United States
         Environmental Protection
         Agency
Office of Water and
Waste Management
Washington DC 20460
 November, 1980
830R80101
         1990: A STRATEGY
         FOR  MUNICIPAL
         WASTEWATER
         TREATMENT
  •?*« "v.;;-*-^S1«8fiSg^.;-

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                        WORKSHOPS

1990:  A STRATEGY  FOR MUNICIPAL WASTEWATER TREATMENT
           WORKSHOP I  NOVEMBER 16-19, 1980
           WORKSHOP II NOVEMBER 19-22, 1980


                      RESTON, VIRGINIA
                        SPONSORED BY:


         U.S.  ENVIRONMENTAL PROTECTION AGENCY
   For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, D.C. 2O402

                  l'/\ L"v;r  "-:?tta!  Protection  Agency


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        UNITED STATES ENVIRONMENTAL PROTECTION  AGENCY

                          WASHINGTON, D.C.  20460
                                                     THE ADMINISTRATOR
DEAR WORKSHOP PARTICIPANT:

     Welcome to the Environmental  Protection Agency's National  Workshop
on developing a 1990 Strategy for municipal  wastewater treatment.   Your
contributions to this Workshop will  help shape the future course of this
Nation's water quality.

     The Strategy is EPA's review and reassessment of the construction
grants section of the Clean Water Act (CWA).  At this Workshop, you and
a diverse group of experts representing environmentalists, labor,  Govern-
ment, industry, and public interest  groups will examine the major issues
confronting the program.   Your proposals will form the basis of a recom-
mended legislative and administrative package for Congressional review
and reauthorization of the CWA.  Further elaboration of the Workshop
scope and purpose is provided in Chapter 1 of this workbook.

     EPA welcomes your involvement.   Each of you will play an important
role in helping to formulate effective and workable solutions for municipal
wastewater treatment.  I  can assure  you that your recommendations  are
vital to EPA in determining the 1990 Strategy.
     Best wishes for a productive workshop.

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                             PREFACE
     This document represents information compiled for discus-
sion purposes only.  It has not been reviewed by EPA senior
management, and therefore does not represent official Agency
positions.

     This document has been prepared by Temple, Barker &
Sloane, Inc., under contract No. 68-01-5964 to the U.S. Envi-
ronmental Protection Agency.

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   Sunday:  Evening

   Monday:  Morning
            Lunch
                                              TOPICAL AGENDA*

                                      EPA WORKSHOP ON A 1990 STRATEGY
                                    FOR THE CONSTRUCTION GRANTS PROGRAM
Reception, Dinner, Welcome, Orientation

Plenary Session  I
  Background on  the Construction Grants Program; elements of a strategy; goals and
  objectives; and  Introduction to the compliance options
Work Groups
  Compliance Options—ensuring that existing and new treatment plants work

Open
            Afternoon  Continue work groups
                       Plenary Session 11
                         Work group reports (5 minutes each)
                         Presentation/Discussion:  project funding priorities for 1990
                       Work Groups
                         Project Funding Priorities—what facilities to fund, ,In what types of communities,
                           and what funding mechanisms to use.
            Dinner

            Evening

  Tuesday:  Morning
Open

Open
            Lunch
Plenary Session  111
  Work group reports (10 minutes each)
  Presentation/Discussion:  operations—the construction grants process

Work Groups
  Making the construction grants process work faster and better

Open
            Afternoon  Plenary Session IV
                         Work group reports (5 minutes each)
                         Presentation/Discussion:  management and planning Issues; and pulling together a
                           compIete strategy
            Dinner

            Evening

Wednesday:  Morning
Work Groups
  Develop recommendations for al I elements of the 1990 strategy

Open

Work group rooms available for continued discussions (optional)

Plenary Session V
  Work group presentations of 1990 strategy recommendations (one-half hour each)
  Discussion
            Lunch      Open

            Adjournment
*The topical agenda for Workshop II will be Identical, running from Wednesday evening to Saturday noon.  A
detailed agenda will  be distributed at each workshop and will  show specific times, coffee breaks, room
locations, etc.

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                                 LIST OF PARTICIPANTS

                     1990 Construction Grants Strategy Workshop I
                                 November 16-19, 1980
J. Stanley Alexander
National Conference of Black Mayors
666 11th Street, Suite 314
McLachlen Bank Building
Washington, DC  20001

Wl11 lam C. Anderson
Chairman, Executive Committee,
  Environmental Engineering Division
Pi card & Anderson
69 South Street
Auburn, New York  13021

Susan Boyd
Concern, Inc.
Room 210
2233 Wisconsin Avenue, N.W.
Washington, DC  20007

Stephanie Bradfield
State-Federal Relations
Calif. Water Resources Control Board
P.O.  Box 100
Sacramento, California  95801

Fred Burton
City Manager
City of Bluefield
P.O.  Box 4100
Bluefield, West Virginia  24701

Frank Cervi
Field Representative for
  Executive Director
National Assn. Development Org.
313 Cottage Lane
Canyon City, Colorado  81212

Edith Chase
League of Women Voters of Ohio
National Resources Director
65 So. 4th Street
Columbus, Ohio  43215
Ray Chavez
New Mexico Water D&S Corporation
1005 South Solano
Las Cruces, New Mexico  88001

Robert Davis
Executive Secretary
State Water Control Bd.
P.O. Box 11143
Richmond, Virginia  23230

James DeLaPlaine
Houston Land Manager
Fox & Jacobs
6711 Bengal
Houston, Texas  77092

Andy El Iicott
Mgr. Public Affairs
2626 Penn Avenue, N.W.
Washington, DC  20037

James Fries, Chief
Planning Standard Branch
Division of Water
Bureau of Environmental Protection
Frankfort, Kentucky  40607

Joseph Frisella
President of FriselI a Engineering
Three Arnold Street
Wakefield, Rhode Island  02879

D. Eugene Gayman, Chairman
Water Resources Policy
  Advisory Committee
RD #3
Chambersburg, Pennsylvania 17201

Karl Gilbert
Center for Urban Environmental
  Studies
1012 14th Street, N.W.
Washington, DC  20005

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SESSION I  (Cont'd)
Louis Glide
Director Environmental  Programs
CampbelI  Soup
Camden, New Jersey  08101

James E.  Gutman, Chairman
State Water Quality Advisory Comm.
233 Wiltshire Lane
Severna Park, Maryland  21146

Mark Hammer
University of Nebraska
Civil Engineering Col Iege
226 Bancroft Hall
Lincoln,  Nebraska  68588

Fred Harper
Orange County Sanitation District
P.O. Box 8127
Fountain  Valley, California  92708

Andrew Howarth, Director
Rural Community Assistance Program
Rural Housing Improvement, Inc.
Box 370
WInchendon, Massachusetts  01475

Paul B. Kelman
Chief of  Environmental  Planning
Atlanta Regional Commission
230 Peach Tree, N.W.
Atlanta,  Georgia  30303

Bryon Kent
Water Program Manager
Yaklma Indian Nation
P.O. Box 151
Toppenlsh, Washington  98948

D. J. Kirk
Manager Environmental Engineer
P.O. Box 57
Plttsburg, Pennsylvania  15230

Ruth Kretschmer
Supervisor Bu Page County
22 West 345 Crest
Medina, IIllnois  60157
Tex LaRosa, Acting Commissioner
Agency of Environmental
  Conservation
Dept. of Water Resources
State Office BuiIding
Her Itage I  I
Montpelier, Vermont  05602

BiI I  Lee
Bill  Lee Contracting Company
P.O.  Box 486
Dothan, Alabama  36301

Susan Lofgren
League of Women Voters
2411  South Newberry
Tempe, Arizona  85282

Francis X. McArdle
Commissioner New York City
Dept. of Environmental Protection
1 Center Street
Room 2358 Municipal Bldg.
New York, New York  10007

W. J. McKee
National Society of
  Professional Engineers (NSPE)
2029 K. Street, N.W.
Washington, DC  20006

Tess McNulty
League of Women Voters
2160 Vassar Dr.
Boulder, Colorado  80303

Bob Nicholson
Vice President
Zimpro, Inc.
Military Road
Rotschlld, Wisconsin  54474

Tom R. Osborne, Manager
VWP/EPA Wastewater Pub I ic
  Participation Project
702 Shenandoah Ave., N.W.
P.O. Box 2868
Roanoke, Virginia  24001

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SESSION I  (Cont'd)
Neal Potter, Chair
NACo Water Subcommittee
Councilman for Montgomery Co.
6801 BrookviIle Road
Chevy Chase, Maryland  20015

Ervin S. Queen
Appalachian Water & Sewer
  Development Association
P.O. Box 1346
Logan, West Virginia  25601

Arturo Ramirez, Manager
Military Highway Water Supply Corp.
P.O. Box 1048
Progreso, Texas  78579

William Relnhart
Special  Assistant to the
  Comptroller
State of Tennessee
501 Union Bldg., 6th Floor
Nashville, Tennessee  37219

Samuel H. Sage
Executive Director
Sierra Club—Atlantic Chapter
800 Second Avenue
New York, New York  10013

Wayne Schmidt
Michigan United Conservation Club
226 So.  Hayford Avenue
Lansing, Michigan  48912

Garrett Sloan, Director
Miami Water Sewer Authority
P.O. Box 330316
Miami, Florida  33133
                                                      Robert  B. Teska
                                                      President, Teska Associates
                                                      627 Grove Avenue
                                                      Evanston, Illinois  60201

                                                      Paul  S.  Tracy, Jr.
                                                      Vice  President, City Bank
                                                      Money Market Division
                                                      P.O.  Box 850
                                                      New York, New York  10043

                                                      Dale  Twachmann, President
                                                      Institute of Water Resources
                                                      404 Jackson St., Suite 3005
                                                      Tampa,  Florida  33602

                                                      Barbara  Webber, Chairman
                                                      Natural  Resources Committee
                                                      53 West  49th Street
                                                      Indianapolis,  Indiana  46208

                                                      John  B.  Wei Is, Jr.
                                                      Water Resources Assistance Corp.
                                                      Court Street
                                                      PaIntsvl Me, Kentucky  41240

                                                      Robert A. Wieboldt
                                                      Executive Vice President
                                                      New York State Builders Association
                                                      112 State Street, Suite 1318
                                                      Albany,  New York  12207

                                                      Betty Woodruff
                                                      League of Women Voters
                                                      910 Wayne Road
                                                      Columbia, Missouri  65201

                                                      L. Carl  Yates
                                                      McGcodwIn, Williams & Yates,  Inc.
                                                      909 Rolling Hi I Is Drive
                                                      FayettevlIle, Arkansas  72701

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                                  LIST OF PARTICIPANTS

                      1990 Construction Grants Strategy Workshop II
                                  November 19-22, 1980
Carol C. Amick, State Senator
Chairman, Committee on Natural
  Resources & Agriculture
Mass. Senate, Rm. 416-A
State House
Boston, Massachusetts  02133

Thomas Beyard, Vice President
Center for Urban Environmental
  Studies
1012 14th Street, N.W.
Washington, DC  20005

Ron Buckhalt
Director, Government Relations
National Utility Contractors Assn.
815 15th Street, N.W., Suite 838
Washington, DC  20005

T. Gould Charshee, Jr.
Maryland Regional Planning Council
2225 North Charles Street
Baltimore, Maryland  21218

Fred Cooper
Mississippi Institute for Small Towns
5305 Executive Place, Suite B
Jackson, Mississippi  39206

Glen Ehrlch
Director of Public Works
County of Fairfax
4100 Chain Bridge Road
Fairfax, Virginia  22030

I.B. Ellis, President
W.S. Dickey Co.
824 East Fourth Street
P.O. Box 6
Pittsburg, Kansas  66762

Senator Fred Finllnson
Majority Leader Utah State Senate
721 Kearns Bui Id Ing
Salt Lake City, Utah  84101

Steve Garman
City Manager
City of Pensacola
P.O. Box 12910
Pensacola, Florida  32521
J.B. Gilbert, President AWWA
V.P., Brown & CaI dwell Inc.
723 S. Street
Sacramento, California  95814

Patrick C. 61Isson
Director of Finance
DeKalb County
556 North McDonough Street, Room 904
Decatur, Georgia  30030

Edward Graham
Section Head, Sewer System Planning
Washington Suburban Sanitary Comm.
312 Marshall Avenue
Laurel, Maryland  20810

Carmen Guarino
Water Pollution Control Federation
11 Kings Oak Lane
Philadelphia, Pennsylvania  19115

Audrey Jackson, Chairwoman
State Land Use & Water Resources
League of Women Voters
Rt. 2, Box 925
HIIIsboro, Oregon  97123

Charles Jones
Jordan, Jones, Gould Ing, Inc.
2000 Clean/lew Ave., #200
Atlanta, Georgia  30340

Charles Kaiser, Jr.
General Council of Metropolitan
  St. Louis Sewage District
2000 Hampton Avenue
St. Louis, Missouri  23139

Charles Kamsakl
Community Development Specialist
NationaL Council of La Raza
1101  vine St., Suite E
McAllen, Texas  78501

Stan KeaslIng
Director of Field Services
Rural Community Assistance Corp.
1990 K. Street, Suite 202
Sacramento, California  95814

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Session II (Cont'd)
Lane Kendlg
Director of Planning'
Lake County, Illinois
c/o 472 KlIlarney Pass
Mundellne, IIllnois  60060  )

Austin Llbrach
Director of Environmental  Affairs
Washington Metropolitan Council
  of Governments
1875 I  Street, N.W.
Washington, DC  20006

Robert McGarry, General Manager
Washington Suburban Sanitary Comm.
4017 Hamilton Street
Hyattsvllle,  Maryland  20781

Peggy McNei 11
Supervisor, Mercer Co. (N.J.
Soil Conservation District
39 Linwood Circle
Princeton, New Jersey  08540

Louis Meter
American Society of Civil  Engineers (ASCE)
1625 I  Street, N.W., Suite 607
Washington, DC  20006

Alan Merson
EPA Science Advisory Board
5163 KenlIworth PI., N.W.
Seattle, Washington  98105

Patricia M. Nesbitt
Environmental  Consultant
Route 2, Box 374
Strasburg, Virginia  22657

E.J. Newbould
President, NCPI
1015 15t»i Street, N.W.
Washington, DC 20002

Bob Olt
Manager, Environmental Services
Union Carbide Corporation
P.O. Box 44
Tonawanda, New York  14150

Roy Overton
Izaak Wai toner League
1215 Prospect Avenue
W. Des Molnes, Iowa  50265
Clem Rastatter
Conservation Foundation
1717 Massachusetts Ave., N.W.
Suite 300
Washington, DC  20036

Marllyn Reeves
League of Women Voters
16506 Forest Mi I I  Court
Laurel, Maryland  20810

David Sawicki, Director
Planning and Development Institute
University of Wisconsin at Milwaukee
P.O. Box 413
MiIwaukee, Wisconsin  53201

James P. Schafer
Environmental Planner
Havens i Emerson,  Inc.
700 Bond Court Building
Cleveland, Ohio  44114

Frederick Schaffler
New England  Interstate Water
  Pollution Control Commission
607 Boylston St.
Boston, Massachusetts  02116

John Scheaffer
Scheaffer & RolI in
130 North Franklin Street
Chicago, IIllnois  60606

Franklin Sebastian
Envlrotech
3000 Sand Hill Road
MenloPark, California  94025

David Shepard, Mayor
City of Oak Park
13600 Oak Park Blvd.
Oak Park, Michigan  48237

Joel Smith, President
Oklahoma Wild Life Federation
806 Pine-Oak
Edmond, Oklahoma  73034

Ross V Incent
Ecology Center of Louisiana
P.O. Box 19344
New Orleans, Louisiana  70179

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Session II (Cont'd)
Randy Wade
Basin Planning Unit
Supervisor
Dept. of Natural Resources
Box 7921
Madison, Wisconsin  53707

Doug Waiker
Resources Environmental
  Qua IIty Division
U.S. Chamber of Commerce
1615 H. Street, N.W.
Washington, DC  20006

John Wander
Peat, Warwick and Mitchel
1990 K Street, N.W.
Washington, DC  20006

Joe Waters, Executive Director
Heart of Georgia Planning and
  Development Commission
501 Oak Street
Eastman, Georgia  31023

Calvin E. Weber, P.E.
Asst. Commisioner of Health
  for Environmental Qua IIty
Westchester County Dept.  of Health
150 Grand Street
White Plains, New York  10601

Gordon Wood
01 In Corporation
1710 K Street, N.W.
Washington, DC  20006

John J. Wright
Executive Vice President
Greater Birmingham Association
  of Home BuiIders
612 South 37th Street
Birmingham, Alabama  35222

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                           CONTENTS

       TOPICAL AGENDA

       LIST OF PARTICIPANTS


   I.  INTRODUCTION TO THE 1990 WORKSHOP

  II.  BACKGROUND ON THE CONSTRUCTION GRANTS PROGRAM

 III.  STRUCTURE FOR THE 1990 STRATEGY

  IV.  WORKING ASSUMPTIONS, GOALS, AND OBJECTIVES FOR THE 1990
       STRATEGY

   V.  COMPLIANCE—MAKING SURE THE TREATMENT PLANTS WORK

  VI.  PROJECT FUNDING PRIORITIES—WHAT FACILITIES TO FUND, IN WHAT
       TYPES OF COMMUNITIES, AND WHAT FUNDING MECHANISMS TO USE

 VII.  OPERATIONS—MAKING THE GRANTS PROCESS WORK BETTER

VIII.  MANAGEMENT AND OVERSIGHT—RUNNING A DELEGATED PROGRAM

  IX.  IMPLICATIONS FOR PLANNING AND THE WATER QUALITY MANAGEMENT
       PROCESS


APPENDICES

   A.  LIST OF 1990 ISSUE PAPERS AND DRAFT STRATEGIES

   B.  GLOSSARY OF KEY WORDS AND ACRONYMS

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CHAPTER I
INTRODUCTION

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              I. INTRODUCTION TO THE 1990 WORKSHOP
THE MOVE TOWARD REASSESSMENT

     Since 1973, the Environmental Protection Agency (EPA) has
awarded almost $30 billion to over 11,000 communities for the
planning, designing, and constructing of waste treatment
plants and interceptors to solve waste management problems.
The Municipal Construction Grants Program under the Clean
Water Act of 1972 is one of the largest environmental public
works efforts in history and has impacted nearly every section
of the country.

