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It is an inefficient way to do business. You are not doing it either in optimum engineering or optimum financing, and you are not catching your benefits as early as you had projected in your original starts. What this, in effect, says, then, is the number of new starts being added is too great for the current level of financing.
Mr. Johnson. Now, I think a lot of our problems are due to this slow down. We are getting back into environmental and ecological problems on every one of these projects that are hanging fire, and we are either going to be in court, or we are going to modify
some of it, or we are going back and extend the time and also increase the price of the projects, the way it looks to me.
Gen. Koisch. Very right, sir. Any delays where we have a force in being, you carry the management force in producing next to nothing.
Mr. JOHNSON. Thank you.
Mr. WRIGHT. The committee's final witness today is Mr. Thomas E. Carroll, Assistant Administrator for Planning and Management, Environmental Protection Agency. Mr. Carroll is accompanied by Mr. Alexander Greene, Director, Grants Administration Division. Would you gentlemen submit to the formality of the oath: Do you solemnly swear that the testimony you will give to the subcommittee will be the truth, the whole truth, and nothing but the truth, so help you God?
TESTIMONY OF THOMAS E. CARROLL, ASSISTANT ADMINISTRATOR
FOR PLANNING AND MANAGEMENT, ENVIRONMENTAL PROTECTION AGENCY; ACCOMPANIED BY ALEXANDER J. GREENE, DIRECTOR, GRANTS ADMINISTRATION DIVISION
Mr. CARROLL. I do.
Mr. Wright. You may proceed in such manner as you find desirable, Mr. Carroll, either incorporating the total prepared statement at this point in the record, commenting on it in summary, or you may read it, if you would prefer.
Mr. CARROLL. I would prefer to read it.
Mr. CARROLL. Mr. Chairman and members of the subcommittee, it is a pleasure to appear before this subcommittee to discuss the process aspects of the Water Waste Treatment Construction Grants program of
As you know, the Environmental Protection Agency was established to pull together the previously fragmented pollution control activities of the Federal Government and provide the focus for a single, integrated attack on all the activities which degrade our physical environment.
As Assistant Administrator for Planning and Management, I am responsible for overall planning and evaluation activities, for allocation of resources within the Agency, and for the administrative aspects of running the Agency, including grants administration. The last function I mentioned includes design and administration of the process for awarding grants for construction of waste treatment plants. Accompanying me today is Mr. Alexander Greene, Director of the Division of Grants Administration.
For the subcommittee's convenience, before discussing the construction grant application review and an award process, let me briefly review the background and progress of the Federal Government's construction grants activities.
Federal aid in connection with construction of water and sewer programs was first authorized by the Congress in 1948. This was in the form of a loan program. However, the program was never funded, and it was not until 8 years later-1956—that Federal aid became a reality.
The program, as originally authorized, provided for grants for construction of sewage treatment facilities including necessary interceptor and outfall sewers. The grants were limited to 30 percent of the cost of construction, or $250,000, whichever was less. The annual appropriation was limited to $50 million.
Spurred by the grant program, construction of waste treatment works increased nationally from an average of $222 million per year for the 5-year period preceding the program, to $360 million per year over the next 5 years. In this same period, construction of facilities in the smaller communities more than doubled. It soon became apparent, however, that $50 million a year was not enought to get the job done. Also, it gave the larger cities little incentive to construct facilities because of the low grant ceiling.
Thus, in 1961, Congress increased the authorization to $80 million for 1962, $90 million for 1963, and $100 million for 1964 through 1967.
To attract the larger cities, the grant maximum was raised to $600,000. And to encourage neighboring communities to join together to build larger, more efficient plants, a new provision permitted multiple grants for such projects to a maximum of $2.4 million.
At the same time, we were authorized to withdraw from the States any unused funds, reallocating these moneys to States that could use them. As a result of the 1961 amendments, contract awards rose to more than $600 million per year.
The act was next amended by the Water Quality Act of 1965. The annual authorization was increased to $150 million for 1966 and 1967, the individual grant limitation went up to $1.2 million, and the multimunicipal grant limitation went to $4.8 million.
