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[House Report 104-635]
[From the U.S. Government Publishing Office]



104th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 2d Session                                                     104-635
_______________________________________________________________________


 
       DISTRICT OF COLUMBIA WATER AND SEWER AUTHORITY ACT OF 1996

                                _______
                                

 June 25, 1996.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

_______________________________________________________________________


  Mr. Clinger, from the Committee on Government Reform and Oversight, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 3663]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Government Reform and Oversight, to whom 
was referred the bill (H.R. 3663) to amend the District of 
Columbia Self-Government and Governmental Reorganization Act to 
permit the Council of the District of Columbia to authorize the 
issuance of revenue bonds with respect to water and sewer 
facilities, and for other purposes, having considered the same, 
report favorably thereon without amendment and recommend that 
the bill do pass.

                Background and Need for The Legislation

                             A. Background

History of Blue Plains Wastewater Treatment Facility

    Though not one of Washington, D.C.'s tourist attractions, 
the Blue Plains Wastewater Treatment Plant is the largest of 
its kind in the United States and is the Washington Region's 
most significant environmental facility. The facility is 
responsible for treating raw sewage from Washington, DC and 
neighboring jurisdictions in Maryland and Virginia. Blue Plains 
provides sewer service for almost all major federal facilities 
in the Washington region.
    Owned, operated by, and located in the District of 
Columbia, about 52% of the influent sewage flow is from the 
District; about 39% from the Washington Suburban Sanitary 
Commission (Montgomery County and Prince Georges County in 
suburban Maryland) and approximately 9% from Virginia (the 
Counties of Fairfax and Loudon, plus Dulles Airport, as well as 
the Pentagon). Thus, most all federal facilities in the 
Washington Region, in all 3 branches of government, plus around 
2 million residential users, depend upon Blue Plains. A 
collapse of Blue Plains would be an ecological catastrophe.
    The Federal Water Pollution Control Act, as amended by the 
Clean Water Act of 1977 and the Water Quality Act of 1987 (the 
``Clean Water Act'') 33 U.S.C. 1319, governs protection of the 
water quality, fish, wildlife, scenic and recreational aspects 
of the Potomac River and its tributary navigable waters. While 
the District owns and operates Blue Plains, it is subject to 
the conditions and limitations contained in the National 
Pollutant Discharges Elimination System (``NPDES'') Permit 
Number DC0021199 (the ``Permit'') issued by the Environmental 
Protection Agency (EPA) effective February 4, 1991, pursuant to 
the Clean Water Act. In September, 1995, the EPA listed the 
flow of raw sewage into the Potomac because of shortcomings at 
Blue Plains as a ``very real possibility.'' The Permit expired 
on February 3, 1996. Negotiations are currently underway to 
extend or renew the permit.
    How the Blue Plains Wastewater Treatment Facility and the 
water and sewer collection and distribution systems of the 
District of Columbia deteriorated is a story that reflects the 
enormous growth of the Washington region beginning with World 
War II and then the growing out migration to the suburbs. It is 
also an all too familiar story in the Nation's Capital of 
municipal shortcomings in terms of available resources, best 
management skills, and allegations of serious improprieties.
    Blue Plains now treats an average 325 million gallons a day 
(mgd) of sewage. Consisting of 154 acres of waterfront land in 
Southwest, the District calculates that Blue Plains is an asset 
valued at $1.4 billion. It's annual operating and capital 
budget is around $250 million.
    In 1934 the original facilities provided primary treatment 
only, treating 130 mgd's with a service population of around 
650,000. Capital funding for construction was provided by the 
Federal government, the District, Fairfax County, Virginia, and 
the Washington Suburban Sanitary Commission (WSSC). The WSSC is 
an entity of the state of Maryland which represents Montgomery 
and Prince Georges County.
    Expansion occurred in 1949, when chlorination was added, 
along with secondary (biological) treatment. The plant was 
expanded again in 1959. The most recent expansion and upgrade 
started in 1972 and was completed in stages by 1983. The plant 
now has a peak design capacity of 650 mgd, plus primary 
treatment capacity for an additional 289 mgd of storm flow.
    EPA funding began in 1973. Since then, EPA has given the 
District over $360 million in construction grants. Maryland and 
Virginia have received an additional $187 million to support 
Blue Plains construction.
    In 1984, a Blue Plains Feasibility Study evaluated various 
assessed needs through 2010. An upgrade to 370 mgd with a peak 
flow of 740 mgd was recommended, and expansion is currently 
underway.
    The Blue Plains collection system consists of approximately 
1,275 miles of sewers, 9 wastewater pump stations, and 15 storm 
water pump stations. Because Blue Plains is in the District, 
EPA Region III has primary oversight for its operation. The 
District's Department of Public Works' Water and Sewer Utility 
Administration (WASUA) is responsible for the day-to-day 
operation of the water and sewer systems and operation of the 
Blue Plains facility. The District's potable water supply is 
provided by the Washington Aqueduct which is owned and operated 
by the US Army Corps of Engineers. The District of Columbia 
owns and maintains its water distribution system.
    The existing institutional arrangements for treatment and 
transmission capacity allocation and for capital and operating 
cost allocation are governed by a series of agreements between 
the users. Prior agreements are: the 1954 Agreement between 
WSSC and the District, the 1959 Agreement between Fairfax 
County and the District; the Agreements executed in the 1960's 
between the District and the Users of the Potomac Interceptor; 
the 1970 Memorandum of Understanding; the 1971 Interim 
Treatment Agreement; the 1974 Blue Plains Sewage Treatment 
Plant Agreement as amended; the 1976 Agreement between the 
District and WSSC; the 1984 Memorandum of Understanding on Blue 
Plains; and the 1984 Sludge Memorandum of Understanding. The 
current operative agreement, the Blue Plains Intermunicipal 
Agreement of 1985 (IMA), was signed on September 5, 1985 by 
those acting in an official capacity for the District of 
Columbia, Fairfax County, Montgomery County, Prince Georges 
County, and the WSSC. This latter agreement was developed with 
assistance from the Metropolitan Washington Council of 
Governments.
    The basic rate structure consists of two tiers. Blue Plains 
retail customers, that is residents of the District, have their 
rates set by the City Council. The suburban users are wholesale 
customers and their payments are calculated on a cost formula 
basis.