     While much progress has been achieved in improving the
overall water quality of the nation, many needs still remain.
Critics have taken the Construction Grants Program to task for
its administrative complexity, burdensome requirements, proj-
ect delays, facility performance failures, and high costs.

     As a result, EPA has begun a reassessment which will lead
to a 1990 strategy for the Construction Grants Program.  This
effort will determine what the goals should be for 1990 and
what steps are needed in the 1980s to reach them.  The strat-
egy will recommend both administrative and legislative strat-
egies for five major areas:  compliance, project funding
priorities, operations, management, and planning and the water
quality management process.  The completed strategy will
assist EPA in preparing for next year's Congressional review
and reauthorization of the Construction Grants section of the
Clean Water Act, as well as provide guidance for immediate
administrative modifications to the program.
THE APPROACH TO DATE

     The basic approach to the reassessment and strategy de-
velopment consists of the following three phases, the first of
which has already been completed:

       •  Phase I;  Research and prepare issue papers,
          and hold public interest group meetings.  Dur-
          ing this phase, EPA prepared over 40 research
          papers covering specific issues of concern
          within the Construction Grants Program.  In
          addition, EPA staff has met on a regular basis
          with approximately 15 groups representing such

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                             1-2
          interests as state and local governments, con-
          sulting engineers, sewerage agency administra-
          tors, and rural residents.  Individual issue
          papers were reviewed and broad alternatives for
          change were discussed at these meetings.  At
          the conclusion of Phase I, tentative strategy
          documents were developed by EPA for each of the
          five topic areas.

       •  Phase lit  Conduct workshops.  These workshops
          will serve to promote active discussion on the
          issues that have been brought into focus and
          that will continue to evolve as EPA refines its
          strategy.

       •  Phase III;  Propose a 1990 strategy.  A syn-
          thesis of the results of Phase I and Phase II
          will be developed into a proposed strategy
          appropriate for publication in the Federal
          Register and subsequent public review and
          comment.

     Another important aspect of the approach involves an
advisory committee known as the 1990 Policy Committee.  The
Committee was established to oversee the strategy effort.  It
provides review and direction on the principal policy matters
involved in the strategy.  Four representatives of state
government as well as representatives of the Association of
State and Interstate Water Pollution Control Administrators
(ASIWPCA) and the National Governors' Association (NGA) cur-
rently serve on the 1990 Policy Committee.  These representa-
tives meet regularly with the Assistant Administrator for
Water and Waste Management and other EPA managers to discuss
the chief policy issues confronting the 1990 strategy.
THE PLAN OF THIS DOCUMENT

     This document is organized into two parts.  The first
part—Chapter II—describes the current EPA program and its
effects.  The second part—Chapters III through IX—describes
a decision process for arriving at a strategy and analyzes the
major policy issues that must be considered in selecting the
best strategy.  The policy issues cover five topics:

       •  Compliance--making sure the treatment plants
          work;

       •  Project funding priorities—what types of proj-
          ects to fund, in what types of communities to
          build them, and what funding mechanisms to use
          to achieve these objectives;

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                              1-3
       •  Operations—making  the  grants  process work
          better;

       •  Management  and  oversight—running a delegated
          program;  and

       •  Implications  for  planning  and  the water quality
          management  process.

     Two appendices are also  included.   One contains refer-
ences to the various  issue  papers that  are  available (under
separate cover) on  many of  the  topics  described in this docu-
ment.  These are available  from EPA  for  more detailed back-
ground reading.  The  second appendix is  a  glossary of the key
words and acronyms  that will  be encountered in this document.
PURPOSE OF THE OPTIONS  PRESENTED

     The policy options  discussed  in  Chapters V through IX
represent a range of  the  points of  vie\y that  were expressed by
different people during  the  research  for  this workshop.  These
options provide a menu  of  choices  that  could  be made in devel-
oping a 1990 strategy for  the  Construction  Grants Program.
The options are neither  exhaustive  nor  mutually exclusive.
They are intended as  starting  points  for  discussions in the
workshops and may be  modified  and  extended  as participants
feel appropriate.  Elements  of separate options may be com-
bined in new ways which  the  work groups feel  are appropriate
as they formulate the components of a recommended strategy.
WORKSHOP STRUCTURE

     The workshop will contain  six  key  elements,  as follows:
I.   Full-Group Discussions—
     Review of the Working Papers

     Full-group discussions will take  place  in  the  main meet-
ing room at several points during  the  workshop.   The purpose
of these discussions will be to identify  and  discuss the prin-
cipal issues indicated in this  document and  other issues as
they are raised by the workshop participants.   The  discussions
will serve as a preparation for the more  detailed discussions
that will occur among individual teams.

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                              1-4
II.   Team Discussions

     At several points during  the workshop,  the  full  group
will break into four teams.  Each team  of  participants will be
expected to select options  independently and  to  develop a
tentative position on the topic  assigned.
III.  Brief Team Progress Reports

     At the conclusion of each of  these  team working  sessions,
each team will present to the full working  group a five- to
ten-minute report of its tentative position  on  the given
issue.  These reports will not be  considered binding  on any
team.  Their purpose will be to provide  an  indication of each
team's progress and direction.
IV.  Team Preparation of  Integrated
     Recommendations

     Starting in the afternoon of  the  second  full  day of the
workshop, each team will  be asked  to draw upon  its work of the
preceding sessions to prepare an integrated  set  of recommenda-
tions related to the overall 1990  strategy as discussed in
this document.
V.   Team Presentation

     On the last morning of  the workshop  the  group will  be
joined by members of EPA's senior  policy  staff.   Each team
will be expected to make a 20- to  30-minute presentation of
its recommendations to the full group,  using  appropriate
visual aids.  Following each presentation  a brief question-
and-answer period will be allowed  to  answer questions of sub-
stance and clarification.
VI.  Final Discussion

     After the team presentations,  the  participants will dis-
cuss the issues raised and  the  recommendations made.  The
workshop will not attempt to  reach  a  consensus on individual
issues.  Its focus will be  on obtaining a full discussion of
issues and recommendations  for  EPA's  subsequent use in revis-
ing the five strategy documents and developing an overall 1990
strategy proposal for the Construction  Grants Program.

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CHAPTER II
BACKGROUND

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     II.  BACKGROUND ON THE CONSTRUCTION GRANTS PROGRAM
     This chapter presents a summary of the Construction Grants
Program as background for the discussions that will occur at
the workshop.  While all workshop participants are knowledgeable
about the program, this chapter will help to provide a common
frame of reference and set of statistics for all of them.  The
chapter is organized into eight major sections:

       •  Historical perspective of the Construction
          Grants Program

       •  Compliance status

       •  Current funding policies

       •  Types of projects—remaining needs and past and
          future funding

       •  Geographic patterns and community size—remain-
          ing needs and past funding

       •  Operations—the grants process

       •  Management oversight

       •  Planning and water quality management
HISTORICAL PERSPECTIVE OF THE
CONSTRUCTION GRANTS PROGRAM

     The Construction Grants Program receives its authority
from the Clean Water Act (P.L. 92-500, passed in 1972) and
subsequent amendments.  The Act seeks to "restore and maintain
the chemical, physical, and biological integrity of the Nation's
waters."  This legislation is the basis for most of EPA's water
pollution control activities, including effluent guideline
limitations for industries, non-point source programs for area-
wide activities, and the funding of regional water quality
management plans.  In addition, the construction of publicly
owned treatment works (POTWs) to eliminate municipal discharge
of untreated or inadequately treated pollutants is a major
focus of effort under the Act.

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                            II-2
     The objective of the Construction Grants Program is to en-
courage nationwide construction of sewage treatment facilities—
a major step toward the clean water goals of the Act.  The fol-
lowing goals for the grants program are specified by the Act:

       •  Achieving nationwide secondary treatment by
          1977-1978 (extension to 1983 possible),

       •  Achieving best practicable wastewater treat-
          ment technology (BPWTT) by 1983, and

       •  Achieving fishable and swimmable waters
          where possible.

     The grants program provides the financial means by which
these goals can be accomplished.  Simply stated, the Construc-
tion Grants Program will provide up to 75 percent of eligible
project costs for conventional treatment systems and 85 percent
for systems employing innovative and alternative wastewater
treatment methods.  The program therefore provides both incen-
tive and assistance to communities seeking to comply with water
quality standards.

     As of June 30, 1980, $31.6 billion has been appropriated
by Congress under this program, of which $26 billion has been
obligated by EPA in over 19,000 grants to communities.  Approxi-
mately 2,100 plants representing a value of $2.6 billion have
been completed.  It is important to note that P.L. 92-500 is
not the first effort in this area; during the 1956-1972 period,
prior to the passage of 92-500, P.L. 84-660 provided assistance
to 13,764 projects in the amount of $5.2 billion.  Despite this
effort, the 1978 Needs Survey reported a remaining eligible
need of $106 billion.
COMPLIANCE STATUS

     There have been significant improvements in water quality
throughout the nation:

       •  Dissolved oxygen levels (the primary indicator
          of pollution from sewage and other organic
          matter) diminished in the Northeast, Southeast,
          and Great Lakes regions of the country from
          1971-1972 to 1977-1978.

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                            II-3
       •  A study of coliform bacteria levels (a common
          measure of water pollution) in rivers near 24
          cities between 1968 and 1976 showed higher
          levels in only 4, no change in 2, and lower
          levels in 18 over that period.

Much of this general improvement as well as many localized
improvements are connected with the impacts of the POTWs com-
pleted as a result of the Construction Grants Program.

     In spite of its many successes, the program currently
faces a number of challenges based in part on the performance
of completed plants.  The statistics indicate that many of the
plants funded under this program are out of compliance at least
part of every year, and in many cases for extensive periods.
These statistics have given rise to the criticism that many of
the plants do not work, and that in turn has been the primary
force behind the movement to re-evaluate the Construction
Grants Program.


Current Status of Compliance

     In the spring of 1977, a comprehensive study of municipal
treatment plants with flows greater than 1 MOD was carried out
for EPA.  The results of that study showed that, of the 1,167
secondary treatment plants with flows treater than 1 MGD, over
77 percent were in violation of their NPDES permit requirements
to some degree.  Further study showed that 53 percent of the
facilities had either serious or significant violations (defined
in the study on the basis of the extent, frequency, and nature
of violations over a three-month period).  These percentages
are displayed in Table II-l.  An additional 4.4 percent of the
facilities had minor violations.  Although distinctions between
serious, significant, and minor violations are judgmental in
nature, the above data appear to indicate that compliance prob-
lems among treatment plants exist and must be dealt with in
some manner.

     Additional data from other studies confirm EPA's findings.
For example, a soon-to-be released General Accounting Office
study of EPA-funded sewage treatment plants states the following
conclusions:

       •  32 percent violated permits for four con-
          secutive months and were at least 50 per-
          cent over standards.

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                               II-4
                             Table II-l

                     OVERVIEW OF COMPLIANCE PROBLEMS


                              Out of Compliance
      Percent of Total Plants

      Number of Plants
 Facility Out
of Conpliance
to Some Extent

   77X

   903
   Facility
 Seriously or
Significantly Out
 of Compli ance

     53X

     619
                                                  Total Number of
                                                  Plants with Flow
                                                  Greater than 1 MGD
1,167
      Note:  "Seriously or significantly out of Conpliance" are based on the extent,
           frequency, and nature of violations over a three-month period.

      Source:  Energy and Environmental Analysis, Inc., Evaluation of Municipal Waste-
            water Treatment Plants Under the NPOES Permit/Enforcement Plan,
            February 13, 19"78.
        •  50 percent to 70 percent are  in violation  at
           any given time.

      These studies  use a. sample of major  plants to determine
compliance status.   Unfortunately, it is  not possible with
current data to know exactly  the compliance status of all the
plants  in operation.  The data management systems of EPA and
the states do not provide timely and accurate statistical data
on POTW performance, even though each of  the 14,000  POTWs in
operation is required to submit quarterly reports on its
plant discharge quality and quantity.   While the samples provide
indications of the  status of  major plants, it is even more dif-
ficult  to obtain performance  information  on minor facilities,
those with flows of less than 1 MGD.  Regardless of  these present
limitations, every  sample study points  to a substantial number
of problems in the  compliance area.  The  next section examines
what  those problems are.
Major  Reasons for  Noncompliance

     Noncompliance with permit  conditions is usually a complex
issue  involving  a  number of  factors.   An  EPA study  of 180 non-
complying POTWs  revealed many basic problems.  Overall, the
problems can be  categorized  into three general areas:  design
and construction,  influent,  and operations and management.
Each area is shown in Table  II-2 and discussed below.

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                              II-5
                             Table 11-2

                        REASONS FOR NONCOMPLIANCE
      Problem Area

      Influent

      Design and Construction

      Operations and Maintenance
Percent of Noncompliance Cases
     (EPA study of 180
     Noncomplying POTWs)

         64*

         49X

         20X
      Note: Percents total more than 100 because many systems have more than one
          type of violation.

      Source:  Energy and Environmental Analysis, Inc., Evaluation of Municipal
            Hastewater Treatment Plants Under the NPDES Permit/Enforcement
            Plan, February 13, 19/d.
     Influent Problems

     Influent problems are the most frequent  causes of  noncom-
pliance.   The EPA  study of plants found the  following to  be
the largest causes  of  influent problems:

        •   Industrial  flow

        •   Infiltration/inflow

        •   Overload  by  domestic flows

        •   Combined  sewer overflows

     Industrial flows  cause problems for  three basic reasons:
(1) inappropriate  pretreatment or the complete lack of  pre-
treatment  prior to  discharge to  the sewer  system, (2) illegal
sewer connections,  and (3) illegal dumps  of  waste into  sewer
collection systems.   Certain industrial wastes contain  toxics
or inappropriate pH which can slow down or eliminate microbial
activity  in activated  sludge.

     Infiltration/inflow (I/I) is another  problem area.   Infil-
tration can cause  problems due to long-term  or seasonal POTW
hydraulic  overloading.  Inflow can have immediate adverse
affects,  especially after rainstorms.  In  general, I/I  contrib-
utes to noncompliance  by causing flows that  exceed hydraulic
design  average flows,  allowing inorganic materials to enter the
system, or washing  out sludge blankets.

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                            II-6
     Another area of influent problems,  overload by domestic
flow (due to additional hook-ups or higher than anticipated use
per household), causes flows that exceed POTW average flow de-
signs or average organic limits.  Finally, CSOs cause problems
in that they lead to excessive flows, excessive levels of in-
organics, and flows that exceed POTWs'  instantaneous capability
to handle organics.


     Design and Construction Problems

     According to the EPA study, almost  half of all noncompli-
ance was related to design and construction.  Some studies have
singled out design deficiencies as the principal cause of non-
compliance with permit requirements.  Other studies indicate
that design and construction problems,  although significant,
are not the primary cause of noncompliance.  The following are
examples of design- and construction-related problems:

       •  Lack of process flexibility,

       •  Inappropriate application of instrumentation,

       •  Improper sizing, selection, and arrangement of
          plant components,

       •  Inappropriate processes,

       •  Improper sizing of hydraulic/organic components,

       •  Unnecessarily high O&M costs leading to charges
          that cannot be supported by the users,

       •  Inadequate or inappropriate sludge processing
          and disposal system, and

       •  Plants that require expert operation; e.g.,
          relatively minor variations in influent may
          result in process upset or hydraulic overload.

     Design-based problems have several  basic causes.  One is
that plants are not always designed with ease of operation in
mind.  Another is that the characteristics of wastes are not
constant and can change over the life of design and construction
Yet another reason for construction-related problems is the "or
equal" clause used in construction bidding, which gives the
building contractor the option to substitute equipment that is
equal in rated performance to that specified in the design.  In
too many cases such alternate equipment  has proven to be either

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                            II-7
untested, and unable to live up to the required operating
performance, or less durable thap required, and subject to
breakdown.

     Finally, the present design process makes it difficult to
assign responsibility for a design, construction, or equipment
fault to any one firm or individual.  The design process is
segmented with one firm conducting the broad facilities plan
(known as Step 1 in the Construction Grants Program), perhaps
another performing the detailed design (Step 2), still another
contractor building the plant (Step 3), and finally, the grantee
or another contractor operating the plant.  In addition, during
the review by EPA and/or the state, changes in the design are
often called for.  If a fault is identified in the completed
facility, each of these parties may point to the other as the
probable cause.


     Operations and Management (O&M) Problems

     These problems are estimated by one study to be involved
in about 20 percent of noncompliance cases.  The chief cause of
O&M problems is the lack of operator skill needed to run the
plant and to make process control adjustments in response to
continuously changing influent conditions.  Other major areas
of concern are maintenance problems, insufficient funding of
operations, and poor management control systems.  These problems
may become even more important as existing plants become older
and the toll of improper O&M procedures mounts up.  It is also
important to note that a study by EPA's Office of Research and
Development estimates that 70 percent of plants could be
brought back into compliance through O&M measures—even when
problems are related to I/I or design.

