Rural water systems need $140 billion for fixes and feds aren't flush

By Whitney Forman-Cook

© Copyright Agri-Pulse Communications, Inc.



WASHINGTON, March 4, 2015 - Rural communities will need $140 billion in drinking water and wastewater system upgrades in the coming decades, according to a Government Accountability Office (GAO) report.

The crux of the issue, GAO told the House Energy and Commerce Committee, is that water and wastewater infrastructure programs, run by the seven federal agencies that provide essential support to rural utilities, are facing more than $1 billion in reduced spending in fiscal 2015.

According to the Environmental Protection Agency (EPA), the smallest water systems - those serving fewer than 3,300 persons, service only about 8 percent of the U.S. population, “but represent nearly 83 percent of all systems with reported funding needs.” Other estimates suggest these small utilities make up over 90 percent of all systems.

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Because rural utilities are typically situated in areas with small and low-income tax bases, the GAO said, affordable user rates are not likely to cover the cost of major infrastructure projects or sometimes even basic water services. 

To supplement their budgets, rural utilities often depend on federal and state grants and subsidized loan programs to provide water system services to their customers and meet the requirements of the Safe Water Drinking Act. In all, seven federal agencies provide such grants and loans, while also offering technical assistance to rural communities for water system upgrades.

EPA, the largest federal funding source, allocated a portion of its Drinking Water and Clean Water Revolving Funds (SRF), which have a combined budget of $2.35 billion, to rural communities through state revolving funds in fiscal 2014.

The budget requested for SRF programs in fiscal 2015 reflects a considerable cut however- $581 million to be exact - that witnesses at the Commerce Committee hearing say will be devastating to rural communities.

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“We currently have needs approaching $3 million for our wastewater system. We need new aeration tanks, new sludge drying equipment, and new pumps as our facility is 30 years-old,” Joe Keegan, mayor of Castleton-on-Hudson in New York, told the lawmakers.

“We really don't have a way to finance it. It would triple the sewer rates to take out a loan for that much (and) we just financed a new storage tank for drinking water for $800,000 dollars using municipal bonding and we'll have to pay that off,” he said.

The USDA's Rural Utilities Service (RUS), the second largest federal funding source for rural water systems, provided $485 million in grants, loans and technical assistance in fiscal 2014.

The budget request for FY 2015, however, was $247 million, leaving just over half of its 2014 budget for small towns that need support.

The other federal programs available to rural communities - administered by various Cabinet departments as well as the Army Corps of Engineers - are looking at a combined reduction in spending of $321 million in FY 2015.

On top of desperately needing outside assistance, GAO's report found that rural communities don't have the technical expertise or the money to pay consultants to complete the funding applications required by these federal agencies.

“For example, engineers GAO interviewed estimated that preparing additional preliminary engineering work could cost anywhere from $5,000 to $50,000, and that the cost of an additional environmental analysis could add as little as $500 to a community's costs or as much as $15,000,” the report said.

Bobby Selman, certified water operator and representative for the Mississippi Rural Water Association, urged Congress to support “simple” funding applications, as “it can currently take up to three to four years from the beginning of the process to the awarding of funding.”

To help with the burden of applying for assistance, EPA, USDA and several of the other federal agencies took steps last month to “develop a standard engineering report that communities can use to apply for funding from multiple agencies,” the GAO reported.

But House lawmakers were not convinced the new initiative would be enough to solve the cash flow problem for utilities. 

“It is long past time for us here in Congress to provide robust financial support for our water utilities,” Rep. Paul Tonko, D-N.Y., said in his opening statement. “In addition to support through traditional funding mechanisms - the SRF and grant programs - we should also examine alternative financing mechanisms, new technologies and potential new partnerships that will enable every dollar to go forward to reducing the backlog of infrastructure projects and… operating costs through (water and energy) efficiency.”

In the meantime, Mayor Keegan said his small community would rely on circuit riders - roving technical experts employed through state rural water associations - for planning and emergency support. 

“We can't afford to own the equipment (to fix water main breaks) and the circuit rider (New York Rural Water Association) is an expert in using it - this saves us thousands of dollars and time,” Keegan said.

K.T. Newman, testifying on behalf of the National Rural Water Association, said that 1,900 residents in Shaw, Mississippi, were rescued by Mississippi Rural Water Association when the town was without clean water for half a year. 

“The community was under a boil water order for over six months because of a broken chlorinator needed to disinfect the drinking water. The local schools had to buy bottled water,” he said. 

Newman said that the circuit rider helped the town get back on its feet by devising a plan to pay for a new chlorinator, developing a new billing system for users, training government officials and securing credit and emergency financing.

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