and enforcement authority for the Public Water System Supervision program to the states. SDWA drinking water regulations apply to more than 158,000 public water systems (both privately and publicly owned systems) that provide piped water for human consumption to at least 15 service connections or that regularly serve at least 25 people. Of these systems, 52,000 are community water systems (CWSs) that serve residential populations year-round. (Roughly 15% of community systems are investor-owned.) All federal regulations apply to these systems. Nearly 19,000 water systems are non-transient, non-community water systems (NTNCWSs), such as schools or factories, that have their own water supply and serve the same people for more than six months but not year-round. Most drinking water requirements apply to these systems.8 In contrast to the 40-plus years of federal support for financing municipal wastewater treatment facilities, Congress relatively recently, in 1996, established a program under SDWA to help public water systems finance projects needed to comply with federal drinking water regulations. Funding support for drinking water only occurred more recently for several reasons. Until the 1980s, the number of drinking water regulations was fairly small, and public water systems often did not need to make large investments in treatment technologies to meet those regulations. Moreover, good quality drinking water traditionally had been available to many communities at relatively low cost. By comparison, essentially all communities have had to construct or upgrade sewage treatment facilities to meet the requirements of the 1972 Clean Water Act. In addition, when the SDWA was first enacted,

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few expected that the number of small, less economical water systems would continue to increase. Over time, drinking water circumstances have changed as communities have grown, and commercial, industrial, agricultural, and residential land-uses have become more concentrated, thus resulting in more contaminants reaching drinking water sources. Moreover, as the number of federal drinking water standards and related monitoring requirements have increased, many communities have found that their water may not have been as good as once thought and that additional treatment was needed to meet the new standards and protect public health. From 1986 to 1996, for example, the number of regulated drinking water contaminants grew from 23 to 83. EPA and the states began expressing greater concern that many of the nation‘s community water systems (44,000, or 83% of all CWSs, of which were small) were likely to lack the financial capacity to meet the rising costs of complying with SDWA requirements. Congress responded to these concerns with the 1996 SDWA Amendments (P.L. 104182), which established a drinking water state revolving loan fund (DWSRF) program to help public water systems finance projects needed to comply with SDWA regulations and to further the public health protection objectives of the act. This program, patterned after the Clean Water Act SRF, authorizes EPA to make grants to states to capitalize DWSRFs, which states then use to make loans to water systems. States are required to match 20% of their federal capitalization grant, and must make available 15% of their grant for loan assistance to small systems. Communities repay loans into the fund, thus making resources available for projects in other communities. Eligible projects include installation and replacement of treatment facilities, distribution systems, and certain storage facilities. Projects to replace aging infrastructure are eligible if they are needed to maintain compliance or to further public health protection goals. Public water systems eligible to receive DWSRF assistance include community water systems (whether publicly or privately owned) and not-for-profit noncommunity water systems. The law generally prohibits states from providing DWSRF assistance to systems that lack the capacity to comply with the act or that are in significant noncompliance with SDWA requirements, unless these systems meet certain conditions to return to compliance. (Although the law authorizes assistance to privately owned community water systems, some states have laws or policies that preclude privately owned utilities from receiving DWSRF assistance.) Appropriations for the program were authorized at $599 million for FY1 994, and $1 billion annually for FY1995 through FY2003. Although the funding authority for the DWSRF program has expired, Congress continues to appropriate funds. Through FY2009, Congress has provided $13.1 billion for this program, including $2.0 billion as part of the American Recovery and Reinvestment Act (P.L. 111-5). Congress added several new features to the DWSRF program to reflect experience gained under the Clean Water Act program and differences between the drinking water and wastewater industries. A key difference in the DWSRF is that privately owned as well as publicly owned systems are eligible for funding. Another distinction is that states may use up to 30% of their DWSRF grant to provide additional assistance, such as forgiveness of loan principal or negative interest rate loans, to help economically disadvantaged communities.9 Paralleling the Clean Water Act, the SDWA requires EPA to assess the capital improvement needs of eligible public water systems. Needs surveys must be prepared every four years. In contrast to the CWA, which includes a statutory allotment formula for SRF

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capitalization grants, EPA must distribute DWSRF funds among the states based on the results of the latest survey. Eligible systems include roughly 52,000 public and private community water systems and 21,400 not-forprofit noncommunity water systems. (See Table 1 for a comparison of key features of the clean water and drinking water SRF programs.) Table 1. Key Features of the Clean Water and Drinking Water State Revolving Fund Programs.

Year authorized Authorization Appropriations through FY2009 Cumulative funds available through 2008 (capitalization grants, state match, etc.) Eligible uses of fund (types of assistance)

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Loan terms

Clean Water SRF 1987 $8.4 billion (FY1989-1994) $30.9 billion

Drinking Water SRF 1996 $9.4 billion (FY1994-2003) $13.1 billion

$70.1 billion

$16.2 billion

Loans, refinance, insurance, guarantee, purchase debt, security for leveraging, 4% grant for administration Interest between 0% and market rate; 20year terms; longer terms allowed administratively in some states

Loans, refinance, insurance, guarantee, purchase debt, security for leveraging Interest between 0% and market rate; 20-year terms; 30year terms and subsidized loans (principal forgiveness) for economically disadvantaged systems Publicly and privately owned community and nonprofit, non-community drinking water systems Projects to upgrade/replace drinking water source, treatment, storage, transmission and distribution Dams, reservoirs (unless for finished water), water rights (unless purchase through consolidation), O&M Yes: up to 31% of grant (for administering DWSRF, public water system supervision, source water protection, capacity development, operator certification programs) Yes: up to 30% of grant (principal forgiveness), 30year repayment Yes: up to 33% of DWSRF capitalization grant amount

Eligible systems

Municipalities, intermunicipal, interstate, or state agency

Eligible projects

Projects for wastewater treatment plants; qualified nonpoint source and estuary improvement projects

Ineligible projects

Operation and Maintenance (O&M)

Set-asides

No

Disadvantaged assistance

No

Transfers between SRFsa

Yes: up to 33% of clean water SRF capitalization grant amount

Source: CRS, adapted from EPA Drinking Water State Revolving Fund Program Report to Congress, Office of Water, EPA 91 8-R-03-009, May 2003. a. Although the SDWA statutory provision authorizing inter-fund transfers expired in FY200 1, Congress has approved transfers in subsequent appropriations laws (see page 22).

EPA conducted its third survey of capital improvement needs for public water systems in 2003.10 Based on this survey, EPA estimated that systems needed to invest $276.8 billion in Water Infrastructure Issues, edited by James D. Haffner, and Elizabeth M. Gennady, Nova Science Publishers, Incorporated, 2011. ProQuest Ebook

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drinking water infrastructure improvements over 20 years to comply with drinking water regulations and to ensure the provision of safe water. This amount exceeded the 2001 needs survey estimate of $150.9 billion ($165.5 billion in 2003 dollars) by more than 60%. EPA attributed this increase to several factors, such as the inclusion in the latest survey of $1 billion in security-related needs, as well as funds needed for compliance with several new and pending regulations. Also, water systems had improved their assessment of needs for infrastructure rehabilitation and replacement in 2003, which EPA determined had been underreported in previous surveys. With the number of regulated drinking water contaminants now exceeding 90, and with more rules pending, these needs are expected to continue to grow. Consequently, stakeholders continue to press Congress to reauthorize and increase appropriations for this program.

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USDA Assistance Programs While EPA administers the largest federal water infrastructure assistance programs, the U.S. Department of Agriculture (USDA) also provides funding. It administers grant and loan programs available to communities with populations of 10,000 or less, thus benefitting small communities, many of which have had problems obtaining assistance through the CWA and SDWA loan programs. Many small towns have limited financial, technical and legal resources, and have encountered difficulties in qualifying for and repaying loans. They often lack opportunities for economies of scale or an industrial tax base, and thus face the prospect of high per capita user fees to repay a loan for the full cost of a sewage treatment or drinking water project. USDA‘s grant and loan programs are authorized by the Rural Development Act of 1972, as amended (7 U.S.C. § 1926). The purpose of these USDA programs is to provide basic amenities, alleviate health hazards, and promote the orderly growth of the nation‘s rural areas by meeting the need for new and improved rural water and waste disposal facilities. Loans and grants are made for projects needed to meet health or sanitary standards, including clean water standards and Safe Drinking Water Act requirements. In recent years, USDA officials have increased their coordination with state clean water and drinking water officials in administering their programs. They have done this both to better meet health and environmental goals and to minimize program redundancies and/or inconsistencies. For FY2009, Congress appropriated $538 million in regular appropriations for USDA‘s water and waste disposal grant and loan programs, plus $1.34 billion in supplemental appropriations under economic recovery legislation, P.L. 11 1-5.11

CONTEXT FOR THE WATER INFRASTRUCTURE DEBATE: INVESTMENT NEEDS Some of the factors that have led to increased attention to water infrastructure reflect longstanding concerns (for example, how cities will meet regulatory requirements), while others are more recent (such as, new analyses of broader funding needs, including maintenance and repair of older systems). A number of interest groups—many with long-

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standing involvement, as well as new groups and coalitions—have assisted in bringing attention to these issues. Among them are the Water Infrastructure Network (WIN), a coalition of 29 state, municipal, environmental, professional, and labor groups organized in 1999, and the H2O Coalition, organized in 2001, consisting of the National Association of Water Companies, the Water and Wastewater Equipment Manufacturers Association, and the National Council for Public-Private Partnerships. Two WIN reports on funding needs and policy have received considerable attention, and the H2O Coalition has responded to some issues in the WIN reports. In April 2000, WIN issued a report estimating a $24.7 billion average annual investment gap for the next 20 years for municipal wastewater and drinking water systems to address new problems and system deterioration.12 Over the 20-year period, according to WIN‘s analysis, $940 billion is required for wastewater and drinking water investments, and more than $1 trillion in O&M spending is required. A second WIN report, issued in 2001, recommended a multibillion dollar investment program in water infrastructure.13

EPA Needs Surveys

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EPA‘s contribution to the debate over needs is primarily its wastewater and drinking water needs surveys. The Safe Drinking Water Act requires EPA to assess the capital improvement needs of eligible public water systems every four years thereafter. Concurrently, and in consultation with the Indian Health Service and Indian tribes, EPA must assess needs for drinking water treatment facilities to serve Indian tribes. Similarly, the Clean Water Act requires EPA, in cooperation with states, to report biennially to Congress on the cost of construction of all needed publicly owned wastewater treatment works in the United States (in reality, the clean water needs survey is done every four years).

Drinking Water Needs The most recent drinking water needs survey, conducted in 2007 and issued in March 2009, covers the period from 2007 through 2026. As noted above, the survey indicates that systems need to invest $334.8 billion in drinking water infrastructure improvements over 20 years to comply with drinking water regulations and to ensure the provision of safe water. This amount is similar to the 2003 needs estimate of $276.8 billion ($331.4 billion when adjusted to 2007 dollars). The agency notes that the latest survey reflects the use of more consistent methodologies for needs estimation among the states and continued improvements in reporting of needs related to infrastructure rehabilitation and replacement. Although all of the infrastructure projects in the needs assessment would promote the health objectives of the act, EPA reports that just 16% ($52.0 billion) is attributable to SDWA regulations, while $282.8 billion (84%) represents nonregulatory costs. Most needs typically involve installing, upgrading, or replacing transmission and distribution infrastructure to allow a system to continue to deliver safe drinking water; systems with such needs usually are not in violation of a drinking water standard. Projects attributable to SDWA regulations (including proposed regulations) typically involve the upgrade, replacement, or installation of treatment technologies.14

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Wastewater Needs The most recent wastewater survey, conducted in 2004 and issued in 2008, estimates that $202.5 billion is needed for projects and activities eligible for Clean Water Act assistance.15 This estimate includes $134.4 billion for wastewater treatment and collection systems ($10.5 billion more than the previous report), $54.8 billion for combined sewer overflow corrections ($1.5 billion less than the previous estimate), $9 billion for stormwater management ($2.8 billion more than the previous estimate), and $4.3 billion to build systems to distribute recycled water (a new category in this report). The total is 8.6% larger than needs reported in the previous survey, four years earlier. The increases are due to several factors, according to EPA: needs for rehabilitation of aging infrastructure, facility improvements to meet more protective water quality standards and, in some cases, providing additional treatment capacity for handling wet-weather flows. Needs for small communities (under 10,000 population) represented about 9% of the total. The clean water needs survey does not separately identify needs for Alaskan Native villages, and only a few states report needs for Indian tribes. More comprehensive estimates are made by the Indian Health Service (IHS) of the U.S. Department of Health and Human Services, which operates a Sanitation Facilities Construction program pursuant to the Indian Sanitation Facilities Act (P.L. 86-121). IHS estimated that, as of the end of FY2005, more than140,000 American Indian and Alaska Native (AI/AN) homes needed sanitation facilities, including over 36,000 homes that needed potable water. The total needing safe water improvements is about 12% of all AI/AN homes, compared with about 1% of all U.S. homes, according to IHS. The backlog of documented Indian sanitation facility projects as of the end of FY2005 totaled more than $2 billion, with those projects considered by the IHS to be economically and managerially feasible totaling $990 million.16 Expressed as average annual investment needs, the EPA surveys estimate $16.7 billion for drinking water systems and $10.1 billion for wastewater systems. EPA acknowledges that needs estimates generally have been conservatively biased. First, all reported needs in both surveys must be documented with project-specific information. Second, needs that are ineligible for SRF funding are not reflected; thus, in the drinking water survey, needs for fire flow, dams, and untreated reservoirs are omitted. Neither EPA survey explicitly accounts for infrastructure needs due to population increases, since growth-related projects are not eligible for EPA funding. The wastewater needs survey does not include information about privately owned facilities or facilities that serve privately owned industrial facilities, military installations, national parks or other federal facilities, as they are not eligible for funding under the clean water SRF program. Finally, neither survey accounts for financing costs associated with utility borrowing to pay for capital investment. Despite various challenges and limitations, needs estimates have improved with experience. For the most recent drinking water needs survey, for example, EPA reported that state and water system efforts to correct past problems with significant under-reporting of needs appear to have been successful.17

CBO’s Report on Future Investment A 2002 report by the Congressional Budget Office (CBO) also contributes to the discussion about investment needs.18 In that report, CBO presented two scenarios of future

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needs for capital investment and O&M costs, a low-cost case and a high-cost case. The two scenarios span the most likely possibilities that could occur, according to CBO, and present a range of estimates for each, reflecting the limited information available about existing water infrastructure. For example, CBO said, there is no accessible inventory of the age and condition of pipes (which account for the majority of both drinking water and wastewater systems‘ assets). As such, a shortage of data compounds the general analytic problem of making 20-year estimates of what would happen under current and currently anticipated trends. CBO estimated that for the years 2000 to 2019, annual costs for investment will range between $11.6 billion and $20.1 billion for drinking water systems, and between $13.0 billion and $20.9 billion for wastewater systems, or between $24.6 billion and $41.0 billion for water and wastewater combined (in 2001 dollars). Additionally, CBO estimated that annual costs over the period for O&M, which are not eligible for federal aid, will range between $25.7 billion and $31.8 billion for drinking water and $20.3 billion to $25.2 billion for wastewater systems, or between $46.0 and $57.0 billion for water and wastewater combined. The principal differences in costs under CBO‘s two scenarios reflect different assumptions about several factors: (1) the rate at which drinking water pipes will be replaced, (2) savings that may be associated with improved efficiency (e.g., demand management to reduce peak usage, consolidation of systems to achieve economies of scale, labor productivity), (3) the costs to wastewater utilities for controlling combined sewer overflows, and (4) the repayment period on borrowed funds.19 CBO estimated that, for both types of systems, the difference between current capital spending (approximately $22 billion by all levels of government in 1999) and future costs— what some call an investment funding gap—would be $3.0 billion annually in the low-cost scenario and $19.4 billion in the high-cost case. Together, the future costs under the low-cost scenario (which CBO believes is reasonable, given the uncertainty about the condition of existing infrastructure, prospects for improved efficiency, and assumptions about borrowing) represent growth of 14% from 1999 levels, while under the high-cost case, the estimated increases represent growth of about 90%. CBO also examined estimates in WIN‘s 2000 report, because of the public attention that it has received. CBO‘s analysis shows approximately an $18.6 billion difference between current spending and WIN‘s estimate of future annual costs, and is thus close to CBO‘s highcost case. Investing at either the level in WIN‘s report or the CBO high-cost scenario would require nearly a doubling of current annual spending levels. WIN‘s single point estimate of annual investment needs for drinking water and wastewater ($40 billion) is similar to CBO‘s high-cost case estimate. In contrast, CBO‘s low-cost case estimate is $15.7 billion less than that in the WIN report (see Table 2), because of differences in assumptions concerning the timeline for replacing drinking water pipes, savings from efficiency, and borrowing terms. Overall, in examining the 2000 WIN report, CBO was critical of a number of analytic aspects. In particular, while WIN includes financing costs in its analysis, WIN‘s estimates of total capital investment needs do not reflect ―costs as financed.‖ Costs as financed conveys the full costs of investments made out of funds on hand during the period analyzed and the debt service (principal and interest) paid in those years on new and prior investments that were financed through borrowing. Costs as financed are a kind of moving average that smooths out year-to-year changes in investment volume. In contrast, WIN‘s 2000 report includes total debt service on new investments from 2000 to 2019, regardless of when those

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payments occur, rather than the debt service actually paid during the period (on both pre-2000 and new investments). The difference is important, according to CBO, because utilities‘ past investments financed from 1980 to 1999 and still being paid off from 2000 to 2019 are smaller than the investments projected to be financed during the latter period. WIN‘s approach to estimating investment needs (capital plus financing) results in approximately a 20% over-estimate, according to CBO.20

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EPA’s Gap Analysis Report In addition to the needs surveys, in 2002 EPA issued a study, called the Gap Analysis, assessing the difference between current spending and total funding needs for drinking water and wastewater infrastructure.21 Using data from the needs surveys and updated information, the Gap Analysis estimated total needs for drinking water and clean water (capital investment plus financing costs, and operation and maintenance (O&M)) from 2000-2019, as well as the projected gap between current spending and needs. This report examined a range of estimates, based on two scenarios: a low-end estimate assuming a 3% annual real growth in revenues (an increase in user rates and equivalent increase in customer growth) and a high-end estimate assuming no growth in water utility systems‘ revenues.22 Using these two scenarios, the Gap Analysis estimates a 20-year investment gap between current spending levels and capital investment needs for wastewater and drinking water combined between $66 billion and $224 billion (in 2001 dollars). In addition, it estimates a 20-year gap in spending for O&M between $10 billion and $409 billion. Under EPA‘s analysis, the estimated average annual gap between current spending and investment needs is between $1.6 billion and $23.1 billion, and the average annual O&M gap is between $0.3 billion and $36.3 billion, depending on the scenario. Compared with estimates of baseline expenditures, EPA‘s projections imply an average annual increase in costs over the 20-year period that ranges from 2.8% to 85.8% for capital investment and O&M combined. A January 2003 CBO report examined estimates in the 2002 CBO report and in EPA‘s Gap Analysis.23 As shown in Table 2, the differences between EPA‘s and CBO‘s projections of total investment costs are not especially significant: both EPA‘s and CBO‘s high-end estimates ($46.5 billion and $41 billion, respectively) reflect a near doubling of baseline investment costs through 2019. WIN‘s 2000 estimate ($40 billion) has a similar implication. EPA‘s and CBO‘s low-end investment estimates ($25 and $24.6 billion, respectively) reflect less than a 15% increase in costs through 2019. Differences between EPA‘s and CBO‘s investment estimates are explained by differences in assumptions, such as the potential for efficiency savings and different time profiles for replacement of drinking water pipes. For most factors, CBO believes that a strong case cannot be made for the choice of one agency‘s estimates over the other, so long as the differences are recognized. Greater differences are apparent between CBO ‘s and EPA‘s high-end scenario estimates for O&M ($57 billion and $82 billion, respectively). According to CBO, that difference stems from EPA‘s adopting the unrealistic assumption that drinking water infrastructure is replaced in large quantities early in the 20-year period, rather than being replaced more evenly throughout the span, with high O&M costs throughout the period as a by-product of the early

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increase in capital stock. In WIN‘s report, O&M annual cost estimates are closer to CBO‘s high-end scenario than to EPA‘s. Table 2. Estimated Costs for Water Infrastructure (billions of dollars).

WIN

CBO 2002

Lowend Highend

EPA Gap Analysis Low-end Highend

Average annual cost 2000-2019 —Investment 40.3a 24.6 41.0 25.0 46.5 —O&M 52.6 46.1 57.0 46.1 82.0 Average annual cost above baseline spending (gap) 2000-2019 —Investment 18.6a 3.0 19.4 1.6 23.1 —O&M 11.8 7.1 18.1 0.3 36.3 Source: CRS. a. The $40.3 billion and $18.3 billion in this table reflect CBO‘s re-estimate of investment needs in the WIN 2000 report. CBO re-estimated the WIN information to reflect investment costs as financed, in order to give comparability with CBO‘s and EPA‘s analyses.

Table 2 summarizes estimates from the 2000 WIN report, the 2002 CBO report, and EPA‘s Gap Analysis on average annual costs for water infrastructure (wastewater and drinking water combined) and the potential average annual increase above current spending levels that would be required to achieve such expenditures.

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ISSUES While estimates of funding needs have become one focal point for discussion, some argue that trying to focus on precise needs estimates is not as important as recognizing the general need. For example, CBO‘s reports and EPA‘s Gap Analysis caution that projections of future costs associated with water infrastructure are highly uncertain and could lie outside of the ranges that they present. Different assumptions could increase or decrease the results. CBO explained this point in its 2003 report.24 Because available data are limited, the agencies must use many assumptions to develop their projections, and the 20-year projection window provides ample opportunity for unforeseen developments to influence costs. Data limitations make it impossible for the agencies to know even baseline investment costs with certainty.

As is evident from their analyses of various investment scenarios, CBO and EPA believe that funding gaps are not inevitable, if other steps are taken. Both emphasize that funding gaps occur only if capital and O&M spending remains unchanged from present levels. Future spending and other measures that systems could adopt to reduce both types of costs, such as asset management processes,25 could significantly alter estimates of future needs. How a gap would be filled raises a number of other issues. Whether water infrastructure needs over the

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next 20 years are $200 billion or $1 trillion, they are potentially very large, and the federal government is unlikely to provide 100% of the amount. Questions at issue include what is the precise problem to be solved; who will pay, and what is the federal role in that process; and how to deliver federal support.

Priorities: What Are the Problems to Be Solved?

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Defining the scope of the water infrastructure problem is a key issue. As described previously, traditionally the CWA and SDWA have assisted projects needed to upgrade and improve wastewater and drinking water systems for compliance with federal standards. There still are significant needs for those core projects: for example, the 2003 clean water needs survey reports that more than one-half of the $171 billion in total treatment needs are for projects to correct overflows from existing municipal sewers, particularly sanitary sewer overflows (S SOs).26 Regarding drinking water needs, the EPA estimates that, of the $334.8 billion in needs, $52 billion (16%) is required for water systems to comply with regulations. However, these needs are expected to increase as the number of SDWA regulations increases. Another $282.8 billion (84%) of total needs is for projects that water utilities consider a high priority for ensuring the continued delivery of safe drinking water; these projects typically involve the upgrade, replacement, or installation of transmission and distribution infrastructure.

Infrastructure Replacement While not disregarding needs for compliance-related projects, stakeholders also are focusing on the problem of projects that have not traditionally been eligible under federal aid programs— major repair and replacement of existing systems. Currently, federal funds may be used for projects that involve minor system repairs (such as correcting leaky pipes that allow infiltration or inflow of groundwater into sewer lines) but may not be used for major rehabilitation, or extensive repair of existing sewers that are collapsing or are structurally unsound. In many cities, systems that currently meet standards and provide adequate service are, according to advocacy groups, reaching the end of their service-life and will require substantial investment in the near future. The EPA needs surveys do not explicitly identify or quantify needs for aging water infrastructure systems or facilities. The American Water Works Association‘s 2001 report focused solely on the need to reinvest in aging drinking water infrastructure. It estimates that nationally over the next 30 years, $250 billion may be required to replace worn out facilities and systems. The replacement problem is occurring not because of neglect or failure to do routine maintenance, AWWA and others say, but because water infrastructure facilities and pipes installed decades ago are now wearing out. Most pipes were installed and paid for by past generations in response to population growth and economic development booms of the 1 890s, World War I, 1 920s, and post-World War II. The oldest cast iron pipes, dating from the late 1 800s, have an average useful life of about 120 years, while pipes installed after World War II have an average life of 75 years. The useful life of pipe varies considerably, based on such factors as soil conditions, materials used, and character of the water flowing through it. Also, pipe deteriorates more rapidly later in the life cycle than initially. AWWA says,

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―Replacement of pipes installed from the late 1 800s to the 1 950s is now hard upon us, and replacement of pipes installed in the latter half of the 20th Century will dominate the remainder of the 21st century.‖27 Treatment plant assets are more short-lived than pipes, with typical service lives of 15 to 50 years. Thus, many that were built in response to environmental standards in the 1970s and 1980s also will begin to be due for replacement in a few years. This concern over infrastructure deterioration recalls an earlier period when infrastructure was a hotly debated topic. In the 1980s, there was much debate among policymakers about an infrastructure funding gap and the need for federal solutions to the perceived problem that America‘s public facilities were wearing out faster than they were being replaced. Some said that, because of declining public investment, America‘s infrastructure was in ruins. Analysts proposed strategies for planning, financing, and managing investments to address decay of the nation‘s public works infrastructure.28 After a period of publicity and attention, debate about an ―infrastructure crisis‖ waned. Congress did not enact legislation creating substantially new federal approaches to infrastructure but did reauthorize funding for several existing programs, including wastewater. Today, analysts may differ over whether an infrastructure crisis did, in fact, exist then and whether local officials made choices sufficient to defer the issue for a later day. In the end, this earlier infrastructure debate resulted in little obvious action and without the breakdowns some had warned of. However, the current concerns may reflect a new situation: AWWA says that the replacement problem being debated today is not that utilities are faced with making up for a historical gap in the level of replacement funding. Rather, it is that utilities must ramp up budgets to prevent a replacement gap from developing in the near future; that is, to avoid getting behind.

Security With the exception of the latest EPA drinking water needs survey, none of the investment needs reports discussed previously (WIN report, or those by CBO and EPA) accounts for increased security-related needs that utilities have begun to identify. In its 2002 report, CBO said: Because water systems are still developing estimates of the costs for increasing security in the wake of the September 11 attacks, the estimates do not include those expenses—but preliminary reports suggest that security costs will be relatively small compared with the other costs for investment in infrastructure.29

One partial estimate for wastewater systems reported that, among large wastewater utilities, operators identified $135 million in security-related needs for the period 2002-2006, with approximately one-quarter of those reporting saying that their needs exceed $1 million.30 Although poorly quantified and potentially small relative to overall infrastructure needs, the costs of addressing security concerns for drinking water systems are expected to be significant. The Bioterrorism Preparedness Act of 2002 (P.L. 107-188) required all community water systems serving more than 3,300 persons to assess their vulnerabilities to terrorist attack or other intentional acts to disrupt the provision of safe and reliable drinking water supplies. Having done so, many of these systems now are taking, or planning to take, steps to improve the security of their facilities and to protect sources of drinking water. The

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AWWA has estimated that the roughly 8,400 community water systems covered by the Bioterrorism Act would have to spend more than $1.6 billion just to implement the most basic steps needed to improve security (such as better controlling access to facilities with fences, locks, perimeter lights, and alarms at critical locations). This estimate does not include the capital costs of upgrades to address vulnerabilities identified in vulnerability assessments, such as hardening pumping stations, chemical storage buildings, transmission mains, adding redundant infrastructure, or relocating pipelines of facilities. Efforts to estimate costs have been hampered by the fact that the security measures needed for utilities are very sitespecific. However, the AWWA estimates that, nationwide, community water systems will need to invest billions of dollars to address identified vulnerabilities.31 The total security need estimated from the 2003 drinking water needs survey was $1 billion. EPA noted that the survey provided only a partial estimate of security needs, as it was done while water systems were expanding their security evaluation and planning efforts. Many water systems had completed vulnerability assessments and corrective action plans, but frequently lacked cost estimates for making security improvements.32 In the 2007 survey (published in 2009), water systems identified a total of $422 million in needed security projects; however, EPA noted that total cost that systems incur to protect infrastructure and water quality is likely to be much greater as many of these costs are folded into construction costs for infrastructure projects and not identified separately.33 To cover the costs of making security improvements, some water utilities have imposed rate increases or reallocated existing resources. However, many others have been increasing rates to pay for projects needed to comply with new regulations, but had not contemplated the need for additional resources to address security concerns. Asserting that homeland security is primarily a federal responsibility, and that the needs are large, some individual communities and water associations have approached Congress in search of assistance.34 In the Bioterrorism Preparedness Act, Congress authorized funding for FY2002 through FY2005 for EPA to provide financial assistance to drinking water systems for several purposes, including making basic security enhancements, but no funding was provided. EPA has identified numerous security improvements that are eligible for funding through the drinking water and clean water state revolving fund programs,35 and infrastructure bills since the 108th Congress specified that projects to improve security would be eligible for assistance under the clean water and drinking water state revolving funds. However, these funds are used primarily to comply with Safe Drinking Water Act and Clean Water Act requirements, and it is uncertain how readily these funds might become available for security measures.36

Funding Other Priorities Wastewater SRF funding is used for construction of publicly owned municipal wastewater treatment plants, implementing state nonpoint pollution management programs, and developing and implementing management plans under the National Estuary Program (CWA, Section 320).37 Drinking water SRFs may provide assistance for expenditures that will facilitate compliance with national drinking water regulations or that will ―significantly further the health protection objectives‖ of the Safe Drinking Water Act. There are many proposals for expanding the scope of activities eligible for SRF funding, in addition to meeting major replacement and security-related needs, raising numerous tradeoff questions for policymakers.

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Legislative proposals (including H.R. 720 and S. 3617 in the 110th Congress) would have added a number of new types of projects to those already eligible for SRF assistance: water conservation; water reuse, reclamation, or recycling; measures to increase facility security; and implementation of source water protection plans, for example. More recently, there has been growing interest, as well, in ―green‖ infrastructure, such as projects that treat or minimize sewage or urban stormwater discharges using nonstructural approaches, stream buffers, wetland restoration, or low-impact development technologies. The rationale for using federal assistance is that investments in some of these approaches could reduce overall needs for capital investment. All, arguably, could benefit water quality protection and improvement, as do traditional infrastructure investments, and supporting them through the popular mechanism of SRFs would help ensure comparatively secure funding. But expanding the scope of eligibility also arguably dilutes the current focus of these programs, at a time when traditional needs remain high. This tension already exists with the wide range of set-asides authorized under the drinking water SRF, where, in addition to funding infrastructure projects, states may reserve up to 31% of their federal capitalization grant for a range of other purposes. For example, states may use up to 10% of their grant to implement wellhead protection programs and another 10% to fund local source water protection initiatives. (See discussion below of set-asides, under ―Delivering Federal Support.‖) Many argue that greater investment in managing nonpoint sources of water pollution would especially benefit public health and water quality. According to state data compiled by EPA, polluted runoff is the major source of water quality problems in the United States. Water quality survey data indicate that 40% of surveyed U.S. waterbodies are impaired by pollution (meaning that waters fail to meet applicable standards) and that surface runoff from diffuse areas such as farm and ranch land, construction sites, and mining and timber operations is the chief cause of impairments, while municipal point sources contribute a much smaller percentage of water quality impairments to most waters.38 The possible cost of practices and measures to address the nonpoint pollution problems has not been comprehensively documented. Nevertheless, it is conceivable that investments in nonpoint pollution abatement (e.g., grants for nonpoint pollution management projects under the Clean Water Act, technical and financial assistance to farmers through USDA, Safe Drinking Water Act grants to protect sources of drinking water) could have equal or greater environmental benefit than investments in water infrastructure. For example, New York City is funding an extensive watershed protection program, including areas far from the metropolitan area, in an effort to avoid the need to build a filtration plant that would cost the city several billion dollars. Growing populations in many areas of the country are placing increasing demands on water supplies and wastewater treatment facilities. Yet, even without new growth, many people in existing small and rural communities do not have access to public sewers or water supply and, thus, are using alternative systems to help them comply with environmental laws and to solve public health problems. Local officials face a challenge of striking a balance between ensuring that water and wastewater services are affordable, but also providing sufficient revenue for system needs. To deliver these services, they often face challenges arising from economic, geographic, and technological impediments. Outside of EPA‘s and USDA‘s traditional programs, it appears that Congress is increasingly being asked to authorize direct financial and technical assistance for developing or treating water, including rural water supply projects to be built and largely funded by the Bureau of Reclamation of the

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Department of the Interior, water recycling projects built and partially funded by the Bureau, and pilot programs for water supply and wastewater treatment projects funded by the U.S. Army Corps of Engineers. To yet another group of stakeholders, these, too, reflect priority problems in need of legislative attention and federal solutions. Indeed, the 109th Congress passed legislation (P.L. 109-451) authorizing the Bureau of Reclamation to establish a program for design and construction of rural water supply projects in 13 Reclamation states in the West. Policymakers face decisions about priorities and tradeoffs, since spending decisions often are essentially a zero-sum game: that is, what priority should be given to traditional infrastructure projects needed to comply with standards, versus the emerging problem of infrastructure replacement, versus nonpoint pollution management or other competing activities also having environmental benefits? Since not all can be supported, do some have greater priority than others? What should the federal government support? Should eligibility for SRF funding be expanded to include less traditional activities? Is there clearly a federal role for some or all activities, or is a larger federal role justified for some than for others?

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The Federal Role Many stakeholders are seeking substantially increased federal spending on water infrastructure for reasons described in this report. Among groups involved in water infrastructure (states, cities, equipment manufacturers, the construction industry), a longstanding issue is the gap between funding needs and available resources from federal, state, and local sources. Data compiled by EPA demonstrate that federal capitalization grants are the largest, but not the only, source of monies in the SRFs. For example, cumulatively from 1996 through 2008, drinking water SRFs have made available $16.2 billion in funds for assistance. Of the total, $8.9 billion was provided by capitalization grants, while the remainder—nearly $7.3 billion—came from state match contributions, leveraged bonds, principal repayments, interest earnings, as well as some transfers from the clean water SRF.39 Likewise, cumulatively from 1988 through 2008, clean water SRFs have had $70 billion in funds available. Less than half ($26 billion) has come from federal capitalization grants, while the remainder similarly derived from state matching funds, leveraged bonds, principal repayments, and interest earnings. In addition, state assistance outside of the SRF programs is an important source of total funds available for water infrastructure. For example, from FY1 991 through FY2000, states made about $13.5 billion available for drinking water and wastewater projects under state-sponsored grant and loan programs and by selling general obligation and revenue bonds.40 Local government officials estimate that, on average, ratepayers currently pay about 90% of the total cost to build their drinking water and wastewater systems (through direct local financing or loan repayments to SRFs); federal funds provide the remainder.41 (Small rural systems depend more on government aid than do large systems.) According to the National League of Cities, these capital costs, plus operations and maintenance for which localities also are responsible, total about $60 billion annually for drinking water and wastewater systems.42 Cities also say that they have been raising water and sewer rates to accommodate

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increases in operating and maintenance costs, which have risen 6% above inflation annually.43 Municipal officials contend that increased local fees and taxes alone cannot solve all funding problems. This is true, they say, both with respect to costs of meeting future needs (e.g., new treatment requirements) and costs of reinvesting in aging infrastructure. Water and wastewater officials acknowledge that they will continue to cover the majority of water infrastructure needs, but believe that doing so presents a significant challenge in keeping water affordable. This is especially true in small cities, rural areas, and cities with shrinking populations and/or local economies where a possible doubling or tripling of water and sewer rates to meet all needs could be required. If some such cities are unable to finance replacement or improvement of their water infrastructure, declining service levels, violations of water quality requirements, and threats to public health and the environment could occur, officials say.44 Assertions about financial impacts and affordability are at the heart of many stakeholders‘ efforts seeking greater federal support. The Water Infrastructure Network, for example, says that local sources alone cannot be expected to meet the challenge of large water and sewer needs, and that the benefits of federal help accrue to the nation as a whole, since water moves across political boundaries. Moreover, WIN argues that 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. Highways and aviation currently ―enjoy sustainable, long-term federal grant programs,‖ supported by trust fund revenues, while water infrastructure does not.45 In its 2001 report, WIN recommended a five-year, $57 billion authorization above current funding for loans, grants, loan subsidies and credit assistance to capitalize state-administered grant and loan programs which it believes would cover about one-half of the estimated five-year capital funding shortfall. WIN estimated that, even with that additional investment, average household water and sewer rates would increase over the next 20 years, but in WIN‘s projections, average rate increases would be 100%, compared with 123% without such a boost in federal support.46 Some analysts dispute the view that federal funding solutions are essential to meeting future investment needs. According to this view, funding problems are in many cases due to the failure of local communities to assign a high priority to water and wastewater services and result in failure to set local water rates and other user charges at levels that cover capital and operating expenditures. This is especially true in the case of municipally or publicly owned utility systems which, unlike investor-owned systems, often do not support the full cost of service through rates. Publicly owned systems predominate in the wastewater industry (constituting more than 95%). In the drinking water industry, approximately 33% of public water systems are privately owned; however, most of these systems are small, serving roughly 15% of the U.S. population. The H2O Coalition, another group in the water infrastructure debate, believes that it is not possible to state with any confidence what is unaffordable to customers and therefore what the magnitude of government support should be, because few utilities have done detailed long-term needs projections and analyzed ways of addressing these needs through rates.47 ―Rate shocks‖ which result from large rate increases can be managed to a degree, analysts say, by financing, ratemaking, and conservation strategies. They argue that if water services continue to be subsidized by federal funds, subsidies should not reward utilities‘ inefficiency, but should be used strategically and equitably.48 Some advocate using needs-based subsidies to help low-income households by providing direct payment assistance or funding a lifeline rate.

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CBO has repeatedly argued that federal spending programs to support water infrastructure (direct project grants and SRF capitalization grants, as well as credit subsidies in the form of loans, loan guarantees, and tax preferences) can have a number of unintended consequences. In a February 2007 report (one of a regular biennial series) on the budgetary implications of policy choices, one of the policy options that CBO presents is a phaseout of federal capitalization grants for SRFs over a three-year transitional period. CBO cites several economic rationales for doing so. For example, grants may encourage inefficient decisions about water infrastructure by allowing states to lend money at below-market interest rates, in turn reducing incentives for local governments to find less costly ways to control water pollution and provide safe drinking water. Also, federal contributions may not result in increased total investment if they are merely replacing funding that state and local sources would otherwise have provided.49 In its 2001 report, WIN recommended initially doubling federal support for water infrastructure, and increasing it by 500% after five years. Others, including the H2O Coalition, doubt that increased federal support of that magnitude is necessary or appropriate. Even if policymakers agree that there is a federal role, significant questions remain about defining that role and agreeing on priorities.

Delivering Federal Support

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The question of how federal financial support is delivered to water infrastructure projects involves several issues, including the state-level mechanism for administering funding, composition of aid (loans and grants), and assistance for private as well as public entities. Related issues are impacts of other federal requirements, use of set-asides, and how funds are allotted to states.

Administrative Entity Financial aid provided through the clean water and drinking water SRFs is administered by state- level agencies designated in agreements signed by EPA and individual states. Many evolved from the agencies that previously administered the Clean Water Act construction grant program that preceded the SRF program. In many states, SRFs are managed by the state environmental agency or branches of that agency responsible for implementing the CWA and the SDWA. In other states, they are managed by separate financing authorities or offices. About 30 states currently administer the two SRF programs jointly; the remainder administer parallel SRF programs. State officials say that, where administration of the two is not joined, there are good reasons for maintaining the separation. Section 302 of the 1996 SDWA amendments included a provision allowing states to transfer a portion (up to 33%) of a capitalization grant between the two programs to give states funding flexibility. That original authority expired in FY2001, but Congress has continued to extend it through annual appropriations acts since FY2002. Since 1999, 13 states and Puerto Rico have used this provision to transfer funds between their clean water and drinking water SRF programs. In its 2001 report, WIN recommended that the SRF concept be replaced with an alternative mechanism called State Water and Wastewater Infrastructure Financing Authorities which would work with state clean water and drinking water programs but would

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handle the infrastructure banking aspects for both. WIN says that this would be highly efficient, enabling a single state agency to determine priorities and appropriate financial assistance instruments. Most state officials now involved with the two SRF programs object to this proposal, believing that it would de-construct what exists and is working well now. It would also substitute a new organizational entity for that which individual states have determined works best for them, including the 20 states that prefer separate SRF programs. Also, by giving decisionmaking authority to a new entity, the WIN concept would shift authority from existing state agencies. WIN supporters believe that differences between their proposal and the views of state program officials are not vast, but many state officials disagree.

The Type of Assistance Provided: Grants and Loans One issue that divides the stakeholder groups is whether to provide assistance through grants, as well as loans, with cities (both large and small) and the WIN group favoring a significant place for grants, and most states and the H2O Coalition favoring loans in preference to grants. Both SRF programs authorize states to make loans at or below market interest rates, including zero interest loans. However, for several years, both small and large cities have urged Congress to explicitly authorize water infrastructure grants, in addition to loans, to provide flexible assistance best suited for particular community and state needs. Thus, the drinking water SRF, enacted nine years after the clean water SRF program, allows up to 30% of capitalization grants to be used to provide loan subsidies to disadvantaged communities. Grants that do not require repayment obviously are preferred by communities. For example, some small communities that lack an industrial tax base or means to benefit from economies of scale find it difficult to repay a loan for 100% of the cost of water infrastructure projects. Some larger cities also seek grants, on the basis that water infrastructure is just one of numerous costly capital needs that they must meet, and a partial subsidy in the form of a grant would help make those costs more affordable for ratepayers. Small and disadvantaged communities‘ financing problems also have been addressed by permitting a longer loan repayment period. By spreading out repayment, communities can reduce the amounts due on an annual basis, thus lessening the amount of rate increases needed to finance the repayment (although total financing costs over the life of the loan may be higher). Under both SRF programs, annual principal and interest repayments begin one year after project completion and are to be fully amortized 20 years after project completion. Under the drinking water SRF, however, states may allow economically disadvantaged communities up to 30 years to repay loans. The Clean Water Act does not currently permit 30-year repayments, but House Appropriations Committee report language accompanying EPA‘s FY1998 appropriations bill (H.Rept. 105-175) encouraged EPA to allow states to issue bonds allowing for clean water SRFs with repayment terms of greater than 20 years. Consequently, EPA has allowed a few states (e.g., Massachusetts, West Virginia, Maryland) to issue 30-year clean water SRF loans. Many state officials are reluctant to use a portion of the SRF to award grants, principally because, to the extent that part of the SRF is used for making grants, the corpus of the loan fund and its ability to be a self-sustained long-term source of funding are diminished. States acknowledge that a loan ―buy down,‖ in the form of granting forgiveness of a portion of the SRF loan principal, can be a useful option for dealing with disadvantaged communities.

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However, many states prefer to limit the use of grants as much as possible and would oppose being obliged to make grants. State water quality officials who previously administered the Clean Water Act‘s construction grant program and others (including CBO) believe that grants can undermine efficient investments by leading to substitution of federal funds for state and local funds, rather than augmenting state and local investment, and distort decisions about preventive maintenance, treatment technology, and excess capacity. According to EPA, states are being conservative in using the principal forgiveness authority under the drinking water SRF: since 1996, only 16 states have done so, and assistance provided with principal forgiveness has totaled less than 3% of all drinking water SRF assistance since that time. Members of the H2O Coalition favor limited and targeted federal assistance, so that utilities are encouraged to attain and maintain business-like operations. If federal assistance is provided, the Coalition, like many state officials, advocates that it should be primarily in the form of low- interest or zero-interest loans. The Coalition supports assistance for low-income families to supplement their water and sewer bills, where necessary, either paid to the lowincome families or directly to the utility. Some loan forgiveness (as under the drinking water SRF) or grants (with at least 50% local cost share) are options that the Coalition supports in rare cases, and only so long as assistance produces long-term solutions and ensures that federal monies are used cost- effectively. Except in cases where virtually all of a utility‘s customers are impoverished, assistance for low-income households should be favored over grants, this group says. According to the Coalition, grants or loans with substantial forgiveness subsidize all customers‘ rates, even those that are able to afford the full cost of service, and therefore are not an efficient use of scarce federal assistance.50

Federal Funds for Private Infrastructure Systems Currently under the drinking water SRF program, eligible loan recipients include community water systems, both publicly and privately owned, and not-for-profit noncommunity water systems (e.g., schools with their own water supply). Eligible loan recipients for wastewater SRFs are any municipality, intermunicipal, interstate or state agency, but not privately owned utilities. A number of stakeholders advocate that SRF funds be made available to privately owned wastewater systems, as well. This would ―level the playing field‖ between the two programs, it is argued, and also would encourage publicprivate partnerships and privatization. Another issue involving the private sector arises from the Internal Revenue Code. Under federal tax law, certain activities financed by the issuance of state and local bonds have a special status because the interest earned is exempt from federal income taxation. Tax-exempt financing enables state and local governments to borrow at a lower interest rate than either private business or the federal government must pay on taxable debt. In general, tax-exempt status applies to activities broadly defined as having public purpose. Some specific activities considered to have both public and private purposes are eligible for tax-exempt financing. However, these public/private activities are subject to a cap that limits the volume of private activity bonds (PABs) state and local governments may issue annually. PABs for water infrastructure are subject to the volume cap, and tax-exempt financing can be done if the project is able to secure an allocation from the volume cap. Because private water bonds compete under this cap with other private bond uses such as housing, industrial development, and student loans, some groups favor legislation that would exempt all PABs for water and sewage facilities from the volume cap. President Bush‘s

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FY2009 budget request included a proposal to exempt PABs used to finance drinking water and wastewater infrastructure from the PAB unified state volume cap, in order to provide states and communities greater access to PABs to help finance water infrastructure needs. A bill to authorize such a change (H.R. 537) has been introduced in the 111th Congress. Similar legislation was introduced in both the 109th and 110th Congresses. Current law provides such an exemption for government-owned and operated solid waste disposal facilities. Opponents argue that restrictions on tax-exempt financing should be maintained, because of the costs to the federal government, in terms of income tax revenues foregone. Similarly, some opponents say that the bonds represent an inefficient allocation of capital, favoring some projects over others, and increase the cost of financing traditional governmental activities. Also in the 110th Congress, H.R. 1959 was introduced to permit interest on federally guaranteed USDA water, wastewater, and essential community facilities loans to be tax exempt.51

Other Federal Tax Issues A second federal tax issue related to the Internal Revenue Code concerns arbitrage. If proceeds of tax-exempt bonds issued by state and local governments in connection with SRF programs are invested in securities that pay a higher yield than the yield on the bonds, the earnings are termed arbitrage profits. Unchecked, state and local governments could substitute arbitrage earnings for a substantial portion of their own citizens‘ tax effort. Thus, Congress has decided that such arbitrage should be limited, and that tax-exempt bond proceeds must be used quickly to pay contractors for the construction of the capital facilities for which the bonds were issued. Federal tax law requires that bond proceeds be spent out during a specified period; if not, the arbitrage earnings must be rebated to the U.S. Treasury.52 The Internal Revenue Service (IRS) places arbitrage restrictions on SRF reserves. In the case of the SRFs, this issue can arise when governments use SRF monies to borrow funds at tax-exempt rates in order to issue municipal bonds and then invest the funds received from the issues in higher earning taxable securities. The process of using federal capitalization grants and state matching funds as collateral to borrow in the public bond market so as to increase the pool of available funds for project lending is termed leveraging. It is used by more than one-half of states, according to EPA. EPA‘s Environmental Finance Advisory Board has expressed concern that the interpretation of the IRS arbitrage limitations reduces the amount of funds potentially available for infrastructure projects because it requires the yield on invested reserves to be no greater than the bond maturity rate, and it has urged EPA to support amending the Internal Revenue Code to provide that monies contributed to SRFs be freed from arbitrage earnings restrictions.53 Many states urge that amounts used as reserves to secure bonds for SRF projects be exempted from the arbitrage rebate rules so that any interest earnings could be used for additional investment in water infrastructure projects. The Council of Infrastructure Financing Authorities (CIFA), which represents most of the SRF organizations, argues that applying the arbitrage rules in the case of SRFs does not make sense since by law these funds can only be used for the purpose of financing water and wastewater facilities. CIFA has estimated that if arbitrage restrictions were lifted, SRFs could earn an additional $100 to $200 million annually on their funds. If these earnings were used as reserves to secure additional bonds, they could provide an additional $200 to $400 million annual investment in infrastructure projects. However, others respond that without the existing arbitrage rule, state and local governments could issue tax-exempt bonds solely for the purpose of gaining arbitrage profits, at the

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expense of greater revenue losses to the federal government and ultimately higher interest rates on bonds whose proceeds actually are used for the acquisition or construction of capital facilities.54 Legislation in the 110th Congress (S. 1910) would have lifted arbitrage restrictions on federal capitalization grants and state matching funds for clean water and drinking water SRFs. The 109th Congress considered this issue. In P.L. 109-115 (providing FY2006 appropriations for the Treasury Department), Congress directed the Secretary of the Treasury to submit a report to the House and Senate Committees on Appropriations providing a legal basis for applying arbitrage bond regulations to the reserve funds held by the clean water and drinking water SRFs, which generally contain replacement proceeds (from loan repayments) but not bond proceeds.55

Federal Cross-Cutting Requirements Under both SRF programs, a number of federal authorities, executive orders, and government- wide policies apply to projects and activities receiving federal financial assistance, independent of program-specific statutory requirements, and many stakeholders favor repealing their applicability to water infrastructure projects. These include environmental laws (e.g., Clean Air Act, Endangered Species Act), social legislation (e.g., Age Discrimination Act, Civil Rights Act), and economic and miscellaneous laws (DavisBacon Act, Uniform Relocation and Real Property Acquisition Policy Act of 1970, and procurement prohibitions under environmental laws and Executive Order 11738). These federal cross-cutting requirements apply only to projects funded directly by the federal capitalization grants, but not to SRF activity made from loan repayments, interest earned, or other state monies contained in the SRF. In addition, the clean water SRF attaches 16 specific statutory requirements to activities funded directly by federal capitalization grants that are carryover (―equivalency‖) requirements from the prior construction grant program (e.g., specific project evaluation requirements). Under both SRF programs, projects financed with funds directly made available by federal capitalization grants are subject to Environmental Impact Statement requirements of the National Environmental Policy Act. Projects funded by other monies in the SRF also must undergo an environmental review; however, a state may select its own method for conducting environmental reviews, if approved by EPA. Many stakeholders believe that these other federal cross-cutting requirements are burdensome and costly and, in many cases, only ancillary to benefits of water infrastructure projects. One particularly contentious issue is compliance with the Davis-Bacon Act which requires, among other things, that not less than the locally prevailing wage be paid to workers employed, under contract, on federal construction work ―to which the United States or the District of Columbia is a party.‖ Critics of Davis-Bacon say that it unnecessarily increases public construction costs and hampers competition (with respect to small and minority-owned businesses). Supporters say that the law helps stabilize the local construction industry by preventing competition from firms that could undercut local wages, and perhaps working conditions, and thus compete unfairly with local contractors. Congress has added Davis-Bacon prevailing wage provisions to more than 50 separate program statutes, including the Clean Water Act and generally to the Safe Drinking Water Act. However, the applicability of Davis-Bacon to the clean water SRF expired in FY1994,

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when the authorizations in P.L. 100-4 expired. Further, since the drinking water SRF program was established in 1996, EPA has interpreted the SDWA to not require applicability of the Davis- Bacon Act to all construction projects supported by SRFs.56 Inclusion of its requirements in the CWA and SDWA SRF programs has been controversial, and that controversy was a prominent reason that no water infrastructure financing legislation has been enacted recently.

Set-Asides The utility of set-asides that allow for using a portion of SRF capitalization grants for program purposes other than directly constructing infrastructure is likely to be debated. Under the clean water SRF, a state must reserve the greater of 1% of its capitalization grant or $100,000 each year to carry out specified planning requirements under the CWA. Under the drinking water SRF, a state may use up to 31% of its capitalization grant for specified SDWA programs including supervision of public water systems, operator certification, compliance capacity development, and state and local source water protection initiatives (some uses require a 50% state match). Reserving a large amount of funds, even for related implementation activities, necessarily limits the funds available to the state for assisting infrastructure projects. Also, several of the set-aside activities have their own funding authority; thus, a concern for states is that Congress may rely on the SRF to fund other SDWA requirements instead of providing the authorized appropriations, and the overall funding for drinking water activities may be diminished. Drinking water program officials acknowledge this problem, but many believe that set-asides are a useful means of ensuring that monies will be available for activities that might otherwise not have a secure source of funds. Because states have some flexibility, in fact, few are using the full amount that could be reserved under the set-asides. According to EPA, only a few states have used the full 31% that the law allows, and the average amount reserved by all states since 1996 is 16%. Many state clean water program officials have a different view of mandatory set-asides, based on experience administering the previous construction grant program which for a time required states to reserve a portion of federal funds for specified types of projects. Because of problems in spending those set-aside funds (e.g., finding beneficial projects on which to spend all the required reserved funds) and extensive oversight by EPA, many of them now oppose the reservation of core funds (especially mandatory set-asides), except for covering SRF administrative costs. Nevertheless, a number of stakeholder groups have recently urged Congress to include several different types of reserves in the CWA SRF program, such as requiring states to set aside a fixed percentage of funds for projects in rural communities, or for ―green‖ infrastructure projects involving water or energy efficiency, water reuse, or nonstructural approaches. A separate issue relates to set-asides for administration. Under both the CWA and SDWA programs, states may reserve up to 4% of their federal capitalization grants annually for the reasonable costs of administering the SRF. As the SRFs have developed and loan portfolios have grown, many states argue that an amount equal to 4% of the allotment is insufficient for administering the program. This problem is exacerbated by the fact that congressional appropriations of capitalization grants generally have remained steady (and for the clean water SRF, actually had been reduced nearly 50% since FY2004). Many states impose fees on borrowers, which has the effect of increasing costs for the borrower. Thus, an issue of

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concern to many is increasing the amount that states are allowed to reserve for administrative purposes.

Allotment of Funds and Congressionally Directed Project Grants Another issue of interest is how federal funds are allocated among the states. Capitalization grants for clean water SRFs are allotted according to a state-by-state formula in the Clean Water Act. It is a complex formulation consisting basically of two elements, state population and capital needs for wastewater projects. Because the allocation formula has not been revised since 1987, yet needs and population have changed, the issue of state-by-state distribution of federal funds is likely to be an important topic when legislation is considered. In contrast, capitalization grants for drinking water SRFs are allotted by EPA based on the proportional share of each state‘s needs identified in the most recent national drinking water needs survey, not according to a statutory allotment formula.57 Among the questions likely to be discussed are, should a single formula apply to both programs? Should allocation follow from a statutory or administrative formula? Do EPA‘s needs surveys provide an accurate basis for state-by-state distribution? If programs are expanded to include eligibility for new activities, such as pollution prevention and watershed protection, how should they be reflected in state-by-state allocations? Crafting an allotment formula has been one of the most controversial issues debated during past reauthorizations of the Clean Water Act. The dollars involved are significant, and considerations of ―winner‖ and ―loser‖ states bear heavily on discussions of alternative formulations. A related issue is whether a portion of federal water infrastructure funds will continue to be allocated in the form of congressionally directed appropriations for specified communities‘ projects, which have become increasingly prominent and are often referred to as earmarks. In recent years, congressional appropriators have dedicated a significant portion of annual water infrastructure assistance as grants for specific communities, both small and large. The federal share of costs under these grants is 55%. For example, for FY2009 (P.L. 111-8), Congress appropriated $689 million for clean water SRF capitalization grants, $829 million for drinking water SRF grants, and $183.5 million in earmarked grants for 303 listed projects. Appropriations directed by Congress for identified projects enable legislators to assist communities otherwise unable to fully qualify for state-administered programs, or those seeking a grant rather than a loan that must be repaid. State officials that administer the SRF programs generally oppose these types of grants because such congressional actions deny states the ability to determine priority for project funding. 58

Research on New Technologies The basic technologies used by communities to meet wastewater and drinking water needs have changed little for several decades, in part because utility officials often favor using conventional, familiar systems and technologies. This is particularly the case in the wastewater sector where regulatory requirements have been relatively static for years. Although this has long been true in the drinking water sector as well, the situation is changing as new regulations are requiring many public water systems to apply new technologies.

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EPA‘s revised drinking water standard for arsenic has drawn particular attention to the need for research on treatment technologies that are affordable and suitable for small water systems. In the conference report for the Consolidated Appropriations Act for FY2005 (P.L. 108-447), Congress expressed concern that many small communities, especially rural communities in the West, will not be able to afford to comply with the arsenic rule and that it could pose a large financial hardship on these communities.59 Congress has provided funding specifically for research on cost-effective arsenic removal technologies for small systems. However, overall federal support for research and development (R&D) of new drinking water and wastewater technologies is limited. While much of EPA‘s drinking water research is focused on health effects studies, the identification of feasible treatment technologies is a central component of EPA‘s drinking water standard setting process, and technology research has received support. However, EPA‘s water research budget often has fallen short of its regulatory needs, and consequently, competition for available funding has been considerable. According to the Water Infrastructure Network, technology R&D is supported at the federal level mainly by programs of EPA‘s Office of Research and Development and EPA‘s Environmental Technology Verification (ETV) Program. Also, Congress has directed that EPA provide appropriated funds to nonprofit research foundations including the Water Environment Research Foundation ($2.1 million in FY2008 and $2 million in FY2009) and the American Water Works Association Research Foundation ($1.7 million in FY2008 and FY2009). The ETV Program began in 1995 to verify the performance of innovative technology developed by the private sector and to accelerate the entrance of new technologies in all media. In the water and drinking water areas, technologies have been verified for a number of packaged drinking water systems especially needed for small community water supplies. Pilots also are underway to evaluate source water protection technologies and urban wet weather flow control technologies. In its 2001 report, WIN recommended that Congress authorize $250 million annually for a new Institute of Technology and Management Excellence to support the development and use of innovative technologies that would reduce the cost of meeting drinking water and clean water requirements and replacing water infrastructure.60 The CBO also has noted that one option to increase federal support for water infrastructure would be increased federal spending on R&D that could reduce water systems‘ costs and improve efficiency, such as technical R&D into new pipe materials, construction and maintenance methods, and treatment technologies. Economic principles suggest that federal involvement may be appropriate to increase cost-effectiveness when other entities, such as private firms and state governments that may fund R&D for water systems, do not have adequate incentive to consider the spillover benefits that would accrue from a national perspective as a result of research investments. Increased federal support of technical R&D could take the form of additional research projects managed by EPA, larger federal grants to private organizations, or both.61 In the past, Congress has attempted to advance new and innovative technologies in other ways, in addition to R&D activities. Beginning with the 1977 amendments to the Clean Water Act, Congress authorized specific incentives for such technologies, in particular by increasing the federal share under the construction grant program for innovative and alternative technology projects that reuse or recycle wastewater and sludge, reduce costs, or save energy consumption. The act also provided for 100% modification or replacement of innovative or alternative systems in the event of technological failure or significantly increased operating

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costs, as a safety measure to reduce the potential uncertainty of using risky or unproven wastewater treatment technologies. The federal funding bonus and the potential for full replacement if a wastewater system failed were seen by states and cities as significant incentives for using technologies other than conventional treatment systems. However, these incentives were funded as set-asides from construction grants. These set-asides were not universally popular among state officials at the time, and they were not extended when the clean water SRF program was created. In 1989, EPA estimated that, compared with conventional treatment processes, for every dollar invested in designing and constructing an innovative project, 40 cents was saved over the life of the facility. Many now believe, however, that under the clean water SRF program, without the incentive of bonus funds or 100% replacement grants, few communities are constructing projects that utilize unproven or unfamiliar technology. The Safe Drinking Water Act has no such incentives, but regulatory pressures and population growth are forcing both water and wastewater utilities to assess the potential of alternative treatment technologies. In this regard, issues for congressional consideration could include possible financial incentives or regulatory incentives (such as allowing some additional compliance flexibility) for use of innovative technology, as well as increased federal support for technology R&D.