     These O&M problems are especially severe in smaller plants.
Approximately 85 percent of the POTWs have a design capacity of
less than 1 MGD.  The quality of compliance information is even
poorer for these facilities than for the majors, but the avail-
able information indicates that the performance of minor POTWs
is worse than that of major plants.  Many small communities
lack the management abilities and technical resources (e.g.,
trained operators and maintenance staff, specialized equipment,
and quality control capabilities) necessary to achieve continu-
ing compliance with NPDES permit requirements.  For example,
trained operators will often transfer to larger facilities be-
cause of limited advancement opportunities at small POTWs.  This
often leaves a serious gap in the small POTW staff, which seldom
enjoys sufficient depth to sustain stable operation.  Another
typical small POTW problem relates to the greater unit costs of

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                            II-8
operating small facilities,  which results in service charges
that are generally higher than in major facilities providing
similar levels of treatment.  This situation is aggravated by
the fact that income levels  are often relatively low in small
communities.  This results in pressure on POTW management to
reduce treatment costs, often by eliminating O&M activities
essential to continuing compliance.  In short, smaller facili-
ties are more likely to experience compliance problems related
to O&M than are their larger counterparts.
CURRENT FUNDING POLICIES

     The Construction Grants Program operates under procedures
and policies covering a myriad of issues.  In an effort to pro-
vide further background on the program, the subsequent sections
outline current policies covering the following major topics:

       •  Eligibility policy and the Needs Survey,

       •  State priority lists,

       •  The allotment formula,

       •  The rural set-aside,

       •  The innovative and alternative set-aside, and

       •  Multiple-purpose projects.


Eligibility Policy and the Needs Survey

     The Agency currently funds 75 percent of most eligible proj-
ect costs and 85 percent of innovative and alternative projects.
Wastewater treatment may encompass a number of facilities, but at
the present time, federal grants will only fund certain types of
activities.  Eligible needs are broken down into the following
categories and are enumerated every two years in the Needs Survey;

     Category I—SECONDARY TREATMENT.  This category includes
those facilities that are required to provide "secondary treat-
ment" or "best practicable wastewater treatment technology"
(BPWTT).  Systems designed to serve individual residences are
also included in this category.

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                            II-9
     Category II—HIGHER TIJAN SECONDARY TREATMENT.  This cate-
gory includes treatment facilities that must achieve treatment
levels more stringent than that afforded by secondary treatment.
Requirements for these treatment levels generally exist where
water quality standards require the removal of such pollutants
as phosphorus, ammonia, nitrates, or organic and other substan-
ces.  Also included in category II is the cost of treatment
necessary to raise the treatment level of facilities from pri-
mary to secondary.

     Category IIIA—CORRECTION OF INFILTRATION/INFLOW.  Inclu-
ded in this category are the costs of correcting sewer system
infiltration/inflow problems.  Needs could also be reported
for preliminary sewer system analyses and for detailed sewer
system evaluation surveys.

     Category IIIB—MAJOR REHABILITATION OF SEWERS.  Require-
ment s^ortherfzpTacer^^                              of exist-
ing sewer systems are reported in this category if the correc-
tive actions are necessary to the total integrity of the system.
Major rehabilitation is considered to be extensive repair of
existing sewers beyond the scope of normal maintenance programs,
where sewers are collapsing or structurally unsound.  This is
intentionally a very restrictive definition.  If all rehabili-
tation for major urban areas were included, the total needs
could rise by tens of billions of dollars or more.

     Category IVA—NEW COLLECTOR SEWERS.  This category includes
the cost of constructing new collector sewer systems and appur-
tenances designed to correct violations caused by raw discharges,
seepage to waters from septic tanks and the like, and/or to
comply with federal, state, or local actions.  The definition
is meant to restrict federal funding of the collector systems
that serve primarily to promote local growth in suburban areas.

     Category IVB—NEW INTERCEPTOR SEWERS.  Included in this
•category are costs for new interceptor sewers and transmission
pumping stations necessary for the bulk transport of wastewaters.
This category is defined to restrict the eligibility of inter-
ceptors that serve primarily to promote local growth in suburban
areas.

     Category V—CONTROL OF COMBINED SEWER OVERFLOW.  Facilities
to prevent and/or control periodic bypassing of untreated wastes
from combined sewers to achieve water quality objectives are in-
cluded here; treatment and/or control of stormwater in separate
storm and drainage systems are not.

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                            11-10
     At present, facilities are funded by EPA based on a 20-year
reserve capacity, and advanced wastewater treatment and advanced
secondary treatment (AWT and AST) projects require justification
on a water quality basis.
State Priority Lists

     The Clean Water Act requires the development of an inven-
tory of all needed wastewater facilities by each state.  The
Act further requires each state to develop a system for assign-
ing a priority to wastewater treatment projects and, in turn,
to use this system for ranking all such projects within the
state.  As originally envisioned, it was expected that these
requirements would result in the development of a priority
listing of all needed wastewater treatment facilities.  Based
on this "priority listing" and the amount of funds allocated
to a state each year, an "imaginary funding line" was to be
drawn below the last project for which funds were available in
a given year.  This process was to be repeated each year until
all such wastewater treatment needs were satisfied.

     Priority systems as actually developed are methodologies
for the selection of projects for funding; they are not strictly
used to determine the relative importance of a particular proj-
ect on an environmental basis.  Reasons for this include the
provision that funds not obligated will be subject to reallot-
ment, the fact that projects must go through rigorous review
and public participation activities, and the fact that a spe-
cific amount of funds must be directed to certain types of
projects or types of communities.  In addition, enforcement
actions against municipalities will move systems up on the
priority list (this is the philosophical underpinning of EPA's
Municipal Enforcement Strategy).  Even after the priorities
have been decided, in practice "bypass procedures" are fre-
quently used to fund ready-to-proceed projects, which may be
lower in priority, in order to use up allotted monies.

     Section 216 of the Act provides that each state shall be
solely responsible for determining the priority to be given
each category of projects within the state.  EPA approves pri-
ority systems, but does not approve the actual positioning of
specific projects.  In the past EPA has had a more direct in-
fluence on the priority lists.  In the 1977 Amendments, how-
ever, Congress reaffirmed the states' responsibility in that
area.  At present EPA's influence on specific projects exists
only through "jawboning."

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                            11-11
The Allotment Formula

     The share of each year's Congressional appropriation for
which each state is eligible is described in the Clean Water
Act itself (Section 205).  Though the specifics of the allot-
ment formula have changed over time, the basic factors have
remained the same.  The state share is based on the portion of
national needs in certain needs categories applicable to that
state (based on the biannual Needs Survey), and the population
of the state.  Moreover, each state must receive at a minimum
1/2 of 1 percent of the total funds allotted; and Guam, Virgin
Islands, Samoa, and the Trust Territories shall not receive in
sum more than 1/3 of 1 percent of the total funds allotted.
In addition, at least 25 percent of monies spent must go
toward categories IVA, IVB, and V.

     Funds allotted to states remain available for obligation
to projects for two years.  After that period, the funds are
reallotted to those states that have obligated all their funds
(the reallotment is on the same relative basis as the original
allotment).

     Currently, a rather complex allotment formula is in force.
The House and Senate arrived at slightly different versions of
the allotment formula for FY78 and FY79, each giving different
relative emphasis to various needs categories (the Senate giv-
ing preference to categories I, II, IIIA, IVB, and V; the House
giving preference to categories I, II, and IVB), and population
(high priority in the Senate, low priority in the House).  The
resulting compromise formula calculates the amounts a state would
receive under the Senate version and under the House version
and then averages that amount.  The result is a slightly heavier
emphasis on needs than on population.  The minimums for states
and territories remain in effect.
The Rural Set-Aside

     Over 53 million Americans live in small, rural communities;
of these rural Americans, over 2.4 million lack adequate sewage
disposal and treatment facilities.  Of total estimated national
needs of $106 billion for sewage treatment facilities, it is
estimated that $23 billion (or 1/5) of these needs occur in com-
munities of less than 10,000 population.  Yet while the pollution
problem facing a small, rural community may be pressing, the
community's position on a state priority list may be so low as
to preclude for many years a solution through the use of a fed-
eral construction grant.  Moreover, rural communities often
lack the financial resources or expertise necessary to complete
a sewage treatment project on their own.

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                            11-12
     Beginning in FY79, rural states (i.e., states with at
least 25 percent of its population qualifying as rural) were
required to set aside 4 percent of their allotments for alterna-
tive and unconventional systems to be used in communities with
a population of 3,500 or less, or in highly dispersed areas
of larger communities.  At present there are 34 such states.
In addition, states not strictly defined as rural may request
the Administrator to set aside, in a similar manner, up to 4
percent of their allotted funds (two states have done so to
date).  In addition, 205(g) monies are available to be used in
rural initiatives.
The Innovative and Alternative
(I/A) Set-Aside

     Section 201(g)(5) of the Clean Water Act of 1977 requires
all facility plans initiated after September 30, 1978, to con-
sider innovative and alternative technology for municipal waste-
water treatment in order to meet the national goals of (a)
greater recycling and reuse of water, nutrients, and natural
resources; (b) increased energy recovery and conservation, reuse,
and recycling; (c) improved cost-effectiveness in meeting speci-
fic water quality goals; and (d) improved toxics management.
The Act also requires EPA to set aside a percentage of the state
allotment (2 percent in FY79 and FY80 and 3 percent in FY81)
and to increase the federal share of grants for I/A processes
from 75 percent to 85 percent.  Moreover, the Act provides for
grants to pay 100 percent of the cost to modify or replace inno-
vative or alternative technologies that have failed.  The three-
year I/A program as presently mandated by Congress will expire
on September 30, 1981.


Multiple-Purpose Projects

     A multiple-purpose project in the Construction Grants Pro-
gram is one that combines a wastewater treatment project meet-
ing an NPDES permit with another acceptable purpose, such as
reclamation and reuse, energy generation, urban drainage, recre-
ation, or the disposal of municipal and industrial waste.

     The current funding policy of EPA for the design and con-
struction of muliple-purpose projects involves the use of the
Alternative Justifiable Expenditures (AJE) method for allocating
the costs to the various project purposes.  The AJE method has
been used since 1976, primarily in projects involving combined
sewer overflow and urban drainage problems.

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                            11-13
     The AJE method is based on the assumptions that achieving
multiple purposes simultaneously should be less costly than
achieving them separately, and that all purposes should share in
the cost savings.  Thus, the funding for a project under this
policy is less than it would have been had the project been
designed for the single purpose of pollution control.  It has
been argued, therefore, that this method discourages integrated
facilities.

     The current funding policy for projects combining water
pollution control with recreation is different from the policy
for all other types of multiple-purpose projects.  The Agency
funds such projects at the level of the most cost-effective
single-purpose pollution control project, which means that
no costs associated with the design and construction of recre-
ation elements are eligible.  However, the grantee is not eco-
nomically penalized for undertaking this particular multiple-
purpose approach, as he would be for all others under the AJE
method.
TYPES OF PROJECTS—REMAINING NEEDS
AND PAST AND FUTURE FUNDING

     In considering whether to change the grant program's em-
phasis on the types of projects to be funded, it is important
to understand what types of projects have been funded in the
past and what the relative needs are among project categories
for the future.  Unfortunately, national statistics on the types
of projects funded in the past are scarce.  Prior to January
1978, statistics were not maintained detailing which needs cate-
gories were associated with each grant, or how much of each
grant's funds went to treatment plant construction versus other
needs categories, e.g., new interceptors.  Data have been main-
tained since 1973, however, concerning aggregate grants awards,
by state and region and also by community size.  Accordingly,
the profile presented below of funding under the Construction
Grants Program is based primarily on future needs data when de-
scribing the types of projects involved, and is based on histor-
ical needs data when describing the geographic areas or sizes
of communities affected.
Remaining Needs

     The 1978 Needs Survey estimated that a total of $106 bil-
lion would be needed to complete the construction of all the
eligible sewage facilities in the country.  If, in addition,

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                            11-14
needs for constructing stormwater collection and treatment
systems were included, another $62 billion would be required.

     Figure II-l on the following page illustrates the rela-
tive funding needs of the various types of projects.  Of the
$106 billion total, only $15 billion is earmarked for construct-
ing secondary treatment plants (needs category I).  Presumably,
that amount would complete the national program of achieving
secondary treatment for the entire country.  Very small commun-
ities (fewer than 500 people) are not included in these esti-
mates, however.  Another $21 billion is designated for treatment
facilities of more advanced design (needs category II).  Ad-
vanced secondary treatment and tertiary (advanced wastewater)
treatment are included in this category.

     Three other needs categories are of similar magnitude, rang-
ing from $19 to $26 billion.  The largest is needs category V,
combined sewer overflows (CSOs), estimated at almost $26 billion.
CSOs remedy the problems of overloading treatment plants at times
of peak stormwater flow.  Categories IVA and IVB, new collectors
and new interceptors, totaled approximately $19 billion each.

     The final two needs categories are much smaller, due in
part to the limited eligibilities of projects in these cate-
gories.  These are infiltration and inflow (IIIA) and replace-
ment and rehabilitation (IIIB), estimated at $2.4 and $4.9 bil-
lion respectively.  Although the Category IIIB estimate may
seem to some observers to be relatively small, this is due
largely to the restrictive definition applied to this needs
category by EPA.  For example, if eligibilities were less
restrictive for rehabilitation, the needs in urban areas would
be much larger.


Types of Projects Funded, 1978-1979

     Two important questions in the analysis of the Construc-
tion Grants Program are which categories have been funded and
at what levels.  As discussed previously, data concerned with
funding by needs category were not collected until 1978; there-
fore, it is not possible to examine pre-1978 spending patterns.
Post-1978 data, however, provide insight in answering these
two questions and are examined in the following sections.

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                           11-15

                          Figure 11-1

    NATIONAL  FUNDING  NEEDS BY  PROJECT CATEGORY
     NEEDS CATEGORY
         VI. STORM WATER
      V. COMBINED SEWER
         OVERFLOW
   IVB. NEW INTERCEPTORS
    IVA. NEW COLLECTORS



     1MB. REHABILITATION

IIIA. INFILTRATION/INFLOW



              II. AST/AWT




            I. SECONDARY
                                                      -$167.8
                                                     $160
      DOLLAR NEEDS
         (Billions)

$20
Source: 1978 Needs Survey, Cost Estimates for Construction of POTW Facilities. GICS Database".

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                             11-16
     Awards by  Needs Category

     In calendar  years 1978 and 1979,  approximately $7.5 billion
was spent  for construction of treatment  plants.  Figure II-2
shows the  distribution of awards by needs category.  As can be
seen in the figure,  secondary treatment  facilities alone account
for 37 percent  of the grant money, and when coupled with advanced
wastewater treatments, a full 53 percent  of all awards are ac-
counted for.  In  addition, new collectors and interceptors rep-
resented over 1/3 of all awards.
                             Figure 11-2

           NATIONAL DISTRIBUTION OF AWARDS DOLLARS BY
                        PROJECT CATEGORY
                          1978-1979  AWARDS
           INFILTRATION/
           INFLOW 1.2'
        REHABILITATION
           2.1%
            Source:  GICS Database. Awards dele ww« anatynd and refined by EPA
                  staff.  Approximately 40 percent of awards required additional
                  analysis.
     Table  II-3 depicts the 1978 needs and the 1978/79 awards
for treatment  and pipe-related projects as well as for infil-
tration/inflow and combined sewer  overflows.  The heavy  empha-
sis relative to needs on treatment  projects is clear.  This
reflects  the emphasis on the part  of  POTWs to meet current
regulatory  requirements.  Pipe-related projects, however, have
been funded in close relation to their share of 1978 needs.

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                                11-17
                              Table 11-3

                         1978-1979 DOLLAR AWARDS:
                          TREATMENT VERSUS PIPES
                    (percent of 1978 dollars by need category)
            Treatment
               Secondary
               AST/AWT
                 Subtotal
               Replacement/
                 Rehabilitation
               Collectors
               Interceptors
                 Subtotal
            Other
               Infiltration/Inflow
               Combined Sewer
                 Overflows

                 Subtotal

                  Total
                                1978 Needs1
 14*

 19

 33X
  5%
 18
 18
 41X
 2*

 24
 26*

100*
              1978 and
             1979 Awards2
 37X
 16
 53X
 2X
 13
 22
 37X
  IX

  9

 IPX

100X
            A1978 Needs Survey, GICS Database.
            o
            GICS Database.  Awards data were analyzed and refined by
            EPA.  Approximately 40 percent of awards required additional
            analysis.
      Awards  by Region

      While data on  national-level  distribution of awards by
project category are available, definitive material for  regional
analysis is  not so  easily  identified.  An  initial approach to
this  analysis has been to  use dollar award data  collected from
the regions  since 1978 (for  administrative and management pur-
poses,  EPA divides  the country into ten  regions,  which are de-
tailed  in Exhibit II-2).   Due to data collection  and processing
problems, however,  the quality of  some existing  information is
in question.   Therefore, a sample  of verifiable  data has been
developed to provide insight into  this area.  The sample was
derived from all grant awards that correctly identified  the

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                            11-18
breakdown of grant awards into individual needs categories.
The resultant sample contained 41 percent of the awards and
amendments made for Step 3 and combined Step 2 and Step 3
projects (known as Step 4 in the Construction Grants Program)
from 1978 to 1979.  This 41 percent of the number of awards
represents 45 percent of all award dollars.  For individual
regions, however, the percentage of award dollars represented
in the sample ranges from 85 percent for Region VI to 4 per-
cent for Region VII; the percent of dollars represented in
the sample for each region is illustrated by the shaded areas
in Figure II-3.  It must be kept in mind that the smaller the
percent of dollars represented in the shaded areas, the greater
is the likelihood of error in the displayed distribution as
compared with the true regional distribution.  However, the
sample appears to be, with the exception of Regions VII and
IX, very representative, with over 40 percent of each region's
award dollars represented.

