Drinking Water Infrastructure
Information on Estimated Needs and Financial Assistance Gao ID: GAO-02-592T April 11, 2002The Environmental Protection Agency (EPA) conducts an infrastructure needs assessment every four years to estimate the future capital investment needs of local drinking water systems. In its most recent survey, EPA estimated that nearly $151 billion will be needed during the next 20 years to repair, replace, and upgrade the nation's 55,000 community water systems. The needs assessment survey serves as the basis for EPA's grants to the states under the drinking water revolving fund program. To ensure that it collected valid data to estimate drinking water infrastructure needs EPA conducted site visits to selected systems and had states review supporting documentation. However, EPA cannot tell how closely the estimates reflect actual state-by-state needs because it did not calculate the precision of estimates. GAO found that 31 out of 50 states surveyed established revolving loan funds programs to assist disadvantaged communities. In fiscal years 1991 through 2000, nine federal agencies made available about $44 billion in grants, loans, and loan guarantees for drinking water and wastewater capital improvements.
GAO-02-592T, Drinking Water Infrastructure: Information on Estimated Needs and Financial Assistance
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United States General Accounting Office:
GAO:
Testimony:
Before the Subcommittee on Environment and Hazardous Materials,
Committee on Energy and Commerce, House of Representatives.
For Release on Delivery:
Expected on Thursday:
April 11, 2002, at 9:30 a.m.
Drinking Water Infrastructure:
Information on Estimated Needs and Financial Assistance:
Statement of David G. Wood:
Director, Natural Resources and Environment:
GAO-02-592T:
Mr. Chairman and Members of the Subcommittee:
I am pleased to be testifying before you today as you consider the
infrastructure needs facing the nation‘s drinking water systems. As you
know, the U.S. Environmental Protection Agency (EPA) is required to
conduct an infrastructure needs assessment every 4 years to estimate
the future capital investment needs of local drinking water systems. In
its most recent national survey, EPA estimated that nearly $151 billion
will be needed over the next 20 years to repair, replace, and upgrade
the nation‘s 55,000 community water systems. The needs assessment
survey, which EPA uses to estimate infrastructure needs for each state,
serves as the basis for EPA‘s grants to the states under the Drinking
Water State Revolving Fund (DWSRF) program. This program helps
communities finance the infrastructure projects needed to comply with
federal drinking water regulations and protect public health. EPA
requests annual appropriations to capitalize the states‘ revolving loan
funds and then makes specific allotments to each state. The states,
which are required to match a portion of the grants, use the funds to
make low-interest loans to their local water systems; as the loans are
repaid, the states‘ funds are replenished, enabling them to make loans
to other eligible drinking water projects. For projects located in
communities that qualify as ’disadvantaged,“ the states may extend loan
repayment periods or use a portion of their grants to provide additional
subsidies.
In addition to EPA, a number of federal agencies provide financial
assistance for drinking water facilities through a variety of grant and
loan programs, some of which also may be used for wastewater
facilities. Further, some states sponsor their own financial assistance
programs for local drinking water and wastewater facilities.
My testimony today discusses several issues critical to assessing the
nation‘s drinking water infrastructure needs: (1) the precision of
EPA‘s most recent estimate of drinking water infrastructure needs, (2)
states‘ use of EPA‘s drinking water state revolving funds to aid
disadvantaged communities, and (3) the amounts and types of drinking
water infrastructure funding EPA, other federal agencies, and the
states have made available.
The information provided in this testimony is based on two recently-
issued reports: our January report for this subcommittee and committee
[Footnote 1] and our November 2001 report on federal and state
financial assistance for water infrastructure.[Footnote 2] We focused
on certain aspects of EPA‘s methodology in reviewing the agency‘s needs
assessment, specifically the impact of sampling on the estimate‘s
precision. In addition, we surveyed all 50 states to determine how they
use their drinking water state revolving loan funds to assist
disadvantaged communities. Finally, we obtained information on federal
and state drinking water and wastewater infrastructure funding over a
10-year period (fiscal years 1991 through 2000) by collecting data from
the nine federal agencies responsible for the majority of the federal
assistance and, using a detailed questionnaire, surveying the states to
collect information on state-sponsored programs. Forty-six states
responded to our funding survey. We converted the annual amounts
reported by the federal agencies and the states to constant year 2000
dollars.
