EPA Financial Advisory Board Studies Water Funding

I recently attended a meeting of the EPA Environmental Financial Advisory Board (EFAB) comprised of mayors, city council chairs...

I recently attended a meeting of the EPA Environmental Financial Advisory Board (EFAB) comprised of mayors, city council chairs, water development directors, banking and financing interests, environmental finance directors, the industrial community, members of academia and environmentalists. The purpose of this advisory board is to provide advice and recommendations to EPA on creative approaches to funding environmental programs, projects, and activities.

The importance of EFAB to the Agency was clearly reflected in the fact that EPA Administrator Stephen Johnson, EPA Deputy Administrator Marcus Peacock, and EPA Assistant Administrator for Water Ben Grumbles were all in attendance.

The board discussed a variety of topics pertinent to the water and wastewater industry, including environmental management systems; the state revolving fund programs; and affordability of water and wastewater services. Recent recommendations coming from the board included endorsing full cost pricing for water and wastewater services; mitigating affordability problems at the household level through carefully targeted rate policies; and providing useful life financing of up to 40 years for projects receiving state revolving fund assistance, making environmental facilities more affordable.

After its two-day meeting, EFAB then sponsored a one-day roundtable session to explore innovative financing tools and techniques for implementing sustainable watershed plans. The need for investing in watershed protection and restoration is evident with 39% of assessed river miles, 45% of assessed lake acres, and 51% of assessed estuary square miles currently impaired, according to EPA’s Water Quality Inventory. The challenge to finding financing mechanisms that are fair, sufficient, affordable, sustainable, and politically acceptable is formidable.

It was encouraging to learn, however, that much progress is being made at the regional, state and local level to address the challenges our country faces in financing sustainable water infrastructure on a watershed basis. With over 2,000 watersheds in the U.S., this is no small order.

One of the best examples of an innovative financing technique being employed by a state to address a watershed challenge is that employed by the State of Maryland with its Bay Restoration Fund. Established in May 2004, the fund consists of two financing mechanisms. The first entails a $2.50 per month per household surcharge on sewer bills and an equivalent fee for commercial and industrial users based on wastewater flow. It is anticipated that $60 million will be raised per year to finance bonds to upgrade Maryland’s wastewater treatment plants, allowing the state to significantly reduce nutrients in Chesapeake Bay.

The second funding mechanism is based on a $30 annual fee for users of onsite systems. Estimated to raise $12.6 million annually, 60 percent of the funds will be used to upgrade onsite systems with nitrogen removal technology, with the remaining 40 percent of the funds going toward providing financial assistance to farmers to implement cover crops on farmlands. Ultimately, the State of Maryland hopes to remove an additional 20 million pounds of nitrogen and 1.1 million pounds of phosphorous to meet its water quality standards for the Bay. Creation of this innovative, dedicated funding tool is a bold step in the right direction.

Needless to say, it is going to take every federal, state and local funding option available to meet these enormous needs as well as those facing other fragile watersheds throughout the country. There was good news and bad news presented at the meeting concerning the federal government’s role in this process.

First, the good news. The Clean Water State Revolving Fund (CWSRF) and Drinking Water State Revolving Fund (DWSRF) remain strong. With a combined source of low-cost financing in excess of $6 billion annually, the two programs have proven to be a critical catalyst for making the necessary investments to protect and restore our nation’s capital infrastructure and water resources.

However, the Administration’s proposed fiscal 2007 budget includes only $688 million for the CWSRF, a 22 percent reduction from fiscal 2006 and nearly a 50 percent reduction from three years ago. The DWSRF budget proposal stands as its current $860 million. This attack on the CWSRF is unjustifiable, especially given the significant leveraging that has been achieved by the states in its use of the funds and the subsequent return of investment that the program proudly attains.

This will be among one of the many topics discussed at WWEMA’s 33rd Washington Forum, Who’s Driving the Water Market (and How Do We Get on Board?), being held on May 10-11 in the Nation’s Capital. This year’s program will take an in-depth look at the increasingly important role being played by regional authorities, and state and local governments, in determining water quality standards and developing creative ways to finance the capital infrastructure and pollution prevention activities so desperately needed to restore, protect and preserve our nation’s critical watersheds. The future of our life-sustaining ecosystems depends on the success of these initiatives.

About the author:

Dawn Kristof is president of the Water and Wastewater Equipment Manufacturers Association. WWEMA has operated for 98 years as a Washington, D.C.-based, non-profit trade organization representing the interests of companies that serve the water and wastewater industry.

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