Congressional and Administration Activity

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Momentum in Congress to consider the issues discussed in this report has grown since the 107th Congress, partly in response to urgings of stakeholder groups. During this period, the Administration has promoted a number of steps to ensure that investment needs are met in an efficient, timely, and equitable manner.

Congressional Activities House and Senate committees held oversight hearings on water infrastructure financing issues during the first session of the 107th Congress, and in the second session, the House Transportation and Infrastructure Committee approved H.R. 3930, a bill authorizing $20 billion in clean water SRF assistance for five years. No committee report was filed. The Senate Environment and Public Works Committee reported legislation authorizing $35 billion in total funding over five years for the clean water and drinking water SRF programs (S. 1961, S.Rept. 107-228). No further action occurred on either bill, in large part due to controversies over provisions in both bills to apply requirements of the Davis-Bacon Act to SRF-funded water infrastructure projects (discussed above) and also over CWA grant allocation formulas in the two measures. Attention to these issues resumed in the 108th Congress. First, in July 2003, the House Transportation and Infrastructure Subcommittee on Water Resources and Environment approved H.R. 1560, legislation similar to H.R. 3930, the bill approved by that committee in 2002. H.R. 1560 would have authorized $20 billion for the clean water SRF program for FY2004-FY2008. It included several provisions intended to benefit economically disadvantaged and small communities, such as allowing extended loan repayments (30 years, rather than 20) and additional subsidies, including principal forgiveness and negative interest loans, for communities that meet a state‘s affordability criteria. It also included provisions to

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require communities to plan for capital replacement needs and to develop and implement an asset management plan for the repair and maintenance of infrastructure that is being financed. The Water Resources and Environment Subcommittee continued to examine infrastructure issues and, in April 2004, held a hearing on aging water supply infrastructure.62 In October 2004, the Senate Environment and Public Works Committee reported S. 2550 (S.Rept. 108-386), authorizing $41.25 billion over five years, including $20 billion for the clean water SRF program and $15 billion for the drinking water SRF program. The bill included a new formula for state-by-state allocation of clean water SRF grants, and expansion of the types of projects and activities eligible for clean water SRF grants. It would have directed states to reserve a portion of their annual clean water and drinking water SRF capitalization grants for making grants to eligible communities, and further would have required EPA to establish a grant program to help small water systems comply with drinking water regulations. (For discussion, see CRS Report RL32503, Water Infrastructure Financing Legislation: Comparison of S. 2550 and H.R. 1560, by Claudia Copeland and Mary Tiemann.) No further action occurred on either bill. Once again, the issue of the applicability of the prevailing wage requirements of the Davis-Bacon Act to SRF-funded projects affected consideration of the legislation, but criticism also included objection by some states to funding allocation formulas in the bills and opposition by the Administration to funding levels. During the 109th Congress, the Senate Environment and Public Works Committee reported a water infrastructure financing bill, S. 1400 (S.Rept. 109-186). Similar to S. 2550 in the 108th Congress, this bill would have extended both SRF programs (authorizing $20 billion over five years for the clean water SRF program and $15 billion drinking water SRF). It would have revised and updated the CWA formula for state-by-state allocation of SRF monies and would have specified that the prevailing wage requirements of the Davis-Bacon Act would apply to all projects financed from an SRF. It also would have directed the EPA to establish grant programs for small or economically disadvantaged communities for critical drinking water and water quality projects; authorized loans to small systems for preconstruction, short-term, and small- project costs; and directed the EPA to establish a demonstration program to promote new technologies and approaches to water quality and water supply management. No further action occurred on this bill. Water infrastructure financing also received consideration in the 110th Congress, but, again, no legislation was enacted. In March 2007, the House passed H.R. 720, the Water Quality Financing Act of 2007. It was substantially similar to legislation that the House Transportation and Infrastructure Committee‘s Water Resources and Environment Subcommittee approved in the 108th Congress (H.R. 1560, described above). It would have authorized $14 billion for the clean water SRF program for FY2008-FY20 11. It included several provisions intended to benefit economically disadvantaged and small communities, such as allowing extended loan repayments (30 years, rather than 20) and additional subsidies (e.g., principal forgiveness and negative interest loans) for communities that meet a state‘s affordability criteria. H.R. 720 included provisions to require communities to plan for capital replacement needs and to develop and implement an asset management plan for the repair and maintenance of infrastructure that is being financed. In September 2008, the Senate Environment and Public Works Committee approved S. 3617 (S.Rept. 110-509), the Water Infrastructure Financing Act, similar to the measure that the committee approved in the 109th Congress (S. 1400). S. 3617 would have authorized $20

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billion for grants to capitalize the Clean Water Act SRF program and $15 billion for Safe Drinking Water Act SRF capitalization grants through FY20 12. The bill would have expanded eligibility for clean water SRF assistance, including, for example, projects that implement stormwater management, water conservation or efficiency projects, and water and wastewater reuse and recycling projects. S. 3617 included a number of provisions to make the clean water and drinking water SRF programs more parallel, such as allowing SRF assistance to be used by private as well as public wastewater treatment systems. It also included several provisions to benefit small or economically disadvantaged communities, such as through new technical assistance and more generous loan terms. These issues also are receiving attention in the 111th Congress. For information, see CRS Report R40098, Water Quality Issues in the 111th Congress: Oversight and Implementation, by Claudia Copeland, and CRS Report RS22037, Drinking Water State Revolving Fund (DWSRF): Program Overview and Issues, by Mary Tiemann.

Administration Activities The Bush Administration addressed water infrastructure in a number of general ways, but did not offer legislative proposals of its own. The Administration opposed the SRF authorization levels proposed in bills in recent Congresses, saying that those levels would exceed the Administration‘s targets for federal investment in water infrastructure and do not support the President‘s priorities of defense and homeland security. The debate was joined in the presentation of the President‘s annual budget request, where the Administration identified a federal capitalization target of $6.8 billion for the clean water SRF program for 2004 through 2011, supported by annual appropriations of $730 million. The Administration also said that it would support annual appropriations of $850 million for the drinking water SRF program through FY20 18.63 That amount of total funding, EPA officials said, combined with state matching, loan repayments, and other resources, would enable the clean water SRF to eventually revolve at $3.4 billion annually and the drinking water SRF to revolve at $1.2 billion annually and be self-sustaining in the long run.64 The Bush Administration argued that funding needs are not solely the responsibility of the federal government, and that actions on the part of local governments are also required to help close the gap. Stakeholder groups concur, at least to the extent of agreeing that the problem is not solely the responsibility of any single level of government or entity, and that all must act to find solutions. But many stakeholders have argued that the level of federal investment endorsed by the Administration is insufficient to maintain investment levels in water infrastructure that are needed to achieve the nation‘s goals for safe and healthy water. While saying that federal and state funding can help water utilities meet future needs, EPA‘s principal water infrastructure initiative has been to support other types of responses to these issues. In particular, since 2003 EPA has promoted strategies that it terms the Four Pillars of Sustainable Infrastructure.65 The Four Pillars are: 

Better Management. EPA believes that better management practices like asset management, environmental management systems, consolidation, and public- private partnerships can offer significant savings for water utilities. Asset management is an inventory-based approach to planning, based on condition and risk, to assess future capital and operating needs. Regionalization or consolidation can in some cases

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

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enable utilities to achieve savings (and compliance) by combining physical and institutional assets and/or managerial and technical support. Full-Cost Pricing. Ensuring that sufficient revenues are in place to support the costs of doing business is key to constructing, operating, and maintaining infrastructure and can encourage efficient water use. Efficient Water Use. The need for costly infrastructure can be reduced by better management of water use. Options include metering, water reuse, water-saving appliances, water-saving landscaping techniques, and public education. Watershed Approaches to Protection. This pillar centers on the concept that, in addressing infrastructure needs for water supply and water quality, it is important to look more broadly at water resources in a coordinated way, to ensure that actions achieve the greatest benefit on a watershed-wide basis.

EPA pursued a Sustainable Infrastructure Leadership Initiative in partnership with water utilities to promote the Four Pillars. The purpose of the initiative was to identify new and better ways of doing business in the water and wastewater industries and promote them widely, and thus ensure sustainability of water systems. For example, EPA worked to encourage utility rate structures that lead to full cost pricing and will support water metering and other conservation measures. EPA also encourages consumers to use water-efficient products (e.g., residential bathroom products), with the intent of reducing national water and wastewater infrastructure needs by reducing projected water demand and wastewater flow, thus allowing deferral or downsizing of capital projects. The Obama Administration‘s EPA continues generally to support the water infrastructure management strategies in the Four Pillars. Where the new Administration has shifted the debate from its predecessor, however, is in regard to federal budgetary resources for water infrastructure investments. First, the Administration supported inclusion of $6.0 billion for the clean water and drinking water SRF programs in economic recovery legislation enacted in February 2009, the American Recovery and Reinvestment Act (P.L. 111-5, see page 3). Second, in the FY2010 budget request, presented in April 2009, the Administration sought a total of $3.9 billion in appropriations for the two EPA SRF programs, representing a 157% increase above the regular FY2009 appropriated levels, which totaled $1.52 billion.

CONCLUSION The preceding discussion identifies a number of issues that Congress, the Administration, and stakeholders continue to debate regarding water infrastructure needs and concerns. Many of the issues already are the subject of advocates‘ recommendations and policy positions. Only recently, however, have some begun to address the long term challenge of actually paying for the larger financial commitment that many of them seek and, in particular, of identifying alternatives to finance a larger, sustained federal role. Some may wish to fund a larger amount of federal spending for water infrastructure entirely out of general revenues in the U.S. Treasury, but that faces substantial hurdles and competition with many other government priorities. Thus, several questions arise: if a substantial financing gap exists that cannot be met by improved efficiencies or local revenue enhancement, and if a larger federal

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financial role is determined to be appropriate, where would that money come from? Are there alternative revenue sources that could be identified to support increased federal involvement? Some analytic work has already been done on these questions, including research by academics and interest groups.66 EPA has contributed analysis in various ways, including a study requested by Congress in the mid-1990s that examined financial mechanisms to enhance the capability of governments to fund mandated environmental goals.67 In addition, the EPA‘s Environmental Finance Advisory Board has developed various publications, including A Guidebook of Financial Tools, which provides a comprehensive review of financing mechanisms, and related tools that may help communities pay for environmental projects and lower compliance costs.68 Environmental advocates generally are less engaged in debates about water infrastructure than groups representing states, cities, and those involved in constructing facilities. However, some now argue that increased federal investment is needed to fix water quality problems caused by discharges of untreated and inadequately treated sewage and that ―the federal government should greatly increase its contribution to water infrastructure needs through a clean water trust fund,‖ which they call the best long-term source of sewage treatment funding.69 Among the options under discussion are various types of water-related fees that could be dedicated to water infrastructure and other water quality projects, including one based on water withdrawals or use, permit fees, effluent fees, chemical feedstock fees, and environmentally ―green‖ product fees. Each such option has economic and equity impacts, spillover effects, and questions about administration that need thorough assessment. In June 2005, a House Transportation and Infrastructure subcommittee held hearings on alternative means to fund water infrastructure projects in the future. At one hearing, witnesses discussed creating a national clean water trust fund that would conceptually be similar to trust funds that exist for highway and aviation projects. Witnesses and subcommittee members discussed difficulties in identifying potential revenue sources for such a trust fund that would be deemed fair and equitable. A second hearing addressed other financing options, such as expanded use of tax-exempt private activity bonds, and more efficient management techniques, such as asset management programs and sustainable infrastructure initiatives. In the 109th Congress, legislation was introduced to establish a $7.5 billion federal trust fund for wastewater infrastructure improvements. This bill, H.R. 4560, contemplated a system of user fees to create the fund, but the source of revenue was not specified. No further action occurred on this bill, because finding consensus on the revenues to support such a large spending increase is a challenge that has eluded proponents. Interest in this issue has been revived in the 111th Congress. A House Transportation and Infrastructure subcommittee held a hearing on issues associated with a water infrastructure trust fund on July 15. Witnesses included officials from GAO who discussed findings of a GAO report that reviews issues relevant to designing a trust fund.70 Also, a bill has been introduced that would establish a trust fund to supplement current federal support for water quality and drinking water SRFs and to support related activities (H.R. 3302, the Water Protection and Reinvestment Act). Under this proposal, the revenue sources for the trust fund would include an excise tax on water- based beverages, an excise tax on items disposed of in wastewater (such as toothpaste and toilet paper), an excise tax on pharmaceutical products, and a tax on corporate profits.

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Beyond discussion of trust funds or similar mechanisms, increased public/private partnerships are advocated by some, and other options also may merit exploration. As difficult as it may be for policymakers to resolve the many infrastructure financing issues, such as those discussed in this report, resolving how to pay for water infrastructure is no less a challenge.

End Notes

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1

This report focuses on drinking water systems that take in water, treat it, monitor it, and distribute it to households and other customers, and wastewater systems that collect, treat, and typically discharge water after use. It does not address infrastructure related to water supply systems that generally are part of larger multi-purpose projects for irrigation, flood control, power supply and recreation that typically are built or assisted by the Bureau of Reclamation and the U.S. Army Corps of Engineers. 2 American Water Works Association, Dawn of the Replacement Era, Reinvesting in Drinking Water Infrastructure, May 2001, p. 5. (Hereafter cited as AWWA Report.) 3 American Water Works Association, Protecting Our Water: Drinking Water Security in American After 9/11, Executive Summary, 2003. 4 For background, see CRS Report RL3 0478, Federally Supported Water Supply and Wastewater Treatment Programs, coordinated by Claudia Copeland. 5 For information, see CRS Report R40216, Water Infrastructure Funding in the American Recovery and Reinvestment Act of 2009, by Claudia Copeland, Nicole T. Carter, and Megan Stubbs. 6 This report does not address in detail legislative or other activity in the 111 th Congress. For information, see CRS Report R40098, Water Quality Issues in the 111th Congress: Oversight and Implementation, by Claudia Copeland, and CRS Report RS22037, Drinking Water State Revolving Fund (DWSRF): Program Overview and Issues, by Mary Tiemann. 7 For discussion of several of these factors, see Water Pollution Control Federation (now, the Water Environment Federation), The Clean Water Act with Amendments, 1982, p. 14. 8 Another 86,210 systems are transient non-community water systems (TNCWSs) (e.g., campgrounds and gas stations) that provide their own water to transitory customers. TNCWSs generally are required to comply only with regulations for contaminants that pose immediate health risks (such as microbial contaminants), with the proviso that systems that use surface water sources must also comply with filtration and disinfection regulations. 9 For more information, see CRS Report RS22037, Drinking Water State Revolving Fund (DWSRF): Program Overview and Issues, by Mary Tiemann. 10 Environmental Protection Agency, Drinking Water Infrastructure Needs Survey and Assessment: Third Report to Congress, June 2005. EPA 8 16-R-05-001. Available online at http://www.epa.gov/safewater/needs.html. 11 In addition to providing support through these EPA and USDA programs, Congress is increasingly being asked to provide direct authorizations for individual projects developed by the Department of the Interior‘s Bureau of Reclamation and the U.S. Army Corps of Engineers. A key practical difference between these projects and EPA and USDA programs is that with individual project authorizations, there is no predictable assistance, or assurance of funding once a project is authorized. (For more discussion, see CRS Report RL3 0478, Federally Supported Water Supply and Wastewater Treatment Programs, coordinated by Claudia Copeland.) 12 Water Infrastructure Network, Clean & Safe Water for the 21 st Century, A Renewed National Commitment to Water and Wastewater Infrastructure, April 2000. 13 Water Infrastructure Network, Recommendations for Clean and Safe Water in the 21 st Century, February 2001. (Hereafter cited as WIN Recommendations.) 14 Environmental Protection Agency, 2007 Drinking Water Infrastructure Needs Survey and Assessment: Fourth Report to Congress, EPA 8 16-R-09-001, March 2009, http://www.epa.gov/safewater/needssurvey/index.html. 15 U.S. Environmental Protection Agency, Clean Watersheds Needs Survey 2004, Report to Congress, Washington, January 2008, 1 vol., available at http://www.epa.gov/owm/mtb/cwns/2004rtc/toc.htm. 16 U.S. Department of Health and Human Services, Indian Health Service, ―FY2007 Budget Requests, Justification of Estimates for Appropriations Committees; Sanitation Facilities Construction,‖ February 2006, p. IHF-1 1. 17 U.S. Environmental Protection Agency, Drinking Water Infrastructure Needs Survey and Assessment: Third Report to Congress, June 2005, p. 5. 18 U.S. Congressional Budget Office, Future Investment in Drinking Water and Wastewater Infrastructure, November 2002, 58 p. (Hereafter cited as CBO 2002.) 19 Ibid., pp. 18-22. 20 Ibid., p. 19.

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21

U.S. Environmental Protection Agency, The Clean Water and Drinking Water Infrastructure Gap Analysis, September 2002, EPA 816-R-02-020, 50 p. 22 For each scenario in the Gap Analysis, EPA presents a range of estimates and a point estimate within each range. For simplification, CRS refers to these point estimates, but readers should consult the EPA report for full discussion. 23 U.S. Congressional Budget Agency, Future Spending on Water Infrastructure: A Comparison of Estimates from the Congressional Budget Office and the Environmental Protection Agency, letter report, January 2003, 14 p. 24 Ibid., p. 1. 25 Asset management is a planning approach for conducting integrated assessments of future capital and operating needs to ensure that investments are made efficiently. 26 SSOs are releases of raw sewage from sanitary sewer collections systems before the wastewater reaches the treatment plant. These discharges are a major type of wet weather pollution. 27 AWWA Report, p. 11. 28 See, for example, Pat Choate and Susan Walter, America in Ruins. Council of State Planning Agencies, 1981, 97 p.; and Roger J. Vaughan and Robert Pollard, Rebuilding America, Planning and Managing Public Works in the 1980s, Council of State Planning Agencies,1984, Vol. 1, 182 p. 29 CBO 2002, p. x. 30 Association of Metropolitan Sewerage Agencies, The AMSA 2002 Financial Survey, 2003, p. 79. 31 Statement of Howard Neukrug on behalf of the American Water Works Association, in: U.S. House, Committee on Transportation and Infrastructure, Subcommittee on Water Resources and the Environment, Aging Water Supply Infrastructure, Hearing, 108th Congress, 2nd session, April 28, 2004 (108-63), p. 61. 32 U.S. Environmental Protection Agency, Drinking Water Infrastructure Needs Survey and Assessment: Third Report to Congress, June 2005, pp. 10-11. 33 Environmental Protection Agency, 2007 Drinking Water Infrastructure Needs Survey and Assessment: Fourth Report to Congress, March 2009, p. 13. 34 Ibid. 35 See U.S. Environmental Protection Agency, ―Use of the Clean Water State Revolving Fund to Implement Security Measures at Publicly Owned Treatment Works,‖ at http://www.epa.gov/owm/ cwfinance/cwsrf/ security and ―Use of the Drinking Water State Revolving Fund (DWSRF) to Implement Security Measures at Public Water Systems,‖ EPA-816-F-02-040, at http://www.epa.gov/safewater/dwsrf/pdfs/security-fs.pdf. 36 For more information on drinking water security issues and funding, see CRS Report RL3 1294, Safeguarding the Nation’s Drinking Water: EPA and Congressional Actions, by Mary Tiemann. 37 According to EPA, 37 clean water SRF programs have funded more than 6,100 nonpoint source pollution control projects, providing $2.1 billion in SRF funding since 1990. No estuary projects have been funded through the SRF. 38 U.S. Environmental Protection Agency, Office of Water, National Water Quality Inventory, 2000 Report, August 2002, EPA 841-R-02-001, 207 p. 39 Federal and state data for the drinking water SRF program are available through EPA‘s DWSRF National Information Management System (DWNIMS), http://www.epa.gov/safewater/dwsrf/dwnims.html. 40 U.S. Government Accountability Office, Water Infrastructure: Information on Federal and State Financial Assistance, November 2001, GAO-02-134, p. 18 (formerly the General Accounting Office). 41 U.S. House, Committee on Transportation and Infrastructure, Subcommittee on Water Resources and the Environment, Meeting Clean Water and Drinking Water Infrastructure Needs, Hearing, 105th Congress, 1st session, April 23, 1997 (105-18). p. 307. 42 Statement of Bruce Tobey on behalf of the National League of Cities on Water and Wastewater Infrastructure Needs in: U.S. House, Committee on Transportation and Infrastructure, Subcommittee on Water Resources and the Environment, Water Infrastructure Needs, Hearing, 107th Congress, 1st session, March 28, 2001 (1078), p. 131. 43 Ibid., p. 132. 44 Water Infrastructure Network, ―Commonly Asked Questions and Answers about the WIN Report,‖ Water Infrastructure Now, May 5, 2001, p. 5. (Hereafter cited as WIN Questions and Answers.) 45 WIN Recommendations, p. 3. 46 WIN Questions and Answers, p. 3. 47 ―Comparison of Recommendations of the WIN and the H2O Coalition,‖ February 16, 2001, see http://www.nawc.org/issues 48 Statement of Janice Beecher on behalf of the National Association of Water Companies, in: U.S. House, Committee on Transportation and Infrastructure, Subcommittee on Water Resources and the Environment, Water Infrastructure Needs, Hearing, 107th Congress, 1st session, March 28, 2001 (107-8), p. 55. 49 U.S. Congressional Budget Office, Budget Options, February 2007, pp 7 1-72. 50 H2O Coalition, ―What is the Water Infrastructure Problem and What are the Solutions?‖ Issue Paper, February 26, 2001, pp. 7-11. 51 For more information, see CRS Report RL3 1457, Private Activity Bonds: An Introduction, by Steven Maguire.

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For information, see CRS Report RL30638, Tax-Exempt Bonds: A Description of State and Local Government Debt, by Steven Maguire. 53 U.S. Environmental Protection Agency, Environmental Finance Advisory Board, ―Arbitrage Relief Would Increase Funds Available to Meet Critical Water and Sewer Funding Needs,‖ May 7, 2006, 3 p. 54 U.S. Environmental Protection Agency, The Drinking Water State Revolving Fund Program, Report to Congress, EPA 918-R-03-009, May 2003, p. 95. 55 Conference Report to accompany H.R. 3058, Making Appropriations for the Departments of Transportation, Treasury, and Housing and Urban Development, the Judiciary, District of Columbia, and Independent Agencies for the Fiscal Year Ending September 30, 2006, H.Rept. 109-307, November 18, 2005, p. 207. 56 For information, see CRS Report RL3 1491, Davis-Bacon Act Coverage and the State Revolving Fund Program Under the Clean Water Act, by William G. Whittaker. 57 For information, see CRS Report RL3 1073, Allocation of Wastewater Treatment Assistance: Formula and Other Changes, by Claudia Copeland. 58 For information, see CRS Report RL32201, Water Infrastructure Projects Designated in EPA Appropriations: Trends and Policy Implications, by Claudia Copeland. 59 H.Rept. 108-792, to accompany H.R. 4818, p. 1567. 60 Water Infrastructure Network, Recommendations for Clean and Safe Water in the 21 st Century, pp. 11-12. 61 CBO 2002, pp. 33-34. 62 U.S. House, Committee on Transportation and Infrastructure, Subcommittee on Water Resources and the Environment, Aging Water Supply Infrastructure, Hearing, 108th Congress, 2nd session, April 28, 2004 (10863), p. 78. 63 In FY2007, the President requested $688 million for clean water SRF capitalization grants and $842 million for drinking water SRF grants; Congress appropriated $1.1 billion and $838 million, respectively. In FY2008, the President‘s budget requested $688 million for clean water SRF grants and $843 million for drinking water SRF grants; Congress appropriated $689 million and $829 million for the two programs, respectively. For additional information, see CRS Report 96-647, Water Infrastructure Financing: History of EPA Appropriations, by Claudia Copeland. 64 U.S. Environmental Protection Agency, FY2006 Justification of Appropriations, Estimates for the Committee on Appropriations, February 2005, p. STAG-68; FY2004 Justification of Appropriations, February 2003, p. SA37. 65 U.S. Environmental Protection Agency, Sustainable Water Infrastructure for the 21 st Century. See http://www.epa.gov/waterinfrastructure/. 66 For example, see Clean Water Council, America’s Environmental Infrastructure: A Water and Wastewater Investment Study, 1990, 46 p. 67 U.S. Environmental Protection Agency, Alternative Funding Study: Water Quality Fees and Debt Financing Issues, Final Report to Congress, June 1996, 99 p. 68 Environmental Financial Advisory Board and Environmental Finance Center Network, A Guidebook of Financial Tools: Paying for Sustainable Environmental Systems, April 1999 revision. This and other publications by the Environmental Finance Advisory Board are available online at http://www.epa.gov/efinpage/. 69 Natural Resources Defense Council and Environmental Integrity Project, Swimming in Sewage, February 2004, pp. 57-58. 70 U.S. Government Accountability Office, Clean Water Infrastructure: A Variety of Issues Need to Be Considered When Designing a Clean Water Trust Fund, GAO-09-657, May 2009.

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Chapter 2

WATER INFRASTRUCTURE FUNDING IN THE AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009 Claudia Copeland, Megan Stubbs and Charles V. Stern

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SUMMARY On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (P.L. 111-5, the ARRA, or Recovery Act). Among the purposes identified in the legislation are preservation and creation of jobs and promotion of U.S. economic recovery, and investment in transportation, environmental protection, and other infrastructure that will provide long-term economic benefits. This report identifies funding for water infrastructure programs and projects contained in the legislation. The legislation directs additional appropriations to a number of existing federal programs that either directly invest in water infrastructure projects or provide assistance to states and localities for such activities. Water infrastructure funding in the bill, available for obligation through September 30, 2010, is provided to five federal agencies and one commission. This funding totals $13.5 billion. The bill provides funding for locally built wastewater and drinking water treatment projects through assistance programs administered by the Environmental Protection Agency (EPA) and the U.S. Department of Agriculture (USDA). For the EPA wastewater program, the enacted bill provides $4.0 billion. For the EPA drinking water program, P.L. 111-5 provides $2.0 billion in additional funds. These funds were allocated to states according to established formulas, and states will award actual assistance to projects and communities. For the USDA programs that benefit rural communities, the Recovery Act provides $1.38 billion in grants and loans; USDA state offices are making individual project decisions. Additional funding in the bill for these programs is three to four times more than the level of recent appropriations. The enacted legislation provides funding for water resources development and management projects administered by four agencies. It provides $4.6 billion for the U.S.

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Army Corps of Engineers (Corps) and $1.0 billion for the Bureau of Reclamation (Reclamation). The legislation also provides $340 million for USDA‘s Natural Resources Conservation Service (NRCS) agricultural watershed program, and $220 million for the Department of State‘s International Boundary and Water Commission (IBWC) for levee and dam upgrades. Congress directed that the funds be used consistent with the eligibility and prioritization constraints and direction provided in P.L. 111-5 and the accompanying conference report, H.Rept. 111-16, but discretion regarding which specific water resource projects received funds was largely left up to the these federal agencies. Even after enactment, implementation of the additional water infrastructure funding in the ARRA is raising a number of issues, including how general restrictions in the legislation, such as ―Buy American‖ requirements, will affect timely spending of ARRA funds. Another issue concerns matching fund requirements. Unless project assistance is provided entirely as grants, communities and project sponsors will need to come up with matching funds, which could be very challenging in the current fiscal environment. Congressional committees have held several hearings on use of ARRA water infrastructure funds, and additional oversight is likely during the remainder of the 111th Congress.

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INTRODUCTION In response to a deteriorating national economy and recession, in February 2009 the Congress passed and President Obama signed into law the American Recovery and Reinvestment Act (P.L. 111-5). Among the purposes identified in the legislation are preservation and creation of jobs and promotion of U.S. economic recovery, and investment in transportation, environmental, and other infrastructure that will provide long-term economic benefits. This report identifies funding for water infrastructure programs and projects included in the bill. The legislation directs additional appropriations to a number of existing federal programs that either directly invest in water infrastructure projects or provide assistance to states and localities for such activities. Water infrastructure funding, available for obligation through September 30, 2010, is summarized in Table 1. The infrastructure activities discussed here comprise one of many broad categories of infrastructure that received additional funding under the legislation, for construction, repair, and modernization of a range of infrastructure categories both traditional (e.g., highways, airports, passenger rail, and schools) and less traditional (e.g., broadband and the electric power transmission grid). These provisions of the legislation reflect a concept that has drawn much attention by policymakers as one option for addressing the nation‘s faltering economic conditions: the concept of countering the effect of the current recession with increased government spending on public works in order to create jobs while also promoting long-term economic growth.1 Proponents argued that states and localities had hundreds of infrastructure projects that were ―ready to go‖ to construction in 90 or 120 days, except for funding, and thus could contribute quickly to job creation and economic stimulus,2 especially in the construction sector that has been particularly hard hit by the recession. During House and Senate debate on the legislation, both supporters and critics favored more infrastructure spending, with some critics urging changes to increase short-term, stimulative provisions of the bill, including more targeted infrastructure spending, and less

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spending on activities with less certain quick stimulative effect. Nevertheless, in the floor debates concerning the overall size and composition of the legislation, only one specific proposal to increase infrastructure funds in the bill was adopted.3 The enacted legislation includes some additional funds for high-speed rail projects that were not included in the House or Senate versions.4

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General Provisions Applicable to ARRA Water Infrastructure Funding As enacted, the legislation contains several general provisions that apply to all water infrastructure projects and programs funded by the legislation. Two of these general provisions reflect policies to deliver the federal funds quickly, in order to create jobs. First, under section 1602, preference was to be given to activities that could start and finish quickly, with a goal that at least 50% of the funds go to activities that could be initiated within 120 days of enactment. Second, section 603 requires that all funds be obligated by September 30, 2010 (specific deadline provisions applicable to EPA funds are discussed below). Two additional general provisions concern certain other restrictions on using federal funds. First, section 1605 requires that local entities that receive ARRA financial assistance use American- made iron, steel, and manufactured goods in the construction of their projects. Section 1605(b) allows federal agencies, with limited exceptions and applied consistently with U.S. international obligations, to waive this ―Buy American‖ procurement requirement if doing so is in the public interest because there are insufficient American supplies, or if the use of American supplies will increase the cost of the project by more than 25%. Finally, section 1606 directs that all projects funded directly by, or assisted in whole or in part by, ARRA shall comply with prevailing wage requirements of the Davis-Bacon Act. This act requires, among other things, that not less than the locally prevailing wage be paid to workers employed, under contract, on federal construction work ―to which the United States or the District of Columbia is a party.‖ Critics of Davis-Bacon say that it unnecessarily increases public construction costs and hampers competition (with respect to small and minority-owned businesses). Supporters say that the law helps stabilize the local construction industry by preventing competition from firms that could undercut local wages, and perhaps working conditions, and thus compete unfairly with local contractors.

WASTEWATER AND DRINKING WATER EPA State Revolving Fund (SRF) Programs The federal Clean Water Act (CWA) and Safe Drinking Water Act (SDWA) impose regulatory requirements regarding wastewater treatment and drinking water quality in the United States. For wastewater treatment, the CWA prescribes performance levels to be attained by municipal sewage treatment plants in order to prevent the discharge of harmful wastes into the Nation‘s lakes, rivers, and other surface waters. For drinking water quality, public water systems are subject to federal regulations under the SDWA which limit levels of contaminants in treated water and require, for example, system monitoring, treatment to

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remove certain contaminants, and reporting. Both of these laws authorize financial assistance so that communities can construct treatment facilities in compliance with these requirements.5 Under both laws, Congress appropriates federal capitalization grants as seed money to support State Revolving Funds (SRFs), and states provide matching funds equal to 20% of the federal capitalization grant. States, in turn, provide loans from the SRFs to communities for water infrastructure projects. Over the long term, the loan programs are intended to be sustained through repayment of loans to states, thus creating a continuing source of state assistance for other communities. The SRF capitalization grants are appropriated through the Environmental Protection Agency‘s (EPA‘s) State and Tribal Assistance Grants account (in the Interior and Environment Appropriations bill) and are allocated among the states according to formulas. Historically, the federal government has had a large financial role in assisting communities to meet their wastewater funding needs (having appropriated more than $75 billion since 1973) and also more recently in meeting drinking water treatment needs (more than $10 billion since 1997). However, estimates of funding needs remain very high ($203 billion for wastewater and $277 billion for drinking water), while appropriations for EPA assistance have declined in recent years. The economic recovery legislation provides additional FY2009 funding for the two SRF capitalization grant programs. Table 1 . Water Infrastructure Funding in the American Recovery and Reinvestment Act of 2009 (P.L. 1 1 1-5). Agency

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EPA

Program Clean Water State Revolving Fund capitalization grants

P.L. 111-5 $4.0 billion

EPA RUS/USDA Reclamation/DOI Corps/DODa NRCS/USDA IBWC/State Dept.

Drinking Water State Revolving Fund capitalization grants $2.0 billion Rural water and waste disposal grants and loans $1.38 billion Water and Related Resources $1.0 billion Army Corps of Engineers Civil Works Program $4.6 billion Agricultural Watershed Programs $340 million International Boundary and Water Commission $220 million Total $13.5 billion Source: Compiled by CRS. Note: Table does not include funds for the Economic Development Administration‘s Public Works and Economic Development program or the Department of Housing and Urban Development‘s Community Development Block Grant program, both of which could be used for water infrastructure and other projects, See discussion on page 5. a. Amounts include the $25 million for the Corps regulatory program and $100 million for the Formerly Utilized Sites Remedial Action Program (FUSRAP).

The Recovery Act provides an additional $4.0 billion for clean water SRFs and $2.0 billion for drinking water SRFs. Total stimulus funding for the two SRF programs is four times larger than the funding levels for these programs in regular FY2009 appropriations. As requested by many states, the legislation waives the current law requirement that states must provide a 20% match to the federal capitalization grant. The CWA and SDWA allow states to make low-interest or no-interest loans from the SRF. The Recovery Act allows states to also provide additional subsidization in the form of

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negative interest loans, principal forgiveness, grants, or a combination, but the legislation sets no project- specific limits on such assistance.6 States are to use 50% of the capitalization grant to provide additional subsidization. In addition, states are to use not less than 20% of capitalization grants to support green infrastructure, water efficiency, or other environmentally innovative projects (unless there are insufficient applications for such projects).7 Under the Recovery Act, funds appropriated to states were allocated according to existing formulas, or methods of apportionment. Under current law, clean water SRF capitalization grant allocation is governed by a formulation in the CWA,8 while drinking water SRF capitalization grants are allocated according to a formula developed by EPA that reflects the proportional share of each state‘s funding needs.9 Based on those formulas, Table A-1 in the Appendix to this report shows amounts that states were eligible to receive under the funding levels in the bill. The table reflects that, before funds were distributed to states, 1.5% was reserved for EPA to provide assistance to Indian Tribes and, under the drinking water SRF, to Alaska Native Village water systems, consistent with current law. Also, the table reflects that an additional 1.0% of the funds was reserved for program oversight by EPA and remains available for the agency‘s use through September 30, 2011. States award SRF assistance to projects on their Intended Use Plans, lists that states develop to identify which projects in which communities will receive funding. EPA was directed to submit a report to the House and Senate Appropriations Committees within 30 days of enactment containing a general plan for expenditure of funds provided by the legislation, another report within 90 days providing detailed project level information associated with the general plan, and bi-annual reports on implementation, but there are no deadlines for actually awarding the funds in the bill. However, these reports to Congress would not identify wastewater and drinking water projects that would be funded, because states would be making those decisions, not EPA. As described above, the legislation generally requires that ARRA funds be obligated by September 30, 2010. However, it also includes special deadline provisions that apply to the EPA SRF monies. The legislation directed that states are to give priority to wastewater and drinking water projects that could proceed to construction within 12 months of enactment (i.e., by February 17, 2010) and required that all SRF funds must be under contract or construction within that time. Further, the funds were provided as ―use it or lose it,‖ because EPA was directed to redistribute any SRF capitalization grant funds that were not under contract or construction by February 17.

Other Federal Programs Under the EPA SRF programs, rural and non-rural communities compete for funding; rural areas and other small communities have no special priority. For rural areas, the U.S. Department of Agriculture (USDA) administers grant and loan programs for water and wastewater projects, with eligibility limited to communities of 10,000 or less. These programs are administered at the national level by the Rural Utilities Service (RUS) at USDA.10 Funding needs in rural areas are high (at least $50 billion, according to EPA surveys), and there is heavy demand for funds. At the end of FY2007, USDA reported a $2.4 billion

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backlog of requests for 928 water and wastewater projects. The Recovery Act also provides additional appropriations for these programs totaling $1.38 billion ($968 million in grants and $412 million in direct loans). Funding under the enacted bill is more than 2.5 times larger than the funding level in FY2009. The general provisions of P.L. 111-5 concerning preference for projects that can start quickly, obligation deadlines, and Buy American and prevailing wage requirements, described above, also apply to these USDA funds. ARRA also includes funding for other federal programs that are not targeted to water infrastructure (or even to infrastructure exclusively), but could potentially be used for such purposes. One is the Public Works and Economic Development program of the Economic Development Administration (EDA, Department of Commerce). EDA is authorized to provide economic development grants to areas experiencing substantial economic distress in order to directly encourage business expansion, diversify local economies, and general or retain long-term jobs in the private sector. Economic development grants may be used for a wide range of purposes. ARRA provides $150 million for EDA grants. Regular FY2009 funding, enacted in March after ARRA, was $133 million, and FY20 10 funding is $158 million. ARRA also includes $1.0 billion for the Community Development Block Grant (CDBG) program administered by the Department of Housing and Urban Development (HUD). CDBG funds are used by about 1,200 state and local governments for a broad range of activities to invest in their own economic development priorities that are intended to result in decent housing in a suitable living environment. Program policy requires that at least 70% of funds must benefit low- and moderate-income persons. Regular FY2009 funding for the CDBG was $3.6 billion, and FY2010 funding is $3.99 billion.

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Implementation and Oversight Recovery Act funds for wastewater and drinking water projects were disbursed by the federal government to states and localities where the actual project decisions were made and spending will occur. EPA moved quickly after enactment of the legislation to issue guidance to states on how the agency would award and administer grants to wastewater and drinking water state revolving funds.11 The guidance addressed a number of issues unique to the ARRA SRF funds, such as how states are to meet the law‘s requirement that at least 20% of the funds be used for green infrastructure projects, additional reporting requirements for accountability and transparency, and details that states must provide on their plans for using the federal funds, including principal forgiveness. Most states reportedly decided to fund projects from existing priority lists (in order to meet the law‘s requirements to select projects that can proceed quickly to construction), while some developed supplemental project priority lists (especially where projects to meet the law‘s green project reserve had not previously been identified). EPA had awarded nearly all of the $6.0 billion in clean water and drinking water SRF capitalization grants to states, the District of Columbia, Puerto Rico, and one Territory by December 2009. States, in turn, began to award funds to specific projects, and local governments to enter into contracts. But actual commitment of funds was slow: as of November, about 30% of clean water SRF and 17% of drinking water SRF funds were

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reported to be under contract. Consequently, for some time federal officials and some Members of Congress were concerned about the ability of states to have all funds under contract or construction by February 17, 2010, as required by ARRA, or EPA would be required to reallocate remaining funds. However, when February 17 arrived, EPA reported that all states made the one-year deadline, and no funds were reallocated. As discussed above, the EPA SRF provisions of the legislation allow states to provide subsidization in the form of principal forgiveness, negative interest loans, grants, or a combination, and, in fact, states are required to use at least 50% of ARRA funds as subsidization. Traditionally, SRF assistance to communities is provided as loans that eventually are repaid to states. The concept of allowing principal forgiveness or negative interest loans means that communities will have less of a repayment burden. There is, however, a tension in how states will use this authority. As much as state budgets are under pressure from the current recession, so, too, are cities‘ budgets, and recipients of SRF assistance would rather receive a grant or partial grant than a loan that must be fully repaid. If states are generous in the amounts of subsidization that they provide (for example, requiring only small amounts of assistance or even none to be repaid), a few communities will benefit greatly. But if states are more restrictive (for example, providing only a small amount of additional subsidization), it may be possible to assist more communities in the state, yet those communities will have a larger repayment responsibility. Further, many states are concerned that providing financial assistance to communities with subsidies means that eventual repayments to the SRF will be less than 100%, thus diminishing the corpus of the SRF and impairing its long-term ability to serve as a source of additional future investment and assistance. Both OMB and EPA issued guidance on implementing the law‘s Buy American provision (see page 2), which is another new consideration in using the ARRA funds. EPA‘s guidance details how an SRF assistance recipient (i.e., local government) may apply for a waiver from the Buy American requirement and how the agency will evaluate such requests. 12 EPA has issued four nationwide ―Buy American‖ waivers based on the ARRA‘s public interest provision, as well as nearly four dozen project-specific waivers because U.S.-made products meeting specifications justified by local conditions and requirements were not available. EPA issued a nationwide waiver to allow some already-funded SRF projects to refinance loans to access the more attractive financing options that the Recovery Act provides, but this waiver only applies to eligible projects for which debt was incurred on or after October 1, 2008, and before February 17, 2009. A second waiver applies to projects that solicited bids on or after October 1, 2008, and before February 17, 2009, and a third applies to ―de minimis‖ use of non-domestic iron, steel, and manufactured goods in a project where such components comprise in total no more than 5% of materials in the project. A fourth nationwide waiver clarifies the previous ―de minimis‖ waiver. The Buy American requirement has become among the most contentious provisions of the ARRA for water infrastructure projects. Some state and local officials criticized the relatively high threshold in the law for waiving the provision based on increased costs (25%). Further, the provision has prompted special concern in the water infrastructure sector because only a limited amount of equipment and materials is manufactured in the United States, according to reports. Some critics say this could result in monopolies for certain companies and could increase the cost of ARRA projects because domestic content may be more expensive than foreign-supplied materials. A Canadian trade official characterized the

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provision as discriminatory and as a threat to traditional trading openness between the two countries. 13 But many policymakers support the general Buy American provision in the law, saying that it will help create domestic jobs. Also of interest has been states‘ and localities‘ ability to identify the law‘s mandate that at least 20% of SRF monies be used for so-called ―green‖ projects, since it was a new requirement and was complicated by the law‘s one-year deadline for having projects under contract. As part of its initial guidance on implementing ARRA, EPA identified examples of many types of projects that would be eligible for the law‘s Green Project Reserve (GPR).14 In March 2010, EPA reported that all states met the 20% requirement and that, overall, states are investing 28% of ARRA funds on the four types of ―green‖ projects identified in the legislation. 

 

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

43% of GPR funds are being spent on energy efficiency projects, such as installing solar panels or wind turbines or more efficient pumps and motors at treatment plants, which tend to be more capital-intensive than other project types. 31% of GPR funds are being spent on water efficiency projects, such as installation of water meters or rehabilitation of collection sewer systems. Environmentally innovative projects, such as projects to achieve pollution prevention with reduced costs or to adapt treatment plants to impacts of climate change, account for 11% of GPR funds. Green infrastructure projects, such as green roofs and green practices to manage stormwater with wetlands and other natural systems, account for 15% of GPR funds.

Congress extended the 20% GPR requirement to FY20 10 appropriations for the clean water and drinking water SRF programs. Other federal agencies that received ARRA funds for wastewater and drinking water projects also are proceeding with implementation. For example, as of May 2010, USDA has obligated about 80% of the $1.38 billion in grant and loan funds that it received for rural water and waste disposal projects in more than 600 communities. USDA expects to award assistance to about 200 more communities by the September 30 deadline. The Economic Development Administration‘s six regional offices were responsible for selecting and administering the $150 million in ARRA funds that EDA received (which is the normal process for that agency), and as of September 30, 2009, EDA had awarded all of these funds to 68 grants in 37 states. The EDA total includes $27 million in grants to promote ―green‖ jobs. As of January, EDA reported that it had broken ground on 20 projects, totaling $45 million, or 31% of the ARRA funds. Finally, HUD, which received $1.0 billion in ARRA CDBG funds, announced allocation of the funds in March 2009 to approximately 1,200 state and local governments; as of December 2009, grantees had spent less than 8% of the total. Congressional committees have held several hearings on implementation of the Recovery Act. At the time of the legislation‘s enactment, the chairman of the House Transportation and Infrastructure Committee sent letters to governors requesting that they provide specific certifications and accountability information regarding ARRA-funded projects. Since April 2009, the committee has held four hearings on implementation of the water infrastructure funding provisions, receiving testimony from EPA, EDA, the Army Corps of Engineers and others within that committee‘s jurisdiction on steps to disburse funds to states and award assistance to specific projects. Other committees that have begun oversight activities include

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the House Natural Resources Committee (see discussion below), House and Senate Appropriations Committees, and the House Science and Technology Committee, which, among other topics, has investigated how government agencies are ensuring transparency and accountability for Recovery Act spending. At the April 2009 hearing of the Transportation and Infrastructure Committee, the EPA Inspector General (IG) testified that EPA and its grantees would likely be challenged to spend the Recovery Act funding in a timely manner, as required by the legislation. The IG also observed that, because Recovery Act-funded grants do not require a match by the recipient and the law includes provisions for loan forgiveness, there is risk of fraud, waste, and abuse that EPA will need to monitor closely. 15 At a November hearing, Members expressed concern about the ability of some states to meet the February 17, 2010, statutory deadline to have ARRA-funded wastewater and drinking water projects under contract. EPA officials acknowledged the concern, but said then that the agency was working to help states, so as to avoid having to reallocate funds: as previously described, all states made the deadline, and no funds were reallocated. Many states have been challenged by the Buy American and ―green infrastructure‖ requirements of the law, according to EPA.

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WATER RESOURCES The federal government has a long history of involvement in water resource development projects, such as dams, levees, coastal protection, and navigation works, to facilitate navigation, expand irrigated agriculture, and reduce flood losses. More recently, Congress has authorized and funded federal projects and programs to restore aquatic ecosystems, develop water recycling projects, and construct western rural water supply projects. At the federal level, these activities are principally the responsibility of two agencies. Under its civil works program, the U.S. Army Corps of Engineers (Corps, Department of Defense) constructs and operates primarily navigation, flood, coastal protection, and aquatic restoration throughout the country. The Bureau of Reclamation (Reclamation, Department of the Interior) is authorized to construct and manage multi-purpose projects serving irrigation, municipal and industrial water supply, flood control, power production, and recreation purposes in the 17 western states.16 Congress provides appropriations to support these activities through annual Energy and Water Development appropriations bills. The economic recovery legislation provides supplemental funding above regular appropriations for the Corps, Reclamation, and other water resources activities at the Department of Agriculture‘s Natural Resources Conservation Service (NRCS) and the Department of State‘s International Boundary and Water Commission (IBWC). The general provisions of P.L. 111-5 concerning preference for projects that can start quickly, obligation deadlines, and Buy American and prevailing wage requirements, described above, also apply to all of these water resources projects and activities.

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Corps of Engineers Projects P.L. 111-5 provides a total of $4.6 billion for the Corps. All of the funds go toward Corps civil works activities, however, some of the funds are directed toward activities other than federal water resources projects—$25 million for the Corps regulatory program and $25 million for the Formerly Utilized Sites Remedial Action Program (FUSRAP), a program to investigate and clean up or control sites that were part of the early atomic energy and weapons program. The legislation also reserves $200 million for water-related environmental infrastructure projects, which are projects more similar to the municipal water and wastewater systems previously discussed, than the Corps‘ primary flood, navigation, and aquatic restoration missions.17 P.L. 111-5 directs that the ARRA funds be used for either entire projects, programs, or activities, or elements of those. It states that funds are directed to activities that can be completed with the stimulus funds, and that do not create future budgetary obligations. It also states that funds shall only be used for programs, projects, or activities that ―heretofore or hereafter‖ receive funds provided in Energy and Water Development appropriations acts.18 P.L. 111-5 authorizes unlimited reprogramming authority for Corps funds provided under the legislation. It requires quarterly reports to the House and Senate Appropriations Committees on the allocation, obligation, and expenditure of the funds.

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Bureau of Reclamation Projects and Programs ARRA provides a total of $1.0 billion for Reclamation projects and programs. The law directs that the funds be used for projects, programs, or activities that can be completed with these funding amounts, and that do not create future budgetary obligations. It also authorizes unlimited reprogramming authority for Reclamation funds provided under the legislation. Of the total ARRA funds for Reclamation, P.L. 111-5 provides $126 million for water reclamation and reuse projects (Title XVI projects, which typically treat municipal wastewater for reuse rather than discharge or desalinate brackish groundwater or seawater). The law also provides $50 million for projects under the Central Utah Project Completion Act, $50 million for California Bay-Delta projects, $60 million for rural water projects, and $10 million for inspection of canals in urbanized areas, amounts that were proposed by the Senate. The Recovery Act also authorizes Reclamation to extend up to 50 years, with interest, the timeframe for water supply customers to repay the U.S. government for extraordinary maintenance and replacement of facilities. Short repayment times for major maintenance and rehabilitation projects have been of great concern to Reclamation water users in recent years, and are a growing concern as existing infrastructure ages. In the earlier House and Senate versions of the bill, Reclamation would have been authorized to extend repayment up to 25 years without interest.

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Agricultural Watershed Programs Under several small watershed programs, NRCS provides technical advisory services and financial assistance (partial grants) to state and local organizations to plan and install measures to prevent erosion, sedimentation, and flood damage to conserve, develop, and utilize land and water resources. The programs fund land treatment, and nonstructural and structural facilities for flood prevention, erosion reduction, agricultural water management, public recreation development, fish and wildlife habitat development, and municipal or industrial water supplies. Structural measures can include dams, levees, canals, pumping plants, and other facilities.19 Agricultural watershed programs have existing formulas for allocating program funding. Factors considered include risk to life, flood damage reduction, water conservation, water quality, and erosion control, to name a few.20 P.L. 111-5 provides ARRA funding for three agricultural watershed programs. One is Watershed and Flood Prevention Operations, used to design and build flood prevention, water quality improvement, and similar projects. The enacted legislation provides $290 million divided in half, with $145 million for Watershed and Flood Prevention Operations and $145 million to purchase and restore floodplain easements though the Emergency Watershed Protection program. Under a floodplain easement, a landowner voluntarily offers to sell NRCS a permanent conservation easement that provides NRCS with full authority to restore and enhance the floodplain‘s functions and values. The third program is Watershed Rehabilitation, which rehabilitates dam projects previously constructed with NRCS assistance that have reached the end of their engineering design life. P.L. 111-5 provides $50 million for these activities. This amount is equal to 4.5 times the appropriations for these NRCS activities in FY2009 (which were enacted in March 2009). ARRA requires that spending be used to fully fund projects that can be completed and allocated to projects that can be commenced promptly. The conference report, H.Rept. 111-16, provides further direction to USDA on prioritization of the funds.

International Boundary and Water Commission Projects The Recovery Act includes $220 million for the International Boundary and Water Commission for its water quantity program. The bill directs that IBWC use the funds for immediate repair and rehabilitation requirements. The four projects specified to receive the funds (Rio Grande Flood Control System, Safety of Dams, Colorado Boundary; and Capacity Preservation) are for flood damage reduction infrastructure upgrades (i.e., levee improvements and dam safety measures).

Implementation and Oversight Unlike some of the other water infrastructure activities funded in the legislation (including the EPA wastewater and drinking water programs discussed previously), little was publicly known about how most of the water resources funds would be distributed when P.L. 111-5 was enacted. Generally, formulas are not used to distribute funds to the Bureau of

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Reclamation and Corps of Engineers. Instead, Congress typically, in either the text or report language of appropriations bills, distributes most of the appropriated funds across individual Corps and Bureau projects or programs, or the distribution is delegated to the agency. In contrast, P.L. 111-5 and the conference report (H.Rept. 111-16) list broad prioritization criteria and identified several broad categories in which it expects the agencies to allocate funds. Until the Administration notified Congress on how it chose to distribute the funds (discussed below), it was largely unknown which projects would be funded and how much assistance each state would receive. When ARRA was enacted, questions were raised whether federal water resources agencies and contracting officers would be able to put the funds to use within the deadlines established in the bill; these questions arose in part because of the complexity of the projects‘ planning and construction processes and the contracting officer‘s existing workloads and processes. The amounts in P.L. 111-5 represent roughly 80% of the typical annual Corps appropriations, 80% of the typical Reclamation appropriations, and 4.5 times NRCS‘s current annual agricultural watershed funding.

Army Corps of Engineers In P.L. 111-5, Congress appropriated $4.6 billion in funding among six Corps accounts, including approximately $2 billion for activities funded in the Operation and Maintenance account; $2 billion for projects in the Construction account; $375 million in the Mississippi River and Tributaries account; $25 million in the Investigations account; $25 million in the Regulatory account; and $100 million under the FUSRAP account. The Corps released its list of projects to receive ARRA funds on April 28, 2009, and subsequently made multiple updates to the list.21 Of the total funding directed to the Corps, the Administration budgeted $4.4 billion across 1,182 water projects in 49 states and nine FUSRAP sites; it also reserved $200 million in order to cover cost contingencies for these projects. According to the Corps, the Administration arrived at its ARRA project list using the criteria in P.L. 111-5, its conference report, long-standing executive branch policy, and policy established for distributing ARRA funds. As a result, only those projects that had been reviewed by the Assistant Secretary of the Army (Civil Works) and approved by the Office of Management and Budget were eligible. For example, the Corps is authorized to conduct beach nourishment projects, which place sand on beaches to reduce property damage from coastal storms.22 However, Administration policy has been to not fund these projects in recent budget requests, therefore they were not included in the ARRA project list. There has been criticism by some Members of Congress and other stakeholders regarding the exclusion of beach nourishment projects from the ARRA list and also regarding the project list‘s exclusion of all ―new starts.‖ In 2009, the House Transportation and Infrastructure Committee held oversight hearings that included testimony on Corps ARRA implementation on April 29, July 31, and November 4. Most recently, the committee held a hearing on Corps ARRA oversight on February 23, 2010. Concerns had previously been raised about Corps projects not moving as quickly as hoped. As of May 7, 2010, the Corps had obligated $3.54 billion (77% of its ARRA funds) and outlaid $1.32 billion (29%).23 At an earlier hearing, the Corps indicated in testimony that bids for some ARRA contracts were lower than anticipated; consequently, some ARRA funds may be available for additional projects.24 In February, the Corps estimated that ARRA funds

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had helped create or maintain 5,800 jobs, and that 74% of contract actions have been awarded to small businesses.25

Bureau of Reclamation Reclamation announced its first outline of projects to be funded under ARRA on April 15, 2009.26 The agency announced that a total of $945 million in funding was to be awarded to projects in six program areas—meeting future water supply needs ($450.9 million); infrastructure reliability and safety ($164.6 million); environmental/ecosystem restoration ($236.3 million); green buildings ($13.5 million); water conservation challenge grants ($40.0 million); and emergency drought relief $40.0 million. An additional $50 million was to be transferred to the Department of the Interior‘s Central Utah Project Completion Act effort, and $5 million was to be set aside for management and oversight. The House Natural Resources Water and Power Subcommittee held an oversight hearing on Reclamation ARRA funding on April 28, 2009. Several Members of Congress and witnesses questioned why there was not more emergency drought funding, while others questioned a perceived high level of spending on environmental and ecosystem restoration projects. In response, the Reclamation witness noted that much of the environmental/ecosystem spending could be directly or indirectly tied to water supply reliability and that drought projects had not been fully identified.27 At a House Appropriations Energy and Water Development Subcommittee hearing on the FY20 11 budget on April 14, 2010, several Members voiced concerns related to ARRA funding. Issues raised included concerns related to the potential inclusion of new construction starts and unauthorized funding included in ARRA project lists, as well as potential reallocations for projects coming in under budgeted levels and the schedule for remaining project obligations. Additionally, legislation has been introduced that would provide Reclamation with the authority to redirect ARRA funding toward the non-federal cost share for projects that reduce the impacts of severe drought in certain areas of California and other western states. Reclamation raised concerns with these provisions at a House Natural Resources Water and Power Subcommittee hearing on February 4, 2010.28 To date, no further action has occurred. Of the $451 million for water supply needs, the Department of the Interior estimates that $135 million will go toward 27 projects authorized under Reclamation‘s water reuse authority, commonly known as the Title XVI program. Twenty-six of those projects are in California; the one New Mexico project identified in the July 1 list received $2.5 million in ARRA funds. Another $200 million will be used for authorized rural water supply projects.29 Since the announcement of initial project allocations in July 2009, Reclamation has funded numerous projects. According to Reclamation, regional funding ranges from $28.3 million for the Upper Colorado Region to $260 million for the Mid-Pacific Region (California and Klamath River Basin).30 Overall, as of May 7, 2010, Reclamation had obligated $641 million (or 68% or of its ARRA funds) and outlaid $147 million (16%). Reclamation has previously responded to concerns about its rate of obligations by stating that it has a plan in place to ensure all obligations are made by the end of the fiscal year. Agricultural Watershed Programs As of May 10, 2010, NRCS has obligated over $196 million, or 57%, of the $340 million available through ARRA.31 The agency expects the obligation rate to increase as summer

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construction season commences, thereby obligating all ARRA funds by September 30, 2010. Congressional updates are provided through written testimony at the House Transportation and Infrastructure Committee‘s periodic ARRA progress hearings. For Watershed Rehabilitation, 26 aging flood control structures in 11 states were originally selected on April 6, 2009. As of May 10, 2010, NRCS has obligated just over $21 million (42% of the original $50 million) for these projects and construction has begun on four of these dams. Five projects have withdrawn due to engineering challenges, land rights issues, and sponsor cost- share requirements. NRCS announced the allocation of $84.8 million on April 16, 2009, and $42.3 million on June 2, 2009, of the original $145 million for selected projects within the Watershed and Flood Prevention program. As of May 10, 2010, NRCS has obligated $75.2 million (or 52%) and signed 284 contracts for 83 of the 87 planned projects. Of these projects, contracts have been awarded and construction has begun on 53 projects totaling $61.7 million.32 NRCS reports obligating over $100 million (69% of the original $145 million) for the purchase of floodplain easements under the Emergency Watershed Program (EWP).33 Overall EWP floodplain enrollment continues to change due to withdrawals and additions. The application period closed in April 2009, and offers to purchase easements were sent to landowners in July 2009. Since then, 107 transactions were withdrawn, and an additional 74 replacement projects were added. NRCS has closed on 138 easements and made over $46 million in payments. Following the closing of more easements, NRCS anticipates an increase in restoration work to occur over the next 12 months increasing expenditures by $19 million. NRCS initially allocated funds for 289 easement acquisitions covering over 35,000 acres nationwide. Due to the recent changes, the agency now expects to enroll over 38,000 acres on 256 easement acquisitions through ARRA funding.

