Hearings and Business Meetings

SD-366 Energy Committee Hearing Room 10:00 AM

The Honorable David Lansford

Eastern New Mexico Rural Water Authority

US Senate Committee on Energy and Natural Resources

Dirksen Senate Office Building, SD-366, May 11, 2005

Mayor David Lansford’s Testimony

THANK YOU for the opportunity to appear before you today to comment on Senate Bill 895, the "Rural

Water Supply Act of 2005".

My name is David Lansford. I am the Mayor of Clovis, New Mexico, and serve as the Chairman of the

Eastern NM Rural Water Authority. With me this morning is Orlando Ortega, Mayor of the City of

Portales, NM, and Vice Chairman of the Water Authority.

We consider it an honor to be afforded the opportunity to participate in this dialogue.

Before I continue on with my prepared statement, I would like to make a general comment regarding the

essence and the significance of the legislation. I believe that this bill is pioneering legislation because it

lays the groundwork and provides a mechanism for rural economic sustainability and expansion in the

western United States. Rural communities are eager for growth and are the destination for many in our

country who are seeking less congestion, less crime and a more traditional lifestyle.

Some sociologists see a third migratory shift in America. Couple this migration with the natural increase

in population and we have an enormous opportunity and responsibility all in one. This legislation shows

great leadership on the part of the U.S. Senate and in years to come will be recognized as the key

legislation which allowed for economic growth, better quality of life and the tool that eased the burden on

government services in the population dense cities of our country. I'm more than convinced that countless

millions will benefit both directly and indirectly from this historic legislation.

We have taken the opportunity to review SB.895, particularly as it relates to our ongoing efforts in New

Mexico, and offer the following comments:

As you know, we are working diligently towards the development of a rural regional water supply project

for twelve communities and counties in eastern NM, and have been doing so for over six years. In many

respects, our project closely fits the model envisioned by this legislation. We recognize the need for a

rural water program and strongly support its implementation.

Projects like this involve many players. We are fortunate to have a federal partner in the Bureau of

Reclamation, and the NM Interstate Stream Commission and NM Water Trust Board as our state partners.

Ours is a unique initiative in NM and we are all learning the ropes and developing processes together.

Consequently, the past few years have been something of a moving target for us.

The current initiative for the Eastern NM Rural Water System began over six years ago as a collaboration

of the 12 community and county members, Reclamation, and the State of New Mexico, but our project

was first conceived over 40 years ago.

Positive aspects of the Legislation…

The legislation recognizes that a national interest exists for a water supply program in the Reclamation

States to provide clean, safe, affordable and reliable water supplies to rural areas, on a regional basis. In

particular, these are instances where limited viable options exist for sustainable water supply and where

the available source of supply is geographically remote from the rural consumers.

The legislation establishes a framework and a time schedule within which the federal and non-federal

partners have better-defined roles, eligibility criteria and direction on which to base project development

decisions.

The legislation promotes and provides for a regional perspective to water resources management that

could include elements not traditionally considered. For example, in our case, source water protection of

both quality and quantity is critical. Authorizing legislation introduced by Senator Bingaman last year, for

our project, included a wastewater collection and treatment component to assist the region in significantly

reducing the potential for septic tank leakage into the reservoir which serves as our surface water source.

This bill requires that eligible projects assess both federal and non-federal resources for capital project

costs. It also provides for the appropriate level of non-federal cost share be based on an assessment of

capability to pay by the non-federal entities. In our case, working closely with the 12 member agencies,

the NM Water Trust Board and the NM Legislature, we are leveraging local, state and federal dollars to

implement the project.

The Loan Guarantee provisions of Title II – the Twenty First Century Water Works Act provide a

powerful tool to assist non-Federal entities with private sector loans or financing, particularly those that

otherwise may have limited financing options.

The draft Act includes a provision to scale the level of effort needed to complete appraisal investigations

and feasibility studies relative to the scope of the project to minimize the costs to the non-Federal entities.

Concerns that we have with the Legislation…

The legislation includes a factor that requires the projects be "cost effective" and show a positive

benefit/cost ratio. These terms needs additional definition or relevance. For example, our project may not

present well in a benefit/cost analysis without incorporating the detailed "apples to apples" comparison of

the "no project" alternative -- what is the long-term economic impact on the region if nothing is done to

develop a sustainable water supply and the deteriorating groundwater conditions persist. This "no project"

option is a much more difficult and subjective analysis short of years of technical assessment.

The bill requires a minimum of a 25% non-federal cost share for capital costs if the Secretary deems the

project eligible for authorization, not withstanding the rural regions’ capability to pay.

Sec.105 Subsection (a) Part 3.B, on Pg.11, provides for the Secretary to enter into a cooperative

agreement with a non-federal entity to conduct appraisal investigations and feasibility studies, if the

Secretary determines that "using the non-Federal project entity to conduct the work is the lowest cost

alternative for completing the work".

In our case, finance consultants working on our project since 1999 note that financing through tax exempt

bonds or the NM Finance Authority may be more advantageous than loan guaranteed private sector

financing and is typically 1 to 1 ½ % lower than that obtained through private transactions.

We have found that in many instances there are local resources, experience and knowledge that may be

more "cost effective" and "timely" while not necessarily the lowest cost. Our project has experienced a

series of studies over 40+ years that have not necessarily advanced the project.

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It seems though, that as we progress and get closer to possible authorization, we run up against new

questions and obstacles that impede our progress. We are very cognizant that time is of the essence for us.

Not only are our groundwater supplies running out, but our water purchase agreement with the State of

New Mexico is time sensitive, and construction costs are escalating annually. We understand that steel

prices alone increased approximately 40% last year due to global demand factors.

We are encouraged that SB.895 may include flexibility in assessing the non-federal costs, based on

analysis of capability to pay, rather than application of a "blanket" fixed federal share approach. Much

discussion has taken place regarding the member agencies ability and willingness to pay for our project.

Can we afford the cost? The more pressing question is not can we afford to do this project but rather can

we afford to not do the project.

We applaud you for taking this initiative to put in place a rural water program that will clarify the federal

and non-federal roles and requirements, and formally establish a process that will minimize the "moving

target" syndrome that we have experienced. Though we are considerably well advanced in our

implementation plan and do not desire to back up several steps, and potentially several years, or to lose

the momentum we currently have, we feel that this Act will undoubtedly benefit many other projects

similar to ours that will come before you in the future.

Thank you again for your time this morning, and we’ll be glad to answer any of your questions.