     Nationally, the sample's percent distribution of award  dol-
lars for each project category is very similar to that shown in
Table II-3.  This fact adds credibility to the results derived
from the sample.

     Figure II-3 presents the award distribution by EPA region
and project category for grants awarded since January 1, 1978.
This figure highlights the diversity of award patterns by EPA
Region.  Even for secondary treatment, which typically receives
a large commitment of award dollars, there is great variation
by EPA region ranging from 19 to 62 percent of their respective
awards.

     Figure II-4 shows the sample award dollars distribution for
the seven project categories by EPA regions.  While Figure II-3
shows that the typical portion of a region's award dollars going
to CSOs is about 5 percent and that Region V has spent a much
larger portion on CSOs, the actual amount of this difference is
apparent only upon examination of Figure II-4.  From Figure II-4,
it is clear that a full 93 percent of all CSO dollars were spent
in Region V.  Other examples of this type of variation can be
seen through similar comparisons of these two figures.


     Innovative and Alternative Projects (I/A)

     During the period October 1978 through June 1980, a total
of 248  I/A technology projects were funded by EPA.  The 248
projects totaled over $27 million in I/A set-aside value (32
percent of the $84 million FY79 set-aside available).  Of the
248 projects funded, 31 included innovative technology (4 mil-
lion) and 224 included alternative technology ($23 million).

-------
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                                        11-20
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-------
                            11-21
     Rural Set-Aside Projects

     As of September 30, 1980 (end of fiscal year 1979), of the
$77.1 million total of the required individual state set-aside,
$7.63 million of FY79 monies could potentially have been lost
to reallotment.  Several states have excellent records in uti-
lizing the 4 percent set-aside while others show little or no
utilization of the set-aside.
     Second Grants

     No definitive data are available to assess the current
use of second grants to fund additional capacity.  For example,
it is diffi-cult to differentiate between undesired second grants
for additional capacity and intentionally time-phased grants.
An effort to determine the extent of second grants was based
on sample data of grantees who reported zero needs in 1978 but
received grants and of grantees who had secondary treatment
but still reported needs.  In both these instances, between 85
and 90 percent of the cases were easily determined to be valid
awards and not second grants for additional capacity.  More
detailed analyses of the remaining 10-15 percent were not car-
ried out due to resource constraints.  Even using this upper
bound, however, would result in a very small dollar estimate
of the extent of second grants.
Types of Fundable Projects, 1980

     The pattern of projects that are currently ready to pro-
ceed, or "fundable," gives a good perspective on what is like-
ly to be built in the next few years.  Data in this area are
available only on a regional basis.  As one would expect,
emphasis on secondary treatment plants is reflected in a high
percentage of projects of that type being ready to proceed.
As shown in Table II-4, 15 percent of secondary treatment
needs are currently fundable, in contrast to about 5 percent
for most of the other major categories.  Replacement and
rehabilitation shows a high percentage, perhaps because a few
large projects overwhelm the small needs base.  It is signifi-
cant to note that CSOs, which represent almost 1/4 of the 1978
needs, represent only 1 percent of the projects that are ready
to proceed (detailed data on needs and fundable projects for
each category for each region are shown in Exhibits II-3 and
II-4, respectively).

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                              11-22
                             Table 11-4

                   PERCENT OF NEEDS THAT ARE READY TO PROCEED
                           AS OF AUGUST 1980
                   (percent of 1978 dollars by need category)
              Needs Category

                I.  Secondary
                II.  AST/AWT
              IIIA.  Infiltration/Inflow
              IIIB.  Replacement/Rehabilitation
               IVA.  Collectors
               IVB.  Interceptors
                V.  Combined Sewer Overflows

                    Average Overall
Percent Fundable

    15X
    5
    5
    17
    4
    5
    1

    6*
              Source:  1978 Needs Survey; Wastewater Treatment Priority
                    List, GICS Database, August 1980.
     There have been questions raised regarding whether the
federal  government ought  to  give equal funding priority to
projects that involve treatment plants and  those that involve
pipe systems, such as new collectors, new interceptors, and
most replacement an
-------
                            11-23

Table II-5

1980 FUNOABLE PROJECTS:
TREATMENT VERSUS PIPES
(percent
Treatment
I . Secondary
II. AST/AWT
Subtotal
Pipes
III8. Replacement/
Rehabilitation
IVA. Collectors
IVB. Interceptors
Subtotal
Other
of 1978 dollars
1978 Needs*
14*
19
33X

5X
18
18
41X

IIIA. Infiltration/Inflow 2<
V. Coufclned Sewer
Overflows
Subtotal
Total
24
26X
100X
X1978 Needs Survey, GICS Database.
2Hastewattr Treatment Priority List, GICS
by need category)
1980 Fundable
Projects2
37*
17
54*

13X
12
16
41X

2*
3
5X
100X
Database, August 1980.
the needs are and where the awards have been going.  In this
section, needs and awards are examined by region, by state, and
by size of community.
Awards by Region

     The needs as assessed by the 1978 Needs Survey show a very
different level of need among the regions:  Region VIII requires
$2 billion, while Region V requires $23 billion.  In addition,
as shown in Figure II-5, the needs closely follow the population
in the regions.  As would be expected, the obligated funds
(which follow the allotments that are based on needs and popula-
tion) also follow that same pattern.

     The particular categories of need that represent the greater
amounts of funding requirements differ from region to region.
For example, as shown in Figure II-6, Regions II and IV have a

-------
                                                11-24
                                          Figure 11-5
                             1978  NEEDS, FUND OBLIGATIONS,
                                     AND POPULATION
                  $30
           DOLLARS
           (Billions)
                  $25
                  $20

                  $15

                  $10

                   $5
        $24
DOLLARS
(Billions) $22
                                                    50
                                                       POPULATION
                                                       PROJECTED FOR
                                                    40THE YEAR 2000
                                                       (Millions)
                                                     30
                                                    20
                                                     10
    I    II    III    IV   V    VI   VII  VIII   IX   X
                 EPA REGIONS
Source: 1978 Needs purvey, GICS Database; Qlean Water Fact Sheet,
      June 30, 1980;  1979 Statistical Abstract of the United
      States, Table 13.
                      Figure II-6

           1978  NEEDS  BY  EPA  REGIONS
                                                                                      CATEGORY
                                                                          OTHER
                                                                          SECONDARY          I
                                                                          AST/AWT            II
                                                                          INFILTRATION/INFLOW MIA
                                                                          REHABILITATION     1MB
                                                                          NEW COLLECTORS    IVA
                                                                          NEW INTERCEPTORS  IVB
                                                                          CSO                V
                 I
 II
III
                            IV       V      VI
                             EPA REGIONS
Source:  1978 Needs Survey, GICS Database.

-------
                                       11-25
      significant  need  for pipe-oriented  projects (categories  IIIB,
      IVA,  IVB), 46 and  54 percent  of their total needs respectively,
      Region  V's biggest need  is for CSOs,  accounting for  46 percent
      of its  total  needs.   Secondary treatment,  to some the most  im-
      portant needs category,  ranks as the  largest needs category in
      two regions  (VII  and IX)  and  is among the  top  three  needs  cate-
      gories  in five of  the ten regions.
      Awards  by State

           When states  are examined  across EPA regions, as shown in
      Figure  II-7,  the  concentration of  total  grant  dollars among a
      relatively  few states  is clear.  Twenty  states account for al-
      most 80 percent of the grant  dollars.  However,  this closely
      tracks  the  population  distribution by state:   the same twenty
      states  represented 74  percent  of the total population in  1970,
      The remaining states also show a strong  correlation  between
      grant  dollars received and population size.
      60%

PERCENT

      50%



      40%



      30%



      20%



      10%




       0%
58%
                                      Figure II-7

                         DISTRIBUTION OF GRANT DOLLARS
                            PERCENT OF TOTAL GRANT DOLLARS
                            RECEIVED BY STATES LISTED THROUGH
                            JUNE 30, 1980

                            PERCENT OF TOTAL 1970 POPULATION
                            LIVING IN STATES LISTED
                First 10
                States
               New York
               California
               Illinois
               Ohio
               New Jersey
               Michigan
               Pennsylvania
               Florida
               Texas
               Massachusetts
         Second 10
           States
          Maryland
          Indiana
          Virginia
          Missouri
          Minnesota
          Wisconsin
          Georgia
          North Carolina
          Connecticut
          Washington
Third 10
 States
Tennessee
West Virginia
Kentucky
Iowa
South Carolina
Louisiana
Puerto Rico
Oregon
Alabama
Oklahoma
Fourth 10
 States
New Hampshire
Maine
Kansas
Colorado
Mississippi
Hawaii
Washington D.C.
Arkansas
Delaware
Arizona
Fifth 10
 States
Rhode  Island
Nebraska
Nevada
Alaska
Utah
Idaho
Vermont
New Mexico
Montana
South Dakota
  Final 7
  Areas
North Dakota
Wyoming
Pacific Islands
Guam
Virgin  Islands
Samoa
North Marianne Islands
        Source:  Clean Water Fact Sheet, June 30, 1980; 1970 Census of Population, Number of Inhabitants. Table 14,

-------
                            11-26
Awards by Community Size

     The share of number of grant awards  and  grant  dollars
varies greatly by community size.   Figure II-8  shows the
number and dollar value of grants by community  size for the
1972-1980 period.  In total, 55 percent of  the  grants went to
communities with fewer than 5,000 inhabitants,  while 13 per-
cent went to communities with more  than 100,000 inhabitants.
Conversely, only 12 percent of the  dollars  went to  communities
of fewer than 5,000, while those with more  than 100,000 people
received 47 percent of the grant monies.
                         Figure 11-8

            GRANTS BY COMMUNITY SIZE (POPULATION)
              NUMBER OF AWARDS
                 >100,000
                            <5,000
$ VALUE OF AWARDS

> 100,000      < 5,000
                    Source:  Clean Water Fact Sheet, June 30, I960.
     Figure II-9 shows  the  distribution  of the number of grants
and number of communities by  community size,  while Figure 11-10
shows population and dollar awards  by  community size.  Both
figures highlight the relative  differences in funding for vary-
ing community sizes:  larger  communities receive more grants and
more dollars than might be  expected.   The vast majority of com-
munities in the country, 80 percent, are small communities, yet
they have received only 55  percent  of  the total number of grants
awarded to date. Similarly, although 31  percent of the population
resides in small communities, these communities receive only 12
percent of the awards measured  on a dollar basis.  Less than 1
percent of the communities  in the United States have populations

-------
                            11-27
of greater than 100,000, while 9 percent of the awards go to
these areas.  Moreover, communities of more than 100,000 people
account for 31 percent of the population but receive 42 percent
of the funding dollars.

     The communities with populations between 5,000 and 100,000
have a distribution of award dollars that is relatively well
correlated with population share.  On average, however, the
larger the community size, the more likely it is to receive an
award.  It appears that smaller communities are not receiving
their share of the awards of dollars based upon the number of
small communities and their share of population.  Explanations
of this phenomenon may include:

       •  Large communities have been faster at getting
          more projects ready to proceed because they
          have larger, more able staffs;

       •  EPA enforcement policy concentrates on larger
          municipalities, thus moving their projects up
          on the priority list;

       •  Water quality impacts may be more important
          in these large municipalities;

       •  Conscious policy decisions have been made by
          states and EPA to concentrate on aiding larger
          municipalities; and

       •  Other sources of funding are available to small
          communities.1


Standard Metropolitan Statistical Areas (SMSAs)

     SMSAs represent the more heavily populated areas of the
country.  It is useful to examine the needs of SMSAs as a way
to focus on the need in the more urban areas of the county.
 Approximately 1/3 of the Farmers Home Administration's grant
 and loan funds over the last five years has been awarded for
 wastewater projects—a total of over $3.5 billion.  In addition,
 the Housing and. Urban Development Department's Entitlement and
 Small Cities Program also has awarded approximately $3.6 bil-
 lion in both FY79 and FY80.  Most of these funds, however, are
 awarded to metropolitan areas.  In addition, a significant
 portion of these funds is awarded to drinking water projects.

-------
                                               11-28
PERCENT
                                            Figure 11-9

                     DISTRIBUTION  OF  NUMBER OF GRANTS AND PLACES
                80%                   BY COMMUNITY SIZE
                                                          PLACES
                                                                                 11%
                              5-10        10-25      25-60       50-100      >100

                                COMMUNITY SIZE (Population  in 1000's)
             Source:  Clean Water Fact Sheet, June 30, 1980;  1970 Census of Population, Number of Inhabitants. Table 19.
        50%
PERCENT
        40%
        30%
        20%
        10%
         0%
                   Figure 11-10

DISTRIBUTION OF POPULATION AND AWARDS
       DOLLARS BY COMMUNITY SIZE
                                                                                47%
                 31%
                                                     DOLLAR VALUE
                                                      OF AWARDS
                              5-10       10-25       25-50      50-100       >100

                               COMMUNITY SIZE  (Population in 1000's)
             Source:  Clean Water Fact Sheet, June 30, 1980;  1970 Census of Population, Number of Inhabitants, Table 5.

-------
                            11-29
     Needs for SMSAs for 1978 were reported for most states,
with the exception of Vermont, Wyoming and Alaska.  In addition,
no SMSA-related needs were reported for Puerto Rico, Virgin
Islands, American Samoa, Guam, or the Pacific Territories.
Figure 11-11 shows the SMSA needs by project type based on
1978 data.  Of the $72.5 billion in need, only 14 percent was
associated with secondary treatment.  However, secondary and
advanced wastewater treatment represented 35 percent of the
total SMSA need.  CSOs were also a significant need, accounting
for 21 percent of the need.

     Geographic Patterns

     Figure 11-12 shows the SMSA needs by category and EPA
region.  Clearly, Regions II and V have the most significant
needs.  Secondary treatment is the largest needs category for
only three regions (IV, VII, IX) while CSOs are a significant
need, representing the largest or second largest needs category
for six regions.

     Comparison with National Needs

     Figure 11-13 shows a comparison of SMSA and national
needs by EPA region.  In all cases, more than 50 percent of
the people in the regions live in SMSAs.  In Regions II and IX
this figure approaches 90 percent.  Moreover, for most regions,
except Region VIII, SMSA needs represent over 1/2 of the total
needs in the regions.  SMSAs in Regions II and IX account for
over 80 percent each of the total needs in each region.  Figure
11-13 also points out the general correlation between SMSA
population and SMSA needs.
OPERATIONS—THE GRANTS PROCESS

     The grants process administratively disburses the funds
of the Construction Grants Program.  It seeks to ensure through
administrative procedures that the funds are committed in a
timely manner to projects of acceptable quality.

     The process by which communities receive grants is segmen-
ted into three steps:

     Step 1:  Preliminary planning and engineering

     Step 2:  Detailed plans and specifications

     Step 3:  Facility construction

The steps must be followed in proper sequence, with each step
requiring a separate application procedure (except for small
communities where steps 2 and 3 can be combined).  The process

-------
                          11-30


                        Figure 11-11

      SMSA  FUNDING NEEDS BY  PROJECT CATEGORY
    NEEDS CATEGORY
     V. COMBINED SEWER
        OVERFLOW
   IVB. NEW INTERCEPTORS
     IVA. NEW COLLECTORS
     1MB.  REHABILITATION


MIA.  INFILTRATION/INFLOW





              II.  AST/AWT
             I. SECONDARY
DOLLAR NEEDS
   (Billions)
         Source: 1978 Needs Survey, GICS Database.

-------
                                            11-31


                                          Figure 11-12
                             1978 SMSA  NEEDS BY  EPA REGION
DOLLARS
(Billions)
         $4 -
         $2 -
                                                                                  CATEGORY
                                                                     CSO                 V
                                                                     NEW INTERCEPTORS   IVB
                                                                     NEW COLLECTORS     IVA
                                                                     REHABILITATION      1MB
                                                                     INFILTRATION/INFLOW IMA
                                                                     AST/AWT             II
                                                              K:X::;X;X:| SECONDARY          I
                                       IV       V      VI
                                          EPA  REGIONS
             Source:  1978 Needs Survey, GICS Database.

-------
                             11-32

                         Figure  11-13

   PERCENT  OF TOTAL REGIONAL NEED ATTRIBUTABLE TO SMSAs
TOTAL NEED 	 100%

PORTION OF POPULA-80%
TION WITHIN SMSA _


PORTION OF NEEDS „..
ATTRIBUTABLE TO 	 	 _
SMSAs

40%
20%
0%



/



- 58%







/











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V













N.
X.
>
63%
'..


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/
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.i;::


III     IV    V    VI
      EPA REGIONS
                                             VII   VIM   IX
X
             Source:  1978 Needs Survey, GICS Database; 1979 Statistical Abstract of the United States
                  Tables 11 and 19.	'
itself and the projects  in  their  various stages are often re-
ferred to as "the pipeline."   When  an application is approved,
a grant is provided to finance the  planning (Step 1), design
(Step 2), or construction  (Step 3)  of a wastewater treatment
system.  The administrative process involved in each of these
steps is described below.