International Boundary and Water Commission Projects On March 9, 2009, the Department of State released a list of IBWC levee projects (without funding levels for each project) to receive the ARRA funds.34 By November, IBWC had awarded contracts or begun construction on a number of projects identified on the list, especially for rehabilitation of portions of the Lower Rio Grande Flood Control Project in Texas.35 With ARRA and other prior year appropriations, construction for the highest priority IBWC levees is anticipated to be completed by September 2011.

CONCLUDING THOUGHTS The infrastructure funding provisions of the Recovery Act raise some general issues. Funding infrastructure is a long-term investment, not quick-fix spending, that should lead to something durable, useful, and financially productive. Water infrastructure projects often involve complicated planning and construction efforts that span multiple years. The long-term nature of such investments can be at odds with the stimulus goal of quickly injecting money into the economy. Thus, one question in debating infrastructure spending as part of economic recovery is, what is truly stimulative? Critics have contended that the haste to fund ―ready to go‖ projects would likely to result in spending on many projects with marginal value, such as projects with plans that have been backlogged for some time because they lack sufficient

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merit, but were provided opportunity for funding when ARRA was enacted. Assessing the economic and environmental benefits of ARRA projects will take place for some time in the future, particularly because capital projects typically are multi-year investments. ARRA includes a number of oversight measures.36 However, these appear to be focused on the important issues of identifying waste, fraud, and abuse, and ensuring compliance with applicable standards and competition requirements in contracts and grants, but not necessarily on evaluating or ensuring the quality of funded projects. That responsibility resides with officials at all levels of government, including those who are making project funding decisions, and those charged with providing oversight and monitoring of grants and contracts. Federal agencies are likely to face challenges in managing recipients‘ activities in order to achieve ARRA‘s goals and requirements, while ensuring that expenditures begin quickly. ARRA provided emergency supplemental appropriations for FY2009 and FY20 10 for a number of existing federal programs.37 The law was unusual in many respects, including the fact that the FY2009 supplemental funds in the legislation were enacted before resolution of the regular FY2009 appropriations for most agencies, which were contained in a full-year omnibus appropriations bill that the President signed on March 11, 2009 (P.L. 111-8). The regular FY2009 appropriations for water infrastructure programs provided in that legislation were about the same as in FY2008. As described in this report, some of the water infrastructure funds included in the Recovery Act represented a significant increase above recent program funding levels—for some, from three to four times higher than the FY2009 amount. Many infrastructure stakeholder groups then urged Congress to sustain similar high levels in regular appropriations in FY20 10 and beyond, because infrastructure projects typically involve outlays over multiple years. They argued that individual project planning and implementation would be disrupted if federal assistance is uneven or unpredictable, very large one year and much lower the next year. But because the infrastructure funds in P.L. 111-5 are to be available for obligation through FY20 10 and will be spent out over several years,38 some policymakers argued that it would not be necessary to appropriate increased levels for these programs in FY20 10. Still, with Administration support in the FY20 10 budget request, regular FY20 10 appropriations for the water infrastructure programs discussed in this report, which were enacted later in 2009, were for the most part slightly higher than regular FY2009 appropriations, but generally not as large as the substantial supplemental amounts that agencies received under ARRA. Whether it will be possible to sustain high spending levels for these programs in future years, beyond the period covered by P.L. 111-5, is uncertain because of the significant fiscal challenges that policymakers face, but it is likely that there will continue to be calls for Congress to do that very thing.

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APPENDIX. STATE ALLOCATION OF EPA WASTEWATER AND DRINKING WATER FUNDS IN ARRA Table A-1. State Allocation of EPA Wastewater and Drinking Water Funds in the American Recovery and Reinvestment Act of 2009 (P.L. 111 -5) (Millions of Dollars).

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STATES Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware District of Columbia Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio

CLEAN WATER SRF FUNDS ($4 BILLION) $44.3 $23.7 $26.7 $25.9 $283.1 $31.7 $48.5 $19.4 $19.4 $133.6 $66.9 $30.7 $19.4 $179.0 95.4 $53.6 $35.7 $50.4 $43.5 $30.6 $95.7 $134.4 $170.2 $72.8 $35/7 $109.7 $19.4 $20.2 $19.4 $39.6 $161.8 $19.4 $436.9 $71.4 $19.4 $222.9

DRINKING WATER SRF FUNDS ($2 BILLION) $19.5 $19.5 $55.3 $24.5 $159.0 $34.4 $19.5 $19.5 $19.5 $88.1 $54.8 $19.5 $19.5 $79.5 $27.2 $24.3 $19.5 $20.5 $27.6 $19.5 $26.8 $52.2 $67.5 $35.1 $19.5 $37.9 $19.5 $19.5 $19.5 $39.5 $43.2 $19.5 $86.8 $65.6 $19.5 $58.5

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STATES

CLEAN WATER SRF FUNDS ($4 BILLION) $32.0 $44.7 $156.8 $26.6 $40.6 $19.4 $57.5 $180.9 $20.9 $19.4 $81.0 $68.8 $61.7 $107.0 $19.4 $3.6 $2.6 $1.7

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DRINKING WATER SRF FUNDS ($2 BILLION) $31.5 $28.5 $65.7 $19.5 $19.5 $19.5 $20.2 $160.7 $19.5 $19.5 $20.8 $41.8 $19.5 $37.8 $19.5 $0.5 $2.1 $1.8

Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming American Samoa Guam Northern Mariana Islands Puerto Rico $51.6 $19.5 Virgin Islands $2.1 $2.0 TOTAL $3,909.0 $1,950.0 Source: EPA (http://www.epa.gov/recovery). Note: Individual state allocations and totals reflect the fact that under the legislation, before funds are allocated to states, 1.5% was reserved for EPA to provide assistance to Indian Tribes, consistent with current law. Also, an additional 1 .0% was reserved from the combined funds for program oversight by EPA, for a total of 2.5% in reserved funds.

End Notes 1

For background, see CRS Report R40107, The Role of Public Works Infrastructure in Economic Stimulus, coordinated by Claudia Copeland. 2 In late 2008, state and local water agencies reportedly identified from $9 to $20 billion in wastewater treatment projects and $10 billion in drinking water projects that are ―ready to go.‖ Inside EPA, ―States Seek over $9 Billion for Clean Water Projects in Stimulus Bill,‖ September 12, 2008; ―AWWA members Asked to Contact Congress on Drinking Water Infrastructure and Stimulus Bill,‖ http://www.awwa.org/Government/ Content.cfm?ItemNumber= 3821&navItemNumber=161 8. 3 While the House adopted an amendment to increase transit capital grant funding by $3 billion, the Senate rejected an amendment offered by Senators Murray and Feinstein that would have provided $25 billion more for highway, transit, and drinking water and wastewater projects. 4 For information, see CRS Report R40214, Transportation and Transportation Security Related Provisions of House and Senate Stimulus Legislation (H.R. 1), by John W. Fischer et al. 5 For additional information, see CRS Report RL3 0478, Federally Supported Water Supply and Wastewater Treatment Programs, coordinated by Claudia Copeland. 6 The SDWA already allows principal forgiveness for assistance provided to economically disadvantaged communities.

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7

ARRA omits provisions from the House-passed bill that would have required that 80% of capitalization grant funds go to municipalities that meet state affordability criteria. Under the existing SDWA SRF program, states use affordability criteria to determine whether a community is economically disadvantaged. 8 For information, see CRS Report RL3 1073, Allocation of Wastewater Treatment Assistance: Formula and Other Changes, by Claudia Copeland. 9 See http://www.epa.gov/safewater/dwsrf/allotments/funding 10 For information, see CRS Report 98-64, Rural Water Supply and Sewer Systems: Background Information, by Claudia Copeland. 11 James A. Hanlon and Cynthia O. Dougherty, ―Award of Capitalization Grants with Funds Appropriated by P.L. 111- 5, the ‗American Recovery and Reinvestment Act of 2009,‘‖ memorandum, March 2, 2009. http://www.epa.gov/water eparecovery/docs/604bARRA_guidance_memo_FINAL.pdf 12 James A. Hanlon and Cynthia O. Dougherty, ―Implementation of the Buy American provisions of P.L. 111-5, the ‗American Recovery and Reinvestment Act of 2009,‘‖ memorandum, April 28, 2009. http://www. epa.gov/water eparecovery/docs/04-29-2009_BA_waiver_process_final.pdf 13 Guy Saint-Jacques, Deputy Head of Mission, Embassy of Canada to the United States, Address to the 2009 National Clean Water Policy Forum, May 4, 2009. 14 See http://www.epa.gov/water 15 U.S. Environmental Protection Agency, Office of Inspector General, EPA Action Needed to Ensure Drinking Water State Revolving Fund Projects Meet the American Recovery and Reinvestment Act Deadline of February 17, 2010, Audit Briefing Report No. 10-R-0049, December 17, 2009. 16 For more information, see CRS Report R40 180, Water Resources Issues in the 111th Congress, coordinated by Betsy A. Cody. 17 For information on Corps environmental infrastructure projects, see CRS Report RL3 0478, Federally Supported Water Supply and Wastewater Treatment Programs, coordinated by Claudia Copeland. 18 This statutory language may indicate that not only may projects previously funded be eligible for stimulus funds, but also activities funded in subsequent legislation, such as regular FY2009 appropriations legislation, which Congress enacted in March 2009 (P.L. 111-8), after enactment of the ARRA. 19 For information, see CRS Report RL30478, Federally Supported Water Supply and Wastewater Treatment Programs, coordinated by Claudia Copeland. 20 These formulas are established by NRCS and are made publicly available through its website. For the NRCS FY2009 fund allocation formulas and methodologies, see http://www.nrcs.usda.gov/programs/pdf_files/ 2009_Allocation_Formulas.pdf. 21 For a list of how the ARRA funds are distributed across the projects, see http://www.usace.army.mil/recovery Projects.aspx. For a map of where the ARRA projects are located, see http://www.usace.army.mil/recovery /Pages/ ProjectLocations.aspx. Corps projects receiving ARRA funds are located in 49 states and Puerto Rico; according to the Corps, Wyoming had no eligible projects. 22 In Section 2018 of the Water Resources Development Act of 2007 (P.L. 110-114), Congress stated that it is the policy of the United States to promote beach nourishment. 23 See Reporting data for week of May 7, 2010 at http://www.recovery agency_reporting2.aspx?agency_ code=96&dt=05/07/2010. 24 Oral testimony, Jo-Ellen Darcy, Assistant Secretary of the Army (Civil Words), before the House Transportation and Infrastructure Subcommittee on Water Resources and Environment, at the Hearing on Recovery Act: Progress Report on Water Resource Infrastructure Investment, on November 4, 2009, available at http://transportation.house.gov/ hearings/hearingDetail.aspx?NewsID= 1037. 25 Complete Statement of Terence C. Salt, Principal Deputy Assistant Secretary of the Army (Civil Works) before the U.S. Congress, House Committee on Transportation and Infrastructure, Subcommittee on Water Resources and Environment, Recovery Act: Progress Report on Water Infrastructure Investment, 111th Cong., 2nd sess., February 23, 2010, available at http://transportation 26 See http://recovery. Reclamation‘s evaluation and selection criteria for developing the list is at http://recovery.doi.gov/docs/bor/project 27 Of particular note among the environmental projects was $109 million for a Red Bluff (CA) fish passage facility within Reclamation‘s Central Valley Project, which received widespread and bipartisan support. The project represents nearly one-third of the environmental and ecosystem ARRA funding outlined by Reclamation; according to Reclamation, the project will help facilitate the delivery of water supplies elsewhere in the CVP service area. 28 U.S. Congress, House Committee on Natural Resources, Subcommittee on Water and Power, Hearing on H.R. 4225, 111th Cong., 2nd sess., February 4, 2010. Testimony available at http://www.usbr.gov/newsroom/ testimony/detail.cfm? RecordID=1561. 29 For information on these projects, see http://recovery 30 For a breakdown of project funding by region, see http://recovery #releases.

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U.S. Congress, House Committee on Transportation and Infrastructure, Statement of Dave White, Chief of NRCS USDA, hearing on the Recovery Act: Progress Report for Infrastructure Investments, 111 th Cong., 2nd sess., May 25, 2010. 32 For exact agricultural watershed project locations, see http://www.usda.gov/recovery 33 U.S. Congress, House Committee on Transportation and Infrastructure, Statement of Dave White, Chief of NRCS USDA, hearing on the Recovery Act: Progress Report for Infrastructure Investments, 111 th Cong., 2nd sess., May 25, 2010. 34 For the project list, see http://www.state 35 For weekly Department of State reports on ARRA financial activity, see http://www.state 36 The legislation provides oversight funds for federal agency Inspectors General and for the Government Accountability Office. It also establishes a Recovery Accountability and Transparency Board to coordinate and conduct oversight and to report quarterly to the President and Congress. 37 By designating the appropriations as emergency spending, the discretionary spending in the bill was not subject to the constraints of the congressional budget resolution (S.Con.Res. 21, 1 10th Congress) under provisions of the Congressional Budget Act of 1974. For information, see CRS Report RL3471 1, Consolidated Appropriations Act for FY2009 (P.L. 110-329): An Overview, by Robert Keith. 38 For example, the Congressional Budget Office estimated that 55% of the EPA SRF capitalization grant funds in the legislation will be spent in Fiscal Years 2010 and 2011. Only 3% will be spent in FY2009. A total of 79% will be spent between FY2009 and FY20 12. Letter from Douglas W. Elmendorf, Director, Congressional Budget Office, to Honorable Nancy Pelosi, Speaker, U.S. House of Representatives, February 13, 2009, http://www.cbo.gov/ftpdocs/ 99xx/doc9989/hr1conference.pdf.

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Chapter 3

WATER INFRASTRUCTURE FINANCING: HISTORY OF EPA APPROPRIATIONS Claudia Copeland

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SUMMARY The principal federal program to aid municipal wastewater treatment plant construction is authorized in the Clean Water Act (CWA). Established as a grant program in 1972, it now capitalizes state loan programs. Authorizations since 1972 have totaled $65 billion, while appropriations have totaled $85 billion. It has represented 25-30% of total funds appropriated to the Environmental Protection Agency (EPA) in recent years. In appropriations legislation, funding for EPA wastewater assistance is contained in the measure providing funds for the Department of the Interior, Environment, and Related Agencies, which includes EPA. Within the portion of that bill which funds EPA, wastewater treatment assistance is specified in an account now called State and Tribal Assistance Grants (STAG). Three trends in the funding of this account are most prominent: inclusion of noninfrastructure environmental grants to states, beginning in FY1 993; increasing number and amount of special purpose grants since FY1989; and the addition of grant assistance for drinking water treatment projects in FY1 997. This report summarizes, in chronological order, congressional activity to fund items in this account since 1987. Prior to the 1987 amendments, wastewater treatment assistance was provided in the form of grants made to municipalities. The federal share of project costs was generally 55%; state and local governments were responsible for the remaining 45%. The 1987 amendments altered this arrangement by replacing the traditional grant program with one that provides federal grants to capitalize state clean water loan programs, or state revolving funds (SRFs). As a general matter, states and cities support the program changes and the shift to a loan program that was intended to provide long-term funding for water quality and wastewater construction activities. However, the change means that local communities now are responsible for 100% of projects costs, rather than 45%, because they are required to repay

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loans to states. The greater financial burden of the act‘s loan program on some cities has caused some to seek continued grant funding. This has been particularly evident in the appropriations process where, in recent years, Congress has reserved as much as 30% of funds in the STAG account for special purpose grants directed to specified communities. Since FY2000, appropriators have awarded earmarks to a larger total number of projects, resulting in more communities receiving such grants, but at the same time receiving smaller amounts of funds, on average. Most of the funded projects are not authorized in the Clean Water Act or the Safe Drinking Water Act. State water quality officials, state infrastructure financing officials, and EPA have objected to this practice, since it reduces the amount of funding for state SRF programs. Since FY1997, the STAG account also has been used to fund a drinking water SRF grant program established by Congress in 1996. Appropriations for the drinking water SRF program through FY20 10 have totaled $14.5 billion.

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INTRODUCTION The principal federal program to aid municipal wastewater treatment plant construction is authorized in the Clean Water Act (CWA). Congress established this program, essentially in its current form, in the Federal Water Pollution Control Act Amendments of 1972 (P.L. 92500) (although prior versions of the act had authorized less ambitious grants assistance since 1956). Title II of P.L. 92-5 00 authorized grants to states for wastewater treatment plant construction under a program administered by the Environmental Protection Agency (EPA). Federal funds are provided through annual appropriations under a state-by-state allocation formula contained in the act itself. States used their allotments to make grants to cities to build or upgrade wastewater treatment plants and thus to achieve the overall objectives of the act: restoring and maintaining the chemical, physical, and biological integrity of the nation‘s waters. The federal share of project costs, originally 75% under P.L. 92-500, was reduced to 55% in 1981. By the mid-1980s, there was considerable policy debate between Congress and the Administration over the future of the act‘s construction grants program and, in particular, the appropriate federal role. Through FY1984, Congress had appropriated nearly $41 billion under this program, representing the largest nonmilitary public works programs since the Interstate Highway System. The grants program was a target of the Reagan Administration‘s budget cutters, who sought to redirect budgetary priorities in part to sort out the appropriate roles of federal, state, and local governments in a number of domestic policy areas, including water pollution control. The Administration‘s rationale included several points.   

The original intent of the program to address the backlog of sewage treatment needs had been virtually eliminated by the mid-1980s. Most remaining projects (such as small, rural systems) were believed to pose little environmental threat and were not appropriate federal responsibilities. State and local governments, in the Administration‘s view, were fully capable of running construction programs and have a clear responsibility to construct treatment capacity to meet environmental objectives that were primarily established by states.

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Thus, the Reagan Administration sought a phaseout of the act‘s construction grants program by 1990. Many states and localities supported the idea of phasing out the grants program, since many were critical of what they viewed as burdensome rules and regulations that accompanied the federal grant money. However, they sought a longer transition and ample flexibility to set up long-term financing to promote state and local self-sufficiency. Congress‘ response to this debate was contained in 1987 amendments to the act (P.L. 100-4, the Water Quality Act of 1987). It authorized $18 billion over nine years for sewage treatment plant construction, through a combination of the Title II grants program and a new State Water Pollution Control Revolving Funds (SRF) program. Under the new program, in Title VI of the act, federal grants would be provided as seed money for state-administered loans to build sewage treatment plants and, eventually, other water quality projects. Cities, in turn, would repay loans to the state, enabling a phaseout of federal involvement while the state builds up a source of capital for future investments. Under the amendments, the SRF program was phased in beginning in FY1989 (in FY1989 and FY1990, appropriations were split equally between Title II and Title VI grants) and entirely replaced the previous Title II program in FY1 991. The intention was that states would have flexibility to set priorities and administer funding, while federal aid would end after FY1994. The authorizations provided in the 1987 amendments expired in FY1994, but pressure to extend federal funding has continued, in part because, although Congress has appropriated over $85 billion in assistance since 1972, funding needs remain high: an additional $202.5 billion nationwide is needed for all types of projects eligible for funding under the act, according to the most recent formal estimate by EPA and states.1 Thus, Congress has continued to appropriate funds, and the anticipated shift to full state funding responsibility has been delayed. In contrast to the 40-plus years of federal support for financing municipal wastewater treatment facilities, Congress established a program under the Safe Drinking Water Act (SDWA) to help communities with financing of projects needed to comply with federal drinking water regulations more recently, in 1996.2 Funding support for drinking water only occurred more recently for several reasons. First, until the 1980s, the number of drinking water regulations was fairly small, and public water systems often did not need to make large investments in treatment technologies to meet those regulations. Second and relatedly, good quality drinking water traditionally has been available to many communities at relatively low cost. By comparison, essentially all communities have had to construct or upgrade sewage treatment facilities to meet the requirements of the CWA. Over time, drinking water circumstances have changed, as communities have grown, and commercial, industrial, agricultural, and residential land-uses have become more concentrated, thus resulting in more contaminants reaching drinking water sources. Moreover, as the number of federal drinking water standards has increased, many communities have found that their water may not be as good as once thought and that additional treatment technologies are required to meet the new standards and protect public health. Between 1986 and 1996, for example, the number of regulated drinking water contaminants grew from 23 to 83, and EPA and the states expressed concern that many of the nation‘s 52,000 small community water systems were likely to lack the financial capacity to meet the rising costs of complying with the Safe Drinking Water Act. Congress responded to these concerns by enacting the 1996 SDWA Amendments (P.L. 104-182) which authorized a drinking water state revolving loan fund (DWSRF) program to

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help systems finance projects needed to comply with SDWA regulations and to protect public health. This program, fashioned after the Clean Water Act SRF, authorizes EPA to make grants to states to capitalize DWSRFs which states then use to make loans to public water systems. Appropriations for the program were authorized at $599 million for FY1994 and $1 billion annually for FY1995 through FY2003. According to the most recent EPA-state survey, future funding needs for projects to treat and deliver public drinking water supplies in the United States are $335 billion over the next 20 years.3

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Table 1. EPA Water Infrastructure Funding ($ in millions). Fiscal Year 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Total

CWA Authorization $2,400 2,400 2,400 2,400 2,400 2,400 1,800 1,200 600 — — — — — — — — — — — — — — — — $18,000

SDWA Authorization

President’s Request

Appropriation

599 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 — — — — — — — $9,599

$2,400 2,000 2,000 1,500 1,200 1,600 1,883 2,467 2,047 2,528 2,365 2,178 2,078 2,028 1,753 1,753 2,233 2,185 1,798 1,794 1,649 1,570 1,553 1,397 3,920 $49,879

$1,800 2,361 2,304 1,950 1,980 2,100 2,383 2,483 2,375 2,769 2,155 2,201 2,468 2,527 2,561 2,621 2,660 2,599 2,612 2,336 2,005 2,005 1,695 7,702a 3,674 $64,326

Source: Compiled by CRS. a. The FY2009 total includes $6.0 billion in supplemental appropriations provided under the American Recovery and Reinvestment Act, P.L. 111-5, consisting of $4.0 billion for CWA SRF capitalization grants and $2.0 billion for SDWA SRF capitalization grants.

EPA analyses have focused attention on the issue of local governments‘ need for funds and what the federal role should be in assisting states and cities. In September 2002, EPA released a study, called the Gap Analysis, which assesses the difference between current capital spending for wastewater and drinking water infrastructure and total funding needs. EPA estimated that, over the next two decades, the United States needs to spend nearly $660

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billion to replace existing wastewater and drinking water infrastructure systems and to build new ones. According to the study, if there is no increase in investment, there will be about a $11 billion per year gap between current capital expenditures for water infrastructure ($23 billion annually) and projected spending needs. Table 1 summarizes funding for water infrastructure programs since enactment of P.L. 100-4. In appropriations legislation, funding for these EPA programs is contained in the measure providing funds for the Department of the Interior, Environment, and Related Agencies.4 Within the portion of the bill which funds EPA, wastewater treatment assistance first was specified in an account called Construction Grants, which was later renamed State Revolving Funds/Construction Grants, then renamed Water Infrastructure. Since FY1996, this account has been titled State and Tribal Assistance Grants (STAG). The remainder of this report summarizes, in chronological order, congressional activity to fund items in the STAG account since the 1987 Clean Water Act amendments. The STAG account now includes all water infrastructure funds and management grants provided to assist states in implementing air quality, water quality, and other media-specific environmental programs. The FY1996 appropriation was the first to include both water infrastructure and other state environmental grants; the latter previously were included in EPA‘s general program management account. Amounts shown in Table 1 include funds for Clean Water Act infrastructure grants, drinking water SRF grants (discussed below), and earmarked infrastructure projects grants (also discussed below), but Table 1 does not include the funds for consolidated state environmental management grants. However, these state grants are discussed below in sections providing the appropriations chronology.

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Trends in Water Infrastructure Funding Three changes are especially evident in the recent history of water infrastructure funding, as reflected in the appropriations account where these funds are detailed. One is inclusion in the account of non-infrastructure grants to states. This began in FY1 993 with addition of Clean Water Act Section 319 grants for state programs to manage nonpoint source pollution and was expanded in FY1996 to include all state grants for management of environmental programs, in a single consolidated grants appropriation. A second trend, discussed below, has been an increasing number and amount of specially earmarked grants for needy cities and other special purpose projects. A third trend, also discussed below, is expansion of the account to include SRF capitalization grants for drinking water projects, under authority of the Safe Drinking Water Act Amendments of 1996 (P.L. 104-134).

SRF Capitalization Grants vs. Special Purpose Project Grants The practice of earmarking a portion of the construction grants/SRF account for specific wastewater treatment and other water quality projects began in the FY1989 legislation. Since then it has increased to the point of representing a significant portion of appropriated funds (31% of the total water infrastructure appropriation in FY1 994, for example, but less in recent years: 2.5% in FY2009 and 5% in FY2010). The number of projects receiving these earmarked funds also has increased: from four in FY1989 to 319 in FY2010. Since FY2000,

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the larger total number of earmarked projects has resulted in more communities receiving such grants, but at the same time receiving smaller amounts of funds. Thus, while a few communities have received individual earmarked awards of $1 million or more in recent years, the average size of earmarked grants has shrunk: $18.1 million in FY1995, $4.9 million in FY1999, $1.08 million in FY2006, and $586,000 in FY20 10. (Conference reports on the individual appropriations bills, noted in the later discussion in this report, provide limited detail on projects funded in this manner.) The effective result of earmarking has been to reduce the amount of funds provided to states to capitalize their SRF programs. Of the $64.3 billion appropriated to EPA for water infrastructure programs since 1986, $7.4 billion has gone to earmarked project grants.5 Interest groups representing state water quality program managers and administrators of infrastructure financing programs have criticized this practice of appropriators. They contend that earmarking undermines the intended purpose of the state funds, to promote water quality improvements nationwide. Many state officials would prefer that funds be allocated more equitably, not based on what they view largely as political considerations, and they would prefer that state environmental and financing officials retain responsibility to set actual spending priorities. Further, they say, because directed funding of special projects diminishes the level of seed funding to SRFs, it delays the time when states will be financially selfsufficient and may actually prolong the time when states seek continued federal support. The practice of earmarking has been criticized because designated projects are receiving more favorable treatment than other communities‘ projects: they generally are eligible for 55% federal grants (and will not be required to repay 100% of the funded project cost, as is the case with a loan through an SRF), and the practice sidesteps the standard CWA process of states‘ determining the priority by which projects will receive funding. It also means that the projects have generally not been reviewed by the CWA authorizing committees. This is especially true since FY1 992 when special purpose grant funding has been designated for projects not authorized in the Clean Water Act or amendments to it or in the Safe Drinking Water Act. Members of Congress may intervene for a specific community for a number of reasons. In some cases, the communities may have been unsuccessful in seeking state approval to fund the project under an SRF loan or other program. For some, the cost of a project financed through a state loan, which the community must fully repay, is deemed unacceptably high, because repaying the loan can result in such increased user fees that ratepayers feel are unduly burdensome. The community then seeks a grant to avoid this costly financial scenario. This is often the case with wastewater projects in small and rural communities. A number of the special purpose grants have been made to projects characterized as ―needy cities‖ based on local economic conditions. In the early years of this congressional practice, special purpose grant funding originated in the House version of the EPA appropriations bill, while the Senate for the most part resisted earmarking by rejecting or reducing amounts and projects included in House-passed legislation. With this difference in legislative approach, special purpose grant funding on several occasions were an issue during the House-Senate conference on the appropriations bill. Since FY1999, however, both the House and Senate have proposed earmarked projects in their respective versions of the EPA appropriations bill, with the final total number of projects and dollar amounts being determined by conferees. In addition, as it has now been 19 years since the last major amendments to the Clean Water Act, the desire by some Members to

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address special needs problems that might be debated during reauthorization has increased, thus leading to greater pressure on House and Senate Members to use the appropriations process to handle such concerns.6 Technically, the Clean Water Act Title II grants program ended when authorizations for it expired after FY1990. One result of earmarking special purpose grants in appropriations bills has been to perpetuate grants as a method of funding wastewater treatment construction long after FY1990. At the same time, it also has resulted in Congress providing EPA grants for drinking water system projects, which had not previously been available.

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Local Cost Share on Special Purpose Grants The federal percentage share and local match required on special purpose grants depends on the project and the year of funding. For example, in the case of appropriations for projects in Boston, San Diego, New York City, and Des Moines, IA (discussed below in the section concerning FY1 989), authorization of appropriations and federal cost share were specified in the 1987 Clean Water Act amendments. For a number of other projects for which appropriations were provided in FY1992 and FY1993, the appropriations acts specified that funds were provided ―as grants under title II,‖ resulting in a requirement for local communities to provide a 45% share of project costs. After FY1993, the appropriations acts themselves are the authority for the special purpose projects grants. In the FY1 995 appropriation bill, which also directed allocation of funds appropriated in FY1994 to several needy cities, Congress addressed the issue of federal and local cost shares in report language accompanying the bill, but not in the appropriation act itself.7 The conferees are in agreement that the agency should work with the grant recipients on appropriate cost-share arrangements. It is the conferees‘ expectation that the agency will apply the 45% local cost share requirement under Title II of the Clean Water Act in most cases.

In the FY1996 appropriations, both the act and accompanying reports were silent on federal/local cost share and applicability of Title II requirements. Because of that, EPA officials planned to require only a 5% local match for most of the special purpose grants in that bill, which is the standard matching requirement for other EPA non-infrastructure grants. Under the agency‘s rules, the local match could include in-kind services, as well as funding toward the project. In the FY1997 appropriations, Congress included report language as it had in FY1995 concerning federal and local cost share requirements.8 The conferees are in agreement that the Agency should work with the grant recipients on appropriate cost-share agreements and to that end the conferees direct the Agency to develop a standard cost-share consistent with fiscal year 1995.

The FY1998 and FY1999 appropriations included neither bill nor report language on this point. However, language in the House and Senate Appropriations Committees‘ reports on the FY1998 and FY1999 bills directed EPA to work with grant recipients on appropriate costshare arrangements.9 For FY2000, Congress included explicit report language concerning the local match.10

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Claudia Copeland The conferees agree that the $331,650,000 provided to communities or other entities for construction of water and wastewater treatment facilities and for groundwater protection infrastructure shall be accompanied by a cost-share requirement whereby 45 percent of a project‘s cost is to be the responsibility of the community or entity consistent with longstanding guidelines for the Agency. These guidelines also offer flexibility in the application of the cost-share requirement for those few circumstances when meeting the 45 percent requirement is not possible.

Similar report language concerning local cost-share requirements accompanied the conference reports on the appropriations bills from FY200 1 through FY2005. Since FY2004, Congress has specified in the appropriations legislation that the local share of project costs shall be not less than 45%. Similarly, since the FY2003 appropriations legislation, Congress also has specified that, except for those limited instances in which an applicant meets the criteria for a waiver of the cost- share requirement, the earmarked grant shall provide no more than 55% of an individual project‘s cost, regardless of the amount appropriated.

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Grants for a Drinking Water SRF One additional aspect of earmarking a portion of the account‘s appropriation began in FY1994 when the Administration requested and Congress agreed to provide funds to capitalize state drinking water SRFs. In response, Congress appropriated drinking water SRF grants three times, but those actions were contingent on enactment of authorizing legislation, which occurred in 1996, as described above. Subsequently, capitalization grants for drinking water SRF programs were provided for the first time in FY1997 and have been included in each subsequent appropriations bill. These appropriations have totaled $14.5 billion and have averaged $1.0 billion per year. As Congress continues to support both clean water SRFs and drinking water SRFs, the two types of grants share whatever overall level of funding is available within the account.

APPROPRIATIONS CHRONOLOGY FY1986, FY1987 The authorization period covered by P.L. 100-4 was FY1986-FY1994. By the time the amendments were enacted, FY1 986 was over, as was a portion of FY1 987. Thus, appropriations for those two years only indirectly reflected the policy and program changes for later years that were contained in P.L. 100-4. For FY1 986, Congress appropriated a total of $1.8 billion, consisting of $600 million approved in December 1985 (while Congress was beginning to debate reauthorization legislation that eventually was enacted as P.L. 100-4 in January 1987) and $1.2 billion more in July 1986. For FY1987, while debate on CWA reauthorization continued, President Reagan requested $2.0 billion, consistent with his legislative proposal to terminate the grants program by FY1990. In October 1986, Congress appropriated $2.4 billion (P.L. 99-500 / P.L. 99-59 1). However, only $1.2 billion of that amount was released immediately, pending enactment of a reauthorization bill, which was then in conference. Following enactment of the Water Quality Act of 1987, remaining FY1 987 funds were released as part of a supplemental appropriations

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bill (P.L. 100-71). Conferees on that measure agreed, however, to shift $39 million of the remaining unreleased grant funds to other priority water quality activities authorized in P.L. 100-4. The final total of construction grant monies was $2.361 billion.

FY1988 For FY1988 the President again requested $2.0 billion. In December 1987, Congress approved legislation providing FY1 988 appropriations (P.L. 100-202, the omnibus continuing resolution to fund EPA and other federal agencies). In it, Congress appropriated $2.3 04 billion for construction grants. Final action on the EPA budget and other funding bills had been delayed by budget-cutting talks between Congress and the White House. Reduced construction grants funding was one of many spending cuts required to implement a congressional-White House ―summit agreement‖ on the budget. The final construction grants appropriation was less than funding levels that had been provided in separate versions of a bill passed by the House and Senate before the budget summit, $2.4 billion.

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FY1989 For FY1989, President Reagan requested $1.5 billion, or 35% below FY1988 appropriations and 37.5% less than the authorized level of $2.4 billion for FY1989. In separate versions of an EPA appropriations bill, the House and Senate voted to provide $1.95 billion and $2.1 billion respectively. The final figure, in P.L. 100-404, was $1.95 billion which included $68 million for special projects in four states. Thus, the actual amount provided for grants was $1 .882 billion. That total was divided equally between the previous Title II grants program and new Title VI SRF program, as provided in the authorizing language of P.L. 100-4. The FY1989 legislation was the first to include earmarking of funds for specified projects or grants in EPA‘s construction grants account, an action that continued in subsequent years, as discussed above. All of the projects funded in the 1989 legislation were ones that had been authorized in provisions of the Water Quality Act of 1987 (WQA, P.L. 100-4). The designated projects were in Boston (authorized in Section 513 of the WQA, to fund the Boston Harbor wastewater treatment project), San Diego/Tijuana (Section 510, to fund an international sewage treatment project needed because of the flow of raw sewage from Tijuana, Mexico, across the border), Des Moines, IA (Section 515, for sewage treatment plant construction), and Oakwood Beach/Redhook, NY (Section 512 of the WQA, to relocate natural gas distribution facilities near wastewater treatment works in New York City).

FY1990 For FY1990, President Reagan‘s budget requested $1.2 billion in wastewater treatment assistance, or 50% less than the authorized level and 38.5% less than the FY1 989 enacted amount of $1.95 billion. Further, the Reagan budget proposed that the $1.2 billion consist of

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$800 million in Title VI monies and $400 million in Title II grants, contrary to provisions of the CWA directing that appropriations be equally divided between the two grant programs, as in FY1989. President‘s Bush‘s revised FY1 990 budget, presented in March 1989, made no changes from the Reagan budget in this area. In acting on this request, Congress agreed to provide $2.05 billion, including $46 million for three special projects (Boston, San Diego/Tijuana, and Des Moines), leaving a total of $1 .002 billion each for Titles II and VI (P.L. 10 1-144). Title II funds were reduced by $6.8 million, however, due to funds earmarked for a specific project in South Carolina. Although these amounts were appropriated, all funds in the bill were reduced by 1.55% (or, a $31.8 million reduction from the construction grants account) to provide funds for the federal government‘s anti-drug program. Final FY1990 appropriations were altered again by passage of the FY1 990 Budget Reconciliation measure and implementation of the Balanced Budget and Emergency Deficit Control Act (the Gramm-Rudman-Hollings Act), which established procedures to reduce budget deficits annually, resulting in a zero deficit by 1993. For each fiscal year that the deficit was estimated to exceed maximum targets established in law, an automatic spending reduction procedure was triggered to eliminate deficits in excess of the targets through ―sequestration,‖ or permanent cancellation of budgetary resources. Thus, to meet budget reduction mandates and, in particular, deficit reduction targets under the Balanced Budget and Emergency Deficit Control Act (the Gramm-RudmanHollings Act), additional funding cuts were included in P.L. 10 1-239, the Budget Reconciliation Act of 1989, affecting construction grants funding and all other accounts not exempted from Gramm-Rudman procedures. P.L. 101-239 provided that the ―sequestration‖ procedures under the GrammRudman-Hollings Act would be allowed to apply for a portion of FY1 990 (for 130 days, or 3 5.6% of the year), providing an additional automatic spending reduction in EPA and other agencies‘ programs subject to the act. As a result of these reductions, funding for wastewater treatment aid in FY1 990 totaled $1.98 billion, or $30 million more than in FY1989. The total included $53 million for special projects in San Diego, Boston, Des Moines, and Honea Path/Ware Shoals, SC, $960 million for Title II grants, and $967 million for Title VI grants. The combined reductions amounted to 3.4% less than the amount agreed to by conferees on P.L. 101-144 (i.e., $2.05 billion), before subtracting funds for anti-drug programs and accounting for effects of the Gramm-Rudman partial-year sequester.

FY1991 For FY1 991, President Bush requested $1.6 billion in funding for wastewater treatment assistance. This total included $15.4 million to be earmarked for the San Diego project authorized in Section 510 of the Water Quality Act of 1987, to fund construction of an international sewage treatment project. The remainder, $1 .584 billion, would be only for capitalization grants under Title VI of the act, as the 1987 legislation provides for no new Title II grants after FY1 990. In acting on EPA‘s appropriations for FY1 991 (P.L. 101-507), Congress agreed to provide $2.1 billion in wastewater treatment assistance. Beginning in FY1 991, all

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appropriated funds are utilized for capitalization grants under Title VI of the act (as provided in the Water Quality Act of 1987); funding for the traditional Title II grants program was no longer available. The enacted level included several earmarkings: $15.7 million for San Diego, $20 million for Boston Harbor (section 513 of the WQA), and $16.5 million for a new Water Quality Cooperative Agreement Program under Section 1 04(b)(3) of the act.11 The President‘s budget had requested $16.5 million to support state permitting, enforcement and water quality management activities, especially to offset the reductions in aid to states due to elimination of state management setasides from the previous Title II construction grants program. Congress agreed to the level requested, but provided it as a portion of the wastewater treatment appropriation, rather than as part of EPA‘s general program management appropriation, as in the President‘s request. As a result of these earmarkings, $2.048 billion was provided for Title VI grants.

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FY1992 For FY1 992, President Bush requested $1.9 billion in wastewater treatment funds, or $100 million more than authorized under the Water Quality Act of 1987 for Title VI grants in FY1 992. However, out of the $1.9 billion total, the President‘s request sought $1.5 billion for Title VI SRF grants and $400 million as grants under the expired Title II construction grants program for the following coastal cities: Boston, San Diego, New York, Los Angeles, and Seattle. Two of the five designated projects had been authorized in the 1987 Clean Water Act amendments; the other three did not have explicit statutory authorization. Also, $16.5 million was requested for Water Quality Cooperative Agreement grants to the states. In acting on the request in November 1991, Congress provided total wastewater funds of $2.4 billion (P.L. 102-139). The total was allocated as follows:     

$1,948.5 million for SRF capitalization grants, $16.5 million for section 1 04(b)(3) grants, $49 million for the special project in San Diego-Tijuana (section 510 of the Water Quality Act), $46 million to the Rouge River (MI) National Wet Weather Demonstration Project, and $340 million as construction grants under title II of the Clean Water Act for several other special projects—the Back River Wastewater Treatment Plant (Baltimore), Maryland, the Boston Harbor project, New York City, Los Angeles, San Diego (a wastewater reclamation project), and Seattle. •

This appropriation bill was the first to include special purpose grant funding for several projects not specifically authorized in the Clean Water Act or amendments to that law.

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FY1993

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For FY1993, President Bush requested $2.484 billion for state revolving funds/construction grants (now called the water infrastructure account). The requested total included $340 million to be targeted for 55% construction grants to six communities: Boston, New York, Los Angeles, San Diego, Seattle, and Baltimore. In addition, the President requested that $130 million be directed toward a Mexican Border Initiative, consisting of $65 million for construction of the international treatment plant at San Diego (to address the Tijuana sewage problem), $15 million for projects at Nogales AZ and New River, CA, and $50 million as 50% grants for colonias in Texas.12 The President also requested $16.5 million for Section 104(b)(3) grants. Along with these special project and grant amounts, the request sought $2.014 billion for SRF assistance. Final action on FY1993 funding occurred on September 25, 1992 (P.L. 102-389). It provided an appropriation of $2.55 billion, but $622.5 million of this amount was reserved for special projects and other grants. The bill provided $50 million in CWA Section 319 grants13 and $16.5 million in Section 1 04(b)(3) grants out of the SRF amount. It included $556 million for the following special purpose grants: the international treatment plant at San Diego (Tijuana—Section 510 of the WQA, with bill language capping funding for that project at $239.4 million), plus projects in Boston, New York, Los Angeles, San Diego, Seattle, Rouge River MI, Baltimore, Ocean County NJ, Atlanta, and for colonias in Texas, Arizona and New Mexico. The final SRF grant amount under the bill was $1 .928 billion. Early in 1993, President Clinton requested that Congress approve ―economic stimulus and investment‖ spending, in the form of supplemental FY1 993 appropriations. Both his original proposal and a subsequent modified proposal included additional SRF grant funds, but neither of the bills enacted by Congress in response to these requests (P.L. 103-24, P.L. 103-50) provided additional SRF funds.

FY1994 For FY1994, the Clinton Administration requested $2.047 billion for water infrastructure. The funds in this request were $1.1 98 billion to capitalize State Revolving Funds, $150 million for Mexican Border Project grants, and $100 million for a single hardship community (Boston). The request also included $599 million to capitalize new state drinking water revolving funds. The final version of the FY1 994 legislation (P.L. 103-124) provided $2.477 billion for water infrastructure/state revolving funds. Of this total amount, $599 million was to be reserved for drinking water SRFs, if authorization legislation were enacted; $80 million was for Section 319 grants; $22 million was for Section 104(b)(3) grants; and $58 million was for Tijuana/San Diego- Section 510 of the WQA. This resulted in an appropriation of $1.71 8 billion for clean water SRFs. In addition, the final bill provided that $500 million be used to support water infrastructure financing in economically distressed/hardship communities. Under the bill, these funds were not available for spending until May 31, 1994, and were set aside until projects were authorized in the CWA for this purpose.

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Thus, the bill as enacted provided $1.21 8 billion immediately for clean water SRFs, with the expectation that $500 million more would be available for financing hardship community projects after May 31, 1994.

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FY1995 For FY1995, President Clinton requested $2.65 billion for water infrastructure consisting of: $1.6 billion for CWA SRFs, $100 million for Section 319 nonpoint source management grants to states, $52.5 million for a grant to San Diego for a wastewater project pursuant to Section 510 of the WQA, $47.5 million for other Mexican border projects, $50 million to the State of Texas for colonias projects, and $100 million for grants under Title II for needy cities (intended for Boston). The request included $700 million for drinking water SRFs, pending enactment of authorizing legislation. The President‘s budget also requested $21.5 million for Section 104(b)(3) grants/cooperative agreements. Final agreement on FY1995 funding was contained in P.L. 103-327, enacted in September 1994, which provided a total of $2.9 62 billion for water infrastructure financing. Of the total, $22.5 million was for grants under Section 104(b), $100 million for Section 319 grants, $70 million for public water system grants (grants to states under the Safe Drinking Water Act to support state implementation of delegated drinking water programs), $52.5 million for the Section 510 project in San Diego, and $700 million for drinking water SRFs (contingent upon enactment of authorization legislation). The remaining $2.0 17 billion was for CWA projects. Of this amount, $1 .235 billion was for clean water SRF grants to states under Title VI of the CWA. The remaining $781.8 million (39% of this amount, 26% of the total appropriation) was designated for 45 specific, named projects in 22 states. The earmarked amounts ranged in size from $200,000 for Southern Fulton County, PA, to $100 million for the City of Boston. Finally, the conferees included bill language concerning release of the $500 million in FY1 994 needy cities money (because the authorizing committees of Congress had not acted on legislation to authorize specific projects, as had been intended in P.L. 103-124) as follows: 

$150 million to Boston, $50 million for colonias in Texas, $10 million for colonias in New Mexico, $70 million for a New York City wastewater reclamation facility, $85 million for the Rouge River project, $50 million for the City of Los Angeles, $50 million for the County of Los Angeles, and $35 million for Seattle, WA.

FY1996 In February 1995, President Clinton submitted the Administration‘s budget request for FY1996. It requested $2.3 65 billion for water infrastructure funding consisting of $1.6 billion for clean water state revolving funds, $500 million for drinking water state revolving funds, $150 million to support Mexico border projects under the U.S.-Mexican Border Environmental Initiative and NAFTA and $100 million for special need/economically

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distressed communities (not specified in the request, but presumed to be intended for Boston), plus $15 million for water infrastructure needs in Alaska Native Villages. In February 1995, congressional appropriations committees began considering legislation to rescind previously appropriated FY1995 funds, as part of overall efforts by the 104th Congress to shape the budget and federal spending. These efforts resulted in passage in July of P.L. 104-19 which rescinded $16.5 billion in total funds from a number of departments, agencies, and programs. In the water infrastructure area, it rescinded $1,077,200,000 from prior year appropriations including the $3.2 million for a project in New Jersey (it had mistakenly been funded twice in P.L. 103-327) and $1,074,000,000. Although not contained in bill language, it was understood that the larger rescinded amount consisted solely of drinking water SRF funds (leaving $1 .235 billion for FY1995 clean water SRF funds, $778.6 million for earmarked wastewater projects—both amounts as originally appropriated—and $225 million in FY1994- FY1995 drinking water SRF funds that had not yet been authorized). It took until April 1996 for Congress and the Administration to reach agreement on FY1996 appropriations for EPA as part of omnibus legislation (P.L. 104-134) that consolidated five appropriations bills not yet enacted due to disagreements over funding levels and policy. Agreement came as the fiscal year was more than one-half over. Before that, however, congressional conferees reached agreement in November 1995 on FY1996 legislation for EPA (H.R. 2099, H.Rept. 104-353). Conferees agreed to provide $2.323 billion for a new account titled State and Tribal Assistance Grants, consisting of infrastructure assistance and state environmental management grants for 16 categorical programs that had previously been funded in a separate appropriations account. The total included $1.1 25 billion for clean water SRF grants, $275 million in new appropriations for drinking water SRF grants, and $265 million for special purpose project grants. Report language provided that the drinking water SRF money also included $225 million from FY1995 appropriations that were rescinded in P.L. 104-19. The drinking water SRF money would be available upon reauthorization of the Safe Drinking Water Act; otherwise, it would revert to clean water SRF grants if the SDWA were not reauthorized by June 30, 1996. This made the total for drinking water SRF grants $500 million. The November 1995 agreement on H.R. 2099 included $658 million for consolidated state environmental grants. In doing so, Congress endorsed an Administration proposal for a more flexible approach to state grants, a key element of EPA‘s efforts to improve the federalstate partnership in environmental programs. In lieu of traditional grants provided separately to support state air, water, hazardous waste and other programs, consolidated grants are intended to reduce administrative burdens and improve environmental performance by allowing states and tribes to target funds to meet their specific needs and integrate their environmental programs, as appropriate. Congress‘ support was described in accompanying report language.14 The conferees agree that Performance Partnership Grants are an important step to reducing the burden and increasing the flexibility that state and tribal governments need to manage and implement their environmental protection programs. This is an opportunity to use limited resources in the most effective manner, yet at the same time, produce the resultsoriented environmental performance necessary to address the most pressing concerns while still achieving a clean environment.

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Including state environmental grants in the same account with water infrastructure assistance reflects Congress‘ support for enhancing the ability of states and localities to implement environmental programs flexibly and support for EPA‘s ability to provide block grants to states and Indian tribes. The H.R. 2099 conference agreement also included legislative riders intended to limit or prohibit EPA from spending money to implement several environmental programs. The Administration opposed the riders. The House and Senate approved this bill in December, but President Clinton vetoed it, because of objections to spending and policy aspects of the legislation. With no full-year funding in place from October 1995 to April 1996, EPA and the programs it administers (along with agencies and departments covered by four other appropriations bills not yet enacted) were subject to a series of short-term continuing resolutions, some lasting only a day, some lasting several weeks. In March 1996, the House and Senate began consideration of an omnibus appropriations bill to fund EPA and other agencies for the remainder of FY1 996, finally reaching agreement in April on a bill (H.R. 3019) enacted as P.L. 104-134.15 Congress agreed to provide $2.8 13 billion for a new account titled State and Tribal Assistance Grants, consisting of state grants and infrastructure assistance, as in H.R. 2099, the vetoed measure. The total was divided as follows:  

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   

$658 million for consolidated state environmental grants, $1 .3485 billion for clean water SRF grants (including $50 million for impoverished communities), $500 million in new appropriations for drinking water SRF grants, $150 million for Mexico-border project grants and Texas colonias, as requested, $15 million for Alaskan Native Villages, as requested, and $141.5 million for 17 special purpose project grants.

Report language provided that the drinking water SRF money also included $225 million from FY1995 appropriations that remained available after the rescissions in P.L. 104-19, for a total of $725 million. The drinking water SRF money was contingent upon reauthorization of the Safe Drinking Water Act by August 1, 1996; otherwise, it would revert to clean water SRF grants. The final agreement (P.L. 104-134) included several of the legislative riders from previous versions of the legislation, including riders related to drinking water and clean air, but dropped others strongly opposed by the Administration. Funds within the State and Tribal Assistance Grants account were redistributed after Congress passed Safe Drinking Water Act amendments in August 1996. Enactment of the amendments (P.L. 104-182) occurred on August 6—after the August 1 deadline in P.L. 104134 that would have made $725 million available for drinking water SRF grants in FY1996. Thus, the previously appropriated $725 million reverted to clean water SRF grants, making the FY1996 total for those grants $2.0735 billion.

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FY1997 While debate over the FY1996 appropriations was continuing, in March 1996, President Clinton submitted the details of a FY1997 budget. For water infrastructure and state and tribal assistance, the request totaled $2.852 billion consisting of 



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  

$1.35 billion for clean water SRF grants (the request included language that would authorize states the discretion to use this SRF money either for clean water or drinking water projects), $165 million for US-Mexico border projects, Texas colonias, and Alaskan Native Village projects, $113 million for needy cities projects, $674 million for state performance partnership consolidated management grants, and $550 million for drinking water infrastructure SRF funding, contingent upon enactment of authorizing legislation.

In response to the Administration‘s request, in June 1996 the House approved legislation (H.R. 3666) providing FY1997 funding for EPA. In the State and Tribal Assistance Grants account, the House approved $2.768 billion, $84 million less than requested but on the whole endorsing the budget request. The total provided the following: $1.35 billion for clean water SRF grants, as requested; $165 million, as requested, for U.S.-Mexico border projects, Texas colonias, and Alaskan Native Village projects; $450 million for drinking water SRF funding, contingent upon authorization; $674 million for state performance partnership consolidated management grants; and $129 million for seven special purpose grants. In July, the Senate Appropriations Committee reported its version of H.R. 3666. The committee approved $2.8 15 billion for this account, consisting of $1 .426 billion for clean water SRF grants; $550 million for drinking water SRF grants, contingent upon authorization; $165 million, as requested, for U.S.-Mexico border projects, Texas colonias, and Alaskan Native Village projects; and $674 million for consolidated state grants. The committee rejected the provision of the House-passed bill providing $129 million for special purpose grants, including funds for Boston and New Orleans requested by the Administration, saying in report language that earmarking is provided at the expense of state revolving funds and does not represent an equitable distribution of grant funds (S.Rept. 104-3 18). During debate on H.R. 3666 in September, the Senate adopted an amendment to reduce the FY1997 appropriation for clean water SRF grants by $725 million in order to fund the new drinking water SRF program. This action was intended to restore funds to the drinking water program which had been lost when Safe Drinking Water Act amendments were not enacted by August 1, 1996. Thus, the Senate-passed bill provided $701 million for clean water SRF grants and $1 .275 billion for drinking water SRF grants for FY1997. Other amounts in the account were unchanged. The conference report on H.R. 3666 (H.Rept. 104-812) was approved by the House and Senate on September 24, 1996. President Clinton signed the bill September 26 (P.L. 104204). It reflected compromise of the House- and Senate-passed bills, providing the following amounts within the State and Tribal Assistance Grants account ($2.875 billion total):

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$625 million for clean water SRF grants, $1 .275 billion for drinking water SRF grants, $165 million, as requested, for U.S.-Mexico border projects, Texas colonias, and Alaskan Native Village projects, $674 million for consolidated state grants, and $136 million for 18 specific wastewater, water, and groundwater project grants (the 7 specified in House-passed H.R. 3666, plus 11 more; the bill provided funds for each of the needy cities projects requested by the Administration, but in lesser amounts).

The allocation of clean water and drinking water SRF grants was consistent with the Senate‘s action to restore funds to the drinking water program after enactment of the Safe Drinking Water Act amendments in early August. Subsequently, Congress passed a FY1997 Omnibus Consolidated Appropriations bill to cover agencies and departments for which full-year funding had not been enacted by October 1, 1996 (P.L. 104-208). It included additional funding for several EPA programs, as well as $35 million (on top of $40 million provided in P.L. 104-204) for the Boston Harbor cleanup project.

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FY1998 President Clinton presented the Administration‘s budget request for FY1998 in February 1997. For water infrastructure and state and tribal assistance, the request totaled $2.793 billion, consisting of $1 .075 billion for clean water SRF grants, $725 million for drinking water SRF grants, $715 million for consolidated state environmental grants, and $278 million for special project grants. House and Senate committees began activities on FY1998 funding bills somewhat late in 1997, due to prolonged negotiations between Congress and the President over a five-year budget plan to achieve a balanced budget by 2002. After appropriators took up the FY1998 funding bills in June, the House passed EPA‘s appropriation in H.R. 2158 (H.Rept. 105-175) on July 15. In the State and Tribal Assistance Grants account, the House approved $3 .019 billion, consisting of $1.25 billion for clean water SRF grants ($600 million more than FY1 997 levels and $175 million more than requested by the President), $750 million for drinking water SRF grants ($425 million less than FY1997 levels, but $25 million more than the request), $750 million for state environmental assistance grants, and $269 million for special projects. The latter included funds for the special projects requested by the Administration but at reduced levels ($149 million total for these projects), plus $120 million in special project grants for 21 other communities. The Senate passed a separate version of an FY1 998 appropriations bill on July 22, 1997 (S. 1034, S.Rept. 105-53). It provided $3.047 billion for the STAG account, consisting of $1.35 billion for clean water SRF grants, $725 million for drinking water SRF grants, $725 million for state environmental assistance grants, and $247 million for special project grants. The Senate bill provided the amounts requested by the Administration for U.S.-Mexico border projects, Texas colonias, and Alaskan Native Village projects (but no special funds for

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others requested by the President), plus $82 million for 18 special project grants for other communities identified in report language. Conferees reached agreement on FY1998 funding in early October 1997 (H.R. 2158, H.Rept. 105-297). The final version passed the House on October 8 and passed the Senate on October 9. President Clinton signed the bill October 27 (P.L. 105-65). As enacted, it provided $3.2 13 billion for the STAG account, consisting of $1.35 billion for clean water SRF grants, $725 million for drinking water SRF grants, $745 million for consolidated state environmental assistance grants, and $393 million for 42 special purpose project and special community need grants for construction of wastewater, water treatment and drinking water facilities, and groundwater protection infrastructure. It included the following amounts for grants requested by the Administration:

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$75 million for U.S.-Mexico border projects, $50 million for Texas colonias, $50 million for Boston Harbor wastewater needs, $10 million for New Orleans, $3 million for Bristol County, MA, and $15 million for Alaskan Native Village projects.

The final bill also provided funds for all of the special purpose projects included in the separate House and Senate versions of the legislation, plus three projects not included in either earlier version. Bill language was included in P.L. 105-65 to allow states to cross-collateralize clean water and drinking water SRF funds, that is, to use the combined assets of amounts appropriated to State Revolving Funds as common security for both SRFs, which conferees said is intended to ensure maximum opportunity for states to leverage these funds. Senate committee report language also said that the conference report on the 1996 Safe Drinking Water Act Amendments had stated that bond pooling and similar arrangements were not precluded under that legislation. The appropriations bill language was intended to ensure that EPA does not take an unduly narrow interpretation of this point which would restrict the states‘ use of SRF funds.16 On November 1, 1997, President Clinton used his authority under the Line Item Veto Act (P.L. 104-130) to cancel six items of discretionary budget authority provided in P.L. 105-65. The President‘s authority under this act took effect in the 105th Congress; thus, this was the first EPA appropriations bill affected by it. The cancelled items included funding for one of the special purpose grants in the bill, $500,000 for new water and sewer lines in an industrial park in McConnellsburg, PA. Reasons for the cancellation, according to the President, were that the project had not been requested by the Administration; it would primarily benefit a private entity and is outside the scope of EPA‘s usual mission; it is a low priority use of environmental funds; and it would provide funding outside the normal process of allocating funds according to state environmental priorities.17 However, in June 1998, the Supreme Court struck down the Line Item Veto Act as unconstitutional, and in July the Office of Management and Budget announced that funding would be released for 40-plus cancellations made in 1997 under that act (including those cancelled in P.L. 105-65) that Congress had not previously overturned. (For additional

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information, see CRS Report RL33635, Item Veto and Expanded Impoundment Proposals: History and Current Status, by Virginia A. McMurtry.)

