Statement of J.R. Sandoval, Chief of Staff
State of Idaho
Idaho Department of Environmental Quality
BEFORE THE UNITED STATES SENATE
Subcommittee on Fisheries, Wildlife, and Water
Committee on Public Works and the Environment
State Perspective: Needs of Small Communities for Water and Wastewater Infrastructure
March 27, 2001

Mr. Chairman and Members of the Committee:

My name is Jon Sandoval. I am Chief of Staff at the Idaho Department of Environmental Quality in Boise, Idaho. I bring greetings to you, Mr. Chairman, from Governor Kempthorne, and Director, Steve Allred.

I am testifying to share with you the perspectives of Idaho and other largely rural Western States who, along with their small communities, face unique and often overlooked challenges in meeting water and wastewater needs. On behalf of the State of Idaho, I very much appreciate your invitation to share my comments with you today.

Water and Wastewater Infrastructure Needs of Small Communities

Enhancements over the years to the Safe Drinking Water Act (SDWA) and the Clean Water Act (CWA) have significantly enabled states to address major improvements in how infrastructure needs of small rural communities are served. States have been very successful in their efforts to work with small communities to better define current and projected infrastructure needs in rural areas. It is small communities who are most impacted by lack of capacity and financial stress in assuring citizens are provided safe drinking water and wastewater treatment at an affordable cost.

Small communities face a unique situation as they must weigh the costs of necessary capital investments to meet national environmental and public health goals of the CWA and the SDWA with other pressing public needs. These communities struggle with the need to replace outdated and failing infrastructure in order to achieve environmental compliance. Small communities in Idaho, and in all Western states face a number of common issues:

How much is available to spend, and are revenues adequate? How do they document the need for financial assistance? Can debt service be properly managed? How do they obtain the necessary engineering, financial and technical expertise at an affordable cost? How much does it cost to operate and maintain their facilities? How do they find and obtain affordable public financing? How much of the cost will consumers have to bear?

Small communities in Idaho, and throughout the Western United States, find themselves facing what they perceive are unrealistic regulatory burdens. These same communities have serious funding limitations and few opportunities to address drinking water quality and wastewater treatment infrastructure needs in rural areas.

In Idaho, the mechanics of documenting need is a major challenge on our small communities. While limited technical assistance is available from state and federal sources, these communities face a number of obstacles when it comes to defining need as trends have continued to suggest:

* Federal requirements are increasingly becoming more stringent to improve water quality and drinking water safety.

* Increasing costs of attaining these requirements will continue to escalate as there is a more directed focus to:

* use technologies that are more complex and expensive * recognize energy use costs have tripled in the Pacific Northwest * acknowledge the rising costs of capital improvements to replace aging and/or failing water distribution systems and wastewater collection systems is, for many of these communities, an extreme hardship.

Small communities across the western portion of the United States face substantive environmental challenges and responsibilities. Local leaders find themselves, as one Mayor of a small community of 1500 in Eastern Idaho stated "being documented to death". Documenting needs of small communities to a host of jurisdictional and public financing agencies results in a great deal of dialogue and discussion but, unfortunately, yields little or no on-the-ground results. As the Mayor from that small town in Eastern Idaho concludes: "It's all talk. I am asked to make de-facto decisions about complex financing and technical issues about water treatment processes without the benefit of knowing exactly what it means to my community".

Small communities are at a distinct disadvantage with federal requirements for environmental compliance - as these entities lack necessary financial resources, capacity, structure, access to technology, and the right tools in their communities to make informed and rational decisions. The debate in small communities traditionally focuses on the merits of upgrading a 20-year old wastewater treatment plant, buying a fire truck, or upgrading a 50-year old elementary school. What should the community determine is the best value for their tax dollar: Environmental compliance? Schools? Public Safety? This is the reality of the issues and the decisions small communities have to make.