     Step 1:  The applicant must  submit a plan of study,
     i.e., a document outlining the work to be done in
     preparing the initial  facility plan.  This plan
     must include the costs expected and a work schedule.
     Comments on the plan's compatibility with the area-
     wide management plan  (the 208  plan) must be obtained
     as well as comments from the A-95 Clearinghouse.
     If the applicant's  planned actions are approved, a
     Step 1 grant is awarded.   The  grant provides funds
     with which to work  out a facility plan (201 plan).
     This plan defines the  problem, examines alternative
     solutions, and selects one solution for implemen-
     tation.  The plan must include the results of
     public input, an environmental assessment, an
     infiltration/inflow analysis,  and a sewer survey,
     if required.  The plan must  then be submitted to
     the Clearinghouse,  the state,  and EPA (until dele-
     gation is complete) for  comments and approval.

     Step 2:  The application for a Step 2 grant must in-
     clude:  the approved  facility  plan, assurances of
     compliance with specified federal acts (such as the

-------
                            11-33
     Civil Rights Act), service agreements, and a sewer
     use ordinance.  A reasonable user charge system
     must be developed, i.e., a charge system that will
     cover all operating and maintenance costs of the
     treatment facility.  Finally, industries to be
     served by the proposed project must assure EPA
     that they will pay for their fair share of the
     project's costs.

     If the state and EPA approve the application, the
     applicant receives a Step 2 grant.  This grant pro-
     vides funds with which to draw up a detailed set of
     plans and specifications for the project, suitable
     for bidding by construction firms.  Both technical
     and administrative project requirements must be
     addressed in the plan and specifications.  Detailed
     construction cost estimates must also be prepared
     in order to judge the reasonableness of the bids
     received.  The completed plans and estimates must
     be approved before application for a Step 3 grant.

     Step 3;  The application for a Step 3 grant must
     include:  the approved plans and estimates generated
     in Step 2, assurances of compliance with specific
     federal acts and project requirements, and a
     realistic grant payment schedule from EPA to the
     locality.  If both the state and EPA approve these
     documents, the applicant receives federal funds
     for construction of the project.
Effect of Delegation on the Grants Process

     As delegation of program administration to the states pro-
ceeds, many of the review and approval activities outlined
above will no longer be performed by EPA.  In particular, the
dual and often redundant reviews by the state and EPA will be
replaced by reviews performed only by the state.  EPA will re-
main ultimately responsible for the performance of the construc-
tion Grants Program, but it will be less involved in day-to-day
activities of individual project planning and construction.
Process Time

     Data compiled by EPA Headquarters show that the typical
time involved for the entire grants process (from the initial
meetings through project close-out) is between seven and eleven
years.  There is a general feeling among those involved in the
grants process that this time period is longer than it has to be,

-------
                            11-34
     The State of California has recently compiled  data on the
time involved for projects of various sizes to complete each of
the three basic steps as well as pre-Step 1 and post-Step 3
activities.

     Figure  11-14 shows that the largest portion of time in the
grants process involves post-Step 3 (project close-out) activi-
ties for projects smaller than $10 million, while Step 3 (con-
struction) is the largest portion of time expected  for projects
greater than $10 million.  The other elements of the process
that are exceedingly time-consuming are facility planning and
the procurement process.

     Within  each of the steps many individual tasks (some of
which were outlined in the earlier brief description of the
grants process) are necessary.  Figure 11-15 illustrates the
interrelationship of the subtasks and the critical  path of the
entire process.  The critical path is useful in highlighting
which activities to examine as possible candidates  for reducing
the overall  time of the grants process; changes in  those activ-
ities could  reduce the overall time of the process, while changes
in other activities would not affect the overall schedule.
Present Initiatives to Improve the Process

     Efforts are currently underway to reduce the time and com-
plexity 'Of the grants process while preserving project quality.
It is hoped that the delegation of program administration to the
states will reduce both the time and the complexity of the pro-
cess.  The reduction in redundant reviews should reduce the
time, and the reduction in the number of major actors in the
process should help reduce the complexity of the process.  In
addition, special initiatives aimed at assisting small commun-
ities are also underway (to be discussed in later chapters).
MANAGEMENT OVERSIGHT

     Management of the Construction Grants Program requires an
understanding of all the other components of the program, since
management's objective is to coordinate all functions.  While
some facets of construction grants (e.g., funding) can be de-
scribed independently of other areas, management must address
the comprehensive program.  This section presents a description
of EPA's current management of the program.  It has been seg-
mented into two parts; the first section relating to EPA's roles
and responsibilites, the second relating to evaluation of man-.
agement effectiveness.

-------
                                  11-35


                                 Figure  11-14

                            PORTION OF  TIME
                  ATTRIBUTABLE TO PROJECT  STEPS
TOTAL TIME = 524 YEARS
TOTAL TIME = 622 YEARS
       Projects of U*
       Than $1  Million
TOTAL  TIME = 7.75 YEARS
         Projects of
       $10-$50 Million
         Project* of
      $1-$10 Million
                                     TOTAL TIME = 9.34  YEARS
      Projects of More
     Tfeart $50 Million
Pre-Step 1:  Start to Award
          of Step 1  Grant
Step 1:  Award to Step 1
       Completion
Step 2:  Preparation of Step
       2 Application to
       Step 2 Completion
Step 3:  Preparation of Step
       3 Application to
       Completion of Con-
       struction
Post-Step 3: Completion of
           Construction to
           Final Project
           Close Out
     Source:  California data.

-------
                                                 11-36
                                                Figure  11-15

           THE CONSTRUCTION GRANTS PROCESS:  A TIME FRAME BASED ON A TYPICAL
                                   $10-15 MILLION TREATMENT PLANT

                                      TOTAL TIME REQUIRED:  9.93 YEARS
                                                  YEARS FROM INITIAL
                                                   START OF PROJECT
   STEP I  APPLICATION
  STEP I  GRANT AWARD
   STEP 11 APPLICATION
 STEP II GRANT AWARD
                 STEP  II
 STEP III  APPLICATION —
STEP III  GRANT AWARD



y*""""""'^'.."-'""""""" 	 "
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-9
•**-
    1. Prepare Plan of Study
    2. A/E Procurement
    3. State and EPA Application Review


   -1. Process Step 1 Grant

    1. Prepare E A
    2. Public Participation Programs
    3. Prepare Facilities Plan
                                                                             1. State Review of Facilities Plan
                                                                            1. Prepare EIS
                                                                            2. Public Hearings
                                                                            3. EPA Review of Facilities Plan
    1. Prepare Step 11 Application
    2. Step II A/E Procurement

 \  1. State Review of Step 11 Application

    1. EPA Review of Step II Application
    1. Design and Submit Plans and Specs
    2. Draft Plan of Operation
    3. Prepare Step III Application
' \  1. EPA and State Review of Plans and Specs
O—1. Process Step Ml Grant
    1. Advertise for Bids

    1. Review Bid Package
   -1. Pre—Construction Conference
                                                                            1.  Construction of Project
                                                                            2.  Inspections
                                                                            3.  Payments
                                                                         y-«— 1.  EPA and State Project Review

                                                                            1.  Project Start-Up


                                                                            1.  Final Inspection
                                                                            1.  Final Audit
                                                                         -•—1.  Project Closeout
                  Source: A combination of actual and theoretical time requirements bated on data obtained from California
                         and Pennsylvania.

-------
                            11-37
Roles and Responsibilities

     The Construction Grants Program operates in a multi-level
organizational structure, with responsibility decentralized
within EPA to the ten regions.  Five organizational layers, both
within and outside EPA, must communicate with each other and
function together to administer the program properly,  with
governments on the federal, state, and local levels sharing
principal responsibility for meeting the program objectives.
Each of these levels is briefly described below:

       •  EPA Headquarters has an indirect (but major) impact
          on the Construction Grants Program as a result of
          the decentralized operation and management of EPA
          regions.  However, EPA Headquarters does play a
          critical role in defining the objectives of the
          Construction Grants Program, providing regulations,
          policy, and guidance on the methods of operating the
          program, and measuring the progress of the program
          versus the program objectives.

       •  EPA regions are the principal operating arm of EPA
          for the Construction Grants Program.  EPA regional
          administrators have the authority to approve the
          award of the grants, as well as interpret regulations
          and policy to meet the specific needs of the region.
          The regions directly impact program operations
          through the management of the grants process and the
          approval of all outputs from the municipalities.
          Delegation to the states will cover most of the
          direct operations of the EPA regions.

       •  State agencies are responsible for preparing and
          certifying project priority lists and river basin
          plans, as well as reviewing and certifying construc-
          tion grant applications, appearing in a variety of
          forms from state to state.

       •  Local public bodies, responsible for the treatment of
          wastewater, exist in a number of different govern-
          mental forms including incorporated municipalities,
          townships, counties, and sanitary or utility districts
          The responsible locality participates in nearly every
          step of the construction grants process, from initial
          planning through the operation and management of
          wastewater treatment systems.

-------
                            11-38
       •  Private firms experienced in the design of sanitary
          engineering facilities may provide services ranging
          from the preparation of plant design and specifica-
          tions to grant applications preparation, municipal
          budgeting assistance, and coordination of financing
          sources.  Engineering firms often function as a "de
          facto" department of public works for many small
          communities.  Construction contractors perform the
          direct construction work, under contract to the
          locality.

     In addition to the intergovernmental relationships outlined
above, program operations are also affected by the internal EPA
management structure and the division of program responsibilities
among the various offices.  Two points regarding this internal
management approach are relevant:

       •  EPA has a matrix approach to management, with the
          individual regional administrators responsible for
          operational control over the program in his/her
          region (including the allocation of resources) and the
          assistant administrator in Headquarters responsible
            r national program performance.  The assistant ad-
          nuiistrator is held accountable for meeting program
          object I es by the administrator, the Office of Manage-
          ment ana Budget, Congress, and the public, despite
          the fact that the regional administrator awards the
          grants and reviews all project documents.  This
          matrix approach goes beyond the Headquarters/regional
          relationship in most other federal programs.

       •  Within EPA, responsibilities for program performance
          are divided across offices, with at least four
          separate offices influencing program direction.  The
          main operational office is the Office of Water and
          Waste Management, but separate policy is set by the
          Office of Environmental Review (NEPA), the Office of
          Civil Rights (MBE, Civil Rights), the Office of
          Enforcement (NPDES permits), and the Office of Air,
          Noise, and Radiation (Section 316 policy, sludge
          management).

     Currently, EPA is the direct manager of the entire grants
program; however, it delegates specific tasks to states and
oversees their performance.  EPA's interpretations of legisla-
tive intent requires EPA to maintain full responsibility for
all CGP activities whether or not it has lead authority for an
activity.  Through a series of regulations, Program Requirements

-------
                            11-39
Memorandum (PRMs) and Program Operations Memorandum (POMs), how-
ever, EPA has interpreted the CWA and established policies cover-
ing delegation of some responsibilities.  EPA has determined that
the types of responsibilities which it can delegate to states and
those which it must manage are:

       •  Category 1—Nondelegable Activities—These ac-
          tivities cannot be delegated to the states or
          to the Army Corps of Engineers (who now provide
          Step 3 resources), either because delegation
          is restricted by regulation or because the
          activity is EPA-specific (such as "Management
          of Delegation").

       •  Category 2—Technically Nondelegable Activities—
          These activities are technically nondelegable
          and the final review responsibility will remain
          with EPA.  However, the state or the Army Corps
          of Engineers may, under delegation, assume a
          strong staff role in support of EPA.  Consequently,
          although these activities are considered techni-
          cally nondelegable, in fact a large portion of
          the staff work may be delegated.

       •  Category 3—Delegable Activities—These activi-
          ties are considered fully delegable, assuming an
          adequate oversight role by the regions.

     The specific activities within each of these categories
which can or cannot be delegated to the states are listed in
Table II-6.  As can be seen in the table, the vast majority of
activities are considered delegable.

     Since total delegation is not possible (due to legislative
constraints as discussed above) and the transfers of delegable
activities to the states is still occurring, EPA remains ac-
tively involved in direct program operations.  EPA's current
role is characterized by responsibility in four major areas:

       •  Direct operations—day-to-day oversight of proj-
          ects for nondelegated states.  Other activities
          can be seen in Category 1, Table II-6.

       •  Delegation oversight—ultimately responsible for
          all delegated activities.  See Category 3,
          Table II-6.

       •  Delegation management—responsible for overall
          management of the delegation process.

-------
                                                11-40
             •    Regional  program  management—responsible  for
                  national  direction  of  the  program and  implemen-
                  tation/interpretation  of  legislative mandates.
                                              Tablt 11-6

                                  OELEGABLE AND NONOELEGAM ACTIVITIES
     Category 1—Itondelegable Activities

    Priority list Review and Acceptance
    Negative Declaration
    Disputes, Appeals, Protests
    State Agreement Management (Delegation)
    Negotiation of State Agreements and Amendments

    Construction Mgt. Assistance Grant Management
    Corps Agreement Management

Category 2—Technically Itondeleqable Activities

Step 1
   Processing Step 1 Grant Offers
    MSE Review
    Payments
    Grant Amendments
    Review of Environmental Assessment
     & Preparation of Appraisal
    Public Hearings

Step 2/2+3
    Processing of Step 2/2+3 Grant Offers
    MBE Review
    Payments
    Grant Amendments

Stepi 3
   HPFocessing of Step 3 Grant Offers
    MBE Review
    Payments
    Grant Amendments
    Interim Audit Resolution
    Final Audit Resolution

Support Activities
    Inquiry Response (FOI, Congressional, OMB,  GAO)
    Construction Grants Program Planning (including ZB8)
         Category 3—Oelegeble Activities

Step  1
   Preapp11 cation Conference
   Plan Of Study
   Review of Application t Clearinghouse Comments
   Review of Prop. Eng.  Contr.
   Overall Management of Projects
   Mid-Course Facility Planning Reviews
   Public Pertlcteatiofl  ProeriM
   Review of Facility Plan (excluding  I/I EAS)
   I/I Analysis
   Sewer Systea evaluation Survey
   Review of Facility Plan fro* an Operability  Stand
       nistrative Review of Application
    Review of.Proposed Engineering Contract
    (Including Overall Management of Project)
    Predeslgn Conference
    In-p>oc«s Design Review*
    Tcdknt««V»t AdMi»«ttrat»e Review of FiS
    Construct ability t B1d4ab111ty
    Draft Plan of Operation Review
    Review of UC/ICR Syttem
    Assessment of the Operability/Maintainability
    Review of VE

Step 3
    Administrative Review of Application
    Review of Proposed Engineering Contract*
    Overall Management of Project Preconstruction>
    Preconstruction Conference
    Bid Package Review
    Overall Management of Projects
    Processing Change Orders
    Interim Inspections
    Plan of Operation Review & Tracking of Compliance
    Otft Manual  Review
    Sewer Use Ordinance Review
    UC System Review
    1 Year Follow-up 01* Inspection
    Review of Pretreatment Plan
    Start-up Services
    Final Project Inspection and Certification
     Operabllity
    Project Close-out

Support Activities
    InfoVraatlon Control & Support of RCGM
Source:  Background Paper,  Current Use of Resources. July IS, 1980.

-------
                            11-41
     In non-delegated states, EPA must examine individual
projects for the following:

       •  Environmental soundness

       •  Consideration of alternatives to traditional
          treatment and discharge

       •  Consideration of cost effectiveness.

In addition, EPA also encourages innovation and energy conser-
vation in projects and ensures that grantees comply with other
federal laws as they apply.

     Personnel resources required within the program are esti-
mated at 368,000 work years in FY80.  Approximately 99 percent
of all the personnel resources in the program are at the local
level, either as temporary construction workers or as local
staff assigned to the treatment works.  The state and federal
resources (0.5 percent of the total each) are limited to
overseeing the grant program and reviewing various program
outputs for conformance with federal and state requirements.

     State resources resulting from delegation, combined with
resources resulting from an EPA agreement with the Army Corps
of Engineers, has augmented what was acknowledged to be a
severe resource deficit in federal/state management of the
program.  State resources for the program are expected to con-
tinue to increase (although at a decreasing rate) as delegation
of operations spreads.  In FY82, approximately 80 percent of
the direct operational workload is expected to be assumed by
either the Corps (approximately 20 percent) or the states (60
percent).  EPA workload in FY82 will consist of:  the remaining
direct activities not delegated; management of the nondelegable
activities (i.e., NEPA, Bid Protest Resolutions); national
initiatives where overriding federal interest demands involve-
ment; national policy development and program management; and
oversight and quality assurance of state operations.

     Despite the promotion of delegation by Congress and EPA,
the progress toward delegation experiences major hindrances:
states are not legally bound to accept delegation and some
states do not want this responsibility.  Some of the reasons
for state reluctance are salary scales that make hiring quali-
fied staff difficult, the existence of personnel ceilings in
an increasing number of states, and situations in which the
responsibility for water quality programs is split among
multiple agencies.

-------
                            11-42
     This means that EPA, which is ultimately responsible for
the grants program even for states which accept delegable
tasks, must try to oversee the program through approval of a
state's program and its generic system for developing the pri-
ority project list.  In day-to-day operations in a delegated
state EPA has no project approval or veto authority over indi-
vidual projects.  These realities greatly affect the Agency's
ability to manage through delegation.

     Despite these limitations, 44 states are expected to have
signed delegation agreements by mid-FY82.  States, however,
have been slow to take on many of the delegable tasks and
slips in the schedule of transfer of activities outnumber
advances by more than 2 to 1.
Evaluation of
Management Effectiveness

     The present management system does not permit easy and
effective evaluation of program operation.  As a result, it is
difficult to identify specific problem areas before they lead
to more complex problems and issues.  For example, noncompli-
ance may be an indication that the facility design and approach
process need revamping.  Yet without good data on compliance
the need may go unheeded.

