OFFICE OF THE CHIEF FINANCIAL OFFICER
 CENTER FOR ENVIRONMENTAL FINANCE
          NOVEMBER 2014
             EPA 19OR14009

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INTRODUCTION

This report summarizes the work and accomplishments of EPA's Environmental Finance Program.
The two main components of the program are the Environmental Financial Advisory  Board
(EFAB) and the agency-supported Environmental Finance Centers (EFCs). Both the EFAB and
the EFCs provide unique services to the nation,  helping  find ways to pay for sustainable
environmental programs and promote responsible stewardship. Together, these initiatives seek to
lower costs, increase investments, and build the capacity of public and private parties to support
environmental needs.

The EFAB is an independent advisory committee established to recommend ways that EPA can
address the growing environmental financing challenges facing the nation. First chartered in 1989
and operating under the authority  of the Federal Advisory Committee Act (FACA), the  EFAB
reports to the EPA Administrator and program offices on environmental finance issues, options,
proposals, innovations,  and  trends. The Board is  comprised  of approximately  30 members
appointed by the agency's Deputy Administrator. The membership represents diverse points of
view from those in state and local  governments; the banking and finance communities; business
and industry; and non-profit organizations. The Board provides policy and technical advice on a
wide range of financial issues, with a particular focus on supporting the EPA's strategic goals and
cross-cutting fundamental strategies, as outlined in its Strategic Plan.

Environmental goals cannot be met without financing, which is essential to implementing state
and local programs. However,  knowledge about how to fund environmental programs is often
limited, especially at the local level. As a result, there is a need to educate public officials on the
front lines of financial environmental  facilities and services about options and tools available to
help them meet their  requirements and  ensure a healthy environment for the people in their
communities.

The EFCs  are  nine  university-based  organizations that provide  innovative  solutions to
communities to help manage the cost of environmental protection. The EFCs provide state and
local officials and small businesses with advisory services; education, publications, and training;
technical assistance; and analyses  on financing alternatives. EFCs  pursue various avenues of
education and training such as offering short courses on environmental finance for state and local
officials as well as graduate-level educational courses through regular university curricula. In
addition, the EFCs  develop and publish case studies about financing techniques  and serve as
clearinghouses for  regional  and state information  on environmental financing and  program
management. Other activities include providing outreach services by developing tools, training
courses, delivering lectures, or otherwise educating communities and relevant stakeholders about
financing  issues.  The EFCs have  proven to be effective vehicles for promoting innovative
environmental financing techniques for states and localities.

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In addition to the EPA support, all of the EFCs attract additional funds through grants and contracts
with other public and private clients.  During FY 2014, centers in the network operated at the
following universities:

   •   University of Southern Maine (Region 1)
   •   Syracuse University (Region 2)
   •   University of Maryland (Region 3)
   •   University of North Carolina at Chapel Hill (Region 4)
   •   University of Louisville (Region 4)
   •   Cleveland State University (Region 5)
   •   Wichita  State University (Region 7)
   •   Dominican University of California (Region 9)
   •   Boise State University (Region 10)

The EFAB and the EFCs provide financial experience and expertise outside of the Agency's core
competency  of  developing and implementing  environmental  programs.  These  programs also
complement each other - the EFCs share with the EFAB their real-world experience and the EFAB
members may also make their professional experience available to assist the EFCs in their work.

ENVIRONMENTAL FINANCIAL ADVISORY BOARD HIGHLIGHTS

The EFAB's charter was approved by the Deputy Administrator for another two-year term on
March 7, 2014.  The charter renewal is  in accordance with the provisions of the Federal Advisory
Committee Act (FACA), 5 U.S.C. App.2 and relevant Agency policies. The EFAB is in the public
interest and  supports EPA in performing its  duties and responsibilities. Some of the major
objectives of the EFAB are to provide policy advice  and recommendations for:

   •   Reducing the cost of financing sustainable environmental facilities, discouraging polluting
       behavior, and encouraging stewardship of natural resources;
   •   Identifying approaches specifically targeted to small community financing;
   •   Creating incentives to increase private investment in the provision of environmental
       services  and removing or reducing constraints on private involvement imposed by  current
       regulations;
   •   Removing  barriers  and increasing  opportunities for the U.S.  financial services and
       environmental goods and services industries in other nations; and,
   •   Developing new and innovative environmental financing approaches and supporting and
       encouraging the use of cost-effective  existing approaches.

