United States
Environmental Protection
Agency
EPA841-K-94-001
January 1994
Offiqe of Water (4503 F)
A State and Loeal
Government Guide
to Environmental
Program Funding
Alternatives
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Environmental Program Funding Alternatives
Implementation of environmental protection programs at the state
and local levels often requires nonfederal government funding.
Traditionally, funding for environmental programs has come from
general revenue funds. Now that federal, state, and local govern-
ments are facing fiscal constraints, alternative sources of funding are
becoming important options for implementing nonpoint source
pollution controls and other environmental protection measures.
Traditional sources of funding, such as taxes and bonds, are being
supplemented by innovative funding sources like special license
plates and income tax checkoffs.
There are four basic ways to fund public programs and facilities:
current revenues (pay as you go), borrowing (bonding), intergovern-
mental transfers/assistance (fees or taxes collected by one level of
government and passed on to another in the form of loans or grants),
and public-private partnerships (private sector involvement in
historically public sector activities). Since not every financing
source or mechanism is appropriate for every state or local program,
legal, administrative, and political aspects of financing must be
taken into consideration when selecting funding alternatives.
This booklet provides an overview of traditional funding mecha-
nisms and introduces state and local governments to innovative
alternatives to traditional funding. The focus is on nonpoint source
pollution, but funding sources and mechanisms can be applied to
environmental programs in general. A list of contacts and refer-
ences is included at the back of the booklet to answer questions and
provide additional information.
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Contents
What Are State Revolving Funds?.
1
What Are Leases?—. 2
What Are Grants? . 3
What Are Public-Private Partnerships? _ 4
What Are Taxes? 5
What Are Fees?. 9
What Are Bonds? 12
Look to the Future ... Pollutant Trading_ 14
Be Creative! 15
Comparing Your Options 16
For Further Information 18
Additional Information on Selected
Reference Materials _ — 26
Document Distribution Centers Inside Back Cover
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What Are State
Revolving
Funds?
State Revolving
Funds (SRFs)
provide long-term,
low-interest loans to
local governments
or individuals for
capital investments.
The repayment of
these loans over
time allows the fund
to revolve its
lending ability
continuously. In
other words, through
repayments the
number of available
loans is increased.
Established by the
Clean Water Act
Amendments of
1987, SRFs are
intended to be
administered and
operated by the
states to provide a
permanent source of
financing for state
and local government water quality projects. SRF assistance can be
used for the construction of wastewater treatment plants, the imple-
mentation of approved state nonpoint source management programs
and ground-water protection strategies under section 319 of the
California Uses State Revolving
Fund to Control NPS Pollution
California uses part of its State Re-
volving Fund (SRF) for nonpoint source
pollution control. The fund is adminis-
tered by the State Water Board. The
State Water Board has separated the
administration of the fund from the
wastewater treatment facilities program
and has developed a flexible program
that will evaluate and select for fund-
ing a wide variety of nonpoint source
pollution control projects. Eligible
projects include construction of dem-
onstration projects, retention/detention
basins, wetlands for stormwater treat-
ment, and a variety of best manage-
ment practices to reduce or remove
nonpoint source pollutants. The non-
point source program for the SRF also
permits the establishment of substate
revolving funds that can provide fund-
ing to private individuals to finance new
onsite septic systems, mound systems,
leach fields, etc.
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Clean Water Act, and the development and implementation of
estuary conservation and management plans under section 320 of
the Clean Water Act.
What Are
Leases?
A lease is a contract that allows another party to use land or a building
for a specified time, usually in return for repayment. Leasing obliga-
tions aren't considered debt in most states, and voter approval for
financing is not required.
A lease-purchase agreement (municipal lease) grants the party
holding the property lease (the lessee) the option of applying lease
payments to the purchase of the facility. The lessee is responsible
for paying taxes. These agreements can be used to finance the pur-
chase of environmentally sensitive areas, land for wetlands restoration,
or other projects.
Georgia Leases Shellfish Beds
to Commercial Fishermen
Georgiapromotes oyster managementthrough its innovative Shell-
fish Program. Georgia does not allow open shellfishing. Recre-
ational harvesting by the general public takes place in designated
public grounds, and commercial harvesters must obtain a lease for
harvesting shellfish from the Georgia Department of Natural Re-
sources, Coastal Resources Division. Leases are awarded on the
basis of bids for a specific shellfish harvesting area. The bid is
awarded to the most preferable combination of lease payments and
the strongest management plan. The shellfish resource manage-
ment plans are judged on the basis of certain criteria, such as shell
deposition methods. Funds gained from the lease program are
used to manage the shellfish program.
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A sale-lease back arrangement allows the owner of a facility to sell it
to another entity and subsequently lease it back from the new owner.
Under a tax-exempt lease, for example, Town X sells a sewage treat-
ment plant to Y Corporation in order to finance upgrades and repays
Y Corporation's investment with lease payments. These arrangements
can provide alternative financing for a facility and may limit a
government's liability.
What Are
Grants?