     Data on the length of time of various phases of the con-
struction grants process are also difficult to obtain.  The
information presented in the operations section concerning the
length of time needed to complete projects is also related to
management issues and the difficulty in obtaining timely data
to be used in program evaluation.
PLANNING AND THE WATER QUALITY MANAGEMENT PROCESS

     Construction grants are an element of a broad water qual-
ity management program.  To improve construction grants, one
must also improve the water quality management program, which
considers pollution from all sources.  For example, the choice
of cost-effective POTW control options must consider nonpoint
source information, a product of the WQM program.  Also, the
WQM program provides evidence of the effectiveness of point
source controls including POTW construction.  Finally, through
this process the WQM program determines the permit conditions
for facilities funded under the CGP.

-------
                            11-43
also improve the water quality management program, which con-
siders pollution from all sources.  For example, the choice of
cost-effective POTW control options must consider nonpoint
source information, a product of the WQM program.  Also, the
WQM program provides evidence of the effectiveness of point
source controls including POTW construction.  Finally, through
this process the WQM program determines the permit conditions
for facilities funded under the CGP.

     In the following actions, the current planning and water
quality management process is described from the assessment of
the problem through solution development and implementation.


Problem Assessment

     The Act details the responsibilities of EPA and the states
in assessing the status and goals relating to water quality.
Section 303(a) of the CWA directs the state to set water quality
standards (WQS) and EPA to approve them.  Where the states do
not set adequate water quality standards, EPA may promulgate
standards for them.  Once they are approved, states must review
and revise if necessary their WQS at least once every three years
Under the Act, a standard consists of both a designated use
(e.g., public water supply) and a set of numerical criteria to
support that use.  EPA provides water quality criteria for the
states to consider in setting their standards.

     The Act also requires states to monitor the quality of
their surface and ground water supplies, analyze the data, and
prepare a. report documenting the extent to which streams provide
for propagation of fish and wildlife and contact recreation.

     Determination of whether certain base-level controls on
point sources and feasible controls on non-point sources will
allow individual stream segments to meet water quality standards
is also required.  The state then establishes, and EPA approves,
"total maximum daily loads" (TMDLs) which will allow for propa-
gation of fish and wildlife and contact recreation.  If a. stream
will meet WQS, it is classified as "effluent limited."  If a
stream will not meet WQS without additional controls, it is
classified as "water quality limited."  By regulation, states
must develop waste load allocations (WLAs) for all water
quality limited segments.  WLAs allocate loads among individual
dischargers and help identify point source permit conditions.

     If a segment can not attain the water quality standards
for technical, environmental, or economic reasons, the use
designation is lowered (along with the attendant criteria and
standards) until "attainability" of standards is possible.

-------
                             11-44
This iterative procedure  (and further steps in the process)  is
illustrated in Figure  11-16.
                          Figure 11-16

            THE WATER QUALITY STANDARDS PROCESS
                     Water Quality Standard!
                       i
                    Attainability Determination
Solutions  Development and
Implementation

     The CWA  sets  forth extensive procedures  aimed  at developing
a plan of  action to meet water quality goals  and  set  priorities
within the many  actions required.  The act sets  forth several
mechanisms related to priority setting.   States  are required to
set priorities  for analysis of water quality  limited  stream

-------
                            11-45
segments.  States must also inventory their treatment works
construction needs, develop systems for assigning priorities,
and develop priority lists.

     The Act requires the states to develop plans which, on a
segment-by-segment basis, cover the following:

       •  Achievement of effluent limits and compliance
          schedules for point sources at least as
          stringent as those required by the Act or in
          any applicable water quality standards,

       •  Incorporation of applicable elements of
          areawide plans and basin plans,

       •  Total maximum daily loads,

       •  Procedures for revising the plans,

       •  Adequate authority for intergovernmental
          cooperation,

       •  Control of residual wastes from water
          treatment, and

       •  An inventory and priority ranking of waste-
          water treatment works construction needs.

     Areawide plans, which states or regional agencies develop,
must also include treatment works priorities which the states
must incorporate into their priorities under 303(e).  To receive
a construction grant, a treatment works must have certified pri-
ority within the state in accordance with an approved state plan.

     The areawide plans required under Section 208 of the Act
are prepared by areawide agencies, usually designated by the
Governor.  The agencies prepare areawide waste treatment manage-
ment plans with federal funding assistance for areas with sub-
stantial water quality problems.  The plan is the blueprint for
achieving or making progress toward water quality goals.  The
plans should include, but are not limited to:

       •  Identification of necessary municipal and indus-
          trial treatment works for a 20-year period,
          annually updated; necessary collection and storm
          runoff systems; and a program of necessary fi-
          nancial arrangements for these treatment works.

       •  Establishment of an areawide regulatory program
          to control all point and non-point sources of
          pollution, to control the location, modification,

-------
                            11-46
          and construction of new discharges within the
          area;  and to ensure that industrial and commer-
          cial wastes discharged into any treatment works
          meet pretreatment requirements.

       •  Identification of agencies necessary to con-
          struct, operate, and maintain the facilities
          and carry out the plan (Designated Management
          Agencies).

       •  Identification of measures necessary to carry
          out the plan, including financing; identifica-
          tion of the required time, costs, and economic,
          social, and environmental impacts of the plan.

       •  A process to identify and develop procedures
          and methods for control of pollution from agri-
          culture, silviculture, mining, construction,
          salt-water intrusion, residual wastes, and sub-
          surface excavations.

     Section 201(g) authorizes EPA to award grants for publicly
owned treatment works construction.  POTW construction is a
major step in following through on the plan and moving toward
water quality goals.   The initial step of the grants process is
the "facility plan."  The facility plan must conform with appro-
priate areawide plans.

     Under the Act, EPA (or the state, if it has delegated per-
mit authority) develops conditions for NPDES point source per-
mits.  These permits generally require of dischargers certain
effluent limits, data, reporting, and other items and must not
conflict with approved areawide plans.  In general, permits re-
quire that POTWs install secondary treatment by July 1, 1977.
These so-called technology standards are based on the concept
of uniform discharge limits for municipal dischargers and indus-
trial dischargers in individual categories.  The 1977 Amendments
added a toxics emphasis to these requirements, requiring EPA to
set effluent limits equivalent to BAT for both direct and indi-
rect dischargers of 65 toxic chemicals.  This forms much of the
basis for the focus of the pretreatment program.  Where tech-
nology-based effluent standards fail to allow stream segments
to meet water quality standards, the Act authorizes EPA (or the
State) to set more stringent permit requirements.

-------
                               Exhibit INI

    PUBLIC LAW 92-500 AND SUBSEQUENT Af€MOMENTS;   OBLIGATIONS AND OUTLAYS*

                                (In dollars)
Fiscal Year
1973*
1974
1975
19 7«*
1977C
1978
1979
1980
Authority
5.000,000.000
6,000,000.000
7,000.000,000
0
1.480.000,000
4.500,000,000
5.000,000,000
5.000,000,000
Allotments
2.000,000.000
3.000,000.000
4,000,000,000
9.000,000,000
1.480,000.000
4.500,000,000
4.200.000,000
3,400.000,000
Obligated (Each FY)
1.532,048,571
1.444,443.360
3.616,168,130
4.813,639,424
6.663,832,006
2,300,916,959
3.871,696,000
1.765.000,000
Outlays
0
158,816,688
874,158,134
2.563,497,940
2,710,444,759
2.959,897,559
3.612,400,000
3,274,100,000<1
      not Include reimbursable furtds.
^Contract authority.
•Includes transition quarter (July-September 1976).
Includes $480 million under Public Works Employment Act.
^Includes reimbursable and old law projects.

Source:  Clean Water Fact Sheet,  July 1980.

-------
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-------
                                         Exhibit 11-3

                                      1978 NEEDS SURVEY1

                                    (mil I Ions of do)lars)
EPA Region
1
II
III
IV
V
VI
VII
VIII
IX
X
Total
CAT i
1,489
3,669
1,236
1,358
501
569
1,413
419
3,386
1,023
15,090
CAT II
687
2,177
2,525
3,680
5,802
1,674
464
654
2,121
698
20,507
CAT IMA
65
254
31
648
583
324
188
62
77
178
2,437
CAT 1MB
121
2,772
1,348
3
213
102
23
93
85
98
4,877
CAT IVA
1,985
3,359
2,196
4,306
2,592
1,201
504
121
1,827
899
19,022
CAT IVB
1,305
2,800
1,676
3,659
2,637
1,556
1,218
395
2,240
961
18,474
CAT V
3,335
4,333
3,669
1,116
10,369
39
1,228
75
167
1,390
25,742
Total
9.006
19,373
12,696
14,791
22,716
5,477
5,051
1,836
9,919
5,258
106,153
Note:  Sun of entries may not equal  totals due to rounding.

1 Needs Categories:   (I)  Secondary, (II) AST/AWT, CIIIA) I/I, (IIIB) Rehabilitation,
 (IVA) Collectors,  (IVB)  Interceptors, (V) CSOs.
Source:  1978 Needs Survey. Cost Estimates for Construction of POTW Facilities, Table 1.

-------
                                                  Exhibit I 1-4

                                        FUNDABLE PROJECTS BY  EPA REGION

                                             (thousands  of dol lars)
EPA Region2
1
II
III
IV
V
VI
VII
VII 1
. IX
X
Tota 1
ELI6. COST
479,134
635,582
683,798
865,677
1,477,794
458,677
635,717
182,561
430, 1 72
173,554
6,022,666
CAT 1
190,130
287,760
198,739
212,140
296,470
288,135
278,683
104,493
244,300
100,751
2,201,601
CAT II
40,519
39,322
96,041
283,431
426,988
13,166
47,552
38,558
35,915
8,506
1,029,998
CAT 1 1 IA
4,505
12,258
1,187
22,304
34,579
16,565
19,608
1 1 ,046
469
200
122,721
CAT II IB
45,196
25,596
1 14,386
78,947
320,983
35,442
135,544
7,120
12,509
29,628
805,351
CAT IVA
3,422
105,361
233,554
13,502
135,048
67,564
99,456
3,712
49,213
513
711,345
CAT IVB
118,163
142,827
39,179
254,711
177,268
37,805
53,977
12,590
85,977
33,956
956,453
CAT V
77,199
22,458
712
642
86,458
-
897
5,042
1,789
—
195,197
'Needs Categories:   (I)  Secondary,  (II)  AST/AWT,  (MIA)  I/I,  (1MB)  Rehabilitation,  (IVA)  Col lee-tors,
 (IVB) Interceptors,  (V)  CSOs.
^Communities >500 persons.
Source:   Wastewater Treatment Priority List,  GIGS  Database,  August 1980.

-------
CHAPTER
STRUCTURE

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-------
              III.  STRUCTURE FOR THE 1990 STRATEGY
     Strategy development  involves  opening  up for examination
and potential change  the most  basic elements of a program such
as goals, priorities, program  structure,  and roles.   Accord-
ingly, it is a complex  and  often  emotionally intensive pro-
cess.  To facilitate  a  productive strategy  development process
for the 1990 strategy,  this  chapter describes the structure
that has been used in organizing  topics  and issues in this
notebook and in the workshop.   This chapter also deals with
the personal and objective  perspectives  of  what a strategy is,
and therefore what the  process  demands  from participants.
WHAT IS A STRATEGY?

     A strategy is a blueprint  for  action.   It  acknowledges or
establishes goals for  a  program,  and  sets  out  the priorities,
program structure, roles,  and pattern  of  responsibilities by
which those goals will be  achieved.

     A strategy is not a "plan."  Plans  are  important in order
to put a strategy into effect and to  carry  it  out.  Plans are
the tactics for implementation, and  involve  schedules,  as-
signments, resource allocations,  and  so  on.   Strategies, how-
ever, are the "policies" and structure of  the  program,  and
address questions such as  what  types  of  activities and  what
responsible organizations  will  be authorized  for  consideration
in the plans.

     A strategy is based on choices,  and a  sound  strategy is
almost always founded  on difficult  choices.   The  more that
basic policy issues are  thoroughly  debated  and  decided  in the
initial strategy-setting process, then the  smoother and more
effective is the subsequent implementation  effort.  Accord-
ingly,  this workshop notebook presents a wide  range of
choices on the principle policy issues of  the  Construction
Grants Program.

-------
                             III-2
ELEMENTS OF A STRATEGY FOR 1990

     For purposes of this workshop,  the strategic  issues  and
policy choices for the Construction  Grants  Program have been
divided into topical categories.  The categories  and  major
issues are listed in the Exhibit at  the beginning  of  this
chapter.

     The 1990 strategy for the Construction Grants Program
must include each of the following elements:

       •  Goals.  Acknowledgment of  the program  goals
          and objectives, and a set  of working assump-
          tions, many of which relate to  items under
          legislative authority.

       •  Compliance.  A framework for actions to  guar-
          antee that the facilities  constructed  under the
          program perform as they are designed to  perform.

       •  Funding.  A set of project priorities  and fund-
          ing mechanisms that will encourage the  con-
          struction of the most important types  of facil-
          ities, in the communities  that  need  them the
          most.

       •  Operations.  A set of policies  and division
          of responsibilities that will improve  the speed
          and performance of the grant review  and  ap-
          proval process.

       •  Management.  The roles that federal  and  state
          governments should adopt in carrying out vari-
          ous aspects of the strategy.

       •  Planning.  The ways in which new  or  different
          planning systems will be needed to support  the
          ongoing federal, state, and local decision-
          making processes under the strategy.

     The goals will be reviewed by the workshop  participants
but are not expected to be a major topic  for discussion,
except insofar as they affect choices on  the other elements.
Each of the remaining elements will  be discussed  during the
workshop, in the sequence in which they are listed above.
Work groups will discuss them and make recommendations in each
area.  The final strategy recommended by  each  work group  will
represent a pulling together of the  various recommendations
into one overall statement.

-------
                             III-3
     Strategic options  for  each  of  these  elements are detailed
in subsequent chapters  and  listed  in  decision  tables at the
beginning of each chapter.   The  decision  tables are provided
as a quick reference  to  the issues  and  options in each area.
They are intended as  useful aids during the  work group dis-
cussions, and list  topics  in  the sequence in which the work-
shop participants will  discuss  them in  developing their recom-
mendations.

     As each team selects  options  in  the  columns across the
decision tables, it will define  a  unique  potential strategy.
The choices in various  columns  must relate  to  one another
logically, in the context  of  the strategy,  but there is no
predetermined correspondence  of  options in  one column to those
in another; any compliance  approach could at least theoretic-
ally be combined with any  funding  approach,  and so on.  Any
horizontal path through  the table,  from an  approach in one
column to some other  approach in each of  the other columns,
will define a potential  strategy.
THE PERSONAL ORIENTATION TO  STRATEGY  DEVELOPMENT

     Developing a strategy for a major  program such  as  the
Construction Grants Program  is something  an  Agency does in-
frequently.  Most of the day-to-day activities are focused on
the implementation of a program strategy.   Even the  monthly or
annual activities are, for the most part,  concentrated  on
planning, budgeting, and carrying  out  the  Agency's various
program strategies.

     Since strategy development is done infrequently,  it
naturally requires a mental  shift  in  attitude  and  orientation,
away from the more frequent  activities  of  implementation.
Many of the decisions involved in  implementation are based
on the goals, priorities, program  structure,  and roles  which
have been previously established for  a  program.  Now,  in
strategy development, these  key descriptors  of a program are
themselves the subjects for  debate and  decision-making.  Ac-
cordingly, participants in the 1990 strategy  development pro-
cess must mentally shift gears and be willing  to propose and
discuss changes to the basic elements of  the  Construction
Grants Program.

     Strategy development therefore demands  a  great  deal of
its participants—that they  be open-minded  and willing  to
reconsider basic goals and priorities of  the  program;  that
they be creative in shaping  better ways of  achieving the basic

-------
                            III-4
goals of the program; that they be realistic and fair in
acknowledging the practical difficulties with various pro-
posals; and, finally, that they be far-sighted enough to rep-
resent not only their own organizational and personal inter-
ests but also the broad public interests of the entire pro-
gram.

-------
CHAPTER IV
OBJECTIVES

-------
                IV. WORKING ASSUMPTIONS, GOALS. AND
                  OBJECTIVES FOR THE 1990 STRATEGY
     In order for the workshops to result in meaningful discus-
sions on a future course for the government's Construction Grants
Program, there must be a common set of working assumptions and at
least general agreement on the broad goals and objectives of the
program.  These topics will not be the subject of a workshop
session, but will establish part of the underlying framework for
all of the sessions at the workshop.  Accordingly, even though
these assumptions are expected to be subscribed to by most, if
not all, participants, they are fair game for discussion at the
workshop if participants feel that alternate points of view have
significant implications for the 1990 strategy.
WORKING ASSUMPTIONS

     The major working assumptions provide a rationale for con-
ducting the workshop and for expecting that significant benefits
will come from it.  In short, these assumptions can be summarized
in three steps:  first, that there will continue to be a signifi-
cant Construction Grants Program; second, that it needs to be
modified and improved; and third, that it can be changed as a
result of the discussions at the workshop.

     The following are the specific working assumptions:

       •  Funding for the Construction Grants Program will
          continue at the level of approximately $4 billion
          per year until 1990.

       •  A decision on the appropriate level of funding for
          the program is up to Congress and is not a topic
          for the workshop to decide.

       •  The Construction Grants Program needs to be re-
          examined and probably changed because:
          —Criticism has been significant from
            within the government and from the
            public, and
          —There will never be enough funding to
            meet all the needs.