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FY1999 President Clinton‘s budget request for FY1999, presented to Congress in February 1998, requested $2.9 billion for the State and Territorial Assistance Grants account, representing 37% of the $7.9 billion total requested for EPA programs. The total included $1 .075 billion for clean water SRF grants, $775 million for drinking water SRF grants, $115 million for water infrastructure projects along the U.S.-Mexico border projects and in Alaskan Native Villages, $78 million for needy cities projects, and $875 million for consolidated state environmental grants. Legislative action on the budget request occurred in mid-1998. Both houses of Congress increased amounts for water infrastructure financing, finding the Administration‘s request for clean water and drinking water SRF grants, as well as special project funding, not adequate. First, the Senate Appropriations Committee reported its version of an EPA spending bill in June (S. 2168, S.Rept. 105-216). This bill, passed by the Senate July 17, provided $3.2 billion for the STAG account, consisting of $1.4 billion for clean water SRF grants, $800 million for drinking water SRF grants, $105 million for U.S.-Mexico and Alaskan Native Village projects, $100 million for 39 other special needs infrastructure grants, and $850 million for state performance partnership/categorical grants. As in FY1998, the committee included bill language allowing states to cross-collateralize their clean water and drinking water State Revolving Funds, making the language explicit for FY1999 and thereafter. Second, the House passed its version of EPA‘s funding bill (H.R. 4194, H.Rept. 105-610) on July 29. This bill provided $3.2 billion for the STAG account, consisting of $1.25 billion for clean water SRF grants, $775 million for drinking water SRF grants, $70 million for U.S.Mexico and Alaskan Native Village projects, $253.5 million for 49 other special needs infrastructure grants (including nine projects also funded in the Senate bill), and $885 million for state environmental management grants (a 20% increase above FY1998 amounts for these state grants). Conferees resolved differences between the two versions in October 1998 (H.R. 4194, H.Rept. 105-769). The conference agreement provided $3.4 billion for the STAG account, consisting of $1.35 billion for clean water SRF grants, $775 million for drinking water SRF grants, $80 million for U.S.-Mexico and Alaskan rural and Native Village projects, $301.8 million for 80 other special needs project grants, and $880 million for state and tribal environmental program grants. The House and Senate approved the agreement on October 7 and 8, respectively, and President Clinton signed the bill into law on October 21 (P.L. 105276). Additional funding was provided in the Omnibus Consolidated and Supplemental Appropriations Act, FY1999 (P.L. 105-277). This bill, which provided full-year funding for agencies and departments covered by seven separate appropriations measures, directed $20 million more in special needs grants for the Boston Harbor wastewater infrastructure project, on top of $30 million that was included in P.L. 105-276.

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FY2000 For FY2000, beginning on October 1, 1999, the Administration requested $2.63 8 billion for water infrastructure assistance and state environmental grants. The total, $370 million less than the FY1999 appropriation for this account, consisted of $800 million for clean water SRF grants, $825 million for drinking water SRF grants, $128 million for Mexican Border and special project grants, and $885 million for consolidated state environmental grants. The request included one SRF policy issue. The Administration asked the appropriators to grant states the permission to set aside up to 20% of FY2000 clean water SRF monies in the form of grants for local communities to implement nonpoint source pollution and estuary management projects. Currently, under the Clean Water Act, SRFs may only be used to provide loans. Some have argued that some types of water pollution projects which are eligible for SRF funding may not be suitable for loans, as they may not generate revenues which can be used to repay the loan to a state. This new authority, the Administration said, would allow states greater flexibility to address nonpoint pollution problems. Critics of the proposal said that making grants from an SRF would reduce the long-term integrity of a state‘s fund, since grants would not be repaid. Members of Congress and stakeholder groups were particularly critical of the budget request for clean water SRF grants, $550 million (40%) less than the FY1999 level. Critics said the request was insufficient to meet the needs of states and localities for clean water infrastructure. In response, EPA acknowledged that several years ago the Administration made a commitment to states that the clean water SRF would revolve at $2 billion annually in the year 2005. Because of loan repayments and other factors, EPA said, the overall fund will be revolve at $2 billion per year in the year 2002, even with the 20% grant setaside included in the FY2000 request. According to EPA, the $550 million decrease from 1999 would have only a limited impact on SRFs and would still allow the Agency to meet its long-term capitalization goal of providing an average amount of $2 billion in annual assistance. The House and Senate passed their respective versions of an EPA appropriations bill (H.R. 2684) in September 1999. The conference committee report resolving differences between the two versions (H.Rept. 106-379) was passed by the House on October 14 and the Senate on October 15 and was signed by the President on October 20 (P.L. 106-74). The final bill provided $7.6 billion overall for EPA programs, including $3.47 billion for the STAG account. Within that account, the bill included $1.35 billion for clean water SRF grants, $820 million for drinking water SRF grants, $885 million for consolidated state grants, $80 million for U.S.-Mexico Border and Alaska Rural and Native Village projects, and $331.6 million for 141 other special needs water and wastewater grants specified in report language. The final bill did not approve the Administration‘s request to allow states to use up to 20% of clean water SRF monies as grants for nonpoint pollution and estuary management projects. Subsequent to enactment of the EPA funding bill, Congress passed the Consolidated Appropriations Act for FY2000 with funding for five other agencies (P.L. 106-113), which included provisions requiring a government-wide cut of 0.3 8% in discretionary appropriations. The bill gave the President some flexibility in applying this across-the-board reduction. Details of the reduction were announced at the time of the release of the FY200 1 budget. EPA‘s distribution of the rescission resulted in a total reduction of $16.3 million for 139 of the special needs water and wastewater projects identified in P.L. 106-74. These projects were reduced 4.9% below enacted levels. The Agency did not reduce funds for the

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two projects that had been included in the President‘s FY2000 budget request (Bristol County, MA and New Orleans, LA) or for the United States-Mexico Border and the Alaska Rural and Native Villages programs. EPA also reduced funds for the clean water SRF (enacted at $1.35 billion) by 0.3%, for a final funding level of $1 .345 billion. The drinking water SRF appropriation was not reduced, nor were consolidated state grants.

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FY2001 The President‘s budget for FY2001 requested a total of $2.9 billion for EPA. For the second year in a row, President Clinton requested $800 million for the clean water SRF program, a $545 million reduction from the FY2000 level. The request included $825 million for the drinking water SRF program, $100 million for U.S.-Mexico Border project grants, $15 million for Alaskan Native Villages projects, two needy cities grants totaling $13 million (Bristol County, MA and New Orleans, LA), plus $1 .069 billion for consolidated state environmental grants. The budget included a policy request similar to one in the FY2000 budget, which Congress rejected. The FY2001 budget sought flexibility for states to set aside up to 19% of clean water SRF monies in the form of grants for local communities to implement nonpoint source pollution and estuary management projects. The House approved its version of EPA‘s funding bill (H.R. 4635, H.Rept. 106-674) on June 21, 2000. For the STAG account, H.R. 4635 provided $3.2 billion ($273 million more than requested, but $288 million below the FY2000 level). The total in the STAG account consisted of $1.2 billion for clean water SRF grants, $825 million for drinking water SRF grants, $1 .068 billion (the budget request) for categorical state grants, and $85 million for U.S.-Mexico Border and Alaska Rural and Native Villages projects. Beyond these, however, the House-passed bill included no funds for other special needs grants. The Senate approved its version of the funding bill (S.Rept. 106-410) on October 12. For the STAG account, the Senate-passed bill provided $3.3 billion, consisting of $1.35 billion for clean water SRF grants, $820 million for drinking water SRF grants, $955 million for categorical state grants, $85 million for U.S.-Mexico Border and Alaska Rural and Native Village projects, and $110 million for special needs water and wastewater grants. In October, the House and Senate approved EPA‘s funding bill for FY2001 (H.Rept. 106988), providing $1.35 billion for clean water SRF grants (the same level enacted for FY2000) and $825 million for drinking water SRF grants. The enacted bill included $110 million for water infrastructure project grants in Alaskan Rural and Native Villages and U.S.-Mexico border projects and an additional $336 million for 237 other specified project grants throughout the country. The bill also provided $1,008 million for state categorical program grants ($60 million less in total than requested). Total funding for the STAG account was $3.6 billion. Congress disapproved the Administration‘s policy request concerning use of clean water SRF monies. President Clinton signed the bill October 27 (P.L. 106-377). Subsequently, in December, Congress provided $21 million more for five more special project water infrastructure grants (in addition to the $336 million in P.L. 106-377) as a provision of H.R. 4577, the FY2001 Consolidated Appropriations bill (P.L. 106-554). Also in that legislation, Congress enacted the Wet Weather Water Quality Act, authorizing a two-

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year, $1.5 billion grants program to reduce wet weather flows from municipal sewer systems. The provision was included in Section 112, Division B, of P.L. 106-554.

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FY2002 In April 2001, the Bush Administration presented its budget request for FY2002. The Administration requested a total of $2.1 billion for clean water infrastructure funds, consisting of $823 million for drinking water SRF grants, $850 million for clean water SRF grants (compared with $1.35 billion appropriated for FY200 1), and $450 million for the new program of municipal sewer overflow grants under legislation enacted in December, the Wet Weather Water Quality Act. However, that act provides that sewer overflow grants are only available in years when at least $1.35 billion in clean water SRF grants is appropriated. Subsequently, Administration officials said they would request that Congress modify the provision linking new grant funds to at least $1.35 billion in clean water SRF grants. The Bush budget requested no funds for special earmarked grants, except for $75 million to fund projects along the U.S.-Mexico border and $35 million for projects in Alaskan Native Villages (both are the same amounts provided in FY2001). In response, some Members of Congress and outside groups criticized the budget request, saying that it did not provide enough support for water infrastructure programs. The President‘s budget also requested $1.06 billion for state categorical program grants. The House passed its version of FY2002 funding for EPA on July 30 (H.R. 2620, H.Rept. 107- 159). The House-passed bill provided a total of $2.4 billion for water infrastructure funds, consisting of $1.2 billion for clean water SRF grants, $850 million for drinking water SRF grants, $200 million for special project grants (individual projects were unspecified in the report accompanying H.R. 2620), $75 million for U.S.-Mexico Border projects, and $30 million for Alaskan Rural and Native Villages. The House bill provided no separate funds for the new wet weather overflow grant program, which the Administration had requested. Including $1.08 billion for state categorical program grants, total STAG account funding in the bill was $3.44 billion, about $150 million higher than the President‘s request. The Senate passed its version of this appropriations bill on August 2 (S. 1216, S.Rept. 107-43). Like the House, the Senate rejected separate funding for wet weather overflow grants, and the Senate increased clean water SRF grant funding to the FY200 1 level. The Senate-passed total for the STAG account was $3.49 billion, including $1.35 billion for clean water SRF grants, $850 million for drinking water SRF grants, $140 million for special needs infrastructure grants specified in accompanying report language, $75 million for U.S.-Mexico Border projects, $30 million for Alaskan Rural and Native Villages, and $1.03 billion for state categorical program grants. Resolution of this and other appropriations bills in fall 2001 was complicated by congressional attention to general economic conditions and responses to the September 11 terrorist attacks on the World Trade Center and the Pentagon. Nevertheless, the House and Senate gave final approval to legislation providing EPA‘s FY2002 funding (H.R. 2620, H.Rept. 107-272) on November 8, and President Bush signed the bill on November 26 (P.L. 107-73). The final bill did not include separate funds for the new sewer overflow grant program requested by the Administration, which both the House and Senate had rejected, but

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it did include $1.35 billion for clean water SRF grants, $850 million for drinking water SRF grants, $344 million for 337 earmarked water infrastructure project grants specified in report language, and the requested $75 million for U.S.-Mexico Border projects and $30 million for Alaskan Rural and Native Villages. The bill included total STAG funding of $3.7 billion.

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FY2003 President Bush presented the Administration‘s FY2003 budget request in February 2002, asking Congress to appropriate $2.1 85 billion for EPA‘s water infrastructure programs (compared with $2.659 billion appropriated for FY2002). The FY2003 request sought $1.21 2 billion for clean water SRF grants, $850 million for drinking water SRF grants, and $123 million for a limited number of special projects (especially in Alaska Native Villages and in communities on the U.S.- Mexico border). The Administration proposed to eliminate funds for unrequested infrastructure project spending that Congress had earmarked in the FY2002 law, which totaled $344 million. Also, the Administration requested no funds for the municipal sewer overflow grants program enacted in 2000. Members of Congress criticized the request level for clean water SRF capitalization grants, which was $138 million below the FY2002 enacted amount. In August 2002, the Senate Appropriations Committee approved an FY2003 funding bill for EPA that would provide $1.45 billion for clean water SRF grants, $100 million more than the FY2002 level (S. 2797, S.Rept. 107-222). In addition, the Senate committee bill included $875 million for drinking water SRF grants, $140 million for special needs infrastructure grants specified in report language, $45 million for Alaskan Rural and Native Village project grants, $75 million for U.S.-Mexico Border projects, and $1.1 34 billion for state categorical program grants. The House Appropriations Committee approved its version of an FY2003 funding bill with $1.3 billion for the clean water SRF program (H.R. 5605, H.Rept. 107-740) in October. This bill also included $850 million for drinking water SRF grants, $227.6 million for special needs infrastructure grants enumerated in report language, $35 million for Alaskan Rural and Native Village project grants, $75 million for U.S.-Mexico Border projects, and $1. 173 billion for state categorical program grants. Neither appropriations committee included funds for the sewer overflow grant program authorized in 2000 (the Administration did not request FY2003 funds for these grants). Due to complex budgetary disputes during the year, final action did not occur before the th 107 Congress adjourned in November 2002, and it extended into 2003, more than five months after the start of the fiscal year. Congress and the President reached agreement on funding levels for EPA and other non-defense agencies in omnibus appropriations legislation, H.J.Res. 2 (H.Rept. 108-10), which the President signed on February 20 (P.L. 108-7). The EPA portion of the enacted bill included $1.34 billion for clean water SRF grants, $844 million for drinking water SRF grants, and $413 million more for 489 special water infrastructure project grants to individual cities specified in conference report language, plus projects in Alaska Native Villages and communities on the U.S.-Mexico border. It also provided a total of $1.14 billion for categorical state grants.18

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FY2004 On February 3, 2003, before completion of the FY2003 appropriations, President Bush submitted his budget request for FY2004. It requested a total of $1 .798 billion for water infrastructure funds, consisting of $850 million for clean water SRF grants, $850 million for drinking water SRF grants, and $98 million for priority projects (especially in Alaska Native Villages and in communities on the U.S.-Mexico border). As in previous years, the Administration requested no funds for congressionally earmarked project grants for individual communities. Members of Congress and interest groups criticized the request for clean water SRF grants ($490 million below the FY2003 enacted level), but Administration officials responded by saying that the request reflects a commitment to fund this program at the $850 million level through FY20 11. Funding at that level and over that long-term period, plus repayments of previous SRF loans made by states, is expected to increase the revolving levels of the overall program from $2.0 billion to $2.8 billion per year, the Administration said. The President‘s budget also requested $1.2 billion for categorical state grants. On July 25, the House approved H.R. 2861 (H.Rept. 108-235), providing FY2004 appropriations for EPA. As passed, the bill included $1.2 billion for clean water SRF grants, $850 million for drinking water SRF grants, $203 million for earmarked water infrastructure project grants, and $75 million in grants for high-priority projects in Alaskan Native Villages and along the U.S.- Mexico border. Senate action on its version of a funding bill for EPA (S.Rept. 108-143) occurred on November 18. The Senate-passed bill provided $1.35 billion for clean water SRF grants, $850 million for drinking water SRF grants, $130 million for targeted infrastructure project grants, plus $95 million in grants for projects in Alaskan Native Villages and along the U.S.-Mexico border. Like the previous year‘s appropriations, Congress did not enact legislation providing FY2004 funds for EPA before the beginning of the new fiscal year; thus EPA programs were covered by a series of continuing resolutions (CRs). The last of these CRs (P.L. 108-135) extended FY2003 funding levels through January 31, 2004. On December 8, 2003, the House passed legislation providing full-year funding for EPA and other agencies that lacked enacted appropriations (H.R. 2673). The conference report on this bill (H.Rept. 108-401) provided $1.34 billion for clean water SRF grants, $845 million for drinking water SRF grants, and $425 million in grants for 520 earmarked grants in listed communities, Alaska Native Villages, and U.S.-Mexico border projects.19 The Senate approved the conference report on January 22, 2004, and President Bush signed the legislation January 23 (P.L. 108-199).

FY2005 The FY2005 EPA appropriation for water infrastructure funds was the lowest total for these programs since FY1997 (the first year in which Congress provided both clean water and drinking water SRF capitalization grants, as well as earmarked project grants). The decline was due primarily to a reduction in funding for the clean water SRF program from an average of $1.35 billion since FY1998 to $1.09 billion. President Bush‘s FY2005 budget, presented February 2, 2004, requested a total of $3.0 billion for water infrastructure assistance and state environmental program grants. It included

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$850 million for clean water SRF grants, $850 million for drinking water SRF grants, $94 million for priority projects (primarily in Alaska Native Villages and along the U.S.-Mexico border), and $1.25 billion for categorical grants. As in recent budgets, the Administration requested no funds for congressionally earmarked project grants. Anticipating that critics likely would focus on the clean water SRF request ($492 million below the FY2004 level), in its budget documents the Administration said that the request included funding for the clean water SRF at $850 million annually through 2011, which, together with loan repayments, state matches and other funding sources, would result in a long-term average revolving level of $3.4 billion. Likewise, the budget anticipated funding the drinking water SRF program at the same $850 million annually through 2011, resulting in a long-term average revolving level of $1.2 billion. House and Senate Appropriations committees began review of the EPA budget request in March. On September 9, 2004, the House Appropriations Committee reported FY2005 funding for EPA in a bill that included the Administration‘s requested level of $850 million for clean water SRF grants, $850 million for drinking water SRF grants, and earmarked grants for priority water infrastructure projects totaling $393.4 million (H.R. 5041, H.Rept. 108674). On September 21, the Senate Appropriations Committee reported its version of this bill (S. 2825, S.Rept. 108-353), which included $1.35 billion for clean water SRF grants, $850 million for drinking water SRF grants, and $217 million for earmarked project grants. Final action on the FY2005 appropriation did not occur before the start of the fiscal year. On November 20, the House and Senate passed H.R. 4818 (H.Rept. 108-792), the Consolidated Appropriations Act, 2005, an omnibus appropriations bill comprising nine appropriations measures, including funding for EPA. The bill provided total funding for EPA of $8.1 billion,20 a decrease from the $8.4 billion approved in FY2004, but $340 million more than was requested by the President in February. One of the most controversial items in the final bill was a $251 million decrease for clean water SRF grants from the FY2004 level, although the $1.09 billion total is $241 million more than in the President‘s budget. The final measure also included $843 million for drinking water SRF capitalization grants; $401.7 million for 669 earmarked grants in listed communities, Alaska Native villages, and U.S.Mexico border projects; and $1.14 billion for categorical state grants. The $2.34 billion total for water infrastructure programs and projects was $542 million more than was requested by the President, but $276 million less than Congress appropriated for FY2004. President Bush signed the legislation December 8, 2004 (P.L. 108-447).

FY2006 The FY2006 appropriation for water infrastructure funds marked the second consecutive year in which Congress appropriated less funding for these programs, providing lower levels both for clean water SRF capitalization grants and for earmarked project grants than in FY2005. President Bush presented the FY2006 budget request in February 2005. Overall for EPA, it sought 5.6% less than Congress had appropriated for FY2005. The Administration‘s deepest cuts affecting EPA were proposed for the STAG account. The budget requested $730 million for clean water SRF grants (33% below FY2005 appropriated funding and 45.6%

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below the FY2004 level), $850 million for drinking water SRF grants (a slight increase from the FY2005 level), $69 million for priority projects (primarily in Alaska Native Villages and along the U.S.-Mexico border), and $1.2 billion for state categorical grants. As in previous years, the Administration requested no funds for congressionally earmarked water infrastructure projects. Advocates for the SRF programs (especially state and local government officials) contended that cuts to the clean water program would impair their ability to carry out needed municipal wastewater treatment plant improvement projects. Administration officials responded that the proposed SRF reductions for FY2006 were because Congress had boosted funds above the FY2005 request level. These officials said that the Administration plans to invest $6.8 billion in the clean water SRF program between FY2004-FY20 11, after which federal funding is expected to end, and the state SRFs are expected to have an annual revolving level of $3.4 billion. If Congress appropriates more than is requested in any given year (as occurred in FY2005), they said, that target will be met sooner, leading to reduced requests for the SRF in subsequent years until a planned phaseout in FY20 11. On May 19, 2005, the House passed H.R. 2361, providing FY2006 funding for EPA. As passed, it provided $850 million for clean water SRF grants ($120 million more than the President‘s request), $850 million for drinking water SRF grants, and $269 million for earmarked water infrastructure grants. During debate, the House rejected two amendments to increase clean water SRF funding. On June 29, the Senate passed its version of H.R. 2361, providing $1.1 billion for clean water SRF grants, $850 million for drinking water SRF grants, and $290 million for earmarked project grants. The House bill required that $100 million of the SRF funding come from balances from expired contracts, grants, and interagency agreements from various EPA appropriation accounts. The Senate bill, in contrast, called for a $58 million rescission of unobligated amounts associated with grants, contracts, and interagency agreements in various accounts, but did not specify that such monies go to SRF funding. Conferees resolved differences between the bills (H.Rept. 109-188), and the House and Senate approved the measure in July; the President signed it into law on August 2 (P.L. 10954). As enacted, the bill provided $900 million for clean water SRF grants; $850 million for drinking water SRF grants; $285 million for 259 earmarked grants in listed communities, Alaska Native villages, and along the U.S.-Mexico border; and $1.13 billion for categorical state grants. The final bill required a $80 million rescission from expired grants, contracts, and interagency agreements in various EPA accounts (not just the STAG account) not obligated by September 1, 2006. It did not direct the rescinded funds to be applied to the clean water SRF, as proposed by the House. The $2.03 billion total in the bill for EPA water infrastructure programs and projects was $386 million more than was requested by the President, but $301 million less than Congress appropriated for FY2005. However, the funding amounts specified in P.L. 109-54 were reduced slightly. First, a provision of P.L. 109-54, Section 439, mandated an across-the-board rescission of 0.476% for any discretionary appropriation in that bill. Second, in December 2005 Congress enacted P.L. 109- 148, the FY2006 Department of Defense Appropriations Act, and Section 3801 of that bill mandated a 1% across-the-board rescission for discretionary accounts in any FY2006 appropriation act (except for discretionary authority of the Department of Veterans Affairs). As a result of these two rescissions, the final levels for the STAG account were: $887 million for clean water SRF grants; $838 million for drinking water SRF grants; $281 million for 259

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earmarked grants in listed communities, Alaska Native villages, and along the U.S.-Mexico border; and $1.11 billion for categorical state grants. FY2006 EPA water infrastructure programs and projects thus total $2.0 billion. On October 28, President Bush requested that Congress rescind $2.3 billion from 55 ―lower- priority federal programs and excess funds,‖ including $166 million from clean water SRF monies. In the end, Congress did not endorse the specific request to reduce clean water SRF appropriations. The two rescissions resulting from P.L. 109-54 and P.L. 109-148 totaled a $13.2 million reduction from the $900 million specified in the EPA appropriations act.

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FY2007 President Bush presented the Administration‘s FY2007 budget request in February 2006, asking Congress to appropriate $1 .570 billion for EPA‘s water infrastructure programs. The FY2007 request sought $687.6 million for clean water SRF grants, $841.5 million for drinking water SRF grants, and $40.6 million for special projects in Alaska Native Villages, Puerto Rico, and along the U.S.-Mexico border. When the 109th Congress adjourned in December 2006, it had not completed action on appropriations legislation to fund EPA (or on nine other appropriations bills covering the majority of domestic discretionary agencies and departments) for the fiscal year that began October 1, 2006, thus carrying over this legislative activity into the 110th Congress. In December 2006, Congress enacted a continuing resolution, P.L. 109-383 (the third such continuing resolution since the start of the fiscal year on October 1), providing funds for EPA and the other affected agencies and departments until February 15, 2007. The President‘s FY2007 budget request for clean water SRF capitalization grants was 22% less than the FY2006 appropriation for these grants and 37% below the FY2005 funding level. The request for drinking water SRF grants was essentially the same as in recent years ($4 million more than FY2006, $1.7 million less than FY2005). As in recent budgets, the Administration proposed no funding for congressionally designated water infrastructure grants, but, as noted above, it did seek a total of $40.6 million for Administration priority projects. Advocates of the clean water SRF program (especially state and local government officials) again contended, as they have for several recent years, that the cuts would impair their ability to carry out needed municipal wastewater treatment plant improvement projects. Administration officials responded that cuts for the clean water SRF in FY2007 were necessary because Congress boosted funds above the requested level in FY2005 and FY2006. On May 18, 2006, the House passed H.R. 5386 (H.Rept. 109-465), providing the requested level of $687.6 million for clean water SRF grants and $841.5 million for drinking water SRF grants. The Senate Appropriations Committee approved the same funding levels for these grant programs when it reported H.R. 5386 on June 29 (S.Rept. 109-275), but the Senate did not act on this measure before the 109th Congress adjourned in December. Before adjournment, Congress enacted a continuing resolution (CR), P.L. 109-383 (the third such CR since the start of the fiscal year on October 1), providing funds for EPA and the other affected agencies and departments until February 15, 2007. Funding levels provided under this CR followed a ―lowest level‖ concept for individual programs, that is, programs were funded at the lowest level under either House- passed FY2007 appropriations, Senate-passed

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appropriations, or the FY2006 funding. For clean water SRF grants, the resulting appropriation through mid-February was $687.6 million, as in House-passed H.R. 5386. For drinking water SRF grants, the appropriation level through mid- February was $837.5 million, the FY2006-enacted level. The CR included funds for congressionally earmarked water infrastructure project grants totaling $200 million, as in House- passed H.R. 5386. Returning to these issues in 2007, in mid-February, Congress passed H.J.Res. 20, a continuing appropriations resolution that provides funding for EPA and the other affected agencies through the end of FY2007. As passed, this full-year resolution held most programs and activities at their FY2006 appropriated levels. However, clean water SRF capitalization grants were one of the few programs that received a funding increase under the resolution: these grants received $1.08 billion ($197 million more than in FY2006, and $396 million more than the President requested for FY2007). The resolution further prohibited project grants for congressional earmarks, but not for special project grants requested in the President‘s budget. The action to ban earmarks in FY2007 occurred when leaders in the 110th Congress sought to finish up appropriations actions that were unresolved at the end of the 109th Congress, and at the same time the newly elected Congress moved to adopt rules and procedures to reform the congressional earmarking process for the future. (Water infrastructure project earmarks totaled $281 million in EPA‘s FY2006 appropriation.) President Bush signed H.J.Res. 20 on February 15 (P.L. 110-5). The final FY2007 amounts provided in P.L. 110-5 were   

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

$1 .084 billion for clean water SRF capitalization grants, $837.5 million for drinking water SRF capitalization grants, $83.75 million for Alaskan Native Village and U.S.-Mexico Border project grants requested by the Administration, and $1.11 billion for categorical state grants.

FY2008 The President‘s FY2008 budget request was presented to Congress on February 5, 2007, before finalization of the FY2007 appropriations. The budget sought $687.6 million for clean water SRF grants, the same amount requested for FY2007; $842.2 million for drinking water SRF grants; $25.5 million for special project grants for Alaskan Native Villages and the U.S.Mexico Border region; and $1 .065 billion for categorical state grants. In June 2007, the House passed H.R. 2643, providing FY2008 appropriations for EPA. This bill included $1.1 25 billion for clean water SRF grants, $842.2 million for drinking water SRF grants, plus $175.5 million for 143 congressionally designated water infrastructure project grants. The Senate Appropriations Committee approved companion legislation (S. 1696) that similarly included higher funding levels for several water quality programs. The Senate committee‘s bill provided less funding for clean water SRF grants than the House bill ($887 million), the same amount for drinking water SRF grants, and slightly more for congressionally designated water infrastructure project grants ($180 million). The Senate did not take up S. 1696.

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By October 1, the start of FY2008, Congress had not enacted any appropriations bills for FY2008, and Congress enacted several short-term continuing appropriations resolutions to temporarily fund EPA and other government agencies until final agreement, which occurred in December 2007. Full-year funding for EPA‘s water infrastructure programs was included in the Consolidated Appropriations Act for FY2008 (Division F, Title II), signed by the President December 26, 2007 (P.L. 110-161). The final FY2008 amounts21 provided in this legislation were    

$689.1 million for clean water SRF capitalization grants ($1.5 million more than requested by the Administration), $829.0 million for drinking water SRF capitalization grants ($13.2 million less than requested), $177.2 million for 282 earmarked grants in listed communities, Alaska Native villages, and U.S.-Mexico border projects ($151.7 million more than requested), and $1 .078 billion for categorical state grants ($13.3 million more than requested).

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FY2009 The President‘s FY2009 budget request was presented to Congress on February 6, 2008. The budget sought $555 million for clean water SRF grants, $134 million less than Congress appropriated for FY2008; $842.2 million for drinking water SRF grants, $13 million more than was appropriated for FY2008; $25.5 million for special project grants for Alaskan Native Villages and the U.S.-Mexico Border region, $18.8 million less than was appropriated for FY2008; and $1 .057 billion for categorical state grants. As in past years, the budget requested no funds for other earmarked grants. In June 2008, a House Appropriations subcommittee approved a bill with FY2009 funding for EPA, but no further action occurred before the start of the fiscal year. At the end of September 2008, Congress and the President agreed to legislation providing partial-year funding for EPA and most other agencies and departments. This bill, the Consolidated Security, Disaster Assistance, and Continuing Resolution Act, 2009 (P.L. 110-329) provided funding through March 6, 2009, at FY2008 funding levels. A second short-term continuing resolution was enacted on March 6 (P.L. 111-6), while Congress was finishing consideration of a full-year omnibus FY2009 appropriations bill that the President signed on March 11 (P.L. 111-8). The omnibus bill provides $689 million in regular appropriations for clean water SRF grants, $829 million for drinking water SRF grants— both are the same levels as were appropriated in FY2008—and $1 .094 billion for categorical state grants. The omnibus appropriations act also includes $183.5 million for earmarked water infrastructure grants.

FY2009 Supplemental Appropriations, the American Recovery and Reinvestment Act In February 2009, Congress responded to the nation‘s current economic crisis by enacting the American Recovery and Reinvestment Act (ARRA, P.L. 111-5), legislation providing FY2009 supplemental appropriations to a number of government programs. Part of the philosophy underlying the legislation is the concept of using federal investments to make accelerated investments in the nation‘s public infrastructure in order to create jobs while also

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meeting infrastructure needs. To that end, the legislation includes $4.0 billion for clean water SRF capitalization grants (for an FY2009 total of $4.689 billion) and $2.0 billion for drinking water SRF capitalization grants (for an FY2009 total of $2.829 billion). The supplemental SRF funds are available for obligation through FY20 10, but under the legislation, states are to give preference when awarding funds to activities that can start and finish quickly, with a goal that at least 50% of the funds go to activities that can be initiated within 120 days of enactment. States are to give priority to wastewater projects that can proceed to construction within 12 months of enactment, and funds for projects that are not under contract or under construction by February 12, 2010, will be reallocated by EPA to other states. Further, the legislation requires states to reserve at least 20% of the SRF capitalization grant funds for a Green Project Reserve, that is, projects intended to achieve improved energy or water efficiency. It also specifies that all assistance agreements made in whole or in part with funds appropriated under the ARRA must comply with prevailing wage requirements of the DavisBacon Act.22 Table A-1, in the Appendix to this report, shows state-by-state funds for FY2009 under both P.L. 111-8 and the ARRA.

FY2010

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President Obama presented his Administration‘s FY20 10 budget request on May 7, 2009. For EPA as a whole, the budget sought $10.5 billion, a 38% increase above levels enacted in EPA‘s regular FY2009 appropriations (P.L. 111-8). The bulk of the increase in the President‘s budget was for water infrastructure assistance, which would receive 157% above FY2009 levels (excluding ARRA supplemental funds). The request included:    

$2.4 billion for clean water SRF capitalization grants; $1.5 billion for drinking water SRF capitalization grants; $20 million for Alaska Native village and U.S.-Mexico Border projects; and $1.11 1 billion for state categorical grants (1.5% above FY2009 levels).

Congress provided FY2010 appropriations for EPA in P.L. 111-88, passed by the House and Senate in October 2009 and signed into law on October 30. In this measure, Congress provided the following:    

$2.1 billion for clean water SRF capitalization grants; $1 .387 billion for drinking water SRF capitalization grants; $186.7 million for 319 congressionally earmarked special project grants, including assistance for Alaska Native villages and U.S.-Mexico Border projects; and $1.11 6 billion for state categorical environmental grants.

The FY2010 appropriations act includes some restrictions that Congress also specified in the American Recovery and Reinvestment Act, discussed above, namely a requirement that 20% of clean water and drinking water SRF capitalization grant assistance be used for ―green‖ infrastructure and also that Davis-Bacon Act prevailing wage rules shall apply to

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construction of wastewater or drinking water projects carried out in whole or in part with assistance from the SRF.

FY2011 President Obama presented the FY20 11 budget request in February 2010. For EPA as a whole, the budget sought $10.02 billion in discretionary budget authority, a 3% decrease from levels enacted for EPA in FY20 10. The largest component of the reduced request, compared with FY20 10, is $200 million less for grants to capitalize clean water and drinking water SRF programs. In explaining the request, EPA budget documents noted that even with a slight reduction, the budget ―continues robust funding for the SRFs.‖ As in past years, the President requested no funds for congressionally designated water infrastructure projects.23 The request included:

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   

$2.0 billion for clean water SRF capitalization grants; $1 .287 billion for drinking water SRF capitalization grants; $20 million for Alaska Native village and U.S.-Mexico Border projects; and $1 .277 billion for state categorical grant programs (14% higher than the FY20 10 enacted amount).

A number of legislative difficulties contributed to the fact that Congress did not enact EPA‘s FY20 11 appropriation or any other appropriation bill before the start of the fiscal year on October 1. A House appropriations subcommittee did approve an Interior, Environment, and Related Agencies bill in June 2010, but no further action occurred in the House or Senate. Consequently, at the end of September, Congress passed a Continuing Resolution measure (H.R. 3081). The measure provides extended funding for EPA and most other agencies at FY20 10 levels through December 3, 2010. The President signed the bill on September 30.

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APPENDIX. Table A-1. FY2009 SRF Capitalization Grant Appropriations to States.

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STATES AL AK AZ AR CA CI CT DE DC FL GA HI ID IL IN IA KS KY LA ME MD MA MI MN MS MO

CWA SRF ALLOTMENT 1.13% 0.61% 0.68% 0.66% 7.24% 0.81% 1.24% 0.50% 0.50% 3.42% 1.71% 0.78% 0.50% 4.58% 2.44% 1.37% 0.91% 1.29% 1.11% 0.78% 2.45% 3.44% 4.35% 1.86% 0.91% 2.81%

CWA SRF FY2009 APPROPS. P.L. 111-8 $7,686,095 $4,113,866 $4,642,608 $4,496,678 $49,159,377 $5,497,825 $8,420,496 $3,374,035 $3,374,035 $23,201,499 $11,621,451 $5,323,388 $3,374,035 $31,086,466 $16,565,421 $9,302,863 $6,204,397 $8,748,329 $7,555,776 $5,320,673 $16,624,472 $23,337,248 $29,554,541 $12,633,458 $6,192,858 $19,054,375

CWA SRF ARRA APPROPS. P.L. 111-5 $44,265,516 $23,692,449 $26,737,560 $25,897,125 $283,117,143 $31,662,900 $48,495,054 $19,431,639 $19,431,639 $133,621,347 $66,929,898 $30,658,287 $19,431,639 $179,032,200 $95,403,054 $53,576,754 $35,732,169 $50,383,101 $43,514,988 $30,642,651 $95,743,137 $134,403,147 $170,209,587 $72,758,217 $35,665,716 $109,737,357

TOTAL CWA SRF $51,951,611 $27,806,315 $31,380,168 $30,393,803 $332,276,520 $37,160,725 $56,915,550 $22,805,674 $22,805,674 $156,822,846 $78,551,349 $35,981,675 $22,805,674 $210,118,666 $111,968,475 $62,879,617 $41,936,566 $59,131,430 $51,070,764 $35,963,324 $112,367,609 $157,740,395 $199,764,128 $85,391,675 $41,858,574 $128,791,732

SDWA SRF ALLOTMENT 1.00% 1.00% 2.84% 1.26% 8.15% 1.76% 1.00% 1.00% 1.00% 4.45% 2.81% 1.00% 1.00% 4.08% 1.40% 1.25% 1.00% 1.05% 1.42% 1.00% 1.38% 2.68% 3.46% 1.80% 1.00% 1.94%

SDWA SRF FY2009 APPROPS. P.L. 111-8 $8,145,940 $8,145,940 $23,134,470 $10,263,884 $66,389,411 $14,336,854 $8,145,940 $8,145,940 $8,145,940 $36,265,725 $22,890,091 $8,145,940 $8,145,940 $33,235,435 $11,404,316 $10,182,425 $8,145,940 $8,553,237 $11,567,235 $8,145,940 $11,241,397 $21,831,119 $28,184,952 $14,662,692 $8,145,940 $15,803,124

SDWA SRF ARRA APPROPS. P.L. 111-5 $19,500,000 $19,500,000 $55,380,000 $24,570,000 $158,925,000 $34,320,000 $19,500,000 $19,500,000 $19,500,000 $86,814,000 $54,795,000 $19,500,000 $19,500,000 $79,560,000 $27,300,000 $24,375,000 $19,500,000 $20,475,000 $27,690,000 $19,500,000 $26,910,000 $52,260,000 $67,470,000 $35,100,000 $19,500,000 $37,830,000

TOTAL SDWA SRF $27,645,940 $27,645,940 $78,514,470 $34,833,884 $225,314,411 $48,656,854 $27,645,940 $27,645,940 $27,645,940 $123,079,725 $77,685,091 $27,645,940 $27,645,940 $112,795,435 $38,704,316 $34,557,425 $27,645,940 $29,028,237 $39,257,235 $27,645,940 $38,151,397 $74,091,119 $95,654,952 $49,762,692 $27,645,940 $53,633,124

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STATES MT NB NV NH NJ NM NY NC ND OH OK OR PA RI SC SD TN TX UT VT VA WA WV WI WY PR Terr.

CWA SRF ALLOTMENT 0.50% 0.52% 0.50% 1.01% 4.14% 0.50% 11.18% 1.83% 0.50% 5.70% 0.82% 1.14% 4.01% 0.68% 1.04% 0.50% 1.47% 4.63% 0.53% 0.50% 2.07% 1.76% 1.58% 2.74% 0.50% 1.32% 0.25%

CWA SRF FY2009 APPROPS. P.L. 111-8 $3,374,035 $3,515,893 $3,374,035 $6,868,887 $28,088,455 $3,374,035 $75,867,946 $12,405,400 $3,374,035 $38,695,184 $5,553,482 $7,764,829 $27,227,129 $4,615,458 $7,041,288 $3,374,035 $9,985,000 $31,416,336 $3,621,777 $3,374,035 $14,066,965 $11,953,357 $10,714,650 $18,581,969 $3,374,035 $8,964,848 $1,696,860

CWA SRF ARRA APPROPS. P.L. 111-5 $19,431,639 $20,248,620 $19,431,639 $39,559,080 $161,766,147 $19,431,639 $436,936,293 $71,444,793 $19,431,639 $222,852,090 $31,983,438 $44,718,960 $156,805,626 $26,581,200 $40,551,966 $19,431,639 $57,505,299 $180,931,974 $20,858,424 $19,431,639 $81,014,025 $68,841,399 $61,707,474 $107,016,693 $19,431,639 $51,630,072 $9,772,500

TOTAL CWA SRF $22,805,674 $23,764,513 $22,805,674 $46,427,967 $189,854,602 $22,805,674 $512,804,239 $83,850,193 $22,805,674 $261,547,274 $37,536,920 $52,483,789 $184,032,755 $31,196,658 $47,593,254 $22,805,674 $67,490,299 $212,348,310 $24,480,201 $22,805,674 $95,080,990 $80,794,756 $72,422,124 $125,598,662 $22,805,674 $60,594,920 $11,469,360

SDWA SRF ALLOTMENT 1.00% 1.00% 1.00% 1.00% 2.21% 1.00% 4.45% 3.37% 1.00% 3.00% 1.61% 1.46% 3.37% 1.00% 1.00% 1.00% 1.04% 8.24% 1.00% 1.00% 1.06% 2.14% 1.00% 1.94% 1.00% 1.00% 0.33%

SDWA SRF FY2009 APPROPS. P.L. 111-8 $8,145,940 $8,145,940 $8,145,940 $8,145,940 $18,002,527 $8,145,940 $36,249,433 $27,451,818 $8,145,940 $24,437,820 $13,114,963 $11,893,072 $27,451,818 $8,145,940 $8,145,940 $8,145,940 $8,471,778 $67,122,546 $8,145,940 $8,145,940 $8,634,696 $17,432,312 $8,145,940 $15,803,124 $8,145,940 $8,145,940 $2,688,160

SDWA SRF ARRA APPROPS. P.L. 111-5 $19,500,000 $19,500,000 $19,500,000 $19,500,000 $43,095,000 $19,500,000 $86,775,000 $65,715,000 $19,500,000 $58,500,000 $31,395,000 $28,470,000 $65,715,000 $19,500,000 $19,500,000 $19,500,000 $20,280,000 $160,680,000 $19,500,000 $19,500,000 $20,670,000 $41,730,000 $19,500,000 $37,830,000 $19,500,000 $19,500,000 $6,435,000

TOTAL SDWA SRF $27,645,940 $27,645,940 $27,645,940 $27,645,940 $61,097,527 $27,645,940 $123,024,433 $93,166,818 $27,645,940 $82,937,820 $44,509,963 $40,363,072 $93,166,818 $27,645,940 $27,645,940 $27,645,940 $28,751,778 $227,802,546 $27,645,940 $27,645,940 $29,304,696 $59,162,312 $27,645,940 $53,633,124 $27,645,940 $27,645,940 $9,123,160

Source: Compiled by CRS. Notes: Dollar amounts in the table reflect 1.5% setaside for Indian Tribes under both SRF programs that is reserved prior to distribution to states. ARRA appropriations also reflect amounts reserved by EPA for administration.

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End Notes 1

U.S. Environmental Protection Agency, Office of Wastewater Management, Clean Watersheds Needs Survey 2004, Report to Congress, January 2008, http://www.epa.gov/cwns/2004rtc/cwns2004rtc.pdf. For information, see CRS Report RS22037, Drinking Water State Revolving Fund (DWSRF): Program Overview and Issues, by Mary Tiemann. 3 U.S. Environmental Protection Agency, Drinking Water Infrastructure Needs Survey, Fourth Report to Congress, February 2009, EPA-816-R-09-001. 4 Prior to the 109th Congress, EPA appropriations were included in legislation funding the Department of Veterans Affairs, Department of Housing and Urban Development, and Independent Agencies (VA/HUD). In January 2005, House and Senate Appropriations Committees reorganized, and jurisdiction over funding for EPA and several other entities was moved to the Appropriations subcommittees covering Interior and Related Agencies. 5 For additional information, see CRS Report RL32201, Water Infrastructure Projects Designated in EPA Appropriations: Trends and Policy Implications, by Claudia Copeland. 6 In the 1 04th Congress, the House passed a comprehensive CWA reauthorization bill that included provisions concerning water infrastructure, but because of controversies with a number of provisions, the legislation was not enacted. Since the 107th Congress, House and Senate committees have considered legislation to reauthorize water infrastructure financing programs. The House has twice passed bills, and legislation has been reported to the Senate, but not bill has been enacted. For information, see CRS Report R40098, Water Quality Issues in the 111th Congress: Oversight and Implementation, by Claudia Copeland. 7 H.Rept. 104-715, accompanying H.R. 4624, 103rd Cong., 2d sess., p. 42. 8 H.Rept. 104-812, accompanying H.R. 3666, 104th Cong., 1st sess., p. 74. 9 H.Rept. 105-175, accompanying H.R. 2158, 105th Cong., 1st sess., p. 69; S.Rept. 105-216, accompanying S. 2168, 105th Cong., 2nd sess., p. 82. 10 H.Rept. 106-379, accompanying H.R. 2684, 106th Cong., 1st sess., p. 141. 11 Section 104(b)(3) grants have been used to support a variety of special studies and projects allowing states and localities to demonstrate innovative approaches to implementing the core water quality program. 12 Colonias are unincorporated areas outside city boundaries along the U.S.-Mexico border. Most lack adequate public utilities, especially water and wastewater services. 13 The 1987 Clean Water Act amendments authorized federal grants to assist states in implementing programs to manage water pollution from nonpoint sources such as farm and urban areas, construction, forestry, and mining sites. Because of competing demands for funding, it had been difficult for Congress to fund this grant program and other water quality initiatives in the 1987 Act. Appropriators did fund Section 319 grants in EPA‘s general program management account (abatement, control and compliance) in FY1990, FY1991, and FY1992, but well below authorized levels. In the FY1993 Act, appropriators moved funding into the SRF/construction grants account, thereby providing a degree of protection from competing priorities. 14 H.Rept. 104-384, accompanying H.R. 2099, 104th Cong., 1st sess., in Congressional Record, vol. 141, no. 193, daily ed. December 6, 1995, p. H 14132. This was the second conference report on this bill; a previous agreement, reflected in H.Rept. 104-3 53, was rejected by the House on November 29. However, amounts in the State and Tribal Assistance Grants account were the same in both versions. 15 The conference report on H.R. 3019 (H.Rept. 104-537) references the conference report on the vetoed H.R. 2099, making the two reports together the full statement of the conference committee regarding EPA funding and the State and Tribal Assistance Grants account. 16 S.Rept. 105-53, accompanying S. 1034, 105th Cong., 1st sess., p. 71. 17 Office of Management and Budget. ―Cancellation Pursuant to Line Item Veto Act,‖ 62 Federal Register 59768, November 4, 1997. The President also cancelled funding for two other projects in the EPA portion of the bill, a water and wastewater training institute in Alabama and a solar aquatic wastewater treatment plant in Vermont. These projects were funded under a separate EPA account in the bill, the environmental programs and management account. 18 H.J.Res. 2 included an across-the-board 0.65% reduction to accounts funded by the legislation, and to each program, project, and activity within an account. This reduction is reflected in amounts described here. 19 H.R. 2673 included an across-the-board 0.59% reduction to accounts funded by the legislation, and to each program, project, and activity within an account. This reduction is reflected in amounts described here. 20 H.R. 4818 included an across-the-board 0.80% reduction to accounts funded by the legislation, and to each program, project, and activity within an account. This reduction is reflected in amounts described here. 21 Finals amounts shown here reflect a 1.56% across-the-board reduction of appropriated amounts for accounts included in Division F of the legislation. 22 For additional information, see CRS Report R40216, Water Infrastructure Funding in the American Recovery and Reinvestment Act of 2009, by Claudia Copeland, Megan Stubbs, and Charles V. Stern. 23 For additional information, see CRS Report R41 149, Environmental Protection Agency (EPA): Appropriations for FY2011, by Robert Esworthy et al.

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Chapter 4

WATER INFRASTRUCTURE PROJECTS DESIGNATED IN EPA APPROPRIATIONS: TRENDS AND POLICY IMPLICATIONS Claudia Copeland

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SUMMARY Congressional action to designate funds within appropriations legislation for specified projects or locations has been increasing in recent years as a way to help communities meet needs to build and upgrade water infrastructure systems, whose estimated future funding needs exceed $630 billion. Such legislative action has often been popularly referred to as earmarking. This report discusses appropriations for water infrastructure programs of the Environmental Protection Agency (EPA), focusing on such designations in the account that funds these programs. Information on the programmatic history of EPA involvement in assisting wastewater treatment and drinking water projects is provided in two appendixes. Congressional appropriators began the practice of supplementing appropriations for the primary Clean Water Act (CWA) and Safe Drinking Water Act (SDWA) assistance programs with grants for individually designated projects in FY1989. These designated project grants are often referred to as earmarks or as STAG grants. Since 1989, of the $56.8 billion appropriated to EPA for water infrastructure assistance, more than 13% ($7.4 billion) has gone to designated project grants. Notably since FY2000, appropriators have awarded such grants to a larger total number of projects, resulting in more communities receiving such assistance, but at the same time receiving smaller amounts of funds, on average. Members of Congress may intervene to provide funding for a specific community for a number of reasons. In some cases the community may have been unsuccessful in getting state approval to fund the project under other programs. Some, especially small and rural communities, seek a grant because the cost of a project financed through a state loan which must be fully repaid is deemed unacceptably high (loans are the primary assistance under the CWA and SDWA). However, this congressional practice has been criticized by state water program managers and administrators of infrastructure financing programs because

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designated projects are receiving more favorable treatment (55% federal grants, rather than loans) and because the practice sidesteps the standard process of states‘ determining the priority by which projects will receive funding. Projects so funded through appropriations acts also have generally not been reviewed by congressional authorizing committees. Attention is often drawn to the relatively few projects that have received large special project grants (more than $100 million), especially over multiple years. The majority of designated projects, however, receive comparatively small amounts. More than 75% of the projects designated in the EPA appropriations legislation have received total awards (either in a single year or over multiple years) of $2 million or less. While some Members of Congress, interest groups, and Administration officials are critical of these types of congressional actions, it is likely that communities will continue to seek this type of assistance, and there is little indication that the practice will cease.

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INTRODUCTION Congressional action to designate funds within appropriations legislation for specified projects or locations has been increasing in recent years as a way to provide funding for designated communities to build and upgrade water infrastructure systems. In the past, such legislative action has often been popularly referred to as earmarking. The future needs for projects to treat municipal wastewater or treat and deliver public drinking water supplies in the United States are large—$298 billion for wastewater treatment and $335 billion for public water systems, according to the most recent estimates reported by states and the Environmental Protection Agency (EPA).1 Federal funding to assist communities in meeting the goals and requirements of environmental laws has been provided first through programs in the Clean Water Act and also, more recently, through a program in the Safe Drinking Water Act. Under the core assistance programs in these acts, Congress annually appropriates block amounts which are allocated among states according to specified allotment formulas. States, then, make assistance awards to individual communities. From 1972 through FY2010, Congress has provided $96.8 billion for these core programs. Under both laws, federal funds capitalize state revolving funds (SRFs), which states then use to make loans to communities for water infrastructure capital projects. Local communities, in turn, repay loans to the state revolving fund, not the federal government. In FY1989, congressional appropriators began the practice of supplementing appropriations for the SRF programs with designated project grants in the EPA appropriations account that funds Clean Water Act and Safe Drinking Water Act assistance. Unlike loans under the two SRF programs, these grants generally are provided on the basis of 55%-45% federal-local cost sharing, with no requirement to repay the federal share. Since 1989, Congress has awarded $7.4 billion for these grants, which have increased as a portion of appropriated water infrastructure funds in that account. Notably since FY2000, appropriators have awarded grants to a larger total number of specified projects (e.g., 46 in FY1995, compared with 319 in FY2010), resulting in more communities receiving such assistance, but at the same time most of them receiving smaller amounts of funds, on average (e.g., $18.1 million in FY1995, compared with $585,508 in FY2010).

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This report discusses appropriations for EPA water infrastructure programs, focusing on congressional special project designations in the account that funds these programs. While some Members of Congress, interest groups, and Administration officials are critical of these types of congressional actions, there is little indication that the practice will cease. Information on the programmatic history of EPA involvement in assisting wastewater treatment and drinking water projects also is provided in two appendixes.2

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DEFINING SPECIAL PURPOSE PROJECT GRANTS In appropriations legislation, funding for EPA clean water and drinking water programs is contained in the measure providing funds for the Department of the Interior, Environment, and Related Agencies.3 Within the portion of that bill which funds EPA, wastewater treatment and drinking water assistance are specified in an account called State and Tribal Assistance Grants (STAG). This appropriations account includes all water infrastructure funds, as well as management grants that assist states in implementing air quality, water quality, and other media- specific environmental programs.4 Today, the STAG account includes appropriations both for the primary Clean Water Act and Safe Drinking Water Act assistance programs (see Appendixes A and B for background) and for congressionally designated special purpose project grants, which many persons have popularly referred to as earmarks, or often as STAG grants. There is no single definition of the term ―earmark‖ that is accepted by all practitioners and observers of the congressional appropriations process, nor has there been a standard practice across all 13 appropriations bills. While definitions of this practice vary, an earmark generally is considered to be an allocation of resources to specifically targeted beneficiaries. They may be proposed by the President or may be originated by Congress. In the 110th Congress, a number of budget process reform proposals were debated, including changes to House and Senate rules affecting earmarking, as this practice has been controversial.5 The focus of this report is funds set aside within the EPA STAG account to fund individual water infrastructure projects, locations, or organizations, detailed either in the appropriations act or the joint explanatory statement of its accompanying conference report, and not distinguishing those requested by the Executive from those designated by Congress.

Trends in Congressionally Designated Project Grants Pressure to provide designated special project grant funding has been evident in the appropriations process where, in recent years, Congress has reserved as much as 30% of funds in the account that provides clean water and drinking water assistance for specified communities. The practice of designating a portion of the construction grants/SRF account for specific wastewater treatment and other water quality projects began in the FY1989 EPA appropriations legislation. Since then it has increased as a portion of appropriated funds in the STAG account (3% of the total water infrastructure appropriations in FY1 990, for example, increasing to 31% in FY1994, but somewhat less in recent years: 11% in FY2009 and 12% in FY20 10).

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The number of projects receiving these designated funds also has increased: from four in FY1989 to 319 in FY20 10. Since FY2000, the larger total number of projects has resulted in more communities receiving such grants, but at the same time receiving smaller amounts of funds. Thus, while a few communities have received individual awards of $2 million or more in recent years, the average size of grants has shrunk: $18.1 million in FY1995, $4.9 million in FY1999, $1.08 million in FY2006, and $585,508 in FY2010. See Table 1 for additional detail. (FY2007, a special case, is discussed separately below.) Conference reports on the individual appropriations bills provide some description of projects funded in this manner, but the text is typically very brief. The effective result of using substantial amounts for congressionally designated project grants has been to reduce the amount of funds provided to states to capitalize their revolving loan programs. Of the $56.8 billion appropriated to EPA for water infrastructure programs since 1989 (both for wastewater, under the Clean Water Act, and drinking water projects, under the Safe Drinking Water Act), $7.4 billion, or 13%, has gone to specified project grants. Unlike loans under the two SRF programs, these grants generally are provided on the basis of 55%-45% federal-local cost sharing, or the maximum dollar amount specified in the appropriations act, whichever is less, with no requirement to repay the federal share. The matching requirements are spelled out in statutory and/or report language.6 From FY1989 to FY1995, the Boston Harbor project, discussed below, received the largest single project grant each year ($25 million in FY1989, $100 million in FY1994). In all years except FY2008, since FY1996, the largest single grant in each year‘s appropriations act has been designated for ―architectural, engineering, planning, design, construction and related activities in connection with the construction of high priority water and wastewater facilities in the area of the United States-Mexico Border‖ (P.L. 109-54). Appropriations for these U.S.Mexico Border projects have totaled $780 million. From FY1989-FY1994, designated project grants were used only to assist wastewater treatment projects. The first two such grants for drinking water projects were provided in FY1995 appropriations legislation, two more were awarded in FY1997, and 12 (out of 42 total) were designated in FY1998. Since then, the number of designations for individual drinking water projects has increased, and since FY2005, project grants have been divided approximately equally between wastewater treatment projects and projects involving drinking water or water supply. Further, for several years recently, more than one-third of the individual grants are repeats, that is, grants awarded to projects that have previously received one or more. In the early years of this congressional practice, special purpose grant funding originated in the House version of the EPA appropriations bill, while the Senate, for the most part, resisted the practice by rejecting or reducing amounts and projects included in House-passed legislation. With this difference in legislative approach, special purpose grant funding was an issue on several occasions during the House-Senate conference on the appropriations bill. Since FY1999, however, both the House and Senate have proposed projects in their respective versions of the EPA appropriations bill, with the final total number of projects and dollar amounts being determined by conferees. In addition, as it has now been 20 years since the last major amendments to the Clean Water Act, the desire by some Members to address special needs wastewater problems that might be debated during reauthorization of that act

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has increased, thus leading to greater pressure on House and Senate Members to use the appropriations process to handle such concerns.7

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Table 1. Water Infrastructure Grants Designated in EPA Appropriations Acts. Fiscal Year # of Projects Total Grants Average Grant Range of Grant Awards 1989 4 $68,000,000 $17,000,000 $3 million-$25 million 1990 4 $53,000,000 $13,250,000 $6.8 million-$20 million 1991 2 $35,700,000 $17,850,000 $15.7 million-$20 million 1992 8 $435,000,000 $54,375,000 $35 million-$100 million 1993 13 $556,000,000 $42,769,231 $7 million-$100 million 1994 9 $558,000,000 $62,000,000 $10 million-$150 million 1995 46 $834,100,000 $18,132,609 $200,000-$100 million 1996 20 $306,500,000 $15,325,000 $150,000-$100 million 1997 21 $301,000,000 $14,333,333 $50,000-$100 million 1998 42 $393,125,000 $9,360,119 $100,000-$75 million 1999 82 $401,750,000 $4,899,390 $100,000-$50 million 2000 143 $395,344,000 $2,764,643 $285,000-$50 million 2001 244 $466,370,000 $1,911,352 $50,000-$75 million 2002 339 $458,900,000 $1,353,687 $100,000-$75 million 2003 491 $413,407,272 $841,970 $19,870-$49.7 million 2004 520 $425,077,160 $817,456 $84,598-$49.7 million 2005 669 $401,685,600 $600,427 $29,760-$49.6 million 2006 259 $288,806,966 $1,084,197 $49,300-$49.3 million 2007 2 $83,749,000 $41,874,500 $34.5 mil.-$49.3 million 2008 282 $177,192,000 $628,340 $78,750-$24.6 million 2009 303 $183,500,000 $605,611 $138,000-$20.0 million 2010 319 $186,777,000 $585,508 $68,000-$17 million Source: Compilation by CRS of water infrastructure project grants in the VA/HUD appropriations acts for FY1 989-FY2005, the Interior, Environment, and Related Agencies Appropriations Act for FY2006, the Consolidated Appropriations Act for FY2008 (Division F), the Omnibus Appropriations Act, 2009, the Interior, Environment and Related Agencies Appropriations Act, 2010, and accompanying conference reports for each.

