&EPA
             United States
             Environmental Protection
             Agency
                Office of
                Underground Storage Tanks
                Washington, D.C. 20460
EPA/530/UST-88/002
August 1988
Funding Options for
States and  Local
Governments

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N.
                 UNDERGROUND STORAGE TANK PROGRAMS:
                        FUNDING OPTIONS
              FOR STATE AND LOCAL GOVERNMENTS
                      U.S. Environmental Protection Agency
                      Office of Underground Storage Tanks
                             August 1988

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ACKNOWLEDGEMENTS
      The Environmental Protection Agency's
  Office of Underground Storage Tanks (OUST)
  wishes  to acknowledge and express its appre-
  ciation  for the efforts of Ann Carey of ICF In-
  corporated and the EPA Regional UST staff
  and State program representatives  who gathered
  the initial data for this handbook in a very short
  time. They reviewed, revised, and updated it
  throughout its  preparation.

      OUST also wishes to  thank the members of
  review  panel who gave generously of their time
  to provide their comments and support to make
  this a better handbook.  Review panel members
  included;  Victoria Gallagher, San Diego UST
  Program;  Chuck Head, UST      Coordinator,
  Tennessee Division of Groundwater Protection;
  John Hoick, UST Coordinator, Minnesota  Pol-
  lution-Control Agency; Helen Ladd, Ph.D.,
  Professor  of Public Policy Studies, Duke
University; Jerry Miller,  Director, National
Association of State Budget Officers; John
Petersen, Government Finance Officers Asso-
ciation;  and Frank Sudol, Newark, NJ, De-
partment of Engineering.  We give special
recognition to Dr. Ladd for providing the
ideas and framework for a major revision of
Chapter III.

    Finally, special thanks to Kate Becker of
ICF Incorporated, who performed the diffi-
cult task of turning early, technical drafts of
this report into a more "user-friendly"  hand-
book.
    Sandy Strauss
    EPA Project Manager
    June 1988

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CONTENTS
  I.   UNDERGROUND STORAGE TANKS:  FINANCING STATE AND
      LOCAL PROGRAMS	
           How The Federal Law Affects You	1
           How To Pay For Your UST Program	  2
           How This Handbook Can Help You 	  3
           How This Handbook Is Organized 	  3
  II.  WORKING WITH THE LEGISLATIVE AND EXECUTIVE BRANCHES
           Starting A New Program: Initial Funding Efforts	5
           Justifying Your Program Costs	  6
           Knowing The Political Climate	6
           Involving The Interest Groups	  6
           Giving A Little To Get A Little	6
  III.  GENERAL CONSIDERATIONS FOR SELECTING A
       FUNDING MECHANISM	
           What Are The Funding Needs Of Your Program?	9
               What Is Your Program's Scope And Design?	  9
               Is It A New Or An Ongoing Program?	  10
               Can Some Of The Effort Be Delegated?	  10

           What Are General Approaches To Raising Program Funds?	  10

           How Do Different Funding Mechanisms Perform?	11

           What Is The Revenue Potential Of A Mechanism?	  11
               Projecting Revenues	  11
               Pattern of Revenues Over Time	  12

           What Is The Distribution Of The Funding Burden?	  12
               "Those Who Created the Need Should Pay"	12
               "Those Who Benefit Should Pay"	  12
               "Widely Dispersed Program Benefits Should Be Paid For By All Taxpayers"	  13

           What Are The Incentives Created By A Mechanism?	  13

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CONTENTS
  IV. FUNDING MECHANISMS FOR STATE PROGRAMS	15

           Registration And Permit Fees	15
               Tank And Facility Fees	16
               Site Activity Fees	16
               Tank Tester And Installer License Fees	17

           Petroleum Product Assessments	20
               Gasoline Sales Tax	20
               Petroleum Product Excise Tax	20
               Bonds	23
               General Obligation Bonds	24
               Revenue Bonds	24
               Special Tax Bonds	24

           Revolving Loan Funds Capitalized With Bond	25
           Corporate Receipts Or Income Taxes	26
           Other Mechanisms In Use	27
   V.  FUNDING MECHANISMS FOR LOCAL PROGRAMS	29

            Water Utility Assessments	29
            Special Property Assessments	30
            Other Funding Mechanisms For Local Programs	31
   VI.  WHAT SOME OTHER STATES HAVE TRIED:
       A SUMMARY OF EPA'S 1987 SURVEY	33

            How Are States Currently Funding Their UST Programs?	33
            What Changes In Funding Sources Are States Considering?	34
            What Can You Conclude From What Other States Are Doing?	35
   VII. WHERE DO YOU GO FROM HERE?	41

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APPENDICES	  A-l

          A.  Comparison of Financing Mechanisms by Major Choice Factors	  A-l
          B.  Registration and Permit Fees by Stale	B-l
          C.  Petroleum Product Assessments by State	  C-l
          D.  Bonds by State	D-l
          E.  Other Funding Mechanisms by State	  E-l
          F.  State Implementing Agencies	F-l
EXAMPLES	  17

         The Maine Tank Registration Fee	  17
         The Florida Tank Registration Fee	  18
         The Maine Tank Installer Certification Fee	  19
         The Maine Petroleum Product Transfer Fee	  21
         The Florida Petroleum Product Tax	  22
         The California Hazardous Substance Cleanup Bond Fund	  25
         The Superfund Corporate Income Tax 	  27
         The Santa Clara Valley Water District Groundwater Charge	  29

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CHAPTER I
                      UNDERGROUND  STORAGE  TANKS:
               FUNDING  STATE  AND  LOCAL  PROGRAMS
      Underground storage tanks (USTs) are a fact
  of American life. They constitute a hazard to
  public health if they are not installed and main-
  tained safely, and they require immediate and
  often costly cleanups when they leak.  There are
  consequences for those who decide to ignore the
  problem of leaking USTs. In the event of a major
  cleanup, your government may face the ultimate
  responsibility for paying the costs for cleanups
  that are not covered by owners or operators or the
  Federal Leaking Underground Storage Tank
  (LUST) Trust Fund. An effective prevention
  program that detects problems early is  the best
  insurance against environmental damage  and
  health risks caused by leaks.  You, as a State or
  local UST program official, can help decide
  whether your program's current funding is suffi-
  cient or whether more or different funding sources
  arc necessary.

      The purpose of this handbook is to present
  you with funding alternatives that can provide
  new or expanded sources of funds for your pro-
  gram. It is often helpful to learn how other pro-
  gram officials have met similar challenges. Some
  of you, however, are  officials in one of the many
  State and local governments that has an effective
  UST program up and running. We suggest that
  you be selective in your reading of this handbook.
  We did not design it to be read from cover to
  cover; we did try to provide a wide range of op-
  tions for those of you who are new to the  question
  of program funding.

      We at  the U.S. Environmental Protection
  Agency (EPA) have assembled information on
  how State and local UST programs are  being
  funded. In 1987, EPA surveyed the UST  pro-
  grams in all 50 States.  Each State reported on the
  mechanisms it uses to fund its prevention  and
  cleanup activities; some Slates have continued to
  submit funding data throughout the preparation of
  this handbook. The data from the survey  appear
 as examples of specific applications of dedicated
 funding mechanisms throughout the handbook; the
 raw data are in the appendices; a summary ap-
 pears in Chapter VI. Please note that these data
 represent only what is happening now.  In addi-
 tion, we wish  to make the following statements
 about the data.

      • All programs are still in their develop-
        ment phase.

      • Funding data contained herein are for the
        programs at their current levels.

      • These levels differ from State to State.

      • Funding needs are changing and will con-
        tinue to change as programs evolve.

      • The mechanisms used and the levels of
        funding are constantly changing.
How the Federal Law Affects You

    In 1984, Congress passed Subtitle I of the
Hazardous and Solid Waste Amendments to the
Resource Conservation and Recovery Act. Sub-
title I requires the EPA to address the problem of
leaking underground storage tank systems. Be-
cause of the nature of the problem, Congress in-
tended the UST program to be administered pri-
marily at the State and local levels. EPA is not in
a position to underwrite UST programs.

    Some resources are available through EPA
program grants for prevention programs and
through the LUST Trust Fund for cleanups, but
neither will fund an entire program.  EPA program
grants provide "seed" money for the develop-
ment and implementation of State-run UST pre-
vention programs. Currently, fundable tasks in-
clude such activities as developing legislative

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PAGE 2
   authorities, developing enforcement programs, or
   developing the funding mechanisms discussed in
   this handbook. Other fundable tasks include State
   program approval application activities, outreach
   efforts, and compliance monitoring and enforce-
   ment activities. Current (fiscal year 1989) fund-
   ing levels for State grants are $162,500 per State
   (as well as Puerto Rico and the District of Colum-
   bia) and $137,500 for the remaining territories.  A
   25 percent match is required.

       The LUST Trust Fund was created by the Su-
   perfund Amendments and Reauthorization Act
   (SARA) and is available to States for cleanups of
   leaking USTs. The Trust Fund can be used only if
   the costs of a cleanup exceed the minimum insur-
   ance coverage that an owner or operator is re-
   quired to maintain, or if a solvent owner cannot be
   located or refuses to pay for corrective action. In
   addition, the Trust Fund can be used only for en-
   forcement- or cleanup-related activities associated
   with petroleum releases;  it will not be available
   for most regulatory activities (such as routine in-
   spections, permits, outreach, and program devel-
   opment). States and territories will be required to
   provide a 10 percent match once the new UST
   regulations take effect.

       Neither the Trust Fund nor the program grants
   will provide sufficient resources necessary to fund
   an effective State or local  UST program. State
   and local governments need to find additional
   funding sources to pay for their UST  programs.
   How to Pay for Your UST Program

       State and local program revenues typically
   come from one of two sources:  general revenues
   and dedicated fees or taxes.  General revenues are
   drawn from a State or local general fund and are
   appropriated on an annual or biennial basis to
   various programs. Each year (or every two years),
   UST program needs are balanced against compet-
   ing demands for limited resources. Over time, the
   amount of annual  appropriations may become
   constant. However, there is no binding commit-
   ment from year to year, and appropriations for in-
   dividual programs may change as a result of shift-
   ing public priorities or changes in revenues.
    General revenues are currently the most com-
mon source of funding for State UST programs;
38 States currently use general revenues either
alone or in conjunction with dedicated funding
sources. General revenues are not discussed in
detail in this handbook because they are already
being used by a number of programs, and they are
generally well understood by program managers.

    The other major source of funding is dedi-
cated program fees or taxes. These are fees or
taxes that are collected from a designated source
and are dedicated to a specific program, hence
their name. Fees are typically levied for a particu-
lar service,  whereas taxes are often more generally
applied.

    There is a wide variety of funding mecha-
nisms that you can potentially use to support State
and local UST programs. In this handbook we
focus on the following mechanisms:

     •  Registration and permit fees,

     •  Petroleum product assessments,

     •  Corporate receipts or income taxes,

     •  Water utility assessments, and

     •  Special property assessments.

    This list is not intended to be all-inclusive;
rather, it illustrates the range of mechanisms
available for your consideration.  Dedicated fund-
ing mechanisms can be used to supplement or re-
place general revenue  funding. They can be used
to pay for specific activities (such as licensing) or
for general  program costs. The applicability of
different mechanisms to various program needs
depends on the amount and flow of revenues from
such mechanisms, as discussed later.

    Bonds  are sometimes considered a third
source of revenue. While they generate bond pro-
ceeds, they are only a  mechanism for spreading
the program funding burden out over time. An-
other source of funds (general revenues or dedi-
cated fees or taxes) is  still needed to repay the
bonds. The applicability of bonds to UST pro-
gram needs is discussed in this handbook.

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                                                                                                  PAGE 3
    In choosing a funding mechanism, you must
consider what segment of the population will pro-
vide the funds through that mechanism. Some
dedicated funding mechanisms, such as registra-
tion and permit fees, tend to fall to those parties
who contribute directly to the problem (for ex-
ample, tank owners or product manufacturers and
distributors). Others, such as petroleum product
or water assessments, fall to parties who are indi-
rectly related to the problems (gasoline buyers) or
are beneficiaries of the program (water users).
How This Handbook Can Help You

    You may need a combination of funding
sources to cover the costs and ensure the stability
of your UST program. The question is which ones
and in what combination? Because every State
and local government is unique, we can't answer
that question for you. We can, however, give you
information about the funding mechanisms and
examples of what other States have done and how
they rate their success. And we can make some
suggestions. For example, the funds appropriated
to your program from general revenues may  vary
from year to year because of the process by which
they are allocated. So we  suggest that if you use
general revenues you also have in place other
funding mechanisms, preferably dedicated mecha-
nisms, to guard against a major loss of revenues as
a result of changes in funding priorities, the econ-
omy, and the like.

    As you read this handbook, you will note that
there is no one right way to fund a program.
States are currently using a number of strategies,
each achieving some measure of success.
How This Handbook Is Organized

    The organization of this handbook is quite
straightforward.

     •  Chapter II has information on working
        with the legislative and executive
        branches.
     •  Chapter III provides factors that you
        should consider when choosing a funding
        mechanism.

     •  Chapter IV looks at the funding mecha-
        nisms that are best suited for States.  It
        contains descriptions of each mechanism,
        pros and cons as they relate to the choice
        factors, and examples of their applica-
        tion.

     •  Chapter V covers the funding mecha-
        nisms that are best suited for localities
        and treats them as in Chapter IV.

     •  Chapter VI is an overview of how some
        mechanisms are being used,
        including combinations of funding
        mechanisms and the relationship of the
        mechanism  to the activities performed.

     •  Chapter VII contains some ideas about
        where to go for additional
        information.

     •  The appendices contain charts and raw
        data and are referenced throughout the
        chapters.  These data come from EPA's
        1987 Interim Report on State Funding for
        Underground Storage Tank Programs and
        additional information submitted from
        States since that report.

    We encourage you to contact individual State
programs to find out how well a specific mecha-
nism works in a specific State. A list of State im-
plementing agencies is provided in Appendix F.
Staff members from the Office of Underground
Storage Tanks (OUST) (202-475-9722) can refer
you to people who can answer any other questions
you may have as a result of reading this hand-
book.

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CHAPTER II
                                                                                                   PAGES
                WORKING  WITH  THE LEGISLATIVE  AND
                               EXECUTIVE   BRANCHES
      Establishing funding for an UST program re-
  quires that you work effectively with a variety of
  decision makers. It means not only determining
  what funds you need and selecting appropriate
  mechanisms, but it also means interacting with
  your own agency officials, the executive branch,
  the State or local budget office, and the State leg-
  islature or local commissioners or boards. These
  decision makers are often faced with critical po-
  litical choices and must decide among numerous
  conflicting demands.  After your office determines
  its funding needs and proposes a funding mecha-
  nism, officials in your own agency must be com-
  mitted to your choice before it can be presented to
  the legislature. The legislature will decide
  whether your funding proposal fits into the overall
  fiscal priorities of your State, while the executive
  branch (often with the advice of the budget of-
  fice),  will determine whether the mechanism is
  worthy of being signed into law.  All these deci-
  sion makers can influence your ability to establish
  dedicated funding  mechanisms to run an UST
  program.