-------
                            IV-2
       •  Basic changes in the Construction Grants Program
          can be made because both EPA and Congress are open
          to a basic,  iogical modification to the program at
          this time.
GOALS AND OBJECTIVES FOR 1990

     Developing a strategy involves setting priorities among
various program elements.   Such priorities will be based on
individual perceptions of  the program's goals and objectives.
In order to have common agreement on recommendations,  therefore,
it is important to make explicit at least the broad goals and
objectives for the program for the next ten years.

     Of course, the overall goals of the Clean Water Act still
stand as the ultimate target for this and other water quality
programs.  These workshops are predicated on the assumption
that, however Congress may alter the Clean Water Act in the
future, it will leave in force the primary mission of the Con-
struction Grants Program:   that of supporting the construction
and improvement of the nation's sewage systems as a critical
element in improving and protecting the quality of the nation's
surface and ground water resources.

     More specifically, between now and 1990 EPA desires to in-
clude in its strategy for  the Construction Grants Program the
following goals and objectives:

       •  Ensuring that the plants and other projects
          that are built perform as intended;

       •  Supporting, with limited funding, those
          projects for which there is the greatest
          financial and water quality need for federal
          support;

       •  Striving for maximum water quality benefits
          from the program expenditures;

       •  Increasing program delegation to the states;

       •  Achieving municipal self-sufficiency, so that
          publicly owned treatment works and related
          facilities operate on a sound, self-supporting
          financial basis; and

-------
                            IV-3
       •  Encouraging the most cost-effective solutions
          to water quality needs on a local and regional
          basis.

     These goals and objectives provide the context in which
workshop participants should debate and develop their recom-
mendations for changes to the Construction Grants Program.

-------
CHAPTER V
COMPLIANCE

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-------
                   V. COMPLIANCE—MAKING SURE
                    THE TREATMENT PLANTS WORK
     One frequent target for critics of the Construction
Grants Program has been the compliance record of the plants
funded under the program.  While there is general agreement
that the present level of performance of POTWs is not satis-
factory, opinions differ as to the severity of the problem.
Fairly reliable data seem to indicate that as many as half of
the treatment plants may be seriously out of compliance with
their permit requirements for several months a year.  The
higher figures that are occasionally cited are somewhat mis-
leading, because they include minor and transient violations
which have little water quality significance.

     Nonetheless, everyone would like to see a better record
on compliance.  Making sure the plants and other facilities
funded under the program work as they were designed to work is
critical to maintaining public confidence in the program and
to achieving the maximum degree of water quality benefits.

     There are three major elements to this topic area:

       •  How to find out which plants have problems?

       •  What to do to correct problems at existing plants?

       •  How to prevent problems in plants yet to be built?

     The first two questions address existing treatment plants
while the third focuses on future facilities.  The following
sections highlight the principal elements of each question,
including various options proposed by interested parties.
HOW TO FIND OUT WHICH PLANTS HAVE PROBLEMS?

     The first step in assuring compliance is, logically
enough, determining which plants have problems.  While that
sounds simple enough, it has not been easy in practice.  Data
are collected and reported on a regular basis, but perhaps are
not controlled for errors and omissions as much as need be,
and perhaps the data are not organized or automated in a
manner that facilitates meaningful analysis.

     There are also some who want the information systems to
extend beyond just identifying the systems that already have
problems to raising warning flags for the systems that are
likely to have problems in the future.  These systems, they

-------
                             V-2
contend,  could be spotted in many cases through regular
reviews of the financial, operating, and management practices
of the systems.  These might be resource-intensive reviews,
but it is argued that they could be justified if they will
avoid serious noncompliance problems, and perhaps costly
changes,  later.

     Three options have been discussed for identifying which
plants have problems:

       •  Option 1—Make More Effective Use of Existing
          Reporting and Data Systems, through better
          quality control, improved information systems,
          and more disciplined reviews.

       •  Option 2—Require Annual or Biannual Audits.
          Periodic audits would become an ongoing program
          for the review of management practices, financial
          condition (including user charges), and operat-
          ing practices.

       •  Option 3—Implement Trigger Audits.  Require
          an audit only when "triggered" by noncompliance
          with NPDES permit conditions for an extended
          period or by significant amounts.


Option 1—More Effective Use of
Existing Reporting and Data Systems

     Option 1 emphasizes the augmentation of the in-place
reporting and data system.  Discharge Monitoring Reports
(DMRs) are currently required, on a quarterly basis,  for use
in collecting detailed information for the analysis of effluent
quality and quantity.  It is a self-monitoring system whereby
the POTW is responsible for the sample collection and analyses
based' upon detailed EPA requirements regarding sampling tech-
niques and laboratory procedures.  EPA could more carefully
monitor the DMR to assure collection of quality data  and could
establish a standardized computerized data analysis system to
make it more useful.

     At present, "noncompliance" is defined simply as not meeting
the permit requirements.  The term is imprecise, since there is
no indication of the degree of seriousness or the duration of
the violation.  More effective use of the current data could
provide more meaningful information on compliance if  it were
simply tabulated in better ways.

-------
                             V-3
     Advocates feel that the DMR is currently underutilized.
Each of more than 14,000 POTWs has an ongoing DMR system.  More
careful sampling and reporting efforts by operators of POTWs
would offer a low-cost, comprehensive method of collecting qual-
ity data.  In addition, a data management system would, once in
place, provide an ongoing vehicle which would provide reliable
and standardized compliance data.  Typical statements made by
advocates include:

    "The existing system makes sense—let's just use
     it right."

    "We've spent a lot of time and money developing
     the systems we have.  With a little more effort,
     they can be effective."

     Opponents feel that neither EPA nor most states could en-
sure that proper quality control procedures are followed in
sampling and testing procedures.  There are also concerns about
establishing a standardized data processing system.  Typical
statements are:

    "Some operators intentionally avoid proper sampling
     and testing techniques when they know the quality
     of their effluent is poor."

    "Data processing systems are always expensive and
     time-consuming to develop and never really run
     correctly."
Option 2—Require Annual
or Biannual Audits

    Option 2 would require management, financial, and operations
audits on an annual or biannual basis.  Proponents feel that
audits would be a form of preventive maintenance.  Early diag-
nosis of potential problem areas could facilitate remedial ac-
tions before facilities developed compliance problems.

     The types of audits envisioned by proponents of this option
include:

       •  Management—to ensure that staffing levels
          are adequate and filled with qualified
          personnel, that communication•with major
          dischargers into the system exists, that a
          pretreatment program is in place, and that
          long-range planning is adequate.

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                             V-4
       •  Financial—to ensure that  adequate revenues
          are being  collected to cover  all  charges,
          that a reserve fund for maintenance and
          repairs is included in charges,  that an
          effective  user charge system  is  in place
          and working,  and that standard accounting
          practices  are being followed.

       •  Operations and Maintenance—to ensure that
          the plant  is  being operated as designed, that
          adequate monitoring of inflow water quality
          and quantity  is conducted  to  allow proper
          adjustments by the operator to the plant's
          operation, and that maintenance  of the plant
          and collection system is adequate.

     Supporters of this option contend  that:

    "An ounce of prevention is worth a  pound of cure."

    "Most organizations have to have a  financial audit
     of the books every year.  This  audit  is similar to
     that, a look at the operating and  maintenance prac-
     tices, the user charge system,  and the management
     practices to see that they're not  getting into
     trouble."

    "It's the one way to ensure the long-term viability
     of POTWs that presently comply with their permits
     and therefore never get looked  at  very carefully."

     Opponents claim that an audit program would be very expen-
sive and that there is  some question as to whether there are a
sufficient number of adequately trained "auditors" to make the
program effective.  Some comments are:

    "Who is going to pay for the audits?  It's going to
     be expensive to have someone visit every plant yearly
     and really check into those areas  with more than a
     superficial examination."

    "Why not require audits only for noncomplying plants?
     If plants are meeting permit requirements now,  the
     chances are that they've got things under control
     and ought to be left alone."

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                             V-5
Option 3--Implement Trigger Audits

     Option 3 would require POTWs to conduct such audits only if
they failed significantly to meet certain effluent criteria in
the NPDES permit.   The specific trigger criteria would be devel-
oped by the Agency, and would probably be a combination of
length of time out of compliance, degree by which the standard
is exceeded, and the type of measures exceeded.  The criteria
could also include information on past history of the system.

     Advocates of  this option argue:

    "This is a cost-effective program.  Only facili-
     ties with perpetual or serious compliance
     problems would be required to conduct audits,
     and they are  the ones who need them the most."

Opponents comment  that the "trigger" component is not an effec-
tive tool to ensure compliance:

    "Trigger criteria mean that a facility is already
     out of compliance before it gets any help or
     attention.  And then what it needs isn't an
     audit--it needs a series of diagnostics which
     are aimed at  how to correct problems."

    "Regularly scheduled audits would be cheaper in the
     long run.  Problems could be caught before they
     are expensive to remedy."

    "In most cases, the staff of a POTW that is out
     of compliance could not perform these detailed
     audits reliably."
WHAT TO DO TO CORRECT PROBLEMS
AT EXISTING PLANTS?

     Once problems are identified at existing plants, there are
several basic approaches that EPA and the States can rely on
to see that the problems are corrected.   The options in this
area differ in the degree to which the federal and State
agencies would become directly involved in identifying and
correcting the problems.  They also differ in the extent to
which federal funds from the Construction Grants Program would
be available for such remedies.

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                             V-6
     The differences among approaches are great.  At one extreme,
some people favor placing great reliance on enforcement, and
taking noncomplying systems into court to force them to meet
standards.  Others, however, acknowledge the practical limita-
tions of that approach.  The courts, they point out, are re-
luctant to assess stiff fines on municipalities.  Furthermore,
the courts would be more willing to order the municipalities
to take specific corrective action if EPA or the states could
tell the court exactly what should be done.  This logic leads
to a policy of relying on diagnostic audits, followed up
perhaps by enforcement against recalcitrant systems.

     A related point of view is that systems are quite willing
to implement corrective action, if only they know what to do.
As a result, the governmental approach should be to rely on get-
ting information and technical assistance advice to the systems.

     A final viewpoint is that many noncomplying systems need
more than just information on what their problem is or what to
do.  They actually need personnel assistance in taking that ac-
tion, such as in setting up operator procedures to deal with
changing influent conditions.  There are also systems that feel
they need or deserve direct financial assistance as well.

     The four major options which represent this range of views
on what primary action the federal and State governments should
rely on to correct existing treatment plant problems are:

       •  Option 1—Increase Enforcement.  Bolster the
          existing enforcement program.  Aggressively
          pursue POTWs not in compliance.

       •  Option 2—Require Detailed Diagnostic Audits.
          Require in-depth O&M and management audits
          if a system is seriously out of compliance.

       •  Option 3—Increase Technical Assistance.
          Rely on programs for both O&M and management
          assistance.

       •  Option 4—-Fund Corrective Actions for Design
          and Operations.  This might involve paying for
          hardware or investing in a start-up period
          of third-party mangement.

     Each of the four options is presented below with accom-
panying views from interested parties.

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                             V-7
Option l--Increase Enforcement

     This program consists of reliance on enforcement as the
primary mechanism for moving plants from noncompliance to posi-
tions of compliance.  Enforcement actions could focus on one or
more of the following:

       •  Sewer ordinances--to ensure that municipalities
          are taking strong enough stands relating to
          local industry and others so that the influent to
          the plants meets plant design parameters.

       •  Pretreatment program—as above, to ensure that
          municipalities have adequate pretreatment pro-
          grams in place and are enforcing them so the
          sewage treatment plant itself will work as
          designed.

       •  Effluent discharge requirements—to put the
          responsibility on the municipality to determine
          what to do and then to implement that plan in
          order to comply with the POTW discharge permit.

     The court actions that EPA and/or the states might seek
could include civil penalties or fines, bans on new sewer hook-
ups, or even court-ordered third-party management of a system
until it can demonstrate that it is in compliance and able to
stay that way.  Less direct effects of such action could result
as well.  For example, a town's bond rating might be jeopardized
when the full financial and management implications of the local
POTW problems came to light.

     Supporters of primary reliance on enforcement claim:

    "Stepped-up enforcement is the driving force
     necessary to improve compliance rates.  These
     guys won't take action unless threatened with
     court act ion."

    "The current construction grants program could work
     effectively if only POTWs would actively try to
     meet the parameters of their permits."

Opponents point to the Agency's limited success historically in
the enforcement area.  In 1979, only a few POTWs were taken to
court,  despite the large number that were out of compliance.
Opponents comment:

    "Court cases are a time-consuming, costly, and in-
     efficient use of resources for national-level
     compliance problems."

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                             V-8
    "Enforcement is an 'after-the-fact'  reaction to
     noncompliance.  Put  your resources  on preventive
     measures."

    "Enforcement is only  useful for inexpensive remedial
     actions at POTWs.  What if expensive redesign and con-
     struction is needed  and POTWs don't have the money?"

    "How can EPA take a POTW to court for noncompliance
     if part of the problem has to do with a design EPA
     reviewed?"
Option 2—Require Detailed
Diagnostic Audits

     Unlike the options discussed under the first question in
this chapter, this type of audit would be more comprehensive
and in-depth and conducted by outside experts.  Both technical
and nontechnical, operations and management areas would be
scrutinized.  Problems would be identified and a remedial plan
developed.  The plan would list specific steps necessary for
compliance.

     The proponents of this option feel that a comprehensive
audit with an accompanying action plan is one way to ensure
that all problem areas are identified and addressed.  They
claim:

    "A comprehensive diagnostic audit has got to be
     the first step in solving a plant's problems.
     Until you know exactly what the problems are and
     what should be done, no city council or mayor or
     court will go along and OK everything."

    "Piecemeal approaches to compliance just don't
     work. Most problems cover several aspects of a
     POTW's operations."

    "You need the implementation plan, too, or the
     audit isn't effective."

Opponents find several faults with this option:

    "Who's going to pay for this—it could be a very
     expensive and protracted diagnostic program.
     Should 201 funds be used?  Should we fast-track
     these grants over other kinds to get diagnostics
     started as quickly as possible?"

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                             V-9
    "What if the action plan is beyond the financial
     means of the grantee?"

    "I doubt that there are enough qualified auditors
     to make the program effective."
Option 3—Increase Technical Assistance

     Technical assistance is a method whereby EPA or the state
directly assists the POTW.  The form of the program could be
regional assistance centers, programs that involve states,
and/or information for individual POTWs.l

     There are several types of aid which could be used.
Below are some examples of specific actions that have been
discussed:

       •  O&M Procedural Changes—help establish O&M
          systems that can respond to changes in
          influent volume and loadings so that action
          can be taken by operators before a plant
          has compliance problems.

       •  Operator Training—expand or duplicate on a
          regional level such programs as EPA's Na-
          tional Training and Operational Technology
          Center to train operators and increase the
          supply of new, competent operators.

       •  User Charges—encourage adequate and
          equitable rate structures through direct
          assistance or outside consultants.  This
          would provide sufficient funds to maintain
          the financial integrity of the POTWs,
          thereby aiding compliance.

       •  Tracking of Equipment Failures—develop
          systems to track major equipment malfunc-
          tions, leading to published reliability
          analyses and possibly even certification.
 Chapter VIII contains a discussion of the options for forms
 of technical assistance, including types of assistance,
 subject areas, and locations for such staff.

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                             V-10
       •   Circuit Riders—develop programs where
          experts (operators,  troubleshooters,  etc.)
          would service a series of POTWs from a
          central location.  This would be done on an
          "as needed" basis.

     Those who favor technical assistance express many reasons
for support such as:

    "More competent operators  would help keep a
     POTW in compliance and  catch problems before
     they become compliance  issues.  It's a cost-
     effective approach."

    "Many systems undercharge  users—that leads to
     inadequate funds for O&M  and long-term self-
     sufficiency problems.  They need help analyzing
     what appropriate rates  should be."

    "Knowing what equipment  is malfunctioning will
     help us to catch the problems and fix them,
     thereby getting the POTWs back into compliance."

    "Circuit riders would be an efficient use of
     resources.  No one individual POTW would carry
     the burden of supporting  a team of experts—yet
     they would be available when needed."

Opponents feel that technical  assistance alleviates states and
local municipalities of responsibilities that they should right-
fully bear:

    "EPA has no business getting involved in the
     funding of operations-related problems."

    "The federal government  shouldn't subsidize POTWs
     that are poorly managed."

Others raise objections over the broader issue of just how far
technical assistance will carry the program:

    "I don't have anything against technical assistance,
     but I don't see how that  can be a primary basis for
     getting more plants into  compliance^I think you
     need some sort of carrot  or stick, and just giving
     them more information won't be enough."

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                             V-ll
Option 4—Fund Corrective Actions
for Design and Operations

     Option 4 represents a change to the current program where
the intent is to participate in the initial construction phase
of a POTW but to leave O&M and ongoing maintenance/compliance
costs as the responsibility of the local communities.  The cur-
rent policy is that municipalities are financially responsible
for whatever corrections are required for their facilities.  An
argument can be made, however, that funding such corrections
under the Construction Grants Program will be far more effective
in achieving compliance, since (a) municipalities are generally
financially pressed, and (b) efforts to establish liability
claims are difficult since many different firms and government
agencies are involved in building a treatment plant.

     There is a plethora of remedial funding activities which
could be pursued.  Some which have been voiced which would solve
problems related to volume of influent (especially stormwater)
are redesign and construction of holding ponds or additional
capacity.  Another activity which could be funded is to replace
equipment or even part of a facility.  A different type of
funding, not hardware-related, would be to provide initial
seed money for third-party mangement.  Reactions to this type
of change in EPA's role in the compliance area have ranged
widely.  Typical comments from supporters of this option are:

    "This is the fastest, most direct way for correct-
     ing the problems that cause noncompliance."