It is increasingly difficult for small towns to manage and implement environmental requirements, even though EPA and states have broadened and expanded their capacity to provide direct technical assistance. States, as well as the federal government, often impose unrealistic expectations on these communities to document need at a level of detail without acknowledging the reality of the issues and decisions these small communities in rural areas must make.

The realities we need to address when it comes to understanding and responding to the infrastructure needs of small communities is that small towns and rural areas dominate our nation. Approximately 90 million people live within jurisdictions serving less than 10,000 residents. Approximately 75 million people live in small, rural communities of less than 2,500. One-third of all local governments do not have any employees. 97 percent of the country's landmass is classified as "rural".

In Idaho, there are 36 rural counties, with 88.3 percent of Idaho's land area, and 36.2 percent of the state's population. Idaho averages 14.8 persons per square mile, compared to 74.6 persons for the United States. Idaho is the seventh most rural state in the country with rural counties averaging 6.1 persons per square mile. Counties with fewer than six persons per square mile are often referred to as "frontier areas" with six counties having less than two persons per square mile. In Idaho, we define a "small community" as a community of 1,000 people or less. I would encourage the Environmental Protection Agency to consider using this definition because it has been our experience using our definition of small communities ... these are the communities where the greatest hardship exists. These are the communities where the need for infrastructure improvement and enhancement are Idaho's biggest challenge and where we do not see enough federal response to address the financial stress of rural communities.

People who live in small rural communities in Idaho are proud of their communities and their rural heritage. They want to comply with reasonable health and environmental standards. However, local officials are concerned about requirements where no consideration for the unique circumstances and challenges of small communities has been factored. These same local leaders take issue with unnecessary and cumbersome regulations restricting a small community's ability to respond intelligently to local priorities and needs.

Small communities want to provide the necessary infrastructure for safe drinking water supplies and wastewater treatment facilities but need to have the federal government recognize the limited financial capacity these small communities are experiencing. Changing demographics, high unemployment, declining tax base and increased costs of doing business are unique realities of small communities in rural areas. To not acknowledge these realities is a grave mistake. If there is no regulatory relief and no flexibility to find innovative mechanisms to finance small community infrastructure needs, we will witness "regulatory and financial flight" by small communities. As it stands, small communities in Idaho and across all states in the West cannot viably comply with overly prescriptive environmental mandates or find innovative ways to obtain and secure financing for infrastructure needs.

We have a responsibility as public policy makers to assist small communities to build capacity to comply with reasonable environmental regulations and to solve the financing issues in a collective effort to ensure public health and environmental protection.

Fiscal concerns at all levels of government, and particularly for smaller, rural communities, have dramatically elevated the issues of federal environmental protection program costs and flexibility. Environmental laws depend extensively on State and local implementation, which raise questions of where the financial burden should lie. Public health values are also raised, as it is our responsibility to extend these values uniformly to all citizens, which can also lead to unequal cost burdens because of variations in local conditions, services involved, populations affected and economies of scale. Environmental compliance has become more costly, especially for small communities struggling with other competing public and community needs. Environmental statutes (i.e., CWA and SDWA) are not consistent in addressing the sharing of cost burden of achieving local public health and environmental benefits.

There is a tension between desired environmental goals at the national level and the need to finance infrastructure enhancements at the local level. Issues in this debate include greater use of market incentives, cost effectiveness and flexibility in regulation, and more critical attention to who should pay for environmental protection - the unfunded mandates issue.

A general perception in small communities in the West is that the costs to States and localities imposed by Federal mandates are growing disproportionately faster than Federal assistance. We calculate in Idaho, if we are to meet the infrastructure needs of all small rural communities, we will need to spend considerable state resources and need to find more innovative ways to fund infrastructure needs. We suggest grant funding or, at minimum, very low interest loans in order to allow federally mandated projects to meet new requirements.