Problems and status of Blue Plains

    Problems, with the Blue Plains Facility have been growing 
more serious since the 1970's. These underlying problems have 
involved permit issues and the proper handling of sludge. The 
EPA filed suit in 1984 against the District for numerous 
alleged operational problems. As a result of the suit, a formal 
5 year Consent Decree was entered into in 1985. Throughout the 
life of the Consent Decree violations continued, and a 
considerable amount of stipulated penalties was owed.
    In 1990 EPA filed a second lawsuit for effluent violations, 
construction delays and inadequate maintenance of treatment 
equipment. In 1991 agreement was reached on a $1.5 million 
penalty to settle both this and the previous case. The decree 
was to be negotiated, and it was not until late 1994 that an 
agreement was reached settling the litigation. The City paid a 
$500,000 penalty and made other operational changes.
    On August 31, 1995, EPA issued an Administrative Order to 
the District to correct maintenance and operational problems. 
Both short-term and long-term strategies were required to be 
implemented. In November, 1995, EPA conducted another joint 
inspection. The report, completed in March, 1996, reiterated 
previous concerns, including financing. The report found that 
the capital improvement budget for Blue Plains would be $20 
million short for FY '96. As accurately summarized and reported 
by R.H. Melton in The Washington Post on December 14, 1995, the 
EPA report warned that ``Blue Plains is on the verge of failing 
its central mission * * * (and) is now so dilapidated it poses 
a serious pollution threat and will soon run out of money it 
needs for long-delayed repairs.''
    EPA and the Department of Justice also worked with the City 
to resolve more short-term immediate problems at Blue Plains. 
As stated, while the District owns and operates the Blue Plains 
Wastewater Treatment Works, including the Blue Plains 
Wastewater Treatment Facility, it does so subject to the 
conditions and limitations contained in the Permit issued by 
EPA pursuant to the Clean Water Act. EPA's National Enforcement 
Investigation Center (NEIC), in reports dated July, 1995, and 
January, 1996, presented findings alleging serious permit 
violations from two inspections at Blue Plains. Included were 
serious allegations of periodic shortages of chemicals critical 
for the proper operation of the facility and effective 
wastewater treatment, and failure to make timely payments to 
Blue Plains contractors and chemical suppliers. At that time 
the total amount awarded to the District under all EPA grants 
for Blue Plains exceeded $360 Million.
    Citing the IMA, and the findings of a District audit dated 
August 11, 1995, EPA and the Department of Justice alleged that 
the revenues in the Water and Sewer Enterprise Fund were pooled 
with other revenues in the District's General Fund, and WASUA's 
ending cash balance for FY '94 of some $83 million was made 
unavailable by the District for the operation and maintenance 
of Blue Plains in FY 95. Overall, the District is alleged to 
have diverted at least $96 million in revenue from user fees. 
The District government took money from the Water and Sewer 
Enterprise Fund intended for Blue Plains and used it for other 
purposes. Thus, while Blue Plains was in danger of falling 
apart and creating an environmental catastrophe, the District 
government was diverting money collected for repairs and 
maintenance, leaving no funds for that vital work.
    On February 7, 1996, the Commonwealth of Virginia served 
the required 60 day notice on EPA and the District of its 
intent to file a citizen suit under the Clean Water Act against 
the District for allegedly violating its EPA operating permit 
at Blue Plains. Virginia's main contention was that the lack of 
proper operation and maintenance, adequate funding, and 
discharge levels were caused by the District diverting rate 
payer funds to other uses than funding Blue Plains, and that 
the District should restore the funds. Virginia Attorney 
General James S. Gilmore, in his notice letter to District 
Mayor Marion Barry, said that the Blue Plains facility is in 
``critical condition'' that could lead to ``major failures'' in 
pollution control that would endanger the Potomac River and the 
Chesapeake Bay.
    On April 5, 1996, the last day of the sixty-day notice 
period, the United States Government (EPA and Justice) filed a 
civil action under Section 309(b) of the Clean Water Act, 
seeking injunctive relief against the District for alleged 
violations of the Blue Plains Permit. Under law, the EPA suit 
effectively prevented Virginia from filing its litigation. Also 
filed with the Complaint was an executed ``Settlement Agreement 
and Order'' (``Consent Decree'') between the parties resolving 
outstanding disputes. The lawsuit, referring to EPA inspections 
made in 1995, asserted deterioration, inadequate maintenance 
programs and other major problems at Blue Plains that could 
lead to the discharge of high concentrations of chemical 
pollutants and harmful micro-organisms into the Potomac. A 
``significant risk to public health and the environment'' was 
warned if corrective steps weren't taken promptly. The District 
agreed to make significant upgrades and repairs estimated to 
cost $20 million over the next two years. The settlement looked 
to Congressional action to separate water and sewer revenues 
from the District's General Fund (Section 154 of the District 
of Columbia Appropriations for FY 1996, signed on April 26, 
1996). The Stipulated Agreement and Order requires the District 
to submit monthly reports to EPA on the status of the 
construction projects outlined in the agreement, as well as the 
status of payments owing and made to chemical suppliers and for 
maintenance.
    On May 9, 1996 Virginia filed a Motion to Intervene in the 
federal case along with a proposed Complaint. Virginia claims 
that the suit otherwise would not sufficiently protect its 
interests. As this report is filed no resolution of Virginia's 
request to intervene has occurred and the Stipulated Agreement 
and Order has not become final.
    The ``Congressional ratification'' mentioned in the Consent 
Decree refers to legislation enacted by the District of 
Columbia government (DC Act 11-201), approved by the Financial 
Responsibility and Management Assistance Authority (the 
``control board'' created by Public Law 104-8) with certain 
recommended amendments, and transmitted to Congress under the 
Home Rule Act and Article 1, Section 8, Clause 17 of the U.S. 
Constitution. Essentially, the District's legislation was in 
response to the demands made by the EPA for fundamental change 
in the structure and operation of Blue Plains.

The District Government's response to continuing problems at Blue 
        Plains

    On February 7, 1995 Bill 11-102 was introduced in the 
District of Columbia Council, known as the ``District of 
Columbia Water and Sewer Authority Act of 1995.'' The bill went 
to hearing before the Committee on Public Works and Environment 
on May 3, 1995. The Committee Mark-up occurred on October 25, 
1995. Following approval by the full Council and the Mayor's 
signature on February 1, 1996, the legislation, now known as 
Act 11-201 (Law 11-111), ``the District of Columbia Water and 
Sewer Authority Act of 1996,'' was referred to the control 
board under Section 207 of Public Law 104-8. It was approved, 
with some recommendations for modifications, by the control 
board on February 15, 1996. The enactment was then officially 
transmitted to Congress by the District government on February 
22, 1996.
    Throughout the legislative process District officials met 
with and negotiated with officials of the suburban 
jurisdictions over an acceptable structure and operating 
scheme. The District was, and still is, facing a grave fiscal 
and financial crisis. This led to many of the under funding 
problems at Blue Plains and for the District's water and sewer 
pipes. Under pressure from EPA and the suburban users of Blue 
Plains the District government decided to create a new, 
independent Water and Sewer Authority as a District of Columbia 
agency. The Water and Sewer Authority would include all of the 
``joint use'' sewer facilities (the Blue Plains plant and a 
number of pipes within the system) along with the water 
distribution and sewer collection systems within the District 
itself.
    The suburban jurisdictions strongly favored a true regional 
authority such as an Interstate Compact modeled after the 
Airports Authority or the Washington Metropolitan Area Transit 
Authority (WMATA). A regional authority would take considerable 
negotiation to set up and could only be created with the 
approval of the Virginia, Maryland, and District legislatures. 
Because of the fiscal distress of the District, the need to 
find a means of guaranteeing repair and maintenance of the 
water and sewer pipes, and the necessity to do something 
quickly, the District insisted on proceeding on its own. An 
offer was made to include voting representatives of the 
suburban jurisdictions on the Board of the new Water and Sewer 
Authority in order to give them more direct influence and to 
gain their acceptance for the creation of the Authority.
    The thrust of the Water and Sewer Authority proposal was to 
separate water and sewer revenues from the General Fund so that 
further diversion of those funds would not be possible. The 
Water and Sewer Authority would set the rates it charged at 
whatever level was required to make it completely self-
supporting and it would finance capital projects through 
revenue bonds secured by its own revenue. Under the terms of 
the home rule act (PL 93-198), the District government does not 
have the power to sell revenue bonds for water and sewer 
purposes, so the proposed new Authority could not be 
implemented without Congressional action to grant the necessary 
borrowing power.
    The proposed legislation was modified considerably as it 
worked its way through the District's legislative process and 
negotiations intensified after the Council passed Act 11-201. 
The control board held an extensive hearing on the legislation 
and then forwarded it for the required 30 day Congressional 
review. The Committee engaged in discussions with the District 
government, the user jurisdictions, and EPA. Considerable 
background and support was provided by Council of Governments 
(COG) staff. The Committee reached an understanding with the 
District and user jurisdictions that it would not proceed with 
the vital revenue bond power for the Water and Sewer Authority 
until it was satisfied with the District's legislation and that 
the user jurisdictions supported the proposal.
    The original District legislation finished its 30 day 
review and became District law on April 18, 1996. The Committee 
did not consider the legislation as complete, but was satisfied 
that negotiations were proceeding on a compromise and that it 
ultimately could legislate for the District on this issue if a 
satisfactory resolution was not found. On June 5, 1996 the 
District Council passed significant, substantive amendments to 
the original proposal which were the result of the negotiation 
process. These amendments were supported by the Committee, EPA, 
the control board, and the user jurisdictions. At a Committee 
hearing on June 12, 1996, the user jurisdictions testified that 
they were willing to accept and participate on the Water and 
Sewer Authority as amended by the Council on June 5, 1996. EPA 
testified that the amendments significantly improved the 
proposal.
    The original enactment established a 10 member authority, 
with 4 members designated by the suburban user jurisdictions. 
It sought to facilitate the adequate delivery of water to the 
District and sewer system services to the District and portions 
of the Metropolitan Washington area, delegated Council 
authority (if Congress granted such authority) to issue revenue 
bonds to the Authority, dedicated District water and sewer 
revenues to the Authority, transferred the functions of the 
Water and Sewer Utility Administration (WASUA), Department of 
Public Works, to the Authority, and abolished WASUA.
    Amendments recommended by the Control Board included 
formalizing a plan within 60 days for the repayment of the 
unavailable funds, approximately $81 million, and a requirement 
to maintain complete separation of the water and sewer revenues 
and cash balances from those of the General Fund.
    In order to lay the foundation for timely and rapid 
Congressional action, the District of Columbia Subcommittee of 
the Government Reform and Oversight Committee, chaired by Rep. 
Tom Davis, held an Oversight Hearing on February 23, 1996 on 
``Water and Sewer Systems in the District of Columbia.'' 
Chairman Davis, in his Opening Statement, referred to Blue 
Plains as an ``enormous and growing'' crisis, and mentioned the 
EPA ``boil water'' alert in the District in November, 1995 as 
indicative of concurrent problems with the water distribution 
system.
    Following further negotiations between the user 
jurisdictions, the District of Columbia Council, by emergency 
legislation, amended Act 11-201 to incorporate agreed upon 
amendments. Key provisions increased the new Board's size from 
ten to eleven members (6 members from the District and 5 from 
the suburban jurisdictions), raised the number of Board members 
to be recommended by Montgomery and Prince Georges Counties 
from one to two members each, and eliminated the Board of 
Director's position reserved for a person recommended by the 
WSSC. Eight votes are necessary to hire or fire the General 
Manager. The Water and Sewer Authority is specifically named as 
the permit holder for Blue Plains as requested by EPA. The 
financial independence from the General Fund is strengthened 
and the study of privatization or forming a regional authority 
is clarified and improved. The emergency legislation was passed 
by the Council on June 5, 1996.
    There then remained, as contemplated by the Act, the 
necessity for Congress to adopt affirmative legislation 
conferring revenue bond power for water and sewer purposes on 
the Council, allowing the Council to transfer such power to the 
Water and Sewer Authority, and to take the Authority ``off-
budget'' (meaning that the Mayor and Council cannot affect the 
self-funded budget adopted by the Board of the Authority). 
Accordingly, H.R. 3663, District of Columbia Water and Sewer 
Authority Act of 1996, was introduced on June 18, 1996. The 
bill was referred to the Government Reform and Oversight 
Committee, and a hearing was held by the District of Columbia 
Subcommittee on June 12, 1996.