The allocation of funds to States was changed from a basis giving equal weight to relative per capita income and relative population to a basis giving more weight to relative population. Also at that time a bonus was authorized for projects which conform to a comprehensive metropolitan or regional plan developed for the area where the waste treatment project is to be built.
Before the program under the 1965 amendments had gone very far ahead, Congress passed now legislation, the Clean Water Restoration Act of 1966. This bill liberalized the funding for construction grants still further, authorizing $450 million for 1968, $700 million for 1969, $1 billion for 1970, and $114 billion for 1971.
In addition, the bill permitted reimbursement of local and State funds used in lieu of Federal funds, where project construction was initiated after June 30, 1966. And, effective July 1, 1967, the dollar limiton grants was abolished; also the percentage of Federal participation was increased for projects in States which provide State aid for waste treatment construction.
The full authorization of the 1966 legislation was not funded; appropriations for the period 1968 through 1971 totalled $2.2 billion as compared with the $3.4 billion authorized.
From the inception of the construction grants program to April 30, 1971, grants totalling $2.3 billion were made to 11,287 projects for waste treatment facilities having a value of $10.2 billion.
Two provisions of the 1966 amendments—reimbursement and increased grants where the State also contributes to the cost—are worthy of further mention. Since June 30, 1966, to April 30, 1971, 1,109 proj. ects moved ahead without Federal funds or with a lesser amount of Federal aid than authorized by law. These projects, costing four and a quarter billion dollars, represent a potential Federal payment of $1.7 billion.
Based on the extent of completion of construction of these projectsthat is, the amount of Federal funds which would have been paid out as of March 31, 1971—these reimbursement projects represent $334 million in Federal funds.
Mr. WRIGHT. I am not sure I understand what you just said. The committee of course is familiar with the history of the law and each of its subsequent amendments that have come through this committee. But you have just stated that in approximately a 5-year period, 1,109 projects moved ahead without Federal funds, that the Federal payment would have been $1.7 billion, but that we reimbursed the projects a total of $334 million. I do not understand that.
Mr. CARROLL. The $334 million represents the amount of construction in place for which States and localities have not been paid the Federal share.
Mr. WRIGHT. We still owe them that much? Mr. CARROLL. That is correct. $1.7 billion is the portion of the total commitment made on the part of State and localities for which the Federal Government is morally committed to pay in the future. But except for the $334 million, we would have not yet have paid this amount in any event because our payments are related to construction in place, and they have not yet achieved that construction in place.
Mr. Wright. Did we intend in the 1966 act, in your judgment, to encourage communities to go ahead on the ground that we would pay them back when we had the funds to do so ?
Mr. CARROLL. I think that there was an inference as a result of the 1966 act on the part of many States and localities that they would be paid, and the act would be funded more closely to the authorized limits than it was.
Mr. WRIGHT. The reason we became in arrears in our payments to the communities was their anticipation that appropriations would somewhere equate, or reasonably equate the authorization, and in fact, until the current year they have not done so ?
Mr. CARROLL. I think that is the primary reason, Mr. Chairman. There may be two other reasons. Since the time of the passage of that act in 1966, standards have been increased around the country, and more communities and States have gone to requirements for secondary treatment. Also you have had population growth that was not anticipated at the time of the passage of that act.
The State aid provision authorizes the basic 30 percent Federal grant to be increased to 40 percent if the State pays 30 percent; and the Federal grant may be increased to 50 percent if the State pays 25 percent and enforceable water quality standards have been established for the waters into which the project discharges. The State payment, in various forms, is now made by 32 of the 50 States.
Grants may be made to any municipality having the authority to construct, operate, and maintain a sewage treatment works. The term "municipality” is defined in the act to mean “any city, town, borough, county, parish, district, or other public body created by or pursuant to State law and having jurisdiction over disposal of sewage, industrial wastes, or other wastes.” This does not permit grants to private developers, other nonpublic organizations, and industries.