If we realistically want to address the small community water and wastewater infrastructure need, we need to see more federal dollars directed to local government in the form of grants for costs related to National Environmental Policy Act (NEPA) requirements. While the SRF programs in Drinking Water and Wastewater work well for larger municipalities, small communities are distinctly at a disadvantage when it comes to capacity, documenting need, securing the necessary financing package to service to debt obligations.

Compounded by the cost factor is the additional perception that there is no flexibility. State and local interests are at stake. The perceptions of small communities is not to "roll back" environmental and other laws designed to protect the public health and welfare --- but, on the contrary, to have firm support that Congress should address the funding issues directly without altering requirements to comply with pollution standards.

Local government is most affected by the costs of complying with federally mandated pollution standards, particularly for meeting drinking water and sewage treatment requirements. The capacity to borrow money at commercial financing institutions is not a viable option. It is our experience that "small communities" without staff, technical and financial expertise, access to technology, and no money - need a much better solution to address their infrastructure needs. Small communities will have to spend considerably more money per year than they now spend if they are to meet the total investment, operation, and maintenance needs to replace aging and failing distribution and collection systems.

Small communities are most frequently at a disadvantage when it comes to "documentation". Small communities lack capacity, know-how, and sophistication to produce Capital Improvement Plans, Environmental Impact Statements (EIS), or Engineering Reports describing capital improvements necessary to provide safe water or demonstrate adequate capacity to treat waste.

In Idaho, as in most rural states, where capital improvement plans and engineering reports are unavailable or cannot be produced by small communities, the state response has been effective. State Water Quality engineering staff take the lead to compile required documentation on-site or through contractual assistance to the community via a state initiated "planning grant" to obtain the necessary data to be submitted to EPA. We sometimes experience great frustration in obtaining approval of priority projects with EPA as approximately 15% of our proposed projects are "disapproved" for lack of adequate documentation. While the documentation is provided, there is a general perception in Idaho that there is heavy reliance at EPA to support "modeling data and applications" over documented needs submitted by individual states.

Based on the documentation we collect from small communities, or when small communities have generated and submitted detailed explanations of infrastructure needs on their own, we make determinations for funding based on:

- Public Health Emergency or Public Health Hazard - Highest Priority to protect Water Quality and the environment - Watershed Restoration - Watershed Protection from Impacts - Preventing Impacts to Uses - Highest priority to protect water quality and the environment - Ability to pay and secure public financing - Water Quality Violation - General Conditions of Existing Facilities - Under Consent or Administrative Order - Incentives: - Source water assessment - Master or facility plan complete - Replacement fund established - Regionalization/consolidation plan implemented - Rate structure - Monitoring requirements met - Affordability (O.M.R and debt service greater than 2% of median household income (MHI)

Small communities incur pollution control costs because they own or operate public water supplies for drinking water, sewage treatment and/or waste disposal facilities. The 1987 revision to the Clean Water Act began a phaseout of the long-standing federally funded sewage treatment grant program with a revolving loan program that local governments could tap, but would have to repay. When it comes to the needs of small communities, there have to be better solutions and a much better federal response to provide direct funding assistance to communities of 1,000 or less.

Our experience in Idaho, as it is with most states in the West, is that we have to do a much better job of serving the needs for water and wastewater infrastructure needs of small rural communities. It means, States and EPA must be more flexible, innovative and more responsive to the needs of communities who are experiencing severe financial hardship.

We must work with EPA to find better ways to increase state capacity to provide more technical assistance to these impacted communities. A mandatory Wastewater Operator Certification Program is a good idea in respect to evolving and expanding federal testing and monitoring requirements --- but we need to ensure funding is available to train operators before requirements are implemented if we want to ensure we are protecting water treatment in small rural communities.