                        b. need for legislation

    H.R. 3663 amends the Home Rule Act to authorize the 
issuance of revenue bonds with respect to water and sewer 
facilities, and for other necessarily related purposes. Bonding 
and budget matters for the District are covered in the Home 
Rule Act (PL 93-198) and can only be changed by Act of 
Congress. Without H.R. 3663 the District of Columbia's Water 
and Sewer Authority (Act 11-201, amended by Emergency Act on 
June 5, 1996) is a de facto nullity.
    Thus, H.R. 3663 is essential in order to allow revenue 
bonds for water and sewer purposes and to permit the District 
Government to delegate that power to the new Water and Sewer 
Authority. Other provisions are needed to prevent the District 
Government from changing the Authority's budget, and to exempt 
bond proceeds and repayments from being part of the District's 
appropriations process. Also, when Water and Sewer Authority 
revenues are removed from the General Fund they must also be 
removed from the calculation determining the District's debt 
service cap and, at the same time, existing water and sewer 
General Obligation bonds sold for water and sewer purposes must 
be removed from that calculation.
    The District Government has the power to issue General 
Obligation bonds for any legitimate purpose and has used this 
authority since 1984 to sell bonds for water and sewer 
purposes. Section 490 of the Home Rule Act gives the District 
of Columbia Council the power to sell revenue bonds only for 
certain specified purposes. The Council does not currently have 
the power to sell revenue bonds for water and sewer purposes, 
and may not provide that revenues of the new Water and Sewer 
Authority may be used to pay off revenue bonds for those 
purposes. Only Congress can confer this power. When the Council 
is given such power HR 3663 provides that it may (as it has 
already done legislatively) delegate that power to another 
District entity--in this case the new Water and Sewer 
Authority.
    Revenues in the District's Water and Sewer Enterprise Fund 
were ``pooled'' with revenues in the District's General Fund in 
recent years. The District's Department of Public Works, Water 
and Sewer Utility Administration (WASUA), which is being 
abolished by the District legislation, had an ending cash 
balance for FY '94 of some $83 million that was made 
unavailable by the District for the operation and maintenance 
of the Blue Plains Wastewater Treatment Facility in FY '95 
because the District had used the funds for other purposes. At 
the recommendation of the control board and with the agreement 
of the other interested parties, the District is required to 
repay the new Water and Sewer Authority $83 million. A 4 year 
plan to do that is incorporated in the District's Financial 
Plan, which is a legally binding document under PL 104-8. The 
Control Board has assured the Subcommittee, the participating 
jurisdictions, and the State of Virginia, that it fully intends 
to enforce the District's commitment to repay the funds. 
Congress, of course, retains the ultimate power to enforce 
repayment, and is the ultimate guarantor since it must approve 
the annual District budget.
    The testimony of Henri N. Gourd, Vice President of MBIA 
Insurance Corporation, which was made part of the permanent 
record of the hearing held on June 12, 1996, was very helpful 
to the Committee. Mr. Gourd stressed the importance of making 
certain that the new Water and Sewer Authority ``* * * be 
independent from any government body'' and that ``Control of 
the revenue stream by the issuing entity is critical to future 
bondholders.'' Mr. Gourd mentioned 9 issues related to a future 
sale of revenue bonds aimed at ``maximizing the attractiveness 
of the securities to the capital markets.'' It is important 
that these matters be provided for in the Authority legislation 
or that the Authority have the power to implement them on its 
own. These points and how they are addressed are as follows:
          1. Fees and charges to the new Authority should be in 
        force and effect at least as long as any of the 
        Authority's bonds are outstanding.
          In response to a question Mr. Gourd stated that the 
        June 5 Council amendment to Section 207 of the District 
        bill takes care of this point.
          2. The bond market can not be expected to embrace a 
        new bond issue until the Authority becomes a free-
        standing independent entity.
          Mr. Gourd was assured that the Authority will not 
        attempt to sell revenue bonds until long after it is 
        fully operational, and that the Committee will work 
        with the District to make sure that this happens as 
        soon as possible.
          3. The Study called for in the bill must be as 
        comprehensive as those done for other new authorities, 
        and for systems operating under EPA consent decrees.
          In response to a question, Mr. Gourd acknowledged 
        that it is not necessary for Congress to spell out the 
        type and frequency of such studies, and that the 
        Authority is capable of doing this on its own.
          4. The rates must reflect the needs of the system as 
        a whole, ``covering expected capital needs, operation 
        and maintenance expenses and debt service expenses by a 
        factor in excess of one.''
          In response to a question, Mr. Gourd agreed that the 
        June 5 Council amendments are acceptable to satisfy 
        this concern.
          5. An ``additional bonds test'' must be met. This is 
        a coverage test prior to the issuance of additional 
        parity bonds ``to protect against dilution of the 
        revenue stream once the initial series of bonds are 
        issued.''
          In response to a question, Mr. Gourd agreed that the 
        Authority has sufficient motivation to do this and is 
        not precluded from doing so by any provision of the 
        District legislation or of HR 3663.
          6. An independent, outside accounting firm ``and/or 
        engineering firm'' is commonly asked to certify that 
        ``projected operating and debt service expenses will be 
        covered by the rates in compliance with bond 
        documents.''
          In response to a question, Mr. Gourd agreed that the 
        June 5 Council amendments are specific enough, and that 
        the Authority Board can be relied upon to take this 
        step.
          7. A ``closed loop'' is preferable for holders of the 
        revenue bonds.
          In response to a question, Mr. Gourd agreed that the 
        June 5 Council amendments are sufficiently strong and 
        clear on this point.
          8. Revenue bond holders ``prefer a senior claim to 
        the revenues.''
          Mr. Gourd agreed to work with the Committee if the 
        current language isn't sufficient to do this.
          9. A ``debt service reserve fund'' is recommended 
        ``to provide liquidity * * * for water and sewer 
        revenue bonds * * * in any future financing by the 
        Authority.''
          In response to a question, Mr. Gourd agreed that this 
        would be covered under generally accepted accounting 
        procedures and is specifically allowed under the 
        District legislation.
    In response to other questions asked at the hearing, Mr. 
Gourd agreed that the new Water and Sewer Authority is 
``substantially independent'' and, all else being equal, should 
get a good rating. Mr. Gourd also agreed that taking the 
Authority out of the General Fund entirely and letting it 
collect its own revenues and put them into its own account is 
adequate to deal with the ``control of revenue'' issue.