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The Center for Environmental Finance (CEF) implemented a process to recruit EFAB members in
an effort to create a FACA committee that reflects a rich diversity of talent, expertise, experience,
and  points  of view  necessary  to  provide  balanced  environmental  finance  advice  to the
Administrator. This process involved  frequent interaction with  the agency's  senior officials,
including the Office of General Counsel, Office of the Administrator and Office of Diversity and
Advisory Committee Management and Outreach. Along with the traditional outreach recruiting
efforts such as the Federal Register notification and recommendations from past and present board
members,  CEF solicited recruitment on multiple Listservs, social media, targeted minority and
women  organizations, and  public interest groups. This effort resulted in the largest pool of
qualified candidates in the history of the Board.

The EFAB held two successful public meetings on December 12-13, 2013 and May 13-14, 2014.
The purpose of the meetings were to hear from informed speakers on environmental finance issues,
proposed  legislation,  and  EPA priorities; to  discuss activities, progress,  and preliminary
recommendations with regard to current EFAB work projects; and to consider requests for
assistance from EPA offices.

Through these public meetings, EFAB developed independent reports on financing environmental
programs and activities. They issued reports making recommendations concerning programs and
activities managed by EPA's Office of Water, Office of Policy, and the Region 1 office.

COMPLETED PROJECTS

Municipal Energy  Efficiency and Greenhouse Gas  Emissions Reduction:  Financing and
Implementing Energy Efficiency Retrofits in City-Owned Facilities (January 2014): At the
request  of the EPA Region 1  office, the Board produced a report that would help smaller
communities understand the benefits of processes to develop and methods of financing energy
efficiency projects. The Board reviewed a vast amount of existing information and distilled it down
to a useable educational piece  that will help communities,  particularly  those without dedicated
energy staff, decide whether and how to move forward on efficiency measures.

Utilizing SRF Funding for Green Infrastructure Projects (January 2014): The report analyzes
and explores the potential of the Clean Water State Revolving Fund (CWSRF) to provide credit
guarantees to green infrastructure projects within current program eligibilities and resources. This
opportunity could be especially attractive for the large state CWSRF programs and/or for states
that leverage their CWSRF programs. The findings in  the report  indicate that some CWSRF
programs have reached a point where they may  have the capacity to expand funding for green
infrastructure projects by  offering credit guarantees at the same triple-A  ratings enjoyed by most
CWSRF loan programs. The report also discusses other program  strengths that could more than
double these capacity estimates.  The report makes recommendations on the process needed to
realize these potential program benefits. At the request of the EPA's Office of Water and the White

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House's Council on Environmental Quality, the EFAB also produced a three-page summary of the
larger technical report.

Transit-Oriented Development for Sustainable  Communities  (July 2014):  The  EFAB was
charged with developing information regarding financing tools and strategies that could be applied
to transit-oriented development (TOD) for sustainable communities. The Board hosted a workshop
on transit-oriented  development and a roundtable on environmental infrastructure  investment.
These meetings brought together many government, industry, and finance experts with real-world
experience in financing and implementing development projects. The EFAB prepared a report to
the agency suggesting that public-private partnerships (P3s) provide access to alternative forms of
financing that would enable TOD project directors to more easily harness private  developers'
expertise,  industry innovation, and accelerate the timetable  of meeting economic development
goals. The Board also recommended that the EPA identify means to improve the  P3  process,
especially as it related to TOD, to further the environmental and economic development benefits.