Grants are sums of money
awarded to state or local
governments or nonprofit
organizations that do not
need to be repaid. Grants
are awarded for the pur-
pose of financing a particu-
lar activity or facility.
EPA grants provide
funding for state and local
governments to meet
national environmental
quality goals. EPA
establishes criteria to
receive grant funds, which
applicants must meet
before using the funds for a
specific activity or pro-
gram. Section 319 of the
Clean Water Act allocates federal funds to states for implementing
approved nonpoint source management programs. Grant money can
also be used for post-implementation monitoring and groundwater
assessment as part of an approved NFS pollution control program.
Sea Grant Funded
through NOAA
The Sea Grant College Chesa-
peake Bay Studies Program is
funded through an environmental
research grant financed and ad-
ministered by NOAA. The pro-
gram provides a focal point for all
of NCAA's Chesapeake Bay ef-
forts. It funds research on fish
populations, toxic substance trans-
port, fate and effects, and remote
sensing, and it coordinates directly
with the state/federal Chesapeake
Bay Program on issues related to
living resources, habitat restora-
tion, and coastal zone manage-
ment.
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Section 604(b) of the Clean Water Act requires an allotment of funds
to provide grants to states to carry out water quality management
planning. Section 314 of the Clean Water Act provides funding for
project grants to states for assessing the water quality of publicly
owned lakes, developing lake restoration and protection plans, imple-
menting the plans to restore and preserve a lake, and performing post-
restoration monitoring to determine the longevity and effectiveness of
the restoration. Section 106 of the Clean Water Act provides state and
interstate agencies and Indian tribes with funding to administer pro-
grams for the prevention, reduction, and elimination of water pollution,
for example the prevention and abatement of surface water pollution.
Other grant programs under the Clean Water Act include section
604(b) (Water Quality Management Planning), section 320 (National
Estuary Program), section 104(b)(3) (Water Quality Cooperative
Agreements), and section 104(g) (Small Community Outreach).
Section 6217 of the Coastal Zone Act Reauthorizanon Amendments of
1990 (CZARA) requires states to establish Coastal Nonpoint Source
Programs, which must be approved by both NOAA and EPA. Ap-
proved programs will be implemented through changes to the state
nonpoint source management program approved and funded by EPA
under section 319 of the Clean Water Act and through changes to the
state coastal zone management program approved by NOAA under
section 306 of the Coastal Zone Management Act.
What Are Public-Private
Partnerships?
Public-private partnerships can be defined as private sector involve-
ment in what historically have been public sector activities. Private
sector investment in capital facilities reduces the burden on public
budgets. For example, a developer could build a stormwater facility
large enough to also treat the runoff from nearby public roads. Partner-
ships can be used to pay for capital and/or operating costs, when
neither the public nor the private entity can afford to fund the project
alone. Capital arrangements involve private ownership and operation
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Wetlands Mitigation Partnership
The U.S. Army Corps of Engineers issued a permit to some Florida
developers to restore a degraded 345-acre wetland on land owned
by the city of Pembroke Pines. These entrepreneurs, who call
themselves the Florida Wetlandsbank, sell credits to other develop-
ers who have impacted degraded wetlands elsewhere and have
gained approval to satisfy the state's wetlands mitigation require-
ments through offsite mitigation. The Florida Wetlandsbank will
transform the land into a public park.
of a public facility. Private construction and operating costs are often
lower than public costs.
Private sector wastewater treatment programs have been 15 to 20
percent more cost-efficient than public programs (USEPA, The
Clean Air Act of 1990: A Guide to Public Financing Options).
Public-private partnerships often result in higher-quality service and
shorter implementation time, according to a 1991 survey of state
officials. However, statutory or regulatory changes needed to
arrange public-private partnerships may delay implementation of a
program. Other issues that may need to be considered include
government concern over loss of control in a partnership, political
opposition from government workers, and negative public opinion.
What Are
Taxes?
A tax is a charge against income, property, or the sale of goods and
services. Most jurisdictions do not require that a tax be used for a
specific purpose but instead use the funds to provide a variety of
public services, such as solid waste management^ public safety,
education, and environmental programs. However, taxes can be
targeted to raise funds for a specific activity.
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Annual NPS Control Tax
A proposal has been developed to
charge Puget Sound, Washington,
landowners an annual nonpoint
source pollution control tax based on
property size and land use. Owners
with onsite sewage systems, live-
stock, and parcels in areas required
to develop comprehensive storm-
water management plans would be
assessed a surcharge if land uses
are not managed to reduce nonpoint
source pollution.
Property and sales taxes
are charged as a percentage
of property value or gross
sales and are imposed at
the state and local levels.
Revenue from a property
or sales tax can be used to
fund projects. Dare
County, North Carolina,
for example, has an
economy dominated by
seasonal tourism. The
county uses sales taxes on
lodging, meals, and
entertainment to obtain
funds to finance public facilities that must accommodate the infra-
structure needs of sudden, but temporary, population in-creases.
Similar local sales taxes could be used by a state or local gov-ernment
to fund nonpoint pollution control programs at the local level.