In summary, our work has shown the following:
* EPA took a number of steps to help ensure that it collected valid
data to estimate drinking water infrastructure needs, such as
conducting site visits to selected systems and asking states to review
supporting documentation. However, EPA and other users of the needs
assessment cannot tell how closely the estimates reflect actual state-
by-state needs because EPA did not calculate the precision of the
estimates. EPA set a target level of precision”generally, the agency
wanted to be 95 percent certain that its estimates were within 10
percent of the ’true“ needs. We found indications that the level of
uncertainty was higher than EPA‘s target level of precision, possibly
by a considerable amount, for reasons associated with some of EPA‘s
sampling methods. Because the results of the survey are used to
estimate both national and state-level needs, they can influence the
level of congressional appropriations for the drinking water state
revolving fund program, and they form the basis for EPA‘s allotment of
these funds to the states. Accordingly, we recommended that EPA
calculate and report the level of precision actually achieved in its
recent needs assessment, and determine what implications, if any, its
findings have on the methodology to be used to conduct future needs
assessment surveys. EPA concurred that such a calculation would confirm
whether the survey met its precision targets and stated that it would
revisit the issue in the design of the 2003 survey.
* Thirty-one states have established programs under their revolving
loan funds to assist disadvantaged communities, according to the
results of our 50-state survey. Of the states with programs, 21
provided about $94 million in special subsidies”mainly loan principal
forgiveness”and 23 offered extended loan terms. While criteria for
defining disadvantaged communities vary, states typically use some
measure of household water rates relative to a community‘s median
household income. In addition, states reported that other factors, such
as concerns about depleting the fund and the availability of assistance
from other federal and state sources, influenced their decisions to
offer assistance to disadvantaged communities under the revolving fund
program. Because providing additional loan subsidies can affect the
extent to which states‘ revolving loan funds are replenished”and
therefore potentially the extent to which future federal funds will be
requested”we attempted to estimate of the number of systems potentially
eligible for such assistance. On the basis of limited information
provided by the states, we estimate that about 28 percent of the
nation‘s smallest water systems could qualify for additional subsidies.
* In fiscal years 1991 through 2000, nine federal agencies made
available about $44.0 billion in grants, loans, and loan guarantees for
drinking water and wastewater capital improvements. Of this amount, EPA
provided about $3.7 billion in drinking water state revolving loan fund
grants and about $16.6 billion under a similar program for wastewater
facilities. EPA‘s assistance, combined with that of three other
agencies”the Departments of Agriculture, Housing and Urban Development,
and Commerce”accounted for about 98 percent of the total federal
assistance. About 11 percent of the federal aid was specifically for
drinking water facilities and another 40 percent was for either
drinking water or wastewater facilities. Also, according to responses
to our survey, state governments made a total of about $25 billion in
state funds available for water infrastructure programs over the 10-
year period, including over $10 billion to match EPA‘s capitalization
grants. State-sponsored grant and loan programs accounted for about
$9.1 billion of the states‘ contributions, including $800 million
specifically designated for drinking water facilities and $6.3 billion
that could be used for either drinking water or wastewater facilities
(and in some cases for other types of infrastructure projects). In
addition, states reported that they made another $4.4 billion available
for loans by selling general obligation and revenue bonds, and
contributed about $1.4 billion from other state sources for purposes
such as matching non-EPA federal funds and financing state-designated
specific drinking water or wastewater projects.
Background:
Under the 1996 amendments to the Safe Drinking Water Act, EPA is
required to conduct an infrastructure needs assessment every 4 years to
estimate the future capital investment needs of water systems eligible
for assistance through the DWSRF program.[Footnote 3] Of the estimated
$150.9 billion capital investment needed according to EPA‘s most recent
survey, 80 percent ($119.7 billion) is linked to projects involving the
installation, upgrade, and replacement of the basic infrastructure
needed to deliver safe drinking water to the public. The remainder of
the estimated needed investment--$31.2 billion, or about 20
percent”will go to projects directly associated with existing,
proposed, or recently issued regulations.