Since the practice of designating projects began to increase in the early 1990s, the position of the Clinton and both Bush Administrations has been to propose a limited number of such grants for inclusion in the President‘s annual budget submission (such as U.S.-Mexico Border projects), but generally to oppose the congressional practice of specifying a large number of projects as a significant portion of funds in the STAG account, especially in recent years. Appropriators have supported most but not all projects requested by the President, while modifying the funding amounts for some of the Administration‘s requests and adding many more projects not requested by the Administration. For example, the first Administration request for a specified project was in the FY1992 budget. The George H.W. Bush Administration sought $400 million at that time for grants to be directed to six projects in coastal cities. Congress agreed to funding for those six, plus two others. Likewise, in FY1993, Congress agreed to grants for six projects requested by the Administration, plus

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seven others. This pattern of Administration requests and congressional response has continued. In FY2010, the Administration requested grants for two special needs projects; Congress funded both of them, plus 317 others.

Project Grants for Specific Cities The four projects designated in FY1989 were projects for which funding had been authorized in the 1987 Water Quality Act (WQA, P.L. 100-4). (These project authorizations were in Title V of the WQA, which did not specifically amend the Clean Water Act.) The authorized projects were: 

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  

Boston, to provide secondary treatment of wastewater and improve the environmental quality of Boston Harbor, San Diego, to remedy discharges of untreated sewage from Tijuana, Mexico, Des Moines, a sewage treatment plant project, and Oakwood Beach, New York, for relocation of natural gas facilities related to two sewage treatment facilities.

For the next two years, appropriators continued to designate only WQA-authorized projects, with one exception. Two of these authorized projects (Boston Harbor and San Diego/Tijuana) continued to receive some funding through FY1999, but most designations since FY1992 have been for projects not specifically authorized in federal law. From FY1989 to FY1999, Congress appropriated a total of $740 million for the Boston Harbor project—the largest total amount received by a single community under provisions in the EPA appropriations act. A few other communities have received large total amounts of such grants over multiple years. For example, the WQA-authorized San Diego project received $235 million over seven years, and another San Diego project for a wastewater reclamation facility received a total of $135 million in the early 1 990s. Los Angeles was awarded a total of $160 million from FY1 992-1994 for unspecified projects. New York City received $210 million in grants over that same time period, also for unspecified infrastructure projects. Detroit has received grants totaling $352 million since FY1992 for a project called the Rouge River Wet Weather Demonstration Project. Designated funding in the EPA appropriations act for projects along the U.S.-Mexico border (distributed to multiple communities) have totaled $780 million since FY1996. Projects in Alaska Native and rural villages (also distributed to multiple locations) have been awarded $452 million since FY1995.8 The large awards for these projects tend to mask the average value of water infrastructure designated project grants. For example, in FY2010, the average of all 319 awards was $585,508, but discounting the $30 million for Alaska Native and rural village projects and U.S.-Mexico border projects, the average for other individual grants was $494,565.

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No Special Project Grants in FY2007 For FY2007, Congress was unable to enact all appropriations bills before the start of the fiscal year, on October 1, 2006. Final action on appropriations for EPA, as well as for other domestic agencies and departments funded under 11 of 13 appropriations acts, was delayed until mid- February 2007—after the FY2008 budget request had been submitted. In February, Congress passed a continuing appropriations resolution providing full-year funding through the end of FY2007 (P.L. 110-5). In order to complete the unfinished business in a timely manner, House and Senate leaders decided to include no congressional special purpose grants in the resolution, explaining the decision in a press release.9

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There will be no Congressional earmarks in the joint funding resolution that we will pass. We will place a moratorium on all earmarks until a reformed process is put in place. Earmarks included in this year‘s House and Senate bills will be eligible for consideration in the 2008 process, subject to new standards for transparency and accountability. We will work to restore an accountable, above-board, transparent process for funding decisions and put an end to the abuses that have harmed the credibility of Congress.

Under the FY2007 appropriations bill for EPA that had been under congressional consideration during 2006 (H.R. 5386), the House would have provided $200 million for 146 special project grants. The Senate would have provided $210 million for 195 projects. As a result of the process adopted in P.L. 110-5, none received funding. The congressional moratorium did not apply to special project grants requested by the Administration in the President‘s FY2007 budget request; it had sought $14.9 million for Alaska Native and rural villages, $24.8 million for U.S.-Mexico Border projects, and $990,000 for a single project in Puerto Rico. The final result in P.L. 110-5 (see Table 1), however, provided funding for Administration priorities at the same levels that were enacted for FY2006: $34.5 million for Alaska Native and rural villages, $49.3 million for U.S.-Mexico Border projects, and no funding for the Puerto Rico project. After this single year, Congress resumed including special purpose grants in EPA‘s FY2008, FY2009, and FY2010 appropriations (see Table 1).

Policy Implications Groups representing state water program managers and administrators of infrastructure financing programs have criticized the congressional practice of awarding grants to designated communities. They contend that it undermines the intended purpose of the state funds, which is to promote environmental improvements nationwide. Many state officials would prefer that funds be allocated more equitably, not based on what they view largely as political considerations, and they would prefer that state environmental and financing officials retain responsibility to set actual spending priorities. Further, they say, because directed funding to special projects diminishes the level of seed funding for loans under state revolving funds, it delays the time when states will become financially self-sufficient—and may actually prolong the period when states seek continued federal support.

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The practice has been criticized because designated projects are receiving more favorable treatment than other communities‘ projects: they generally are eligible for 55% federal grants (and will not be required to repay 100% of the funded project cost, which they must do in the case of a loan through an SRF), and the practice sidesteps the standard process of states‘ determining the priority by which projects will receive funding. It also means that the projects have generally not been reviewed by the congressional authorizing committees. This is especially true since FY1992, when special purpose grant funding has been designated for projects not authorized in the Clean Water Act or amendments to it or in the Safe Drinking Water Act. Members of Congress may intervene to provide funding for a specific community for a number of reasons. In some cases, the community may have been unsuccessful in getting state approval to fund the project under an SRF loan or other program. For some, especially small and rural communities, the cost of a project financed through a state loan, which the community must repay in full, is deemed unacceptably high, because repaying the loan can result in increased user fees that ratepayers feel are unduly burdensome. The community then seeks a grant to avoid this costly financial scenario. A number of the special purpose grants have been made to projects characterized as ―needy cities,‖ based on local economic conditions. Since FY1993, report language accompanying the appropriations bills (and specifically legislative language since FY2004) has directed that grants awarded in this manner shall require that 45% of a project‘s cost be the responsibility of the local community. EPA is allowed to be flexible in applying the local cost-share, based on the community‘s financial capability, but the agency has rarely modified the general requirement. Technically, the CWA Title II grants program ended when authorizations for it expired after FY1990. One result of awarding special purpose grants in appropriations bills has been to perpetuate grants as a method of funding wastewater treatment construction long after FY1990. At the same time, it also results in grants which had not previously existed for drinking water system projects. Following enactment of an appropriations act, project grants designated by Congress are not provided automatically to the designated recipient communities or organizations. Since the funds are awarded as EPA grants, recipients must first meet all applicable EPA requirements in regulations and guidelines that apply to other grant programs, including applying for the grant and complying with other federal laws and requirements, and must continue to comply with program- and project-specific rules as long as the grant remains active. Consequently, there are administrative costs associated with special purpose grants both for the local communities and for EPA, which administers several hundred more of these grants every year.

FINAL THOUGHTS Attention is often drawn to the relatively few projects that have received large grant awards by Congress, especially over multiple years. However, the other side of that story is the large number of projects that receive relatively small amounts—especially as a percentage of the total cost of water infrastructure projects, which can be very large. Even with the large awards described here for some communities, more than 75% of the projects designated in the

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EPA appropriations legislation have received total awards (either in a single year or over multiple years) of $2 million or less. The trend of appropriators to provide smaller awards is reflected in the fact that only a small number of projects have received awards of $1 million or more: 27 in FY2008 (9.6% of total earmarks), 27 again in FY2009 (9% of total), and 22 in FY20 10 (6.9% of total). This congressional practice has raised two significant policy issues. The first is that it alters the process of who decides which water infrastructure projects will receive funding, from state program officials to Members of Congress (for those projects not also requested by the Executive), and how the merits of particular projects may be evaluated. The second issue, noted above, is that it reduces the amount of funds provided to capitalize state revolving loan programs, thus arguably delaying the time when states will become financially self-sufficient in administering capital programs and potentially prolonging the time when states and communities seek continued federal aid. Some Members of Congress, interest groups, and Administration officials are critical of including special project grants in this and other appropriations acts. Other Members and many local officials view it as an appropriate way to assist communities that would not be served by the legislated programs. Based on the recent trends, there is little indication that the practice will cease. Despite the moratorium for FY2007, the practice resumed and has continued since FY2008, although new rules do provide greater transparency by requiring that the sponsors of earmarks be identified in committee reports. Still, as individual award amounts have gotten smaller, it is not unreasonable to question whether some communities may conclude that the cost of receiving such funding—both in terms of political capital spent to seek it and actual resources spent subsequently to secure the grant from EPA—exceeds the benefits.

APPENDIX A. BACKGROUND: FEDERAL INVOLVEMENT IN WASTEWATER TREATMENT The Water Pollution Control Act of 1948 (P.L. 80-845) was the first comprehensive statement of federal interest in clean water programs. While it contained no federally required goals, limits, or even guidelines, it started the trickle of federal aid to municipal wastewater treatment authorities that grew in subsequent years. It established a grant program to assist localities with planning and design work and authorized loans for treatment plant construction. With each of the four successive amending statutes in the 1950s and 1960s, federal assistance to municipal treatment agencies increased. A construction grant program replaced the loan program; the amount of authorized funding went up; the percentage of total costs covered by federal funds was raised; and the types of project costs deemed granteligible expanded. In the Federal Water Pollution Control Act Amendments of 1972 (P.L. 92-500, popularly known as the Clean Water Act (CWA)), Congress revised the existing federal clean water law, including provisions related to wastewater systems. In the 1972 law, Congress strengthened the federal role in clean water and established the first national standards for sewage treatment. A number of new conditions were attached to projects constructed with grants (such as comprehensive planning requirements). In order to assist communities in

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meeting the ambitious water quality improvement goals of the new law, federal funds increased dramatically, and the federal share was raised from 55% to 75%. The grant program was reauthorized in 1977 (P.L. 95-217) and again in 1981 (P.L. 97117). Efforts began focusing on use of federal funds for projects with clear environmental benefits, out of concern that the program‘s wide scope was not well focused on key goals. Especially reflected in the 1981 amendments were budgetary pressures and a desire to reduce federal spending. Annual authorizations were reduced from $5 billion to $2.4 billion, the federal share was again set at 55%, and project eligibilities were limited. The most recent CWA amendments were enacted in 1987 (P.L. 100-4). That legislation authorized $18 billion over nine years for wastewater treatment plant construction, through a combination of the traditional grant program and a new State Water Pollution Control Revolving Funds (SRF) program. Under the new program, federal capitalization grants are provided as seed money for state-administered loans to build sewage treatment plants and other water quality projects. Local communities, in turn, repay loans to the state, a process intended by Congress to enable a phaseout of federal involvement after states build up a source of capital for future investments. Under the amendments, the SRF program was phased in beginning in FY1989 and entirely replaced the previous grant program in FY1 991. The intention was that states would have greater flexibility to set priorities and administer funding, while federal aid would end after FY1994. As a general matter, states and cities supported the program changes and the shift to a loan program that was intended to provide long-term funding for water quality and wastewater construction activities. However, the change means that local communities now are responsible for 100% of project costs financed under the SRF program, rather than 45% under the previous grant program. While municipalities have made substantial progress toward meeting the goals and requirements of the act, state water quality reports continue to indicate that discharges from wastewater treatment plants are a significant source of water quality impairments nationwide. The original authorizations expired in FY1994, but pressure to extend federal funding by reauthorizing the Title VI SRF program and by providing appropriations both for SRF capitalization grants and earmarked project grants, has continued, in part because estimated funding needs remain large. Thus, Congress has continued to appropriate funds, and the anticipated shift to full state responsibility has not yet occurred. Authorizations since 1972, for both the previous Title II grant program and now for the Title VI SRF program, totaled $66 billion, while appropriations have totaled $85.1 billion through FY2010. For the first 10 years following enactment of the 1987 amendments, appropriations for wastewater treatment assistance (Title II and Title VI grants) averaged $1.57 billion per year. From FY1998 to FY2004, Title VI appropriations averaged $1.35 billion per year. FY2005 appropriations totaled $1.09 billion, FY2006 appropriations totaled $887 million, FY2007 appropriations totaled $1.08 billion, and appropriations totaled $689 million in FY2008 and the same amount in FY2009. In the American Recovery and Reinvestment Act (P.L. 111-5), enacted in February 2009, Congress appropriated an additional $4.0 billion in supplemental FY2009 funds, to be available through FY2010. FY2010 appropriations (in P.L. 111-88) were $2.1 billion, bringing total CWA appropriations since the 1987 amendments to $34.9 billion.

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APPENDIX B. BACKGROUND: FEDERAL INVOLVEMENT IN DRINKING WATER In contrast to the 40-plus years of federal support for financing municipal wastewater treatment facilities, Congress only recently—in 1996—established a program under the Safe Drinking Water Act (SDWA) to help communities with financing of projects needed to comply with federal drinking water regulations. Funding support for drinking water only occurred more recently for several reasons. First, until the 1980s, the number of drinking water regulations was fairly small, and public water systems often did not need to make large investments in treatment technologies to meet those regulations. Second and relatedly, good quality drinking water traditionally has been available to many communities at relatively low cost. By comparison, essentially all communities have had to construct or upgrade sewage treatment facilities to meet the requirements of the CWA. Over time, drinking water circumstances have changed, as communities have grown, and commercial, industrial, agricultural, and residential land-uses have become more concentrated, thus resulting in more contaminants reaching drinking water sources. Moreover, as the number of federal drinking water standards has increased, many communities have found that their water may not be as good as once thought and that additional treatment technologies are required to meet the new standards and protect public health. Between 1986 and 1996, for example, the number of regulated drinking water contaminants grew from 23 to 83, and EPA and the states expressed concern that many of the nation‘s 52,000 small community water systems were likely to lack the financial capacity to meet the rising costs of complying with the Safe Drinking Water Act. Congress responded to these concerns by enacting the 1996 SDWA Amendments (P.L. 104-182) which authorized a drinking water state revolving loan fund (DWSRF) program to help systems finance projects needed to comply with SDWA regulations and to protect public health. (For additional background, see CRS Report RS22037, Drinking Water State Revolving Fund (DWSRF): Program Overview and Issues, by Mary Tiemann.) This program, fashioned after the Clean Water Act SRF, authorizes EPA to make grants to states to capitalize DWSRFs which states then use to make loans to public water systems. Appropriations for the program were authorized at $599 million for FY1 994 and $1 billion annually for FY1 995 through FY2003. Actual appropriations, first provided in FY1 997, totaled $11.1 billion and averaged $857 million per year through FY2009. In addition, in the American Recovery and Reinvestment Act (P.L. 111-5), enacted in February 2009, Congress appropriated an $2.0 billion in supplemental FY2009 funds, to be available through FY20 10. FY20 10 appropriations (P.L. 111-88) were $1 .387 billion, bringing the total since FY1997 to $14.5 billion and increasing the annual average to $1.0 billion.

End Notes 1

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U.S. Environmental Protection Agency, Clean Watersheds Needs Survey 2008, Report to Congress, Washington DC, June 2010, 1 vol., EPA-832-R-10-002; Drinking Water Infrastructure Needs Survey, Fourth Report to Congress, February 2009, EPA-816-R-09-001. For additional background, see CRS Report RL3 1116, Water Infrastructure Needs and Investment: Review and Analysis of Key Issues, by Claudia Copeland and Mary Tiemann.

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Prior to the 109th Congress, EPA appropriations were included in legislation funding the Department of Veterans Affairs, Department of Housing and Urban Development, and Independent Agencies (VA/HUD). In January 2005, House and Senate Appropriations Committees reorganized, and jurisdiction over funding for EPA and several other entities was moved to the appropriations subcommittees covering Interior and Related Agencies. 4 For additional discussion, see CRS Report 96-647, Water Infrastructure Financing: History of EPA Appropriations, by Claudia Copeland. 5 See CRS Report RL33818, Federal Budget Process Reform in the 110th Congress: A Brief Overview, by Robert Keith. 6 See, for example, Interior Department and Further Continuing Appropriations, Fiscal Year 2010, P.L. 111-88, 123 Stat. 2936. 7 In the 104th Congress, the House passed a comprehensive CWA reauthorization bill, H.R. 961, but provisions in it that addressed regulatory relief and similar issues were controversial, and no further action occurred. Since the 107th Congress, House and Senate committees have considered legislation to reauthorize water infrastructure financing programs. The House has passed reauthorization bills three times, and legislation has been reported to the Senate, but no bill has been enacted. For information, see CRS Report R40098, Water Quality Issues in the 111th Congress: Oversight and Implementation, by Claudia Copeland. 8 Some water infrastructure projects funded in the EPA bill also have received designated funding in other appropriations acts. For example, Alaska Native and rural village projects received $217 million in Agriculture Appropriations acts from FY1997 to FY2006. Additionally, a small number of those with grants designated in EPA appropriations has received funding through Energy and Water Development Appropriations acts, which fund water projects and programs of the U.S. Army Corps of Engineers and Bureau of Reclamation. Examples of water infrastructure projects funded in this dual manner include combined sewer overflow projects in Lynchburg and Richmond, Virginia, and Nashua, New Hampshire; construction of alternative water supply in Jackson County, Mississippi; and projects to support an environmental restoration plan in Onondaga Lake, New York. In general, projects so designated in the Energy and Water appropriations bill have previously been authorized in legislation such as Water Resources Development acts (WRDA) before receiving appropriations. Since the 1992 WRDA (P.L. 102- 580), Congress has authorized more than 100 Corps environmental infrastructure projects and programs in that act and subsequent amendments to it and has provided Energy and Water appropriations to about one-half of them. 9 ―Byrd-Obey Announce FY 2007 Plan,‖ press release, December 11, 2006. Text available at http://appropriations

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Chapter 5

RURAL WATER INFRASTRUCTURE: IMPROVED COORDINATION AND FUNDING PROCESSES COULD ENHANCE FEDERAL EFFORTS TO MEET NEEDS IN THE U.S.-MEXICO BORDER REGION United States Government Accountability Office

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WHY GAO DID THIS STUDY A serious problem for U.S. communities along the U.S.-Mexico border is the lack of access to safe drinking water and sanitation systems. Inadequate systems can pose risks to human health and the environment, including the risk of waterborne diseases. Numerous federal programs provide grants, loans, or other assistance to rural U.S. communities, including those in the border region, for drinking water and wastewater projects. GAO was asked to determine (1) the amount of federal funding provided to rural U.S. communities in the border region for drinking water and wastewater systems and (2) the effectiveness of federal efforts to meet the water and wastewater needs in the region. GAO analyzed agency financial data; reviewed statutes, regulations, policies, and procedures; and interviewed federal, state, local, and private sector officials.

WHAT GAO RECOMMENDS GAO suggests that Congress consider requiring federal agencies to develop a coordinated plan to improve the effectiveness of drinking water and wastewater programs in the border region and recommends that the agencies take steps to comply with statutory and regulatory requirements. Because USDA and DOD generally believe they are in compliance with relevant statutory and regulatory requirements; they did not fully concur with this recommendation. GAO believes that its findings and recommendations remain valid.

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WHAT GAO FOUND Seven federal agencies—the Environmental Protection Agency (EPA), the Department of Agriculture (USDA), the Department of Housing and Urban Development (HUD), the U.S. Army Corps of Engineers (the Corps), Economic Development Administration (EDA), the Indian Health Service (IHS), and the Bureau of Reclamation (Reclamation)—obligated at least $1.4 billion for drinking water and wastewater projects to assist communities in the U.S.-Mexico border region from fiscal years 2000 through 2008. USDA and EPA obligated 78 percent, or about $1.1 billion, of the total $1.4 billion—with USDA obligating 37 percent, or $509 million, and EPA obligating 41 percent, or $568 million. Agencies provided assistance for a variety of drinking water and wastewater activities, such as constructing or improving treatment facilities and installing distribution lines. For example, of the $509 million total, USDA obligated about $502 million to public utilities or similar entities for construction of or improvements to water and wastewater infrastructure. It obligated over $7 million to individuals in the border region for household projects, such as repairs to indoor plumbing. Federal efforts to meet drinking water and wastewater needs in the border region have been ineffective because most federal agencies (1) have not comprehensively assessed the needs in the region, (2) lack coordinated policies and processes, and (3) in some cases have not complied with statutory requirements and agency regulations. Although federal agencies have assembled some data and conducted limited studies of drinking water and wastewater conditions in the border region, the resulting patchwork of data does not provide a comprehensive assessment of the region‘s needs. Without such an assessment, federal agencies cannot target resources toward the most urgent needs or provide assistance to communities that do not have the technical and financial resources to initiate a proposal for assistance. In contrast, IHS has collected data on water and wastewater conditions for each tribal reservation. As a result, the agency can select projects that target the greatest need. In addition, although some federal agencies recognize the importance of a collaborative and coordinated process to increase program effectiveness, agencies‘ policies and processes are generally incompatible or not collaborative with those of other agencies. For example, most federal programs require separate documentation to meet the same requirement and the agencies do not consistently coordinate in selecting projects. As a result, applicants face significant administrative burdens and project completion can be delayed. Moreover, GAO found that some agencies do not always meet the requirements stipulated in federal statutes and agency regulations concerning how they are to determine the eligibility of applicants or projects and how they are to prioritize funds. For example, USDA and HUD do not ensure that recipients‘ use of targeted funds intended for use in the border region complies with statutory requirements for establishing project priorities in the border region. Finally, the Corps has not established any guidance to ensure funds are targeted to those projects with the greatest need.

ABBREVIATIONS BECC CDBG

Border Environment Cooperation Commission Community Development Block Grant

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Rural Water Infrastructure CWTAP CPAP EDA EPA HUD IDIS IHS NADB SAAP SDS SFC STAG USDA USGS WRDA

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Colonias Wastewater Treatment Assistance Program Community Program Application Processing Economic Development Administration Environmental Protection Agency Department of Housing and Urban Development Integrated Disbursement and Information System Indian Health Service North American Development Bank Special Appropriation Act Projects Sanitation Deficiency System Sanitation Facilities Construction State and Tribal Assistance Grant Department of Agriculture U.S. Geological Survey Water Resources Development Act

December 18, 2009 The Honorable Collin C. Peterson Chairman Committee on Agriculture House of Representatives

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Dear Mr. Chairman: A serious problem along the U.S.-Mexico border is the lack of access to safe drinking water and sanitation systems.1 U.S. residents who lack safe drinking water systems often buy and store water in outdoor tanks or barrels for drinking and other domestic uses. This practice represents a significant health risk because the water is often transferred or stored in open containers and is thereby subject to contamination. In addition, some residents rely on substandard septic systems or cesspools to dispose of sewage because they do not have access to wastewater treatment systems. Leaks from substandard septic systems can contaminate sources of drinking water, such as wells, and can also leave sewage on the ground, where residents, especially children, may be exposed to bacteria and other pathogens. Exposure to contaminated water and wastewater may contribute to the increased rate of waterborne diseases in this region. For example, according to an EPA report, waterborne diseases such as hepatitis A and cholera occur at much higher rates in the Texas border region than in other parts of the state. Numerous federal programs provide grants, loans, or technical assistance to rural communities in the United States, including those in the border region, for drinking water and wastewater projects. Seven federal agencies—the U.S. Department of Agriculture (USDA), the Environmental Protection Agency (EPA), the U.S. Department of Housing and Urban Development (HUD), the U.S. Army Corps of Engineers (the Corps), the Department of Health and Human Service‘s Indian Health Service (IHS), the Department of Commerce‘s Economic Development Administration (EDA), and the Department of the Interior‘s Bureau

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of Reclamation (Reclamation)—administer programs that can assist rural communities in the border region with acquiring drinking water and wastewater systems. In addition, four of these seven federal agencies—USDA, EPA, HUD, and the Corps— administer programs that are targeted specifically to the border region. Agencies provide assistance for a variety of activities, such as the planning, design, and construction of treatment facilities; installation of distribution lines and pumping stations; and upgrades to household plumbing. A combination of assistance from multiple programs is used to fund some individual projects. In response to your request for information on the status of rural water infrastructure along the border region, this report addresses (1) the amount of funding federal agencies have provided to rural households and communities in the border region for the purposes of obtaining safe drinking water and wastewater systems and (2) the effectiveness of federal efforts to meet the drinking water and wastewater needs in the border region. Our review focused on fiscal years 2000 through 2008. To determine the extent of federal funding provided to rural households and communities in the border region for drinking water and wastewater projects, we collected and analyzed agency data on obligations provided for drinking water and wastewater activities from those federal programs that, based on our prior work and additional research, were the most likely to provide assistance to the region. As stated earlier, these programs are primarily administered by USDA, EPA, HUD, the Corps, EDA, IHS, and Reclamation. Our review included programs that provide assistance specifically to rural areas as well as programs that provide assistance to both rural and urban areas. We assessed the reliability of the data we used by reviewing information about the underlying database systems, reviewing the data to identify outliers and inconsistent or missing values, and discussing the data with knowledgeable agency officials. We determined that the data obtained from these agencies were sufficiently reliable for the purposes of our review. In addition, we electronically mapped the funds provided by the federal agencies to identify the geographic distribution of funding. To determine the effectiveness of federal efforts to meet the drinking water and wastewater needs of the region, we identified and reviewed existing federal assessments of drinking water and wastewater conditions; program statutes, regulations, policies, and procedures to solicit, accept, and prioritize applications for those agencies with programs targeted to the border region (i.e., USDA, HUD, EPA, and the Corps); and coordination efforts among these agencies. We also interviewed state and local government officials, officials from water and wastewater utilities, nonprofit officials from the region, and such private sector representatives as urban planners and engineers. In addition, we conducted site visits in Texas, New Mexico, and Arizona, in which we observed federally funded projects and discussed with state and local officials their experiences applying for or receiving assistance from federal agencies. Furthermore, we attended two interagency coordination meetings in which various federal and state agency officials discussed the status of ongoing drinking water and wastewater projects in the border region. A more detailed description of our scope and methodology is presented in appendix I. We conducted this performance audit from December 2008 to December 2009 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

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that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. .

BACKGROUND The U.S.-Mexico border extends more than 2,000 miles, from the Gulf of Mexico to the Pacific Ocean. As can be seen in figure 1, portions of four states—Texas, New Mexico, Arizona, and California—encompassing 97 counties and 44 U.S. federally recognized tribal nations make up the border region. The region includes a wide range of community types, from large cities—such as Los Angeles, California, population 3.8 million—to small, rural communities—such as Spofford, Texas, population 75. Of the 44 tribal nations in the region, 30 are in California, 8 in Arizona, 1 in New Mexico, 2 in Texas, and 3 in both California and Arizona. The tribal nations range in population from 1 household in the Jamul Indian Village in California to 3,572 households in the Tohono O‘odham tribal nation in Arizona, whose tribal land covers an area approximately the size of Connecticut.

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History of Water and Wastewater Infrastructure in the Border Region Throughout the border region, a lack of safe drinking water and adequate wastewater treatment has been a continuous problem exacerbated by large gains in population associated with rapid industrial growth that has occurred over the past three decades. Part of this population increase has occurred in communities now commonly referred to as colonias. Initially, colonias emerged as developers sold small plots of residential land to individuals without providing water or wastewater infrastructure. Residents often placed a trailer or similar structure on the land or built their homes themselves, many starting with just one room and adding on periodically as they were able to afford it. Numerous news articles during the 1980s and 1990s described colonias, with one referring to colonias as ―pockets of poverty‖ with conditions similar to those generally associated with ―third-world‖ conditions.2 When colonias first began to emerge, they were often located in remote areas outside of incorporated cities where developers sold land as residential without adhering to the ordinances and regulations of the cities; however, more recently many local governments have begun to classify entire cities or subdivisions within a city as colonias. Since water and wastewater infrastructure were lacking when they bought their lots and built their homes, many residents in colonias relied on on-site alternatives. For example, to obtain water, some used contaminated wells, while others hauled and stored water in barrels or tanks. For wastewater disposal, residents used methods such as septic tanks or cesspools. Septic systems can treat waste safely, but they can also contaminate drinking water with sewage and organic matter if they are not installed and maintained properly. Effective septic systems require that the type and amount of soil be sufficient to absorb wastewater, and that the systems not be located too close to groundwater or surface water. In contrast, cesspools can pose a risk of contamination because they do not treat wastewater and are merely holes in the ground for the disposal of sewage. Problems associated with failing septic systems are not

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restricted to colonias. Rural households throughout the region can experience difficulties maintaining proper on-site wastewater treatment. Figure 2 compares proper septic system function with improper cesspool disposal.

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Figure 1. U.S.-Mexico Border Region.

Source: GAO analysis of EPA data. Figure 2. Proper and Improper On-site Wastewater Treatment.

In response to public health concerns in the border region caused by a lack of clean drinking water and adequate sewage treatment, Congress established various programs with dedicated funding.3 For example, in the early 1990s, Congress established dedicated funding Water Infrastructure Issues, edited by James D. Haffner, and Elizabeth M. Gennady, Nova Science Publishers, Incorporated, 2011. ProQuest Ebook

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for water and wastewater projects to benefit residents of colonias.4 These funds have been used for a number of projects to provide colonia residents safe drinking water and adequate sewage disposal, yet some colonias continue to lack these basic services. Appendix II provides additional information on the establishment of federal funding to assist colonias. Colonias are still found throughout the border region, though their characteristics vary widely. Present-day colonias are communities of all types and sizes, both incorporated and unincorporated. For example, a colonia can be a tribal reservation, a fast-growing retirement community, or a high-poverty subdivision. Moreover, not all colonias have the same level of need. For example, a town in Arizona that already had water and wastewater service was designated a colonia in 2008 because the local water utility did not have the funds to address routine repairs, and believed that the designation would increase its ability to receive federal funds. In contrast, residents of the El Conquistador colonia in Hudspeth County, Texas, have lived without access to water and wastewater service for over 20 years.

Agencies That Provide Assistance in the Region To help communities and households throughout the border region obtain safe drinking water and adequate wastewater treatment, seven federal agencies provide grants, loans, and technical assistance under separate programs and congressional authorizations. These include the following:

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EPA, which has funding for drinking water and wastewater systems that is complementary to its regulatory and enforcement authorities under the Safe Drinking Water Act and the Clean Water Act. EPA provides grants for water and wastewater infrastructure in the border region through several different programs including the U.S.-Mexico Border Water Infrastructure Program. EPA‘s binational program provides grants to water and wastewater facilities within 62 miles of the border.5 EPA allots most of these funds to the Border Environment Cooperation Commission (BECC) and the North American Development Bank (NADB).6 These organizations then administer these funds to implement project development activities and construction. In addition to the funds administered by BECC and NADB, EPA provides grants to tribal nations within the border region. Colonias Wastewater Treatment Assistance Program (CWTAP). EPA awarded grants to the state of Texas from fiscal years 1993 through 1999 for the purpose of funding the construction and improvement of water and wastewater systems in colonias.7 The state of Texas obligated this funding, along with a state match, to public entities during fiscal years 2000 through 2008. Drinking Water and Clean Water State Revolving Fund Programs. EPA annually provides grants to states to help finance local drinking water and wastewater projects nationwide through the Drinking Water and Clean Water State Revolving Fund Programs.8 The states use this funding, along with a required 20 percent match, to capitalize their state revolving funds. The funds provide low-cost loans or other financial assistance for a wide range of water infrastructure projects. In addition, EPA provides funds from the Drinking Water and Clean Water Revolving Fund

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Programs to tribal nations throughout the United States for water and wastewater projects. USDA, which provides grants, loans, and technical assistance for rural water and wastewater projects through its Water and Environmental Program.9 The department can provide assistance for various activities, such as construction of water treatment and sewage collection facilities, connection of single-family homes to water distribution or wastewater collection lines, and training for the operation of water and wastewater utilities. While the program is available to eligible entities nationwide, USDA has been required by annual appropriations acts to set aside a portion of this funding—up to $25 million annually—for water and wastewater systems that benefit colonia residents (referred to as the Section 306C Colonia funds).10 HUD, which disburses grants to states and local governments through the Community Development Block Grant (CDBG) Program to fund housing, infrastructure, and other community development activities. The annual appropriation for CDBG is split according to HUD formulas so that 70 percent is allocated among eligible metropolitan cities and counties (referred to as entitlement communities) 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 (referred to as nonentitlement communities). Each border state is required to use up to 10 percent of total funds for projects to meet the water, sewage, and housing needs of colonia residents (referred to as the Colonia Set-aside).11 According to a HUD official, HUD determines each state‘s Colonia Set-aside amount annually based on input from state officials and other colonia stakeholders, such as nonprofit organizations. For fiscal years 2000 through 2008, HUD established a 10 percent annual set-aside amount for Texas, New Mexico, and Arizona and a 5 percent annual set-aside for California. Additionally, HUD provides CDBG funds to tribal nations that can be used for any eligible CDBG activity, including water or wastewater projects. IHS, which constructs water and wastewater projects through its Sanitation Facilities Construction (SFC) Program. This assistance is available to tribal nations within the United States, and through the program, IHS constructs various projects, including distribution and collection lines, treatment facilities, and home connections. EDA, which provides grants to economically distressed areas through its Public Works and Economic Development Program.12 The funds are used for construction of public facilities, including water and wastewater facilities. The Corps, which has provided assistance for water and wastewater projects in the border region as directed by Congress. Congress has authorized and appropriated funds for the Corps to provide assistance for a number of projects, including projects to benefit colonias in need of water or wastewater infrastructure. Reclamation, which has been directed to provide assistance for drinking water or wastewater treatment projects in response to individual project authorizations but does not have an established program for such assistance. However, in 2006, Congress passed the Rural Water Supply Act, directing Reclamation to develop a rural water supply program. Entities that can seek assistance from most of these federal agencies include local units of government, tribal nations, water or wastewater utilities or similar entities,

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nonprofit organizations, or individual homeowners. Each federal program has its own application process but generally involves the following steps: Pre-application meeting. Federal agencies generally require the entity seeking assistance to meet with agency officials prior to submitting an application. During this meeting, officials and the potential applicant discuss program eligibility, the type of assistance needed, and application requirements. Submission of application. After the pre-application discussion, the entity seeking assistance prepares an application that can include information such as financial, engineering, and environmental studies that describe the project plan and its costs. Some agencies require additional documentation, such as evidence of public support for the project and documentation that the entity cannot obtain commercial credit at a reasonable rate. Review and evaluation of application. Once an agency receives an application, officials review it for eligibility. After the agency determines that an application meets program eligibility requirements, it may be further evaluated, depending on whether the assistance being requested is from a competitive or a noncompetitive program. For competitive programs, agencies generally score each application according to established criteria and then rank the applications so that the projects with the highest scores will receive priority for available funds. For noncompetitive programs, agencies will generally obligate funding as applications are deemed eligible until all available funds are depleted.

FEDERAL AGENCIES PROVIDED AT LEAST $1.4 BILLION OVER 9 YEARS FOR WATER AND WASTEWATER INFRASTRUCTURE IN THE BORDER REGION We found that seven federal agencies obligated at least $1.4 billion for drinking water and wastewater projects in the U.S.-Mexico border region from fiscal years 2000 through 2008. USDA and EPA obligated 78 percent, or about $1.1 billion, of the total $1.4 billion. The remaining 22 percent, or $309 million, came from HUD, the Corps, IHS, EDA, and Reclamation. Table 1 provides additional data regarding federal funds obligated to the border region for water and wastewater projects by agency and program. Details about the funding provided by each of the seven federal agencies to the border region from fiscal year 2000 through 2008 include the following: 

EPA obligated at least $568 million in grants, or 41 percent of the total federal funding provided to the region.13 Of that, about $471 million was obligated through programs targeted to the border region, while just over $98 million was obligated through nationwide programs. Of the $471 million targeted to the border region, EPA obligated $298 million in grant funds through the U.S.-Mexico Border Water Infrastructure Program, and $173 million in grant funds through the Colonias Wastewater Treatment Assistance Program.14 Of the $98 million from nationwide programs, $61 million was congressionally directed in EPA‘s State and Tribal Assistance Grant (STAG) account appropriations, according to data provided by

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United States Government Accountability Office EPA. The remaining nationwide program funds were obligated to tribal nations through the Drinking Water and Clean Water Revolving Fund Programs (about $36 million). Appendix V provides additional data on the obligations from EPA in the border region. In addition, state-administered revolving loan funds partially capitalized by EPA provided approximately $3.4 billion in loan financing to water and wastewater projects in the border region through the Clean Water and Drinking Water State Revolving Fund Programs from fiscal years 2000 through 2008.15 For example, the California Department of Health obligated about $1.7 million for repairs to the drinking water distribution system in Imperial County, California. Appendix VI provides additional data on the obligations from the Drinking Water and Clean Water State Revolving Fund programs in the border region.

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Table 1. Federal Funds Obligated to the Border Region for Water and Wastewater Projects, by Agency and Program, Fiscal Years 2000-2008. Agency/ program EPA U.S.-Mexico Border Water Infrastructure Program Colonias Wastewater Treatment Assistance Program Congressionally directed funds Indian Clean Water and Tribal Drinking Water Revolving Fund Programs EPA total USDA Water and Environmental Program Section 306C Colonia Funds USDA total HUD CDBG Programs Congressionally directed funds HUD total IHS Sanitation Facilities Construction Program EDA Public Works and Economic Development Program Corps Reclamation Total federal funding

Grants

Loans

$298 million 173 million 61 million 36 million

568 million 92 million 208 million 300 million

$209 million 209 million

217 million 925,000 218 million 45 million 39 million 4 million 4 million $1.2 billion

$209 million

Source: GAO analysis of USDA, EPA, HUD, IHS, EDA, Corps, and Reclamation data. Notes: Individual program totals may not add to agency totals because of rounding. In addition to the funding reported in the table, EPA‘s U.S.-Mexico Border Water Infrastructure Program obligated funds to support projects in Mexico. The $4 million in Corps assistance reported was obligated through technical assistance.

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USDA obligated about $509 million, or about 37 percent of the total federal funding.16 Of the $509 million, it obligated $208 million in grant funds through its Section 306C Colonia funds. The remaining $302 million—$209 million in loan funds and $93 million in grant funds—was obligated through its nationwide Water

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and Environmental Program. Of the $509 million total, USDA obligated about $502 million (98 percent) to public utilities or similar entities for construction or improvements to water and wastewater infrastructure. For example, USDA obligated $2.9 million in grants and almost $1 million in loans to the city of Truth or Consequences, New Mexico, for improvements to the wastewater treatment plant and extension of collection lines. It obligated over $7 million to individuals in the border region for household projects, such as installing indoor plumbing. Appendix IV provides additional data on the obligations from USDA funds in the border region. HUD obligated about $218 million, or 16 percent of the total federal funding provided to the region.17 Almost all of the funds, $217 million, were obligated as grant funds through the Community Development Block Grant Programs. The remainder, $925,000, was obligated from HUD‘s Economic Development Initiative Special Project account, according to officials. Of the $217 million in CDBG grants, $51 million of this was identified by states in HUD‘s database as obligated for water or wastewater projects in a colonia.18 For example, New Mexico obligated about $265,000 to extend water distribution lines to 20 residents of a colonia in Sierra County. Additional funds from the Colonia Set-aside Program may have been used in colonias for water and wastewater projects, but we were unable to determine the total amount because HUD does not comprehensively distinguish in its data system which of the CDBG obligated funds are under the Colonia Set-aside. Of the $217 million in CDBG grants, HUD obligated $2.6 million through its Indian CDBG program to two tribal nations—the Salt River Pima-Maricopa Indian Community and the San Pasqual Band of Mission Indians. Appendix VII provides additional data on the obligations from HUD in the border region. IHS obligated about $45 million for the construction of sanitation facilities on tribal nations in the border region. For example, IHS obligated about $8 million to provide basic sanitation services to residents of the Tohono O‘odham tribal nation by participating in a modular bathroom program.19 Through this effort, residents living in traditional adobe structures that lack indoor plumbing are able to attach a modular bathroom to the home and then connect to a wastewater distribution line. Appendix VIII provides additional data on federal obligations made to each tribal nation in the border region. EDA obligated about $39 million in grant funds for public infrastructure projects that included water or wastewater activities. These funds were obligated for 29 projects. For example, EDA obligated $3.2 million in grant funds for a water system project in San Bernardino, California. This project included land acquisition for new water wells, well drilling, new pipeline, a booster pump, obtaining water rights, an engineering and environmental assessment, and removal of an elevated water tank. The Corps obligated just over $4 million in assistance to projects within the border region. The assistance was used for 6 congressionally directed projects in New Mexico, and 3 projects to assist colonias in Texas conducted under the Water Resources Development Act of 1992, which authorized the Corps to assist communities with water and wastewater needs.20 Reclamation obligated almost $4 million in grant funds for 5 water supply projects, for which Congress specifically authorized and appropriated funds, according to agency documents. Reclamation currently funds projects only in response to specific

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United States Government Accountability Office congressional directives, but it was authorized in 2006 by the Rural Water Supply Act to establish a rural water supply program.21 We reported in 2007 that Reclamation planned to develop programmatic criteria to determine eligibility for participation in this program and to assess the status of authorized rural water supply projects and other federal programs that address rural water supply issues, as the act required, by December 2008.22 As of September 2009, agency officials told us that the establishment of the program is still a priority, but it has been delayed by the change of Administration and by efforts to develop a strategy for implementation of the American Recovery and Reinvestment Act funds.23 Agency officials stated they hope to have the program established by the end of calendar year 2009.

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Of the 97 counties in the border region, 94 received some assistance, and 3 received no assistance during fiscal years 2000 through 2008. Figure 3 shows the amounts provided to the 94 counties that received some assistance, which ranged from a low of just under $260,000 provided to Reagan County, Texas, and to a high of almost $130 million provided to Cameron County, Texas.

Note: Because tribal nations do not conform to county boundaries, IHS obligations are not included in figure 3. Figure 3. Federal Funding Obligated from USDA, EPA, HUD, the Corps, EDA, and Reclamation for Water and Wastewater Projects, Fiscal Years 2000-2008.

Appendix III provides further data on each county, including its rural-urban classification and the funding obligated by federal agencies.

FEDERAL EFFORTS HAVE NOT BEEN EFFECTIVE IN MEETING THE WATER AND WASTEWATER NEEDS OF THE BORDER REGION Federal efforts have not effectively addressed the drinking water and wastewater needs in the border region because agencies (1) have not comprehensively assessed the needs of the

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region, (2) lack coordinated policies and processes, and (3) in some cases have not complied with statutory requirements and agency regulations.

Agencies Have Not Comprehensively Assessed Water and Wastewater Conditions, Hampering Their Ability to Meet the Needs of the Region Over the years, some federal agencies have conducted assessments to identify water and wastewater conditions in the border region, but none of these assessments either individually or collectively provides a comprehensive picture of the needs of the region. We identified the following assessments that either have been conducted by federal agencies or are ongoing:

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EPA commissioned a study to set a baseline, as of December 2003, for its U.S.Mexico Border Water Infrastructure Program by estimating the number of households without basic water and wastewater service in the area served by the program. While the data collection effort was used by the agency to establish performance measures and strategic goals, the agency did not establish a process to update the data to reflect current conditions. Without such a process, the accuracy and usefulness of the data are limited. In addition, the study did not distinguish between homes with appropriate septic systems and homes without them. In addition, EPA has reviewed applications received from both the U.S. and Mexico sides of the border through its U.S.-Mexico Border Water Infrastructure Program in 2004, 2006, and 2008 to determine the total amount of funding requested from the border region. The requests for assistance ranged from $590 million to over $1 billion in project construction costs. During the most recent solicitation, over 130 projects on the U.S. side of the border requested assistance representing $800 million in total project cost, according to EPA officials. While EPA told us this effort provides the agency with a snapshot that reflects the existing needs in the region, it acknowledges this snapshot is not a comprehensive assessment of need in the region and captures only the need from those entities that seek assistance from the U.S.Mexico Border Water Infrastructure Program. Further, EPA conducts the nationwide Clean Watersheds Needs Survey every 4 years to identify the funds needed to address problems with wastewater treatment facilities. Similarly, the agency conducts an assessment every 4 years to identify the funds needed for existing drinking water facilities to comply with safe drinking water quality standards. However, on the basis of information provided by agency officials, we do not believe that either of these efforts provides the agency with a comprehensive assessment of the border region. For example, according to officials, these assessments have not traditionally been successful in collecting data from small communities. Officials told us that the 2004 Clean Watersheds Needs Survey had a 36 percent response rate from wastewater systems that serve small communities (those with fewer than 10,000 wastewater customers). In addition, officials told us the 2007 drinking water assessment includes data for all existing utilities serving over 100,000 customers, but only a sample of small community systems are included in the assessment—600 of the approximately 33,000 such systems nationwide.

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Because many of the communities in the border region are small, we do not believe that they would be captured by the survey. In 2008, USDA, reported on the amount of funds directed to colonias in each of the four border states and the amount of unfunded applications the agency received for the program in fiscal year 2008. This report was in response to a request from the Senate Agriculture Committee to, among other things, provide a report that ―identifies where additional resources are most needed.‖24 According to our review of USDA‘s report, the department did not identify where additional resources are needed, but simply reported its backlog of applications from each state.25 For example, the report stated that the department had a pre-application and application backlog of approximately $117 million—with pre-applications accounting for $108 million and applications accounting for $9 million. As with EPA‘s assessment of applications submitted to the U.S.-Mexico Border Water Infrastructure Program, these figures represent only those entities that have contacted USDA for assistance, and therefore do not provide a complete assessment of those areas where resources are most needed. HUD has provided funds for local governments to identify colonias and the water and wastewater conditions within them. From 1992 through 2008, HUD-funded assessments were completed for 43 of the 67 Texas counties in the border region. For example, a 2008 assessment for Dimmitt County, Texas, found that 113 housing units lacked centralized water service. However, as some assessments were conducted more than a decade ago or longer, they may not reflect current conditions. HUD also provided funds to the U.S. Geological Survey (USGS) to collect data on infrastructure in colonias for 6 counties in Texas. The dataset, released in 2007, includes information such as number of households, source of potable water, and whether wastewater collection is available. Since 1989, IHS has collected data on the water and wastewater infrastructure conditions for each tribal reservation in the United States. This information is available through its Sanitation Deficiency System and is updated annually. As a result, IHS can select projects that target the greatest need and report on effectiveness to meet the water and wastewater needs of tribal nations, including those within the border region. In 2007, BECC began efforts to identify the water and wastewater infrastructure needs within the 62-mile region north of the U.S.-Mexico border. The study is expected to compare the number of existing water and wastewater connections with the total number of homes and is expected to identify gaps in access to centralized services. According to BECC officials, data collection and analysis were completed for New Mexico in the first quarter of 2009 and are currently being conducted for Texas, California, and Arizona. BECC expects to complete all data collection and analysis and issue the study by the end of 2010.

Without a comprehensive assessment of the needs of the region and the existing condition of water and wastewater systems, federal agencies are hampered in their ability to identify and provide assistance to those communities with the greatest need. Instead, we found that most federal programs generally provide funds to those communities with the ability to initiate projects and seek assistance, which may not be the ones with the greatest

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need. According to several state and local officials, it is often the communities in the border region that do not have the institutional capacity to identify solutions or apply for funding that are in need of assistance. For example, rural communities, such as unincorporated colonias, may not be aware of potential solutions for obtaining water and wastewater services or how to start the process to seek these services.26 Rural communities may also lack the financial resources to hire a consultant who can help them design a project and prepare the application materials, including the preliminary engineering and environmental documents. According to several officials that we spoke to, engineering and environmental reports can cost from $30,000 to $100,000. A prior federal study has identified this high initial cost as a major obstacle to providing federal assistance for water and wastewater service in the region.27 While federal assistance to help offset this high initial cost is available through some programs, such as EPA‘s U.S.-Mexico Border Water Infrastructure Program, the overall federal assistance provided for such activities is minimal—from fiscal years 2000 through 2008, the program provided funds to 62 projects in the border region representing about $15 million in grant funds.28 Although few federal agencies have made efforts to build institutional capacity in border communities, we did find some efforts by state programs and nonprofits. For example, the Texas Colonias Initiative Program has colonia ombudsmen who assist communities with basic infrastructure needs. In 1999, the state of Texas established a Colonias Initiative Program to advance efforts to connect colonia residents‘ homes to water and wastewater services. The program‘s ombudsmen work in counties in the border region with the highest colonia populations—Hidalgo, El Paso, Starr, Webb, Cameron, Nueces, and Maverick Counties. The role of the ombudsmen includes the following:

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serving as liaisons among colonia residents, federal and state agencies, local governments, and utility companies; facilitating effective communication among colonia stakeholder groups to improve living conditions for colonia residents; mediating among interested groups to resolve situations that prevent the provision of water and wastewater service; serving as conduits for information by conducting community outreach and facilitating community meetings with colonia residents; and monitoring the different phases of projects to ensure progress and project completion.

State and local officials told us that the ombudsmen had helped communities overcome obstacles to obtaining service and had provided valuable information on colonia conditions to state and federal agencies.

Agencies Lack Coordinated Policies and Processes for Providing Federal Assistance in the Border Region The federal agencies that provide most of the funding for water and wastewater projects in the border region—EPA, USDA, and HUD—have not developed comprehensive coordinated policies and procedures, resulting in administrative burdens for applicants, duplication of efforts, and inefficient use of resources. However, the agencies have long

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recognized the need for improved coordination, and in 1997 these agencies issued a joint memorandum to encourage cooperation among federal, state, and local funding agencies. The memorandum states that the agencies will foster coordination efforts by establishing a uniform application, standardizing requirements, coordinating funding cycles, and collaborating in project selection to improve program delivery to small and rural communities, including those in the border region.29 Despite the fact that this joint memorandum was issued over a decade ago, we found that most programs still have different application processes, different requirements for engineering and environmental reports, different deadlines for submitting applications, and different processes for selecting projects.30 Since water and wastewater projects often depend on assistance from more than one agency, these separate and differing requirements can increase the burden on applicants and delay project completion, according to officials we spoke to.31 For example, an engineer in Texas representing a public utility told us that one applicant trying to expand water service to colonia residents had to pay $30,000 more in fees because the engineer had to complete two separate sets of engineering documentation for EPA and USDA. The applicant could have saved these funds had EPA and USDA established uniform engineering requirements. In addition, because most federal programs have no process by which to coordinate and share information on projects they have selected for funding, we found examples where agencies made inefficient use of limited resources.32 For example, we found a case where EPA and USDA both provided funds to design wastewater projects that would serve the same communities in Hidalgo County, Texas. EPA provided funds to design the project as an expansion of service from an existing utility, while USDA provided funds to design the project as a new wastewater treatment facility. The community elected to build the new facility, thus eliminating the need for the EPA design work and resulting in a waste of those federal funds. In another example, HUD provided a utility in Hudspeth County, Texas, over $860,000 in grant funds from 2004 to 2006 to extend water distribution and waste collection lines for residents of a colonia. However, as of September 2009, the distribution lines remain unused because the utility does not have enough water to serve the additional households. The utility intended to use funding from USDA to construct a new well, but the funding obligated by the agency was not enough to cover project costs.33 The utility has been unable to obtain the additional assistance from federal agencies, and no additional water supply has been acquired in the 3 years after the HUD funds were provided to construct the distribution lines, resulting in a $900,000 investment of federal funds in distribution lines that are not usable. We received conflicting reports about this project from USDA and utility officials. Specifically, a USDA official in the state office told us that the agency could provide loan funds only to complete the project and that the agency advised the utility against applying for assistance because the utility could not handle any additional loan burden. In contrast, USDA headquarters officials told us that the agency orally offered a loan to the utility to complete the project, but the utility did not submit an application to officially request the assistance, and a representative of the utility told us that the utility did meet with USDA officials and it was discouraged from submitting an application. In contrast, federal and tribal officials told us that the collaborative relationship between EPA‘s tribal programs and IHS is a model that has been beneficial for tribal nations. The agencies have created a process to coordinate project selection and development in which EPA uses data on the needs of tribal nations from IHS to select projects. According to EPA

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data, IHS administers almost all jointly funded projects, and as a result applicants need to deal with only one federal point of contact. Furthermore, we found examples of states in the border region that have made efforts to better coordinate funding for water and wastewater projects among federal, state, and local agencies and thereby make the application process easier, maximize the use of funds, and reduce complications during project development. The following are examples of coordination within the states: 

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Texas has developed a coordination group for the state and federal agencies that provide funding to colonias, and for representatives from regulatory agencies. This group meets quarterly to discuss the status of ongoing projects in colonias and any impediments to their completion. California organizes ―funding fairs,‖ where several state and federal agencies come together in communities throughout the state to provide information on potential assistance that may be available. Arizona has developed a committee that consists of several state and federal agencies that conduct meetings throughout the state. According to state officials, these meetings provide communities the opportunity to discuss their needs with the officials and to determine which funding agency could best meet their needs. New Mexico, through executive orders, established an initiative to, among other things, increase collaboration among state agencies that fund water infrastructure.34 As a result of the initiative, the state developed a single application process for entities seeking assistance with water and wastewater infrastructure to complete and submit to one state office through a Web-based portal that then disseminates the application to numerous other state and federal agencies for review. The state has also developed a single set of engineering requirements that state and some federal agencies agreed to accept. In addition, a workgroup of state and federal officials meets biweekly to review the applications and identify the combination of programs that would best meet the needs of individual applicants. Federal participation includes the New Mexico USDA Rural Development office, and state participation includes the New Mexico state agencies administering the HUD CDBG Program and the Clean Water and Drinking Water State Revolving Fund Programs.

Our past work on issues that cut across multiple agencies, such as rural water infrastructure, has shown that agencies face numerous challenges in their efforts to improve coordination.35 For example, we have found that agency missions may not be mutually reinforcing or procedures and processes may be incompatible. However, we found that without a coordinated approach, programs can waste scarce funds and limit the overall effectiveness of the federal effort. In order to overcome significant differences in agency missions, cultures, and established ways of doing business, collaborating agencies must have a clear and compelling rationale to work together. The compelling rationale for agencies to collaborate can be imposed externally through legislation or other directives or can come from the agencies‘ own perceptions of the benefits they can obtain from working together. In either case, among the key practices that can help agencies enhance and sustain their collaborative efforts, include the following:

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defining and articulating a common outcome; agreeing on roles and responsibilities; establishing compatible policies, procedures, and other means to operate across agency boundaries; identifying and addressing needs by leveraging resources; and developing mechanisms to monitor, evaluate, and report on results. 36

Agencies Have Not Always Ensured Compliance with Statutory Requirements in Implementing Programs for the Border Region We found that USDA, HUD, and the Corps have not always ensured compliance with statutory requirements and regulations concerning the eligibility of applicants or projects or the prioritization of funds from programs targeted at the border region.

Agencies Are Not Ensuring Compliance with Statutory Eligibility Requirements HUD and the Corps are not ensuring compliance with eligibility requirements set by Congress when they distribute federal assistance. Specifically, we found the following:

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HUD. Under the Cranston-Gonzalez Act, the states of Arizona, California, New Mexico, and Texas shall each make available, ―for activities designed to meet the needs of the residents of colonias in the State relating to water, sewage, and housing,‖ a specified percentage of CDBG funds they receive.37 Under the act, the term ―colonia‖ means any identifiable community that, among other things, is determined to be a colonia on the basis of objective criteria, including lack of potable water supply; lack of adequate sewage systems; and lack of decent, safe, and sanitary housing. In short, the act requires grants to be made for projects meeting the needs of colonias residents, which must be related to water, sewage, and housing. We found that HUD has not developed guidance for determining what constitutes a colonia, has not made such determinations, and has not reviewed states‘ determinations. Lacking guidance and direction from HUD, states have applied the requirement differently. For example, in California and New Mexico most colonias are designated as communities with substandard housing and a lack of either potable water or adequate sewage systems. In Arizona, designations use any one of the three statutory criteria. In Texas, designations are made for areas with substandard housing that lack either adequate water or wastewater treatment, and which are unincorporated, criteria not found in the act. HUD officials said that the CDBG Program relies on states to make decisions that make the most sense for the particular state, and officials do not agree that varying interpretations by states suggest that the lack of guidance is problematic. However, officials stated that in the future, HUD will issue guidance that reportedly will include information on the documentation needed by states to support that a colonia meets statutory requirements. HUD officials also told us that the agency interprets the statute as authorizing colonia funds to be spent on any currently eligible CDBG activity. However, the statute expressly limits the Colonia Set-aside to activities relating to water, sewage, and

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housing. As the agency has not limited state use of the funds, grants have been obligated for numerous activities. Arizona obligated only about 32 percent of the Colonia Set-aside funds for water, wastewater, or housing activities, and the remainder was used for other activities not consistent with the limitations in the act, including about $560,000 for a neighborhood job center and almost $180,000 for a garbage collection vehicle. HUD officials did not say whether the guidance the agency intends to issue in the future will discuss eligible activities. Corps. The Water Resources Development Act of 1992, as amended, authorizes the Corps to provide assistance for wastewater treatment facilities, water systems, and related structures for colonias in the United States along the United States-Mexico border.38 Although the act does not define colonias, the legislative history for the program shows that colonias were considered to be rural settlements in the border region that lack adequate basic water and sewer facilities, specifically stating that most of these communities rely on outhouses or substandard septic tanks. We found that the Corps has not defined ―colonia‖ for the purposes of the act, or developed any guidance for use of these funds. The Corps recognizes that unlike other Section 219 projects, which have specifically identified project locations (e.g., congressionally directed), the colonias Section 219 project is essentially a programmatic authority. Nonetheless, Corps officials stated the program was too small for the agency to develop guidance. While the Corps states that it independently verifies that the assistance it provides under this provision is going to colonias, Corps officials acknowledged that the agency does not have criteria for identifying eligible colonias, and it is unclear by what basis the Corps has verified the communities are colonias as meant in the authorizing statute.39 As a result, the Corps cannot ensure that its assistance is going to colonias. Appendix II provides additional information on the establishment of federal funding to assist colonias and GAO‘s analysis of legal requirements related to eligibility and project priorities.