      There is considerable work to do before you
  present your decision makers with the information
  they need to make a decision concerning the fund-
  ing of your UST program. Much  of the informa-
  tion that you will need to consider for your work
  is contained in the chapters that follow.

      While each jurisdiction has unique character-
  istics and political  considerations  to which you
  must be sensitive, there are some general pointers
  for working effectively with the administration
  and the legislature to develop UST funding
  mechanisms. Please bear with us  when we cover
  aspects of this material that you already know.
  We can't assume that all readers have the same
  level of knowledge and experience. Our goal here
  is to pass along some of the ideas  and approaches
  that have worked successfully for some States.
Starting a New Program:
Initial Funding Efforts

    Certain programs have been receiving public
funding for many years, and government manag-
ers and legislators are accustomed to continuing
their funding. Typically, however, the UST pro-
gram presents a new demand on funds, and legis-
lators and agency officials may be reluctant to
dedicate extensive funding to a new program.
You should make a realistic assessment of your
program needs and be ready to convey them to
your decision makers. If you start small and pro-
pose a less demanding funding mechanism, it may
be easier to get UST funding on the legislative
agenda or in  your agency budget. You can then
demonstrate  the need for and value of increasing
the funding in the future.  Traditionally, programs
need to start  small as they are unlikely to be able
to spend large appropriations in their early phases.
And starting  small does not mean that EPA will
intervene more actively in the State.  EPA is com-
mitted to having State-run UST programs and
realizes that some will start small.

    An example of a program that started small
comes from Utah. Program officials there worked
with the legislature to pass a tank fee system that
was modest in its initial fee structure but allowed
for growth. The tank fee is to be used to cover the
costs of developing the UST program. The initial
assessment was $25 per year per tank, and the
legislative committee can raise the fee up to $100
per tank if it  becomes evident that the fee is not
covering program costs.  Thus, the legislation,
while starting small, allows for growth. In fact,
the Utah legislature is currently considering rais-
ing the fee to $60 per tank per year.

    Officials in Delaware used a different strategy
to get on the  legislative agenda for developing
UST funding. The UST statute in Delaware ere-

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PAGE 6
   ated the Delaware Underground Petroleum Re-
   sponse Fund.  This fund can be used for conduct-
   ing and overseeing cleanups; for helping owners
   meet Federal financial requirements over
   $100,000 per occurrence for corrective action, and
   $300,000 for third-party damage; and for creating
   an amnesty program that reimburses owners and
   operators for all costs incurred in cleanups during
   the first 18 months after the law was established.
   While the fund has been established, it does not
   yet have a funding mechanism dedicated to pro-
   vide revenues. During the next session of the
   Delaware legislature, lawmakers will have to
   decide who will provide the resources for the
   fund. Thus, the legal establishment of the fund
   demands  that the legislature create a mechanism
   to support it. UST program officials are consider-
   ing proposing a gasoline tax, issuing a bond, or
   using general revenues.
   Justifying Your Program Costs

       Defining your program's resource needs is a
   crucial step in developing a funding mechanism.
   Legislators, administrators, budget officers, and
   other officials will be particularly interested in
   your estimates of program costs. In developing
   your estimates, you might rely on information
   from other environmental programs, from other
   State and local UST programs, and from similar
   nonenvironmental programs. New Jersey devel-
   oped a 3-year cost projection based on the number
   of tanks and a list of costing factors, including the
   costs of full-time employees and other administra-
   tive costs, and then used it to justify appropriation
   requests to the legislature. Be careful to not sim-
   ply transfer work projections and costs from other
   programs or to assume that work will be done as it
   has been done in the past. They may not be ap-
   propriate for a program with the number of
   sources of problems and known products present
   in the UST field.
   Knowing the Political Climate

       Clearly, to propose and develop funding
   mechanisms successfully, you need to understand
   the disposition toward different types of mecha-
nisms in your State and its legislature. Some State
environmental programs have a history of being
fee-for-service supported; proposing other types
of mechanisms may be going against the grain.  In
other States, where petroleum taxes may be his-
torically or legally used only for transportation-
related programs, proposing petroleum taxes may
be futile. Knowing what will and what will not be
acceptable can allow program officials to focus on
mechanisms that can realistically be established.
Involving the Interest Groups

    You should consider listening to the concerns
of relevant interest groups in your State and enlist
their participation. Soliciting industry or other
representatives' input can foster their support for
the program. Working with an advisory commit-
tee is an extremely effective way to develop a
program that has a good chance for being success-
ful. In addition, groups affected by a proposed
funding mechanism may voice stronger opposition
later if they are not involved in developing the
mechanism early on.

    Iowa has set up a legislative council respon-
sible for developing UST legislation. The council
is composed of two State senators, two representa-
tives, a representative of the petroleum storage
tank owners and operators, and a representative
from the petroleum industry. Other States have
similar councils, many of which are more broadly
based than Iowa's. Including industry officials in
the legislative process may help eliminate
divisiveness and lead to legislation that is accept-
able to all parties.
 Giving a Little to Get a Little

    The legislative and budget processes often in-
 volve compromising to achieve success.  Decision
 makers in both the executive and legislative
 branches must compromise with one another, and
 people proposing a financing mechanism must
 compromise with those affected by it.  In Pennsyl-
 vania, a recent bill was passed and signed into law
 dedicating a percentage of the State's broad-based
 capital stock-franchise tax (a tax on business in-

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                                                                                                   PAGE 7
come and net worth) to be used for hazardous
waste cleanup. To pass such a tax, the legislature
had to reach a compromise between those who
wanted a reduction in the capital stock tax and
those who wanted to use a portion of the tax to
fund hazardous waste cleanups. The solution was
to partially reduce the overall tax and to dedicate
a portion to the Hazardous Sites Cleanup Fund.

    Similarly, Delaware established a tank fee
system to fund the administrative portion of its
UST program. The bill was passed without vis-
ible opposition of tank owners because it included
an amnesty program they wanted.

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CHAPTER III
                                                                                                PAGE 9
                      GENERAL  CONSIDERATIONS  FOR
                   SELECTING  A  FUNDING  MECHANISM
      In this chapter, we describe a general ap-
  proach to selecting an appropriate funding mecha-
  nism for your UST program. This approach fol-
  lows three basic steps:

       •  Determining your program's funding
          need.

       •  Selecting among different revenue
          sources (general revenues, dedicated
          mechanisms, or bond proceeds).

       •  Evaluating how alternative funding
          mechanisms perform with respect to
          revenues, distribution of the funding
          burden, and incentives.

  Each of these steps is discussed in greater detail
  below, and a matrix which provides brief, side-by-
  side comparisons appears in Appendix A.
  What Are the Funding Needs of Your
  Program?

      The three main considerations that will affect
  the funding needs of your program are discussed
  below.

  What Is Your Program's Scope And
  Design?

      Program scope and design are probably the
  most critical determinants of funding needs. The
  scope and design of a program are determined by
  the program activities, which, in turn, are deter-
  mined by factors such as:

       •  Political and legislative concerns.

       •  Environmental circumstances and  con-
          cerns.
     •  Program goals.

     •  Tank characteristics (number, age, type,
        location, and ownership).

     •  Standard operating procedures.

An example of a factor that has political, environ-
mental, and legislative overtones is deciding on
whether the emphasis of the program will be on
prevention or cleanup activities or both.

    For the purpose of this handbook, we define
"prevention program" or "prevention activities"
as those activities designed to prevent and detect
releases of regulated substances.  A prevention
program may include the following:

     •  Developing regulatory requirements such
        as new and existing tank system stan-
        dards, release detection requirements,
        testing, notification and other reporting
        requirements, and closure standards.

     •  Implementing a notification program that
        provides a data base of all regulated tanks
        in a given jurisdiction.

     •  Establishing a compliance/enforcement
        program that both monitors for compli-
        ance with regulatory requirements and
        ensures that systems not in compliance
        are corrected.

     •  Investigating suspected releases for con-
        firmation purposes.

    "Cleanup program" or "cleanup activities"
are defined as the responses made once the exis-
tence of a release has been confirmed. Therefore,
a cleanup program includes all activities to abate
and remedy releases of regulated substances.

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PAGE 10
      The distinction between "prevention pro-
   gram" and "cleanup program" is made explicit
   here because some States are organized along
   these lines.  In fact, in certain States, responsibil-
   ity for prevention and cleanup activities may lie in
   different agencies or departments. You will find
   that throughout this handbook we note that some
   of the funding mechanisms described are used for
   prevention programs, while others are used for
   cleanup programs. Appendices B through E in-
   clude data on how each mechanism is used. The
   data for each State or local government are based
   on that particular government's definition of the
   prevention and cleanup program, which may dif-
   fer from the definitions given above. The defini-
   tions above merely provide a common frame of
   reference.

      EPA recommends that both prevention and
   cleanup activities be funded. In fact, States must
   be prepared, either through direct funds or in-kind
   contributions (such as staff or equipment), to pro-
   vide the 25-percent match for UST program grants
   and the 10-percent match for the LUST Trust
   Fund beginning in Federal fiscal year 1989.

       In the event of a major cleanup that results
   from lack of attention to a problem, your jurisdic-
   tion may have to pay cleanup costs that are not
   covered by owners or operators of tanks. An
   effective prevention program that detects prob-
   lems early is the best insurance against both the
   environmental damage and the health risks caused
   by leaks.

   Is It A New Or An Ongoing Program?

       Just as program activities change during the
   life of a program, so do the funding needs of a
   program. For example, the funding needed for
   compliance monitoring, enforcement, and correc-
   tive action may be high at first but should decline
   and level off in the latter stages of a program as
   problems are corrected.

   Can Some Of The Effort Be Delegated?

       It may be worthwhile to consider incorporat-
   ing UST program functions into ongoing activities
   in other programs or agencies.  For example, UST
inspection requirements might be added to exist-
ing inspection programs at less cost than creating
an entirely new program.  The ability to delegate
program activities and responsibilities is heavily
influenced by standard operating procedures, effi-
ciency concerns, and personnel experience.

    Responsibility can also be delegated to tank
owners and operators themselves. Shifting the re-
sponsibility for certain activities to the regulated
community is often referred to as "privatization."
Privatization can substantially reduce the costs to
the regulatory agency of many UST prevention
activities.  An example of privatization is requir-
ing UST owners and operators to conduct (or hire
someone to conduct) their own facility inspec-
tions. The owner or operator would then be re-
quired to report the results of the inspection to the
regulatory agency. The regulatory agency can
then verify the results of selected self-reported
inspections and enforce against those who falsi-
fied their results. This privatizing of work elimi-
nates the need for your agency to conduct facility
inspections at all facilities.
What Are the General Approaches to
Raising Program Funds?

    Although there is some movement toward the
use of two or more funding sources, individual
State and local programs (including UST pro-
grams) typically have been financed by either
annual appropriations from general revenues or
dedicated program fees and/or taxes. There are
benefits and drawbacks to both.

    The appropriations process places the UST
program on equal footing with other public pro-
grams supported with general revenues.  Each
year the needs of this program are balanced
against competing demands for limited resources.
Over time the amount of annual appropriations
may become constant as the program matures and
funding needs are well-defined.  At the same time,
a large one-time appropriation to cover a cata-
strophic event can also benefit the program.  In
general, this process ensures program responsive-
ness to changing public priorities.

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                                                                                                  PAGE 11
    Dedicated fees or taxes remove the UST pro-
gram from the budgetary process, providing some-
what greater control to program management.
Legislative control over program design and im-
plementation may be diminished, and control over
program priorities relinquished to the executive
branch. At the same time, program activities may
be limited by the capacity of the funding mecha-
nism, and the program may forego  periodic distri-
butions of additional general revenues.

    Bonds are sometimes considered a third
source of program funds. While bonds generate
bond proceeds, they differ from the other two
revenue sources in that they are simply a mecha-
nism for spreading the funding burden out over
time. Bonds do not remove the need for either
general or dedicated revenue sources. Such
sources are still needed to pay the annual debt
service on the bonds, where "debt service" in-
cludes  interest expense and repayment of princi-
pal.  Bonds may be appropriate where initial pro-
gram funding needs are higher than amounts that
could reasonably be raised with dedicated fees or
taxes or appropriated from general revenues (for
example, for extensive removal, replacement, or
cleanup activities). These other sources would
then be tapped to repay the bonds, spreading the
funding burden out over time.

How Do Different Funding Mechanisms
Perform?

    In  selecting a funding mechanism for your
UST program, it is important to understand and
evaluate how that mechanism would perform in
your particular situation. In the sections below,
we describe how to evaluate different funding
mechanisms  with respect to three critical con-
cerns:

     • What is the revenue potential of a mecha-
        nism?

     • What is the distribution of the funding
        burden?

     • What are the incentives (either desirable
        or undesirable) created by  a mechanism?
    These issues are explored primarily as they
relate to dedicated funding sources. While the
same questions could be applied to general reve-
nues, they are not concerns that are dealt with at
the program level. For UST program managers,
the primary considerations when evaluating gen-
eral revenues are the amount of funds likely to be
appropriated annually to the program and the
continuity of those appropriations from year to
year.

What Is The Revenue Potential Of A
Mechanism?

    A critical factor in evaluating any funding
mechanism is its capacity to provide sufficient
and predictable revenues. Revenue potential is
how much money can be raised with a particular
mechanism (annual and total projected revenues),
and how stable those revenues are over time.
Funding needs vary at different stages of a pro-
gram; if a mechanism cannot provide sufficient
cash flow when needed, it may hamper or inter-
rupt program activities.

Projecting Revenues

    To determine how much revenue a particular
mechanism can generate, you must consider both
the tax base  and the tax (or fee) rate.  For the
mechanisms described in this handbook, the tax
base can take many forms (such as tanks,  facili-
ties, petroleum and petroleum products, water,
property, gross receipts, or income). Similarly,
the tax rate can be expressed in several  ways (in-
cluding dollars per unit or percent of value).

    When estimating revenues from a new fund-
ing mechanism, remember that the size of the tax
base could change in response to the fee or tax. If
tank owners  respond to a tank fee by closing
tanks, actual revenues would be less than pro-
jected revenues. The experience of other pro-
grams with similar mechanisms may help in esti-
mating changes in the tax  base in response to a
new fee or tax.

    Another consideration is how the fee will be
collected.  If the program is responsible for fee
collection, it will incur costs that will offset the

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PAGE 12
   proceeds from the fee.  If the fee is collected
   through another department or agency and allo-
   cated to the program, there may be little or no cost
   to the program.

