Many communities with populations of 10,000 or less face significant challenges in financing the costs of replacing or upgrading aging and obsolete drinking water and wastewater infrastructure. The total estimated cost of such drinking water and wastewater infrastructure projects in these communities, many of which are considered rural, is estimated by federal agencies to be more than $100 billion in the coming decades. For example, communities may need to upgrade basic wastewater systems, which treat wastes by allowing them to settle out in ponds or lagoons, with more sophisticated equipment that mechanically and biologically removes solids and contaminants. As another example, communities may need to upgrade to more expensive filtration equipment to remove contaminants, such as arsenic or excess nutrients, as regulations become more stringent for drinking water quality and wastewater.
Communities typically pay for drinking water and wastewater infrastructure through the rates charged to users of the drinking water and wastewater systems. In some cases, however, these communities do not have the number of users of drinking water and wastewater systems needed to spread the cost of major infrastructure projects and still maintain affordable user rates. In addition, unlike larger, urban communities that can issue their own public bonds to pay for major water and wastewater infrastructure improvements, rural communities face difficulty independently financing such major improvements. In many cases, rural communities have limited access to financial markets, restricting their ability to issue bonds to raise capital. As a result, these communities depend heavily on federal and state grants and subsidized loan programs to finance their water and wastewater infrastructure projects.
The Environmental Protection Agency (EPA) and the U.S. Department of Agriculture (USDA) oversee the three largest federally funded drinking water and wastewater infrastructure assistance programs. EPA provides grant funding to states to administer Drinking Water State Revolving Funds (SRF), which provide annual funding to communities to finance projects for publicly and privately owned drinking water treatment plants, distribution and storage infrastructure, and source projects. EPA also provides grants to states to administer Clean Water State Revolving Funds, which provide funding to communities to finance projects for constructing, replacing, or upgrading publicly owned municipal wastewater treatment plants, as well as managing nonpoint source pollution, watersheds, and estuaries. EPA allocates its funding in the form of capitalization grants to revolving fund programs administered by each state, and state officials in turn distribute loan funding for qualified drinking water and wastewater infrastructure projects in local communities. Communities of any size can apply for assistance. Over the long term, the state revolving fund programs are intended to be sustained through communities repayment of loans, creating a continuing source of assistance for priority drinking water and wastewater infrastructure projects. In fiscal year 2011, the Drinking Water and Clean Water State Revolving Fund programs received $963 million and $1.5 billion in federal appropriations, respectively.
USDAs Rural Utilities Service administers the Water and Waste Disposal program, which provides funding for both drinking water and wastewater projects in low-income rural communities of 10,000 or less. In fiscal year 2011, the program received $516 million in appropriations, which USDA allocated to its offices located in each state, using a formula based on the states rural population, number of households in poverty, and rate of unemployment.
In December 2009, GAO reported that EPA, USDA, and other federal agencies that fund drinking water and wastewater infrastructure for rural communities along the U.S.-Mexico border lacked coordinated policies and processes and did not efficiently coordinate their programs, priorities, or funding. To better address the needs of the region, GAO suggested in December 2009 that Congress consider establishing an interagency mechanism to coordinate programs and funding, such as a task force on water and wastewater infrastructure, in the border region. GAO also identified the need for additional coordination on drinking water and wastewater infrastructure on the U.S.-Mexico border in its March 2011 report on opportunities to reduce duplication in federal programs. GAO updated the status of this work in January 2012 and again in January 2013. While Congress has not created a task force or other means to coordinate in the border region, officials from the federal agencies involved, including EPA and USDA, said they were working to coordinate their efforts to provide drinking water and wastewater infrastructure in the border region within the current statutory authorities that exist.
Following up on this work, GAO conducted a nationwide review of the largest drinking water and wastewater infrastructure funding programsEPAs Drinking Water and Clean Water state revolving fund programs and USDAs Rural Utilities Service Water and Waste Disposal programand reported on this review in October 2012.