Water systems vary in size, which is often measured by the number of
customers they serve. In its most recent survey, EPA obtained
information from 100 percent of the largest 1,111 community water
systems (those serving more than 40,000 people) and samples of the
remaining 7,534 medium systems (those serving from 3,301 to 40,000
people) and 44,373 small systems (those serving 3,300 or fewer people).
Small water systems represent over 80 percent of all community water
systems, but they only account for about 22 percent of the estimated
infrastructure needs. In contrast, the largest water systems represent
about 2 percent of the community systems and account for nearly 44
percent of the needs.[Footnote 4]
Subsidized loan assistance is an integral part of the DWSRF program in
that the interest rates that states offer to local water systems must
be at or below the current market rate.[Footnote 5] In addition, the
Congress has authorized states to use an amount equal to up to 30
percent of their DWSRF capitalization grants to provide additional
subsidies to communities that qualify as ’disadvantaged“ under state-
defined affordability criteria. States with disadvantaged community
programs may opt to forgive a portion of the loan principal or issue a
loan at a negative interest rate. States also have the option of
extending the loan repayment period from the standard 20 years to up to
30 years, provided that the repayment period does not exceed the
expected design life of the project.
U.S. drinking water and wastewater systems encompass thousands of
treatment facilities, collection facilities, and related works and well
over a million miles of pipes and conduits. While the investment, made
over decades, in these facilities is enormous, even more funds will be
needed in the future to support efforts to maintain clean and safe
water. The Water Infrastructure Network”a consortium of industry,
municipal, and nonprofit associations”recently estimated needs of up to
$1 trillion over the next 20 years for drinking water and wastewater
systems combined, when both the capital investment needs and the cost
of financing are considered. User rates serve as the major source of
facilities‘ financing, but both federal and state government agencies
offer financial support as well. In the 107th Congress, legislation has
been introduced in both the House and the Senate that would increase
the amount of federal assistance available through EPA‘s revolving loan
fund programs.
EPA Took Steps to Validate Needs Data, But Did Not Calculate the
Precision of Its Estimates:
The 1996 amendments to the Safe Drinking Water Act require EPA to use
the results of its most recent needs assessment survey to allocate the
amount of each state‘s annual DWSRF allotment. EPA allocates the DWSRF
funds on the basis of each state‘s share of the total estimated
national need, except that each state receives a minimum share of 1
percent. According to EPA, its periodic surveys are therefore intended
to provide ’statistically precise“ estimates of the needed capital
investments, not just in total for the nation, but within each state.
EPA took a number of steps to ensure that it collected valid
information about infrastructure needs at local water systems, and the
cost of addressing those needs. For example, EPA took the following
measures:
* For large and medium-sized systems, EPA used a questionnaire to
collect information on capital projects needed to protect the public
health. According to EPA‘s report to the Congress,[Footnote 6] the
agency asked the surveyed water systems to provide detailed information
on each project including documentation explaining (1) why it is
needed, (2) the basis for the project (e.g., whether it addressed a
current or future need), and (3) the project‘s estimated cost (or
enough information on the design capacities so that EPA could use a
model to estimate the cost.)
* For the smallest water systems, EPA sent trained water system
specialists on site visits to collect data after deciding that
specialists would provide better information than a questionnaire
because small systems generally have neither the data nor personnel to
complete a questionnaire of this type.
In the case of the large and medium-sized systems, EPA obtained
information from a sufficient number of systems to estimate
infrastructure needs on a state-by-state basis. (EPA surveyed 100
percent of the largest water systems”those serving populations of
more than 40,000”and a statistical sample of medium-sized systems,
which amounted to about one-third of the systems serving populations
from 3,301 to 40,000.) For these systems, which typically comprise the
majority of a state‘s needs, EPA set a precision target of plus or
minus 10 percent, at the 95 percent confidence level. This means that
EPA wanted a 95 percent likelihood that its estimate of the needed
capital investment in a particular state would fall within 10 percent
of the actual or ’true“ need for that state.
For the small systems, the agency‘s precision target for the national-
level estimate was similarly set at plus or minus 10 percent at the 95
percent confidence level. EPA officials explained that the agency did
not have the resources to send specialists to enough small systems to
get an accurate picture of small-system needs on a state-level basis.