In respect to the WIN Report, Idaho does agree there will be a substantial funding gap for water and wastewater systems between current investments in infrastructure and the investments that will be needed annually over the next 20 years to replace aging and failing pipes and to meet increasing federal compliance requirements. Idaho has voted to support the resolution of the Environmental Council of the States (ECOS) passed unanimously at its 2001 Spring Meeting on the Water Gap Analysis. Providing additional resources to fix aging infrastructure is essential, but no matter how it is ultimately done, states will be expected to play a significant management role. In addition to the gaps in funding, states also continue to face extraordinary needs to manage nonpoint source issues, TMDLs, as well as new proposed rules to manage animal feeding operations ... which in turn, have an impact on the infrastructure needs of small communities. Increased assistance for state capacity to meet these needs must also be factored into the debate as we attempt to address the rest of our water quality challenges at the local, state and federal level.

It is the financial and prescriptive "federal strings" attached to the revolving loan programs for drinking water and wastewater treatment that raise the hackles and the tempers of local government officials trying to find reasonable financing mechanisms to comply with pollution abatement requirements. The federal government must come to fully recognize that local governments and ratepayers fund 90 percent of clean and safe water infrastructure costs while struggling to resolve competing demands to educate children, maintain roads, fight crime, and provide other basic access to primary health care services.

Small communities should not have "to choose between providing safe and clean water and funding other necessary community and public needs". Better solutions are needed because what we have is not working for small communities.

Overall infrastructure spending, according to the Congressional Budget Office, was about $200 billion per year by the mid 1990s. The Federal capital expenditure, however, has remained relatively flat at about $50 billion per year from 1977 to 1998, or about two percent of the total Federal budget". Local government, and in particular, small communities, has born the brunt of infrastructure improvements and spending since the late 1950s.

The economic history of rural communities is closely linked with natural resources: soils, and water for crop and livestock production; hardrock minerals, coal, oil, and natural gas extraction; and forested lands for timber. Be it rural Idaho, or the Mora Valley of Northern New Mexico; the agricultural production of the San Luis Valley in Southern Colorado; the forested areas of Western Montana; or the Gas Hills in North Central Wyoming ---- small communities in these areas and throughout the West have continued to depend on water as the life blood of their communities. However, new technologies coupled with globalization of labor and the economy are changing where and how Americans work. New applications in resource extraction industries as well as growth in "service" occupations are helping to diversify many rural economies.

Such diversification offers opportunities for small communities. Until the 1960's, environmental protection, whether to preserve environmental amenities such as swimmable and fishable water, to protect economic values or public health --- was almost solely the responsibility of local and State government.

Idaho believes it can manage environmental programs at reduced cost and with more efficient service delivery mechanisms if given requisite flexibility and the ability to decide and determine state environmental protection priorities. In order to maximize our resources, the correct federal response will be to address the economic issues of communities of 1,000 people or less.

The cost of environmental compliance and environmental protection vary widely from one area to another. States are concerned about the need and the cost to replace inadequate or aged drinking water and wastewater treatment facilities. States are concerned about the impacts of these costs in rural areas on small communities in particular. Without a significantly enhanced federal role in providing direct financial assistance to drinking water and wastewater infrastructure, critical investments in small communities will not occur.

Idaho, as well as other Western states, would consider entering into a serious discussion with EPA to closely assess and evaluate the water and wastewater treatment infrastructure needs of communities of 1,000 people or less. The area of focus needs to be directed at increasing state capacity to address impacted community issues, financing, documentation of needs, transmission costs, regulatory compliance, and establishing standards appropriate to small rural communities. We would ask Congress to seriously consider other funding options to get financial resources to these communities in order to respond appropriately to the infrastructure needs.

It has been the Idaho experience that small communities do not have the financial resources available to shoulder the immediate and long-term infrastructure improvement or replacement costs of aged facilities. There is a definitive need for targeted financial assistance to pay for expensive water treatment facilities and adequate public water supplies in small rural communities.

The federal government must come to fully recognize that local governments and ratepayers fund 90 percent of clean and safe water infrastructure costs while struggling to resolve competing demands to educate children, maintain roads, fight crime, and provide other basic access to primary health care services.