               Legislative Hearings and Committee Actions

    On June 18, 1996, Mr. Davis introduced H.R. 3663. It was 
cosponsored by all the members of the Subcommittee on the 
District of Columbia along with Mr. Hoyer, Mrs. Morella, Mr. 
Moran, and Mr. Wynn representing the suburban user 
jurisdictions.
    H.R. 3663 was referred to the Committee on Government 
Reform and Oversight. The Subcommittee on the District of 
Columbia held hearings on February 23, 1996 and June 12, 1996. 
The bill was marked-up in the Subcommittee on the District of 
Columbia on June 18, 1996. There were no amendments offered. 
The legislation passed the Subcommittee by a voice vote.
    The Government Reform and Oversight Committee met on June 
20, 1996, to consider H.R. 3663. There were no amendments 
offered. The bill was reported to the House unanimously by 
voice vote.

                Committee Hearings and Written Testimony

February 23, 1996 oversight hearing

    On February 23, 1996, the Subcommittee on the District of 
Columbia, of the Committee on Government Reform and Oversight, 
met pursuant to notice. The hearing was devoted to oversight 
issues associated with the District's water and waste water 
systems. The purpose of the hearing in regard to Blue Plains 
was to evaluate its over all performance, especially its day-to 
day operation, maintenance, personnel policies, procurement 
practices, and compliance with the Environmental Protection 
Agency (EPA) permits and orders.
    Subcommittee Chairman Davis began by stating that the 
problem of clean and inexpensive water and wastewater treatment 
affect all of the residents and businesses located in the 
metropolitan region. The Chairman went on to say that a failure 
in the wastewater system might threaten the health of the 
Chesapeake Bay, the Potomac River, and other vital wetlands, as 
well as District and suburban residents. He stated that the 
newly proposed Water and Sewer Authority needed borrowing power 
in order to implement any reforms. The Chairman then said that 
the Subcommittee must amend the home rule act if the Water and 
Sewer Authority is to have borrowing power. Ranking Member 
Norton agreed that both the Aqueduct and Blue Plains are 
regional problems which call for bipartisan solutions. She 
expressed her support for the District's effort to establish a 
new, independent Water and Sewer Authority.
    The first panel of witnesses consisted of Mr. Michael 
McCabe, the Director of Region III, EPA. Mr. McCabe reviewed 
the development of the Washington Aqueduct and the Blue Plains 
Wastewater Treatment Facility. He stated that the Aqueduct is a 
complex drinking water infrastructure that is old and run by 
the U.S. Army Corps of Engineers, with its customer base 
concentrated in the City. The Blue Plains facility is located 
in and operated by the District. The facility serves the needs 
of the District and suburban jurisdictions. However, both 
systems have committed recent and serious permit or federal 
standards violations; both have been issued Administrative 
Orders (one is a Proposed Administrative Order) by Region III 
because of problems with their operations; both present 
potential threats to the health and safety of their customers; 
and both are hampered by financial problems.
    Mr. McCabe then addressed possible solutions. For the 
Aqueduct, he stated that the Corps lacks the borrowing/bonding 
authority necessary to procure additional funding for reforms. 
For the Blue Plains facility, Mr. McCabe emphasized the 
importance of the Biological Nutrient Removal Pilot Project, 
which is vital to the health of the Potomac River and the 
Chesapeake Bay. He concluded by saying that the EPA has 
attempted to help the Aqueduct and the Blue Plains facility 
through technical assistance, administrative orders, court-
filed consent orders, unannounced inspections and audits, 
substantial fines, and jaw boning, but the results have been 
virtually negligible. Mr. McCabe suggested that Congress give 
consideration to new financing systems for both institutions, 
including the establishment of separate accounts for the 
collection and disbursement of grant payments and revenues for 
operation and maintenance.
    The second panel of witnesses consisted of Mr. Larry King, 
the Director of the District of Columbia Department of Public 
Works. Mr. King reported on the quality of the drinking water 
and wastewater treatment in the District of Columbia. He stated 
that the City's water is safe, but that many of the water 
distribution and wastewater system components predated the 
Civil War, and need to be modernized and properly maintained. 
Mr. King stated that the District has responded to these 
problems by developing three proposals to improve the 
infrastructure of the Blue Plains Wastewater Treatment Plant, 
the wastewater and combined collection systems, and the water 
distribution systems. Mr. King spoke in support of the D.C. 
Water and Sewer Authority Establishment and DPW Reorganization 
Act of 1996 (Council Act 11-201).
    The third panel consisted of Mr. Tom Jacobus, the Chief of 
Washington Aqueduct, United States Army Corps of Engineers. Mr. 
Jacobus described the operation and history of the Washington 
Aqueduct, as well as recent reforms and improvements. Mr. 
Jacobus then discussed recent problems. The current pay-as-you-
go system for capital improvements will not be enough to fund 
the projects under design and study for the Aqueduct. He also 
described the Aqueduct's cooperation with the District to 
implement the reforms in the EPA's Administrative order.
    The fourth panel of witnesses consisted of Mr. Erik Olson, 
the Senior Attorney of the Natural Resources Defense Council 
and Dr. Peter Hawley, the Medical Director of the Whitman-
Walker Clinic. Mr. Olson's testimony focused on the need to 
make substantial improvements in the District's water system. 
Dr. Hawley stated that D.C. drinking water was dangerously 
close to EPA limits for turbidity, and could easily cause 
illness for many people, especially those who are HIV infected, 
the debilitated elderly, newborns, individuals undergoing 
chemotherapy treatment, and those with rheumatoid arthritis or 
other immunocompromising illnesses.