(Specifically, EPA estimated that it would have to conduct site visits
at approximately 22,000 small water systems to collect enough data to
estimate needs on a state-by-state basis.) Instead, EPA selected a
sample of about 600 small water systems for these site visits. EPA used
the results of these visits to calculate a national-level estimate of
small system infrastructure investment needs. EPA then apportioned this
estimated total among the states on the basis of the number of each
state‘s small systems, categorized by population served and type of
water source.
In an effort to assess the precision of EPA‘s needs estimates, we
performed a limited review of EPA‘s methodology, focusing on the impact
of sampling on the estimate‘s precision. We concluded that EPA probably
did not achieve its intended level of precision. More specifically, we
found indications that the level of uncertainty, or sampling error,
[Footnote 7] was higher than EPA‘s target level of precision, possibly
by a considerable amount. For example, we found that:
* The agency‘s approach did not account for the fact that it
extensively used average costs estimated from models when calculating
its sample size.[Footnote 8] Thus, EPA‘s sample sizes were probably too
small, and it is likely that EPA did not collect data from enough
systems to achieve its precision target.
* Even though EPA‘s technical experts believed that a simple random
sample[Footnote 9] would be required to achieve the target level of
precision for small-system needs, EPA deviated from this sampling
methodology in two important ways. First, to avoid the travel costs
associated with visiting about 600 randomly selected systems located
throughout the country, EPA used statistical sampling to select 100
geographical areas and then chose six systems within each area.
Although an acceptable approach, such a statistical sampling technique
can require a considerably larger sample size than when simple random
sampling is used to achieve the desired level of precision. EPA did not
increase its sample size to account for the change in technique.
Second, based on recommendations from an advisory workgroup,[Footnote
10] EPA intentionally selected at least one area in each of the 50
states, Puerto Rico, and the U.S. Virgin Islands. Such geographical
constraints had the potential of increasing the sampling error, thereby
reducing the level of precision of EPA‘s estimate.
Although EPA has calculated and reported the actual precision levels
for other surveys, EPA officials told us that doing so for the most
recent drinking water needs assessment would not be worthwhile, because
it would not affect the allocation of DWSRF funds to the states. In
addition, according to an EPA official responsible for managing the
periodic needs surveys, EPA has already invested approximately 4 years
and $3.6 million to implement its most recent assessment and summarize
the results. The official said that calculating the actual precision of
the cost estimates would cost at least an additional $30,000 to
$40,000. Moreover, actually achieving the precision target could cause
the agency to incur further costs, depending on how many additional
site visits were needed.
On the other hand, there are arguments in favor of calculating the
precision of EPA‘s estimates. A number of leading survey research
associations advocate for the calculation and reporting of the
precision level to fully inform users of a sample‘s limitations.
[Footnote 11] More importantly, determining the precision level of its
estimates could help EPA identify any needed changes in its survey
methodology”for example, larger or differently selected samples
designed to minimize sampling error”to improve the future surveys
required by the Safe Drinking Water Act. In commenting on a draft of our
January report, EPA agreed that the calculation of confidence limits
would confirm whether the survey met its precision targets. EPA also
stated that it would fully consider our recommendation and that it
would revisit the issue in the design of the 2003 survey.
States Have Made Limited Use of the Optional DWSRF Provision to Assist
Disadvantaged Communities:
Under the 1996 amendments to the Safe Drinking Water Act, the Congress
authorized states to use an amount equal to up to 30 percent of their
DWSRF capitalization grants to provide additional subsidies to
communities that qualify as ’disadvantaged.“ The subsidies may take the
form of forgiving a portion of the loan principal or issuing a loan at
a negative interest rate.[Footnote 12] States have the flexibility to
develop their own criteria to define a disadvantaged community. States
with disadvantaged community programs typically use some measure of
household water rates relative to the community‘s median household
income, allowing the states to assess the impact of capital project
debt on the community‘s water rates and measure the project‘s
affordability.
According to our state survey:
* Thirty-one states have adopted a disadvantaged community program and
offer assistance in the form of loan subsidies or extended loan terms.
Three more states reported plans to offer such assistance as part of
their DWSRF programs within the next 3 years. As of December 31, 2000,
25 of the 31 states had provided assistance to qualified communities.