Agencies Do Not Ensure Funds Intended for Use in the Border Region Are Provided to Those with the Greatest Need USDA and HUD do not ensure that funds intended for use in the border region comply with statutory requirements for establishing project priorities in the border region. Further, the Corps has not established any guidance to ensure funds are targeted to those projects with the greatest need. Specifically, we found the following: 

USDA. The Consolidated Farm and Rural Development Act, as amended, directs USDA to provide financial assistance for water supply and waste facilities and services to communities whose residents face significant health risks, because the community‘s residents do not have access to such facilities. The act states that USDA must give preference to entities ―that propose to provide water supply or waste disposal services to the residents of those rural subdivisions commonly referred to as colonias that are characterized by substandard housing, inadequate roads and drainage, and a lack of adequate water or waste facilities.‖40 Thus, the provision requires USDA to give preference to water and waste projects in colonias where other infrastructure and housing are also inadequate.

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We found that USDA has no process in place to ensure that entities ―propos[ing] to provide water supply or waste disposal services‖ to these colonias are given preference. Instead, USDA told us it views an entity proposing to assist any community the relevant state or local government has designated as a colonia as qualifying for the preference.41 USDA does not attempt to independently verify whether these entities meet the threshold eligibility requirement (proposing to serve communities in which most residents lack access to adequate water or waste facilities), or that the areas to be served meet the statutory definition of ―colonia.‖ The agency also has failed to provide any guidance elaborating on the meaning of an ―adequate‖ water or waste disposal system, or of ―colonia.‖ Despite the lack of guidance, USDA told us that it considers as inadequate a system with any violation of the Safe Drinking Water Act or Clean Water Act, as appropriate. As a result of these issues, we believe that USDA has no assurance that entities proposing to serve eligible colonias with the required characteristics have received the required statutory preference.42 For example, we found that USDA gave an entity proposing a water utility improvement project in New Mexico the colonia preference and obligated $700,000 from the colonia funds. The improvements to the water utility included a new well, tank, and related infrastructure. Rather than reserving the colonia preference to projects that serve areas living without these basic necessities, the agency provided the same preference to this project, which was intended to serve new development, according to the USDA project summary. By awarding the same preference to projects that benefit communities with existing infrastructure, the agency is failing to give preference to those entities proposing to ―provide water supply or waste disposal services‖ to colonias that have the statutory characteristics and live without basic necessities. HUD. The Cranston-Gonzalez Act requires Colonia Set-aside grants to be made in accordance with a distribution plan that gives priority to colonias having the greatest need for such assistance. To do so would require a state to at a minimum identify colonias, discuss the relative needs of colonias, and select projects reflecting the colonias with greatest needs.43 However, we found that HUD has failed to ensure that state distribution plans reflect that priority is given to the colonias with the greatest need. Instead, HUD officials told us that it is up to the states to determine the needsbased grant priorities and the agency does not believe it has the authority to direct states on how to distribute the funds as long as it is in accordance with a distribution plan. We believe that without direction and oversight from HUD, states may not be meeting the statutory requirements. For example, one state does not distinguish between Colonia Set-aside funds and regular CDBG funds and does not actually ―set aside‖ the colonias funds to distribute based on priority of needs. Instead, the state splits the available funds among the regional Councils of Governments, which then determine how to distribute the funds to local projects. The distribution process can vary by region—e.g., one region rotates eligibility among the eligible entities in the county, providing each eligible entity an equal distribution of the funds. The state later adds up the total of the projects that it considers qualifying as colonias to justify the set-aside amount. While HUD officials may believe states are identifying the colonias with the greatest needs, we do not agree that this complies with the act, which requires the agency to take the necessary steps to ensure that the states are

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doing so. In a July 2008 report, the HUD Inspector General also recommended that HUD address this issue, and HUD agreed to issue guidance to assist states to ―more clearly articulate the priorities‖ in developing their method of distribution.44 As of November 2009, the agency had not yet issued this guidance, but officials told us the agency still intends to issue the guidance in the near future. The Corps. We have previously reported that for a federal program to be effective it should, among other things, be well targeted to those with the greatest needs and the least capacity to meet those needs.45 However, we found that the Corps lacks any guidance specific to the colonias funds and does not have a process to ensure that assistance authorized for colonias is targeted at those with greatest need. Instead we found that the Corps selects projects on an ad hoc basis.46 According to a Corps official, when funds become available, the Corps notifies state officials and asks these officials to notify communities of the available assistance. Then communities are required to send a letter to the Corps requesting assistance. When the Corps receives a letter for assistance, it consults with state officials to discuss the project and primarily bases its decision to assist the community on the entity‘s readiness to enter into the required cost-sharing agreement. By using this approach, the Corps is failing to ensure limited funds are provided to those with the greatest need. Appendix II provides additional information on the establishment of federal funding to assist colonias and GAO‘s analysis of legal requirements related to eligibility and project priorities.

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CONCLUSION Meeting the drinking water and wastewater needs of the border region is a difficult undertaking. Among other things, the remoteness of many communities can make it difficult to identify residents in need of water and wastewater services. In addition, the program differences resulting from separate mandates and project eligibility requirements for the various federal programs add to the complexity of coordinating funding needed to complete projects in the region. The ultimate success of providing these basic services to residents of the border region hinges on several factors, of which a well-coordinated implementation approach based on a comprehensive assessment of the region‘s existing water and wastewater needs is key. Federal agencies have obligated more than $1.4 billion in recent years to fund numerous projects that provided water and wastewater service to residents in the border region. However, despite the extensive efforts that have gone into these projects and the agencies‘ recognition over a decade ago of the benefits from coordinated policies and procedures, the lack of (1) an overall needs assessment for the region, (2) comprehensive coordinated policies and procedures, and (3) compliance with all statutory and program requirements is undermining the effectiveness of the federal efforts. We believe that the impact of these deficiencies has limited the availability of federal assistance, created an administrative burden for applicants, delayed project completion, and failed to ensure that federal funds are used effectively and directed according to the criteria established in federal statutes. In a time of constrained resources, continuing to provide an uncoordinated federal response is not the most effective use of federal resources to meet the drinking water and wastewater needs in the border region.

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MATTERS FOR CONGRESSIONAL CONSIDERATION In order to better address the needs of the region, Congress may wish to consider establishing an interagency mechanism or process, such as a task force on water and wastewater infrastructure in the border region that includes the federal agencies that administer programs in the region. Congress may wish to direct any task force, in partnership with state and local officials, to 

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leverage collective resources to identify needs within the border region—including the identification of the water infrastructure status within colonias, and the extent to which the lack of institutional capacity has impeded communities within the border region from seeking assistance; in light of these needs, establish a framework for compatible and coordinated policies and procedures across relevant agencies, such as a coordinated process for the selection of projects, and standardized applications and environmental review and engineering requirements, to the extent possible; evaluate the degree to which there are gaps in the programs and what resources or authority would be needed to address them; and provide periodic status reports regarding the progress made in developing this strategic and coordinated approach.

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Congress may also wish to consider reemphasizing the priorities for use of Colonia Setaside funds by specifically requiring HUD to make these funds available only for grants related to the three existing statutory purposes, and by directing HUD to report annually to Congress on the purposes for which such funds were used and the steps it is taking to ensure that the funds are being used for the required purposes.

RECOMMENDATIONS FOR EXECUTIVE ACTION We are making the following three recommendations for executive action. To ensure that funding established to meet the needs of colonias is used in ways that are consistent with statutory and regulatory requirements, we recommend that 

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The Secretary of Agriculture direct Rural Development to revise its process of determining eligibility to ensure that the agency only provides Section 306C colonia funds for projects that benefit colonias, as defined by federal statute, and to revise its priority process to better target limited funds to those projects meeting the statutory preference criteria. The Secretary of Housing and Urban Development ensure that state agencies provide Colonia Set-aside funds only for projects that benefit colonias, as defined by federal statute, and to promptly establish guidance to ensure states follow a method of distribution that results in the prioritization of Colonia Set-aside funds to those colonias with the greatest need. Further, the Secretary should monitor the states‘ uses of all Colonia Set-aside funds as a distinct component of CDBG monitoring.

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If the Corps continues to assist communities with water and wastewater related activities through the colonia program, the Secretary of Defense direct the Chief of Engineers and Commanding General of the U.S. Army Corps of Engineers to develop eligibility criteria and a standard process to review and select activities for funding that targets the assistance to those with the greatest need. The process should comply with all applicable regulations and include verification of eligibility.

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AGENCY COMMENTS AND OUR EVALUATION We provided the U.S. Department of Agriculture (USDA), the Environmental Protection Agency (EPA), the Department of Housing and Urban Development (HUD), and the U.S. Army Corps of Engineers (Corps) with a draft of this report for their review and comment. In addition, we sent relevant portions of the report to the Department of Commerce‘s Economic Development Administration, the Department of Health and Human Service‘s Indian Health Service, and the Department of the Interior‘s Bureau of Reclamation for their review and technical comment. In its written comments, USDA provided several observations on the report‘s findings but disagreed with the report‘s recommendation. Specifically, USDA agreed that our report accurately reflects the assistance that has been provided in the border region and stated that more work and additional funding are needed to continue the progress being made. USDA also agreed with our report‘s finding that there is no comprehensive federal assessment of the region‘s water and wastewater systems. However, USDA questioned whether a federal level comprehensive assessment is needed to effectively address water system inadequacies or whether a locally based federal presence that leverages local knowledge of local conditions might not be more effective. While we agree that local knowledge of local needs is an important element that can help inform decision makers, we continue to believe that without a comprehensive assessment of the region, federal agencies providing assistance to the region lack necessary information on the magnitude of the problem and on how best to prioritize and target limited resources. Additionally, USDA stated that it believes the examples presented in our report where coordination would have improved the project outcome are rare instances and that the examples of state level coordination in our report demonstrate that effective coordination is occurring amongst the programs. While we agree that some level of coordination is occurring, we disagree that the examples cited in our report are rare instances. During our review, we contacted numerous officials in the border region—including local, state, and tribal officials; engineers and other consultants; nonprofit representatives; water and wastewater utility representatives; and residents—and these officials consistently provided us with numerous examples of the type of concerns they have experienced due to ineffective coordination among the federal agencies. Moreover, while state efforts to coordinate funding for water and wastewater projects are beneficial; we found that these efforts are not consistent throughout the region and can not replace the need for coordination of policies and procedures among federal agencies. We therefore continue to believe that without a coordinated approach federal programs continue to place additional burden on applicants, waste scarce funds, and limit the overall effectiveness of the federal effort. Finally, in its comments, USDA disagreed with our recommendation that it should revise its process of determining eligibility to ensure that Section 306C colonia funds are only provided to those

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projects that benefit colonias, as defined by federal statute, and to revise its priority process to better target limited funds to those projects meeting the statutory preference criteria. Specifically, USDA stated that its current process complies with statutory requirements and that preference is given to entities that propose to provide water or waste disposal services to colonias. In explaining its position, USDA stated that the characteristics of a colonia to be given preference per the statute do not constitute a definition. We disagree with USDA‘s interpretation of the statute and continue to believe that USDA must determine that an area proposed for assistance has these characteristics before the agency provides preference to an entity for funding decisions. Our recommendation would allow entities that propose to provide water and wastewater disposal services to colonias that match the statutory characteristics to receive preference for limited federal funds and ensure that the agency is providing federal funds to those with the greatest need. USDA‘s letter can be found in appendix IX. In its written comments on the draft report, HUD provided several clarifications about its disagreement with our interpretation of the statutory requirements for the CDBG program and also commented on our recommendations, although it did not state whether it agreed or disagreed with them. For example, with regard to our recommendations that state agencies only provide colonia set-aside funds for projects that benefit colonias, as defined by federal statute, and that HUD establish guidance to ensure that states follow a method of distribution that results in the prioritization of Colonia Set-aside funds to those colonias with the greatest need, HUD stated that it will issue guidance to the states that will address the proper administration of the Colonia Set-aside funds. HUD stated that this guidance is currently being finalized, but did not provide a timetable for its release or specify how the guidance would address the issues GAO identified. With regard to our recommendation that HUD should take additional actions to monitor the states‘ use of Colonia Set-aside funds, HUD stated that it already monitors distinct components of the state CDBG program and as part of this process also monitors a portion of the Colonia Set-aside funds. HUD stated that it has recently developed a new monitoring exhibit specifically to assist in the review of Colonia Set-aside funds. Because HUD has not finalized its guidance we believe that our recommendation remains valid. The Department of Housing and Urban Development‘s letter can be found in appendix X. In its comments on the draft report, DOD stated that it believes that the Corps‘ current method of determining which communities receive assistance under its Section 219 program is appropriate; however, DOD partially concurred with our recommendation, and stated that should Congress direct additional funds to the colonias Section 219 program, the Corps will develop written guidance on eligibility criteria and the process for selection of activities. While we appreciate DOD‘s agreement with the need for a formal process and written guidance, we continue to be concerned about the Corps ad hoc selection process for these colonias water and wastewater projects. This is because such a process fails to ensure that limited funds are provided to those colonias with the greatest need—which GAO has found to be a key factor in federal program effectiveness. The Department of Defense‘s letter can be found in appendix XI. The U.S. Environmental Protection Agency, the Department of Commerce‘s Economic Development Administration, the Department of Health and Human Service‘s Indian Health Service, and the Department of the Interior‘s Bureau of Reclamation provided technical comments, which we incorporated throughout the report as appropriate.

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As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution of it until 30 days from the date of this report. At that time, we will then provide copies of this report to the appropriate congressional committees and other interested parties. We will also send copies to the Secretaries of Agriculture, Housing and Urban Development, and Defense, and the Administrator of the Environmental Protection Agency. In addition, this report will be available at no charge on GAO‘s Web site at http://www.gao.gov. If you or your staff have questions about this report, please contact me at (202) 512-3841 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix XII. Sincerely Yours,

Anu K. Mittal Director, Natural Re sources and Environment

APPENDIX I: SCOPE AND METHODOLOGY

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Determining How Much Federal Funding Was Provided to the Border Region To determine how much federal funding was obligated to rural households and communities in the border region for water and wastewater projects, we identified seven agencies with programs that may have provided assistance to these areas. We then collected and analyzed obligation and project location data from each of the seven agencies—the U.S. Department of Agriculture (USDA), the Environmental Protection Agency (EPA), the Department of Housing and Urban Development (HUD), the U.S. Army Corps of Engineers (the Corps), the Department of Health and Human Service‘s Indian Health Service (IHS), the Department of Commerce‘s Economic Development Administration (EDA), and the Department of the Interior‘s Bureau of Reclamation (Reclamation)—from fiscal years 2000 through 2008. We collected data from each agency for the 97 counties that are within 150 miles of the border region. We geographically located the data using MapInfo. We assessed the reliability of the data we used by reviewing information about the underlying database systems, reviewing the data to identify outliers and inconsistent or missing values, and discussing the data with knowledgeable agency officials. We present more details about the data, their limitations, and how we addressed these limitations below. On the basis of these efforts, we determined that the data were sufficiently reliable for the purposes of this report.

Environmental Protection Agency The Border Environmental Cooperation Commission and the North American Development Bank provided grant and loan obligation data for all projects that received funds from EPA‘s U.S.-Mexico Border Water Infrastructure Program. The reports are based on data

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tracked by the agency‘s financial systems and program management data. As U.S.-Mexico Border Water Infrastructure Program grant funds are obligated to entities in both the United States and Mexico, we filtered the data to include only projects that were located in the United States. Additionally, we included only water and wastewater projects in our review. EPA provided grant obligation data for congressionally designated projects from the Special Appropriation Act Projects (SAAP) database. We filtered these data to include only projects whose primary purpose was designated as drinking water or wastewater. The SAAP database does not include county-level data, so we identified the county for each project based on location data EPA was able to provide. After the county was identified for each project, we filtered the data to include only projects in counties within 150 miles of the border. EPA provided grant obligation data on tribal programs from spreadsheets used to track projects. EPA provided data for those tribal nations it determined to be within 150 miles of the border region. State agencies from Arizona, California, New Mexico, and Texas provided loan obligation data for the Drinking Water State Revolving Fund and Clean Water State Revolving Fund programs.

U.S. Department of Agriculture USDA provided grant and loan obligation data for all water and wastewater utility programs from its Community Program Application Processing (CPAP) system. For some projects that were within the areas of our site visits, we obtained additional information, such as copies of the original applications and project summary data. USDA provided grant obligation data for the single-family programs from the Rural Development Data Warehouse. A number of records in the dataset did not include physical addresses. However, all records did include at least county and state data. We did not include one of USDA‘s Section 504 single-family programs in our review. The Section 504 program provides funds to individual households for numerous activities, including water and wastewater projects—such as repairs to septic systems or water wells— but the funds can also be used for other household repairs not related to water or wastewater. USDA does not centrally track how the funds were utilized, and we could not determine what portion of the funds was relevant for our review. Department of Housing and Urban Development HUD provided grant obligation data from its Integrated Disbursement and Information System (IDIS). HUD was not able to extract data by county, but rather provided data for all water and wastewater activities in counties eligible to receive Community Development Block Grant funding in Texas, New Mexico, Arizona, and California. We then reviewed the project location data and determined the county in which each project was located, and we imported the data into a geographic information system and extracted only those activities conducted in the 97 counties included in our review. Within the IDIS, HUD tracks project activities through matrix codes. We obtained data for matrix code 03J—water and sewer improvements, and matrix code 14A—rehab, singlefamily residential units. HUD also provides funds for planning purposes—matrix code 20— some of which may have been used for water and wastewater activities. However, we found the data for matrix code 20 often did not include enough information to determine whether

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the project included a water or wastewater component. We did not include these projects in our review. Furthermore, although we requested data from fiscal years 2000 through 2008, HUD could not ensure that all funds for fiscal year 2008 were included in our data. At the time HUD extracted the data, the agency had not verified that all states had finished inputting data into the database. However, officials stated that they believe most, if not all, of the data were included.

Indian Health Service IHS provided grant obligation data from its Project Data System. We obtained data for all water and wastewater projects in Arizona, California, New Mexico, and Texas. We then reviewed and filtered the data by tribal name and included only the funds obligated to tribal nations located within 150 miles of the U.S.-Mexico border. We determined the tribal nations located in the border region using data provided by EPA, IHS, and the Bureau of Indian Affairs. IHS also provided needs data from the Sanitation Deficiency System.

Economic Development Administration EDA provided grant obligation data from its Operations Planning and Control System. Agency officials identified and provided data for those projects with a water or wastewater component. We reviewed the data and excluded several projects from our review as they were not directly related to the provision or improvement of water or wastewater systems, and thus outside the scope of our review.

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U.S. Army Corps of Engineers The Corps provided data from its P2 Project Management System. Corps officials identified and provided data for drinking water and wastewater projects that received assistance in the border region. We did not collect data for regulatory permits or projects conducted on military installations in the region.

Bureau of Reclamation Reclamation identified and provided data for water and wastewater projects. We determined that several projects were not directly related to the provision or improvement of drinking water or sewage treatment systems, and were thus outside the scope of our review. Specifically, we did not include obligations for activities related to storm water runoff, water recycling, or desalination studies.

Rural Areas Identified Using a System Based on Population and Commuting Patterns with Census Tracts The federal government has not established a formal or consistent definition of what constitutes a rural area. The term ―rural‖ is defined differently by Congress and each federal agency according to agency guidelines and individual project or program authorizations.

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Depending on the agency, rural areas may be defined as ranging from fewer than 2,500 to fewer than 50,000 persons. Some agencies and programs that fund water and wastewater projects in the border region do not focus on serving rural or urban areas but instead provide funds to eligible applicants from any location. We determined that, for purposes of this report, the best system for differentiating rural from urban areas would be based on ZIP codes rather than on counties. Because the number of ZIP codes in the nation is so much larger than the number of counties, classification systems based on ZIP code measures offer a more precise means of identifying rural areas than county-based systems. However, because of data limitations and the multiple ZIP codes often served by projects, we could not reliably track funding to the ZIP code level; we chose to use the dominant Rural Urban Commuting Area (RUCA) system, developed by the Washington State Office of Community and Rural Health in 2001. The system relies on both population and commuting patterns of census tracts to classify each county as rural or urban based on the counties‘ dominant commuting patterns.47 The dominant RUCA system is based on the 10-tiered subcounty RUCA system developed by ERS in conjunction with the Department of Health and Human Services in the late 1990s. The rural-urban continuum system does not explicitly define ―rural.‖ However, the rural-urban continuum codes can be combined to create rural and urban designations for counties.

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Effectiveness of Federal Efforts To assess the effectiveness of federal efforts, we based our review on key evaluation criteria identified in previously published GAO reports.48 Our review did not assess the benefits of individual projects; rather, we determined the effectiveness of the collective federal effort of the programs. Specifically, to determine the effectiveness of the federal effort, we identified whether the agencies with programs targeted to the border region had (1) comprehensively assessed the needs they seek to address; (2) developed cooperative policies, procedures, and requirements; and (3) adhered to all statutory and regulatory requirements, including those that ensure assistance is targeted to those with the greatest need. In order to determine whether federal agencies have comprehensively identified the drinking water and wastewater needs of the region, we reviewed existing assessments and interviewed federal officials regarding their assessment efforts. To determine agencies‘ efforts to enhance and sustain collaboration with other agencies, we reviewed coordination documentation, such as memorandums of agreement; reviewed program requirements; and interviewed federal officials. To determine if agencies‘ programs comply with statutory requirements, we reviewed applicable authorizing statutes, appropriations acts, regulations, and agency policies and guidance. We also reviewed program policies and procedures to solicit and accept applications, and interviewed federal officials regarding their practices. In addition, we reviewed key legislative history for key statutes and any relevant case law. Furthermore, we asked agency attorneys and program officials for explanations where we found noncompliant practices. We conducted site visits to colonias, tribal nations, and other communities in Texas, New Mexico, and Arizona. During the site visits, we observed water and wastewater conditions in the border region and federally funded projects. We also interviewed local, state, tribal, and federal officials; engineering consultants; nonprofit representatives; urban planners; water and

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wastewater utility representatives; and residents regarding their experiences applying for or receiving assistance from federal agencies. In selecting our site visit locations, we considered a number of factors, including (1) geographic location, (2) proximity to identified colonias, (3) proximity to tribal nations, (4) location of federally funded water and wastewater projects, (4) location of federal agency field offices, and (5) recommendations from state and local officials of areas that either lacked basic services or have received the services as a result of receiving federal funds. While the results of the site visits cannot be generalized to all sites or projects, the results do reflect a range of geographic diversity and water and wastewater needs. In addition to the site visits, we conducted telephone interviews with local, state, tribal, and federal officials, and nonprofit representatives in Texas, New Mexico, Arizona, and California not located within the areas where we conducted site visits to obtain additional information on water and wastewater conditions in their communities and their experiences with federal assistance. Furthermore, we attended two interagency coordination meetings in which various federal and state agency representatives discussed the status of ongoing drinking water and wastewater projects in the border region and the challenges they face completing them.

APPENDIX II: ADDITIONAL INFORMATION ON ELIGIBILITY AND PRIORITIZATION REQUIREMENTS FOR USDA, HUD AND CORPS PROGRAMS TARGETED TO THE BORDER REGION

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This appendix provides additional information on GAO‘s analysis of legal requirements related to eligibility and project priorities for targeted USDA, HUD, and Corps programs. This information includes relevant history of the program‘s original authorizing legislation, and additional details and citations.

Legislative History of the USDA, HUD, and Corps Colonias Programs The federal government‘s role in assisting colonias was primarily established when the 101st and 102nd Congresses established dedicated funding—in programs administered by USDA, HUD, and the Corps—to address the needs of colonias.49 These agencies were directed to establish programs dedicated to assisting these communities. The legislative histories of the program authorizations emphasize that the key concern over colonias was public health impacts stemming from the lack of clean drinking water and the inadequate disposal of sewage; for example, one particular concern was that the inadequate systems in use, combined with flooding conditions, would result in human waste in the roads.50 Statements throughout the Congresses consistently depict colonias as areas that lack safe drinking water and sewage disposal facilities, and the colonias were sometimes likened to areas with ―third world‖ conditions.51 Substandard housing is also mentioned,52 but the lack of water and sewer are the predominant characteristics. For example, the sponsor of the HUDadministered Colonia Set-aside explained, ―These citizens do not have sewer, they do not have sewage systems, they do not have running water, and I think that is a travesty in America, that American citizens do not have the basic necessities of life.‖53 Another representative, when introducing amendments to the USDA program legislation, stated

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―[t]here are hundreds of individuals that live in the colonias that will suffer from a lack of adequate water and sanitation facilities. This situation is truly dangerous in terms of sanitation and health hazards from the lack of proper water and sewer systems.‖54 Finally, when the provision authorizing the Corps‘ colonias assistance was added to the Water Resource and Development Act bill, a representative explained: ―Colonias are rural settlements along the United States-Mexico border which lack or have inadequate basic water and sewer facilities. All of the colonias to receive funding under this amendment are located in the United States . . . . Most of the inhabitants of these communities use outhouses or substandard septic tanks for their waste disposal. A set-aside for these areas is particularly crucial from a health standpoint. Because of substandard water resources, contagious diseases pose a particular threat to people living in colonias.‖55

USDA The Consolidated Farm and Rural Development Act, as amended, directs USDA to provide financial assistance for water supply and waste facilities and services to communities whose residents face significant health risks, because the communities‘ residents do not have access to such facilities.56 The act states that USDA must give preference to entities ―that propose to provide water supply or waste disposal services to the residents of those rural subdivisions commonly referred to as colonias that are characterized by substandard housing, inadequate roads and drainage, and a lack of adequate water or waste facilities.‖57 Thus, the provision requires USDA to give preference to water and waste projects in colonias where other infrastructure and housing are also inadequate. We found that USDA has no process in place to ensure that entities ―propos[ing] to provide water supply or waste disposal services‖ to these colonias are given preference. USDA officials explained that the agency considers the funding for colonias to be a set-aside, and therefore only considers entities proposing to assist colonias for this funding.58 However, in implementing the program, USDA told us it views any entity proposing to assist an area that the relevant state or local government has designated as a colonia as qualifying for the preference,59 and awards funds to them on a first-come, first-served basis.60 USDA does not attempt to independently verify whether these entities meet the threshold eligibility requirement (that they propose to provide service to areas where most residents lack access to adequate water or waste facilities), or that the areas to be served meet the statutory definition of ―colonia.‖ While agency regulations repeat the statutory requirement for threshold eligibility61 and define ―colonia‖,62 the agency has failed to provide any guidance elaborating on the meaning of an ―adequate‖ water or waste disposal system, or how to identify those colonias with the statutory preference characteristics. Despite the lack of guidance, USDA told us that it considers as inadequate a system with any violation of the Safe Drinking Water Act or Clean Water Act, as appropriate. Furthermore, the agency simply accepts local designations of colonias to satisfy the regulation and the statute. As a result, USDA has no assurance that entities proposing to serve colonias with the required characteristics have received the required preference.63 By allowing colonia funds to be used for projects that benefit communities with existing infrastructure, the agency is failing to give preference to those colonias that have the statutory characteristics and live without basic necessities.

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HUD Under section 916 of the Cranston-Gonzalez National Affordable Housing Act, the states of Arizona, California, New Mexico, and Texas shall each make available, “for activities designed to meet the needs of the residents of colonias in the State relating to water, sewage, and housing,” a specified percentage of CDBG funds they receive.64 Under the act, the term ―colonia‖ means any identifiable community that, among other things, is determined to be a colonia on the basis of objective criteria, including lack of potable water supply, lack of adequate sewage systems, and lack of decent, safe, and sanitary housing.65 The act requires grants to be made in accordance with a distribution plan that gives priority to colonias having the greatest need for such assistance. In short, the act requires grants to be made for projects meeting the needs of colonias residents, which must be related to water, sewage, and housing, and which give priority to the colonias with greatest need. With respect to the meaning of ―colonia,‖ HUD told us the agency has not developed guidance regarding interpretation of the definition or determination of eligible entities.66 HUD‘s sole written interpretation of the definition, issued in a 2003 notice,67 asserts that all three criteria must be met; nonetheless, HUD officials also stated that the agency allows states to interpret the definition as requiring only one of the three criteria to be met.68 Finally, HUD officials told us that as they give grants to the states for distribution to colonias, the states are ultimately responsible for determining eligible entities; to do so, the states rely on formal ―designation‖ of colonias. Without guidance from HUD, states have applied the requirement differently. For example, in California and New Mexico, most colonias are designated as communities with substandard housing and a lack of either potable water or adequate sewage systems. In Arizona designations use any one of the three statutory criteria. In Texas, designations are made for areas with substandard housing that lack either adequate water or wastewater treatment, and which are unincorporated, a criterion not found in the act. While interpreting colonias as those designated by states may have been the correct interpretation of the Cranston-Gonzalez Act until 1992, in that year Congress repealed a provision requiring that a colonia must be designated as such by the state to be eligible for funds.69 A committee report explains that the designation process was changed so that a colonia can be qualified for this program without regard to a state or county action.70 We believe that HUD‘s reliance on the states in carrying out section 916 fails to give effect to this change in law. HUD officials said that the CDBG Program relies on states to make decisions that make the most sense for the particular state, and officials do not agree that varying interpretations by states suggest that the lack of guidance is problematic. However, officials stated that HUD will be issuing guidance, which they say will include information on the documentation states need to support that a colonia meets statutory requirements. HUD officials also told us that it is up to the states to determine the needs-based grant priorities. However, under the act, states must distribute the colonia funds according to distribution plans that give priority to the colonias in the greatest need of assistance.71 To do so would require a state to at a minimum identify colonias, discuss the relative needs of colonias, and select projects reflecting the colonias with the greatest needs.72 However, we found that HUD has failed to ensure that state distribution plans reflect priority given to the colonias with greatest need. Instead, HUD officials do not believe the agency has the authority to direct states on how to distribute the funds as long as it is in accordance with a distribution plan. Without direction and oversight from HUD, states may not be meeting the statutory requirements. While HUD officials may believe states are identifying the colonias

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with the greatest needs, section 916 requires the agency to not just rely on mere belief, but take such steps as required to ensure it is doing so. HUD officials also told us that the agency interprets the statute as authorizing colonia funds to be spent on any currently eligible CDBG activity. However, the statute expressly limits the set-aside to activities relating to water, sewage, and housing.73 Lacking guidance and direction from HUD, states have applied the requirement differently. Finally, HUD officials said they are required to give states ―maximum feasible deference‖ in interpreting statutory requirements related to the Colonia Set-aside. HUD regulations establish the maximum feasible deference policy; however, the regulations provide for deference only to states‘ interpretations of CDBG requirements under the Housing and Community Development Act of 1974 and certain HUD regulations.74 The Colonia Setaside requirement, however, was established by section 916 of the Cranston-Gonzalez National Affordable Housing Act,75 which stands alone and is not an amendment to the Housing and Community Development Act of 1974. Thus, HUD‘s maximum feasible deference regulation by its terms does not encompass state interpretations related to the setaside.76 Even if it were applicable, the regulation limits deference to state interpretations that ―are not plainly inconsistent with the Act and the Secretary‘s obligation to enforce compliance with the intent of the Congress as declared in the Act.‖77 As outlined above, HUD has not taken steps to ensure state interpretations related to funding of set-aside projects, such as which activities are eligible, are in accordance with law.

The Corps The Water Resources Development Act of 1992 authorized the Corps to provide assistance to colonias.78 The colonias authorization is unique among WRDA section 219 projects, which are otherwise specific earmarked projects; that is, Congress has not directed the funds to particular colonias projects.79 The authorization limits grants to ―colonias in the United States along the United States-Mexico border,‖ but does not define colonias. While limited, the legislative history shows that colonias were understood to be ―rural settlements along the United States-Mexico border which lack or have inadequate basic water and sewer facilities,‖ and that ―[m]ost of the Inhabitants of these communities use outhouses or substandard septic tanks for their waste disposal.‖80 In addition, Congress has elsewhere defined colonias as ―based on objective criteria, including lack of potable water supply, lack of adequate sewage systems, and lack of decent, safe, and sanitary housing.‖81 Nonetheless, the Corps has never developed a definition, an interpretation, or guidance for staff to use in determining whether an assistance recipient is a colonia eligible for the program. Although the Corps recognizes that the colonias section 219 project is essentially a programmatic authority, nonetheless, Corps officials stated the program was too small for the agency to develop guidance. The Corps claimed to independently verify in letter reports, which are brief project reports that the Corps prepares before providing assistance to an entity, that the assistance it provides under this provision is going to colonias; however, the Corps acknowledged that it does not have criteria for identifying eligible colonias. Thus, while these letter reports describe the areas, it is unclear by what basis the Corps has verified they are colonias as meant in the authorizing statute.82 As a result, the Corps cannot ensure that its assistance is going to colonias.

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$707,968 480,335 173,340 943,034 0 3,889,833 1,855,922 3,379,667 1,305,186 365,813 733,750 953,514 5,170,391 Not Collected Not Collected 1,928,333 1,928,333 425,354 1,031,634 1,798,773 1,747,693 2,564,698 1,474,258

0 0 0 0 1,400,000 0 0 0 0 0 0 0 1,446,690 0 0 8,931,000 7,125,000 0 0 0 850,000 0 0

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 989,997 2,406,000 0 0 0 0 0

Total

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 130,494 0 0

Reclamation

0 748,400 6,768,447 0 0 3,265,300 1,433,600 2,494,700 0 2,993,554 0 0 0 0 0 2,083,149 12,342,667 12,735,333 0 0 2,890,100 0 2,373,600

EDA

$15,246,570 0 0 0 0 0 0 68,691 0 61,451,177 0 7,359,501 2,592,244 0 0 37,786 0 0 0 0 21,859,544 0 0

Corps

$6,924,160 0 1,195,000 $75,000 5,880,110 742,000 2,964,000 4,280,000 6,632,605 881,000 5,649,479 7,018,340 11,540,700 446,500 0 15,219,000 4,148,334 1,700,000 49,600 0 6,882,900 1,437,700 815,000

HUD CDBG

Congressionally directed in EPA STAG account

$5,983,185 540,190 2,208,290 555,150 8,665,890 1,969,649 2,165,900 8,536,740 12,736,276 280,720 5,895,470 7,285,064 11,774,134 0 0 8,150,985 4,772,902 7,716,441 5,377,046 0 31,428,830 6,566,721 15,939,245

EPA U.S.Mexico Border Water Infrastructure Program and CWTAP

Urban (4) Urban (4) Rural (6) Rural (7) Rural (6) Urban (1) Urban (4) Urban (2) Urban (1) Urban (4) Urban (3) Urban (3) Urban (3) Urban (1) Urban (1) Urban (1) Urban (1) Urban (1) Rural (9) Urban (5) Urban (3) Urban (5) Rural (7)

USDA Water And Environmental Program loans

Cochise Gila Graham Greenlee La Paz Maricopa Mohave Pima Pinal Santa Cruz Yavapai Yuma Imperial Los Angeles Orange Riverside San Bernardino San Diego Catron Chaves Dona Ana Eddy Grant

USDA Water and Environmental Program grants

County

AZ AZ AZ AZ AZ AZ AZ AZ AZ AZ AZ AZ CA CA CA CA CA CA NM NM NM NM NM

Rural-urban continuum code

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APPENDIX III: TOTAL OBLIGATIONS AND RURAL-URBAN CATEGORIES FOR WATER AND WASTEWATER PROJECTS IN THE BORDER REGION, FISCAL YEARS 2000-2008, BY COUNTY.

$28,861,883 1,768,925 $10,345,077 1,573,184 15,946,000 9,866,782 8,419,422 18,759,798 20,674,067 65,972,264 12,278,699 22,616,419 32,524,159 446,500 0 36,350,253 31,307,233 24,983,128 6,458,280 1,798,773 65,789,561 10,569,119 20,602,103

022039.

Rural (7) Urban (5) Rural (7) Rural (6) Urban (4) Rural (6) Rural (6) Urban (2) Urban (1) Urban (1) Urban (4) Urban (1) Rural (7) Rural (6) Urban (2) Rural (8) Rural (6) Rural (7) Rural (9) Rural (6) Rural (7) Urban (3) Rural (9) Urban (2) Rural (6)

4,866,148 0 1,931,747 3,392,153 13,170,826 2,931,000 843,976 0 1,306,000 0 509,250 0 1,640,635 0 16,644,239 0 0 0 0 0 10,260,180 4,920,400 0 3,209,146 1,971,000

104,000 0 1,142,236 0 1,213,919 1,624,500 786,000 0 3,016,100 0 0 0 0 3,052,000 30,093,600 0 0 0 0 0 6,232,000 3,247,200 0 9,608,000 2,690,000

725,700 0 0 264,133 0 0 0 0 0 0 0 0 1,754,889 0 68,330,278 0 0 0 0 2,077,594 0 0 0 58,737,820 9,683,274

96,200 1,425,350 2,321,100 0 867,300 433,600 0 0 0 0 0 3,613,700 0 0 0 0 0 0 0 0 0 0 0 433,500 0

1,206,225 5,844,378 3,955,304 0 529,540 257,005 2,136,110 2,586,745 3,985,421 1,329,271 3,592,705 3,568,927 0 3,907,467 12,164,874 820,544 1,158,659 461,390 556,980 3,346,826 2,091,180 3,692,292 1,190,607 6,236,201 2,156,605

0 1,450,000 0 1,250,000 0 0 0 0 0 0 0 1,800,000 0 794,421 1,420,000 0 0 0 0 0 0 0 0 0 0

Total

0 2,420,180 0 920,284 0 0 0 0 0 0 0 0 0 0 98,764 0 0 0 0 0 0 0 0 0 0

Reclamation

HUD CDBG

Congressionally directed in EPA STAG account

EPA U.S.Mexico Border Water Infrastructure Program and CWTAP

USDA Water And Environmental Program loans

USDA Water and Environmental Program grants

Rural-urban continuum code

County Hidalgo Lea Lincoln Luna Otero Sierra Socorro Aransas Atascosa Bandera Bee Bexar Brewster Brooks Cameron Concho Crane Crockett Culberson Dimmit Duval Ector Edwards El Paso Frio

EDA

NM NM NM NM NM NM NM TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX

Corps

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State

Appendix III. (Continued).

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

6,998,273 11,139,908 9,350,387 5,826,570 15,781,585 5,246,105 3,766,086 2,586,745 8,307,521 1,329,271 4,101,955 8,982,627 3,395,524 7,753,888 128,751,755 820,544 1,158,659 461,390 556,980 5,424,420 18,583,360 11,859,892 1,190,607 78,224,667 16,500,879

022039.

0 350,000 1,500,000 18,082,498 2,552,032 529,989 1,963,440 190,237 4,580,165 7,870,180 779,750 585,511 2,761,853 374,999 633,433 976,100 621,747 2,779,600 500,000 1,165,000 3,797,817 1,117,508 5,767,224 704,997

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

0 0 0 5,716,823 0 0 0 0 0 0 0 0 0 0 0 0 1,250,000 0 0 0 0 0 0 0

0 0 0 480,868 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Total

Reclamation

0 0 0 625,500 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 867,300 0 0 0

EDA

0 0 0 50,948,407 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 63,115,228 0 0 0

Corps

0 0 200,000 8,152,300 1,012,000 0 100,000 4,031,000 4,256,000 3,361,000 0 0 0 0 0 1,969,000 789,000 5,619,000 0 0 0 0 975,000 1,361,000

HUD CDBG

EPA U.S.Mexico Border Water Infrastructure Program and CWTAP

0 0 1,597,600 14,128,824 346,140 0 1,704,957 7,394,514 2,228,633 1,439,000 0 0 3,162,772 0 0 628,000 3,313,483 3,172,500 0 0 7,147,448 0 0 599,000

Congressionally directed in EPA STAG account

USDA Water And Environmental Program loans

Rural (7) Rural (8) Urban (3) Urban (2) Rural (8) Urban (3) Rural (9) Rural (6) Urban (4) Rural (6) Urban (1) Rural (9) Urban (4) Rural (7) Rural (9) Urban (4) Rural (6) Rural (6) Rural (9) Rural (9) Urban (5) Rural (8) Urban (1) Rural (8)

USDA Water and Environmental Program grants

Gillespie Glasscock Goliad Hidalgo Hudspeth Irion Jeff Davis Jim Hogg Jim Wells Karnes Kendall Kenedy Kerr Kimble Kinney Kleberg La Salle Live Oak Loving Mason Maverick McMullen Medina Menard

Rural-urban continuum code

County

State Copyright © 2011. Nova Science Publishers, Incorporated. All rights reserved.

TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX

0 350,000 3,297,600 98,135,220 3,910,172 529,989 3,768,397 11,615,751 11,064,798 12,670,180 779,750 585,511 5,924,625 374,999 633,433 3,573,100 5,974,230 11,571,100 500,000 1,165,000 74,927,793 1,117,508 6,742,224 2,664,997

022039.

Congressionally directed in EPA STAG account

HUD CDBG

Corps

EDA

Reclamation

Total

Urban (3) Urban (2) Rural (7) Rural (7) Rural (6) Rural (9) Rural (7) Rural (6) Urban (2) Rural (8) Urban (4) Rural (8) Rural (7) Rural (9) Urban (3) Rural (8) Rural (7) Urban (5) Rural (6) Urban (3) Rural (6) Urban (1) Rural (6) Rural (6) Rural (7)

EPA U.S.Mexico Border Water Infrastructure Program and CWTAP

Rural-urban continuum code

County Midland Nueces Pecos Presidio Reagan Real Reeves Refugio San Patricio Schleicher Starr Sterling Sutton Terrell Tom Green Upton Uvalde Val Verde Ward Webb Willacy Wilson Winkler Zapata Zavala

USDA Water And Environmental Program loans

TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX Total:

USDA Water and Environmental Program grants

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State

Appendix III. (Continued).

0 1,702,500 1,037,000 5,477,587 0 0 188,200 1,864,500 4,248,135 0 12,468,723 0 0 0 1,179,000 0 520,580 342,724 2,773 2,968,170 1,548,775 0 0 1,258,138 2,286,762 $300,101,965

0 1,926,000 553,000 3,704,000 0 0 62,800 1,936,000 961,000 0 12,065,500 0 0 0 521,000 0 2,899,000 0 0 315,000 361,000 155,000 0 0 4,342,000 $208,917,583

0 0 228,186 120,713 0 0 0 0 0 0 17,830,708 0 0 372,943 0 0 0 17,229,341 0 39,099,609 4,770,396 0 0 6,998,141 0 $450,902,873

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 $60,812,400

0 2,982,075 3,049,994 1,264,784 258,809 1,136,131 2,895,920 3,715,568 7,392,019 799,157 7,704,128 324,030 349,998 0 1,248,508 643,536 571,817 0 2,469,131 3,222,721 4,043,270 2,658,948 1,202,179 4,028,271 3,723,436 $213983946

0 $97,073 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 419,667 0 0 0 0 0 $4,086,462

0 1,500,000 800,000 0 0 0 0 0 1,643,823 0 1,500,000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 $38,877,757

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 $3,876,865

0 8,207,648 5,668,180 10,567,084 258,809 1,136,131 3,146,920 $7,516,068 14,244,977 799,157 51,569,059 324,030 349,998 372,943 2,948,508 643,536 3,991,397 17,572,065 2,471,904 46,025,167 10,723,441 2,813,948 1,202,179 $12,284,550 10,352,198 $1,281,559,851

022039.

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Source: GAO analysis of USDA, EPA, HUD, Corps, EDA, and Reclamation data Note: We did not collect data from the HUD entitlement counties of Los Angeles, California and Orange, California. These counties are considered by HUD as completely urban. HUD data also do not include the $925,000 authorized through a congressional directive. Rural-Urban continuum codes with category definitions: (1) County in metro area with 1 million population or more (2) County in metro area of 250,000 to 1 million population (3) County in metro area of fewer than 250,000 population (4) Nonmetro county with urban population of 20,000 or more, adjacent to a metro area (5) Nonmetro county with urban population of 20,000 or more, not adjacent to a metro area (6) Nonmetro county with urban population of 2,500-19,999, adjacent to metro area (7) Nonmetro county with urban population of 2,500-19,999, not adjacent to metro area (8) Nonmetro county completely rural or less than 2,500 urban population, adjacent to metro area (9) Nonmetro county completely rural or less than 2,500 urban population, not adjacent to metro area

022039.

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United States Government Accountability Office

APPENDIX IV: TOTAL USDA OBLIGATIONS FOR WATER AND WASTEWATER PROJECTS IN THE BORDER REGION, FISCAL YEARS 2000-2008, BY COUNTY

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The following figure displays the ranges of USDA funding obligated to counties in the border region for water and wastewater projects.

Figure 4. Federal Funding Obligated from USDA.

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APPENDIX V: TOTAL EPA OBLIGATIONS AND RURAL-URBAN CATEGORIES FOR WATER AND WASTEWATER PROJECTS IN THE BORDER REGION, FISCAL YEARS 2000-2008, BY COUNTY

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The following figure displays the ranges of EPA funding obligated to counties in the border region for water and wastewater projects.

Note: Figure does not include funding provided by the Clean Water and Drinking Water State Revolving Funds or EPA‘s tribal programs. As several tribal nations cross county boundaries, we could not include it in the analysis conducted for this figure. Tribal data are presented in detail in appendix VIII. Figure 5. Federal Funding Obligated from EPA.

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United States Government Accountability Office

APPENDIX VI: TOTAL OBLIGATIONS FROM CLEAN WATER AND DRINKING WATER STATE REVOLVING FUNDS AND RURALURBAN CATEGORIES FOR WATER AND WASTEWATER PROJECTS IN THE BORDER REGION, FISCAL YEARS 2000-2008, BY COUNTY.

AZ AZ AZ AZ AZ AZ AZ AZ AZ AZ AZ AZ CA CA CA CA CA CA NM NM NM NM NM NM NM NM NM NM NM NM TX TX TX TX TX

Cochise Gila Graham Greenlee La Paz Maricopa Mohave Pima Pinal Santa Cruz Yavapai Yuma Imperial Los Angeles Orange Riverside San Bernardino San Diego Catron Chaves Dona Ana Eddy Grant Hidalgo Lea Lincoln Luna Otero Sierra Socorro Aransas Atascosa Bandera Bee Bexar

Urban (4) Urban (4) Rural (6) Rural (7) Rural (6) Urban (1) Urban (4) Urban (2) Urban (1) Urban (4) Urban (3) Urban (3) Urban (3) Urban (1) Urban (1) Urban (1) Urban (1) Urban (1) Rural (9) Urban (5) Urban (3) Urban (5) Rural (7) Rural (7) Urban (5) Rural (7) Rural (6) Urban (4) Rural (6) Rural (6) Urban (2) Urban (1) Urban (1) Urban (4) Urban (1)

Clean Water State Revolving Fund Program $21,133,687 0 15,695,000 145,331,926 247,938,323 0 133,120,141 27,344,476 375,000 0 32,852,760 53,339,310 0 818,592,156 236,224,971 69,615,907 107,938,488 231,744,069 0 0 5,400,000 0 2,000,000 0 40,500,000 600,000 0 0 0 0 0 0 0 0 246,440,000

TX TX TX

Brewster Brooks Cameron

Rural (7) Rural (6) Urban (2)

0 0 4,975,000

4,860,000 0 5,730,000

4,860,000 0 10,705,000

TX TX

Concho Crane

Rural (8) Rural (6)

144,285 0

0 0

144,285 0

TX TX TX

Crockett Culberson Dimmit

Rural (7) Rural (9) Rural (6)

0 0 0

0 0 0

0 0 0

TX

Duval

Rural (7)

0

0

0

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State

County

Rural-urban continuum code1

Drinking Water State Revolving Fund Program $3,001,936 5,120,000 7,723,380 2,200,000 0 193,048,850 9,640,758 98,091,704 203,195 0 11,131,869 46,714,395 22,081,858 0 22,905,222 54,649,148 8,200,261 23,573,374 0 0 7,070,000 875,304 808,000 0 8,761,750 4,210,206 222,309 6,565,000 1,841,089 0 0 0 0 0 0

$24,135,622 5,120,000 23,418,380 147,531,926 247,938,323 193,048,850 142,760,899 125,436,180 578,195 0 43,984,629 100,053,705 22,081,858 818,592,156 259,130,193 124,265,055 116,138,749 255,317,443 0 0 12,470,000 875,304 2,808,000 0 49,261,750 4,810,206 222,309 6,565,000 1,841,089 0 0 0 0 0 246,440,000

Total

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Rural Water Infrastructure

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State TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX

County Ector Edwards El Paso Frio Gillespie Glasscock Goliad Hidalgo Hudspeth Irion Jeff Davis Jim Hogg Jim Wells Karnes Kendall Kenedy Kerr Kimble Kinney Kleberg La Salle Live Oak Loving Mason Maverick McMullen Medina Menard Midland Nueces Pecos Presidio Reagan Real Reeves Refugio San Patricio Schleicher Starr Sterling Sutton Terrell Tom Green Upton Uvalde Val Verde Ward Webb Willacy Wilson

Rural-urban continuum code1 Urban (3) Rural (9) Urban (2) Rural (6) Rural (7) Rural (8) Urban (3) Urban (2) Rural (8) Urban (3) Rural (9) Rural (6) Urban (4) Rural (6) Urban (1) Rural (9) Urban (4) Rural (7) Rural (9) Urban (4) Rural (6) Rural (6) Rural (9) Rural (9) Urban (5) Rural (8) Urban (1) Rural (8) Urban (3) Urban (2) Rural (7) Rural (7) Rural (6) Rural (9) Rural (7) Rural (6) Urban (2) Rural (8) Urban (4) Rural (8) Rural (7) Rural (9) Urban (3) Rural (8) Rural (7) Urban (5) Rural (6) Urban (3) Rural (6) Urban (1)

Clean Water State Revolving Fund Program 0 0 104,105,000 37,510,000 0 0 0 64,395,000 0 0 0 0 0 0 2,500,000 0 0 0 0 0 0 0 0 0 17,340,000 0 0 0 0 0 0 1,265,000 0 0 6,870,000 0 7,745,000 0 2,885,000 0 6,000,000 0 0 0 4,000,000 2,190,000 0 0 0 0

Drinking Water State Revolving Fund Program 0 0 10,845,000 145,000 0 0 0 23,612,000 0 0 0 0 0 3,600,000 0 0 0 3,480,000 0 0 0 0 0 0 38,110,000 0 0 0 0 0 0 0 0 0 8,375,000 525,000 0 0 20,900,000 0 3,000,000 0 0 0 0 18,008,000 0 0 3,245,000 0

Total 0 0 114,950,000 37,655,000 0 0 0 88,007,000 0 0 0 0 0 3,600,000 2,500,000 0 0 3,480,000 0 0 0 0 0 0 55,450,000 0 0 0 0 0 0 1,265,000 0 0 15,245,000 525,000 7,745,000 0 23,785,000 0 9,000,000 0 0 0 4,000,000 20,198,000 0 0 3,245,000 0

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United States Government Accountability Office Appendix VI. (Continued).

State TX TX TX

County Winkler Zapata Zavala

Rural-urban continuum code1 Rural (6) Rural (6) Rural (7) Total

Clean Water State Revolving Fund Program 4,595,000 6,415,000 0 $2,709,120,499

Drinking Water State Revolving Fund Program 0 14,826,000 0 $697,900,607

Total 4,595,000 21,241,000 0 $3,407,021,106

Source: GAO analysis of Arizona, California, New Mexico, and Texas Clean Water and Drinking Water State Revolving Fund program data. 1 Rural-urban continuum codes with category definitions: (1) County in metro area with 1 million population or more (2) County in metro area of 250,000 to 1 million population (3) County in metro area of fewer than 250,000 population (4) Nonmetro county with urban population of 20,000 or more, adjacent to a metro area (5) Nonmetro county with urban population of 20,000 or more, not adjacent to a metro area (6) Nonmetro county with urban population of 2,500-19,999, adjacent to metro area (7) Nonmetro county with urban population of 2,500-19,999, not adjacent to metro area (8) Nonmetro county completely rural or less than 2,500 urban population, adjacent to metro area (9) Nonmetro county completely rural or less than 2,500 urban population, not adjacent to metro area

APPENDIX VII: TOTAL HUD OBLIGATIONS AND RURAL-URBAN CATEGORIES FOR WATER AND WASTEWATER PROJECTS IN THE BORDER REGION, FISCAL YEARS 2000-2008, BY COUNTY

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The following figure displays the ranges of HUD funding obligated to counties in the border region for water and wastewater projects.

Figure 6. Federal Funding Obligated from HUD. Water Infrastructure Issues, edited by James D. Haffner, and Elizabeth M. Gennady, Nova Science Publishers, Incorporated, 2011. ProQuest Ebook

APPENDIX VIII: TOTAL OBLIGATIONS FOR WATER AND WASTEWATER PROJECTS IN THE BORDER REGION, FISCAL YEARS 2000-2008, BY TRIBAL NATION. Tribe Agua Caliente Band of Cahuilla Indians, California

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Ak Chin Indian Community, Arizona Augustine Band of Cahuilla Indians, California Cabazon Band of Mission Indians, California Cahuilla Band of Mission Indians, California Campo Band of Diegueno Mission Indians, California Capitan Grande Band of Diegueno Mission Indians of California: Chemehuevi Indian Tribe, California Cocopah Tribe of Arizona Colorado River Indian Tribe, Arizona and California Ewiiaapaayp Band of Kumeyaay Indians, California

IHS Sanitation Facilities Construction Program $1,030,600

EPA Tribal Border Infrastructure

EPA Drinking Water Tribal Setaside

EPA Clean Water Indian Setaside

0

0

0

0

0

$1,030,600

880,000 0 0 0 170,377

0 0 0 0 491,000

0 0 0 0 0

109,500 0 0 0 0

0 0 0 0 0

0 0 0 0 0

989,500 0 0 0 661,377

0

0

0

0

0

0

0

1,506,990 220,000 689,880

502,474 1,058,000 505,100

763,815

1,000,000

170,300 0

3,773,279 1,448,300 5,941,780

4,746,800

HUD Indian CDBG

Tribe total

USDA

0

0

0

0

0

0

0

0

0

Fort McDowell Yavapai Nation, Arizona Fort Mojave Indian Tribe of Arizona and California Gila River Indian Community, Arizona Iiapay Nation of Santa Ysabel, California Inaja Band of Diegueno Mission Indians, California

760,000 434,100 5,307,700 1,346,781 0

0 0 0 1,227,900 0

0 0 1,855,000 0 0

0 686,900 6,754,100 0 0

0 0 0 0 0

0 0 0 0 0

760,000 921,000 13,916,800 2,574,681 0

Jamul Indian Village of California Kickapoo Traditional Tribe of Texas La Jolla Band of Luiseno Mission Indians, California La Posta Band of Diegueno Mission Indians, California Los Coyotes Band of Cahuilla and Cupeno Indians, California

0 233,000 160,000

0 0 2,407,999

0 40,000 559,000

0 0 0

0 0 0

0 0 0

0 273,000 3,126,999

0

0

0

0

0

0

0

244,500

0

0

0

0

0

244,500

022039.

Appendix VIII. (Continued).

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Tribe Manzanita Band of Diegueno Mission Indians, California Mesa Grande Band of Diegueno Mission Indians, California Mescalero Apache Tribe, New Mexico Morongo Band of Mission Indians, California Pala Band of Luiseno Mission Indians, California Pascua Yaqui Tribe of Arizona Pauma Band of Luiseno Mission Indians, California Pechanga Band of Luiseno Mission Indians, California Quechan Tribe, California and Arizona Ramona Band or Village of Cahuilla Mission Indians of California Rincon Band of Luiseno Mission Indians, California Salt River Pima- Maricopa Indian Community, Arizona San Carlos Apache Tribe, Arizona San Manuel Band of Mission Indians, California San Pasqual Band of Diegueno Mission Indians of California Santa Rosa Band of Cahuilla Indians, California Soboba Band of Luiseno Indians, California Sycuan Band of the Kumeyaay Nation Tohono O‘odham Nation of Arizona Torres Martinez Desert Cahuilla Indians, California Twenty-Nine Palms Band of Mission Indians of California Viejas (Baron Long) Group of Capitan Grande Band of Mission Indians, California Ysleta Del Sur Pueblo of Texas Total

IHS Sanitation Facilities Construction Program 0 47,600

217,127 760,000

EPA Drinking Water Tribal Set-aside 0 518,000

2,334,000 0 0 982,000 0 0 2,180,000 0

0 0 3,022,440 0 60,000 $278,621 1,729,300 0

140,000 2,645,000 10,337,500 0 161,732

EPA Tribal Border Infrastructure

EPA Clean Water Indian Set-aside

HUD Indian CDBG

USDA

Tribe total

0 0

0 0

0 0

217,127 1,325,600

1,100,000 0 0 0 0 0 550,000 0

823,500 0 0 109,500 0 0 115,000 0

0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0

4,257,500 0 3,022,440 1,091,500 60,000 278,621 4,574,300 0

1,785,000 0 0 0 1,047,515

0 559,992 50,000 0 0

0 2,943,200 1,790,800 0 0

0 2,000,000 0 0 605,000

0 0 0 0 0

1,925,000 9,938,992 12,178,300 0 1,814,247

0 0 176,000 13,163,776 0 0

0 0 55,400 4,796,032 1,424,469 0

484,000 0 0 3,018,732 545,790 0

0 0 0 6,286,097 0 0

0 0 0 0 0 0

0 0 0 0 0 0

484,000 0 231,400 27,264,637 1,970,259 0

0

500,000

0

0

0

0

500,000

0 $45,151,536

0 $19,973,103

0 $11,346,088

0 $25,129,212

0 $2,605,000

0 $1,000,000

0 $106,795,739

Source: GAO analysis of IHS, EPA, USDA, and HUD data. Note: Additional USDA funds were provided to tribal nations through USDA‘s colonia program. These funds are not represented in this table.

022039.

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APPENDIX IX: COMMENTS FROM THE DEPARTMENT OF AGRICULTURE

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Note: GAO comments supplementing those in the report text appear at the end of this appendix.

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United States Government Accountability Office

See comment 1. Water Infrastructure Issues, edited by James D. Haffner, and Elizabeth M. Gennady, Nova Science Publishers, Incorporated, 2011. ProQuest Ebook

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See comment 2. See comment 3. See comment 4.

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See comment 4.

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The following are GAO‘s comments to the Department of Agriculture‘s letter dated December 8, 2009.