Real estate transfer taxes are assessed as a percentage of property
values when property is sold. These taxes are imposed on property
buyers, sellers, or both. Funds raised by such taxes could be
dedicated to help pur-
chase environmentally
sensitive lands or to
support resource conser-
vation programs.
Commodity taxes are
charged on specific items
(commodities) such as
gasoline, cigarettes, and
hunting or fishing equip-
ment. The money raised
could be targeted for
environmental programs
or services. The federal
gasoline tax, for example,
Tobacco Tax Used to
Protect Water Quality
A tobacco tax helps finance Wash-
ington State's water quality protec-
tion plan. In 1986, the Washington
legislature passed the Centennial
Clean Water Act, which established
a sales tax on tobacco products.
The law dedicates half of the funds
raised to the control of wastewater
discharged directly into marine wa-
ters and the other half to water qual-
ity initiatives such as ground water
protection.
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Duck Stamps Used to Propagate Waterfowl
In 1974, the Maryland General Assembly enacted a bill requiring all
who huntwaterfowl in the state to purchase a$1.10stamp annually that
must be signed by the hunter, affixed to his/her statewide license, and
carried while hunting. Funds from the sale of the stamps are used for
the propagation of waterfowl in the state. The cost of the stamp has
since increased to $6.00, generating nearly $400,000 a year. Similar
programs can be used to generate funds for a variety of environmental
programs such as the purchase of environmentally sensitive habitat.
finances highway improvements. Since 1981, a tax on the diesel
fuel consumed by tugboats has helped to finance maintenance of the
Nation's system of inland waterways.
Tax surcharges are fees added to established tax rates. They are often
used for sudden unforeseen events. A tax surcharge on residential
sewer bills, for instance, might be used to finance the replacement of
stormwater retention basins destroyed during a hurricane.
Tax incentives and disincentives. A tax system can be set up to
encourage or discourage certain behaviors by offering tax reductions or
Tax Incentives
Road capacity can be allocated more efficiently by taxing its users
during peak travel times. This tax takes the form of a "congestion toll."
It can be used as an incentive to travel before or after rush hour, take the
bus, or carpool. The resultant decrease in traffic could reduce capital
outlays for highways by making many expansion projects unnecessary.
In regions facing severe transportation and air pollution problems, such
as southern California, road-use tolls are being implemented. A system
of congestion tolls for drivers crossing the San Francisco-Oakland Bay
Bridge began in September 1993.
Water can be allocated more efficiently by imposing higher prices during
peak hours of use or an increased fee for water use above an allocated
amount. This economic incentive fosters conservation.
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8
increases. Incentives often take the form of state tax credits, deduc-
tions, or rebates. A tax credit for the use of low-flow plumbing
fixtures, for example, can encourage water efficiency. Because of the
desire to save money, disincentives often take the form of fees, taxes,
or price increases. A tax or fee can discourage the inefficient use of a
product because of the increased cost of using more of a product than
needed.
Tax differentiation is a tax incentive used to promote the consumption
of environmentally safe products. This financing mechanism involves
a surcharge added to the cost of a polluting product to encourage the
consumer to purchase a cleaner alternative.
A selective sales tax can be levied either as a retail tax or as an
inspection fee. Kansas, for example, charges a per-ton fertilizer
inspection fee, with proceeds going to support the State Water Plan. A
selective sales tax could fund remediation of agricultural nonpoint
source pollution or could fund research on farming techniques to
reduce environmental impacts. This tax could apply to pesticides,
herbicides, automotive lubricants, etc.
Tax increment financing is the dedication of incremental increases in
real estate taxes to repay an original investment in improved public
facilities, such as stormwater facilities, that resulted in increased
real estate values. Tax increment financing is appropriate for areas
Tax Increment Financing Used to
Redevelop Depressed Areas
Tax increment financing is appropriate for areas where substantial
new development is probable. The City of Orlando, Florida, for
example, created a Community Redevelopment Trust in 1982 to
establish a fund to redevelop depressed areas of the city. The city
created a series of revenue bonds to finance public housing, trans-
portation, and other capital investment. These bonds are not a
general obligation of the trust or the City of Orlando; they are secured
by an irrevocable lien on the increment in property tax revenues paid
into the Trust Fund and interest earned by the Trust Fund.
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where substantial new development is anticipated as a result of
public investment in roads, sewers, or other infrastructure. A
cleaner watershed, for instance, could boost neighboring property
values. The tax increment created could be used to support contin-
ued environmental protection programs.
What Are Fees?
Fees are charges for
services rendered and are
one way for governments
to recover the costs of
providing certain services
to the public. Although
laws vary widely, many
states require that fees be
set at rates that cover only
the actual costs of the
services provided, includ-
ing administrative services.
Plan review fees are
assessed by a local govern-
ment for conducting a
review of development
plans to ensure that they
meet certain requirements.
This technical review is used to determine the adequacy of stormwa-
ter management facilities or erosion and sediment controls and to
ensure proper siting of structures or onsite sewage disposal systems.
These fees help cover the cost of conducting plan reviews and
inspections.