* Of the 31 states with a disadvantaged community program, 27 have
adopted criteria that consider local water rates, often in conjunction
with a community‘s median household income. In total, 21 states use
median household income as a criterion in determining whether
communities qualify as disadvantaged.[Footnote 13]
* Most states that have a disadvantaged community program offer
principal forgiveness or extended loan terms for capital improvement
projects. States rarely offer negative interest rate loans to
disadvantaged communities. (According to state DWSRF officials, they
find this option difficult to explain to local communities and
difficult to administer.)
* Of the 14 states that had provided loan subsidies,[Footnote 14] only
Maine, which had used 23 percent of its grants for assistance to
disadvantaged communities, came close to reaching the 30 percent cap.
In our survey, we asked the states that had not adopted a DWSRF program
for disadvantaged communities to report the reasons why. Of the 19
states without disadvantaged community programs:
* 16 states cited concerns about maintaining the body of the fund or
the long-term viability of the fund as a major (12) or moderate (4)
reason for not establishing a disadvantaged community program;
* 14 states cited the fact that their DWSRF program already offers
loans at below-market interest rates as a major (9 states) or moderate
(5 states) reason for not offering additional assistance to
disadvantaged communities; and;
* 12 states cited the availability of other federal or state programs
to address the needs of disadvantaged communities as a major (5 states)
or moderate (9 states) reason for not providing assistance through the
DWSRF.[Footnote 15]
Non-DWSRF financing from other federal and state sources is available
to help disadvantaged communities, and many states coordinate with
these sources to help disadvantaged communities secure the funding they
need. According to the state drinking water officials we interviewed,
disadvantaged communities often receive a combination of DWSRF and non-
DWSRF funding to finance their drinking water projects. A significant
amount of funding is available for local drinking water projects from
other federal agencies and through state-sponsored grant and loan
programs. In our survey on assistance to disadvantaged communities,
more than half the states indicated that they provided some type of
financial assistance for drinking water projects. Six of the 19 states
without DWSRF-related disadvantaged community programs had state grant
or loan programs intended specifically to help economically distressed
communities to finance drinking water improvement projects.
Because providing additional loan subsidies to disadvantaged
communities can affect the rate at which states‘ revolving funds are
replenished”and therefore potentially the extent to which future
federal funds will be requested”we attempted to determine the
proportion of the nation‘s community water systems that might qualify as
’disadvantaged“ and thus be eligible to receive special assistance.
According to EPA officials, the vast majority of systems serving
disadvantaged communities are likely to be small systems.[Footnote 16]
Therefore, we used the same statistical sample of small water systems
that EPA had selected for its infrastructure needs assessment. (A
statistical sample allows generalizing the results to the universe of
small systems, thereby obtaining a national estimate.)
We identified the specific systems included in EPA‘s sample”from 5 to
34 systems in each state”and as part of our survey asked the states to
determine which of those systems they would consider to be
disadvantaged. We asked states that were able to apply their own
criteria to determine whether each system initially qualified as
disadvantaged or qualified as a result of the additional costs needed
to improve it. Other states were asked to use GAO surrogate criteria
(i.e., to qualify as ’disadvantaged,“ a community‘s water rates would
have to exceed 1.4 percent of its median household income).
Our effort met with limited success for several reasons. The primary
reasons were that some states did not have the information necessary to
readily make a determination about a system‘s disadvantaged status or
they lacked the time and resources to collect the information for us.
[Footnote 17] In total, we obtained information on a portion of EPA‘s
sample representing 24,334 systems, or nearly 55 percent of the 44,373
small community water systems in the United States. On the basis of
EPA‘s sample and the states‘ determinations, we estimated that 6,925
systems, or about 28 percent of the 24,334 small systems reflected in
the results of our survey, qualified as ’disadvantaged.“[Footnote 18]
However, the high non-response rate associated with this analysis left
us without information on the systems representing the remaining 45
percent of the universe. As a result, we could not determine whether
our findings matched the actual percentage of systems that would
qualify as disadvantaged. Specifically, we had no way of determining
whether the systems for which we had information were systematically
different from those systems for which we lacked information in a way
that would make the estimated percentage of disadvantaged communities
higher or lower.
Federal Agencies Made About $44 Billion Available for Drinking Water and
Wastewater Infrastructure, While States Provided About $25 Billion:
From fiscal years 1991 through 2000, nine federal agencies made about
$44 billion in financial assistance available for drinking water and
wastewater infrastructure projects. Of this amount, EPA provided about
$3.7 billion in drinking water state revolving loan fund grants and
about $16.6 billion under a similar program for wastewater facilities.