Review of EPA's Draft Financial Capability Assessment Framework (September 2014): The
EFAB was asked to review the draft of the revised Financial Capability Assessment Framework
by the Office of Water to ensure that the document identifies appropriate examples of additional
information that communities could provide to supplement the findings of EPA's two-part
assessment process identified  in the  Combined Sewer Overflows: Guidance for Financial
Capability Assessment and Schedule Development report  of 1997.  The Board evaluated the
existing framework and recommended the inclusion of 10 additional metrics, in conjunction with
the existing metrics, for consideration in the financial analysis. The EFAB also recommends that
the following  qualitative  factors also be considered in  the framework:  (1)  extraordinary
considerations, (2) additional system priorities and environmental/regulatory matters and (3) small
system considerations.

ENVIRONMENTAL FINANCE CENTERS HIGHLIGHTS

The financial outreach services provided by the EFCs help  the regulated communities to meet
environmental needs by identifying ways of cutting, lowering and shifting costs, and increasing
investments in environmental systems. These accomplishments, to date, have made an important
contribution to environmental progress, but much still needs to be done and their work remains an
ongoing process.

UNIVERSITY OF  SOUTHERN MAINE

   •  Provided assistance to sustainable communities grantees through resource development,
       one-on-one  assistance,  national webinars,  and  in-person events  on  topics  such  as
      implementing and financing green infrastructure; auditing development codes for barriers
      to low impact development; integrating water infrastructure investments and planning into
      local and regional sustainability planning; conducting asset management for  water

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       resources; linking water resources and economic development in rural places; revitalizing
       brownfields; building  resiliency to hazards;  and,  connecting livability planning  to
       combined sewer overflow remediation efforts.
   •   Undertook efforts to pursue new separate funded projects assisting state agencies and the
       EPA Region 1  with needs including fiscal analysis of alternative development patterns,
       healthy communities and food waste and small water systems finance and management.
   •   Completed  a report on  the economics and finance of Maine's water resources and
       infrastructure in collaboration with The Nature Conservancy with support from the Doris
       Duke Charitable and Elmina B. Sewall Foundations, with a focus on the opportunities to
       protect and provide water resources at lower costs.

SYRACUSE UNIVERSITY

   •   Facilitated the Puerto Rico Recycling Partnership (PRRP) as a service to the Puerto Rican
       government and the EPA to promote materials source reduction, clean composting, reuse,
       and recycling through  a  working partnership including  government (at all levels), non-
       profit organizations, citizens, environmental groups, and the private sector. The PRRP is
       designing programs, educating the public, and ensuring effective implementation.
   •   Partnered with  the New York  State Association for Reduction, Reuse, and Recycling to
       develop programs in the Hudson Valley that serve communities seeking to start or enhance
       their waste reduction programs.
   •   Partnered with the Department of Sanitation of New York on their NYC Compost Council
       to establish a best management practices protocol  for hundreds of existing  and  new
       community compost sites throughout all five boroughs of NYC.
   •   Worked together with EPA and Onondaga County's Save the Rain program to plan and
       facilitate the first ever National Green Infrastructure Communities Summit  in October
       2013, inviting  and hosting  communities  from around  the country.  Syracuse's  critical
       involvement in the Save the Rain program  has generated many successes in Onondaga
       County and communities throughout New  York State, the EPA Region 2 office, and
       beyond by allowing Syracuse to transfer knowledge and technical training demonstrated
       first in Onondaga County.

UNIVERSITY OF MARYLAND

   •   Providing technical support on  the Maryland Smart  Energy  Communities  (MSEC)
       program.  The  MSEC  program,  which  is  administered  by  the  Maryland  Energy
       Administration and funded by proceeds from the Regional Greenhouse Gas Initiative, is a
       model for community-scale energy policy and management. Maryland municipalities and
       counties join MSEC when they adopt two of three policy goals related to building energy
       efficiency, renewal energy  generation, or transportation petroleum reduction. Upon
       adopting the policy goals, setting up a system for tracking energy patterns, and establishing