GAO COMMENTS 1. We agree with USDA that local knowledge of local needs is an important element that can help federal agencies identify the water and wastewater needs of the border

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United States Government Accountability Office region. However, while local officials can play a key role and assist federal agencies, without a comprehensive assessment of needs of the regions federal agencies will continue to lack necessary information on the magnitude of the problem and will not have the information they need to prioritize assistance and target limited federal resources. We made no modifications to the report in response to this comment. 2. We disagree with USDA‘s characterization of the examples cited in our report. Throughout the review we contacted various officials in the border region— including local, state, and tribal officials; engineers and other consultants; nonprofit representatives; water and wastewater utility representatives; and residents—and these officials provided us with numerous examples of the types of concerns they have experienced as a result of ineffective coordination among federal agencies. The examples cited in the report were not intended to be inclusive of all of the instances shared with us by officials and instead were only used to provide more specifics of certain types of concerns expressed by the officials we spoke with. We have not modified the report in response to this comment. 3. We believe the report accurately reflects that USDA provides funds to eligible entities, rather than directly to colonias. We have not modified the report in response to this comment. 4. We disagree with USDA‘s comment that it is providing Section 306C colonia funds in compliance with the existing statutory requirements. Specifically, we disagree with the agency‘s comment that preference can be provided to entities proposing to serve a colonia, regardless of whether the area meets the characteristics outlined in the statute. As stated in the report, we believe that USDA‘s current practice of awarding preference to applications without independent verification that the colonia meets all statutory requirements fails to ensure compliance with statutory requirements. In addition, while USDA states that the definition of adequate is determined through compliance with the Safe Drinking Water Act or Clean Water Act, it was unable to provide evidence that this interpretation has ever been formally communicated to staff in guidance or other direction. Without guidance explaining USDA‘s interpretation of this term, as well as what support is required, we believe that this threshold requirement is open to interpretation by USDA field offices. We made no changes to the report in response to this comment.

APPENDIX X: COMMENTS FROM THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Note: GAO comments supplementing those in the report text appear at the end of this appendix. Now on pages 25-26 and 44-45. See comment 1.

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See comment 2.

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United States Government Accountability Office

See comment 3. See comment 4.

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Rural Water Infrastructure

See comment 5. See comment 6. See comment 7.

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United States Government Accountability Office

See comment 8. See comment 9.

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The following are GAO‘s comments to the Department of Housing and Urban Development‘s letter dated December 10, 2009.

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GAO COMMENTS 1. We disagree with HUD‘s granting of ―maximum feasible deference‖ to the states in the interpretation of statutory requirements related to the colonia set-aside. As stated in our report, we do not believe the maximum feasible deference regulation—which does not appear in statute—applies to the colonia set-aside program. This is because the regulation itself does not refer to the codified law concerning the CDBG program, but only to the Housing and Community Development Act (HCDA). In its comments, HUD cites section 916(d) of the Cranston-Gonzalez National Affordable Housing Act of 1990 (NAHA), which is the statute that established the colonia setaside program, to support its position that the agency‘s regulations pursuant to Title I of the HCDA also apply to the colonia set-aside program. However, the relevant passage cited by HUD only subjects the colonia set-aside program to the provisions of Title I of the Act to the extent consistent with NAHA, and applying them in this context is inconsistent. We did not revise our report in response to this comment. 2. We continue to believe that HUD does not have a process to ensure that Colonia Setaside funds are limited to those activities authorized by statute. HUD has not provided guidance to states on this topic and we disagree with HUD‘s interpretation of the law with respect to allowed set-aside activities. We believe that HUD‘s interpretation does not give full recognition to all sections of the law and that HUD is neglecting the overall requirement for Colonia Set-aside funds to be limited to activities related to water, sewage, and housing. We believe the logical interpretation of the law is that funds are to be used for various activities—e.g., planning, construction, etc.—relating to water, sewage, and housing. HUD notes that when Congress amended the relevant section to incorporate by reference another section which lists the types of activities allowed under CDBG, that one proposed amendment would have expressly limited activities to those related to public water and sewage. HUD also stated that because the enacted law featured a different version of this provision that did not contain the express language, the limitation should be understood as having been rejected. However, the history supports another conclusion—that because the limitation already existed in the law, the water and sewage language in the failed amendment was simply not needed. Thus, we believe that the Senate committee clearly articulated that the new activities were to be thos e that ―specifically‖ or ―especially‖ related to water, sewage, and housing. We did not make any change to our report in response to HUD‘s further explanation. 3. Our report recognizes that HUD has stated its intent to issue guidance to assist states to more clearly articulate the priorities in developing their method of distribution. However, during the course of the engagement, we asked HUD for a draft version of the guidance or other documentation so that we could review the contents of the guidance and assess whether it would adequately address our concerns. Because

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HUD did not provide us with any documentation, we have made no modifications to the report in response to this comment. We disagree with HUD‘s characterization of our discussion regarding the interpretation of the colonia definition. As stated in our report, HUD has failed to provide guidance on the interpretation of colonia. During our review, the only documented definition we found that HUD issued in relation to the Colonia Set-aside is in a HUD Office of Community Planning and Development Notice, which as HUD indicates in its response, is not followed by the agency, and is not considered to be an official interpretation of the statute. We continue to believe that to ensure compliance with statutory guidance; HUD should undertake a review of the statute and issue clear guidance to states concerning its interpretation of the definition. We did not revise the report in response to this comment. During our review, we conducted interviews with numerous state and local officials throughout the border region—including officials representing the state agencies that administer HUD‘s CDBG funds. However, our review focused on the federal efforts to meet needs in the U.S.-Mexico border region and not the state efforts. We made no changes in response to this comment. We have modified the report and clarified that the total funding HUD obligated (about $218 million) is a combination of CDBG funds (about $214 million), Indian CDBG funds (about $3 million), and funds provided through the Economic Development Initiative Special Account (about $1 million). Our report already recognizes the changes HUD intends to make to its data system. However, we have added an additional statement to our discussion that the change will allow HUD to verify that all projects funded with Colonia Set-aside funds are located within a colonia. We disagree with HUD‘s characterization that our report suggests that HUD still requires the states to formally designate colonias, or that HUD should be the party to designate colonias. Our report clearly states that we believe that HUD should be conducting activities as necessary to ensure that the states‘ use of funds is compliant with the law. As stated in the report, soon after the enactment of the law that established the Colonia Set-aside requirement, Congress amended the law to remove a requirement that a colonia be designated by the state or county, and as a result we recognize that no formal designation is required. Yet, in implementing the program, states are informally designating colonias, HUD is deferring to the state determinations as though they were formal designations, and HUD has not provided guidance concerning state implementation of the Colonia Set-aside as to how eligible colonias are to be identified. We have made no revisions to the report in response to this comment. The report does not include any information that would indicate that the project in Hudspeth County, Texas has been closed. The report clearly states that HUD provided a utility over $860,000 in grant funds from 2004 to 2006 to extend water distribution lines and waste collection lines for residents of a colonia; and that as of September 2009, the distribution lines remain unused because the utility does not have enough water to serve the additional households and the utility has not been able to obtain the funding needed to construct a new well. We made no changes to the report in response to this comment.

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APPENDIX XI: COMMENTS FROM THE U.S. ARMY CORPS OF ENGINEERS

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Note: GAO comments supplementing those in the report text appear at the end of this appendix. See comment.

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The following is GAO‘s comment to the U.S. Army Corps of Engineer‘s letter dated December 10, 2009.

GAO COMMENT Our report recognized that the Corps had prepared letter reports, which are brief project reports that the Corps prepares before providing assistance to an entity, prior to undertaking each project. However, our report clearly states that the Corps does not have criteria for

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identifying eligible colonias. Therefore, while these letter reports are prepared, it is unclear by what basis the Corps has verified they are colonias as meant in the authorizing statute. We made no changes to the report in response to this comment.

End Notes

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For the purposes of this report, we identify the border region as the area within 150 miles of the U.S.-Mexico border. 2 Peter Applebome, ―Along U.S. Border, a Third-World Is Reborn,‖ New York Times, March 27, 1988. Ken Flynn, ―Lack of Clean Water, Sewers Breed Disease In Border Settlements,” Los Angeles Times, March 19, 1989. Brenda Miller, ―Senator Sees Colonia Water Woes First-hand,‖ The Monitor, Sept 18, 1994. 3 In addition to funding dedicated for colonias, the United States and Mexican governments established the Border Environment and Cooperation Commission (BECC) and the North American Development Bank (NADB) following the 1993 ratification of the North American Free Trade Agreement, to help implement a NAFTA provision that recognized the need for additional water and wastewater infrastructure in the border region. 4 Cranston-Gonzalez National Affordable Housing Act, Pub. L. No. 101-625, § 916 (Nov. 28, 1990); Food, Agriculture, Conservation, and Trade Act of 1990, Pub. L. No. 101-624, § 2327 (Nov. 28, 1990); Water Resources Development Act of 1992, Pub. L. No. 102-580, § 219 (Oct. 31, 1992). 5 According to the La Paz Agreement on cross-border environmental cooperation between the United States and Mexico, the U.S.-Mexico border region extends 100 kilometers (approximately 62.1 miles) on either side of the border. 6 BECC and NADB are jointly financed through both the U.S. and Mexican governments. 7 Congress last appropriated funding for this program in fiscal year 1998; EPA last obligated funding in fiscal year 1999. 8 The Drinking Water State Revolving Fund Program was established to make funds available to drinking water systems to finance infrastructure improvements. The Clean Water State Revolving Fund Program was established to fund wastewater treatment projects. 9 USDA defines a rural area as a city of 10,000 or fewer residents or any unincorporated area. 10 See, e.g., Consolidated Appropriations Act 2008, Pub. L. No. 110–161 (Dec. 26, 2007), 121 Stat. 1866-67; Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 2006, Pub. L. No. 109–97 (Nov. 10, 2005) 119 Stat. 2136; 7 U.S.C. § 1926C (2009). 11 Cranston-Gonzalez National Affordable Housing Act, Pub. L. No. 101-625, § 916 (Nov. 28, 1990). 12 EDA defines an area as economically distressed if it meets one of the following three conditions: (1) an unemployment rate that is at least 1 percent greater than the national average, (2) a per capita income that is 80 percent of the national average or less, or (3) the area has experienced or is about to experience a special need arising from sudden and severe changes in economic conditions. 13 EPA obligations have benefited both urban and rural communities. 14 A 2008 EPA Inspector General report found that nearly 10 years after EPA Region 6 awarded the last CWTAP grant to the Texas Water Development Board, funding remained unspent. The report further states that if Region 6 does not improve its oversight of the program, the funds will probably not be fully spent by the current CWTAP grant fund drawdown projection of 2010. However, the report acknowledges that EPA has taken some positive steps to address unliquidated obligations in the CWTAP, such as working with the board to establish a schedule for using the remaining funds. EPA, Millions of Federal Dollars Remain for Colonias Projects, 08-P-0184 (Washington, D.C.: 2008). EPA obligated the $173 million in Colonias Wastewater Treatment Assistance Program funding prior to fiscal year 2000. However, although EPA obligated these funds to the Texas Water Development Board prior to fiscal year 2000, the Texas Water Development Board continued to obligate the funds to local communities and other entities from fiscal year 2000 through fiscal year 2008. 15 We do not report this sum as part of our total for federal funding to the border region because these funds are loans from a nonfederal fund and thus do not represent the same kind of outlays as direct federal funding. 16 USDA also provides grants from the Technical Assistance and Training Grant Program to national nonprofit organizations, such as the National Rural Water Association and the Rural Community Assistance Program, which may have provided technical assistance to entities in the border region. 17 In addition, HUD provides funds for a variety of planning activities, some of which are used for water and wastewater projects. However, because of data limitations we could not accurately determine whether a planning activity was related to water or wastewater projects. These activities are not included in the totals presented in the report.

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HUD officials reported that $118.8 million was to the Colonia Set-aside Program from fiscal years 2000 through 2008. The agency currently does not require states to distinguish these funds when reporting on CDBG fund uses in HUD‘s data system. States currently have the option to identify if a project occurred in a colonia by using a check box in HUD‘s data system, but HUD acknowledges that states have not been consistent about using this check box. HUD officials reported that the agency intends to issue guidance in the future to remind states of the importance of using the check box and have requested the agency include a new data field specifically to identify states‘ use of Colonia Set-aside funds. HUD reports that once this change to the data system is made, it will be able to identify all projects funded with the set-aside, and could then verify that all such projects are located in a colonia.. 19 Along with the cost for the modular bathrooms, this total also includes improvements to the water and wastewater systems that serve them. 20 Water Resources Development Act of 1992, Pub. L. No. 102-580, § 219 (1992). 21 Rural Water Supply Act of 2006, Pub. L. No. 109-451 § 103 (2006). 22 GAO, Water Resources: Four Federal Agencies Provide Funding for Rural Water Supply and Wastewater Projects, GAO-07-1094, (Washington, D.C.: Sept. 7, 2007). 23 American Recovery and Reinvestment Act of 2009, Pub. L. No. 111-5, p. 23 (2009). 24 Senate Report 110-134, Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Bill, 2008. 25 USDA, Report on Water and Waste Programs—Resources Provided and Needs of the Native Americans, Including Alaskan Natives and the Colonias Populations (November 2008). 26 When we shared this concern with the agencies, EPA officials told us that Clean Water Act regulations limit the agency‘s ability to provide assistance to unincorporated communities without the establishment of a utility or improvement district. 27 EPA, How Investment in Water, Wastewater, and Irrigation Infrastructure Has Affected the Mexico-Texas Border, EPA-X4-976742-01, Prepared by the University of Texas at Austin (Austin, Tex.: 2007). 28 In addition, BECC provides some assistance for these activities through nonfederal funds. 29 USDA-Rural Utility Service, Department of Housing and Urban Development, and U.S. Environmental Protection Agency, Joint Memorandum: Cooperation and Coordination on Jointly Financed Water and Wastewater Activities (Washington, D.C.: 1997). 30 For projects that receive technical assistance from EPA‘s U.S.-Mexico Border Water Infrastructure Program, the agency will tailor engineering and environmental reports to meet the standards of the primary funding agency. 31 EPA and USDA officials commented that the numerous instances of jointly funded projects show that agencies are coordinating. We do not disagree that projects often rely on multiple sources of funding, but we found that the lack of coordinated policies placed additional burden on applicants and delayed project completion. 32 EPA‘s U.S.-Mexico Border Water Infrastructure Program recently adopted a process to coordinate with federal agencies that are providing funding for a project the program may fund. 33 The funding obligated by the agency was initially intended to cover full project costs, but because of cost increases caused by various reasons the funding was insufficient. 34 State of New Mexico, Office of the Governor, Executive Orders 2005-031 and 2007-050. 35 GAO, Results-Oriented Government: Practices That Can Help Enhance and Sustain Collaboration among ederal Agencies, GAO-06-15 (Washington, D.C.: Oct. 21, 2005), and Managing for Results: Barriers to Interagency Coordination, GAO/GGD-00-106 (Washington, D.C.: Mar. 29, 2000). 36 GAO-06-15. 37 Cranston-Gonzalez National Affordable Housing Act, Pub. L. No. 101-625, § 916 (Nov. 28, 1990). The act originally required the set-aside only for fiscal years 1991 to 1994. Appropriations acts made the set-aside mandatory in fiscal year 1996 and then permanently required beginning in fiscal year 1997. Omnibus Consolidated Rescissions and Appropriations Act of 1996, Pub. L. 104-134, 110 Stat 1321-272 (Apr. 26, 1996); Departments of Veterans Affairs and Housing and Urban Development, and Independent Agencies Appropriations Act, 1997 Pub. L. 104-204, 110 Stat 2874, 2887 (Sept. 26, 1996). 38 Pub.L. No. 102-580, § 219 (Oct. 31, 1992); Water Resources Development Act of 2007, Pub. L. No. 110-114 § 5006(a) (Nov. 8, 2007). 39 Moreover, the Corps‘ field personnel initially told us that they rely on a state agency to determine which projects should receive assistance. While the Corps asserted it has flexibility in determining whether a community is an eligible colonia, it cannot reasonably make a determination without any criteria at all. 40 Food, Agriculture, Conservation, and Trade Act of 1990, Pub. L. No. 101-624 § 2327, Nov. 28, 1990. 41 In addition, USDA said it awards funds to them on a first-come, first-served basis and there is no need for ranking and comparing the projects to establish funding priorities. 42 The legislative history of the colonias provision describes them as the poorest areas with no infrastructure. Floor statements describe colonias as areas completely lacking water supply and wastewater systems, rather than having such systems that are inadequate in the sense of needing upgrade; for example, colonias are described as without running water, or as having wells inadequately separated from waste disposal.

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43

For example, a state might identify the universe of colonias and then prioritize them based on need, or identify key characteristics of that category of colonias having the greatest need and then identify and prioritize colonias with those characteristics. 44 In July 2008, the HUD Inspector General issued a report auditing the Colonias Set-aside program, including HUD actions to ensure compliance and detailed review of uses of funds by states. Our findings are consistent with those reported by the Inspector General. HUD, HUD’s Community Development Block Grant Set-Aside for Colonias Was Not Used for Its Intended Purposes, 2008-FW-0001 (Washington, D.C.: July 29, 2008). 45 GAO, 21st Century Challenges, Reexamining the Base of the Federal Government, GAO-05-325SP (Washington, D.C.: Feb.1, 2005). 46 Corps officials first told us that they considered the colonias projects as congressional directives, but later acknowledged that no specific projects had been identified by Congress. 47 Washington State Department of Health, ―Guidelines for Using Rural-Urban Classification Systems for Public Health Assessment,‖ 2001. 48 GAO, 21st Century Challenges, Reexamining the Base of the Federal Government, GAO-05-325SP (Washington, D.C.: Feb.1, 2005), GAO, Effectively Implementing the Government Performance and Results Act, GAO/GGD-96-118 (Washington, D.C.: June 1, 1996); and Practices That Can Help Enhance and Sustain Collaboration Among Federal Agencies, GAO-06-15 (Washington, D.C.: Oct.21, 2006). 49 Cranston-Gonzalez National Affordable Housing Act, Pub. L. No. 101-625, § 916 (Nov. 28, 1990); Food, Agriculture, Conservation, and Trade Act of 1990, Pub. L. No. 101-624, § 2327 (Nov. 28, 1990) (amending the Consolidated Farm and Rural Development Act); Water Resources Development Act (WRDA) of 1992, Pub. L. No. 102-580, § 219 (Oct. 31, 1992). 50 See, e.g., S. Rep. 102-283 (May 15, 1992) at 10 (―Colonias are rural, often remote communities along the U.S.Mexico border. It is estimated that some 350,000 people live in colonias and most generally lack sewage treatment facilities and safe drinking water . . . . [P]rovision of adequate water and sewer facilities to colonias . . . . is especially important in light of the risk of cholera spreading to these communities from Central America.‖). The history also includes several recitations of statistics of increased incidence of hepatitis and other diseases in the colonias. 51 See, e.g., 136 Cong. Rec. H6122 (daily ed. July 31, 1990) (Statement of Mr. Ortiz speaking on the amendment adding the provision for the CDBG set-aside) (―For those of our colleagues who are still unfamiliar with the plight of the impoverished men, women and children living in colonias, let me make a comparison with which you can identity. The colonias are America‘s version of the Third World. These people have never known clean drinking water, simply because they have no access to an adequate water supply. Additionally, they lack any sort of wastewater disposal system, exposing them to serious health risks. These people are the most vulnerable citizens in our society, making it incumbent on us to make life as safe for them as possible.‖); 134 Cong. Rec. H10161 (daily ed. Oct. 13, 1988) (Statement of Mr. Bartlett on a predecessor bill) (―Mr. Speaker, today literally tens of thousands of individuals along the borders live in circumstances of the worst and most unsupportable kinds of living conditions, unsupportable and comparable in many areas with conditions found in Third World countries. The reason for that is they live in these areas called colonias, which are small plots of land side by side, sold and subdivided as plots of land, but without the basic urban infrastructure put into those colonias. They are sold without sewer and water and other items of infrastructure.‖). 52 See, e.g., H. Rep. No. 100-1101 (1988) at 3 (concerning a predecessor bill of the Community Development Block Grant set-aside) (―According to estimates by Congressional Research Service, over 180,000 persons live in the subdivision areas, known as ‗colonias.‘ Most of these subdivisions are located in unincorporated areas of poor, essential rural counties of these states. The inhabitants of these areas lack such basic facilities, as waste and sewage systems, as well as safe and sanitary housing.‖). 53 136 Cong. Rec. H6122 (daily ed. July 31, 1990) (Statement of Mr. Coleman). 54 138 Cong. Rec. S17233 (Oct 7, 1992) (Statement of Mr. Ford regarding HR 6138, which became Pub. L. 102-554 and allowed an exception to one of the eligibility requirements for recognized colonias). 55 138 Cong. Rec. H9239 (Sept. 23, 1992). 56 Food, Agriculture, Conservation, and Trade Act of 1990, Pub. L. No. 101-624, § 2327, Nov. 28, 1990 (emphasis added) (amending the Consolidated Farm and Rural Development Act, § 306c), codified at 7 U.S.C. § 1926c (2009). The act also requires funds to be available only if they will be used primarily to provide services to residents of a county meeting certain per capita income and unemployment criteria; as an exception, this requirement may be satisfied if a rural area was recognized as a colonia as of Oct. 1, 1989. 7 U.S.C. § 1926c(2) (2009). 57 In addition to these statutory eligibility requirements, appropriations acts have limited funds for the 306C colonias program to those colonias along the United States/Mexico border, which USDA has interpreted to mean within 150 miles of the border. See, e.g., Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 2000, Pub. L. No. 106–78 (Oct.. 22, 1999), 113 Stat. 1150-51; Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 2006, Pub. L. No. 109–97 (Nov. 10, 2005), 119 Stat. 2136.

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Recent appropriations acts have provided either an upper limit or a fixed amount, within the Rural Community Advancement Program funds, to be used in colonias for water and wastewater improvements. See, e.g., Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 2006, Pub. L. No. 109–97 (Nov. 10, 2005), 119 Stat. 2136 (stating that ―not to exceed $25,000,000 shall be for water and waste disposal systems to benefit the Colonias . . . . including grants pursuant to section 306C‖), Consolidated Appropriations Act, 2008 Pub. L. No. 110–161 (Dec. 26, 2007) (providing $65 million for colonias, Alaskan villages, and Native Americans, to be allocated consistent with the historical allocation). USDA has a similar set-aside program for Native American tribes. 59 While an amended provision of the statute refers to areas ―recognized as‖ colonias, this provision serves only as an exception to threshold income and unemployment criteria, and does not apply to the preference provision. See Agricultural Credit Improvement Act of 1992, Pub. L. No. 102-554 § 24 (October 28, 1992); 7 U.S.C. §§ 1926c(a)(2), (c)(1) (2009). 60 USDA regulations provide for a numerical score to be assigned to each application. 7 C.F.R. § 1777.13(d) (2009). The scores include points for a ―colonia‖ but do not reflect whether a colonia meets the statutory preference criteria. 7 C.F.R. 1777.13(d)(4) (2009). USDA officials initially confirmed the regulation does not include priority points for the specified group in the statute (explaining its position that ―the preference group listed is equal to the eligible applicants‖). USDA officials later stated that the regulation sets up a scoring system whereby statutory preference characteristics are identified and points are awarded based on the preference. However, the regulation merely awards points to colonias, and does not provide for identification of the individual characteristics. 7 C.F.R. § 1777.13(d)(4) (2009). In addition, USDA generally does not use the scores, but awards funds on a rolling basis. While the regulations provide that scores are to be used when requests exceed available funds, 7 C.F.R. § 1777.13(c), this condition does not occur, since instead of having periodic deadlines at which points USDA could determine whether requested amounts exceed those available, USDA awards funds until they are gone. Thus, even if USDA changes its practice and develops scores to identify projects qualifying for the preference as a subset of colonias, its practice of awarding funds on a rolling basis would fail to give effect to the scores. 61 7 C.F.R. § 1777.12 (b) (2009). 62 7 C.F.R. § 1777.4 (2009) (The regulatory definition differs from the statute‘s articulation of colonias in the context of preference. Compare the regulation‘s ―Any identifiable community designated in writing by the State or county in which it is located; determined to be a colonia on the basis of objective criteria including lack of potable water supply, lack of adequate sewage systems, and lack of decent, safe, and sanitary housing, inadequate roads and drainage; and existed and was generally recognized as a colonia before October 1, 1989‖ to the statute‘s preference to entities proposing to serve residents of rural subdivisions ―commonly referred to as colonias, that are characterized by substandard housing, inadequate roads and drainage, and a lack of adequate water or waste facilities.‖). USDA acknowledged the two are not identical, but stated its position that they are substantially similar. 63 The legislative history of the colonias provision describes them as the poorest areas with no infrastructure. A committee report on a predecessor bill describes colonias as follows: ―It is not uncommon for colonia residents to rely on water from irrigation ditches or from shallow wells drilled on the lot where their home is located, in some cases dangerously close to outhouses or pit latrines. In other areas, colonia residents are forced to transport and store water from many miles away, often in used, 55-gallon chemical drums. The water from such sources is often dangerously contaminated. In colonias without adequate wastewater systems, heavy rains can cause raw sewage overflows or seepage to the soil‘s surface. Residents are sometimes forced to wade through the overflow to get to school or work.‖ H.R. Rep. 101-415 (1990). Floor statements describe colonias as areas completely lacking water supply and wastewater systems, rather than having such systems that are inadequate in the sense of needing upgrade; for example, colonias are described as without running water, or as having wells inadequately separated from waste disposal. See, e.g., 136 Cong. Rec. H796-97 (Statement of Mr. De La Garza, ―This title seeks to provide assistance to all identified colonias which have substandard housing, inadequate roads and drainage, and a lack of adequate water or wastewater facilities;‖ statement of Mr. Coleman, ―These residents live in homes without running water or sewage collection facilities.‖). 64 Cranston-Gonzalez National Affordable Housing Act, Pub. L. No. 101-625, § 916 (Nov. 28, 1990), as amended by Housing and Community Development Act of 1992, Pub. L. No. 102-550, § 810 (Oct. 28, 1992); 42 U.S.C. § 5306 Note (2009) the act originally required the set-aside only for fiscal years 1991 to 1994 (emphasis added). Appropriations acts made the set-aside mandatory in fiscal year 1996 and then permanently required beginning in fiscal year 1997. Omnibus Consolidated Rescissions and Appropriations Act of 1996, Pub. L. 104-134, 110 Stat 1321-272 (April 26, 1996); Departments of Veterans Affairs and Housing and Urban Development, and Independent Agencies Appropriations Act, 1997 Pub. L. 104-204, 110 Stat 2874, 2887 (Sept. 26, 1996). 65 Statements throughout the legislative history of the act consistently depict colonias as lacking in drinking water and sewer facilities. Conversely, there are no statements in the history suggesting a colonia could be a community merely featuring substandard housing, but having adequate water and wastewater. See, e.g., 134 Cong. Rec. H10161 (daily ed. Oct. 13, 1988) (Statement of Mr. Bartlett) (―Mr. Speaker, today literally tens of

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thousands of individuals along the borders live in circumstances of the worst and most unsupportable kinds of living conditions, unsupportable and comparable in many areas with conditions found in Third World countries. The reason for that is they live in these areas called colonias, which are small plots of land side by side, sold and subdivided as plots of land, but without the basic urban infrastructure put into those colonias. They are sold without sewer and water and other items of infrastructure.‖). 66 E.g., HUD OGC-CD Div., interview. HUD‘s Web site describes colonias: ―Colonias are rural communities located within 150 miles of the US-Mexican Border. They often lack the basic necessities most Americans take for granted—running water, electricity, and paved roads… Without safe, sanitary and affordable housing, drinkable water, sewer and drainage systems, colonias struggle with issues often associated with ‗Third World‘ countries.‖ Http://www.hud.gov/groups/farmwkercolonia.cfm(last visited Oct. 22, 2009). 67 HUD Office of Community Planning & Development, Notice CPD-03-10: Use of HUD Resources to Assist Colonias (Oct. 8, 2003). The notice expired in 2004. However, in its response to the IG report, HUD stated it would reissue the notice. HUD Office of Inspector General, Audit Report 2008-FW-0001, p. 26 (July 29, 2008). 68 E.g., HUD OGC-CD Div., interview. 69 Housing and Community Development Act of 1992, Pub. L. No. 102-550, § 810 (Oct. 28, 1992). 70 According to a relevant committee report, the state designation requirement had frustrated the purposes of the colonias grant program because some states and counties had designated few, if any, recipients. H.R. Rep. No. 102-760 at 146, 152-53. (1992) (accompanying H.R. 5334). 71 Cranston-Gonzalez National Affordable Housing Act, Pub. L. No. 101-625, § 916(c) (November 28, 1990); 42 U.S.C. § 5306 Note (2009). 72 For example, a state might identify the universe of colonias and then prioritize them based on need, or identify key characteristics of that category of colonias having the greatest need, and then identify and prioritize colonias with those characteristics. 73 Cranston-Gonzalez National Affordable Housing Act, Pub. L. No. 101-625, § 916(a) (Nov. 28, 1990); 42 U.S.C. § 5306 Note (2009). HUD officials stated that the agency considers the separate provision itemizing activities, section (b), to conflict with and supersede the limitation of section (a) for funds to be set-aside for activities relating to water, sewage, and housing. However, the provisions are harmonious, as the limitation in section (a) acts to modify the activities listed in (b). Thus, the statute indicates that set-aside funds are to be used for those activities in (b) that relate to water, sewage, and housing. 74 24 C.F.R. §§ 570.480(c), 570.3 (2009). 75 Pub. L. No. 101-625, § 916 (Nov. 28, 1990). 76 In the 2003 notice, HUD, by contrasting the colonia set-aside requirement with the general policy of maximum feasible deference, recognized the set-aside as an exception to that policy (―Although States are afforded maximum feasible deference in choosing which projects and grantees to fund with CDBG dollars, the Cranston-Gonzalez National Affordable Housing Act (NAHA) established the Colonia Set-Aside, which mandated that Texas, New Mexico, California and Arizona spend up to 10% of their FY 1991 CDBG grant on projects that benefit colonias.‖). HUD Office of Community Planning & Development, Notice CPD-03-10: Use of HUD Resources to Assist Colonias (Oct. 8, 2003). 77 24 C.F.R. §§ 570.480(c), 570.3 (2009). 78 Pub.L. No. 102-580 § 219 (Oct. 31, 1991); Pub.L. No. 110-114 § 5006(a)(3) (Nov. 8, 2007), 121 Stat 1192 (authorizing appropriation of $35 million ―for providing construction assistance‖ to the colonias project). 79 The Corps considers the colonias funds to be a congressional add. In the absence of specific projects identified by Congress, the Corps has exclusively awarded assistance to projects recommended by a Texas state agency. The Corps implements the assistance, as with all other section 219 projects, using cost-share agreements, a form of cooperative agreement. 80 138 Cong. Rec. H9239 (daily ed. Sept. 23, 1992) (statement of Mr. Laughlin, offering colonias amendment on predecessor bill to WRDA 1992). See also id. at H9240 (statement of Mr. Coleman describing ―these communities, in which people live without running water or safe sewage disposal . . . . In the colonias, residents live with the ever present threat of cholera—a Third World disease that menaces only where people live, in the most unsanitary conditions. This disease threatens because many of the people must draw their water from wells that are dangerously close to substandard septic systems and, therefore, contaminated with human waste.‖). 81 Cranston-Gonzalez National Affordable Housing Act, Pub. L. No. 101-625, § 916(e)(1) (November 28, 1990), 42 USC § 5306 note (2009). 82 Moreover, the Corps‘ field personnel initially told us that they rely on a state agency to determine which projects should receive assistance. While the Corps asserted it has flexibility in determining whether a community is an eligible colonia, it cannot reasonably make a determination without any criteria at all.

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Chapter 6

TERRORISM AND SECURITY ISSUES FACING THE WATER INFRASTRUCTURE SECTOR Claudia Copeland

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SUMMARY Damage to or destruction of the nation‘s water supply and water quality infrastructure by terrorist attack or natural disaster could disrupt the delivery of vital human services in this country, threatening public health and the environment, or possibly causing loss of life. Interest in such problems has increased greatly since the September 11, 2001, terrorist attacks in the United States. Across the country, water infrastructure systems extend over vast areas, and ownership and operation responsibility are both public and private, but are overwhelmingly non-federal. Since the attacks, federal dam operators and local water and wastewater utilities have been under heightened security conditions and are evaluating security plans and measures. There are no federal standards or agreed-upon industry practices within the water infrastructure sector to govern readiness, response to security incidents, and recovery. Efforts to develop protocols and tools are ongoing since the 9/11 terrorist attacks. This report presents an overview of this large and diverse sector, describes security-related actions by the government and private sector since 9/11, and discusses additional policy issues and responses, including congressional interest. Policymakers have been considering a number of initiatives, including enhanced physical security, better communication and coordination, and research. A key issue is how additional protections and resources directed at public and private sector priorities will be funded. In response, Congress has provided $923 million in appropriations for security at water infrastructure facilities (to assess and protect federal facilities and support security assessment and risk reduction activities by non-federal facilities) and passed a bill requiring drinking water utilities to conduct security vulnerability assessments (P.L. 107-188). When Congress created the Department of Homeland Security (DHS) in 2002 (P.L. 107-297), it gave DHS responsibilities to coordinate information to secure the nation‘s critical infrastructure,

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including the water sector. Under Homeland Security Presidential Directive-7, the Environmental Protection Agency (EPA) is the lead federal agency for protecting drinking water and wastewater utility systems. Recent congressional interest has focused on two legislative issues: (1) security of wastewater utilities, and (2) whether to include water utilities in chemical plant security regulations implemented by DHS. In the 109th Congress, a Senate committee approved legislation to encourage wastewater treatment works to conduct vulnerability assessments and develop site security plans. Similar legislation was introduced in the 110th Congress, and has been introduced in the 111th Congress (H.R. 2883). Congress also has turned attention to legislation to extend DHS‘s Chemical Facilities Anti-Terrorism Standards (H.R. 2868) and as part of that debate has been considering whether to preserve an existing exemption for water utilities from chemical facility standards or to include them in the scope of DHS security rules. Continuing attention to these issues in the 111th Congress is likely.

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INTRODUCTION The September 11, 2001, attacks on the World Trade Center and the Pentagon have drawn attention to the security of many institutions, facilities, and systems in the United States, including the nation‘s water supply and water quality infrastructure. These systems have long been recognized as being potentially vulnerable to terrorist attacks of various types, including physical disruption, bioterrorism/chemical contamination, and cyber attack. Damage or destruction by terrorist attack could disrupt the delivery of vital human services in this country, threatening public health and the environment, or possibly causing loss of life. Further, since most water infrastructure is government-owned, it may serve as a symbolic and political target for some. This report presents an overview of this large and diverse sector, describes security-related actions by the government and private sector since 9/11, and discusses additional policy issues and responses, including congressional interest. The potential for terrorism is not new. In 1941, Federal Bureau of Investigation Director J. Edgar Hoover wrote, ―It has long been recognized that among public utilities, water supply facilities offer a particularly vulnerable point of attack to the foreign agent, due to the strategic position they occupy in keeping the wheels of industry turning and in preserving the health and morale of the American populace.‖1 Water infrastructure systems also are highly linked with other infrastructure systems, especially electric power and transportation, as well as the chemical industry which supplies treatment chemicals, making security of all of them an issue of concern. These types of vulnerable interconnections were evident, for example, during the August 2003 electricity blackout in the Northeast United States: wastewater treatment plants in Cleveland, Detroit, New York, and other locations that lacked backup generation systems lost power and discharged millions of gallons of untreated sewage during the emergency, and power failures at drinking water plants led to boil-water advisories in many communities. Likewise, natural disasters such as the 2005 Gulf Coast hurricanes and 2007 Mississippi River floods caused extensive and costly damage to multiple infrastructure systems—transportation, water, electric power, and telecommunications.

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BACKGROUND Broadly speaking, water infrastructure systems include surface and ground water sources of untreated water for municipal, industrial, agricultural, and household needs; dams, reservoirs, aqueducts, and pipes that contain and transport raw water; treatment facilities that remove contaminants from raw water; finished water reservoirs; systems that distribute water to users; and wastewater collection and treatment facilities. Across the country, these systems comprise approximately 77,000 dams and reservoirs; thousands of miles of pipes, aqueducts, water distribution, and sewer lines; 168,000 public drinking water facilities (many serving as few as 25 customers); and about 16,000 publicly owned wastewater treatment facilities. All of these systems and facilities must be operable 24 hours a day, seven days a week. Ownership and management are both public and private; the federal government has ownership responsibility for hundreds of dams and diversion structures, but the vast majority of the nation‘s water infrastructure is either privately owned or owned by non-federal units of government. The federal government has built hundreds of water projects, primarily dams and reservoirs for irrigation development and flood control, with municipal and industrial water use as an incidental, self-financed, project purpose. Many of these facilities are critically entwined with the nation‘s overall water supply, transportation, and electricity infrastructure. The largest federal facilities were built and are managed by the Bureau of Reclamation (Reclamation) of the Department of the Interior and the U.S. Army Corps of Engineers (Corps) of the Department of Defense. Reclamation reservoirs, particularly those along the Colorado River, supply water to millions of people in southern California, Arizona, and Nevada via Reclamation and nonReclamation aqueducts. Reclamation‘s inventory of assets includes 471 dams and dikes that create 348 reservoirs with a total storage capacity of 245 million acre-feet of water. Reclamation projects also supply water to 9 million acres of farmland and other municipal and industrial water users in the 17 western states. The Corps operates 276 navigation locks, 11,000 miles of commercial navigation channel, and approximately 1,200 projects of varying types, including 609 dams. It supplies water to thousands of cities, towns, and industries from the 9.5 million acre-feet of water stored in its 116 lakes and reservoirs throughout the country, including service to approximately 1 million residents of the District of Columbia and portions of northern Virginia. The largest Corps and Reclamation facilities also produce enormous amounts of power. For example, Hoover and Glen Canyon dams on the Colorado River represent 23% of the installed electrical capacity of the Bureau of Reclamation‘s 58 power plants in the West and 7% of the total installed capacity in the Western United States. Similarly, Corps facilities and Reclamation‘s Grand Coulee Dam on the Columbia River provide 43% of the total installed hydroelectric capacity in the West (25% nationwide). Still, despite its critical involvement in such projects, especially in the West, the federal government is responsible for only about 5% of the dams whose failure could result in loss of life or significant property damage. The remaining dams belong to state or local governments, utilities, and corporate or private owners. A fairly small number of large drinking water and wastewater utilities located primarily in urban areas (about 15% of the systems) provide water services to more than 75% of the

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U.S. population. Arguably, these systems represent the greatest targets of opportunity for terrorist attacks, while the large number of small systems that each serve fewer than 10,000 persons are less likely to be perceived as key targets by terrorists who might seek to disrupt water infrastructure systems. However, the more numerous smaller systems also tend to be less protected and, thus, are potentially more vulnerable to attack, whether by vandals or terrorists. A successful attack on even a small system could cause widespread panic, economic impacts, and a loss of public confidence in water supply systems. Attacks resulting in physical destruction to any of these systems could include disruption of operating or distribution system components, power or telecommunications systems, electronic control systems, and actual damage to reservoirs and pumping stations. A loss of flow and pressure would cause problems for customers and would hinder firefighting efforts. Further, destruction of a large dam could result in catastrophic flooding and loss of life. Bioterrorism or chemical attacks could deliver widespread contamination with small amounts of microbiological agents or toxic chemicals, and could endanger the public health of thousands. While some experts believe that risks to water systems actually are small, because it would be difficult to introduce sufficient quantities of agents to cause widespread harm, concern and heightened awareness of potential problems are apparent. Factors that are relevant to a biological agent‘s potential as a weapon include its stability in a drinking water system, virulence, culturability in the quantity required, and resistance to detection and treatment. Cyber attacks on computer operations can affect an entire infrastructure network, and hacking in water utility systems could result in theft or corruption of information, or denial and disruption of service.

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RESPONSES TO SECURITY CONCERNS Water infrastructure system designers, managers, and operators have long made preparing for extreme events a standard practice. Historically, their focus has been on natural events—major storms, blizzards, and earthquakes—some of which could be predicted hours or longer before they occurred. When considering the risk of manmade threats, operators generally focused on purposeful acts such as vandalism or theft by disgruntled employees or customers, rather than broader malevolent threats by terrorists, domestic or foreign. The events of September 11, 2001, changed this focus. Federal dam operators went on ―high-alert‖ immediately following the 9/11 terrorist attacks. Reclamation closed its visitor facilities at Grand Coulee, Hoover, and Glen Canyon dams. Because of potential loss of life and property downstream if breached, security threats are under constant review, and coordination efforts with both the National Guard and local law enforcement officials are ongoing. The Corps also operates under continued high defense alert and temporarily closed all its facilities to visitors immediately after 9/11, although locks and dams remained operational; most closed facilities later re-opened, but security continues to be reassessed. Following a heightened alert issued by the federal government in February 2003, Reclamation implemented additional security measures which remain in effect at dams, powerplants, and other facilities, including limited access to facilities and roads, closure of some visitor centers, and random vehicle inspections.

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Although officials believe that risks to water and wastewater utilities are small, operators have been under heightened security conditions since 9/11. Local utilities have primary responsibility to assess their vulnerabilities and prioritize them for necessary security improvements. Most (especially in urban areas) have emergency preparedness plans that address issues such as redundancy of operations, public notification, and coordination with law enforcement and emergency response officials. However, many plans were developed to respond to natural disasters, domestic threats such as vandalism, and, in some cases, cyber attacks. Drinking water and wastewater utilities coordinated efforts to prepare for possible Y2K impacts on their computer systems on January 1, 2000, but these efforts focused more on cyber security than physical terrorism concerns. Thus, it was unclear whether previously existing plans incorporate sufficient procedures to address other types of terrorist threats. Utility officials are reluctant to disclose details of their systems or these confidential plans, since doing so might alert terrorists to vulnerabilities. Water supply was one of eight critical infrastructure systems identified in President Clinton‘s 1998 Presidential Decision Directive 63 (PDD-63)2 as part of a coordinated national effort to achieve the capability to protect the nation‘s critical infrastructure from intentional acts that would diminish them. These efforts focused primarily on the 340 large community water supply systems which each serve more than 100,000 persons. The Environmental Protection Agency (EPA) was identified as the lead federal agency for liaison with the water supply sector. In response, in 2000, EPA established a partnership with the American Metropolitan Water Association (AMWA) and American Water Works Association (AWWA) to jointly undertake measures to safeguard water supplies from terrorist acts. AWWA‘s Research Foundation contracted with the Department of Energy‘s Sandia National Laboratory to develop a vulnerability assessment tool for water systems (as an extension of methodology for assessing federal dams). EPA supported a project with the Sandia Lab to pilot test the physical vulnerability assessment tool and develop a cyber vulnerability assessment tool. An Information Sharing and Analysis Center (ISAC) supported by an EPA grant became operational under AMWA‘s leadership in December 2002. It allows for dissemination of alerts to drinking water and wastewater utilities about potential threats or vulnerabilities to the integrity of their operations that have been detected and viable resolutions to problems.3 Research on water sector infrastructure protection has been underway for some time. The Department of the Army conducts research in the area of detection and treatment to remove various chemical agents. The Federal Emergency Management Agency (FEMA) has led an effort to produce databases of water distribution systems and to develop assessment tools for evaluating threats posed by the introduction of a biological or chemical agent into a water system. The Centers for Disease Control and Prevention is developing guidance on potential biological agents and the effects of standard water treatment practices on their persistence. However, in the January 2001 report of the President‘s Commission on Critical Infrastructure Protection, ongoing water sector research was then characterized as a small effort that leaves a number of gaps and shortfalls relative to U.S. water supplies.4 This report stated that gaps exist in four major areas, concerns that remain relevant and are guiding policymakers now:  

Threat/vulnerability risk assessments, Identification and characterization of biological and chemical agents,

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

A need to establish a center of excellence to support communities in conducting vulnerability and risk assessment, and Application of information assurance techniques to computerized systems used by water utilities, as well as the oil, gas, and electric sectors, for operational data and control operations.

Less attention has been focused on protecting wastewater treatment facilities than drinking water systems, perhaps because destruction of them likely represents more of an environmental threat (i.e., by release of untreated sewage) than a direct threat to life or public welfare. Vulnerabilities do exist, however. Large underground collector sewers could be accessed by terrorist groups for purposes of placing destructive devices beneath buildings or city streets. Pipelines can be made into weapons via the introduction of a highly flammable substance such as gasoline through a manhole or inlet. Explosions in the sewers can cause collapse of roads, sidewalks, and adjacent structures and injure and kill people nearby. Damage to a wastewater facility prevents water from being treated and can impact downriver water intakes. Destruction of containers that hold large amounts of chemicals at treatment plants could result in release of toxic chemical agents, such as chlorine gas, which can be deadly to humans if inhaled and, at lower doses, can burn eyes and skin and inflame the lungs. Since the 2001 terrorist attacks, many water and wastewater utilities have switched from using chlorine gas as disinfection to alternatives which are believed to be safer, such as sodium hypochlorite or ultraviolet light. However, some consumer groups remain concerned that many wastewater utilities, including facilities that serve heavily populated areas, continue to use chlorine gas. To prepare for potential accidental releases of hazardous chemicals from their facilities, more than 2,800 wastewater and drinking water utilities, water supply systems, and irrigation systems already are subject to risk management planning requirements under the Clean Air Act. Still, some observers advocate requiring federal standards to ensure that facilities using dangerous chemicals, such as wastewater treatment plants, use the best possible industry practices (practices that are referred to as Inherently Safer Technologies, or ISTs) to reduce hazards.5 In June 2007, the U.S. Chemical Safety and Hazard Investigation Board issued a safety bulletin recommending that the Department of Transportation increase regulation of wastewater and drinking water treatment plants and other types of facilities that receive chlorine gas by railcar to require that they install remotely operated emergency isolation devices to unload chlorine railcars, for rapid shutdown in the event of leakage or other failure.6 In March 2006, the Government Accountability Office (GAO) reported on a survey of security measures at 200 of the nation‘s largest wastewater utilities.7 GAO found that many have made security improvements since the 2001 terrorist attacks. Most utilities said they had completed, or intended to complete, a plan to conduct some type of security assessment, although there is no federal mandate to do so. More than half of responding facilities indicated they did not use potentially dangerous gaseous chlorine as a wastewater disinfectant. However, the report noted that these utilities have made little effort to address collection system vulnerabilities, due to the technical complexity and expense of securing collection systems that cover large areas and have many access points. Some told GAO investigators that taking other measures, such as converting from gaseous chlorine, took priority over collection system protections. In a 2007 follow-on study, GAO reported that

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actual and projected capital costs to convert from chlorine gas to alternative disinfection methods range from about $650,000 to just over $13 million. Factors affecting conversion costs included the type of alternative method; the size of the facility; and labor, building, and supply costs, which varied considerably.8 There are no federal standards or agreed-upon practices within the water infrastructure sector to govern readiness, response to security incidents, and recovery. EPA is not authorized to require water infrastructure systems to implement specific security improvements or meet particular security standards. Efforts to develop voluntary protocols and tools are ongoing since the 2001 terrorist attacks. Wastewater and drinking water utility organizations are implementing computer software and training materials to evaluate vulnerabilities at large, medium, and small utility systems, and EPA has provided some grant assistance to drinking water utilities for vulnerability assessments. Out of funds appropriated in 2002 (P.L. 107117), EPA awarded grants to nearly 900 large and medium drinking water utilities to conduct vulnerability assessments. EPA also has targeted grants to ―train the trainers,‖ delivering technical assistance to organizations such as the Rural Community Assistance Program and the Water Environment Federation that, in turn, can assist and train personnel at thousands of medium and small utilities throughout the country. Rural and small systems also have received support from the U.S. Department of Agriculture. With financial support from EPA, drinking water and wastewater utility and engineering groups developed three security guidance documents, issued in December 2004, that cover the physical design of online contaminant monitoring systems, and physical security enhancements of drinking water, wastewater, and stormwater infrastructure systems. The documents provide voluntary guidelines for assisting utilities that have completed vulnerability assessments to mitigate vulnerabilities of their systems through the design, construction, operation, and maintenance of both new and existing systems. Based on the three guidance documents, these groups also have drafted training materials and a set of voluntary standardized best engineering practices that recommend measures to protect water and wastewater infrastructure against a range of threats, including terrorist attacks and other sources of potential harm, such as accidents, chemical contamination, and natural disasters.9

EPA EPA has taken a number of organizational and planning steps to strengthen water security. The agency created a National Homeland Security Research Center within the Office of Research and Development to develop the scientific foundations and tools that can be used to respond to attacks on water systems. The Center conducts applied research on ways to protect and prevent, mitigate, respond to, and recover from security events. In September 2003, EPA created a Water Security Division in the Office of Water, taking over activities initiated by a Water Protection Task Force after the 9/11 terrorist attacks. This office provides guidance and tools to utilities as they assess and reduce vulnerabilities of their systems. It trains water utility personnel on security issues, supports the WaterISAC, and implements the agency‘s comprehensive research plan. EPA has issued both a Water Security Research and Technical Support Action Plan, identifying critical research needs and providing an implementation plan for addressing those

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needs, and a Strategic Plan for Homeland Security. The Strategic Plan, which is not limited to water security concerns, identifies several mission-critical areas on which EPA intends to focus its homeland security planning: critical infrastructure protection; preparedness, response, and recovery; communication and information; protection of EPA personnel and infrastructure; and self-evaluation. There has been evaluation of some of these EPA efforts. A preliminary review of the Research and Action Plan by a panel of the National Research Council identified some gaps, suggested alternative priorities, and noted that the Plan was silent on the financial resources required to complete the research and to implement needed countermeasures to improve water security. Also in 2003, EPA‘s Inspector General issued an evaluation report on the initial Strategic Plan for Homeland Security and concluded that the agency had not outlined how resources, activities, and outputs will achieve the water security program‘s goals. Moreover, the Inspector General said that EPA lacks fundamental components, such as performance measures, for monitoring program performance against goals.10 EPA responded that longterm objectives for critical water infrastructure protection activities could be identified in a future revised strategic plan. A second Strategic Plan for Homeland Security, issued in October 2004, updated the initial strategy principally by reflecting projected funding and resources for the next two years on EPA‘s strategic objectives and recognizing the evolving role of the Department of Homeland Security.11 Reviewing these efforts, the National Research Council concluded in 2007th at EPA has developed useful contaminant information and exposure assessment tools in several key areas, but that other areas, such as physical and cyber security, contingency planning, and wastewater security, have shown weaker or somewhat disjointed progress. An overarching issue is making water security information accessible to those who might need it.12 GAO has issued two reports discussing how future federal funding can best be spent to improve security at drinking water and wastewater utilities.13 Both reports are based on the views of subject matter experts identified by GAO. In the drinking water report, specific activities judged by the experts to be most deserving of federal support included physical and technological upgrades, education and training for staff and responders, and strengthening key relationships between water utilities and others such as law enforcement and public health agencies. In the wastewater report, the experts cited the replacement of gaseous chemicals used in the disinfection process with less hazardous alternatives as a key activity deserving of federal funds, along with improving local, state, and regional collaboration, and support facilities‘ vulnerability assessments. Asked how federal funds should be allocated, both groups of experts favored giving priority to utilities that serve critical assets (such as public health institutions, government, and military bases) and to utilities serving areas with large populations. A key focus of EPA‘s activities since 2005 has been the Water Sector Initiative. Initially known as WaterSentinel, it is a pilot project that could serve as a model for water utilities throughout the country. Its purpose is to test and demonstrate contamination warning systems at drinking water utilities and municipalities. EPA awarded grants to install and evaluate early warning systems in five cities under this program (Cincinnati, New York, San Francisco, Dallas, and Philadelphia). More broadly, EPA has expanded its security activities in two ways. First, its focus has enlarged from the post-9/11 emphasis on terrorism to an ―all hazards‖ approach, emphasizing to water utilities that issues of risk identification and risk reduction also include natural

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disasters (which were the focus of much of the industry‘s attention before 2001) and protection of hazardous chemicals. Second, EPA supports the establishment of intrastate mutual aid and assistance agreements, known as Water/Wastewater Agency Response Networks (WARNS), to facilitate flow of personnel and resources during response to emergencies. They are intended to provide mechanisms for establishing emergency contacts and facilitating short-term emergency assistance to restore critical operations. Mutual aid agreements existed in California and Florida before the 2005 Gulf hurricanes, and more formal efforts to establish similar programs in all 50 states followed on those disasters. So far, WARNS have been established in about 20 states, according to EPA.

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Reclamation and the Corps Officials have been reassessing federal infrastructure status and vulnerabilities for several years.14 The Bureau of Reclamation‘s site security program is aimed at ensuring protection of Reclamation‘s 252 high- and significant-hazard dams and facilities and 58 hydroelectric plants. After September 11, Reclamation committed to conducting vulnerability and risk assessments at 280 high-priority facilities. Risk assessments at these facilities were completed between FY2002 and FY2006. These assessments resulted in recommendations now being implemented to enhance security procedures and physical facilities, such as additional security staffing, limited vehicle and visitor access, and coordination with local law enforcement agencies. The Corps implements a facility protection program to detect, protect, and respond to threats to Corps facilities and a dam security program to coordinate security systems for Corps infrastructure. It also implements a national emergency preparedness program which assists civilian governments in responding to all regional/national emergencies, including acts of terrorism. Both agencies participate in the Interagency Committee on Dam Safety (ICODS), which is part of the National Dam Safety Program that is led by FEMA. A February 2003 White House report15 presented a national strategy for protecting the nation‘s critical infrastructures and identified four water sector initiatives: identify highpriority vulnerabilities and improve site security; improve monitoring and analytic capabilities; improve information exchange and coordinate contingency planning; and work with other sectors to manage unique risks resulting from interdependencies. The strategy was intended to focus national protection priorities, inform resource allocation processes, and be the basis for cooperative public and private protection actions.

Department of Homeland Security The Department of Homeland Security (DHS, established in P.L. 107-297) has a mandate to coordinate securing the nation‘s critical infrastructure, including water infrastructure, through partnerships with the public and private sectors. It is responsible for detailed implementation of core elements of the national strategy for protection of critical infrastructures. One of its tasks is to assess infrastructure vulnerabilities, an activity that wastewater and drinking water utilities have been doing since the 9/11 attacks, under their

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own initiatives and congressional mandates (P.L. 107-188; see ―Legislative Issues,‖ page 14). The legislative reorganization did not transfer Corps or Reclamation responsibilities for security protection of dams and other facilities or EPA‘s responsibilities to assist drinking water and wastewater utilities. In December 2003, President Bush issued Homeland Security Presidential Directive/HSPD-7 which established a national policy for the federal government to identify, prioritize, and protect critical infrastructure as a part of homeland security.16 The directive called for DHS to integrate all security efforts among federal agencies and to complete a comprehensive national plan for critical infrastructure protection. In 2006, DHS issued a National Infrastructure Protection Plan (NIPP), proposing a framework of partnerships between private industry sectors and the government that would work together to secure the nation‘s vital resources. For example, EPA would work with water treatment and wastewater systems, while dams would cooperate with DHS. The Department updated the NIPP in February 2009.17 The plan is intended to provide the unifying structure for the integration of a wide range of efforts for the enhanced protection and resiliency of the nation‘s critical infrastructure and key resources into a single national program. The Department established the Critical Infrastructure Partnership Advisory Council (CIPAC) to coordinate federal infrastructure protection programs with similar activities of the private sector, and state, local, and tribal governments. In 2004, CIPAC established a Government Coordinating Council (GCC) and non-government coordinating council for each sector. The CIPAC Water Sector Committee includes representatives from both the Water GCC(federal members) and the Water Sector Coordinating Council (WSCC). The WSCC consists of 24 members from state and local agencies, water utilities, and water affinity organizations. In response to the original NIPP, DHS and the GCCs, in conjunction with the Sector Coordinating Councils, prepared 17 sector-specific plans which were completed in May 2007. The plans identify sector profiles and assets, assess risks, prioritize infrastructure, identify sector protection plans and measures of progress. The water sector plan for wastewater and drinking water focuses on four goals: (1) sustaining protection of public health and the environment; (2) recognize and reduce risks; (3) maintain a resilient infrastructure; and (4) increase communication, outreach, and public confidence.18 The sector plan for dams, including federal dams, is one of 10 that DHS determined presents security sensitivity issues if widely distributed; thus, those 10 plans were not released to the public. In an early review of the sector plans, GAO found that the drinking water and wastewater sector plan was more developed than that of many other sectors, largely because the sector has a 30-year history of protection and cooperation, but for that reason, the plan did not provide added value for the sector.19 In the NIPP, DHS described a plan to develop a risk analysis method that would include a uniform means of measuring risk and assessing consequences across infrastructure sectors. Some drinking water and wastewater treatment industry officials commented that this plan, known as the Risk Analysis and Management for Critical Asset Protection (RAMCAP), raised concern that it could force some facilities to conduct new, or revise existing, vulnerability assessments. Drinking water industry officials are said to be concerned that a new method may not recognize vulnerability assessments that many drinking water utilities have already completed under requirements of the 2002 Bioterrorism Preparedness Act (see ―Legislative Issues,‖ page 14). This is a particular concern for small and rural utilities, many

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of which have used simpler security models to complete their vulnerability assessment plans and would prefer to build on that model to conduct RAMCAP and similar activities. While physical security of facilities is a key concern, cyber security issues continue to draw attention, as well. The Water Sector Coordinating Council has developed guidance on protecting potentially vulnerable drinking water and wastewater systems from targeted cyber attack or accidental cyber events and has hosted workshops for utility employees who are responsible for control system security.20

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Coordination and Information Sharing The Homeland Security Department‘s involvement in water security concerns has been growing, although under HSPD-7, EPA continues as the lead federal agency to ensure protection of drinking water and wastewater treatment systems from possible terrorist acts and other sabotage. Since early 2004, DHS has been preparing guidance documents on how each infrastructure sector, including water systems, can protect itself from security threats. For some time, the two agencies have been working to clarify their roles in providing security to water utilities. One of the functions of the Water Sector Coordinating Council is to be a point of contact for DHS to vet potential water security policies, allowing one-stop shopping for federal officials. In 2003, DHS created an information-sharing network, called the Homeland Security Information Network (HSIN). Both it and the existing WaterISAC share the goal of providing security information to water utilities, but they differ in some respects. The WaterISAC is a private, subscription service (although it receives some federal funding) that provides information to about 530 water utilities and others on security matters. It is the primary communication tool in the water sector. The HSIN, a software program, is a free, federally funded platform for information sharing. It is not limited to the water sector, and it provides no information by itself; it acts as a bulletin board where DHS, EPA, and utilities can post security-related information. Distinct from the HSIN and the WaterISAC is the Water Security Channel (WaterSC), launched in 2004 as a free service of the WaterISAC, which disseminates EPA and DHS general security bulletins at the request of those agencies to more than 8,400 utilities, state agencies, engineering firms, and researchers.