   Pattern Of Revenues Over Time

      Some funding mechanisms provide a one-
   time source of revenues; others provide a continu-
   ous source; and still others provide revenues that
   fluctuate over time. Ideally, the timing of reve-
   nues from one or more  funding mechanisms will
   match the expenditure needs of the program.
   Mechanisms that provide a one-time or immediate
   source of cash (such as a surcharge on an existing
   tax) or that have a limited duration (such as one-
   time registration fees) may be more appropriate
   for short-term needs. In contrast, mechanisms  that
   take time to establish (such as a product tax) but
   then provide a sustained source of revenues may
   be more appropriate for long-term funding needs.

      It is also important to consider whether pro-
   gram costs will increase over time (for example,
   as a result of inflation). If they are expected to
   increase, it is desirable to design a revenue source
   that grows with inflation. This could be accom-
   plished by indexing the fee schedule to inflation
   or by levying taxes on an ad valorem (percent of
   sales) rather than  a per unit basis. Another ap-
   proach is providing for an automatic rate increase
   in response to program needs. Such a provision is
   contained in the Florida Product Tax described in
   Chapter IV.

   What Is The Distribution Of The
   Funding Burden?

      A second major consideration in evaluating a
   funding mechanism is determining who should
   bear the burden of program costs. While it is not
   an absolute necessity, choosing a funding mecha-
   nism that links the parties who pay with the prob-
   lems for which the funds are spent may strengthen
   a State or local government's efforts to establish
   dedicated program funding.

       Deciding who should pay for program costs
   can be based on one or more of the following
   principles:
     •  Those firms or individuals who, as a
        group, created the need for the program
        should pay for its costs.

     •  Those individuals or groups who benefit
        from program activities should pay those
        costs.

     •  When the benefits of a program are
        widely dispersed and the first principle is
        not dominant, all taxpayers should pay
        the program costs.

    There are no hard-and-fast rules on how the
funding burden should be distributed.  The rela-
tionship of each of these three principles to the
funding approaches discussed in this handbook is
explained below.

"Those Who Created The Need Should
Pay"

    This principle can be used to support fees or
taxes on producers and suppliers of petroleum
(and products) and on tank owners  or operators
whose activities create the need for an ongoing
program to prevent the possibility of ground-water
contamination from a release. This principle is
most applicable to funding for the prevention
aspects of an UST program.

"Those Who Benefit Should Pay"

    The idea that people who benefit from public
programs should pay for them is a standard prin-
ciple of tax equity in other contexts. For example,
this benefit principle is often used to justify the
use of gasoline taxes to finance highways; those
people who use the most gasoline are likely to be
the ones that benefit the most from publicly pro-
vided highways. Beneficiaries of an UST pro-
gram might include water users who benefit be-
cause prevention of UST releases helps ensure
water quality.  Or, in a geographic  area of known
leakages, cleanup of the area can benefit all prop-
erty owners by increasing property values.

     A somewhat different application of the bene-
fit principle applies to benefits that accrue over
time. This means that in any one year people

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                                                                                                    PAGE 13
should pay for only that portion of the benefit that
accrues in that year. This intergenerational bene-
fit principle would justify bond financing in the
case of a program to clean up sites that reflect past
events, such as leaks from abandoned tanks. This
cleanup program clearly benefits both current and
future citizens; therefore,  under the intergenera-
tional benefit principle, cleanup costs should be
spread out over current and future taxpayers.

"Widely Dispersed Program Benefits
Should Be Paid For By All Taxpayers"

    When benefits are widely dispersed (and
burdens are not imposed on the creators of the
problem), the cost may be spread among all tax-
payers through the use of broad-based taxes or
general revenues. Use of either of these funding
sources weakens the link between the program
and the funding of that program. Targeted fees
would  be inappropriate funding mechanisms be-
cause the burden would fall on  only a segment of
the beneficiaries.  Regulating tank owners or pro-
viding oversight for cleanup activities might be
considered a worthwhile public expenditure simi-
lar in spirit to education, which provides benefits
to large segments of the population.
What Are The Incentives Created By A
Mechanism?

    A third major consideration in evaluating a
funding option is the incentives created by the fee
or tax. It is important to understand whether and
how a mechanism can be used to create positive
incentives, and how to avoid or minimize perverse
incentives.

    Those funding mechanisms that are closely
tied to UST program activities (such as tank fees
or petroleum product taxes) may influence tank
management decisions, such as the selection of
tanks  or the handling of petroleum products. For
example, a two-tiered tank fee schedule based on
compliance with regulatory requirements could
encourage the use of a preferred technology. Pe-
troleum product taxes, if passed through to the
customer, may lead to reduced consumption of
those  products.
    The ability to create positive incentives with
many of the funding mechanisms identified in this
handbook is limited by three factors. First, even
at currently used or proposed rates, the tax or fee
will generally not be large enough  to induce firms
to shift to the preferred technology  if the
differential cost of that technology greatly exceeds
the fee. Second, once States set the standards for
management practices, setting fees for varying
levels of compliance will be difficult. Finally, the
administrative costs associated with differential
fee schedules, could require the inspection of
every tank and could far exceed the marginal
revenues generated by the mechanism.

    While the potential for positive incentives is
limited, any revenue source can lead to undesired
behavioral responses.  For example, a tank fee
might encourage some firms to avoid registering
their tanks; an additional tax on gasoline in one
State may induce consumers to buy some of their
gasoline in other States.  In all cases, the higher
the tax rate, the greater the incentive for undesir-
able behavior.  Although undesirable effects can-
not be avoided completely, they can be minimized
by keeping tax rates relatively low.

    This discussion suggests that the primary jus-
tification for choosing most funding mechanisms
should be based on their ability to fund a program.
However, to the extent that those mechanisms also
create appropriate economic incentives, that fact
may be used to support the selection of a mecha-
nism. Program managers should also be aware of
factors other than fees or taxes that create incen-
tives for better tank management, such as finan-
cial assurance requirements or potential cleanup
actions. In most cases, these regulatory expenses
are far greater than any currently imposed fee or
tax and may operate as partial incentives to tank
owners and operators.

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CHAPTER  IV
                                                                                                  PAGE 15
                    FUNDING  MECHANISMS  FOR  STATE
                                          PROGRAMS
      Some funding mechanisms are better suited
  for either State or local application; some are
  suitable for both. This chapter presents informa-
  tion on mechanisms that are suitable for State
  UST programs.  Each mechanism is discussed in
  the same manner. First we describe the mecha-
  nism, then we relate its performance to the factors
  given in Chapter III, and finally we give examples
  of current use, whenever possible. The examples
  appear in inset boxes and cover why a mechanism
  was chosen, how it was implemented, what was
  learned, and general comments and recommen-
  dations that the program officials wished to share
  with us.

      As noted earlier, EPA's 1987 survey of State
  UST funding is  the main source of the funding
  data cited in this handbook. Raw data appear in
  Appendices B through E; a summary of all State
  funding mechanisms appears in Chapter VI. (We
  want to remind the reader that the data in Appen-
  dices B through E represent only what was being
  done by the States at the time this handbook was
  written. Many States are now in the process of
  developing programs. As a consequence, the
  figures we cite here may already be changed.)

      The dedicated mechanisms that States are
  currently using to fund their UST programs in-
  clude:

       •  Registration and permit fees.

       •  Petroleum product assessments.

       •  Bonds.

       •  Corporate receipts or income taxes.

       •  Other mechanisms in use.
    As discussed in Chapter III, deciding who
will pay the tax and understanding how the tax
burden will affect the taxed party is critical to the
success of your program. The funding mecha-
nisms are discussed in light of who will bear the
tax burden. We hope that this approach will help
you, the program official, in your decision-making
process.
Registration and Permit Fees

    Registration and permit fees can be consid-
ered as costs for the privilege of conducting cer-
tain types of activities (such as operating or in-
stalling a tank system in order to run a gasoline
station) and as payment for the services provided
by a government agency. These fees are often
viewed as a way to provide a measure of control
over the business operations and procedures that
affect the welfare of a business community. The
possibility of a fine or revocation of a license can
help persuade businesses to comply with State or
local requirements. Registration and permit fees
may be defined as follows:

     •  Registration fees are fees paid to cover
        notification and recording. They require
        nothing more of the regulated party.

     •  Permit fees are fees paid to obtain a
        permit. They require the regulated party
        to meet certain operating or performance
        standards.

    As shown in Appendix B: Registration and
Permit Fees By State, 17 States currently use reg-
istration and/or permit fees to fund their UST pro-
grams. They are: California, Delaware, Florida,
Illinois, Iowa, Kansas, Louisiana, Maine, Ne-
braska, New Jersey, New Mexico, New York,
Ohio, Oregon, Texas, Utah, and Vermont.

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PAGE 16
       Most of the States in this group use tank or
   facility fees. A few States use other varieties of
   registration and permit fees.  One variation is a
   site activity fee. Another is certification or li-
   cense fees.  Brief descriptions of each of these
   types of fees appears below.

       Aside from general revenues, registration and
   permit fees  are the most common method of fund-
   ing State UST programs.  Because these fees place
   the funding burden directly on responsible parties
   (such as owners and operators), they establish a
   clear link between the fee and the program.  The
   process of collecting fees itself supports program
   activities by helping to verify and improve tank
   data in the program.

       The revenue-generating potential of registra-
   tion and permit fees is limited by the number of
   tanks, facilities, personnel, activities, and so forth
   that are taxed and the rate of the fee. In addition,
   revenues may be affected by changes in the af-
   fected population.

   Tank And Facility Fees

       Tank and facility fees are paid by tank and
   facility owners or operators.  Often they consist of
   a one-time registration fee and a yearly (or peri-
   odic) renewal fee. Some States impose a multi-
   year fee; some States have counties set their own
   fees. Tank  and facility fees vary according to:

        •  Size of tank.

        •  Kind of product stored in the tank
           (chemicals or petroleum).

        •  Size of the business (in terms of square
           footage of buildings, number of employ-
           ees, or other characteristics).

        •  Number of tanks.

        •  Amount charged (currently ranging  from
           $3 to $100 per tank; generally in line
           with other State fees).
    Some States exempt certain tanks or facilities
(for example, State and local government tanks,
heating oil tanks, farm tanks) from any fees.  Ex-
amples of how Maine and Florida are using this
funding mechanism are discussed in inset boxes.

    Revenues from periodic tank or facility fees
tend to fluctuate in the first few periods as more
owners and operators are  identified and as some
drop out by closing their tanks in response to the
new regulatory requirements.  Some States have
found that owners tend to close tanks that either
are so far out of compliance that the cost of bring-
ing them into compliance is prohibitive or are of
marginal usefulness to them. Although this is a
desirable result from an environmental point of
view, it causes fee revenues to level out as the
tank population stabilizes. One-time registration
fees provide an initial infusion of funds, but the
revenues are reduced considerably once the ma-
jority of tanks have been  registered.

     At current and proposed fee rates, the eco-
nomic impact on the majority of tank and facility
owners and operators is likely to  be small. For
most, the fees will be considerably less than the
cost of local license or business fees or other regu-
latory requirements (for example, leak detection
or financial responsibility). For owners or opera-
tors  of tanks of marginal  utility or profitability,
however,  the fees affect the decision to maintain
or close a tank, or the fees could discourage notifi-
cation and registration altogether.

Site Activity Fees

     Site activity fees are fees charged by an UST
regulatory agency for any activity that requires the
agency to visit the facility. For example, agencies
can charge for inspections or for  investigations of
a reported release.  These fees are usually calcu-
lated by hourly rates and are often adjusted de-
pending on when the activity takes place (for
example, a higher fee is charged  during non-busi-
ness hours).  Illinois currently  uses a site activity
fee to provide a portion of the  funds for its UST
program.  Details of the Illinois fee appear in
Appendix B.

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                                                                                                   PAGE 17
Tank Tester And Installer License Fees

    Tank tester and installer license fees are fees
charged to certify or license tank tightness testers
or installers. Tank testers and installers are often
licensed by State or local regulatory agencies to
ensure the quality of their services. These fees
can be imposed before a tank tester or installer
takes a licensing exam or before issuing a license.
Annual renewal fees can also be imposed.  These
types of fees are both a method of raising revenue
and a system of keeping track of who is perform-
ing tank services.

    Unlike the mechanisms described previously,
license fees should not be considered a primary
source of UST program funding.  The revenue
potential of these fees is limited by the number of
licenses issued and the amount of fee that can be
reasonably imposed. These fees can, however, be
used to offset the administrative costs of issuing
licenses,  which is consistent with  the fee-for-
service concept.  Maine's Tank Installer Cerfifica-
tion Fee provides an example of how these fees
can be structured. Maine's fee is discussed in the
inset box following the discussions of the Maine
and Rorida tank fees.
THE MAINE TANK REGISTRATION
FEE

    Maine uses an annual Tank Registration Fee
to partially support its Ground Water Oil Cleanup
Fund, which pays for UST program administration
and cleanup. Fees are assessed on owners or op-
erators of underground storage tanks according to
the following schedule. The fee per tank is:
           Less than 6000 gallons
$25
          6000 gallons or more          $50

          Late charge           $75 or $ 150

          Late charge on consumptive-   $50
          use tanks registered after
          May  1, 1986
    Fees are due on or before January 1.  The $75
or $150 late charge (three times the initial tank
registration fee) is imposed on February 1. The
Department of Environmental Protection's (DEP)
Bureau of Oil and Hazardous Material Control
(Bureau) has one full-time data processing em-
ployee to maintain a data base, send out bills, and
track fee payments.

Why This Mechanism Was Chosen

    State legislators supported the development
and implementation of a tank fee for two reasons.

     • Traditionally, Maine has used dedicated
        funding mechanisms for State programs.

     • Advocates of the fee argued that tank
        fees are equitable because owners and
        operators of tanks are responsible for any
        contamination caused by UST system
        leaks.

    Maine's fee schedule is based on the  idea that
smaller facilities with presumably smaller tanks
would be less able to pay the fee. DEP acknowl-
edges that the problems caused by leaking tanks
bear little relation to tank size and that tank size is
not a good indicator of ability to pay. However,
DEP believes that net profit, possibly a better
indicator, would be difficult to  integrate into a fee
schedule.

    In determining which parties should pay the
fee, the legislature excluded tanks that store petro-
leum for consumption on the premises. While the
legislature recognized that all tanks have the po-
tential to leak, it believed that owners and opera-
tors of marketing and distribution tanks are in a
better position to pay the fee because they sell the
product for profit. Just as petroleum wholesalers
who pay a product fee pass some or all of the tax
burden on to their buyers, so too could tank own-
ers and operators pass the burden on to their cus-
tomers.

    The legislature also believed that it would be
easier to administer the fees levied on marketing
and distribution tanks than those levied on resi-

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PAGE 18
   dential and industrial tanks because groups of
   marketing and distribution facilities often have the
   same owner. (An estimated 5300 marketing and
   distribution facilities are subject to the fee; some
   have the same owner. An estimated 6500 residen-
   tial and 10,000 commercial industrial tanks could
   be subject to the fee; few have the same owner.)