Funding for rural water and wastewater infrastructure is fragmented across the three federal programs GAO reviewed and reported on in October 2012, leading to program overlap and potential duplication of effort by communities that apply for funding from the programs. The three EPA and USDA water and wastewater infrastructure programs have, in part, an overlapping purpose to fund projects in rural communities with populations of 10,000 or less. For the 54 projects GAO reviewed in Colorado, Montana, North Carolina, Pennsylvania, and South Dakota, this overlap did not result in duplicate fundingthat is, funding for the same activities on the same projects. However, GAO identified the potential for communities to complete duplicate funding applications and related documents when applying for funding from both the state SRF programs and the Rural Utilities Services Water and Waste Disposal program. In particular, some communities have to prepare preliminary engineering reports and environmental analyses for each program. Potentially duplicative application requirements may make it more costly and time consuming for communities to complete the application process. GAOs analysis showedand community officials and their consulting engineers confirmedthat these reports usually contain similar information but have different formats and levels of detail. Completing separate engineering reports and environmental analyses is duplicative and can result in increased costs and delays for communities applying to both programs. Engineers GAO interviewed estimated that preparing additional engineering reports could cost from $5,000 to $50,000 and that the cost of a typical environmental analysis could add as little as $500 to a communitys costs or as much as $15,000. Moreover, having to complete separate preliminary engineering reports or environmental analyses may delay a project because of the additional time required to complete and submit these documents.
In October 2012, GAO reported that EPA and USDA have taken some actions to coordinate their programs and funding at the federal and state levels to help meet the water infrastructure needs of rural communities. The report describes examples of coordination between EPA and USDA at the federal level, designed to encourage states to emphasize coordination between their SRF programs and USDAs state-level programs. For example, according to EPA and USDA officials, to inform state officials and communities about the programs and funding opportunities available in their respective states, the federal agencies participate in conferences and workshops, conduct webinars, and sponsor training. In addition, EPA and USDA signed a joint memorandum in 1997 encouraging state-level programs and communities to coordinate in four key areas: program planning documents; policy and regulatory barriers; project funding; and environmental analyses and other common federal requirements. In part to address the last item on common requirements, in February 2012, EPA and USDA formed a working group with representatives from the Department of Housing and Urban Development, the Indian Health Service, and state programs to draft guidelines for uniform preliminary engineering reports to meet federal and state requirements. At the time GAO issued its report in October 2012, the agencies had not completed the draft guidelines, and EPA and USDA had not yet taken action to help states coordinate on environmental analyses, by for example, developing guidelines for uniform environmental analyses. Without such guidelines, communities face a continuing burden and cost of applying for federal funds to improve rural water and wastewater infrastructure.
GAOs October 2012 report also demonstrated that coordination in the four key areas of the 1997 memorandum varied across the five states GAO visited. For example, state and federal officials in Montana created a drinking water and wastewater working group to coordinate project funding and to resolve regulatory barriers such as different funding cycles between the programs. In addition, state and federal officials in Pennsylvania agreed upon uniform environmental analyses that are accepted by all programs. However, in Colorado and North Carolina, state-level programs did not coordinate well initially about project funding, which resulted in the state-level programs planning to pay for the same projects. The state SRF programs and state-level USDA programs were able to avoid paying for the same projects, but state-level USDA programs had or expected to deobligate almost $20 million committed to these projects and return the funds to USDA. Specifically, two USDA state offices could not fully obligate their available funds to new projects by internal deadline dates and, as a result, had to return the funds to the USDA headquarters pool to be made available for projects in other states. If the state programs had been coordinating on projects and funding, the USDA offices might have had more notice of the need to develop new projects in time to keep the funding in their respective states. Further delays in coordinating programs could hinder the efficient use of federal funds in states with high wastewater and drinking water infrastructure needs by preventing funds from reaching needy communities.
To improve coordination and to reduce the potential for inefficiencies and duplication of effort, GAO recommended in October 2012 that the Secretary of Agriculture and the Administrator of EPA take the following three actions:
Implementation of these recommendations could help make more efficient use of federal funds for rural water and wastewater infrastructure. In particular, it could help avoid the reprogramming of state funds and the delay involved in getting funds to communities for their projects. In addition, implementation of guidance on engineering reports and environmental analyses could help eliminate potential duplication of effort and associated costs by communities when they apply for funds. Because the size of individual water and wastewater infrastructure projects can vary significantly, the additional costs associated with duplicative preliminary engineering report and environmental analysis requirements differ for individual projects. As a result, the costs associated with potentially duplicative efforts are difficult to quantify at the program level without reviewing a representative sample of project applications to multiple programs for the same projects.