POLICY ISSUES AND CONGRESSIONAL RESPONSES Congress and other policymakers have considered a number of initiatives in this area, including enhanced physical security, communication and coordination, and research. Regarding physical security, a key question is whether protective measures should be focused on the largest water systems and facilities, where risks to the public are greatest, or on all, since small facilities may be more vulnerable. A related question is responsibility for additional steps, because the federal government has direct control over only a limited portion of the water infrastructure sector. The distributed and diverse nature of ownership (federal, non-federal government, and private) complicates assessing and managing risks, as does the reality of limited resources. The adequacy of physical and operational security safeguards is

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an issue for all in this sector. One possible option for federal facilities (dams and reservoirs maintained by Reclamation and the Corps) is to restrict visitor access, including at adjacent recreational facilities, although such actions could raise objections from the public. Some operators of non-federal facilities and utilities are likewise concerned. As a precaution after the 9/11 attacks, New York City, which provides water to 9 million consumers, closed its reservoirs indefinitely to all fishing, hiking, and boating and blocked access to some roads. Policymakers have examined measures that could improve coordination and exchange of information on vulnerabilities, risks, threats, and responses. This is a key objective of the WaterISAC and also of the Department of Homeland Security, which includes, for example, functions of the National Infrastructure Protection Center (NIPC) of the FBI that brings together the private sector and government agencies at all levels to protect critical infrastructure, especially on cyber issues. One issue of interest is how the Department is coordinating its activities with ongoing security efforts by other federal agencies and nonfederal entities that operate water infrastructure systems, including its implementation of the comprehensive national plan required by Presidential Directive/HSPD-7. For some time, the two agencies have been working to clarify their roles in providing security to water utilities and in other areas and have negotiated agreements concerning joint research projects and coordination for specific field operations. Nevertheless, in the conference report accompanying the FY2005 Consolidated Appropriations Act, Congress directed EPA to enter into a memorandum of understanding (MOU) with DHS to define the relationship of the two entities with regard to the protection and security of the nation. The memorandum was expected to specifically identify areas of responsibilities and the potential costs (including which entity pays, in whole or part) for meeting such responsibilities.21 In response, EPA did not enter into a new MOU but instead, in November 2005, issued a report that identified general authorities that govern EPA‘s and DHS‘s respective actions, ongoing projects that reflect coordination, and existing project-specific MOUs. This report on roles and responsibilities still may not resolve the potential for duplication and overlap among agencies. Currently, for example, policies are being developed both by DHS and EPA, although both agencies are represented on DHS‘s Water Sector Committee through the CIPAC process. Information sharing and dissemination even in this one sector are occurring through several different mechanisms: DHS supports the Homeland Security Information Network (HSIN), while drinking water and wastewater utilities also may receive security-related advisories from two other sources, the WaterISAC and the Water Security Channel. Some have questioned the multiple advisory groups, on top of existing entities, and in particular the potential that the several mechanisms for sharing homeland security information could transmit inconsistent information and make the exchange of information more complicated, not less. Others are optimistic that the systems and groups will sort themselves out into compatible and complementary networks of information sharing, but that process could take considerable time. In its March 2006 report, GAO commented on these multiple information services designed to communicate information to the water sector, but also acknowledged EPA‘s and DHS‘s ongoing efforts to coordinate their activities to advance water sector security. GAO recommended that DHS and the Water Sector Coordinating Council identify areas where information-sharing networks supported by EPA and DHS (especially the WaterISAC and HSIN) could be better coordinated to avoid operational duplications and overlap and to ensure that security threat information is provided to water systems on a timely basis. Water utility industry groups responded to GAO‘s

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recommendation by saying that such coordination efforts are, in fact, underway, and DHS is reportedly reviewing HSIN and considering its future role in information sharing. DHS-EPA coordination again received congressional attention in the 110th Congress. In its draft report on FY2009 funding for DHS, the House Appropriations Committee included report language urging DHS to work with EPA on water security issues. The report encouraged the National Protection and Programs Directorate of DHS to work with EPA ―to improve federal outreach to water system managers, increase support and guidance on implementation of risk assessment techniques, and publicize effective protective measures that can be taken to increase water system security.‖22 Beyond the water sector itself, there is interest in larger coordination issues involving cross-sector interdependencies of critical infrastructures. As noted previously, water utilities are dependent on electric power to treat and distribute power, and electric power is essential to collecting and treating wastewater. Adequate and uninterrupted supply of water is necessary to support municipal firefighting.23 When disasters occur, what affects power also affects water supply, also affects sanitary services, also affects communications capability. The National Infrastructure Advisory Council, which provides the President, through DHS, with advice on infrastructure security, reportedly is considering using the water sector as the focus for a study of sector interdependencies. Another information issue concerns the extent of EPA‘s ability to collect and analyze security data from water utilities, especially information in vulnerability assessments submitted under the Bioterrorism Preparedness Act (discussed below). EPA officials believe that the act permits reviewing utility submissions for overall compliance and allows aggregation of data but precludes the agency from asking for or analyzing data showing changes in security levels, as a safeguard against unintended release of such information. Others, including EPA‘s Inspector General, believe that EPA has the authority and responsibility to review and analyze the information in order to identify and prioritize threats and to develop plans to protect drinking water supplies. Among the research needs being addressed are tools for vulnerability and risk analysis, identification and response to biological/chemical agents, real-time monitoring of water supplies, and development of information technology. The cost of additional protections and how to pay for them are issues of great interest, and policymakers continue to consider resource needs and how to direct them at public and private sector priorities. A critical issue for drinking water and wastewater utilities is how to pay for physical security improvements, since currently there are no federal funds dedicated to these purposes, and utilities generally must pay for improvements using the same revenue or funding sources also needed for other types of capital projects.

Congressional Activity Since the September 11, 2001 attacks, Congress has conducted oversight on a number of these issues and considered legislation to address various policy issues, including government reorganization, and additional appropriations.

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Appropriations Since the 9/11 terrorist attacks, Congress has provided appropriations to the Corps, the Bureau, and EPA for security-related programs and activities to protect water infrastructure, as shown in Figure 1. Through FY2010, these appropriations have totaled $923 million. For both the Bureau of Reclamation and the Army Corps of Engineers, appropriations immediately after 9/11 were intended to support risk assessment of needed security improvements, followed by implementation of measures to ensure the safety and security of the public, Reclamation and Corps employees, and the facilities. For example, since FY2004, both agencies have implemented physical hardening and other protective measures, as well as personnel and information security. Both agencies continue to assess and reassess security needs at their facilities as part of ongoing efforts to ensure their long-term security. Reclamation‘s security budget includes a law enforcement program (guards and surveillance), facility fortification, studies, and review. For several years, Reclamation‘s security activities focused on five National Critical Infrastructure (NCI) dam facilities: Hoover, Shasta, Grand Coulee, Glen Canyon, and Fulsom; in recent years, other facilities also have received recommended security upgrades. Physical security enhancements at Reclamation facilities are intended to protect those facilities from terrorist threats, other criminal activities, and unauthorized operation of water control systems, thus reducing the high risk rating at critical assets. According to the FY2011 budget, from FY2002 through FY2008, several independent and internal reviews were conduction of Reclamation‘s site security program (including a review by Sandia National Laboratory, Interior‘s Office of Inspector General, and the National Academy of Sciences). As a result, Reclamation implemented improvements to all components of its program, including personnel security, information security, facility security, operations security, and law enforcement. The Corps‘ budget as shown in Figure 1 covers recurring security costs (i.e., guards and monitoring) for its administrative buildings and other general use facilities. The Corps also funds certain project-specific facility security upgrades; these amounts cannot be easily identified in the Corps‘ budget and are not reflected in the figure.

Source: Compiled by CRS. Figure 1. Water Infrastructure Security Appropriations Millions of Dollars. Water Infrastructure Issues, edited by James D. Haffner, and Elizabeth M. Gennady, Nova Science Publishers, Incorporated, 2011. ProQuest Ebook

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Funding appropriated to EPA has supported a number of activities. Significant portions of appropriations in FY2002 and FY2003 were for EPA grants for vulnerability assessments carried out by large and medium-size drinking water systems, to assist them in complying with requirements of the Public Health Security and Bioterrorism Preparedness and Response Act (P.L. 107-188, discussed below). EPA appropriations also have supported training and development of voluntary industry practices for security, and grants to states and territories to coordinate activities for critical water infrastructure security efforts.24 EPA also provides support for water security information sharing for drinking water and wastewater utilities through the WaterISAC and the Water Security Channel. EPA has supported two special initiatives since FY2006: the Water Alliance for Threat Reduction (WATR), to train utility operators at the highest risk systems; and a related pilot program to design, deploy, and test biological or other contamination warning systems at drinking water systems (see discussion of the Water Sector Initiative (WSI), on page 7). The FY2011 budget states that five full-scale pilots have been established and that future funding for WSI will be used for evaluation and outreach efforts to migrate lessons learned from the pilots to the water sector as a whole.

Legislative Issues In May 2002, Congress approved the Public Health Security and Bioterrorism Preparedness and Response Act (P.L. 107-188). Title IV of that act required drinking water systems serving more than 3,300 persons to conduct vulnerability analyses and to submit the assessments to EPA. The legislation authorized grant funding to assist utilities in meeting these requirements. (For information, see CRS Report RL31294, Safeguarding the Nation’s Drinking Water: EPA and Congressional Actions, by Mary Tiemann.) Legislation authorizing Reclamation to contract with local law enforcement to protect its facilities also was enacted during the 107th Congress (P.L. 107-69). In 2001, the House and Senate considered but did not enact legislation authorizing a sixyear grant program for research and development on security of water supply and wastewater treatment systems (H.R. 3178, S. 1593). Some of the drinking water research provisions in these bills were included in the Bioterrorism Preparedness Act. In 2002, the House approved a bill authorizing $220 million in grants and other assistance for vulnerability assessments by wastewater treatment utilities (H.R. 5169), but the Senate did not act on a related bill (S. 3037). In the 108th Congress, legislation authorizing vulnerability assessment grants to wastewater utilities was approved by the House, by a 413-7 vote (H.R. 866, identical to H.R. 5169 in the 107th Congress). The Senate Environment and Public Works Committee approved related legislation (S. 1039, S.Rept. 108-149). No further action occurred, due in part to concerns expressed by some that the legislation did not require that vulnerability assessments be submitted to EPA, as is the case with drinking water assessments required by the 2002 Bioterrorism Preparedness Act. Wastewater security issues again received some attention in the 109th Congress. In May 2006, the Senate Environment and Public Works Committee approved S. 2781 (S.Rept. 109345). It was similar to S. 1039 in the 108th Congress in that it would have encouraged wastewater utilities to conduct vulnerability assessments and authorized $220 million to assist utilities with assessments and preparation of site security plans. It also included provisions responding to GAO‘s March 2006 report that found that utilities have made little effort to address vulnerabilities of collection systems, which may be used by terrorists to introduce

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hazardous substances or as access points for underground travel to a potential target.25 S. 2781 would have authorized EPA to conduct research on this topic. During consideration of the bill, the Senate committee rejected an amendment that would have required, rather than encouraged, treatment works to conduct vulnerability assessments and also would have required high-risk facilities to switch from using chlorine and similar hazardous substances to other chemicals that are often referred to as ―inherently safer technologies.‖ Similar legislation was introduced in the 110th Congress (S. 1968). In the 111th Congress, H.R. 2883, the Wastewater Treatment Works Security Act of 2009, would require wastewater utilities that use or store substances of concern to carry out assessments and develop site security plans, in compliance with EPA guidelines. EPA could make grants for vulnerability assessments, security enhancements, or worker training programs; the bill authorizes $1 billion over five years for these grants. Another issue of recent interest has been the concerns of a number of water supply and power users of Bureau of Reclamation facilities about paying for security costs at these facilities. Since 9/11, Reclamation has increased security and anti-terrorist measures at federal multi-purpose dams. From 2002 through 2004, all of the incremental security costs were paid by the federal government. However, since 2005, the Administration has requested that users should fully reimburse government for the guards and patrols portion of site security costs. In the Administration‘s view, project beneficiaries have had several years to adjust their expectations, budgets, and planning for current guard and patrol levels and that post-9/11 cost increases should now be considered project O&M expenses subject to allocation among project purposes and reimbursement from beneficiaries. Many users argued that security costs for which the general public is the beneficiary, including obligations for national defense, should properly be the federal government‘s responsibility. The issue is especially a concern for beneficiaries of Reclamation‘s five highpriority dams, such as Hoover and Grand Coulee, which have the largest security needs, because these users are being asked to pay a proportionally higher share of total security costs than users of other Reclamation facilities. Hearings on the issue were held by the House Natural Resources Committee, in June 2006, and the Senate Energy and Natural Resources Committee, in July 2007. A compromise of sorts is reflected in legislation enacted in May 2008. Section 513 of the Consolidated Natural Resources Act of 2008 (P.L. 110-229) requires water and power users to pay for the cost of security guards, but sets an $18.9 million cap on the amount to be paid by users, indexed for inflation. Since FY2009, Reclamation‘s budget has included this annual reimbursability ceiling.

Water Utilities and Chemical Plant Security The issue of security of wastewater and drinking water utilities also was debated in connection with legislation dealing with chemical manufacturing plant security. As part of a bill providing FY2007 appropriations for the Department of Homeland Security, Congress included provisions authorizing DHS to establish risk-based and performance-based security standards at the nation‘s chemical plants (the Chemical Security Act, Section 550 of P.L. 109295). Under the legislation, chemical plants are required to conduct vulnerability assessment and create and implement site security plans based on identified vulnerabilities. During consideration of comprehensive chemical plant security bills during the 109th Congress, some had proposed that water systems (drinking water and wastewater) be included in the legislation because many store or use extremely hazardous substances, such as chlorine gas,

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that can injure or kill citizens if the chemicals are suddenly released (see page 5). However, water system officials argued that the water sector should be excluded, because facilities have already undertaken vulnerability assessments (as required for many drinking water systems under the 2002 Bioterrorism Act, and as many wastewater utilities have done voluntarily). Further, they argued that requirements in the legislation were potentially duplicative of Risk Management Plan provisions in the Clean Air Act, which apply to more than 2,800 of the largest water systems. The chemical plant security provisions in P.L. 109-295 endorsed these arguments and excluded water systems from the new requirements. Implementing regulations promulgated by DHS in 2007 exempted water systems from security standards. However, under the statute, the temporary DHS rules were scheduled to sunset on September 30, 2009. The 110th Congress considered legislation to reauthorize DHS‘s chemical security program, but no legislation was enacted. At issue were two competing proposals. H.R. 5533 would have revised and extended the chemical facility security program and continue to exempt water facilities. H.R. 5577 would have revised the U.S. chemical plant security program and would have included drinking water and wastewater facilities in its coverage, requiring covered facilities to consider the use of ―inherently safer technology,‖ which could force them to switch chemicals or change their operations to reduce risk.26 At a House Homeland Security Committee oversight hearing in July 2007, DHS Assistant Secretary for Infrastructure Protection Bob Stephan said that the water sector‘s exclusion from the Chemical Security Act created a ―regulatory gap,‖ because chemicals that are covered by the act, including chlorine, are found at unregulated wastewater and drinking water facilities, as well as regulated conventional chemical plants. He also said that DHS is reviewing ways to boost safeguards at water utilities that use large amounts of gaseous chlorine. Similarly, in testimony before a House subcommittee in June 2008, EPA and DHS officials testified in support of eliminating the current exemption for wastewater and drinking water facilities from chemical security regulations. Water utilities oppose being included in the DHS program, arguing that it could lead to costly new mandates. The debate also has raised the issue of federal agency roles and leadership, such as whether EPA should be granted a formal consultative role in development and implementation of chemical security rules. Some were concerned that legislation such as H.R. 5577 would create uncertainty about coordination between EPA and DHS and whether EPA‘s lead role for the water utility sector would be altered. Interest in these issues has continued in the 111th Congress, which has renewed consideration of the applicability of chemical security standards to the water sector. In the FY2010 budget for DHS, the Obama Administration requested that the 2007 chemical facility standards, which exempted wastewater and drinking water facilities and were scheduled to sunset on September 30, 2009, be extended without modification for one year.27 Congress agreed to this request to extend the existing statutory authority until October 4, 2010, in legislation providing FY2010 appropriations for DHS (P.L. 111-83). At the same time, Congress was considering legislation to extend and modify P.L. 109-295, including to make the chemical security standards permanent. As in the 110th Congress, there were competing proposals: H.R. 2868 as introduced would create permanent DHS security rules for chemical plants and wastewater facilities but exempt drinking water plants, while H.R. 3258 as introduced would require EPA to establish risk-based security rules for drinking water plants and for EPA and DHS to consult on security at co-managed drinking water and wastewater

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facilities. Water utilities urged congressional committees not to create a dual or split regulatory arrangement between two agencies, arguing that EPA has longstanding expertise in water and wastewater security issues. House lawmakers developed a compromise that the House passed in November 2009. As passed, H.R. 2868, the Chemical Facility Anti-Terrorism Act of 2009, would authorize EPA to regulate the security of community drinking water systems serving more than 3,300 people, as well as other public water systems that EPA determines present a security risk. It would authorize $315 million in FY2011 for grants to states and nonprofits to help develop security plans for covered public water systems. The bill also would designate EPA as lead agency for wastewater. Incorporating a modified version of H.R. 2883, Title III of the legislation would authorize $1 billion over five years for EPA to make grants to states, municipalities, and other entities to conduct vulnerability assessments at wastewater treatment facilities, provide security-related training to treatment works employees and emergency-response providers, and install security improvements. A controversial issue debated in connection with H.R. 2868 has been whether to require facilities that handle chemicals to take action to reduce the consequences of a terrorist attack, such as using different chemicals, or changing to safer processes for their operations—socalled inherently safer technology (IST). Under the bill as passed, regulated drinking water and wastewater treatment facilities in the top two of four risk categories could be directed by states or EPA to implement methods to reduce the consequences of a chemical release from an intentional act if doing so is feasible, would significantly reduce risk, would not increase interim storage of a substance of concern at the facility, and would not render the facility unable to comply with applicable requirements of the SDWA or CWA. Supporters of the legislation said that by including water facilities, the bill would close a major security gap and that the bill would strengthen chemical facility antiterrorism standards and incorporate best practices. Opponents said that the bill would impose costly mandates while doing little to further security. Utility officials endorsed the compromise giving EPA the lead on water security. The Senate has not yet considered chemical facility security legislation in the 111th Congress.28

End Notes 1

J.E. Hoover, ―Water Supply Facilities and National Defense,‖ Journal of the American Water Works Association, vol. 33, no. 11 (1941), 1861. 2 ―The Clinton Administration‘s Policy on Critical Infrastructure Protection: Presidential Decision Directive 63,‖ May 22, 1998; see http://www.fas.org/irp/offdocs/paper598.htm. 3 For additional information, see http://www.waterisac.org/. 4 Critical Infrastructure Assurance Office, Report of the President of the United States on the Status of Federal Critical Infrastructure Protection Activities, January 2001, 209 p. See http://www.fas.org/irp/offdocs/pdd/ CIP_2001_CongRept.pdf. 5 See, for example, Environmental Defense, Eliminating Hometown Hazards, Cutting Chemical Risks at Wastewater Treatment Facilities, December 2003, 14 p.; and Center for American Progress, Toxic Trains and the Terrorist Threat, How Water Utilities Can Get Chlorine Gas Off the Rails and Out of American Communities, April 2007, 23 p. 6 For information, see http://www.chemsafety.gov/index.cfm?folder=recommendations. &page=details&ReportID= 40&RecipientID=78&show=yes#78. 7 U.S. Government Accountability Office, Securing Wastewater Facilities, Utilities Have Made Important Upgrades but Further Improvements to Key System Components May Be Limited by Costs and Other Constraints, GAO-06-390, March 2006, 64 p.

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8

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U.S. Government Accountability Office, Securing Wastewater Facilities, Costs of Vulnerability Assessments, Risk Management Plans, and Alternative Disinfection Methods Vary Widely, GAO-07-480, March 2007, 26 p. 9 See http://www.asce.org/static/1/wise.cfm. 10 U.S. Environmental Protection Agency, Office of Inspector General, EPA Needs a Better Strategy to Measure Changes in the Security of the Nation’s Water Infrastructure, Report No. 2003-M-00016, September 11, 2003. 11 U.S. Environmental Protection Agency, ―Homeland Security Strategy,‖ October 2004, 46 p. 12 National Academies Press, Improving the Nation’s Water Security, Opportunities for Research, Water Science and Technology Board, 2007. Hereafter, Improving the Nation’s Water Security. 13 U.S. Government Accountability Office, Drinking Water, Experts’ Views on How Future Federal Funding Can Best Be Spent to Improve Security, GAO-04-29, October 2003, 69 p.; and Wastewater Facilities, Experts’ Views on How Federal Funds Should Be Spent to Improve Security, GAO-05-165, January 2005, 70 p. 14 For additional information, see CRS Report RL34466, The Bureau of Reclamation’s Aging Infrastructure, by Nic Lane. 15 The White House, Office of Homeland Security, The National Strategy for the Physical Protection of Critical Infrastructures and Key Assets, February 2003, 90 p. 16 The White House, December 17, 2003 Homeland Security Presidential Directive/ HSPD-7, Critical Infrastructure Identification, Prioritization, and Protection. HSPD-7 superseded PDD-63, which started the process of federal protection of critical infrastructure even before the 2001 terrorist attacks. 17 U.S. Department of Homeland Security, National Infrastructure Protection Plan 2009, February 2009, http://www.dhs.gov/xlibrary/assets/NIPP_Plan.pdf. 18 U.S. Department of Homeland Security and U.S. Environmental Protection Agency, Water, Critical Infrastructure and Key Resources Sector-Specific Plan as input to the National Infrastructure Protection Plan, May 2007, 122 p. See http://www.dhs.gov/xlibrary/assets/Water_SSP_5_21_07.pdf. 19 U.S. Government Accountability Office, Critical Infrastructure Protection: Sector Plans and Sector Councils Continue to Evolve, GAO-07-706R, July 10, 2007, p. 4. 20 Water Sector Coordinating Council Cyber Security Working Group, Roadmap to Secure Control Systems in the Water Sector, March 2008, http://www.awwa.org/files/GovtPublicAffairs/PDF/WaterSecurityRoadmap 031908.pdf. 21 H.Rept. 108-792, to accompany H.R. 4818, Consolidated Appropriations Act, 2005, Congressional Record, daily edition, November 19, 2004, p. H10850. 22 U.S. Congress, House, Committee on Appropriations, ―Draft report to accompany Department of Homeland Security Appropriations Bill, 2009,‖ 110th Congress, 2d session, p. 97, available from http://www.cq.com. 23 Improving the Nation’s Water Security, p. 10. 24 These grants, funded at $5 million per year, were discontinued after FY2009 due to completion of states‘ high priority activities which has consequently decreased demand for the funds, according to EPA. 25 U.S. Government Accountability Office. Securing Wastewater Facilities, Utilities Have Made Upgrades but Further Improvements to Key System Components May Be Limited by Costs and Other Constraints, GAO-06390, March 2006, 64 p. 26 Ibid. 27 U.S. Department of Homeland Security, Congressional Budget Justification FY2010, May 2009, p. 15, http://www.dhs.gov/xlibrary/assets/dhs_congressional_budget_justification_fy2010.pdf. 28 For additional information, see CRS Report R40695, Chemical Facility Security: Reauthorization, Policy Issues, and Options for Congress, by Dana A. Shea.

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CHAPTER SOURCES The following chapters have been previously published:

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Chapter 1 – This is an edited, reformatted and augmented version of Congressional Research Service publication, Report RL31116, dated July 20, 2009. Chapter 2 – This is an edited, reformatted and augmented version of Congressional Research Service publication, Report R40216, dated May 28, 2010. Chapter 3 – This is an edited, reformatted and augmented version of Congressional Research Service publication, Report 96-647, dated October 1, 2010. Chapter 4 – This is an edited, reformatted and augmented version of Congressional Research Service publication, Report RL32201, dated October 80, 2010. Chapter 5 – This is an edited, reformatted and augmented version of United States Government Accountability Office publication GAO-10-126, dated December 2009. Chapter 6 – This is an edited, reformatted and augmented version of Congressional Research Service publication, Report RL32189, dated March 16, 2010.

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INDEX

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A abatement, 24, 113 abuse, 57, 64 access, x, 4, 22, 24, 30, 55, 131, 134, 138, 148, 154, 167, 208, 215, 218, 221, 225, 229 accountability, 54, 57, 122 accounting, 83, 147 acquisitions, 64 administrators, 77, 116, 123 advocacy, 20 age, 16 agencies, 4, 6, 19, 27, 28, 47, 48, 50, 56, 57, 58, 61, 65, 68, 81, 82, 87, 88, 91, 94, 95, 99, 100, 104, 105, 106, 109, 122, 125, 132, 134, 135, 139, 141, 142, 146, 148, 149, 150, 151, 152, 156, 157, 158, 159, 160, 161, 162, 164, 165, 166, 191, 200, 206, 220, 221, 222, 223, 224, 225, 227, 232 aggregation, 226 agricultural watershed program, 48, 60 agriculture, 58 air quality, 76, 118 airports, 49 Alaska, 15, 52, 66, 87, 95, 96, 98, 99, 100, 101, 102, 103, 104, 106, 108, 109, 122, 128 alters, 124 American Recovery and Reinvestment Act, vii, ix, 5, 8, 10, 41, 44, 47, 48, 51, 66, 68, 75, 107, 108, 114, 127, 128, 145, 206 American Recovery and Reinvestment Act of 2009, vii, ix, 44, 47, 51, 66, 68, 114, 206 American Samoa, 67 American Water Works Association‘s, 20 Appropriations Act, 94, 103, 120, 205, 207, 208, 209 arbitrage, 31, 32 arsenic, 3, 35 articulation, 209

assessment tools, 217, 220 assets, 4, 16, 21, 41, 92, 214, 220, 223, 228, 234 audit, 136, 207 authorities, 6, 28, 125, 139, 225 authority, 5, 9, 10, 28, 29, 33, 55, 59, 60, 63, 77, 79, 93, 95, 103, 108, 154, 155, 157, 169, 170, 226 awareness, 215

B bacteria, 134 balanced budget, 91 ban, 105 banking, 28 basic services, 138, 156, 165 BECC, 133, 139, 148, 205, 206 beneficiaries, 118, 230 benefits, ix, 7, 25, 26, 33, 36, 47, 49, 64, 125, 126, 152, 156, 165 beverages, 43 bond market, 31 bonds, 25, 29, 30, 31, 43 Border Environment Cooperation Commission, 133, 139 borrowers, 34 breakdown, 69 budget deficit, 82 budgetary resources, 2, 41, 82 budgetary surplus, 5 burn, 217 businesses, 33, 50

C canals, 59, 60 capital expenditure, 76 capital programs, 125 capital projects, 41, 64, 117, 227 case law, 165 categorical grants, 93, 101, 102, 108

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192

Index

category d, 175, 180 CDBG, 54, 57, 133, 140, 143, 144, 151, 152, 153, 155, 158, 160, 168, 169, 171, 172, 173, 174, 175, 183, 184, 199, 200, 206, 208, 210 Census, 164 certification, 12, 33 challenges, 5, 16, 24, 63, 65, 152, 166 chemical, 22, 42, 72, 209, 212, 213, 215, 216, 217, 219, 227, 230, 231, 232, 233 chemical industry, 213 chemicals, 213, 215, 217, 220, 221, 230, 231, 232 children, 134, 208 chlorine, 217, 218, 230, 231 cholera, 134, 207, 210 cities, 13, 20, 25, 26, 28, 37, 42, 55, 72, 75, 76, 78, 79, 84, 86, 89, 91, 93, 96, 99, 121, 123, 126, 136, 137, 140, 214, 221 citizens, 167, 208, 231 City, 24, 78, 82, 84, 86, 121, 225 city streets, 217 classification, 146, 164 clean air, 89 Clean Air Act, 32, 218, 231 Clean Water Act, x, 2, 3, 6, 7, 8, 9, 10, 11, 14, 15, 23, 24, 27, 29, 33, 34, 37, 39, 44, 46, 50, 71, 72, 74, 76, 78, 79, 84, 94, 113, 115, 116, 117, 118, 119, 121, 123, 125, 128, 139, 155, 168, 191, 206 cleanup, 6, 91 climate change, 56 Clinton Administration, 85, 233 closure, 215 Cocopah Tribe of Arizona, 183 collaboration, 151, 165, 220 collateral, 31 collective resource, 157 Colonias Wastewater Treatment Assistance Program, 133, 139, 205 color, iv commercial, 9, 74, 127, 141, 214 communication, 149, 211, 219, 223, 224 community, 2, 4, 7, 8, 9, 10, 11, 22, 28, 30, 31, 36, 44, 68, 74, 78, 79, 85, 92, 116, 121, 123, 127, 136, 138, 140, 147, 149, 150, 152, 154, 156, 168, 207, 209, 210, 216, 232 Community Development Block Grant, 52, 54, 133, 140, 144, 163, 207, 208 Community Program Application Processing, 133, 162 community water systems, 8, 9, 10, 11, 22, 30, 44, 74, 127 competition, 4, 33, 36, 42, 50, 64 complexity, 61, 156, 218

compliance, 3, 4, 10, 12, 20, 23, 33, 37, 41, 42, 50, 64, 113, 132, 152, 156, 169, 191, 200, 207, 226, 230 complications, 151 composition, 27, 49 compounds, 16 computer software, 218 computer systems, 216 conduction, 228 conference, 35, 48, 60, 61, 78, 80, 88, 90, 92, 94, 95, 99, 100, 113, 118, 119, 120, 225 Conference Report, 46 conflict, 3, 210 Congressional Budget Act of 1974, 70 Congressional Budget Office, 2, 5, 16, 44, 45, 70 consensus, 43 conservation, 4, 23, 27, 39, 41, 60, 62 Consolidated Appropriations Act, 36, 70, 95, 101, 106, 120, 205, 208, 225, 234 consolidation, 11, 16, 41 construction, x, 4, 6, 7, 8, 14, 22, 23, 24, 25, 28, 29, 31, 32, 33, 34, 36, 37, 49, 50, 53, 54, 61, 62, 63, 64, 71, 72, 73, 77, 78, 79, 81, 82, 83, 84, 92, 107, 108, 113, 118, 119, 124, 125, 126, 128, 132, 135, 139, 140, 141, 143, 144, 146, 199, 210, 219 consumers, 41, 225 consumption, 9 containers, 134, 217 contaminant, 219, 220 contaminated water, 134 contamination, 134, 137, 212, 215, 219, 220, 229 contingency, 220, 222 controversial, 33, 35, 101, 118, 128, 232 controversies, 38, 113 cooperation, 14, 149, 205, 223 cooperative agreements, 86 coordination, 13, 135, 149, 151, 152, 159, 165, 191, 211, 215, 216, 221, 224, 225, 226, 232 corruption, 215 cost, 3, 9, 13, 14, 16, 17, 18, 22, 24, 25, 26, 29, 30, 31, 36, 50, 56, 61, 63, 74, 77, 78, 79, 80, 116, 117, 119, 123, 124, 125, 127, 139, 146, 148, 156, 206, 207, 210, 227, 230 covering, 34, 64, 104, 113, 128 CPAP, 133, 162 critical infrastructure, 212, 216, 219, 221, 222, 225, 226, 234 criticism, 38, 62 customers, ix, 1, 2, 26, 30, 43, 44, 59, 147, 213, 215 CWA, x, 11, 13, 20, 23, 28, 33, 34, 38, 39, 50, 52, 71, 72, 74, 75, 77, 80, 82, 85, 86, 110, 111, 113, 115, 116, 124, 125, 126, 127, 128, 233

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Index CWSs, 9, 10 CWTAP, 133, 139, 171, 172, 173, 174, 175, 205 cycles, 150

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D dam upgrades, 48 data collection, 146, 148 database, 135, 144, 161, 162, 163 Davis-Bacon Act, 32, 33, 38, 39, 46, 50, 107, 108 debt service, 17 decay, 21 decision makers, 159 deficiencies, 157 deficit, 5, 82 Delta, 59 denial, 215 Department of Agriculture, ix, 1, 12, 48, 53, 58, 132, 134, 158, 161, 162, 186, 190, 219 Department of Commerce, 53, 135, 158, 161 Department of Defense, 58, 103, 160, 214 Department of Energy, 216 Department of Health and Human Services, 15, 44, 164 Department of Homeland Security, 212, 220, 222, 225, 231, 234 Department of Housing and Urban Development, 54, 132, 133, 134, 158, 161, 163 Department of the Interior, 24, 44, 58, 62, 63, 71, 76, 117, 135, 159, 160, 161, 214 Department of Transportation, 218 designers, 215 destruction, x, 211, 212, 214, 217 detection, 215, 216 DHS, 212, 222, 223, 224, 225, 226, 231, 232 direct payment, 27 directives, 145, 152, 207 discharges, 8, 23, 42, 45, 121, 126 diseases, x, 131, 134, 167, 208 disinfection, 3, 44, 217, 218, 220 distress, 53 distribution, 10, 11, 14, 20, 34, 61, 82, 90, 95, 112, 132, 135, 140, 142, 144, 150, 155, 158, 160, 168, 169, 199, 201, 213, 214, 216 District of Columbia, 33, 46, 50, 54, 66, 214 diversity, 166 DOI, 51 domestic policy, 7, 73 downsizing, 41 draft, 158, 160, 199, 226 drainage, 154, 167, 209, 210 drinking water state revolving loan fund, 10, 74, 127 drought, 62 DWSRF, 2, 10, 11, 12, 40, 44, 45, 74, 113, 127

E early warning, 221 earnings, 25, 31 earthquakes, 215 economic activity, ix, 1, 5 economic crisis, 107 economic development, 20, 53, 54 Economic Development Administration, 53, 132, 133, 135, 161, 163 economic growth, 49 economic recovery, ix, 13, 41, 47, 49, 51, 58, 64 economies of scale, 13, 16, 29 ecosystem, 62, 69 ecosystem restoration, 62 EDA, 53, 57, 132, 133, 135, 140, 142, 143, 144, 145, 161, 163, 171, 172, 173, 174, 175, 205 education, 220 effluent, 42 electricity, 209, 213, 214 eligibility criteria, 158, 160 emergency, 62, 65, 69, 213, 216, 218, 221, 232 emergency preparedness, 216 emergency response, 216 Emergency Watershed Program, 63 employees, 215, 223, 227, 232 energy consumption, 37 energy efficiency, 34, 56 enforcement, 9, 83, 139, 228 engineering, 60, 63, 119, 141, 144, 148, 150, 151, 157, 165, 206, 219, 224 enrollment, 63 environment, x, 2, 5, 26, 48, 88, 131, 211, 212, 223 environmental management, 40, 76, 87, 94 environmental protection, ix, 47, 88 Environmental Protection Agency, ix, x, 1, 3, 44, 45, 46, 47, 51, 68, 71, 72, 113, 114, 115, 116, 128, 132, 133, 134, 158, 160, 161, 162, 206, 212, 216, 233, 234 environmental quality, 121 environmental standards, 21 equipment, 25, 56 equity, 42 erosion, 59 evidence, 136, 141, 191 EWP, 63 exclusion, 62, 231 executive branch, 61 executive orders, 32, 151 expenditures, 5, 18, 19, 23, 26, 64, 65 expertise, 232 exposure, 220

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Index

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F factories, 9 families, 29 farmers, 24 farmland, 214 FBI, 225 federal agency, 69, 164, 165, 212, 216, 224, 231 federal aid, 4, 6, 8, 16, 20, 74, 125, 126 federal assistance, 3, 6, 23, 29, 65, 125, 148, 152, 157, 166 federal authorities, 32 Federal Bureau of Investigation, 213 Federal Emergency Management Agency, 216 federal facilities, 15, 212, 214, 225 federal funds, 2, 6, 7, 20, 25, 27, 29, 34, 49, 50, 54, 117, 125, 126, 138, 142, 150, 157, 160, 166, 220, 227 Federal funds, 72 federal government, ix, 1, 2, 5, 6, 19, 25, 30, 31, 32, 40, 42, 51, 54, 57, 82, 117, 164, 166, 213, 214, 215, 222, 224, 230 Federal Government, 207 federal law, 121, 124 federal mandate, 218 Federal Register, 113 federal regulations, 9, 50 feedstock, 42 FEMA, 216, 221 filtration, 24, 44 financial, ix, x, 1, 6, 10, 13, 22, 24, 26, 27, 28, 32, 36, 37, 42, 50, 51, 55, 59, 69, 72, 74, 78, 123, 127, 131, 133, 139, 141, 148, 154, 162, 167, 219, 220 financial data, x, 131 financial incentives, 37 financial resources, 133, 148, 220 financial support, 27, 219 financial system, 162 fish, 60, 69 fishing, 225 flexibility, 8, 28, 34, 37, 73, 74, 79, 88, 95, 96, 126, 207, 210 flooding, 166, 215 floods, 213 force, 157, 223, 231 Ford, 208 formula, 7, 8, 11, 34, 38, 39, 52, 72 Fort McDowell Yavapai Nation, Arizona, 183 foundations, 36, 219 fraud, 57, 64 full cost pricing, 41 fund transfers, 12

G GAO, x, 43, 45, 46, 131, 132, 133, 138, 143, 154, 156, 160, 161, 165, 166, 175, 180, 185, 186, 190, 191, 192, 198, 199, 201, 204, 206, 207, 218, 220, 223, 226, 229, 233, 234 garbage, 153 General Accounting Office, 45 Georgia, 66 government spending, 49 governments, 30, 31, 36, 42, 88, 205, 221, 223 GPR, 56 grant programs, ix, 1, 26, 39, 51, 82, 104, 109, 124 green buildings, 62 Green Project Reserve, 56, 107 groundwater, 20, 59, 79, 91, 92, 137 growth, 7, 13, 15, 17, 24, 136 guidance, 54, 55, 56, 68, 133, 153, 154, 155, 156, 158, 160, 165, 168, 169, 170, 191, 199, 200, 206, 217, 219, 223, 224, 226 guidelines, 6, 79, 124, 125, 164, 219, 230 Gulf Coast, 213 Gulf of Mexico, 136

H habitat, 60 hacking, 215 Hawaii, 66 hazardous substances, 229, 231 hazardous waste, 88 hazards, 13, 167, 218, 221 health, 8, 10, 13, 14, 23, 36, 44, 134, 154, 167, 208, 213, 220 health effects, 36 health risks, 9, 44, 154, 167, 208 hepatitis, 134, 208 hepatitis a, 208 highways, 26, 49 history, ix, x, 1, 6, 57, 76, 115, 117, 153, 165, 166, 170, 199, 207, 209, 223 homeland security, 5, 22, 40, 219, 222, 225 homeowners, 141 homes, 15, 137, 140, 146, 148, 149, 209 House Committee on Transportation and Infrastructure, 69 House of Representatives, 70, 134 Housing and Urban Development, 46, 52, 54, 113, 128, 132, 133, 134, 158, 160, 161, 163, 192, 206, 207, 209 HUD, 54, 57, 113, 120, 128, 132, 133, 135, 140, 142, 143, 144, 145, 147, 149, 150, 151, 152, 153, 154, 155, 157, 158, 160, 161, 163, 166,

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Index 168, 169, 171, 172, 173, 174, 175, 181, 182, 183, 184, 185, 199, 200, 201, 206, 207, 209, 210 human, x, 9, 131, 166, 210, 211, 212 human health, x, 131 hurricanes, 213, 221

I

iron, 20, 50, 55 irrigation, 43, 58, 209, 213, 217 isolation, 218 issues, ix, 1, 2, 3, 5, 13, 19, 27, 31, 35, 37, 38, 40, 42, 43, 45, 48, 54, 63, 64, 105, 128, 145, 152, 155, 160, 210, 212, 216, 219, 221, 223, 225, 226, 227, 229, 232

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J IBWC, 48, 51, 58, 60, 64 identification, 36, 157, 209, 221, 227 identity, 208 IDIS, 133, 163 IHS, 15, 132, 133, 135, 140, 142, 143, 144, 145, 148, 150, 161, 163, 183, 184, 185 impairments, 8, 24, 126 improvements, 12, 14, 15, 22, 43, 60, 123, 132, 143, 155, 163, 205, 206, 208, 216, 218, 227, 232 incidence, 208 income, 27, 29, 30, 31, 54, 208 income tax, 30, 31 Indian Health Service, 14, 15, 44, 132, 133, 135, 158, 160, 161, 163 Indians, 144, 183, 184, 185 individual character, 209 individual characteristics, 209 individuals, 132, 136, 143, 167, 208, 209 industries, 10, 41, 214 industry, 25, 26, 33, 50, 211, 213, 218, 221, 222, 223, 226, 228 inefficiency, 27 inflation, 25, 230 information exchange, 222 information sharing, 224, 226, 228 information technology, 227 in-kind services, 79 inspections, 215 institutions, 212, 220 Integrated Disbursement and Information System, 133, 163 integration, 222 integrity, 73, 95, 216 interagency coordination, 136, 166 interest groups, 2, 13, 42, 100, 116, 117, 125 interest rates, 27, 28, 32 Internal Revenue Service, 31 International Boundary and Water Commission, 48, 51, 58, 60, 64 investment, ix, 2, 3, 4, 5, 14, 15, 16, 17, 18, 19, 20, 21, 23, 26, 27, 29, 31, 37, 40, 42, 47, 49, 55, 64, 76, 85, 150 investments, 2, 5, 8, 9, 14, 17, 21, 23, 24, 29, 36, 41, 45, 64, 73, 74, 107, 126, 127 Iowa, 66

job creation, 49 jurisdiction, 57, 113, 128 justification, 234

K kill, 217, 231

L lakes, 8, 50, 214 land acquisition, 144 law enforcement, 215, 216, 220, 221, 227, 229 laws, 10, 12, 24, 32, 50, 116 lead, 41, 64, 212, 216, 224, 231, 232, 233 leadership, 216, 231 leakage, 218 legislation, ix, x, 2, 3, 4, 5, 13, 21, 24, 30, 32, 33, 34, 38, 39, 41, 43, 47, 48, 49, 51, 52, 53, 54, 55, 56, 57, 58, 59, 60, 61, 63, 65, 68, 69, 70, 71, 76, 77, 78, 80, 81, 83, 85, 86, 87, 88, 89, 90, 92, 97, 98, 99, 100, 102, 104, 105, 106, 107, 113, 114, 115, 116, 117, 118, 119, 124, 126, 128, 129, 152, 166, 167, 212, 227, 229, 230, 231, 232, 233 lending, 31 levee, 48, 60, 64 levees, 57, 60, 64 life cycle, 21 light, 157, 207, 217 living conditions, 149, 208, 209 living environment, 54 loan guarantees, 27 loan principal, 10, 29 local community, 124 local conditions, 55, 159 local government, 27, 30, 31, 32, 40, 54, 55, 57, 72, 73, 75, 102, 104, 136, 137, 140, 147, 149, 154, 167, 214 Louisiana, 66

M magnitude, 26, 27, 159, 191 majority, 3, 16, 26, 104, 116, 213

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Index

Copyright © 2011. Nova Science Publishers, Incorporated. All rights reserved.

management, 2, 9, 15, 16, 19, 23, 24, 25, 38, 39, 40, 41, 43, 45, 48, 60, 62, 76, 83, 86, 89, 90, 94, 95, 96, 113, 114, 118, 162, 213 manufactured goods, 50, 55 manufacturing, 230 Maryland, 29, 66, 84 mass, 4 materials, 20, 36, 55, 56, 148, 218, 219 matrix, 163 matter, 72, 126, 220 media, 36, 76, 118 methodology, 136, 216 Mexico, vii, x, 63, 67, 81, 85, 86, 87, 89, 90, 91, 92, 93, 94, 95, 96, 97, 98, 99, 100, 101, 102, 103, 104, 105, 106, 108, 109, 113, 119, 120, 121, 122, 131, 132, 134, 136, 138, 139, 140, 142, 143, 144, 146, 147, 148, 151, 152, 153, 155, 162, 163, 165, 168, 170, 171, 172, 173, 174, 175, 180, 184, 200, 205, 206, 207, 208, 210 military, 15, 164, 220 missions, 58, 152 Mississippi River, 61, 213 Missouri, 66 models, 4, 223 modernization, 49 modifications, 191, 200 momentum, 5 Montana, 67 morale, 213 moratorium, 122, 125

N NADB, 133, 139, 205 NAFTA, 87, 205 national emergency, 221 national parks, 15 national policy, 222 National Research Council, 220 national strategy, 221, 222 Native Americans, 206, 208 natural disaster, x, 211, 213, 216, 219, 221 natural disasters, 213, 216, 219, 221 natural gas, 82, 121 Natural Resources Conservation Service, 48, 58 needy, 76, 78, 79, 86, 89, 91, 93, 96, 123 neglect, 20 nonprofit organizations, 140, 141, 206 non-transient, non-community water systems, 9 North America, 133, 139, 162, 205 North American Development Bank, 133, 139, 162, 205 North American Free Trade Agreement, 205 NRCS, 48, 51, 58, 59, 60, 61, 63, 69

NTNCWSs, 9

O O&M, 11, 14, 16, 17, 18, 19, 230 objective criteria, 152, 168, 170, 209 obstacles, 149 Office of Management and Budget, 61, 93, 113 officials, 13, 21, 24, 25, 28, 29, 34, 35, 37, 40, 43, 54, 55, 57, 65, 72, 77, 79, 97, 100, 102, 104, 116, 117, 123, 124, 125, 135, 140, 141, 144, 145, 146, 147, 148, 149, 150, 151, 153, 154, 155, 156, 157, 159, 161, 163, 164, 165, 167, 168, 169, 170, 191, 200, 206, 207, 208, 210, 215, 223, 224, 226, 231, 233 oil, 217 Oklahoma, 67 Omnibus Appropriations Act,, 120 openness, 56 operating costs, 37 operation and maintenance, 17 operations, 24, 25, 29, 215, 216, 217, 221, 225, 228, 231, 232 opportunities, 13 organ, 151 organic matter, 137 outreach, 149, 223, 226, 229 overlap, 225 oversight, 34, 38, 48, 52, 57, 62, 64, 68, 69, 155, 169, 205, 227, 231 ownership, 211, 213, 224

P Pacific, 63, 136 parallel, 28, 39 Pascua Yaqui Tribe of Arizona, 184 pathogens, 134 Pentagon, 98, 212 per capita income, 205, 208 permission, iv, 94 permit, 29, 31, 42 pharmaceutical, 43 Philadelphia, 221 plants, 8, 11, 23, 50, 56, 60, 72, 73, 126, 213, 217, 218, 221, 231, 232 platform, 224 playing, 30 policy, 2, 3, 7, 13, 27, 42, 54, 61, 69, 73, 80, 87, 88, 94, 96, 97, 124, 169, 210, 211, 213, 227 policy choice, 27 policy issues, 2, 124, 211, 213, 227 policy options, 27 Policymakers, ix, 1, 24, 211, 225

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Index pollution, 3, 7, 8, 23, 25, 27, 35, 45, 56, 73, 76, 94, 95, 96, 113 population, 15, 20, 26, 34, 37, 136, 164, 175, 180, 214 population growth, 20, 37 poverty, 137, 138 power plants, 214 preparedness, 219, 221 preservation, ix, 47, 49 prevention, 35, 56, 60 principles, 36 private firms, 36 private sector officials, x, 131 privatization, 30 profit, 10, 30 project sponsors, 48 proposed regulations, 14 protection, 10, 12, 23, 24, 33, 35, 36, 58, 79, 92, 113, 216, 219, 220, 221, 222, 223, 224, 225, 234 public education, 41 public health, x, 2, 9, 10, 23, 24, 26, 74, 127, 128, 138, 166, 211, 212, 215, 220, 223 public interest, 50, 55 public investment, 21 public support, 141 public welfare, 217 public-private partnerships, 30 Puerto Rico, 28, 54, 67, 69, 104, 122 pumps, 56

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Q quality improvement, 77

R ramp, 21 ratepayers, 25, 29, 78, 123 ratification, 205 reality, 14, 224 recession, 48, 49, 55 recognition, 6, 156, 199 recommendations, 42, 132, 158, 160, 165, 221, 233 recovery, ix, 13, 41, 47, 49, 51, 58, 64, 67, 69, 211, 218, 219 recreation, 43, 58, 60 recreational, 225 recycling, 23, 24, 39, 58, 164 redundancy, 216 reform, 105, 118 regulations, x, 6, 7, 9, 10, 12, 14, 20, 22, 23, 32, 35, 38, 44, 73, 74, 124, 127, 128, 131, 132, 135, 137, 146, 152, 158, 165, 167, 169, 199, 206, 208, 212, 231

regulatory agencies, 151 regulatory requirements, ix, 1, 3, 4, 13, 35, 50, 132, 158, 165 rehabilitation, 12, 14, 15, 20, 56, 59, 60, 64 reimburse, 230 reliability, 62, 135, 161 relief, 62, 128 repair, ix, 1, 3, 4, 13, 20, 38, 39, 49, 60 requirements, 3, 7, 8, 9, 10, 13, 23, 26, 27, 32, 33, 34, 36, 38, 39, 48, 50, 53, 54, 55, 57, 58, 60, 63, 64, 74, 79, 80, 107, 116, 119, 124, 125, 126, 127, 132, 141, 146, 150, 151, 152, 153, 154, 155, 156, 157, 159, 160, 165, 166, 169, 191, 199, 208, 218, 223, 228, 229, 231, 233 researchers, 224 reserves, 31, 34, 58 resistance, 215 resolution, 65, 69, 81, 104, 105, 106, 122 resource allocation, 222 response, 8, 20, 37, 48, 62, 73, 80, 85, 90, 95, 97, 121, 135, 138, 141, 145, 147, 157, 191, 199, 200, 201, 205, 210, 211, 216, 218, 219, 221, 223, 225, 227, 232 restoration, 58, 64, 129 restrictions, 7, 31, 32, 48, 50, 108 retirement, 138 revenue, 5, 24, 25, 32, 42, 43, 227 risk assessment, 217, 221, 226, 227 risk management, 217 risks, x, 131, 215, 222, 223, 224, 225 rules, 3, 7, 12, 31, 73, 79, 105, 108, 118, 124, 125, 212, 231, 232 runoff, 3, 23, 164 rural areas, 4, 7, 13, 26, 53, 135, 164 rural counties, 208 Rural Utilities Service (RUS), 53

S SAAP, 133, 162 sabotage, 224 Safe Drinking Water Act, 2, 3, 8, 13, 14, 23, 24, 33, 37, 39, 50, 72, 74, 77, 78, 86, 87, 89, 90, 91, 92, 115, 117, 118, 119, 123, 127, 139, 155, 168, 191 safety, 37, 60, 62, 218, 227 Sanitation Deficiency System, 134, 148 Sanitation Facilities Construction, 15, 134, 140, 143 savings, 16, 17, 18, 41 school, 9, 30, 49, 209 scope, 7, 20, 23, 93, 126, 136, 163, 164, 212 SDS, 134 SDWA, 8, 9, 10, 11, 12, 13, 14, 20, 28, 33, 34, 50, 52, 68, 74, 75, 87, 110, 111, 115, 116, 127, 233

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Index

Secretary of Agriculture, 158 Secretary of Defense, 158 Secretary of the Treasury, 32 securities, 31 security guard, 230 sedimentation, 59 seed, 8, 51, 73, 77, 123, 126 self-sufficiency, 8, 73 Senate, 2, 32, 38, 39, 49, 52, 57, 59, 68, 78, 79, 81, 88, 90, 91, 92, 93, 94, 95, 96, 98, 99, 100, 101, 102, 103, 104, 105, 108, 109, 113, 118, 119, 122, 128, 147, 199, 206, 212, 229, 230, 233 sensitivity, 223 septic tank, 137, 153, 167, 170 settlements, 153, 167, 170 sewage, 8, 9, 13, 23, 30, 42, 45, 50, 73, 74, 81, 83, 84, 121, 125, 126, 127, 134, 137, 138, 140, 152, 153, 164, 166, 168, 169, 170, 199, 207, 208, 209, 210, 213, 217 SFC, 134, 140 shape, 87 shortage, 16 shortfall, 26 showing, 226 skin, 217 sludge, 37 small businesses, 62 small communities, 13, 15, 28, 36, 38, 39, 53, 147 society, 208 sodium, 217 software, 224 solid waste, 31 South Dakota, 67 Special Appropriation Act Projects, 133, 162 specifications, 55 spending, 2, 4, 5, 7, 14, 16, 17, 18, 19, 24, 25, 27, 34, 36, 42, 43, 48, 49, 54, 57, 60, 62, 64, 65, 69, 75, 77, 81, 82, 85, 87, 88, 93, 98, 123, 126 spillover effects, 42 spreadsheets, 162 SRF, 8, 10, 11, 12, 15, 23, 25, 27, 28, 29, 30, 31, 32, 33, 34, 35, 37, 38, 39, 40, 41, 45, 46, 50, 51, 52, 53, 54, 55, 56, 66, 67, 68, 70, 72, 73, 74, 75, 76, 77, 78, 80, 81, 84, 85, 86, 87, 88, 89, 90, 91, 92, 93, 94, 95, 96, 97, 98, 99, 100, 101, 102, 103, 104, 105, 106, 107, 108, 109, 110, 111, 112, 113, 117, 118, 119, 123, 126, 128 stability, 215 staffing, 221 STAG, 46, 71, 72, 76, 92, 93, 94, 95, 96, 97, 98, 102, 103, 115, 117, 118, 120, 134, 142, 171, 172, 173, 174, 175 stakeholder groups, 28, 34, 37, 65, 95, 149

stakeholders, 2, 3, 12, 20, 24, 25, 26, 30, 32, 33, 40, 42, 62, 140 State and Tribal Assistance Grants, 51, 71, 76, 87, 88, 89, 90, 91, 113, 117 State Water Pollution Control Revolving Funds, 8, 73, 126 statistics, 208 statutes, x, 33, 125, 131, 133, 135, 157, 165 statutory authority, 232 steel, 50, 55 stimulus, 5, 49, 52, 59, 64, 69, 85 storage, 10, 11, 22, 214, 233 storms, 62, 215 stormwater, 3, 15, 23, 39, 56, 219 strategic position, 213 structure, 137, 222 subsidy, 29 substitution, 29 supervision, 12, 33 Supreme Court, 93 surplus, 5 surveillance, 227 sustainability, 41

T tanks, 134, 137 target, 7, 40, 73, 88, 102, 132, 148, 158, 159, 191, 212, 230 tax base, 13, 28 taxes, 4, 25 technical assistance, 24, 40, 134, 139, 140, 143, 206, 218 technical comments, 160 technical support, 41 techniques, 41, 43, 217, 226 technologies, 9, 35, 36, 37, 39, 74, 127 technology, 2, 7, 29, 36, 37, 231, 232 telecommunications, 213, 214 telephone, 166 tension, 23, 55 terrorism, 213, 216, 221 terrorist acts, 216, 224 terrorist groups, 217 terrorists, 214, 215, 216, 229 theft, 215 Third World, 208, 209, 210 threats, 26, 215, 216, 217, 219, 221, 224, 225, 226, 227 Title I, 72, 73, 78, 79, 81, 82, 83, 84, 86, 106, 124, 126, 199, 229, 232 total costs, 6, 125 tracks, 163 trade, 56

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Index training, 114, 140, 218, 219, 220, 228, 230, 232 training programs, 230 transactions, 64 transmission, 14, 20, 22, 49 transparency, 54, 57, 122, 125 transport, 209, 213 transportation, ix, 4, 5, 47, 49, 69, 213, 214 Treasury, 32, 46 tribal officials, 150, 159, 191 trust fund, 4, 26, 42, 43 Trust Fund, 46

Copyright © 2011. Nova Science Publishers, Incorporated. All rights reserved.

U U.S. Army Corps of Engineers, 24, 43, 44, 48, 58, 128, 132, 135, 158, 161, 164, 201, 214 U.S. economy, 5 U.S. Geological Survey, 134, 148 U.S. Treasury, 31, 42 unemployment rate, 205 uniform, 150, 223 United States, vii, x, 5, 14, 24, 33, 50, 56, 68, 69, 75, 76, 96, 116, 119, 131, 134, 140, 148, 153, 162, 167, 170, 205, 208, 211, 212, 213, 214, 233 universe, 207, 210 urban, 3, 23, 36, 113, 135, 146, 164, 165, 171, 172, 173, 174, 175, 178, 179, 180, 181, 205, 208, 209, 214, 216 urban areas, 113, 135, 164, 214, 216 urban population, 175, 180, 181 USDA, 12, 13, 24, 31, 44, 48, 51, 53, 56, 60, 69, 132, 133, 134, 135, 140, 142, 143, 145, 147, 149, 150, 151, 152, 154, 155, 158, 159, 161, 162, 166, 167, 168, 171, 172, 173, 174, 175, 176, 183, 184, 185, 191, 205, 206, 207, 208, 209 USGS, 134, 148

V vandalism, 215, 216 variations, 7 vote, 229

vulnerability, 4, 22, 212, 216, 217, 218, 219, 220, 221, 223, 226, 227, 228, 229, 231, 232

W wages, 33, 50 waiver, 55, 68, 80 warning systems, 220, 229 Washington, 44, 67, 128, 164, 205, 206, 207 waste, 13, 51, 56, 57, 64, 137, 150, 152, 154, 155, 159, 166, 167, 170, 201, 207, 208, 209, 210 waste disposal, 13, 51, 56, 154, 155, 159, 167, 170, 207, 208, 209 wastewater treatment systems, ix, 1, 2, 40, 134, 224, 229 water quality, x, 6, 7, 8, 15, 22, 23, 26, 29, 39, 41, 42, 43, 50, 60, 72, 73, 76, 77, 81, 83, 105, 113, 118, 126, 147, 211, 212 water quality standards, 6, 15, 147 water resources, 2, 41, 48, 58, 59, 61, 167 Water Resources Development Act, 69, 134, 144, 153, 170, 205, 206, 207 water rights, 11, 144 water supplies, 4, 9, 22, 24, 36, 60, 69, 75, 216, 217, 227 watershed, 24, 35, 41, 48, 59, 60, 61, 69 weapons, 58, 217 wells, 134, 137, 144, 162, 207, 209, 210 wetland restoration, 23 White House, 81, 221, 233 wildlife, 60 wind turbines, 56 Wisconsin, 67 witnesses, 43, 62 workers, 33, 50 working conditions, 33, 50 World Trade Center, 98, 212 World War I, 20 WRDA, 129, 134, 170, 207, 210

Y yield, 31

Water Infrastructure Issues, edited by James D. Haffner, and Elizabeth M. Gennady, Nova Science Publishers, Incorporated, 2011. ProQuest Ebook