EPA‘s assistance, combined with that of three other agencies”the
Departments of Agriculture, Housing and Urban Development, and
Commerce”accounted for about 98 percent of the total federal
assistance. About 11 percent of the federal aid was specifically for
drinking water facilities and another 40 percent was for either drinking
water or wastewater facilities. Over 82 percent of the total assistance
was provided in the form of grants; the remainder consisted of loans
and loan guarantees. Although the programs differed in terms of
eligibility criteria, allowable uses, and funding priorities, for the
most part, the financial assistance was available to a broad range of
entities. We use the term ’made available“ to encompass several forms
of federal funding. Because of differences in the programs and in the
ways that federal agencies account for their financial assistance, the
information that best reflected the amounts made available for drinking
water and wastewater facilities came from data on appropriations,
obligations, or expenditures, depending on the agency and the specific
program in question. For example, EPA‘s data include appropriated
amounts for the revolving loan fund capitalization grants to the states
for each year; the states may not have loaned the funds (i.e., actually
made them available) to local water systems until after the end of the
fiscal year in which they were appropriated. In contrast, the data for
HUD and Commerce consist of obligated amounts”that is, the amounts of
funds allocated by the agencies to drinking water and wastewater
infrastructure projects during the fiscal year. For the loan programs
of the Small Business Administration and USDA‘s Rural Utilities
Service, the amounts represent the face value of the loans or loan
guarantees that were available to be made for the fiscal year; however,
because most of these loans are repaid, the ultimate cost to the
federal government is significantly less than the face value.
More specifically:
* EPA‘s financial assistance came primarily in the form of grants to
the states to capitalize the Drinking Water and Clean Water State
Revolving Funds. In addition, EPA provided $4.5 billion in grants for
drinking water and wastewater projects specifically designated in the
appropriations process.
* USDA provided local communities $4.5 billion in grants, $7.1 billion
in loans, and $550 million in loan guarantees. USDA also provided $376
million in grants for water and wastewater projects specifically
designated in the appropriations process.
* HUD provided $4.4 billion in block grants”some directly to large
communities and others to states for distribution to smaller
communities”to be used for water and wastewater projects. HUD provided
another $39.9 million for specific projects designated in the
appropriations process.
* Commerce‘s Economic Development Administration provided $1.1 billion
in grants to local communities for water and wastewater infrastructure.
The remaining federal assistance, which totaled about $1.1 billion over
the 10 years, was provided by the Appalachian Regional Commission, the
Federal Emergency Management Agency, the Department of the Interior‘s
Bureau of Reclamation, the Small Business Administration, and the U.S.
Army Corps of Engineers.
In addition to the assistance available to disadvantaged communities
under EPA‘s DWSRF program, other federal programs give priority to
projects in economically distressed areas. For example, to be eligible
for USDA assistance, facilities generally must serve rural areas with
populations of 10,000 or less and must be unable to finance their needs
from their own resources or obtain credit at reasonable rates and terms.
Proposed projects must be located in economically distressed areas to
obtain funding under Commerce‘s program, and projects in severely
distressed areas are eligible for higher funding levels.
According to our state funding survey responses, state governments made
a total of about $25 billion in state funds available for water
infrastructure programs from fiscal years 1991 through 2000.
Specifically, the states reported that they collectively:
* Contributed about $10.1 billion to match EPA‘s capitalization grants
for the drinking water and wastewater state revolving funds. This
amount consisted of about $3.3 billion from state appropriations or
other state sources, and about $6.8 billion that the states
leveraged”that is, raised through the sale of state-issued bonds backed
by the funds.
* Made about $9.1 billion in grants and loan commitments under state-
sponsored programs, including $3.4 billion through a variety of grant
programs and $5.7 billion in loans.[Footnote 19] The states reported
having a total of 56 state-sponsored grant programs, 29 state-sponsored
loan programs, and 35 state-sponsored programs that include grants
and/or loans. Of this funding, $800 million was specifically designated
for drinking water facilities while $6.3 billion could be used for
either drinking water or wastewater facilities or for other types of
infrastructure projects.