Stormwater utility fees are imposed on property owners to pay for
stormwater management. The charge can be based on the amount of
runoff generated from the property, the amount of impervious area
(hard surfaces) on the property, or the assessed value of the property.
Stormwater Utility Fees
There are more than 100 storm-
water utilities in the United States.
Methods of determining storm-
water utility charges vary con-
siderably around the country,
depending on local stormwater
management goals and condi-
tions. In general, utilities are
either publicly owned and oper-
ated enterprises or privately
owned enterprises whose ability
to profit from providing public
services is regulated by a public
agency. Utility fees provide a
more reliable-source of funds for
local stormwater management
than do property taxes.
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10
Impact Fees for
New Development
Carroll County, Maryland, charges
an impact fee on new land devel-
opment. The amount of the fee
depends on the type of develop-
ment (i.e., a single-family home,
commercial development, etc. ).
These fees fund a variety of pro-
grams ranging from water supply
protection to elementary school
education.
Impact fees transfer the
costs of infrastructure
services (roads, sewers,
stormwater treatment, etc.)
needed for private develop-
ment directly to developers
or property owners. Unlike
user fees, which recover
costs over the life of a
project, impact fees are
usually collected in one
lump sum at the beginning
of a project. These fees are
particularly attractive to local governments because they relieve" up-
front financing pressures on local budgets. In California, for
example, several wastewater treatment plants have been financed
with fees paid by developers based on the projects' anticipated
treatment requirements. Impact fees can be used to fund the instal-
lation and maintenance of stormwater management facilities on
newly developed sites.
Inspection fees are charged to cover the costs of making sure that
development plans are properly implemented. These fees may
defray the program costs
of erosion and sediment
control, septic system
siting and installation
inspections, and stormwa-
ter treatment facility
operation and mainte-
nance.
Homeowners Pay
Inspection and Operation
and Maintenance Fees
Otter Tail County, Minnesota, has
developed an onsite utility to protect
its lakes from contamination due to
onsite sewage disposal system fail-
ures. All onsite system owners pay
a basic fee for inspections and ad-
ministration costs and have the op-
tion to pay an additional amount for
additional services. Operation and
maintenance costs are financed by
fees paid by homeowners.
User fees are the most
common way to recover
the costs of providing a
service. These fees can
be tied directly to the use
of a resource or facility
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11
(sports fishing and hunting license fees, park entrance fees, etc.).
User fees are particularly useful at the local level where user groups
are easily identified.
Product charges, similar to commodity taxes, are fees that can be
added to the price of products that could potentially cause degrada-
tion of water quality, such as nonreturnable containers, batteries,
lubricating oil, fertilizers, and pesticides. These revenues can be
earmarked for environmental programs.
Capacity credits are a form of financing in which private interests
(usually developers) purchase future capacity in a public facility
such as a stormwater treatment facility. Applicants are guaranteed
future access to the excess capacity of that particular facility.
Where project construction hinges on adequate funding, capacity
credits can contribute to project completion.
Effluent discharge fees are levied on an industrial facility by a
government authority, based on the volume of pollutants discharged
into water. Under an
effluent discharge fee
system, a discharger is
required to pay a
certain amount for
every unit of pollution
discharged into surface
water. The system can
be based on water
quality objectives, the
costs for financing a
pollution abatement
scheme, or effluent
standards. The system
has several advantages:
it allows firms to
reduce pollution at
lower costs than those
incurred under a
Effluent Discharge Fees for
Industrial and Municipal Sources
Wisconsin has established an unusually
comprehensive fee system for its water
program to recover total direct and indi-
rect program costs. The state issues
general permits and levies permit fees
for discharges based on volume and
type of pollutant. Such pollutants are
associated with various industrial sources
or users, such as concrete products op-
erations; sand, gravel, or crushed stone
operations; swimming pools; petroleum
storage terminals; watertreatment plants;
and dredging projects involving uncon-
taminated sediments. This effluent dis-
charge fee program generated more than
$7 million in 1993.
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12
command-and-control approach; it provides incentives to firms to
invest in pollution control technology; and it can generate revenue
that can be used to fund activities that promote environmental
quality. The disadvantages of the charge system are the complex
planning, analysis, monitoring, enforcement, litigation, and
interjurisdictional negotiation required by local authorities. In
addition, assigning monetary values to pollution damage may be
difficult.
What Are
Bonds?
Bonds are a mechanism to borrow capital for a project and distribute
the burden of repayment over the life span of the project among those
who benefit from it. Just as individuals borrow to finance their homes
through bank-issued mortgages, governments borrow funds from
investors by issuing debt in the form of bonds. Bonds usually finance
capital facilities, such as erosion control structures and stormwater
treatment facilities.
Typically, bonds are
used only to finance
projects that have both
known and proven life
expectancies.