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       a plan for meeting the goals, communities receive a grant to kick-start their goal. Through
       recruiting, workshops, webinars, tutorials (i.e., energy Star portfolio Manager), and on-site
       visits, the EFC has  engaged over 50 Maryland communities in the program,  which is
       intended  to be  more than a one-time grant, and  instead an on-going opportunity for
       communities to access funding, build a network  of peers,  develop  innovative energy
       projects, and serve as leader for local businesses and residents.
   •   Worked with the  Maryland Department of Natural Resources Chesapeake and Coastal
       Service to provide  a  framework  for incentivizing local  efforts to revitalize working
       waterfront communities and economies throughout the State. Known as Phase 1, the EFCs
       objective was twofold: 1) identify opportunities for state leaders to employ innovative
       financing policies and tools in support of local working waterfront initiatives; and 2)
       provide Maryland with a recommended structure for establishing a working waterfronts
       program within the agency.

       The Maryland EFC  found that the working waterfront development issues are uniquely
       local in nature and require community leaders to address and react to a myriad of issues
       including  cultural  and heritage protection,  economic  development,  infrastructure
       construction and maintenance, as well as natural resource restoration and protection.  As a
       result of the complex nature of working waterfront development efforts, the state plays a
       uniquely important role in informing decision-making and improving the capacity of local
       leaders to advance their working waterfronts efforts. Specifically, a working waterfronts
       program for the state of Maryland should focus on coordinating the collective resources at
       the state level to the benefit of local  communities.  The program should be based on five
       key  working  waterfront  development  elements:  1)  comprehensive  planning;  2)
       infrastructure financing; 3)  cultural  and heritage protection; 4)  economic analysis  and
       development; and  5) natural resource restoration and protection.

       The Phase 2 effort currently  underway  to  prove the EFC's  findings uses the  pilot
       community of Cambridge which will have the EFC focus on addressing each of these areas
       within the context of the City's existing  planning efforts. The goal is to demonstrate how
       the state can mobilize and apply its resources to the benefit of local  communities  and
       traditional working waterfront economies and cultures.


UNIVERSITY OF NORTH CAROLINA at CHAPEL HILL

    •  Hosted a public forum featuring presentations from 10  prominent environmental finance
       experts and innovators from a variety of perspectives that cut across sectors and issues.
       Speakers included Stan Meiburg, former Deputy Regional Administrator, EPA Region 4;
       Andrew Sawyers, Director of EPA's Office of Wastewater Management, Office of Water;
       Alfred Griffin, President of the New York Green Bank, and many more. The forum fostered

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       discussion and identified emerging trends, strategies, and ideas that help answer the basic
       "how will we pay" questions at the heart of successful environmental protection. The event
       drew more than 130 in-person attendees and 250 online attendees from across the country.
    •  The EFC  offered a  workshop  on financing  green infrastructure for the Council of
       Infrastructure  Authority and state revolving fund managers and staff. The workshop also
       included a tour of green infrastructure installations  in the Ramsey-Washington Metro
       District, MN  to showcase green infrastructure projects  funded by SRF  programs. The
       workshop and tour reached approximately 80 SRF professionals. In addition, as part of this
       project, the EFC produced a catalog of publications on green infrastructure for stormwater
       management that have finance relevance. Since May 2014, more than 900 people have
       accessed the catalog.
    •  The Georgia Funders Forum is a group of representatives from the various public finance
       programs for  water, wastewater, and stormwater projects in the state of Georgia.  Since
       2007,  the  group  has been meeting a few  times annually. The informal  meetings  are
       convened and facilitated by staff from the EFC. The objective is for staff from various
       financing programs to provide updates on their respective programs and, in some cases,
       explore opportunities to collaborate.