June 12, 1996 Legislative Hearing

    On June 12, 1996, the Subcommittee on the District of 
Columbia, of the Committee on Government Reform and Oversight, 
met pursuant to notice. The hearing was intended to evaluate 
the progress of the Blue Plains wastewater treatment facility 
since the last hearing on February 23, 1996, to examine the 
District's proposal for a Water and Sewer Authority, and to 
obtain testimony on draft Congressional legislation necessary 
for the full implementation of the proposed Water and Sewer 
Authority.
    Subcommittee Chairman Davis began by commending the 
District government for passing legislation establishing the 
Water and Sewer Authority (District of Columbia Act 11-201), a 
self-funding, independent agency and for the improvements 
resulting from the June 5, 1996 amendments. The Authority is 
being created to improve wastewater treatment for the District 
and surrounding Virginia and Maryland jurisdictions as well as 
the maintenance of the District's water distribution system. 
Furthermore, the Authority is being established with voting 
Board representatives from suburban jurisdictions who use the 
facility. Chairman Davis emphasized that the Authority will be 
prohibited from transferring money to the District's General 
Fund, except for the acceptable arrangement for the Authority 
to pay the debt service on outstanding General Obligation bonds 
issued for water and sewer purposes. Mr. Davis acknowledged 
congressional action was necessary before the newly created 
Authority could issue revenue bonds. Ranking Member Norton 
expressed her gratitude to Chairman Davis for allowing the 
local stakeholders to work out a solution to the Water and 
Sewer Authority. She also spoke in favor of amending the home 
rule act to permit the Council to authorize the Water and Sewer 
Authority to issue revenue bonds.
    The first panel of witnesses consisted of Rep. Steny H. 
Hoyer, who expressed his approval of the creation of the 
Authority, which will aid the Blue Plains facility in the 
protection of human and environmental health, as well as daily 
operations, proper equipment, financial stability, and 
sufficient staffing levels. Mr. Hoyer expressed his concern 
about past transfers from the District's Water and Sewer 
Enterprise Fund to the city's General Fund. He stated that the 
District should return the funds removed from the Water and 
Sewer Enterprise Fund, and that the new Water and Sewer 
Authority should be prevented from this type of transfer. Mr. 
Hoyer then expressed support for the revenue bond legislation 
being considered.
    The second panel of witnesses consisted of Mr. Michael 
Rogers, the City Administrator of the District and Mr. Larry 
King, Director, DC Department of Public Works. Mr. Rogers began 
by stating that, when amending the home rule act, Congress 
should deal only with provisions relating to the Authority's 
bonding needs or other necessary Congressional actions, and 
should leave all other issues to the discretion and control of 
home rule government.
    Specifically, Mr. Rogers objected to a Congressional 
amendment requiring an eight vote majority on budget matters of 
joint-use facilities (intended to increase suburban 
participation). He felt this was unnecessary since the 
District's legislation was all ready created with suburban 
consultation. The District legislation was approved by the 
Mayor, the Council, the control board, the suburban 
jurisdictions, and allowed to become law by the Congress. Mr. 
Rogers also pointed out several errors in the draft 
Congressional legislation and asked the Subcommittee to work 
with the District to straighten them out. Mr. King spoke in 
favor of the District legislation as amended.
    The third panel consisted of the Honorable Katherine 
Hanley, Chairman of the Fairfax County Board of Supervisors, 
Mr. Bruce Romer, Chief Administrative Officer of Montgomery 
County, and Mr. Howard Stone, Chief Administrative Officer of 
Prince Georges County, Maryland. Ms. Hanley expressed her 
support of the revised eleven member Authority with five 
members from the suburban jurisdictions. In the long term, the 
Fairfax Board of Supervisors would like a separate Regional 
Authority to operate Blue Plains and joint-use facilities, 
without concern for the city's water and sewer system. Although 
there were other improvements the Board asked for in the 
District's legislation, she supports the creation of a Water 
and Sewer Authority as an important first step.
    Mr. Romer testified on behalf of himself and Mr. Stone. He 
stated that Blue Plains handles about 94% of the wastewater 
flows from Montgomery County and about 54% of the flows from 
Prince George's County, as part of the Inter Municipal 
Agreement of 1985 (IMA). Mr. Romer said that the two counties 
have a considerable stake in the pending legislation; suburban 
residents use 50% of the allocated capacity for Blue Plains, 
and have paid $346 million in capital investment in the Blue 
Plains facility. He also stated that suburban residents 
supported a separate Regional Authority in the long term, but 
supported suburban participation on the Authority's Board of 
Directors in the short term. He supported Congressional 
legislation to give the Water and Sewer Authority revenue bond 
power.
    The fourth panel consisted of Mr. Michael McCabe, the 
Region III Administrator of EPA, and Mr. Henri Gourd, Vice 
President/Manager of MBIA Insurance Corporation. Mr. McCabe 
expressed EPA's support for this legislation and said that the 
independent Water and Sewer Authority, as amended by the 
Council on June 5, 1996 should significantly improve the 
operation and maintenance of Blue Plains. Mr. McCabe also 
stressed the importance of the particular amendment making 
clear that the Water and Sewer Authority is the successor of 
WASUA and is the permit holder for Blue Plains. He also 
endorsed revenue bond power for the Authority. Mr. Gourd 
discussed the opportunities for the Authority in the bond 
market, from his perspective as a municipal bond insurer. There 
are two key issues for the bond market. First, the Authority 
must be an independent agency of the District's government so 
that its credit rating will not be linked to the District's. 
Second, the Authority must control its own revenue, so its 
bondholders will be assured of its financial security. He also 
listed nine important issues for the Authority to secure the 
most favorable bond rating.
    Written testimony was received from the District of 
Columbia Financial Responsibility and Management Assistance 
Authority's (control board) Executive Director, Mr. John W. 
Hill, Jr. Mr. Hill's testimony supported the Council's creation 
of an independent Water and Sewer Authority as it was amended 
on June 5, 1996. The amended version of the District 
legislation effectively addressed the previously stated 
concerns of the control board in regard to the financing and 
membership of the proposed Water and Sewer Authority. Mr. Hill 
also expressed the control board's approval for the goal of the 
congressional legislation. He did, however, express his 
reservations about several details of the proposed legislation 
and noted that these may have been inadvertent. Mr. Hill asked 
the Subcommittee to work with the control board staff to 
perfect the Congressional legislation.