Short-tenn bonds are
usually payable within
1 year. Establishing
short-term debt provides
interim funding of
projects waiting to
receive long-term
financing. There are
two categories of short-
term bonds: notes and
$75 Million Bond Passed to
Protect Environmentally
Sensitive Lands
Broward County, Florida, residents voted
to pass a $75 million bond to purchase
environmentally sensitive lands. The
money has been used to purchase more
than 560 acres of wetlands, pristine up-
lands, endangered species habitat, and
lands necessary for maintaining the in-
tegrity of the Everglades ecosystem. Ini-
tial site maintenance (exotic plant re-
moval, fencing, etc.) will be paid for with
bond money. Long-term maintenance
will be funded as part of the county parks
department's operating budget.
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13
tax-exempt commercial paper. Notes are loans issued in anticipation
of grants, bonds, or taxes. Tax-exempt commercial paper is a form of
unsecured debt backed by a letter or line of credit.
Long-term bonds traditionally match the term of financing with the life
expectancy of the project. A stormwater treatment facility, for ex-
ample, might be expected to perform adequately for 30 years; there-
fore, the community could issue bonds that have a term of up to 30
years. There are two categories of long-term bonds. Term bonds are
loans for which the entire loan amount and interest are payable on the
final maturity date. Serial bonds are similar to traditional home
mortgages: the principal and interest are repaid in periodic installments
over the life of the bond. Long-term bonds can be issued as general
obligation bonds or as revenue bonds, as described below.
General obligation bonds are long-term municipal bonds that are
backed by the full faith and credit of the state or local government.
This means that the state or local government pledges to use all of its
taxing and other revenue-raising powers to repay bond holders. Both
state and local governments have used general obligation bonds to
finance capital projects related to environmental programs, including
purchases of environmentally sensitive lands.
Revenue bonds are long-term municipal bonds guaranteed solely by
the dedication of project income or system funds (e.g., user fees from
the infrastructure where capital costs are covered by the bond) rather
than by a general tax. Both state and local governments have used
revenue bonds to provide start-up capital for stormwater utilities and to
finance environmental projects, including the renovation of wastewater
treatment plants.
Bond banks, of which mere are at least 11 across the
country, are financial institutions created primarily to
provide smaller communities access to the national bond
market to finance infrastructure projects. Typically, a
bond bank either sells bonds in the bond market and uses the proceeds
to purchase bonds from local communities or buys bonds directly from
local communities and pools several small issues into one large bond
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14
issue to be sold in the bond market Small communities could take
advantage of bond banks to finance environmental infrastructure
projects.
Look to the Future...
Pollutant Trading
Point and nonpoint source pollutant trading involves financing reduc-
tions in nonpoint source pollution in lieu of undertaking more expen-
sive point source pollution reduction efforts. A trading program is
intended to produce cost savings to point source dischargers while
improving water quality. Implementing a trading program requires a
waterbody identifiable as a watershed or segment, as well as a measur-
able combination of point sources and controllable nonpoint sources.
There must be significant load reductions for which the cost per pound
reduced for nonpoint source controls is lower than the cost for up-
grading point source controls. Lastly, point source dischargers must
face requirements to either upgrade facility treatment capabilities or
trade for nonpoint source reductions in order to meet water quality
goals.
Such a program allows
the private sector to
allocate its resources to
reduce pollutants in the
most cost-effective
manner, and it encour-
ages the development of
a watershed-wide or
basin-wide approach to
water quality protection.
Such a program also
entails cooperation
between agencies,
however, and requires a
Pollutant Trading
for Nutrients
In a North Carolina watershed, the
Tar-Pamlico Basin Association (a
coalition of point source dischargers)
and state and regional environmen-
tal groups have proposed a two-
phased nutrient management strat-
egy that incorporates point and non-
point source pollutant trading. The
plan requires association members
to finance nonpoint source reduction
activities in the basin if their nutrient
discharges exceed a base allowance.
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15
system to arrive at trading ratios between point and nonpoint source
controls.-
Be
Creative!
The State of Maryland has been
imaginative in its acquisition of
funding to restore the Chesa-
peake Bay. The Chesapeake
Bay Trust was created in 1985 to
bring the financial support of the
business community and private
donors together with the many
community groups and educators
that need financial assistance for
their Bay projects. Maryland's
programs exemplify successful
implementation of innovative
funding alternatives.
State lotteries are becoming a
potential source of revenue for
environmental programs. For
License Plates to
Save the Bay
The State of Maryland has
implemented a license plate
program to fund its Chesa-
peake Bay Trust. More than
400,000 'Treasure the Chesa-
peake" license plates have
been sold, raising more than
$4 million. In the Baltimore
area, automobile dealers of-
fered Bay license plates at no
cost to their new car and truck
customers by paying the $10
fee in June and July 1992,
raising $20,000 for the Trust.
Tax Checkoff to Fund Restoration and
Conservation Programs
Maryland's tax checkoff for the Chesapeake Bay and Endangered
Species Fund is included on the standard tax form. Taxpayers can
contribute a portion of their taxes to the fund, which yielded a record
$1.1 million in 1992. Divided equally between the Chesapeake Bay
Trust and the Department of Natural Resources' Endangered Species
Fund, the checkoff funds a variety of Bay restoration and conservation
programs.