   What Was Learned

       Based on the number and kind of tanks, the
   Bureau projected that the fee would generate ap-
   proximately $250,000 in the first year. It actually
   generated $225,000 in the fiscal year from July
   1985 to June 1986 and $170,000 for the period
   from July 1986 through May 1987.  The Bureau
   attributes the discrepancy between actual and
   projected revenues to changes in the tank popula-
   tion that resulted from 1985 legislation. This
   legislation imposed liability requirements and
   tank technical standards. The fee has generated
   approximately one-fifth of the total funding for
   the Ground Water Oil Cleanup Fund. The balance
   is generated through a Petroleum Product Transfer
   Fee. Bureau officials noted that the tank fee has
   helped them in updating tank population records
   and identifying responsible parties in the event of
   aleak.

   Comments

       Accounting and data systems need to be well
   established before this funding mechanism can be-
   come effective. Enforcing tank fees and late
   charges has increased the administrative burden of
   Bureau staff.
    THE FLORIDA TANK
    REGISTRATION FEE

       The Florida Administrative Code requires all
    owners and operators of storage systems (both
    above and below ground tanks) containing vehicu-
    lar fuels to register their tanks with the Florida
    Department of Environmental Regulation (DER).
    The State Underground Petroleum Response Act
    (SUPER) imposes the following fees on a per-tank
    basis:
    •   Initial registration                $50
    •   Annual renewal                  $25
    •   Late charge (one month late)      $20

    Revenues from fees on petroleum product
tanks are deposited in the Inland Protection Trust
Fund, which is used to clean up surface or ground-
water contamination related to l.he storage of pe-
troleum products.

    The Storage Tank Regulation Section (the
Section) in DER's Bureau of Waste Planning and
Regulation is responsible for administering the
tank fee. The Section uses the 'data base compiled
during the initial (1984) tank registration effort to
identify registrants.  It sends a bill to each regis-
trant for the annual renewal fee, which is due no
later than June 1.

Why This Mechanism Was Chosen

    The Department supported implementation of
a tank fee because it assesses the population most
likely to be responsible for serious damage from
leaks, that is, the owners and operators of large
vehicular-fuel tanks. DER officials noted that the
larger tanks tend to be in more populated areas
and that they could affect a large number of pri-
vate drinking water sources. The State legislature
strengthened the tank fee in  1987 by making it
unlawful for a petroleum distributor to sell gaso-
line to an unregistered facility. DER officials feel
that the law has been instrumental in promoting
compliance with the registration requirement.

How It Was Implemented

     The primary difficulty with implementing the
tank fee was establishing an accounting and bill-
ing system to accommodate the large numbers of
registrants. The first bills for initial registration
were sent in February 1987, and the renewal no-
tices were sent in May 1987.  When the Section
began registering tanks, it employed 13 data entry
technicians to handle the heavy administrative
burden. Since then, the workload has decreased,
and the Section anticipates staff decreases as a
 result.

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                                                                                              PAGE 19
What Was Learned

    DER officials believe that collecting the
fee has sharpened Florida's UST program in
the following ways:

    •   Upon receiving bills, tank owners and
        operators notified the Bureau to
        correct errors in the data base.  This
        improved the accuracy of the data
        base enough to eliminate the neces-
        sity of separate tank surveys.

    •   Approximately 2 percent of the tanks
        initially registered have been
        removed or properly closed. The
        Section believes that these actions
        resulted from the desire toavoid
        paying fees on older, noncomplying,
        or unused tanks.

    Because old tanks have been removed or
replaced since 1984/85 when the data base was
compiled, revenues from the tank  fee have
been slightly lower than projected. The Sec-
tion sent 19,236 initial registration fee forms
to tank owners in February  1987, representing
approximately 56,000 tanks. Payments of the
initial fee generated approximately $2.3 mil-
lion. The Section sent 14,692 renewal fee
forms in May 1987 and received $649,000 by
the due date. This figure is significantly lower
than the $2.3 million figure because it is based
on the $25 renewal fee, rather than on the $50
registration fee. Although these funds are
used primarily for remedial action, 1 percent
of the revenue may be used for administrative
costs related to fee collection.

Comments

    The Section has received numerous com-
plaints about the fee, most from small gas
station owners who claim the fee is unfair or
that they are unable to pay. The Section does
not believe, however, that the relatively small
fee will cause economic hardship. Large mo-
tor-fuel distributors have complained as well,
claiming that the fee is unfair because they
must pay a product tax and a tank fee. Many
large distributors who are tank owners have be-
gun to pass the fee on to dealers.
THE MAINE TANK INSTALLER
CERTIFICATION FEE

    Maine established a certification fee in 1985
to be imposed on all tank installation contractors
in the State.  Installation contractors applying for
certification  are required to pay a $35 application
and examination fee. This fee allows the appli-
cant to take the oral or written test on under-
ground tank  installation rules. First-time appli-
cants must also successfully complete an on-site
exam that consists of installing an underground
storage tank  under the supervision of a member
of the State Board of Underground Oil Storage
Tank Installers.  A $100 fee for this on-site exam
is required.  Installers are required to renew their
license every 2 years, to pay the $35 application
and examination fee, and to take the oral or writ-
ten exam. On-site examinations are not required
to renew a license.  Currently, there are approxi-
mately 250 certified tank installers in the State.

Why This Mechanism Was Chosen

    The revenue generated from this mechanism
was intended to offset some of the administrative
costs of the Board of Underground Storage Tank
Installers and the costs of training materials.

How It  Was Implemented

    Although most staffing costs are provided
through the Maine Ground Water Oil Cleanup
Fund, this mechanism is useful in generating ad-
ditional revenue with very few implementation or
enforcement problems.

What Was Learned

    The State did not have figures for actual
revenues collected. However, based on the num-
ber of installers currently certified, it can be esti-
mated that the fee has generated $33,750 from
initial application and on-site examination fees
and that it generates approximately $4,375 per
year from renewal fees.

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PAGE 20
   Comments

       Officials of the Maine Bureau of Oil and Haz-
   ardous Material Control commented that this
   mechanism may also dissuade unqualified tank
   installers from applying for certification.
   Petroleum Product Assessments
petroleum-refining or chemical-processing
activities.  Keep in mind that the strength of those
industries in a particular State may influence the
legislative acceptability of petroleum product
taxes. In addition, there are differences between
sales taxes and petroleum excise taxes that should
be considered.

Gasoline Sales Tax
       Petroleum product assessments include taxes
   or surcharges on the manufacture, distribution,
   sale, or consumption of petroleum products, at
   either the wholesale or retail level. These taxes
   can be justified as payment for the cost that their
   consumption places on society. They are levied
   on  distributors, retailers, and consumers at a rate
   that may be a percentage of the sale price or a per-
   unit charge. Petroleum product assessments may
   vary according to product type and use, and they
   can exempt certain products or users. There are
   two major categories of petroleum product assess-
   ments:

       •  Gasoline sales tax, which is usually
          assessed at a rate per gallon or barrel.

       •  Petroleum  product excise tax, which in-
          cludes taxes on imports of crude or
          refined petroleum, licensing fees on
          processed fuel, and transfer fees.

       As shown in  Appendix C: Petroleum Product
   Assessments by State, nine States currently use
   petroleum product assessments to fund their UST
   programs. The States are: Florida, Maine, Mary-
   land, Minnesota, New Hampshire, New Jersey,
   New Mexico,  New  York, and Wisconsin. Each
   State levies a petroleum product excise tax. Ex-
   amples of what two States (Maine and Florida) are
   doing appear in boxes.

       As broad-based mechanisms (mechanisms
   that spread the burden over a larger population),
   petroleum product assessments can raise consider-
   able revenues at relatively low rates (for example,
   only a few cents per barrel or tenths of a cent per
   gallon). Petroleum  product assessments  are most
   beneficial in those States or localities with large
    The precedent for using a gasoline sales tax to
fund UST programs was established with the crea-
tion of the LUST Trust Fund, which imposes a
tenth of a cent per gallon tax on motor fuels. Be-
cause of the broad tax base, gasoline taxes have
the potential to raise considerable revenues at
relatively low rates (for example, tenths of a cent
per gallon). Total revenues, however, will fluctu-
ate with consumption, which rises or falls with
changes in price. While virtually every State
levies a tax on gasoline, many currently use the
revenues  only for road construction or transporta-
tion services; in some States, use of gasoline taxes
may be constitutionally restricted to those activi-
ties.  In addition, the gasoline sales tax is increas-
ingly used as a means to raise general revenues at
the State  level. The revenue-generating potential
for UST programs may, therefore, be limited.

    The economic impact of a gasoline sales tax
depends on where the tax is imposed; it could be
imposed on producers, distributors, wholesalers,
or retailers. One concern is that gasoline taxes
tend to be regressive, meaning that low-income
consumers pay at the same rale as high-income
consumers. Also, increasing a gasoline sales tax
could cause some negative economic impacts in
those States whose tax rates are already high,
especially where consumers can purchase gasoline
in border States which charge lower tax rates.

Petroleum Product  Excise Tax

    The consumption of petroleum products other
than gasoline (primarily for manufacturing) is
closely tied to overall economic activity. Hence,
general trends in the economy may cause petro-
leum product assessment revenues to fluctuate.

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                                                                                                   PAGE 21
    If a petroleum product excise tax is placed on
primary feedstocks (such as crude oil), consider-
able revenue can be generated at very low rates.
(This is the mechanism used to fund the Compre-
hensive Environmental Response, Compensation
and Liability Act [CERCLA or Superfund].) For
other products manufactured from petroleum
(such as benzene, solvents, kerosene, pesticides),
the revenue-generating potential may also be con-
siderable, depending on the amount of chemical-
industry activity in a given State or locality.

    The economic impact of a petroleum product
excise tax falls directly on the producers and/or
distributors of petroleum products. Because this
burden may be passed along to consumers in the
form of higher prices,  the relatively low tax rates
may not significantly affect producers.
THE MAINE PETROLEUM
PRODUCT TRANSFER FEE

    Maine uses a Petroleum Product Transfer Fee
to help support both the Ground Water Oil
Cleanup Fund and the Coastal and Inland Surface
Oil Cleanup Fund.  The fees are paid by oil termi-
nal licensees.  Oil terminal facilities are defined as
facilities with a greater than 500-barrel-storage
capacity that are used or capable of being used for
the purpose of transferring, processing, storing, or
refining oil.  Marinas that are both purchasers and
consumers of fuel are exempt from the licensing
and fee requirements.

    The fee  is levied on gasoline and petroleum
products and by-products other than gasoline
(such as No. 2 and No. 6 fuel oil, kerosene, jet
fuel, diesel fuel), liquid asphalt, and crude oil. The
fee schedule for the Ground Water Oil Cleanup
Fund is:
        Gasoline
SO.OS/barrel
        Other refined petroleum products
        (excluding crude oil and
        liquid asphalt)            $0.02/barrel
                         The fee schedule for the Coastal and Inland Sur-
                         face Oil Cleanup Fund is:
                                Gasoline
                                 $0.0 I/barrel
                                Other refined petroleum   $0.05/barrel
                                products (including liquid
                                asphalt)
                                Crude oil
                                 $0.0l5/barrel
    The Transfer Fee is paid monthly by the oil
terminal facility licensee. The Department of
Environmental Protection's (DEP) Bureau of
Administration (Bureau) keeps track of the pay-
ments and issues letters if they are not made.

    The Ground Water Oil Cleanup Fund is used
solely for UST-related activities and receives
revenues from tank fees and installer certification
fees, as well as from the oil transfer fee. The
Coastal and Inland Surface Oil Cleanup Fund is
used to respond to surface spills  and receives
revenues only from the transfer fee.

Why This Mechanism Was Chosen

    Legislators developed the Ground Water Oil
Cleanup Fund as an extension of Maine's Coastal
Protection Fund, which was established in 1970
using an oil transfer fee. Revenues from the fee
are divided between the two funds in order to
address underground leaks as well as surface
spills.

    There was some difficulty with equity ques-
tions such as whether liquid asphalt producers
should be subject to the tax. Negotiations with the
affected industries resolved many of the problems
encountered in the implementation of the fees.

How It Was Implemented

    Because of Maine's experience with its
Coastal and Inland Surface Oil Cleanup Fund,
implementing the additional fees required less
development than would initiating a new tax for
the Ground Water Oil Cleanup Fund.

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PAGE 22
   What Was Learned

      Oil company compliance has been good.  In
   FY 1987, approximately $1.1 million was gener-
   ated by the oil transfer fee for the Ground Water
   Oil Cleanup Fund. An additional $709,000 was
   generated for the Coastal and Inland Surface Oil
   Cleanup Fund.  In the first three quarters of fiscal
   year 1988, the transfer fee has generated $686,000
   for the Ground Water Oil Cleanup Fund and
   $560,000 for the Coastal and Inland Surface Oil
   Cleanup Fund.
   THE FLORIDA PETROLEUM
   PRODUCT TAX

       Florida maintains an Inland Protection Trust
   Fund which is explicitly authorized to address and
   correct problems caused by leaking petroleum or
   petroleum product storage tanks. Revenues for
   the fund are generated primarily through an excise
   tax on all petroleum products. Additional revenue
   is generated through a fee on vehicular-fuel stor-
   age tanks (described earlier), judgments, recover-
   ies, reimbursements, and loans from other State
   funds.

       This tax is paid by "any person who is li-
   censed by the Department to engage in the pro-
   duction or importation of motor fuel, special fuel,
   aviation fuel, or other pollutants."  While several
   taxpayers (such as producers exporting beyond the
   jurisdiction of the State with no  intermediate stor-
   age) are exempt from this tax, they do not consti-
   tute a significant portion of the assessable popula-
   tion. In addition, refunds and credits arc available
   for taxpayers who are double taxed, such as li-
   censed refiners who purchase tax-paid products
   from another refiner and export  these products
   from the State.

       The rate structure of the petroleum product
   tax is designed to maintain a stable dollar amount
   in the fund. When the law was passed in 1984,
   the tax was 10 cents per barrel.  The law stipu-
   lated that if the fund did not exceed $5 million by
   January 1, 1987, the tax was to increase to 20
   cents per barrel until the fund reached $15 mil-
lion. At that point, the tax would be reduced to 10
cents per barrel. When the fund reaches $50 mil-
lion, the tax will be discontinued until the fund
falls below $35 million. At that point, a tax of 10
cents per barrel would be assessed once again.
These changes in rate would take effect 60 days
after the conditions stated in the law are reached.
To date, the Petroleum Product Tax has generated
approximately $20 million.

    The taxpayer submits a monthly report to the
Florida Department of Revenue, which admini-
sters the tax. The taxes are due on the first of the
month following production and are late if paid
after the twentieth of the month. Revenues are
deposited into the Gas Tax Collection Trust Fund,
and the appropriate amount (determined from the
monthly report) is then transferred to the Inland
Protection Trust Fund.