                        Explanation of the Bill

    H.R. 3663 amends the District of Columbia Governmental 
Organization and Reorganization Act (PL 93-198) to permit the 
District of Columbia government to issue revenue bonds for 
water and sewer facilities, and for other related purposes. 
This is necessary in order to implement legislation already 
passed by the District of Columbia Council, as signed by the 
Mayor, and approved by the Control Board under PL 104-8, 
creating the District of Columbia Water and Sewer Authority 
(Act 11-201, amended by Emergency Act on June 5, 1996). After 
submission to Congress, the legislation was permitted to become 
District law on April 18, 1996.
    H.R. 3663 accomplishes the intent of Congress to allow the 
issuance of revenue bonds for water and sewer purposes by the 
District of Columbia and to permit the District Government to 
delegate the power being vested to the new Water and Sewer 
Authority. Other related provisions prevent the District 
Government from altering the Authority's budget and exempts 
bond proceeds and repayments from being part of the District's 
appropriations process. The legislation also removes both the 
revenues of the Water and Sewer Authority and outstanding 
General Obligation bonds issued for water and sewer purposes 
from the calculation of the District debt ceiling.
    Under existing law the District government already has the 
power to issue General Obligation bonds for any legitimate 
purpose. Section 490 of the Home Rule Act gives the District 
power to issue revenue bonds only for certain specified 
purposes. But the District lacks the power to sell revenue 
bonds for water and sewer purposes, and may not provide that 
any revenues of the new Water and Sewer Authority be used to 
pay off any revenue bonds issued for those purposes. The power 
to do that can only be conferred by a statutory enactment of 
Congress, as signed by the President. Should that power be 
conveyed by statute, which is the purpose of H.R. 3663, then 
the Council may, and by it's aforesaid enactments already has, 
delegate that power to another District entity--in this 
instance the new Water and Sewer Authority. Under this bill the 
District government need not then further approve any bonds 
lawfully sold by the Water and Sewer Authority.
    Under existing law the District of Columbia has a debt 
ceiling specified in the home rule act. The District is not 
permitted to have outstanding debt service higher that 14% of 
expected revenues. H.R. 3663 removes revenues of the new Water 
and Sewer Authority from the General Fund, effectively making 
them ``off budget''. What this does is to reduce the amount of 
General Obligation debt the District can assume. Up to $350 
million of the current General Obligation debt was for water 
and sewer purposes. Under the District legislation (Council Act 
11-201, as amended) the new Water and Sewer Authority must pay 
the debt service on the outstanding debt for water and sewer 
purposes, about $38 million each year. This means that the 
existing General Obligation bonds for water and sewer purposes 
will no longer be the responsibility of the General Fund, but 
will be the responsibility of the new Water and Sewer 
Authority. Therefore, this debt should also be removed from the 
debt ceiling calculation.
    The General Obligation bonds issued for water and sewer 
purposes and its annual debt service will be identified in the 
audit required in the District legislation. The Committee 
expects this audit to be conducted by an independent consultant 
well qualified to conduct such work. The Committee also expects 
for the Board of the Water and Sewer Authority to be consulted 
with and to accept the audit report for this matter and also 
for the identification of WASUA spending over the years, 
personnel, and equipment for which the Authority will be asked 
to repay the District under the provisions of the District 
legislation. This audit must also include the value of services 
rendered to the District which were not paid for such as free 
water service to the District government and any other such 
items. Any disputes or disagreements between the Board and the 
District government on these matters should be settled to the 
satisfaction of both bodies. The Committee notes that it 
retains both oversight and legislative power over the District 
and the Water and Sewer Authority and that Congress must 
approve the District and Water and Sewer Authority budget. 
Therefore, any unresolved issues between the parties may be 
subject to Congressional action.
    The new Water and Sewer Authority being created is 
independent, self-funded, and not in the General Fund of the 
District of Columbia budget. H.R. 3663 therefore takes the 
Authority out of the District's budget process. Other than 
nominating and confirming Board members for the Authority, the 
Mayor and Council will have no other role to play by way of 
exercising influence over the Authority. While the Mayor and 
Council may comment on the budget, they can not change it. It 
is Congress alone that may change the Authority's budget under 
H.R. 3663, and Congress alone will be authorizing and 
appropriating the Authority's budget. As a necessary corollary, 
the Authority will be exempt from the mid-year budget 
reductions which may be ordered by the Mayor.
    The Committee notes with favor that the Water and Sewer 
Authority is not only allowed, but is mandated to develop its 
own personnel and procurement systems. These provisions along 
with taking the Authority off budget will overcome past 
personnel problems caused by FTE caps and hiring freezes. 
Getting the Authority out from under the District's cumbersome 
and ineffective procurement system is expected to greatly 
improve the efficiency and cost savings available through good 
management and competitive bidding without an onerous overlay 
of Council enacted set asides and special considerations. The 
Committee expects the Authority to use its power in the area of 
personnel and procurement to aggressively pursue the best 
service at the lowest cost. The Committee included an amendment 
to the District legislation (Section 5 of H.R. 3663) to clarify 
that WASUA personnel transferred to the Water and Sewer 
Authority will only have their compensation guaranteed until 
the new personnel policy is put in place or until new labor 
agreements are entered into. The Committee agrees to allow 
transferred employees to maintain their compensation until the 
new personnel system is implemented, but will not agree to 
maintain employees compensation if their responsibilities or 
classification are reduced under the new system.
    In addition, the Committee supports the provisions of Act 
11-201, as amended, which call for quick action on possible 
contracting out of various parts of the operation and 
maintenance of Blue Plains and the water and sewer pipes of the 
District. The June 5 Council amendments together with consensus 
language in HR 3663 allow the Authority, on its own, to 
contract everything including general management of Blue 
Plains. The only action which the Authority cannot take is to 
sell or lease the entire Blue Plains Wastewater Facility, which 
is appropriate because the District retains title to Blue 
Plains and the Mayor and Council would have to approve a sale 
or lease.
    The question of the equity status of Blue Plains is left 
unresolved. Since the Maryland and Virginia counties have 
received EPA constuction grants and contributed them to Blue 
Plains and have partly paid for capital projects through their 
wholesale rate payments to the District there is disagreement 
with the District's position that it has sole claim to an 
equity interest in Blue Plains. This issue was not resolved by 
the 1985 Intermunicipal Agreement (IMA) and has remained 
unresolved and untested in the courts since then. The Committee 
declined to resolve this complex issue legislatively at this 
time. The asset equity question along with numerous other 
important questions such as going to a true regional authority 
and the potential inclusion of the Washington Aqueduct is to be 
dealt with in a major Study. The study is to be contracted for 
by the Water and Sewer Authority shortly after it is formally 
set up. The suburban jurisdictions, through their 
representatives on the Board, are to have substantive input in 
writing the Request For Proposal, setting the parameters of the 
Study, and reviewing and commenting on any draft Report before 
it becomes final. The Committee expects the District government 
to fulfill its committment to the other jurisdictions and to 
the Congress on the Study.
    Also, unspecified in the District or Congressional 
legislation is an exact structure or list of issues on which 
various components of the Board may vote. The Authority is 
really a bi-fucated body since it is responsible for purely 
District items (water and sewer pipes) and for considerable 
joint use facilities; and because the Board will consist of 
both District members and suburban members. The suburban Board 
members may not vote on matters affecting purely District 
issues, but may vote on all matters affecting the ``general 
management'' of any joint use facilities. The Committee 
understands that ``general management'' is a term of art in 
this context and that this language has been agreed to by all 
the parties. A similar question arises about bond issues since 
bonds may be sold for purely District purposes and for joint 
use facility purposes. Again, the Committee understands that 
all the parties are aware of the issues to be dealt with by the 
Water and Sewer Authority and are willing to work together to 
resolve them. The Committee is aware that goodwill and comity 
can easily overcome any lack of specifics in an organizational 
charter while lack of those qualities can render inoperable the 
best and most carefully designed structure. It is expected and 
anticipated that the Board will work together, in its own self 
interest, to resolve these questions in a friendly spirit of 
regional cooperation. If the Authority is able to work together 
to improve the operation of the area's largest environmental 
facility then further efforts at this type of close regional 
partnerships may become more prevalent.
    The Committee is very pleased that the Council amendments 
of June 5, 1996 guaranteed the complete fiscal independence of 
the Water and Sewer Authority. By allowing the Authority to 
collect its own revenues and deposit them directly with its own 
trustee, the District government has removed itself from even a 
pass through role in handling these funds and guarantees that 
no District official, including the Council, may divert those 
funds for other purposes. This is the most important feature in 
signalling a true transformation in the District government 
structure and delivery of services.
    In the past the District government has acted cavalierly 
towards its water and sewer system and too often has granted 
unfortunate favors or special treatment to some at the expense 
of the ratepayers. For instance, the Council has routinely 
exempted churches and other tax-exempt organizations from 
paying for water. Similarly, the District government does not 
pay for water it uses in its faclilties. Large apartment 
complexes cannot have their water shut off no matter how much 
money they owe for water because the government does not allow 
water service to be cut off for people who are not responsible 
for paying the bills. Because of these and other actions of the 
District government, there is currently an uncollected backlog 
of more than $30 million in unpaid water bills. The Committee 
takes special note of these issues and the fact that the 
District legislation grants the Water and Sewer Authority power 
to deal with each of them. The Committee strongly encourages 
the Authority to require all users of water and sewer service 
to pay their fair share, to be fair but tough about letting 
individuals or businesses fall far behind in paying their 
bills, and to charge the District government for its water and 
sewer service or make an arrangement to offset and revenues 
foregone. Only in this way will all ratepayers be able to feel 
that they are asked only to pay for what they use and that they 
are not subsidizing someone else who could afford to pay.
    The Committee thanks Mayor Barry for his vision for 
proposing such a radical transformation of the water and sewer 
services of the District and for his willingness to include 
voting members on the Board from other jurisdictions. This is a 
major step forward in regional cooperation. City Administrator 
Rogers has been both persistent and flexible in his dealings 
with the other jurisdictions and with the Committee. He 
deserves praise for reaching an agreement that all parties are 
willing to participate in at least as an interim measure. The 
Maryland and Virginia county governments on both the elected 
official and staff levels have shown toughness and attention to 
detail both large and small while maintaining a willingness to 
keep the important objective of improving Blue Plains in mind. 
The Committee hopes that this process and this legislation--
both Council Act 11-201, as amended, and H.R. 3663--are the end 
of the beginning in protecting the environment, improving water 
and sewer service for the Washington area, and a new spirit of 
regional cooperation.
    Concerns have been raised that since the Water and Sewer 
Authority is only a creation of the District government, the 
Council could amend the statue in the future in unfavorable 
ways. The Committee observes that Congress retains ultimate 
oversight and legislative power over the District and its 
legislative acts by the Constitution and PL 93-198. All Council 
acts must undergo Congressional review. Congress remains the 
watchdog of the District. The Committee commits itself to 
careful monitoring of the Water and Sewer Authority as it moves 
forward. It will do anything it can to help or improve the 
prospects of the Authority, and will be vigilant in looking for 
problems or attempts to subvert the performance of the 
Authority.
    The Committee anticiaptes that when H.R. 3663 is considered 
by the House there will be an amendment in the nature of a 
substitute. This amendment consists solely of technical and 
conforming changes and no policy changes are anticipated. 
Therefore, pending unexpected amendments by the House or in the 
Senate, this Report fully reflects the legislation which will 
be passed and will not become irrelevant because it addresses 
substantially different than that which becomes law.

                      Section by Section Analysis

    Section 1: Short Title. The Act may be cited as the 
``District of Columbia Water and Sewer Authority Act of 1996.''
    Section 2: Permits the issuance of revenue bonds for 
wastewater treatment activities. Currently, the District 
Government does not have the power to sell revenue bonds for 
water and sewer purposes, nor to provide that the revenues of 
the Water and Sewer Authority may be used to pay off revenue 
bonds for those purposes. Only Federal statutory law can do 
this. After the District is granted this power it may (and in 
this instance already has, in the form of its enacted law) 
delegate that power to another District entity--in this case 
the new Water and Sewer Authority. Thus, this Section amends 
Section 490 of the Home Rule Act to allow revenue bonds to be 
used for water and sewer purposes (Subsection (a)), allow Water 
and Sewer Authority revenues to be used to pay for revenue 
bonds (Subsection (b)), and permits the District to delegate 
full power to sell bonds without further District Council 
approval to the Water and Sewer Authority and to remove the 
proceeds of bonds and funds obligated to secure or pay debt 
service on bonds from the appropriation process (Subsection 
(c)).
    Section 3: Treatment of revenues and obligations. Removes 
the revenues of the Water and Sewer Authority and the 
outstanding General Obligation debt attributable to water and 
sewer purposes from the calculation of the District's debt 
service ceiling.
    Section 4: Treatment of the budget of the new Water and 
Sewer Authority. As the new Water and Sewer Authority is 
independent, self-funding, and not in the General Fund, it is 
thus appropriate to remove it from the regular budget process. 
The Mayor and Council may comment on the Authority budget, but 
can not change it. This is the same way the budget for the 
courts is treated. Congress may change and must appropriate the 
new Water and Sewer Authority budget. As an independent, self-
funded operation, the new Authority will be exempt from any 
mid-year budget reductions ordered by the Mayor.
    Section 5: Clarification of compensation of current 
employees of the Department of Public Works. This is to conform 
transferred employees to the new personnel system or to new 
collective bargaining agreements.

                        Compliance With Rule XI

    Pursuant to rule XI, clause 2(l)(3)(A), of the Rules of the 
House of Representatives, under the authority of rule X, clause 
2(b)(1) and clause 3(f), the results and findings for those 
oversight activities are incorporated in the recommendations 
found in the bill and in this report.