UNIVERSITY OF LOUISVILLE

    •  Produced two Practice Guides: PG 33 - Communities, Trains, and Trainyards:  Exploring
       Policy Options for Affected Municipalities and PG 34 - Using Principles of Environmental
       Sustainability  to Improve Student Health. Through these Practice Guides, the EFC is able
       to reach out to  a national audience via website. Specific themed guides are listed as
       resources  on  other websites  such as  the Kentucky Department for  Environmental
       Protection (KDEP), the U.S. EPA's Brownfields  Urban Ag  resources  site, and  the
       Geoprofessional Business Association.
    •  Co-authored and published a peer  review chapter on participatory planning in an edited
       volume about Climate Change. Heberle, L., Merrill, S., Keeley, C. and Lloyd, S. (April
       2014) [ "Local Know ledge and Participatory Climate Change Planning in the Northeastern
       U.S. " in International perspectives on climate change: Latin America and Beyond (Editors
       Profs. Leah, Filho; Alves, Fatima; Caeiro, Sandra; and Azeiteiro; Ulisses). Springer. Cham
       Heidelberg, New York, Dordrecht,  London,  pp. 239-252.]
    •  Led the HUD/EPA Sustainable  Communities  Partnership grantee community members
       across the nation, providing them with webinars, workshops, practice guides, targeted fact
       sheets and one-on-one technical assistance in the areas of water infrastructure, brownfields,
       resiliency, and climate change in partnership with the EFCs at the University of Southern
       Maine, the University of Maryland, and the University of New Mexico.
    •  Assisted elected officials and community members in Louisville, KY with communication
       and obtaining information  from EPA  Region 4 representatives and KDEP officials
       regarding the Black  Leaf Chemical Site.  This also included assistance  to a medical

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       researcher at UofL who agreed to perform limited biological  sampling and testing of
       residents who live near the site.
    •  Presented to a national audience of 200 individuals from communities working on vacant
       property issues on the topic of effectively using comprehensive data to reach community
       goals - 2013 Reclaiming Vacant Properties Conference, Center for Community Progress,
       September 9-11,2013.
    •  Keynote speaker for  the Neighbor Works America Green Leadership Forum May 20th,
       2014, in Louisville, KY on the topic of linking environmental protection and safety from
       toxic exposures with affordable housing initiatives. This was a national audience of about
       100 community development professionals.

CLEVELAND STATE UNIVERSITY

   •   Collaborated with Don lannone,  Executive Director  of Ashtabula  County  Growth
       Partnership, on the development of an Integrated Development Budget (IDE) in Butler
       County,  Ohio creating a unified economic development budget and plan linking together
       the  economic initiatives of all  of the local  governments and  not-for-profit workforce
       organizations, and a  private sector technology firm in the county.  The IDE prioritizes
       investments in  technology, infrastructure, and workforce, with increasing the capacity of
       the county fiber backbone, targeting investment in road and bridge, drinking water,  and
       clean water infrastructure, and providing job training to meet the market needs  of the
       region.
   •   Developed the funding strategy tying together the consortium of local governments, special
       districts, county government, the County Port Authority, the Transportation Improvement
       District,  and technology and workforce effects together  to create a  more strategic-
       collaborative approach to economic development.
   •   Conducted a solid waste and recycling rate study for the City of Elyria, Ohio (population
       of approx. 54,000). The City has operated with a legislatively determined rate and lacking
       a cost driven formula. The defined rate is based on a "full cost pricing model." The resultant
       increase is to capitalize a sinking fund for the replacement of their fleet of eight mechanized
       (one arm) collection trucks and trash and recycling bins.
   •   Working with the Ohio Department of Transportation on revenue enhancements through
       defining the market value of and selling the naming rights of public infrastructure assets,
       including highway interchanges and roadside  assistance services in metropolitan areas of
       the state.
   •   Published  (along with colleagues Bill  Jarocki,  Director  of Enterprise Planning  and
       Analysis, Montana Department of Revenue, and Kristina Gillespie,  Chief Operating
       Officer,  Voltaic   Solutions,  LLC) a  series  of  three articles  on  environmental  and
       infrastructure finance topics in the practitioner journal UIM: The Journal of Finance and
       Management for Water  and Wastewater Professionals.  The articles are based on EFC
       projects  in Regions 5 and 10. The first article, Financing America's Infrastructure Needs,

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       identified the utility of implementing for "useful life financing" to match the long-term
       financing strategy to the useful life of the capital asset. The second article entitled COFee:
       A Market Driven Solution to Today's Clean Water Challenges, details the use of a Capacity
       Optimization Fee (COFee) system that promotes economic development and efficient use
       of the wastewater systems by industrial customers.  The third article, entitled COFee in
       Action:  The  City  of Nampa (Idaho) Solidifies the  Connection between Wastewater
       Infrastructure and Economic Development, followed the first operating year of the COFee
       strategy.