Why This Mechanism Was Chosen

    The Florida legislature reasoned that the
cleanup of contaminated sites would be more
expedient  if a dedicated trust fund, rather than
litigation,  were used. The primary objection to a
Petroleum Product Tax was raised by major oil
companies who had upgraded their UST facilities
and established their own cleanup funds. Depart-
ment officials argued that smaller tank owners
would not be able to provide sufficient financial
assurance.

How It Was Implemented and What Was
Learned

    The Inland Protection Trust Fund builds on an
existing tax on the production and transfer of oil
and petroleum products (initially established to
support the Coastal Protection Trust Fund).  As
such,  the tax was relatively easy to implement;
revenue estimates were based on previous experi-
ence.

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                                                                                                   PAGE 23
Bonds

    Bonds are distinct from the other funding
mechanisms presented in this Handbook. While
they can be used to provide one-time or periodic
financing, they are not strictly a source of reve-
nues, as bonds must be repaid.  Instead, bonds are
a means of spreading the funding burden out over
time. The issuer of a bond receives monies up
front and then repays the bond over time through
"debt service," which includes interest expense
plus repayment of principal. Debt service can be
paid from general revenues, from project reve-
nues, or from special taxes or fees, as described
below.

    Bonds typically are used in one of two ways
by State and local governments. They  can pro-
vide direct funding for projects (such as wastewa-
ter treatment plants or highways) whose large
capital costs are incurred immediately but whose
benefits extend into the future.  Alternatively,
they can be used to "capitalize" (or fund) a re-
volving loan fund.

    There are several important factors to con-
sider when evaluating the use of bonds for pro-
gram funding.

    •   Examine the expenditure needs of your
        program. Where program funding needs
        (for example, for extensive cleanup
        activities) are higher than amounts that
        could reasonably be raised with dedicated
        fees or taxes or appropriated from general
        revenues, bonds may provide a source of
        funds.

    •   Determine how the bonds will be repaid
        (as they are not a source of revenues in
        and of themselves).

    •   Examine the equity of bond financing,
        that is, the rationale for spreading the
        funding burden out over many years.
        Where the benefits from program
        expenditures will be enjoyed into the
        future, the repayment of bonds places the
        funding burden on those future benefi-
        ciaries.
    •   Consider the cost of issuing bonds. A
        major drawback of bonds is the interest
        expense, which when extended over 20 or
        30 years can more than double the initial
        project cost in nominal terms.

    While some of that cost may be offset by the
time value of money (that is, the present value of
the debt service used to repay the bonds may
equal the initial project cost), there may be other
expenses that make the use of bond funding more
expensive than other sources of revenues.  This
last consideration makes bonds generally inappro-
priate for funding operating costs, such as for
prevention activities.

    The application of bonds to funding UST pro-
grams is limited primarily to cleanup activities.
As noted above, bonds typically are used to pay
for up-front capital costs; the repayment of debt is
then spread out over the useful  life of the project.
In environmental programs, bonds have been used
to pay for cleanups that result in benefits extend-
ing long into the future, those benefits being re-
duction or elimination of threats to public health
and the environment (for example, the protection
of groundwater).  States with considerable bond
funding for environmental programs include Cali-
fornia, Massachusetts, New Jersey, and New
York. These States have approved bonds to sup-
port their hazardous waste (or Superfund) cleanup
programs, which may extend to problems result-
ing from UST systems, depending on the sub-
stances stored in those tanks and the comprehen-
siveness of the program.

    Government bonds fall into three major
classes of debt:

    •   General obligation bonds.

    •   Revenue bonds, and

    •   Special tax bonds.

    They differ with respect to the revenue
pledged for repayment of debt service, their inter-
est rates, the need for voter appproval, and other
restrictions on their use. The following para-
graphs describe each of these bonds in greater
detail.

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PAGE 24
   General Obligation Bonds

       General obligation bonds are paid out of gen-
   eral revenues and have their repayment insured by
   the full faith, credit, and taxing power of the is-
   suer. If the taxes levied initially are insufficient to
   meet the interest payments in any period, the
   issuer is legally obligated to either raise the tax
   rate or broaden the tax base to obtain the neces-
   sary funds.  If the issuer's taxing power is  limited
   to a specified tax rate, the bonds are still general
   obligation bonds, but they are called limited tax
   bonds.  Purchasers must be informed of the limita-
   tion on the issuer's taxing power. It should be
   noted that general obligation bonds, while repaid
   from general revenues, differ from general reve-
   nues as a source of program funding. Essentially,
   general obligation bonds commit the issuer to
   payment of debt service from general revenues for
   the term of the bond.  When the program is
   funded directly  from general revenues, those
   funds are subject to appropriations from year to
   year.

       General obligation bonds often carry the low-
   est available interest rate of any State of local
   bond offering because they are backed by  the
   "full faith and credit" of the State or locality.
   Bond purchasers generally consider this one of the
   most secure sources of repayment. There  are,
   however, two major restrictions on the use of gen-
   eral obligation bonds. They are subject to voter
   approval  (usually through referendum), and they
   are limited by ceilings on the total amount of
   general obligation debt that can be issued by a
   State or locality. This limit is sometimes ex-
   pressed on a per capita basis.

   Revenue Bonds

       Revenue bonds are repaid from revenues gen-
   erated at  facilities constructed with the proceeds
   of the bond or other facilities owned by the State.
   Revenues are generated by tolls, charges, or rents.
   Bonds payable primarily from revenues of a par-
   ticular facility and also secured by a pledge of the
   full faith, credit, and taxing power of the issuer
   are called double-barreled bonds.  (For example,
   sewer bonds are payable primarily from revenues
of the sewer system, but they are also secured by
the full faith, credit, and taxing power of a city.)

    The interest rate on revenue bonds is often
higher than the rate on general obligation bonds.
This higher rate reflects the inherent "riskiness"
of the project (that is, the possibility that revenues
generated from user fees would be insufficient to
cover debt service) and the lack of full faith and
credit backing.  For "double-barreled" bonds, the
interest rate may be equal to that available on
general obligation bonds. One advantage is that
revenue bonds generally do not require voter ap-
proval and do not count against a State or local
government's debt ceiling.  The use of revenue
bonds for environmental programs (such as USTs)
is limited to those projects that may reasonably
collect a fee for a product or benefit derived from
the expenditure.

Special Tax Bonds

    Special tax bonds are repaid only with funds
raised by a special  tax (such as highway bonds
that are repaid only from a gasoline sales tax).
These bonds include special assessment bonds,
which are payable only from taxes paid by those
who benefit from the facilities constructed with
the proceeds from the sale of the bonds.  (For
example, special improvement bonds for curbs
and gutters are paid for by citizens  who live in the
jurisdictions that benefit from the new curbs and
gutters.)

    The interest rate on special  tax bonds is likely
to be higher than the rate on general
obligation bonds. Again, the interest rate reflects
the bond purchasers'  perception of the security of
the revenue stream pledged for repayment of the
debt. If the special tax is subject to legal chal-
lenge or repeal, or if it generates an uneven flow
of funds  (because of, say, changes in the level of
economic activity), purchasers may require a
higher return on the bond. In most cases, special
tax bonds are not subject to voter approval, and
they do not count against State or local debt ceil-
ings.

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                                                                                                  PAGE 25
Revolving Loan Funds Capitalized
With Bonds

    Bonds can also be used to "capitalize" a re-
volving loan fund program. A revolving loan
fund is a program that lends to localities at interest
rates equal to or less than the State's own borrow-
ing rate. Under this program, the State issues
bonds, whose proceeds are used to set up the fund.
The State is then responsible for repaying the debt
service on the bonds. Localities can then borrow
from the loan fund to finance specific projects and
will, in turn, repay the fund. The security of the
State debt may be linked to payments from locali-
ties.

    The major attraction of a revolving loan fund
is its potential for long-term self-sufficiency.
Once it is capitalized, loan repayments are used to
replenish the fund and make loans for future proj-
ects, thereby leveraging the State's initial invest-
ment.  In practice, however, few revolving loan
funds operate on a "true" revolving basis, with
loan repayments maintaining the fund at a level
that would allow it to operate in perpetuity. The
ability of a revolving loan fund to maintain its
purchasing power will be affected by the terms
under which it makes loans to localities. One ad-
vantage of this program is that it allows localities
to borrow  funds at below-market interest rates and
to repay those funds over an extended period of
time.  Such generous lending practices by the
State, however, limit the overall funding available
through this mechanism.
THE CALIFORNIA HAZARDOUS
SUBSTANCE CLEANUP BOND FUND

    California established the Hazardous Sub-
stance Cleanup Bond Fund (Bond Fund) in 1984
to fund both its share of hazardous waste removal
or cleanup activities as required by CERCLA and
those waste removal or cleanup activities of State-
selected sites that are not eligible for Federal
reimbursement. The State appropriated $7.5 mil-
lion from the Bond Fund to the California Water
Resources Quality Control Board to oversee the
cleanup of leaking UST systems.
    The State may issue up to $100 million in
debt for the Bond Fund. When it established the
Bond Fund, the legislature specified the methods
for repayment of the bonds, the priority of each
method, and an account (a hazardous substance
clearing account) for making the payments. The
sources of funds and their priority for use in re-
paying the bond are as follows:

    •   Money from the premium and accrued
        interest on bond proceeds which are sold.

    •   Recoveries from responsible parties.

    •   Federal reimbursements.

    •   Monies from the Hazardous Waste Dis-
        posal Tax up to $5 million and other un-
        obligated monies generated by the tax.

    •   General revenues.

    The Hazardous Waste Disposal Tax funds
most of the bond repayment.  It is levied on all
persons disposing of more than 500 pounds per
year of any kind of hazardous waste. Different
rates are assigned to different types of hazardous
wastes. The rates are adjusted annually so that the
total revenue will be $15 million. The tax is to be
terminated on July 1, 1991, but State officials
believe it may be extended.  Although this tax and
the other sources for repaying the bond are clearly
specified, the bonds are backed by the full faith
and credit of the State.

Why This Mechanism Was Chosen

    California officials established the Bond Fund
because they felt that the Hazardous Waste Dis-
posal Tax alone could not generate sufficient
funds to pay the costs of hazardous waste cleanups
in the State. The officials decided to forego a
portion of the Hazardous Waste Disposal Tax --
$5 million per year and other unobligated monies
generated by the tax -- to finance bonds that
would generate a large amount of money in a
short time. The advantage of this system is that
California does not dedicate all tax revenues to
bond repayment. As a result, California has both
a constant stream of revenues from the Hazardous

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PAGE 26
   Waste Disposal Tax and a large amount of capital
   from the bonds.

   What Was Learned

       California has issued $50 million worth of
   bonds to date and plans to issue $50 million more
   in 1988. To date the State has been able to fi-
   nance its entire repayment of these bonds from its
   top four priority sources (as listed above). No
   general revenues have been needed or used; the
   State does not expect to need them for this pur-
   pose in the future.
   Corporate Receipts or
   Income Taxes

       Corporate receipts or income taxes may be
   levied on corporations and major businesses
   within the State. This type of tax could be levied
   on all corporations or only those that own under-
   ground storage tanks or handle petroleum prod-
   ucts. In fact, many States already have corporate
   taxes which are used for other purposes; therefore,
   these taxes can be added to existing State or local
   business taxes, eliminating the need to create a
   new tax.

       While both the corporate receipts and income
   tax mechanisms tax a firm's income, they draw
   from different bases and apply different rates.
   Both the corporate receipt tax (often called a gross
   receipt tax) and the corporate income tax  are de-
   scribed below.

       •   A gross receipts tax uses total revenues as
           its base; it does not take the firm's ex-
           penses into account.

       •   An income tax uses the firm's revenues
           after deducting expenses as its base.

       A gross receipts tax typically uses a larger
   dollar base and a lower rate than an income tax.
   Both taxes can be levied at different rates depend-
   ing on the size or type of the business, and both
   can be collected in  conjunction with any existing
   corporate tax and transferred to an appropriate
fund. One example of a corporate income tax, the
Superfund Corporate Income Tax, is presented
below.

    The relationship of a corporate receipts or in-
come tax to your UST program will depend on the
structure of the tax base -- who and what is taxed?
In most cases, small businesses such as "mom and
pop" establishments are exempt from this type of
tax.  However, there are other considerations to be
made. For example, if only those businesses that
produce, import, or consume  petroleum-based
products are taxed, one can say that revenues are
raised from the parties who potentially contribute
to the problem.  On the other hand, if the tax base
is broader, including, for example, all types of
commercial businesses or industries, one can
argue that revenues are being raised from  those
who benefit from UST program activities, and the
revenue potential may be much greater.

     While the revenue-generating potential of a
broad-based corporate receipts or income tax is
very high at relatively low rates, corporate re-
ceipts and income taxes are subject to fluctuations
consistent with the business cycle. They are also
subject to change due to modifications in the defi-
nition of the tax base (that is, what is considered
receipts or income). If the corporate tax base is
broad enough, the funding burden will be shared
by a large number of taxpaying entities, and the
economic impact on individual businesses will be
kept to a minimum.

    In most States, corporate receipts or income
taxes are a component of general revenues. Their
percent contribution to general revenues varies
from State to State depending on the rates im-
posed and the other sources of revenues; for ex-
ample, some States impose no personal income
tax.  Many State legislators may be unwilling to
earmark a portion of business tax revenues for a
specific program, believing that all public pro-
grams should compete equally for general reve-
nues. Clearly defining  the tax base in terms of
who pays on which measure  and demonstrating
the relationship between these parties and the UST
problem may help  to overcome such obstacles.
New Jersey, for example, requires owners and
operators of hazardous  waste facilities to pay a 5-

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                                                                                                 PAGE 27
percent tax on gross receipts to the municipality in
which the facility is located. The municipalities
use the receipts from this tax to pay the expenses
made necessary by the hazardous waste facility
(for example, the extra fire and police protection,
the inspection programs, the extra road construc-
tion). The connection between those paying the
taxes and the use of the tax money is clearly de-
fined. Whether the tax should be on receipts or
income depends primarily on the existing State or
local tax structure.  Most States currently tax net
income rather than gross receipts.
THE SUPERFUND CORPORATE
INCOME TAX

    One of the few examples of a broad-based
corporate income tax specifically dedicated to en-
vironmental programs is the Environmental Tax
passed by Congress in the Superfund Amendments
of 1986. The tax is one of several sources of
funding for the Hazardous Substances Response
Trust Fund (the Federal Superfund), which sup-
ports cleanup of hazardous substance releases na-
tionwide.  (It does not cover petroleum products.)

    The Superfund Environmental Tax is levied
at a rate of 0.12 percent of corporate income.
Corporate  income is based on the Alternative
Minimum  Taxable Income, as defined by the 1986
Tax Reform Act. There is a deduction of $2 mil-
lion, thus excluding smaller businesses from the
taxable population. There are no other exemp-
tions, and all businesses are subject to the tax.  As
a result, the tax base is very broad, and a number
of benefits therefore accrue. These benefits in-
clude the following:

    •   The tax can generate considerable
        revenue at a low tax rate.