The information contained in this analysis is based on findings from the October 2012 report in the related GAO products section. GAO reviewed relevant statutes, regulations, guidance, budgets, and other documents and interviewed officials from EPA and USDA. In addition, GAO selected a nongeneralizeable sample of five statesColorado, Montana, North Carolina, Pennsylvania, and South Dakotaby comparing data on funding needs for rural areas, geographic location, and level of coordination between federal programs. In each state selected, we judgmentally selected a nongeneralizeable sample of communities to visit and projects to observe by analyzing lists of water and wastewater infrastructure projects we obtained from state SRF and state-level USDA officials. We reviewed a total of 54 projects in 31 communities across the five states that had applied for or received funding from at least one of the three programs. We conducted site visits to each state to observe selected projects and to meet with representatives from engineering firms, local communities, and relevant nonprofit organizations associated with the projects. To assess the extent of overlap between the programs, GAO compared annual funding data from EPA and USDA and discussed with state and local officials their experiences in disbursing and applying for funding from the EPA and USDA programs. In addition, to determine the extent to which agencies coordinate at the federal and state levels to help meet the water infrastructure needs of rural communities, GAO met with federal and state officials and considered EPAs and USDAs efforts to promote the guidance established in the 1997 joint memorandum. To identify leading practices for coordination, GAO reviewed its prior work on practices that can help enhance and sustain collaboration among federal agencies. Table 11 in appendix IV lists the programs GAO identified that might have similar or overlapping objectives, might provide similar services, or might be fragmented across government missions. Overlap and fragmentation might not necessarily lead to actual duplication, and some degree of overlap and duplication may be justified.
In commenting on the October 2012 report on which this analysis is based, EPA and USDA neither agreed nor disagreed with GAOs recommendations to develop guidelines to help states develop uniform engineering reports and uniform environmental analyses, pointing out that they have continued to coordinate their efforts but have been limited in what they can require states to do. In particular, both agencies emphasized that EPA does not have the authority to require the states to use particular engineering reports or environmental analyses. They committed to meeting and discussing common areas and guidance and said that they would work with states to encourage the use of uniform requirements in application documents. EPA agreed with GAOs recommendation that the agencies reemphasize coordination at the state-level, while USDA did not agree or disagree with it.
GAO provided a draft of this report section to EPA and USDA for review and comment. In an e-mail received on January 24, 2013, EPA reaffirmed its comments on the October 2012 report, and in a separate e-mail on January 25, 2013, USDA stated that it is currently considering the actions it will take on recommendations made in that report. As of January 2013, EPA and USDA have taken action on the first and second recommendations, but more work remains to be done. On the first recommendation, both EPA and USDA officials said the preliminary engineering report working group has drafted an interagency memorandum that includes the purpose of the working group, a general outline of a preliminary engineering report, and a detailed template of each component of the report. As of mid-January 2013, EPA, USDA, and the Indian Health Service have signed the memorandum and 17 states have been involved in developing the memorandum. EPA and USDA can continue, however, to work with participating states and the remaining states to help them successfully adopt the memorandum and template. On the second recommendation, EPA and USDA have begun efforts to coordinate on environmental analyses. The agencies met in mid-January 2013 to discuss uniform environmental analyses, and have formed a new workgroup of federal and state stakeholders, with EPA as chair. The new workgroup will initially focus on collecting information on possible duplicative environmental review processes.
USDA said that the draft did not provide an accurate picture of the coordination that is already occurring between the agencies, and provided additional examples of interagency coordination at the federal level. The October 2012 report described these additional examples, but the purpose of this document is to summarize the key findings of the report. The section in this report has been clarified by adding a reference to the original report. Both agencies also provided technical comments, which were incorporated as appropriate.
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