However, we may participate in facilities that treat industrial wastes provided that the municipality's system treats the wastes of the entire community, metropolitan area, or region concerned. Where industrial wastes are to be treated by a proposed project, the applicant must assure EPA that it will have in effect when the project becomes operable an equitable system of cost recovery, such as user charges, connection fees or such other techniques as may be available under the State and local law.
Guidelines as to what represents an equitable system of cost recovery are under development and are expected to be issued in the near future. Separate industrial waste treatment facilities are not eligible for Federal assistance.
Grants may be used to construct new sewage treatment plants, to expand or improve existing plants, to construct interceptor and outfall lines, and to provide pumping, power, and other equipment necessary to operation of the treatment works. Sewage collection systems are not eligible under the program.
In determining the amount of a grant, we consider construction contract costs, engineering costs, legal costs, fiscal and bond costs, and administrative costs. We may not participate in site costs, interest during construction, damage judgments or other costs not directly related to construction of the project.
The construction grants program is one of Federal-State cooperation. A grant application is filed with the State water pollution control agency and reaches the Federal Government only after the State approves it as conforming with the State's water pollution control plan. No grant will be made unless the State also certifies that the project is entitled to priority for a grant over other eligible projects in the State.
Now, Mr. Chairman, I am going into the processing of our grant application, and I have a chart here which Mr. Greene will trace for you.
Mr. JOHNSON. Might I ask a question here?
Mr. Johnson. You say the Federal grant may be increased to 50 percent if the State pays 25 percent. Now, there is no limit on the grant as far as dollars are concerned?
Mr. CARROLL. That is correct.
percent and the State 25, the Federal Government would come in for 50, providing there is a plan
Mr. CARROLL. And a cost effective study.
Mr. JOHNSON. And there were sufficient funds in the Government. There is no ceiling on top there, in case you could get in on priority that would have to do with the funds.
Mr. CARROLL. There is one ceiling, that in addition to the formula sharing with the State and the locality, we have the allocation formula among the States based upon population and need, so that there is in effect an allocation of the total appropriation among individual States.
Mr. Johnson. Fine, go ahead.
Mr. WRIGHT. Mr. Carroll, you are beginning to get into the subject matter of these particular hearings, that is the processing and procedural handling of grant applications.
Before you do that, I wonder if you have had an opportunity to review or to read some comments made to the Public Works Committee on June 8 by Mr. Keith S. Krause, speaking for the Interstate Conference on Water Problems, an associate committee of the Council of State Governments?
Mr. CARROLL. I am not familiar with those comments, no, sir.
Mr. Wright. May I hand you an excerpt from them! The comments made by Mr. Krause, who has an interesting background-Mr. Krause is executive director of the Kansas Water Resources Board. He was formerly Acting Assistant Commissioner and Director, Technical Services Program, Federal Water Pollution Control Administration, and prior to that had been a representative of the Department on numerous resources interagency commissions, and a member of the Advisory Board, International Joint Commission, U.S.-Canada, and a member of the water resources task force on the second Hoover Commission.
May we examine this particular excerpt from comments he made? Mr. Krause testifies on behalf of State governments that in recent years, there has been proliferation of responsibilities amongst Federal agencies with regard to water pollution control.
He says we sincerely doubt that this is going to help matters any, and there are numerous examples where duplication of responsibility and effort is already creating problems and it is certainly increasing by leaps and bounds the amounts of paperwork associated with the administration of water quality management.
He says that we, in the States, estimate that there has been a threefold increase in the amount of administrative paperwork required in the last 6 years alone. In order to handle this additional load, there must be additional personnel and particularly at the State level this additional personnel is very difficult to come by. The resultant is that personnel ordinarily dealing with the problems of water pollution in the field such as educating plant operators, field testing the quality of streams and effluents, have had to be reduced in order to comply with the need for reports to justify the expenditures of funds.
What would be your reaction to that conclusion, that paperwork has increased by three times in the last 6 years, and this results in having to take people off of vitally important fieldwork in order to process the paperwork?
Mr. CARROLL. Mr. Chairman, I cannot be responsive to the threefold