    •   The tax can provide a continuous and
        predictable level of funding, because it is
        based on aggregate economic activity  and
        not on specific industries.

    •   The economic impacts are minimal,
        because the tax burden is spread as wide
        as possible.
        The tax is relatively simple to administer,
        because it is based on information
        already collected by the Internal Revenue
        Service.
Other Mechanisms in Use

    Two States are currently using other funding
mechanisms that you might wish to consider.
These mechanisms include a tax on fire insurance
premiums and a hazardous waste disposal fee.
Little detailed information is available on how
these mechanisms perform when measured against
the factors in Chapter III.  However, some data
appear in Appendix E: Other Funding Mecha-
nisms by State.

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CHAPTER  V
                                                                                                   PAGE 29
               FUNDING  MECHANISMS FOR LOCAL PROGRAMS
      The following mechanisms appear to be best
  suited to funding  local UST programs.  The infor-
  mation in this chapter is presented in the same
  format as Chapter IV.

  Water Utility Assessments

      Water utility assessments are fees based on
  water consumption.  The rate may be a percentage
  of the sale price or a per-unit charge. They can be
  assessed on business, commercial, or residential
  consumers. Selected groups may be exempted
  from the assessment or given a tax credit to offset
  a portion of their payment.  Funds raised may be
  collected from the water utility and transferred to
  the appropriate fund. Water utility assessments
  can generate considerable revenue with a low tax
  rate because of their large tax base. An example
  of this mechanism, the Santa Clara Valley Water
  District Groundwater Charge, is discussed in the
  inset box below.

      Water utility assessments for UST program
  activities are a relatively new funding approach.
  Traditionally, localities have placed assessments
  on water to fund public services and the structure
  to support those services (such as providing water
  and maintaining sewers). As States and localities
  review their groundwater protection efforts, how-
  ever, water utility assessments may be used more
  often.

      Water utility assessments are directed at the
  beneficiaries of an UST program--water consum-
  ers. As noted above, the tax base for water utility
  assessments is potentially very large, and consid-
  erable funds can be raised with a low tax rate.
  Further, revenues from water assessments are
  fairly stable, as water consumption tends to re-
  main constant despite overall economic fluctua-
  tions. Rare circumstances, such as extreme
  drought, can affect revenues.
    The greatest burden of water utility assess-
ments is felt by business or commercial firms
who consume large quantities of water. It should
be noted that inequities among taxpayers can
occur if not all sources of water (for example,
private wells) are taxed.  Using different tax rates
for different sources may be the answer: users of
public water could have rates based on amount
consumed, and owners of private wells could have
rates based on an estimated monthly or annual
withdrawal.
THE SANTA CLARA VALLEY
WATER DISTRICT GROUND
WATER CHARGE

    The Santa Clara Valley Water District
(SCVWD), a government entity in California,
funds part of its UST activities through a Pump
Tax on water usage that was established in 1963.
All water producing facilities, that is, any facility
extracting water from the ground for any purpose,
must register with the SCVWD. Failure to regis-
ter is punishable by a fine. All water extracted by
a registered facility in the District is taxed at a set
rate per acre foot. The District is divided into two
zones, each with different tax rates. In the North
zone,  the rate is $100 per acre foot for water used
for nonagricultural purposes and $25 per acre foot
for water used for agricultural purposes. In the
South zone (which until recently was untaxed),
the rate is $22 for nonagricultural uses and $5.50
for agricultural uses. The tax is assessed and col-
lected semi-annually.

How It Was Implemented

    The SCVWD has five methods for measuring
the amount of water extracted at each facility. For
nonagricultural facilities extracting more than 10

-------
PAGE 30
   acre feet of water in a payment period and agricul-
   tural facilities extracting more than 40 acre feet,
   the SCVWD installs a water meter.  The cost of
   the meter ($250 to $300) and installation are paid
   for by SCVWD. The SCVWD uses four other less
   accurate measuring methods for facilities that
   extract less water than the above amounts. The
   water meter and three of the alternative methods
   require on-site readings by the SCVWD.  Read-
   ings of the water meters at larger facilities are
   taken monthly, and readings at other facilities are
   taken semi-annually, prior to the assessment

   What Was Learned

       Total revenue produced by the ground-water
   charge was $20 million  in 1987, and SCVWD's
   total budget is $201 million.  Revenues fluctuate
   with the amount of rain in a given fiscal year.
   Thus, revenue projections are as accurate as the
   estimates for the year's  rainfall.

   Comments and Recommendations

       Program officials cite several difficulties in
   assessing and collecting the groundwater charge.
   First, identifying the facilities can be time con-
   suming.  When the SCVWD recently began taxing
   a new area, it identified over 4000 facilities.
   Temporary personnel were hired to canvass the
   entire area and register all facilities. Second,
   taking on-site readings is labor intensive. Four of
   the five measuring systems require them. Third,
   developing an accurate  computerized tracking
   system is crucial to the success of the revenue
   collection effort.
   Special Property Assessments

       Special property assessments are levied
   against property in a geographic area that is likely
   to benefit from a project or program. Although
   the procedures and restrictions on the use of these
   assessments vary greatly among States and among
   localities, they are usually restricted to funding
   local improvements.  Special property assessments
   often differ from traditional property taxes in that
   the rate is based on the likely benefit the property
owner will receive from the program or project as
opposed to the value of the property. These as-
sessments could be used to fund an UST program
by assessing those property owners likely to bene-
fit from program activities.

    To date, special property assessments have
not been used to fund UST activities.  They are
most commonly used to fund infrastructure proj-
ects (such as street paving, sewers, sidewalks) or
services (such as water, gas, electricity). Property
assessments are easier to use when the benefits
fall to a well-defined group of property owners,
such as the projects and services just mentioned.
They may be more difficult to use in an UST
program, particularly in densely populated areas,
where it is difficult to determine exactly which
property owners will benefit. Property assess-
ments may be more applicable in  less populated
areas (such as unincorporated areas) where the
beneficiaries are more easily identified.

    Property assessments are limited by the
amount and value of property subject to the as-
sessment. If the assessment is a flat rate (for ex-
ample, a set dollar amount per acre), then revenue
potential is limited by acre.  If the assessment is
based on property value (that is, mills per dollar of
assessed value), then revenue is subject to changes
in property value. This may be particularly true
of properties with underground storage tanks, as
their value may decline as a result of a leak and
contamination of soil or groundwater. Revenues
are also affected by the size of the tax base (that
is, whether taxable property is limited to that  of
the tank owners and operators or  whether it ex-
tends to adjacent or nearby properties).

    The economic impact of special property
taxes depends on the assessment rate and the ex-
isting property tax burden. If the tax is directed at
tank owners and operators, those  with large lots or
high property value and few tanks may decide to
close their tanks.  If the tax is directed at adjacent
property, it may prove a disincentive to purchase
property adjacent to properties containing under-
ground storage tanks.

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                                                                                                  PAGE 31
    Property taxes are the domain of local gov-
ernments. In many jurisdictions, property taxes
are used exclusively to fund education and other
public services. Some States or localities may be
reluctant to expand their use to other purposes,
preferring to reserve the revenues for education or
other direct services.  In addition, some States
have capped property assessments in response to
taxpayer initiatives.
Other Funding Mechanisms For Local
Programs

    Some of the mechanisms described in the
chapter on State programs can also be used by
local jurisdictions.  These include:

    •   General revenues.

    •   Registration and permit fees.

    •   Petroleum product fees.

    •   Bonds.

    •   Direct assessment for costs incurred in
        site activities by local agencies.

These mechanisms are already being used in some
localities.  The general considerations described in
Chapter III apply when choosing a funding
mechanism for a local jurisdiction.

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CHAPTER  VI
                                                                                                 PAGE 33
                          WHAT  SOME  OTHER  STATES
                                        HAVE   TRIED:
                    A  SUMMARY  OF  EPA'S  1987  SURVEY
      In October 1987, EPA's Regional UST staffs
  gathered information on the funding mechanisms
  used for UST programs in all 50 States. Each
  State identified the kinds of funding mechanisms
  it was using and when the mechanism was estab-
  lished, who was being assessed and how often,
  and what fee schedules were being used.  No data
  were requested on the total revenues gathered
  from or the adequacy of current funding mecha-
  nisms, but the States did indicate any limits on
  individual assessments, caps on total revenues
  from a mechanism, sunset provisions on the
  mechanism, and whether new or expanded fund-
  ing mechanisms were being considered. The
  results of the survey were distributed in December
  1987 in EPA's Interim Report on State Funding
  for Underground Storage Tank Programs. Since
  the release of the Interim Report, these data have
  been updated to include additional data obtained
  from States. They are presented in Appendices B
  through E.

      Although we include the data to illustrate
  some of the funding options available to you,
  please be aware that the data are preliminary  in
  nature.  States are continually developing  and
  expanding programs; real program costs are just
  becoming known; and levels of funding are, in
  some cases, proving inadequate. Activity in the
  form of proposed legislation to increase fees and
  add new funding mechanisms is occurring in  some
  States. Some States are just starting to become
  active in the area of UST programs. Therefore,
  we present the data in Appendices B through  E
  with the caveat that they provide merely a snap-
  shot of what is happening now; they do not reflect
  what may exist once there are more fully opera-
  tional programs. Rather, they represent programs
  in many different stages.  We do not want to mis-
  lead the reader or misrepresent the data.
    It should also be noted that this handbook
does not provide specific information on what is
required to run a successful UST program. Our
purpose here is to pass along some ideas, solu-
tions, hints, and suggestions that have been effec-
tive for some State and local governments in es-
tablishing funding for their programs.  EPA is cur-
rently collecting data on several State programs
that will be published in mid-1988. The Report
will document the level of activity and the re-
sources needed to support UST programs in those
States; it should be very useful to States looking at
ways to design, expand, or reorganize their pro-
grams. Also in mid-1988, EPA will release its
State Financial Assurance Program Handbook,
which will contain, as the title suggests, informa-
tion on establishing financial assurance programs.
This handbook will be updated as new data from
the States are forwarded to EPA. Both the report
and the handbook will be available through EPA
Regional Offices and the EPA Hotline.
How Are States Currently Funding
Their UST Programs?

    Table VI-1 provides a summary of each
State's funding sources and supported activities.
For further detail on each of the mechanisms in-
cluded in Table VI-1 (with the exception of gen-
eral revenues), see Appendices B through E.

    One State currently provides no funding for
an UST program. Of the 49 States that do provide
funding, 22 States use one or more dedicated
mechanisms  to fund all or part of their programs;
38 use general revenues, either alone or in con-
junction with dedicated mechanisms.

-------
PAGE 34
      Roughly two-thirds of the States (32) rely on
   a single source of funding for their UST programs.
   Only five of the 32 rely solely on a dedicated
   mechanism, the rest use general revenues. Of the
   17 States that use more than one mechanism, six
   rely on dedicated mechanisms alone.

      Most States (37) fund both prevention and
   cleanup programs at some level; 16 use more than
   one mechanism to do so. Three States fund only
   cleanup programs, and three fund only prevention
   programs.  Of these six States, only one  uses more
   than one mechanism to fund its program. Six
   States did not specify how their funds are spent
   and appear to provide funding only for their match
   with the  Federal  UST grant.

      As noted earlier in this handbook, registration
   and permit fees are the most widely used mecha-
   nisms at this time, with 17 States using them.
   Most States currently use these fees to pay for
   prevention activities. Nine States are using petro-
   leum product assessments; most to pay for
   cleanup activities. Only two States currently use
   bonds, and both dedicate the funds to pay for
   cleanups. One State uses a tax on fire insurance
   premiums to pay for prevention activities, and one
   uses a surcharge on hazardous waste disposal to
   pay for cleanup activities.

   What Changes in Funding Sources Are
   States Considering?

      Several States have passed and implemented
   new funding mechanisms since our survey in
   October  1987. Several others have either pro-
   posed or are considering additional or expanded
   funding mechanisms.  Many of these States cur-
   rently rely on general revenues for all of their
   UST  funding. This pattern suggests that relying
   entirely on general revenues has proven  inade-
   quate in  nearly half of the States that do so. Reg-
   istration  and permit fees are the funding mecha-
   nism  being considered or proposed most com-
   monly, and some sort of a tax on petroleum prod-
   ucts and bonds are being considered in other
   States.
What Can You Conclude From What
Other States Are Doing?

    The following generalities may be drawn
from the survey results.

    •   There is no one right way to fund an UST
        program, although certain funding
        mechanisms are currently more widely
        used than others.

    •   Roughly two-thirds of the States rely on a
        single source of funding. Most of these
        States rely on general revenues rather
        than dedicated funding mechanisms for
        all of their UST funding.

    •   Current sources may be proving inade-
        quate. Most State UST programs are
        relatively young, and they will need addi-
        tional funding in the future.

    •   Most States are funding some prevention
        and cleanup activities.

    •   New or expanded dedicated funding
        mechanisms are being considered or pro-
        posed in several States.  Most of these
        States currently rely entirely on general
        revenues.