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16
Lottery Revenues
Kansas uses a portion of its lottery receipts to help finance its water
resource management programs, including wetland protection activi-
ties. Kansas created the State Water Plan Fund in 1989, for which half
of the revenues are derived from the state general fund and state lottery
funds. The other half are derived from a system of fees on municipal
water use, industrial water use, stockwater use, pesticides, fertilizers,
and pollution fines and penalties. In Minnesota, voters approved state
constitutional amendments establishing the Environmental and
Natural Resources Trust Fund and a state lottery to finance the fund.
example, Kansas and Minnesota use lottery receipts to help finance
natural resource management programs.
Comparing
Your Options
Several funding alternatives may be available for a particular
project. For example, the following four funding strategies to
control solid waste could easily be adapted to fund nonpoint source
programs: property taxes, tax incentives/disincentives, user fees, or
tax surcharges. Funding for regional stormwater management
facilities or a shoreline erosion control project could be obtained in
similar ways.
Capital and operating costs and cost-effectiveness must be carefully
analyzed before choosing a funding alternative. Legal, administra-
tive, and political aspects and impacts of each alternative need to be
considered. One must consider the legal workability and political
attractiveness of a financing mechanism; the effort needed for
implementation, including start-up costs and costs for ongoing
collection and management of funds; the fairness of distribution of
the funding burden among individuals; and the public's willingness
to pay or to make a particular sector pay.
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17
Four Funding Strategies^
Control Solid Waste
Tax Incentive/Disincentive
Estherville, Iowa, uses the pay-
by-the-bag approach to trash
collection. This system gives
households an incentive to re-
cycle, compost, and change
their buying habits to reduce
the volume of waste they
generate.
User Fee
Hollywood, Florida, charges
residents a standard monthly
"fee" for solid waste manage-
ment services. This estab-
lishes a direct link between
those who use the services
and those who pay for them.
Property Tax
Fairfax City, Virginia, uses
property taxes to finance trash
collection. Residents are
charged a flat annual amount
that is not relatedto the volume
or type of trash they discard.
Tax Surcharge
Oregon funds solid waste man-
agement through proceeds
from the Bottle Bill, a law that
requires consumers to pay a
deposit on each container pur-
chased. The deposit is re-
funded when the container is
returned for recycling.
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For Further Information
BONDS
USEPA. 1992. Alternative Financing Mechanisms for Environmental
Programs. Final draft Environmental Finance Program, Office of
Administration and Resources Management.
USEPA. 1988. Financing Marine and Estuarine Programs: A
Guide to Resources. Office of Marine and Estuarine Protection.
EPA Document No. 503-8-88-001.
For more information about Broward County Bond Issue, contact:
Broward County Administrator's Office, 115 South Andrews
Avenue, Rm 409, Ft. Lauderdale, FL 33301, ph. (305) 357-7354.
BOTTLE BILLS
For more information on bottle biUs, contact: The Public Interest
Research Group (PIRG) in your area, or PIRG National Headquar-
ters, 215 Pennsylvania Avenue, SE, Washington, DC 20003,
ph. (202) 546-9707.
CONGESTION TOLLS _
World Resources Institute. 1992. Green Fees: How a Tax Shift
Can Work for the Environment and the Economy.
For more information on congestion tolls, contact: World Re-
sources Institute, 1709 New York Avenue, NW, Washington, DC
20006, ph. (202) 638-6300.
DUCK STAMPS __ *__
For more information on duck stamps, contact: Duck Stamp
Program Manager, Maryland Department of Natural Resources,
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Public Communications Office (D-4), Tawes State Office Building,
Annapolis, MD 21402, ph. (410) 774-2035.
EFFLUENT DISCHARGE FEES
Bernstein, J. Undated. Alternative Approaches to Pollution Control
and Waste Management. The World Bank, Urban Management
Program.
USEPA. 1992. Alternative Financing Mechanisms for Environmental
Programs. Final draft Environmental Finance Program, Office of
Administration and Resources Management.
Washington State Department of Ecology. 1993. A Summary of Other
States' Wastewater Discharge Permit Fees. Document No. 93-63.
For more information about Wisconsin's effluent discharge fee pro-
gram, contact: Fee Program Manager, Wisconsin Department of
Natural Resources, P.O. Box 7921,101 South Webster Street, Madi-
son, WI 53707, ph. (608) 267-7638.
FEES
USEPA. 1992. Alternative Financing Mechanisms for Environmental
Programs. Final draft Environmental Finance Program, Office of
Administration and Resources Management.
USEPA. 1992. State and Local Funding of Nonpoint Source Control
Programs. Office of Water. EPA Document No. EPA-841-R-92-003.
Zachmann, B. 1990. A Nonpoint Source Pollution Control Fee
Proposal.
For more information on fees, contact: The Environmental Finan-
cial Advisory Board, c/o USEPA, Office of Administration and
Resources Management (3304), 401 M Street, SW, Washington, DC
20460, ph. (202) 260-1020, fax (202) 260-0710.