* Made another $4.4 billion available for loans by selling general
obligation and revenue bonds (15 states).
In addition, the states reported that they contributed about $1.4
billion from state appropriations, interest earnings, and other state
sources for purposes, such as matching non-EPA federal funds and
financing state-designated specific drinking water or wastewater
projects.
Mr. Chairman, this concludes my prepared statement. I would be happy to
respond to any questions that you or other Members of the Subcommittee
may have at this time.
Contact and Acknowledgments:
For further information, please contact David G. Wood at (202) 512-
3841. Individuals making key contributions to this testimony included
Ellen Crocker, Karen Bracey, Les Mahagan, and Jonathan McMurray.
[End of section]
Footnotes:
[1] U.S. General Accounting Office, Drinking Water: Key Aspects of
EPA‘s Revolving Fund Program Need to Be Strengthened [hyperlink,
http://www.gao.gov/products/GAO-02-135] (Washington, D.C.: Jan. 24,
2002).
[2] U.S. General Accounting Office, Water Infrastructure: Information
on Federal and State Financial Assistance [hyperlink,
http://www.gao.gov/products/GAO-02-134] (Washington, D.C.: Nov. 30,
2001).
[3] Eligible systems include community water systems and not-for-profit
noncommunity water systems. Community systems serve at least 25 people
or 15 connections year-round. Noncommunity systems serve at least 25
people for more than 60 days but less than year-round.
[4] For both large and small systems, these percentages are calculated
excluding the estimated $9.3 billion in needs associated with proposed
or recently promulgated regulations.
[5] According to EPA, the weighted average interest rate of DWSRF loans
in 2001 was 2.4 percent, or about 3 percent lower than the market rates
reported by the states.
[6] U.S. Environmental Protection Agency, Drinking Water Infrastructure
Needs Survey Second Report to Congress EPA 816-R-01-004 (Washington,
D.C.: February 2001), p. 58.
[7] Sampling error is a measure of the amount of uncertainty that
exists about the true cost when costs are estimated from a sample of
systems rather than from data collected from all systems.
[8] For example, in its current needs assessment, EPA had to rely on
modeling”and substituted the average costs generated by the models”for
67 percent of the capital projects identified in its needs survey,
including over 80 percent of the projects associated with small water
systems. Modeling was necessary because project-specific documentation
was not available in many instances.
[9] In a simple random sample, each system has an equal chance of being
included in the sample.
[10] The workgroup consisted of state, American Indian, Alaskan Native
Village, Indian Health Service, and EPA representatives.
[11] The American Association for Public Opinion Research, ’in the
spirit of upgrading current survey practice,“ has promulgated a list of
best practices that includes reporting a measure of each estimate‘s
precision along with the estimate, rather than reporting only the
statistic itself. In addition, the Council of American Survey Research
Organizations‘ code of standards and ethics requires that estimates of
sampling error be calculated and ’available.“
[12] States may also extend the loan repayment period from the standard
20 years to up to 30 years, provided that the repayment period does not
exceed the expected design life of the project. While an extended loan
term makes financing a project more affordable to a community by
reducing the amount of monthly payments, it is not considered a loan
subsidy.
[13] The state of Utah also reported an income-based criterion, but the
state uses the median adjusted gross income rather than household
income.
[14] Although 21 states offer subsidy assistance in their disadvantaged
community programs, only 14 states have actually forgiven a portion of
the loan principal or reduced the loan interest rate below zero
percent.
[15] Our responses do not add to 12 because some states cited the
availability of both federal and state funding as reasons for not using
their DWSRF to assist disadvantaged communities.
[16] Among other problems, small water systems often lack the economies
of scale that make infrastructure projects more affordable at larger
systems.
[17] Determining which systems might fall into the disadvantaged
category because of the high cost of a project, for example, would
require a case-by-case analysis.
[18] Another way of looking at this is to compare the number of systems
estimated to be disadvantaged (6,925) with the total number of small
systems (44,373). Using this approach, we could conclude that
’disadvantaged“ systems comprised a minimum of about 16 percent of
small systems.
[19] Approximately $1.8 billion of the state-sponsored loan programs
were available for other local projects, such as solid waste disposal
facilities, in addition to drinking water and wastewater
infrastructure.
[End of section]
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