                    Budget Analysis and Projections

    This Act provides for no new authorization or budget 
authority or tax expenditures. Consequently, the provisions of 
section 308(a)(1) of the Congressional Budget Act are not 
applicable.

            Cost Estimate of the Congressional Budget Office

    The Committee was provided the following estimate of the 
cost of H.R. 3663, as prepared by the Congressional Budget 
Office.

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, June 25, 1996.
Hon. William F. Clinger, Jr.,
Chairman, Committee on Government Reform and Oversight,
U.S. House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
reviewed H.R. 3663, the District of Columbia Water and Sewer 
Authority Act of 1996, as ordered reported by the House 
Committee on Government Reform and Oversight on June 20, 1996. 
Based on information provided by the Joint Committee on 
Taxation, CBO estimates that H.R. 3663 would have no direct 
impact on the federal budget. Therefore, pay-as-you-go 
procedures would not apply.
    H.R. 3663 would:
          authorize the issuance of revenue bonds, notes, or 
        other obligations by either the Council of the District 
        of Columbia, or if the Council delegates this 
        authority, by the District of Columbia Water and Sewer 
        Authority to finance water and wastewater treatment 
        facilities;
          exclude certain estimated revenues and certain 
        estimated principal and interest payments from the 
        calculation of the amount of debt issuance available to 
        the District of Columbia;
          require the Water and Sewer Authority to submit to 
        the Mayor each year its estimate of the necessary 
        expenditures and appropriations for the following 
        fiscal year; and
          clarify the compensation of the current employees of 
        the District of Columbia's Department of Public Works.
    H.R. 3663 would have no direct budgetary impact on the 
federal government. The bill would remove from the District's 
calculation of its available debt capacity both the estimated 
revenues and the Water and Sewer Authority and the estimated 
principal and interest payments on general obligation bonds 
issued by the Water and Sewer Utility Administration within the 
Department of Public Works prior to fiscal year 1997. Under 
current law, the District cannot issue an amount of long-term 
general obligation debt, other than refunding debt, at would 
cause the estimated payment of principal and interest on the 
District's total outstanding debt in any fiscal year to exceed 
14 percent of the revenues estimated for the fiscal year in 
which the debt would be issued. Thus, by excluding from this 
calculation certain principal and interest payments, H.R. 3663 
would likely result in the District issuing more general 
obligation debt than it would under current law. The Joint 
Committee on Taxation has determined that this change would 
have no direct effect on federal receipts.
    H.R. 3663 contains no intergovernmental or private-sector 
mandates as defined in Public Law 104-4, and would impose no 
direct costs on state, local or tribal governments.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is John R. 
Righter.
            Sincerely,
                                         June E. O'Neill, Director.

                     Inflationary Impact Statement

    In accordance with rule XI, clause 2(l)(4) of the Rules of 
the House of Representatives, this legislation is assessed to 
have no inflationary effect on prices and costs in the 
operation of the national economy.

                        Changes in Existing Law

    Clause 3 of rule XIII of the Rules of the House of 
Representatives requires that any change in existing law made 
by the bill, as reported, be shown with the existing law 
proposed to be omitted enclosed in black brackets, new matter 
printed in italic, and existing law in which no change is 
proposed shown in roman type.

                        Committee Recommendation

    On June 20, 1996, a quorum being present, the Committee 
ordered the bill, as amended, favorably reported.
    Committee on Government Reform and Oversight--104th 
Congress Rollcall
    Date: June 20, 1996.
    Final Passage of H. R. 3663.
    Offered By: Mr. Davis.
    Voice Vote: Ayes.

 Congressional Accountability Act; Public Law 104-1; Section 102(B)(3)

    This provision is inapplicable to the legislative branch 
because it does not relate to any terms or conditions of 
employment or access to public services or accommodations.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3 of rule XIII of the Rules of the 
House of Representatives, changes in existing law made by the 
bill, as reported, are shown as follows (existing law proposed 
to be omitted is enclosed in black brackets, new matter is 
printed in italic, existing law in which no change is proposed 
is shown in roman):

       THE DISTRICT OF COLUMBIA SELF-GOVERNMENT AND GOVERNMENTAL 
                           REORGANIZATION ACT

                            TABLE OF CONTENTS

     * * * * * * *

                     TITLE IV--THE DISTRICT CHARTER

     * * * * * * *

            Part D--District Budget and Financial Management

               Subpart 1--Budget and Financial Management

Sec. 441. Fiscal year.
Sec. 442. Submission of annual budget.
Sec. 443. Multiyear plan.
Sec. 444. Multiyear capital improvements plan.
Sec. 445. District of Columbia courts' budget.
Sec. 445A. Water and Sewer Authority budget.
     * * * * * * *

                     TITLE IV--THE DISTRICT CHARTER

          * * * * * * *

            Part D--District Budget and Financial Management

               Subpart 1--Budget and Financial Management

          * * * * * * *

                      submission of annual budget

  Sec. 442. (a)  * * *
          * * * * * * *
  (b) The budget prepared and submitted by the Mayor shall 
include, but not be limited to, recommended expenditures at a 
reasonable level for the forthcoming fiscal year for the 
Council, the District of Columbia Auditor, the District of 
Columbia Board of Elections, the District of Columbia Judicial 
Nomination Commission, the Zoning Commission of the District of 
Columbia, the Public Service Commission, the Armory Board, 
[and] the Commission on Judicial Disabilities and Tenure[.], 
and the District of Columbia Water and Sewer Authority.
          * * * * * * *


                    water and sewer authority budget


  Sec. 445A. The District of Columbia Water and Sewer Authority 
established pursuant to the Water and Sewer Authority 
Establishment and Department of Public Works Reorganization Act 
of 1996 shall prepare and annually submit to the Mayor, for 
inclusion in the annual budget, annual estimates of the 
expenditures and appropriations necessary for the operation of 
the Authority for the year. All such estimates shall be 
forwarded by the Mayor to the Council for its action pursuant 
to sections 446 and 603(c), without revision but subject to his 
recommendations. Notwithstanding any other provision of this 
Act, the Council may comment or make recommendations concerning 
such annual estimates, but shall have no authority under this 
Act to revise such estimates.

                enactment of appropriations by congress

  Sec. 446. The Council, within fifty calendar days after 
receipt of the budget proposal from the Mayor, and after public 
hearing, shall by act adopt the annual budget for the District 
of Columbia government. Any supplements thereto shall also be 
adopted by act by the Council after public hearing. Such budget 
so adopted shall be submitted by the Mayor to the President for 
transmission by him to the Congress. Except as provided in 
section 467(d), section 471(c), section 472(d)(2), section 
483(d), and subsections [(f) and (g)(3)] (f), (g)(3), and 
(h)(4) of section 490, no amount may be obligated or expended 
by any officer or employee of the District of Columbia 
government unless such amount has been approved by Act of 
Congress, and then only according to such Act. Notwithstanding 
any other provision of this Act, the Mayor shall not transmit 
any annual budget or amendments or supplements thereto, to the 
President of the United States until the completion of the 
budget procedures contained in this Act. After the adoption of 
the annual budget for a fiscal year (beginning with the annual 
budget for fiscal year 1995), no reprogramming of amounts in 
the budget may occur unless the Mayor submits to the Council a 
request for such reprogramming and the Council approves the 
request, but only if any additional expenditures provided under 
such request for an activity are offset by reductions in 
expenditures for another activity.
          * * * * * * *

             reductions in budgets of independent agencies

  Sec. 453. (a)  * * *
          * * * * * * *
  (c) Subsection (a) shall not apply to amounts appropriated or 
otherwise made available to the District of Columbia [courts or 
the Council, or to] courts, the Council, the District of 
Columbia Financial Responsibility and Management Assistance 
Authority established under section 101(a) of the District of 
Columbia Financial Responsibility and Management Assistance Act 
of 1995[.], or the District of Columbia Water and Sewer 
Authority established pursuant to the Water and Sewer Authority 
Establishment and Department of Public Works Reorganization Act 
of 1996.
          * * * * * * *

     Subpart 5--Tax Exemption; Legal Investment; Water Pollution; 
           Reservoirs; Metro Contributions; and Revenue Bonds