WICHITA STATE UNIVERSITY

   •   Developed content  and curriculum for a series of Conservation Planning and Water Loss
       workshops that were held in  four locations across Iowa including: Storm Lake (10/29/13);
       Atlantic (10/30/13); Waterloo (11/5/13);  and, Mt. Pleasant (11/6/13).  These workshops
       focused on short and long-term conservation planning related to drought, as well as the
       impact of unaccounted for  water within the utility. Other topics included  emergency
       preparedness planning and how to use the WaterWise calculator to determine the true cost
       of water loss specific to individual W/WW utilities. The EFC partnered with  the Iowa
       Association of Municipal Utilities for the development and delivery of these workshops.
       The EFC also worked in cooperation with the Iowa  Department of Natural Resources to
       market the  series.  These workshops were extremely successful  as noted through the
       positive evaluations. Over 130 operators and local government professionals from across
       Iowa participated in the workshops.
   •   Worked with the EPA Region 7 office to coordinate a dialogue with the Administrator and
       communities in South Central Kansas on March 13, 2014. The purpose of the event was to
       identify opportunities  and  challenges related to environmental  regulations for small
       communities. The session hosted 35 participants and provided a platform for a candid and
       open discussion about small community opportunities and challenges  on environmental
       compliance. The EFC staff provided a short presentation on the activities of the EFC  over
       the last couple of years and then facilitated the session dialogue.
   •   Planned, coordinated and hosted the 2014 Regional Economic Area Partnership  Regional
       Water Conference. The event was held in Newton, Kansas on May 29, 2014 at the Meridian
       Conference Center  and with over  110 participants attending. The conference's theme was
       Regional Water Planning, which focused on providing assistance to  the  State's broad
       visioning this year  to plan for the State's water resources for the next 50 years. Keynote
       speakers from the Oklahoma's State Water Planning Agency presented the plan  currently
       in use in the state, which was followed by presentations involving the funding and content
       needed action in Kansas.
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DOMINICAN UNIVERSITY AT CALIFORNIA

   •   Worked with nine different Tribes in California and Arizona to help them develop their
       green  economies. Support  to  Tribes  included:  1)  analyzing  a transfer  station  and
       composting operation for the Big Sandy Rancheria and Morongo Tribes; 2) identifying
       recycling commodity prices and supporting recycling program expansion for the Gila River
       Indian Community; 3) exploring multiple financing options to support a waste program for
       the Big Valley Rancheria Band of Porno Indians; 4) preparing a capital improvement plan
       for the Tohono O'odham Nation; and, 5) developing a financial feasibility guidebook for
       a Tribal composting operation for the Trinidad and Bear River Rancherias.

BOISE STATE UNIVERSITY

   •   Completed reprogramming of its signature product, HydroDASH™. It provides a simple
       method for small water systems to generate financial data for lenders and regulators and
       translates financial data into actual knowledge about the true sustainability of a system.
       The system  generates  operating  ratios, a  debt coverage ratio,  needed savings,  an
       affordability index and various comparisons of revenues and costs.
   •   Worked with communities during the year to build financial and managerial capacity. The
       EFC helped the community of Kuna, Idaho, organize their finances so that the public works
       director was able to present a coherent financial plan to their council with the goal of
       creating a system reserve requirement. Additionally, considerable work  was done on
       establishing a long-term rate strategy to meet their goals. West Valley water system is a
       small distribution water system with aging infrastructure. The EFC's efforts were directed
       to help the system understand how to implement an asset management plan. Additionally,
       the EFC worked with the water system on how to apply for a rate increase with their Public
       Utility Commission.

       For more information about  the  Environmental Finance Program,  please visit:
       http://www2. epa. gov/envirofmance.
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