-------
                                          TABLE VI-1


                 SUMMARY OF STATE FINANCING MECHANISMS AND ACTIVITIES
STATE
Alabama*
Alaska
Arizona
Arkansas*
California
Colorado
Connecticut
Delaware
Florida
Georgia*
Hawaii
Idaho
FINANCING MECHANISM
General
Revenues
X
X
X
X
X


X
X
X




X
X
Registration/
Permit
Fees





Local permit fees/
state surcharge




UST Response Fund
Tank fee




Petroleum
Product
Assessments












Petroleum Product Tax



Bonds






Hazardous Substance
Cleanup Bond Fund









Other
















HOW USED
Prevention
Program





X





X


X

Cleanup
Program

X




X





X



Prevention
& Cleanup
Programs


X

X


X
X
X
X




X
How Used not indicated
                                                                                                 "8

                                                                                                 O
                                                                                                 cn

-------
                                                                             o
                                                                             ra
SUMMARY OF STATE FINANCING MECHANISMS AND ACTIVITIES (continued)
STATE
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
FINANCING MECHANISM
General
Revenues
X



X
X

X

X




X

X
Registration/
Permit
Fees

Tester Registration Fee
Site Activity Fee
UST Fund (tank fee)


Tank fee

Tank fee

Tank fee
Tank fee





Petroleum
Product
Assessments












Petroleum Product
Transfer fee
Licensing fee on
processed fuel



Bonds















State Superfund

Other

















HOW USED
Prevention
Program

X
X





X


X


X


Cleanup
Program



X








X


X

Prevention
& Cleanup
Programs
X



X
X
X
X

X
X


X


X

-------
               SUMMARY OF STATE FINANCING MECHANISMS AND ACTIVITIES (continued)
STATE
Minnesota
Mississippi*
Missouri*
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
FINANCING MECHANISM
General
Revenues
X

X
X
X
X

X
X



X


Registration/
Permit
Fees






Tank fee



Registration/Annual
Certification Fee


Tank fee

Petroleum
Product
Assessments

Petrofund







Oil Transfer Fund

NJ Spill Fund


Tax on gasoline,
special fuels
Bonds















Other















HOW USED
Prevention
Program
X







X

X


X

Cleanup
Program









X

X


X
Prevention
& Cleanup
Programs

X


X
X
X
X




X


* How Used not indicated
                                                                                                 I
                                                                                                 ca

-------
                                                                                                  o
                                                                                                  w
               SUMMARY OF STATE FINANCING MECHANISMS AND ACTIVITIES (continued)
STATE
New York
North Carolina
North Dakota
Ohio
Oklahoma*
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee*
Texas
FINANCING MECHANISM
General
Revenues


X
X


X


X
X
X
X
X

Registration/
Permit
Fees
Tank fee (hazardous
substances); Facility
fee (petroleum)




Tank Permit Fund

Tank fee






Tank fee
Petroleum
Product
Assessments

Throughput fee













Bonds















Other




Fire Marshall Operating
Fund (tax on fire in-
surance premiums)



State Superfund
(surcharge on haz-
ardous waste disposal)






HOW USED
Prevention
Program
X



X


X







Cleanup
Program








X






Prevention
& Cleanup
Programs

X
X
X

X



X
X
X
X

X
* How Used not indicated

-------
SUMMARY OF STATE FINANCING MECHANISMS AND ACTIVITIES (continued)
STATE
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
FINANCING MECHANISM
General
Revenues
X


X
X
X

X
Registration/
Permit
Fees

Tank fee
Tank permit fee





Petroleum
Product
Assessments






Fee on petroleum
products

Bonds








Other








HOW USED
Prevention
Program
X
X
X





Cleanup
Program




X

X

Prevention
& Cleanup
Programs



X

X

X
                                                                                •fl
                                                                                o

-------
CHAPTER  VII
                                                                                                  PAGE 41
                      WHERE DO  YOU  GO  FROM  HERE?
      The prevention and cleanup of leaks from
  underground storage tanks is a national issue.
  Congress has provided start-up funding for pre-
  vention work and trust funds to support enforce-
  ment and corrective action where a release has
  occurred. However, underground tanks are a local
  problem first, and State and local program offi-
  cials will need to develop and provide adequate
  funding to support their programs. In this report,
  we have presented you with a range of alternative
  mechanisms for funding your program. We've
  described which mechanisms are currently being
  used and which are being considered by all 50
  States. No single mechanism or combination of
  mechanisms will be right for all  States, but we
  hope that you are now in a better position to make
  the choice that's right for your circumstances. If
  you need more information to help with this
  decision, you can contact the State implementing
  agencies listed in appendix F for answers to spe-
  cific or detailed questions, and the Office of
  Underground Storage Tanks (202-475-9722) for
  concerns of a more general nature.

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COMPARISON OF FINANCING MECHANISMS BY MAJOR CHOICE FACTORS
FINANCING
MECHANISM
General Revenues
Registration and
Permit Fees
Petroleum Product
Assessments
Corporate Receipts
or Income Taxes
Water/Utility
Assessments
Special Property
Assessments
Bonds
REVENUE POTENTIAL
May vary; dependent on
governmental priorities
Limited by number of tanks,
personnel, activities, etc.
for which fee must be paid
Potentially high; dependent
on petroleum usage in the
jurisdiction
Potentially high; dependent
on size of tax base
Potentially high; dependent
on water usage
Limited by amount or value
of property base
Potentially high; dependent
on size of bond issue
CONTINUITY
OF FUNDING
May vary, dependent on
governmental priorities
May fluctuate early due to
changes in the regulated
population
May fluctuate due to trends
in economic activity
May fluctuate due to trends
in economic activity or modi-
fications in tax base
Probably stable, but may
fluctuate with changes in
economic activity or in
droughts
Depends on how it is used;
i.e. temporary or permanent
funding
Generated all at once or
over very short period
LEGISLATIVE
ACCEPTABILITY
Dependent on state prior-
ities; actual funding may de-
pend on current priorities
Potentially high; already
used in many states and
localities
Dependent on current tax
levels, limitations concern-
ing use, acceptability to
industry, etc
Dependent on willingness
of legislature to earmark
such funds for a specific
program
Dependent on willingness to
use for other than tradi-
tional purposes
Unknown-no known use of
this mechanism for UST at
this time
May be authorized by
legislature; usually subject
to voter approval
ECONOMIC IMPACTS/
EQUITY ISSUES
Dependent on the effect
on overall tax rate
Dependent on rate of fee,
number of tanks, facilities,
etc., taxed and health
of taxed entity
Dependent on rate of tax and
fiscal condition of taxed
entity; can be easily
passed on to consumers
Dependent on rate of tax and
fiscal condition of taxed
entity, can be easily
passed on to consumers
Dependent on rate of tax
and fiscal condition of
taxed entity
Dependent on rate of tax,
amount or value of property
and condition of taxed entity
Dependent on type of bond
and source of repayment
RELATIONSHIP OF
TAXED ENTITY TO
PROGRAM ACTIVITIES
Taxes program beneficiaries,
distributes burden according
to jurisdiction's tax structure
Taxes source of problem, i.e.
tank and facility owners and
operators, or is directly
attributable to program
activities
Taxes source of problem, i.e.
producers and consumers of
product
Taxed entity may be source
of problem or program bene-
ficiary, depending on wheth-
er only hazardous material
producers or all corpora-
tions are taxed
Taxes program beneficiary,
i.e. water consumers
Dependent on who is
assessed; difficult to define
a population who should pay
and who will benefit
Dependent on mechanism to
retire the debt
                                                                            g
                                                                            H
                                                                            >

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APPENDIX B
                                                         APPENDIX B-l
           REGISTRATION AND PERMIT FEES BY STATE

What is the
funding
mechanism
used?
When was the
fee
established'
Who pays?
What is the
fee structure
and how often
is it collected''
Is there a
maximum
assessment?
Are there any
exemptions or
restrictions on
that which is
assessed'
Is there a cap
on total rev-
enues? (If so,
what')
Is there a sun-
set provision'
(If so, when')
Are any
changes
planned or
anticipated?
Used for pre-
vention and/
or cleanup
program?
California
Tank fee
1984
Tank owners
1 . Annual permit fee that
varies among local
agencies
2 Per tank state sur-
charge set annually by
legislature and col-
lected once in five years
(current surcharge fee
is $56)
NO
1 Annual permit fee may
be waived for state,
local, and farm tank
owners (1100-1500
gal capacity)
NO
Yes; local agencies with
own ordinance cur-
rently collecting state
surcharge stop collect-
ing it on 1/1/90
NO
Prevention program
Delaware
Tank fee
1/1/88
Tank owners
and operators
$50/tank annually;
$30/tank for late pay-
ment of annual fee
NO
State and county munici-
pal tanks are exempt;
restricted to petroleum
tanks only
NO
NO
Amendment to HB331
anticipated to create
LIST Response Fund
Prevention and Cleanup
programs
Rorida
Tank fee
1987
Owners of above and
below ground tanks
1 . $50/tank initial
registration fee
2. $25/tank annual
renewal fee
NO
Petroleum tanks < 550
gal are exempt
NO
NO
May be amended to in-
clude chemical tanks
Prevention program
Illinois
Tank fee
1988
1 Registration fee for
owners and operators
registered after 1/1/88.
2. Annual tank fee for
owners and operators
1 . $500/tank one-time
registration fee
2. $100/tank annual fee
between 1/1/88 and
12/31/91
NO

NO
Yes; 1991

Cleanup program

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APPENDIX B-2
                  REGISTRATION AND PERMIT FEES BY STATE
                                (continued)

What is the
funding
mechanism
used?
When was the
fee
established?
Who pays?
What is the
fee structure
and how often
is it collected'
Is there a
maximum
assessment?
Are there any
exemptions or
restrictions on
that which is
assessed''
Is there a cap
on total rev-
enues? (If so,
what')
Is there a sun-
set provision?
(If so, when')
Are any
changes
planned or
anticipated?
Used for pre-
vention and/
or cleanup
program?
Illinois
Site activity fee
1988
Installers, repairers and
removers of USTs
$100/site activity M-F;
$200/site activity Sat ,
Sun. or holiday
NO

NO
YES; 1991
NO
Prevention program
Illinois
Tester registration fee
1988
Tank tightness testers
$100/tester annually
NO

NO
YES; 1991
NO
Prevention program
Iowa
Tank fee
1986; revised in 1987
Tank owners
1 $10/tank one-time
registration fee
2. $15/tank annual
permit fee
NO
Tanks < 1 1 00 gal. are
exempt
NO
NO
NO
Prevention and Cleanup
programs
Kansas
Tank fee
1984
Tank owners
$3/tank annually
NO
Farm tanks; only col-
lected on petroleum
product tanks
NO
MO
YES
Prevention program

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                                                  APPENDIX B-3
REGISTRATION AND PERMIT FEES BY STATE
               (continued)

What is the
funding
mechanism
used?
When was the
fee
established?
Who pays?
What is the
fee structure
and how often
is it collected'
Is there a
maximum
assessment?
Are there any
exemptions or
restrictions on
that which is
assessed?
Is there a cap
on total rev-
enues' (If so,
what?)
Is there a sun-
set provision?
(If so, when?)
Are any
changes
planned or
anticipated'
Used for pre-
vention and/
or cleanup
program'
Louisiana
Tank fee
1985
Tank owners
1 . $25/tank one-time
registration fee for
chemical tanks
$15/tank one-time
registration fee for
petroleum tanks
2. $15/tank annually for
> 10000 gal.
$10/tank annually for
2000-9999 gal
$5/tank annually for i.
1000-1 999 gal.
1.$1000/ceiling on reg-
istration fees for
petroleum
2. No ceiling on annual
fees
Same as in EPA proposed
regulations
NO
NO
Looking into changing to
tax on gasoline
Prevention and Cleanup
programs
Maine
Tank fee
1985
Distributors and mar-
keters
1.$50/tank one-time
registration fee
2. $25/tank annually for
< 6000 gal.
$50/tank annually for
2 6000 gal



—

Prevention program
Nebraska
Tank fee
1986
Tank owners
1 . $5/tank one-time
registration fee
2. $7 50/tank annually for
< 2500 gal.
$10/tank annually for
> 2500 gal. and < 5000
gal.
$12. 50/tank annually
for > 5000 and < 7500
gal.
$15/tank annually for
> 7500 gal.
NO
NO
NO
NO
Program will be reviewed.
A "Superfund" bill for cor-
rective action will be rein-
troducedin 1988.
Prevention and Cleanup
programs
New Jersey
Facility fee
1986
Facility owners
$100/facility annually
for facilities with 1 -5
tanks; $15/tank addi-
tional for each tank
over 5 at a facility
NO
NO
NO
NO
NO
Prevention program

-------
APPENDIX B-4
                    REGISTRATION AND PERMIT FEES BY STATE
                                      (continued)

What is the
funding
mechanism
used'
When was the
fee
established7
Who pays'
What is the
fee structure
and how often
is it collected'
Is there a
maximum
assessment?
Are there any
exemptions or
restrictions on
that which is
assessed'
Is there a cap
on total rev-
enues' (If so,
what?)
Is there a sun-
set provision?
(If so, when')
Are any
changes
planned or
anticipated'
Used for pre-
vention and/
or cleanup
program?
New Mexico
"ank fee
6/1/88
Tank owners
$28/tank annually in 1988,
Subsequent fees to be
established by NM Envi-
ronmental Improvement
Board
NO
Same as in EPA proposed
regulations except heat-
ing oil tanks
NO
NO
NO
Prevention program
New York
Tank fee
(Hazardous Substances)
1986
Tank owners
$50/tank every 2 yrs.
for < 550 gal
$100/tank every 2 yrs.
for i 550 and< 11 00 gal
$125/tank every 2 yrs
for 2. 11 00 gal.
$50,000/site*
Process, farm and
movable tanks are
exempt
NO
NO
NO
Prevention program
New York
Facility fee
(Petroleum)
1983
Facility owners
$50/facility every 5 yrs
for >1 100 and < 5000 gal.
$150/facility every 5 yrs.
for ;> 5000 and < 10000
gal
$250/facility every 5 yrs.
for > 1 0000 gal.
NO
Facilities < 11 00 gal.
are exempt
NO
NO
NO
Prevention program
Ohio
Tank fee
1 988
Tank owners
S20/tank every 3 yrs.
plus fines, penalties
NO
State and local govern-
ment tanks are exempt
NO
NO

Prevention and Cleanup
programs
        * Maximum assessment for facility with multiple tanks.

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                                                                                          APPENDIX B-5
               REGISTRATION AND PERMIT FEES BY STATE
                                      (continued)

What is the
funding
mechanism
used?
When was the
fee
established?
Who pays?
What is the
fee structure
and how often
is it collected?
Is there a
maximum
assessment?
Are there any
exemptions or
restrictions on
that which is
assessed?
Is there a cap
on total rev-
enues? (If so,
what?)
Is there a sun-
set provision?
(If so, when')
Are any
changes
planned or
anticipated?
Used for pre-
vention and/
or cleanup
program?
Oregon
Tank fee
2/88
Tank owners or operators
1 . $25/tank one-time
permit application fee
2. $25/tank annual
compliance fee ($20/
tank annually after
7/1/89)
NO
Tanks exempt by Subtitle I
of RCRA are exempt
NO
NO
NO
Prevention program
Texas
Tank fee
1987
Tank owners
$25/tank annually
maximum
NO
Permanently out-of-ser-
vice tanks are exempt
NO
NO
NO
Prevention and Cleanup
programs
Utah
Tank fee
1987
Tank owners
$25/tank annually*
YES; $100/tank"
NO
NO
Annual legislative
approval required
YES
Prevention program
Vermont
Tank fee
1987
Tank owners or operators
$25/tank annually



—

Prevention program
Authority to $100/tank, with public hearings required to raise the rate
The 1988 Legislature provided for a legislative task force to examine the entire state UST issue  Accommodations on their
findings will be made this year. A $60Aank assessment has been proposed

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APPENDIX C
                                                                                                      APPENDIX C-l
                 PETROLEUM PRODUCT ASSESSMENTS BY STATE

What is the
funding
mechanism
used?
When was the
fee
established?
Who pays?
What is the
fee structure
and how often
is it collected?
Is there a
maximum
assessment?
Are there any
exemptions or
restrictions on
that which is
assessed?
Is there a cap
on total rev-
enues? (If so,
what?)
Is there a sun-
set provision7
(If so, when?)
Are any
changes
planned or
anticipated?
Used for pre-
vention and/
or cleanup
program?
Florida
Transfer tax on petro-
leum imported into state
1987
-
$.10/barrel monthly*
—

$50 million
1992

Cleanup program
Maine
Oil transfer fee
1985; revised 1987
Oil terminal facility
licensees
$.03/barrel monthly for
gasoline
$.02/barrel monthly for
refined petroleum
products and by-products
—
Gasoline and liquid
asphalt are not included
in by-product tax
NO
—

Cleanup program
Maryland
Licensing fee on
processed fuel
1973
Bulk oil handlers
3/4 cent/barrel monthly
for oil**
3/4 cent/barrel;
flat fee
Only bulk oil products
$750,000
NO
YES
Prevention and Cleanup
programs
Minnesota
Petroleum tank release
cleanup fee
1987
Petroleum product
distributors
$10/1000 gal.
petroleum*
NO

NO##
NO
NO
Prevention and Cleanup
programs
##
If the fund falls below $5 million, the rate is increased to $.20/barrel.  When the fund increases to $15 million, the rate
drops back to $.10/barrel. When the fund exceeds $50 million, no excise tax will be collected until the fund falls below
$35 million.
Collection would stop if the fund reaches $750,000.  It would be reinstated if the fund falls below $500,000.
The fee will be collected initially during October and November 1987, until $5 million is collected. Collections of the fee will
be reinstated when the fund balance approaches $1  million
The original collection will be $5-6 million, which probably represents the fund's maximum amount.