          * * * * * * *

                  revenue bonds and other obligations

  Sec. 490. (a)(1) The Council may by act authorize the 
issuance of revenue bonds, notes, or other obligations 
(including refunding bonds, notes, or other obligations) to 
borrow money to finance, to refinance, or to assist in the 
financing or refinancing of, undertakings in the areas of 
housing, health facilities, transit and utility facilities, 
recreational facilities, college and university facilities, 
college and university programs which provide loans for the 
payment of educational expenses for or on behalf of students, 
pollution control facilities, [and] industrial and commercial 
development[.], and water and sewer facilities (as defined in 
paragraph (5)). Any such financing or refinancing may be 
effected by loans made directly or indirectly to any individual 
or legal entity, by the purchase of any mortgage, note, or 
other security, or by the purchase, lease, or sale of any 
property.
          * * * * * * *
  (3) Any revenue bond, note, or other obligation, issued under 
paragraph (1) shall be paid and secured (as to principal, 
interest, and any premium) as provided by the act of the 
Council authorizing the issuance of such bond, note, or other 
obligation. Subject to subsection (c), any act of the Council 
authorizing the issuance of such bond, note, or other 
obligation may provide for (A) the payment of such bond, note, 
or other obligation from any available revenues, assets, or 
property (including water and sewer enterprise fund revenues, 
assets, or other property in the case of bonds, notes, or 
obligations issued with respect to water and sewer facilities), 
and (B) the Securing of such bond, note, or other obligation by 
the mortgage of real property (including water and sewer 
enterprise fund revenues, assets, or other property in the case 
of bonds, notes, or obligations issued with respect to water 
and sewer facilities) or the creation of any security interest 
in available revenues, assets, or other property (including 
water and sewer enterprise fund revenues, assets, or other 
property in the case of bonds, notes, or obligations issued 
with respect to water and sewer facilities).
          * * * * * * *
  (5) In paragraph (1), the term ``water and sewer facilities'' 
means facilities for the obtaining, treatment, storage, and 
distribution of water, the collection, storage, treatment, and 
transportation of wastewater, storm drainage, and the disposal 
of liquids and solids resulting from treatment.
          * * * * * * *
  (h)(1) The Council may delegate to the District of Columbia 
Water and Sewer Authority established pursuant to the Water and 
Sewer Authority Establishment and Department of Public Works 
Reorganization Act of 1996 the authority of the Council under 
subsection (a) to issue revenue bonds, notes, and other 
obligations to borrow money to finance or assist in the 
financing or refinancing of undertakings in the area of 
utilities facilities, pollution control facilities, and water 
and sewer facilities (as defined in subsection (a)(5)). The 
Authority may exercise authority delegated to it by the Council 
as described in the first sentence of this paragraph (whether 
such delegation is made before or after the date of the 
enactment of this subsection) only in accordance with this 
subsection.
  (2) Revenue bonds, notes, and other obligations issued by the 
District of Columbia Water and Sewer Authority under a 
delegation of authority described in paragraph (1) shall be 
issued by resolution of the Authority, and any such resolution 
shall not be considered to be an act of the Council.
  (3) The provisions of subsections (a) through (e) shall apply 
with respect to the District of Columbia Water and Sewer 
Authority, the General Manager of the Authority, and to revenue 
bonds, notes, and other obligations issued by the Authority 
under a delegation of authority described in paragraph (1) in 
the same manner as such provisions apply with respect to the 
Council, to the Mayor, and to revenue bonds, notes, and other 
obligations issued by the Council under subsection (a)(1) 
(without regard to whether or not the Council has authorized 
the application of such provisions to the Authority or the 
General Manager).
  (4) The fourth sentence of section 446 shall not apply to--
          (A) any amount (including the amount of any accrued 
        interest or premium) obligated or expended from the 
        proceeds of the sale of any revenue bond, note, or 
        other obligation issued pursuant to this subsection;
          (B) any amount obligated or expended for the payment 
        of the principal of, interest on, or any premium for 
        any revenue bond, note, or other obligation issued 
        pursuant to this subsection;
          (C) any amount obligated or expended to secure any 
        revenue bond, note, or other obligation issued pursuant 
        to this subsection; or
          (D) any amount obligated or expended for repair, 
        maintenance, and capital improvements to facilities 
        financed pursuant to this subsection.
          * * * * * * *

            TITLE VI--RESERVATION OF CONGRESSIONAL AUTHORITY

          * * * * * * *

         budget process; limitations on borrowing and spending

  Sec. 603. (a)  * * *
  (b)(1) No general obligation bonds (other than bonds to 
refund outstanding indebtedness) or Treasury capital project 
loans shall be issued during any fiscal year in an amount which 
would cause the amount of principal and interest required to be 
paid both serially and into a sinking fund in any fiscal year 
on the aggregate amounts of all outstanding general obligation 
bonds and such Treasury loans, to exceed 14 per centum of the 
District revenues (less court fees, any fees or revenues 
directed to servicing revenue bonds, any revenues, charges, or 
fees dedicated for the purposes of water and sewer facilities 
described in section 490(a) (including fees or revenues 
directed to servicing or securing revenue bonds issued for such 
purposes), retirement contributions, revenues from retirement 
systems, and revenues derived from such Treasury loans and the 
sale or general obligation or revenue bonds) which the Mayor 
estimates, and the District of Columbia Auditor certifies, will 
be credited to the District during the fiscal year in which the 
bonds will be issued. Treasury capital project loans include 
all borrowing from the United States Treasury, except those 
funds advanced to the District by the Secretary of the Treasury 
under the provisions of section 2501, title 47 of the District 
of Columbia Code, as amended.
  (2) Obligations incurred pursuant to the authority contained 
in the District of Columbia Stadium Act of 1957 (71 Stat. 619; 
D.C. Code title 2, chapter 17, subchapter II), [and] 
obligations incurred by the agencies transferred or established 
by sections 201 and 202, whether incurred before or after such 
transfer or establishment, and obligations incurred pursuant to 
general obligation bonds of the District of Columbia issued 
prior to October 1, 1996, for the financing of Department of 
Public Works, Water and Sewer Utility Administration capital 
projects, shall not be included in determining the aggregate 
amount of all outstanding obligations subject to the limitation 
specified in the preceding subsection.
  (3) The 14 per centum limitation specified in paragraph (1) 
shall be calculated in the following manner:
          (A) Determine the dollar amount equivalent to 14 
        percent of the District revenues (less court fees, any 
        fees or revenues directed to servicing revenue bonds, 
        any revenues, charges, or fees dedicated for the 
        purposes of water and sewer facilities described in 
        section 490(a) (including fees or revenues directed to 
        servicing or securing revenue bonds issued for such 
        purposes), retirement, contributions, revenues from 
        retirement systems, and revenues derived from such 
        Treasury loans and the sale of general obligation or 
        revenue bonds) which the Mayor estimates, and the 
        District of Columbia Auditor certifies, will be 
        credited to the District during the fiscal year for 
        which the bonds will be issued.
          (B) Determine the actual total amount of principal 
        and interest to be paid in each fiscal year for all 
        outstanding general obligation bonds (less the 
        allocable portion of principal and interest to be paid 
        during the year on general obligation bonds of the 
        District of Columbia issued prior to October 1, 1996, 
        for the financing of Department of Public Works, Water 
        and Sewer Utility Administration capital projects) and 
        such Treasury loans.
          * * * * * * *
                              ----------                              


    SECTION 205 OF THE WATER AND SEWER AUTHORITY ESTABLISHMENT AND 
         DEPARTMENT OF PUBLIC WORKS REORGANIZATION ACT OF 1996

SEC. 205. DUTIES OF THE BOARD.

  (a)  * * *
          * * * * * * *
  (b)(1)  * * *
  (2) Department of Public Works employees whose salaries are 
funded by the Water and Sewer Utility Administration shall 
become employees of the Authority without impairment of civil 
service status and seniority, reduction in compensation 
(notwithstanding any change in job titles or [duties)] duties, 
and except as may otherwise be provided under the personnel 
system developed pursuant to subsection (a)(4) or a collective 
bargaining agreement entered into after the date of the 
enactment of this Act) or loss of accrued rights to holidays, 
leave, and benefits. All employees of the Authority shall 
perform their duties under the direction, control, and 
supervision of the Authority; provided, however, that any 
employee subject to transfer whose existing duties and 
responsibilities are determined by the Authority and the 
Department of Public Works to relate directly and primarily to 
functions of the Department of Public Works, and for whom a 
position at the Department of Public Works is funded in whole 
or in part, shall remain an employee of the Department of 
Public Works and shall continue to perform duties under the 
direction, control, and supervision of the Department of Public 
Works and not under funding arrangements thereafter derived 
from the accounts of the Authority.