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For more information about Maryland's impact fee, contact:
Director, Chesapeake Bay Local Government Advisory Committee,
777 North Capitol Street, NE, Suite 300, Washington, DC 20002,
ph. (800) 446-5422.
For more information about Minnesota's onsite utility fee, contact:
District Officer, Route 2, Box 319, Battle Lake, MN 56515,
ph. (212) 864-5533.
For more information about the State of Washington's nonpoint
source pollution control fee, contact: Shellfish Protection Team,
Washington Department of Ecology, P.O. Box 47600, Olympia,
WA 98504-7600, ph. (206) 459-6836.
GRANTS
Government Printing Office. 1991. Catalog of Federal Domestic
Assistance.
USEPA. 1993. Watershed Protection: Catalog of Federal Pro-
grams. Office of Water. EPA Document No. 841-B-93-002.
USEPA. 1992. Alternative Financing Mechanisms for Environ-
mental Programs. Final draft. Environmental Finance Program,
Office of Administration and Resources Management.
For more information about the Chesapeake Bay Studies Program
grant, contact: Chesapeake Bay Division, National Marine Fisheries
Office of Habitat Protection, NOAA Chesapeake Bay Office, 410
Severn Avenue, Suite 107A, Annapolis, MD 21403,
ph. (410) 280-1871.
LEASING/SELLING
USEPA. 1992. Alternative Financing Mechanisms for Environmental
Progratns. Final draft. Environmental Finance Program, Office of
Administration and Resources Management.
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USEPA. 1988. Financing Marine and Estuarine Programs: A,
Guide to Resources. Office of Marine and Estuarine Protection.
EPA Document No. 503-8-88-001.
For more information on leasing/selling, contact: The Environmen-
tal Financial Advisory Board, c/o USEPA, Office of Administration
and Resources Management (3304), 401 M Street, SW, Washington,
DC 20460, ph. (202) 260-1020, fax (202) 260-0710.
For more information about Georgia's Shellfish Program, contact:
The Shellfish Program, Georgia Department of Natural Resources,
1200 Glynn Avenue, Brunswick, GA 31523-9990,
ph. (912)264-7218.
LOTTERY REVENUES ^^
Apogee Research, Inc. 1990. Financing State Wetlands Programs.
Office of Wetlands Protection, U.S. Environmental Protection
Agency.
For more information on lottery revenues, contact: Wetlands
Strategies and State Programs Branch, Office of Wetlands, Oceans
and Watersheds, Wetlands Division (4502F), 401 M Street, SW,
Washington, DC 20460, ph. (202) 260-7791.
PAY-BY-THE-BAG HOUSEHOLD COLLECTION
World Resources Institute. 1992. Green Fees: How a Tax Shift Can
Work for the Environment and the Economy.
For more information about Iowa's system, contact: World Re-
sources Institute, 1709 New York Avenue, NW, Washington, DC
20006, ph. (202) 638-6300.
POLLUTION TRADING
USEPA. 1992. Alternative Financing Mechanisms for Environ-
mental Programs. Final draft. Environmental Finance Program,
Office of Administration and Resources Management.
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USEPA. 1992. Incentive Analysis for Clean Water Act Reauthori-
zation: Point Source/Nonpoint Source Trading for Nutrient Dis-
charge Reductions. Office of Water, Office of Policy, Planning and
Analysis.
PUBLIC-PRIVATE PARTNERSHIPS
USEPA. 1992. The Clean Air Act of 1990: A Guide to Public
Financing Options. Office of Air and Radiation.
USEPA. 1992. Alternative Financing Mechanisms for Environ-
mental Programs. Final draft. Environmental Finance Program,
Office of Administration and Resources Management.
For more information on the wetland mitigation bank program in
Broward County, contact: Broward County Department of Natural
Resources Protection, 218 SW 1st Avenue, Fort Lauderdale, FL
33301, ph. (301) 519-1230.
SPECIAL LICENSE PLATES
Maryland Office of the Governor. 1992. 1992 Chesapeake Bay
Progress Report.
For more information on special license plates, contact: Office of
the Governor, Governor's Chesapeake Bay Communications Office,
State House, Annapolis, MD 21401, ph. (410) 974-5300, or Chesa-
peake Bay Trust, 60 West Street, Suite 200A, Annapolis, MD
21401, ph. (410) 974-2941.
STATE REVOLVING FUNDS
USEPA. 1992. State and Local Funding ofNonpoint Source
Control Programs. Office of Water. EPA Document No.
841-R-92-003.
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USEPA. 1990. Funding of Expanded Uses Activities by State
Revolving Fund Programs: Examples and Program Recommenda-
tions. Office of Water. EPA Document No. 430-09-90-006.
USEPA. 1988. SRF Initial Guidance. Office of Municipal Pollu-
tion Control.
For more information on state revolving funds, contact: Chief,
Nonpoint Source Loan Unit, Division of Water Quality, State Water
Resources Control Board, 901 P Street, P.O. Box 100, Sacramento,
CA 95801, ph. (916) 657-1043.