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APPENDIX C-2
               PETROLEUM PRODUCT ASSESSMENTS BY STATE
                                (continued)

What is the
funding
mechanism
used?
When was the
fee
established?
Who pays?
What is the
fee structure
and how often
is it collected?
Is there a
maximum
assessment?
Are there any
exemptions or
restrictions on
that which is
assessed9
Is there a cap
on total rev-
enues' (If so,
what')
Is there a sun-
set provision'
(If so, when?)
Are any
changes
planned or
anticipated'
Used for pre-
vention and/
or cleanup
program'
New Hampshire
Oil transfer fee
1979
D istrib utors/retai lers
$ 025/barrel monthly
NO
NO
$2 75 million
NO
May expand to include
tank replacement costs
in 1988
Cleanup program
New Jersey
New Jersey Spill Fund-
transfer fee
1971
Tank owners
$.01/barrel annually
NO
NO
$50 million
NO
NO
Cleanup program
New Mexico
Tax on gasoline and
special fuels
1988
Distributors/retailers
2/10 cent/gallon col-
lected at point of sale
2/10 cent/gallon
NO
$10 million
NO
NO
Cleanup program
New York
Throughput fee
1977
Terminal operators with
> 400,000 gal capacity
$.035/barrel monthly
($ 01 for cleanup funds,
$ 025 for solid waste
facilities)
NO
NO
$25 million
NO
MO
Prevention and Cleanup
programs

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                                                   APPENDIX C-3
PETROLEUM PRODUCT ASSESSMENTS BY STATE
                 (continued)

What is the
funding
mechanism
used?
When was the
fee
established?
Who pays''
What is the
fee structure
and how often
is it collected?
Is there a
maximum
assessment?
Are there any
exemptions or
restrictions on
that which is
assessed'
Is there a cap
on total rev-
enues? (If so,
what')
Is there a sun-
set provision?
(If so, when'}
Are any
changes
planned or
anticipated'
Used for pre-
vention and/
or cleanup
program'
Wisconsin
Petroleum storage
cleanup fund; fee on
petroleum products
1987
Wholesalers/dealers
(usually wholesalers)

-

To be determined
NO
YES, legislation under
development
Cleanup program

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APPENDIX D
                                                           APPENDIX D-l
                        BONDS BY STATE

What is the
funding
mechanism
used?
When was the
fee
established?
Who pays?
What is the
fee structure
and how often
is it collected'
Is there a
maximum
assessment7
Are there any
exemptions or
restrictions on
that which is
assessed'
Is there a cap
on total rev-
enues? (If so,
what?)
Is there a sun-
set provision?
(If so, when?)
Are any
changes
planned or
anticipated?
Used for pre-
vention and/
or cleanup
program?
California
Bond issue
1987
Hazardous waste
generators

—

$15 million
1989
NO
Cleanup program
Massachusetts
Bond issue
1983
Taxpayers

-

$25 million
NO
NO
Cleanup program

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APPENDIX E
                                                         APPENDIX E-l
             OTHER FUNDING MECHANISMS BY STATE

What is the
funding
mechanism
used?
When was the
fee
established'
Who pays?
What is the
fee structure
and how often
is it collected?
Is there a
maximum
assessment?
Are there any
exemptions or
restrictions on
that which is
assessed'
Is there a cap
on total rev-
enues' (If so,
what?)
Is there a sun-
set provision'
(If so, when?)
Are any
changes
planned or
anticipated'
Used for pre-
vention and/
or cleanup
program?
Ohio
Tax on fire insurance
premiums
1979
Anyone who buys fire
insurance
3/4 of 1 % of fire
insurance premiums semi-
annually
NO
Funds can only be used
to administer the Fire
Marshall Division
NO
NO
YES; a permit fund will be
implemented 1/1/88
Prevention program
Oregon
Surcharge on hazardous
waste disposal (for state
Superfund)
1986
Disposers
$20/ton collected at
disposal
NO
NO
NO
NO
NO
Cleanup program

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APPENDIX  F
                                                                                                             APPENDIX F-l
                          STATE  IMPLEMENTING   AGENCIES
     State
Agency
State
Agency
   Alabama         Department of Environmental Management
                   Ground Water Section/Water Division
                   1751 Federal Drive
                   Montgomery, AL 36130
                   (205) 271-7832

   Alaska           Department of Environmental Conservation
                   Pouch O
                   Juneau, AK99811
                   (907) 465-2653

   Arizona          UST Coordinator
                   Department of Environmental Quality
                   Environmental Health Services
                   2005 N. Central
                   Phoenix, AZ 85004
                   (602)257-2318

   Arkansas         Department of Pollution Control and
                              Ecology
                   P.O. Box 9583
                   Little Rock, AR 72219
                   (501) 562-7444

   California        State Water Resources Control Board
                   P.O. Box 100
                   Sacramento, CA 95801
                   (916) 322-0210

   Colorado         Department of Health
                   Waste Management Division
                   Underground Tank Program
                   4310  East llth Avenue
                   Denver, CO 80220
                   (303)331-4864

   Connecticut       Hazardous Materials Management Unit
                   Department of Environmental Protection
                   State Office Building
                   165 Capitol Avenue
                   Hartford, CT 06106
                   (203) 566-4630

   Delaware         Division of Air and Waste Management
                   Department of Natural Resources and
                   Environmental Control
                   P.O. Box 1401
                   89 Kings Highway
                   Dover, DE 19903
                   (302) 736-3693
                                     Florida
                                     Georgia
                                     Hawaii
                                     Idaho
                                     Illinois
              Department of Environmental Regulation
              Solid Waste Section
              Twin Towers Office Building
              2600 Blair Stone Road
              Tallahassee, FL 32399
              (904) 488-0300-2400

              Mike Williams, Chief
              UST Section
              Ground-Water Protection Branch
              Water Management Division
              U.S. EPA, Region IV
              345 Counland Street
              Atlanta, GA 30365
              (404) 347-3866

              Administrator, Hazardous Waste Program
              (UST)
              645 Halekauwila Street
              Honolulu, HI 96813
              (808) 548-2270

              Department of Health
              P.O. Box 3378
              Honolulu, HI 96801-9984
              (808) 548-2270
              Underground Storage Tank Coordinator
              Water Quality Bureau
              Department of Health and Welfare
              Division of Environment
              450 W. State Street
              Boise, ID 83720
              (208) 334-5847

              Underground Storage Tank Coordinator
              (Coordinating Agency)
              Division of Fire Prevention
              Office of State Fire Marshall
              3150 Executive Park Drive
              Springfield, IL 62703-4599

              Illinois EPA  (Lead Agency)
              Division of Land Pollution Control
              Environmental Protection Agency
              2200 Churchhill Road, Room A-104
              Springfield, IL 62706
              (217) 782-6760

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APPENDIX F-2
     State
             Agency
  State
Agency
   Indiana
   Iowa
   Kansas
   Kentucky
   Louisiana
   Maine
   Maryland
   Massachuchetts
Underground Storage Tank Program
Office of Environmental Response
Department of Environmental Management
105 South Meridian Street
Indianapolis, IN 46223
(317)243-5055
Department of Water, Air, and Waste
Management
900 East Grand
DesMoines, IA50319
(515)281-5968

Department of Health and Environment
Forbes Field, Building 740
Topeka, KS 66620
(913)862-9369
Department for Environmental Protection
Hazardous Waste Management
Fort Boone Plaza, Building #2
18ReillyRoad
Frankfort, KY 40601
(502) 564-6716

Department of Environmental Quality
P.O. Box 44066
Baton Rouge, LA 70804
(504) 342-7808 or 9030

Underground Tanks Program
Bureau of Oil and Hazardous Material
            Control
Department of Environmental Protection
Stale House - Station 17
Augusta, ME 04333
(207) 289-2651

Department of the Environment
Hazardous and Solid Waste Management
Administration
201 West Preston Street
Baltimore, MD 21201
(301)225-6549

UST Registry, Department of Public Safety
1010 Commonwealth Avenue
Boston, MA 02215
(617) 566-4500

Department of Environmental Quality
Engineering (LUST)
1 Winter Street
Boston, MA 02108
(617) 292-5648
Michigan        Groundwater Quality Division (UST
                Notification)
                Department of Natural Resources
                Box 30157
                Lansing, MI 48909

                Michigan Department of Natural Resources
                Waste Mangement Division
                P.O. Box 30028
                Lansing, MI 48909
                (517) 373-2794

Minnesota       Underground Storage Tank Program
                Division of Solid and Hazardous Wastes
                Minnesota Pollution Control Agency
                520 West Lafayette Road
                St. Paul, MN 55155
                (612)296-7743

Mississippi       Department of Natural Resources
                Bureau of Pollution Control
                Underground Storage Tank Section
                P.O. Box 10385
                Jackson, MS 3209

Missouri         Department of Natuial Resources
                P.O. Box 176
                Jefferson City, MO 65102
                (314)751-7428

Montana         Solid and Hazardous Waste Bureau
                Department of Health and Environmental
                Science
                Cogswell Building - Room B-201
                Helena, MT 59620

Nebraska        Nebraska State Fire Marshall (UST)
                P.O. Box 94677
                Lincoln, NE 68509-4677
                (402)471-9465

                Department of Environmental Control
                Box 94877
                State House Station
                Lincoln, NE 68509
                (402)471-4230

Nevada         UST Coordinator
                Division of Environmental Protection
                Department of Conservation and Natural
                Resources
                Capitol Complex, 201 S. Fall Street
                Carson City, NV 89710
                (702) 885-4670

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                                                                                                              APPENDIX  F-3
  State
Agency
State
Agency
New Hampshire   Department of Environmental Services
                 Water Supply and Pollution Control
                 Division
                 Hazen Drive
                 P.O. Box 95
                 Concord, NH 03301
                 (603) 271-3503

New Jersey       Underground Storage Tank Coordinator
                 Department of Environmental Protection
                 Division of Water Resources (CN-029)
                 Trenton, NJ 08625
                 (609)984-3156

New Mexico      Health and Environment Department
                 Environmental Improvement Division
                 P.O. Box 968
                 Sanu Fe, NM 87504
                 (505) 827-2894

New York        Bulk Storage Section
                 Division of Water
                 Department of Environmental Conservation
                 50 Wolf Road, Room 326
                 Albany, NY 12233-0001
                 (518) 457-4351

North Carolina    Division of Environmental Management
                 Ground-Water Operation Branch
                 Department of Natural Resources and
                 Community Development
                 P.O. Box 27687
                 Raleigh, NC 27611
                 (919)733-6926

North Dakota      Division of Hazardous Management and
                 Special Studies
                 Department of Health
                 Box 5520
                 Bismarck, ND 58502-5520
                 (701) 224-2366

Ohio             State Fire Marshall's Office
                 Department of Commerce
                 8895 E.  Main Street
                 Reynoldsburg, OH 43068
                 (614) 864-5510

Oklahoma        Underground Storage Tank Program (UST)
                 Oklahoma Corporation Commission
                 Jim Thorpe Building
                 Oklahoma City, OK 73105
                 (405)521-3107

                 Oklahoma Department of Pollution Control
                 (LUST)
                 P.O. Box 53504
                 Oklahoma City, OK 73152
                 (405)271-4468
                                      Oregon
                                      Pennsylvania
                                      Rhode Island
                                      South Carolina
                                      South Dakota
                                      Tennessee
                                      Texas
                                      Utah
              Department of Environmental Quality
              811SW Sixth Avenue
              Portland, OR 97204
              (503) 229-5153 or 5733

              Department of Environmental Resources
              Bureau of Water Quality Management
              Non-Point Source and Storage Tank
              Section
              9th Floor Fulton Building
              P.O. Box 2063
              Harrisburg, PA 17120
              (717)787-8184

              UST Registration
              Department of Environmental Management
              83 Park Street
              Providence, RI 02903
              (401) 277-2234

              Ground-Water Protection Division
              Department of Health and Environmental
              Control
              2600 Bull Street
              Columbia, SC 29201
              (803) 734-3296

              Office of Water Quality
              Department of Water and Natural
              Resources
              Joe Foss Building
              Pierre, SD 57501
              (605)773-5335

              Division of Ground-Water Protection
                          (UST)
              Department of Health and Environment
              150 9th Avenue, North
              Nashville,  TN 3719-5404
              (615)741-0690

              Texas Water Commission
              P.O. Box 13087
              Austin, TX 78711
              (512) 463-7786

              Division of Environmental Health (UST)
              P.O. Box 45500
              Salt Lake City, UT 84145-0500
              (801)533-6121

              Bureau of Solid and Hazardous
              Waste (UST)
              Division of Environmental Health
              288 N. 1460 West
              P.O. Box 16690
              Salt Lake City, UT 84116-0690
              (801)538-6170

-------
APPENDIX F-4
     State
Agency
   Vermont         Underground Storage Tank Program (UST)
                   Vermont AEC/Waste
                   Management Division
                   State Office Building
                   Montpelier. VT 05602
                   (802) 828-3395

                   Department of Environmental Conservation
                   (LUST)
                   103 South main Street
                   Waterbury, VT 05676
                   (802) 244-8702

   Virginia         Virginia Water Control Board
                   P.O. Box 11143
                   Richmond, VA 23230-1143
                   (804) 257-6685

   Washington      Department of Ecology, M/S PV-11
                   Solid and Hazardous Waste Program
                   Olympia, WA 98504
                   (206) 459-6272

   West Virgina     UST Notification
                   Solid and Hazardous Waste
                   Ground Water Branch
                   Department of Natural Resources
                    1201 Greenbriar Street
                   Charleston, WV 25311
                   (304) 348-5935

   Wisconsin       Bureau of Petroleum Inspection
                   P.O. Box 7969
                    Madison, WI 53707
                    (608) 266-7605

   Wyoming        Water Quality Division
                    Department of Environmental Quality
                    Herschler Building, 4th Floor West
                    122 West 25th Street
                    Cheyenne, WY 82002
                    (307) 777-7085

-------