Small communities should not have "to choose between providing safe and clean water and funding other necessary community and public needs". Better solutions are needed because what we have is not working for small communities and the infrastructure needs are not being adequately addressed in spite of state government efforts to find more creative ways to assist these communities.

Local capacity for developing long-term funding strategy is very limited in rural communities due in large to the complexity of the policies. Economies of scale do not favor small communities. Greater assistance is needed to help communities address infrastructure issues and the need for capital asset management.

The complex matrix of federal, state and private funding sources provides flexibility in water quality efforts; however, this flexibility only exists if knowledge and capacity are present. Greater funding is needed to help build financial knowledge and capacity of rural communities.

We need to work together to design and develop an integrated vision of the economic, environmental and social characteristics of small communities. This requires strong leadership at all levels.

Thank you, Mr. Chairman and Members of the Committee, for this opportunity to comment on this important issue to states and to the small communities we serve in rural areas.

What do we need to do?

* Appropriate flexibility needs to be incorporated into new environmental regulations, and added to existing ones to account for small community priorities and needs. Moreover, regulations should be written in user-friendly language the average citizen can understand.

* We need to switch gears. We need to focus on results and not process. Rules and regulations should identify a result to be achieved rather than a process to be followed.

* SDWA statutory requirements for new contaminants are not based on sound science or risk factors. We need to identify a process to select contaminants for regulation based on sound science, relative risk, and on the real dollar cost of implementation.

* Revisit testing and monitoring requirements for contaminants in SDWA and for effluents and background ambient water criteria related to wastewater treatment under the CWA. If we set requirements, the requirements should consider standards for which there is affordable technology to undertake testing and implement adequate monitoring activities.

* The provisions of the Davis-Bacon Act often have the effect of setting wages at a much higher rate than the local market can sustain. Small communities should pay a fair wage based on a local competitive market, rather than a prevailing wage based on a wage scale that is influenced by larger, metropolitan areas.

* The process for approving new analytical methods for monitoring and testing drinking water and wastewater should be streamlined and expedited.

* A review of the necessity for small rural communities to comply with: National Environmental Policy Act (NEPA); Davis-Bacon wage rates; Minority and Women's Business Enterprise (MBE/WBE) goals; and, Equal Employment Opportunity (EEO) requirements, are costly relative to the amount of money small communities need for infrastructure improvements and/or enhancements. We need to eliminate the red tape.

* If Water and Wastewater Infrastructure Financing Authorities (WWIFAs) are required, this creates a difficulty in Idaho. It is not likely the Idaho Legislature would be agreeable to creating another Financing Authority, as there is no indication specifying how much of the fund could be used for administering programs or what the scope and magnitude of the entity would entail.

* EPA needs to improve methodologies for assessing the environmental impacts, costs, and practical and technical applications of proposed regulations and funding mechanisms. Special consideration should be given to how regulations will impact communities with populations less than 2,500. We need to make sense of the nonsense.

* EPA needs to formulate a reasonable method for allocating federal resources and funds for water and wastewater infrastructure needs targeted on the basis of need ... recognizing that small communities often pay a disproportionate share of the expense.

* States need to be fully recognized and funded for their ability to solve local problems in the most economically feasible and timely manner and to manage water and wastewater infrastructure programs based on experience, capacity, and ability to work with local communities to solve issues. The federal government is too far removed to effectively become "your locally involved federal government". Small communities know their needs, potential, and limitations.

* EPA and Congress need to recognize that states have the capacity and the experience to provide technical assistance to assist small communities to comply with water and wastewater requirements with less federal oversight and intervention.

FY2001 STATE LOAN DRINKING WATER PROJECT PRIORITY (MICROSOFT WORD DOCUMENT -TABLE)

FY2001 STATE LOAN WASTEWATER PROJECT PRIORITY (MICROSOFT WORD DOCUMENT -TABLE)