STORMWATER UTILITIES
Maryland Department of the Environment. 1991. Potential Rev-
enues From Stormwater Utilities in Maryland.
USEPA. 1992. Alternative Financing Mechanisms for Environmental
Programs. Final draft. Environmental Finance Program, Office of
Administration and Resources Management.
USEPA. 1992. State and Local Funding of Nonpoint Source Control
Programs. Office of Water. EPA Document No. 841-R-92-Q03.
USEPA. 1992. Storm Water Utilities: Innovative Financing for
Storm Water Management. Draft final report.
For more information on stormwater utilities, contact: Water Policy
Branch, Office of Policy Analysis, Office of Policy, Planning and
Evaluation, USEPA (2121), 401 M Street, SW, Washington, DC
20460, ph. (202) 260-2756.
For more information on stormwater utilities, contact: The Environ-
mental Financial Advisory Board, c/o USEPA, Office of Adminis-
tration and Resources Management (3304), 401 M Street, SW,
Washington, DC 20460, ph. (202) 260-1020, fax (202) 260-0710.
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24
TAX CHECKOFFS
Maryland Office of the Governor. 1992. 7992 Chesapeake Bay
Progress Report.
For more information on tax checkoffs, contact: Office of the
Governor, Governor's Chesapeake Bay Communications Office,
State House, Annapolis, MD 21401, ph. (410) 974-5300, or Chesa-
peake Bay Trust, 60 West Street, Suite 200A, Annapolis, MD
21401, ph. (410) 974-2941.
TAXES .
Government Accounting Office. 1993. Implications of Using
Pollution Taxes to Supplement Regulation. Document No. GAO/
RCED-93-13.
USEPA. 1992. Alternative Financing Mechanisms for Environmental
Programs. Final draft. Environmental Finance Program, Office of
Administration and Resources Management.
USEPA. 1992. Protecting Coastal and Wetlands Resources: A
Guide for Local Governments. Office of Water. EPA Document
No. 842-R-92-002.
USEPA. 1988. Financing Marine and Estuarine Programs: A
Guide to Resources. Office of Marine and Estuarine Protection.
Document No. 503-8-88-001.
For more information about the State of Washington's tobacco tax,
contact: House Office of the Budget, Second Floor, House Office
Building, MS AS33, Olympia, WA 98504, ph. (206) 786-7107, or
House Ways and Means Committee, MS AS33, Olympia,
WA 98504, ph. (206) 786-7136.
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Notes
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26
Additional Information on Selected
Reference Materials
USEPA. 1992. Alternative Financing Mechanisms
for Environmental Programs. Final draft. Office of
Administration and Resources Management.
This report provides information to resolve two types of funding
shortfalls: state capacity (program personnel) and capital infrastruc-
ture needs. This comprehensive encyclopedia of alternative financ-
ing mechanisms can be used as an information resource for states
and local governments. It is intended to provide information about
principal features of alternative financing mechanisms, their relative
advantages and disadvantages (with particular attention given to
administrative considerations), and some of the key questions and
issues associated with their use.
For more information contact: U.S. EPA, Office of Administration
and Resources Management, Office of the Comptroller, Resource
Management Division (3304), 401 M Street, SW, Washington, DC
20460, (202) 260-1020.
U.S. EPA's Environmental Financing
Information Network (EFIN)
EPA's Environmental Finance Program manages the Environmental
Financing Information Network (EFIN) to disseminate financial
information to public entities. This electronic on-line database
provides information on financing alternatives for state and local
environmental programs and projects. You can use EFIN to search
for environmental financing approaches, publications, and activities.
For more information contact: U.S. EPA, EFIN Center, Environ-
mental Finance Program, Office of the Comptroller (3304), 401 M
Street, SW, Washington, DC 20460, (202) 260-0420.
*U.S. GOVERNMENT PRINTING OFFICE: 1994-0-522-883
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Document Distribution Centers
\
% • ,:
There are five national sources for the distribution of
EPA publications:
EPA's Public Information Center (PIC)
Phone: (202)260-7751 Fax: (202)260-6257
The PIC provides the main contact between the public and EPA
with a visitor's center featuring environmental videos, photo-
graphic displays, and databases.
Center for Environmental Research Information (CERI)
Phone: (513)569-7562 Fax: (513)569-7566
CERI js the focal point for the exchange of scientific and technical
environmental information produced by EPA. It supports the
activities of the Office of Research and Development, its laborato-
ries, .and assqciated programs nationwide.
National Center for Environmental Publications and
Information (NCEPI)
Phone: (513)891-6561 Fax: (513)569-6685
The central dissemination point for EPA is NCEPI, which has
, 4,200 current titles and more than 9 million copies of publications
and multimedia products. NCEPI has an electronic ordering and
inventory system available on EPA's mainframe for EPA staff.
The system links EPA regions, program offices, and field offices.
National Technical Information Service (NTIS),
1 U.S. Department of Commerce
Phone: (703)487-4650 Fax: (703)321-8547
U.S. Government Printing Office (GPO)
Phone: (202)783-3238 Fax: (202)512-2250
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