    "Local costs are reduced so they should be less
     resistant to corrective action."

    "EPA had a hand in getting us into this problem—
     their approval is on every plan—so they should
     help get us out of it."

    "It's a much better use of funds than using
     enforcement actions."

Conversely, opponents of funding corrective actions say:

    "Why should the federal government bail out
     incompetent designers, suppliers, and local
     governments?"

    "We'd spread funds too thin.  There wouldn't be
     enough to concurrently ensure resources for new
     construction grant projects."

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                             V-12
    "This expands the program at a'time when EPA
     can't even fund everything cities need under the
     existing one."
HOW TO PREVENT PROBLEMS IN
PLANTS YET TO BE BUILT

     Over the long term, a major objective of the Construction
Grants Program is to cope with compliance problems in part by
preventing future problems from arising in the plants that
have yet to be built.   If appropriate changes can be made to
the planning, design,  and construction phases of the program,
then many of the types of compliance problems which plague the
program today may not  be significant concerns in the future.

     Discussions have  raised a number of issues which can be
distilled to five major options for the new plants.

       •  Option 1—Alter the Design Process.  Focus on
          preconstruction requirements to ensure appro-
          priate treatments.

       •  Option 2—Alter the Review/Approval Role.
          Redefine the roles of the federal, state, and
          local governmental entities regarding the re-
          view and approval of Steps 1, 2, and 3 of the
          program.

       0  Option 3—Assign Responsibility/Liability—make
          contractors  and suppliers legally responsible
          for specific actions.

       •  Option 4—Redefine Interpretation of Treatment
          Requirements.  Redefine certain technical and
          nontechnical requirements.

       •  Option 5—Implement Pretreatment Programs
          Locally"Improve the quality of influent
          through industrial pretreatment.


Each option is discussed below with the accompanying views of
supporters and opponents.

-------
                             V-13
Option l--Alter the Design Process

     Option 1 focuses on Step 1 and Step 2 requirements.
Some feel that these areas offer the opportunity to ensure.
that treatment facilities are matched to the influents, and
properly sized to accommodate the volume flow.  This would
obviate many influent, treatment design, and infiltration/
inflow (I/I) problems.  More specifically, the types of
suggestions discussed have been along the following lines:

       •  Increase the analyses and influent monitoring
          requirements in Step 1 and Step 2, focusing
          on constituents and flow rates for industrial
          and domestic wastes and more bench pilot
          studies.

       •  Prequalify equipment during Step 2 so that
          the final design could be drawn up with
          full knowledge of the exact equipment that
          could later be selected through the bidding
          process.

       •  Emphasize reliability and appropriate types of
          design redundancy to ensure the technical per-
          formance of a POTW.

       •  Standardize designs, especially for small com-
          munities, to increase reliability by utilizing
          proven designs.

       •  Develop a systems approach to design, using
          experts in operations to write O&M manuals
          and others to do the design, with a project
          manager providing an integrating function.

       •  Modify I/I designs for detecting, monitoring,
          and estimating flow volumes.

     Advocates of this option mention several benefits of alter-
ing the design process.  Many compliance problems are related
to improper designs relating to flow rates and constituents;
therefore it makes sense to "nip the problems in the bud."
Advocates say it is easier and more cost-effective to make de-
sired changes before a plant is built.  Increased Step I/Step 2
analyses could help to ensure that such factors as influent
volumes and constituents are properly incorporated into designs.
A typical comment is:

-------
                             V-14
    "It's important to learn from our past mistakes.
     Let's incorporate our experiences in the facility
     planning and design stages."

More specific areas of the option have also received  supportive
comments:

    "Some redundancy in design is needed to ensure
     performance."

    "Current I/I estimates of project effectiveness
     are muddled and optimistic,  making many treatment
     facilities unreliable."

Opponents of altering the design process have voiced  concern
about such factors as possible increases in the costs and time
required to complete Step 1 and Step 2.  Further delays in the
Construction Grants Program would result in a longer  elapsed
tfime for POTWs to come on-line.  Some comments are:

    "Redundancy in design is costly and unproven.  How
     can you define what is 'appropriate redundancy'?"

    "Standardized designs will kill all innovative
     activities by contractors."

    "It would be hard to find enough experts to make
     widespread use of the systems idea.  Moreover,
     the shared responsibility would just add com-
     plexity to the process."
Option 2--Alter the Review/Approval Role

     This option attempts to reduce the time required to com-
plete a POTW while maintaining quality.  This would be done
by reducing or eliminating certain review functions or changing
the existing role which EPA and the states now take in the
review and approval process.  Two major alternatives have been
suggested:

       •  Use third-party review to help ensure pro-
          per design specifications, management and
          performance.

       •  Require reviews to assure operability
          before grants could be closed out and final
          payments issued.

-------
                             V-15
     Advocates feel that the current comprehensive review and
approval role that EPA and the states now accept is not an effec-
tive or efficient use of resources.  The EPA/state review pro-
cesses get backed up very quickly, causing delays in the con-
struction process.  Interested parties have said:

    "Reduce the number of reviews—they aren't ef-
     fective anyway.  Aren't plants still out of
     compliance?"

Some advocates prefer to see the review process handled differ-
ently.  Some comments are:

    "Operability reviews are an effective way to
     ensure that a new facility will operate in
     compliance under normal conditions."

    "Third-party review can replace many EPA/
     state reviews."

Opponents claim that the present number and detail of reviews
is necessary to reduce the risk of poor design and to ensure
the quality of POTWs:

    "What we need is more, not less, review at each step."

    "How do you really make operability reviews
     work—where can you find the expertise and
     resources to look at a plan and tell how that
     plant will really work?"


Option 3—Assign Responsibility/Liability

     Currently, there is no uniform standard of liability by
which contractors for POTWs must abide.  Two areas of responsi-
bility have been discussed by advocates of the option.

     One proposal requires that at the time of a plant's
start-up, contractors would be responsible for the successful
operation of the plant until it could be shown that permit
conditions were consistently being met.  Proponents feel this
would eliminate the design and construction of POTWs that have
compliance problems from the time they come on-line.

     The second type of responsibility would cover suppliers
of goods and services through the planning, construction, and
post-construction periods.  In this way contractors would have
a legal interest in the quality of their products and services.

-------
                             V-16
     Proponents feel that these two types of legal encumbrance
would help keep POTWs in compliance.  Typical of a supportive
statement is:

    "It's about time that suppliers and contractors
     stood behind their products."

Conversely, opponents of this option fear that contractors
would be unwilling to assume comprehensive responsibility over
broad areas.  Comments on these areas are:

    "You'll never see any innovative designs—they're
     too risky."

    "If things go wrong we'll end up with expensive
     court battles with contractors."

    "You still can't really collect on liability
     clauses.  There are too many people involved
     all along the way.  the municipality, the
     state, even EPA, the designer, the contractor,
     his suppliers, and the inspectors."


Option 4—Redefine Interpretation
of Treatment Requirements

     One method of increasing compliance rates is to redefine
the interpretation of treatment requirements to reflect require-
ments which, while maintaining the integrity of the program,
allow some flexibility to grantees.  One proposal that has been
discussed is the redefinition of secondary standards.  Proponents
have suggested a reduction in the required average removal rate
(from the present 30 ppm TSS/30 ppm BOD requirements) where
beneficial uses would not be detrimentally affected.  This would
allow trickling filters to qualify as a means of achieving secon-
dary treatment.  The filters are not as effective for removing
effluent as is activated sludge treatment, but they can accommo-
date a wider range of flow volumes and types of wastes.  Also,
trickling filters are less expensive to build and operate.

     Another suggestion is to allow a variation from standards
during high flow periods (e.g., rain storms).  At present, in
an effort to treat all water, systems often allow these excess
flows to run through the treatment plant washing out the sludge
blanket and resulting in ineffective treatment for the total
flow.  If variations were allowed during temporary high flow
conditions, the water from the CSOs could be diverted untreated
while the other wastewater would enter the plant and be treated
and discharged as usual.

-------
                             V-17
     Typical comments from those supporting such redefinitions
are:

    "It's a good tradeoff.  While trickling filters
     won't meet current secondary standards, they
     are more dependable and almost as effective."

    "Well-run trickling filters are better than badly
     run activated sludge systems.  You don't need
     as sophisticated operators or equipment with
     trickling filters."

    "Biological treatment would be ideal, but, in
     reality, few facilities can control all the vari-
     ables that adversely affect its effectiveness."

    "If you divert CSO water during high flow periods,
     you wind up with more treated water than if you
     run it all through a plant that won't be able to
     treat any of it."

Those opposing the option feel that existing secondary standards
are needed to ensure a minimum level of water quality on a na-
tional basis.  Some feel that current secondary treatment methods
would work well if only operators were better trained and reacted
more quickly to variations in volume and quality of influent.
Comments from opponents of redefinition include:

    "Start toying with standards and you weaken the
     whole program."

    "Redefinition is the easy way out."

    "Let's try to make secondary treatment more effec-
     tive before we scrap it."


Option 5--Implement Pretreatment
Programs Locally

     The final option identified for preventing problems in
new plants is that of implementing pretreatment programs in
conjunction with the treatment plant planning, design, and
construction.  One of the major causes of plant noncompliance
is that the actual influent to the plants is not consistent
with that for which the plant was designed, and part of that
problem stems from industrial sources.  While all treatment
systems are required to develop pretreatment programs, only a
fraction of them have followed through with completed and

-------
                             V-18
enforced programs.  If future systems actually do develop and
implement such programs, that alone may make their plants
easier to operate, and more reliable.

     Supporters of this option comment:

    "It's the changes in influent that cause us
     problems.  We can set up to handle an average
     wasteload, but if some industrial plant is
     allowed to dump batches of toxic wastes whenever
     they want, we may just not be able to cope with
     it."

    "Until you get the major industrial sources
     controlled so their flows are predictable and
     compatible with the plant process, you can
     forget about achieving full compliance in any
     plant."

Opponents of this option argue:

    "Pretreatment is not the answer everywhere.  In
     some systems, more than 50 percent of the toxic
     wastes introduced into a system are nonindus-
     trial—they are from household and commercial
     sources."

-------
CHAPTER VI
FUNDING

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     VI. PROJECT FUNDING PRIORITIES—WHAT FACILITIES TO FUND,
  IN WHAT TYPES OF COMMUNITIES, AND WHAT FUNDING MECHANISMS TO USE
     In an ideal state, all the projects inventoried  in  the
1978 Needs Survey (see Exhibit VI-1) could be  fully funded
within a short period of time.  Reality, however, presents the
Agency with resource constraints in terms of Congressional
appropriations and the need to schedule funding of projects
over time.  This implies the need for establishing funding
priorities.  The effective funding of the Construction Grants
Program requires decisions in three strategic  areas:

       •  What types of facilities should be constructed?

       •  In what types of communities should  facilities
          be built?

       •  What mechanisms should be used to achieve these
          objectives?

     In view of the fact that the funds available from Con-
gress will probably be insufficient to fund all needs, these
decisions become even more important and difficult.

     In the following sections, each of these  questions  is
discussed with prevailing viewpoints outlined.  More  detailed
discussions and background material can be found in the docu-
ments cited in Appendix A.
WHAT TYPES OF FACILITIES SHOULD BE CONSTRUCTED?

     The different types of projects that could be built under
the Construction Grants Program have a multitude of direct and
indirect effects on such areas as water quality, growth of
communities, integrity of POTWs, and national program costs.
Since a variety of projects with different resulting effects
could be funded, it is necessary to examine the question of
deciding what types of facilities to construct.  In discussing
this issue, three major options predominate:

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                               VI-2
        •   Option  1—Most Needs  Categories  Eligible  (cur-
           rent program)?The current system of eligi-
           bilities  funds almost  all needs  categories with
           some restrictions  (e.g.,  limited  growth).

        •   Option  2—Rank Project Types by  National
           Importance.   Particular project  categories
           would receive higher  funding priority than
           others .

        •   Option  3—Select Projects on the  Basis of Water
           Quality Effects.   Any  project would be eligi-
           ble, but  priority  would be determined on a
           water quality basis.

These positions and  the arguments behind them are presented in
this section.  Possible methods  of  implementing the preferred
position  are discussed in the last  section  of this chapter.
Option  I—Most Needs Categories
Eligible  (current  program)

     Option 1 represents the current situation under which EPA
will fund  needs categories I-V  (with certain  exclusions),  as
shown in Table VI-1.   Individual  projects  are funded on  the
basis of  their position on the  state priority list subject to
the amount of funding available  to the state.
                                Table VI-1

                         PRESENT ELIGIBILITY POLICIES

                      Needs Category           Restrictions. If Any

                I  Secondary

               11  Advanced Secondary Treatment f   Water Qua!Ity
                  Advanced Wastewater Treatment/    Only

              IMA  Infiltration/Inflow

              1MB  Rehabilitation

               IVA  New Collectors

               IVB  New Interceptors

                V  Combined Sewer Overflow

               VI  Stormater
No Growth

No Growth



Not Eligible
              Exhibit VI-1 Illustrates the needs for each EPA region under
              this system.

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                             VI-3
     Advocates of the option point out that broad eligibil-
ities such as these are necessary to provide flexibility for
specific state or community water quality problems.  Advocates
of the present system also feel that the priority lists de-
veloped by the states serve as an appropriate and effective
vehicle for determining the importance of projects on a water
quality basis.  Typical comments made by advocates include:

    "It provides flexibility.  The states, through
     their priority lists, can restrict abuses and
     give priority to important projects."

    "The wide variety of project needs reported in
     each category indicates that all needs categories
     should be eligible for funding—you can't do an
     effective job on a national basis if you limit
     the types of projects allowed."
     Opponents feel, however, that serious problems exist in
the present situation.  These critics feel that states may use
criteria (e.g., political pressure, population) other than
water quality either implicitly or explicitly when developing
the priority lists, thereby undermining intent.  In addition,
in order not to lose allocated funds due to regulatory re-
quirements, projects that are "ready to proceed" are sometimes
funded before projects that are higher on the priority lists.

     Typical comments from critics include:

    "Too many pipe-related projects are being constructed
     simply to obligate year-end funds".

    "Not enough I/A projects are funded because they lack
     a vocal constituency and can't get a good place on
     the priority lists under the present criteria."

     The EPA 1990 study team has proposed in its preliminary
recommendations to continue with most needs categories as
eligible—but with restricted definitions for many of the
categories.  Table VI-2 details the restrictions proposed for
each of the needs categories.

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                                  VI-4
                                   Table VI-2

                             PRELIMINARY RECOMMENDATION
                              OF EPA 1990 STUDY TEW
                     Needs Category

                I  Secondary

               11  Advanced Secondary Treatment |
                  Advanced Wastewater Treatment;

             IIIA  Infiltration/Inflow
             1MB  Rehabilitation




              IVA  New Collectors



              IVB  New Interceptors


               V  Combined Sewer Overflow


              VI  StoriMater
Restrictions.  If Any
Must be Water Quality
  Justified

Must Comply with
  Proposed I/I Program
  Modifications Covering
  Control Techniques,
  Removal Rate Assump-
  tions, etc.

Low Priority Unless
  Significantly
  Contributes to
  I/I Improvements

Must be Cost Effective
  and Necessary to
  System Integrity

Must be Necessary to
  System Integrity

Must be Water Quality
  Justified

Not Eligible
Option 2—Rank Project  Types  by
National  Importance

      Option  2  would fund  specific  project categories  before
others.   The arguments  for  and against  each  category's rela-
tive importance and funding eligibility are  outlined  below:

        •   Secondary treatment.  Many argue  that  secondary
            treatment is  the  focus  of the CWA  and  that  this
            should be the primary focus  of funding.   Their
            arguments include:

           "Let's fund secondary first—that's the focus of
            the  Act—then see what's left for  other  needs."

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                    VI-5
 Opponents to a focus on secondary treatment
 have two primary arguments.  In many instances
 treatment more stringent than secondary is
 necessary to meet water quality standards.
 Conversely, in other instances, secondary may
 not be necessary to meet beneficial uses cri-
 teria.

 Advanced secondary treatment and advanced
 wastewater treatment.  Proponents of a high
 funding priority for AST and AWT feel they are
 important because in many cases AST or AWT may
 be necessary to achieve water quality goals—
 particularly the longer term goals of fishable,
 swimmable waters.  Supporters say:

"While AWT/AST is expensive, there are substan-
 tial water quality benefits, and costs are ex-
 pected to decrease with widespread use."

 Opponents tend to support the strategy of first
 building secondary or deferring any facility
 construction in an area until adequate water
 quality analyses can be done to justify the
 need.

 Infiltration/Inflow.  Those who favor high
 priority for I/I feel it is important due to
 the critical effects of the large volumes and
 the constituents of I/I on the ability of
 plants to treat it.  Many times the flows over-
 extend a plant's treatment capacity.  In addi-
 tion, even when the I/I flow volumes can be
 treated they can significantly increase a
 plant's O&M costs.

"The total national I/I need is so small ($2.4
 billion)—and it can be integral to the suc-
 cessful and cost-effective operation of a com-
 pleted plant—we can't afford not to treat it
 as a high priority item."

 Opponents point to a recently completed compre-
 hensive EPA study of 18 sewer systems, which
 found that I/I projects have a significantly
 lower impact on flow reduction than estimated
 in project design.   Opponents question the
 spending  of more money based on that history.

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                    VI-6
 Rehabilitation.   Those who argue a high prior-
 ity for rehabilitation feel that this category
 can have great impacts on water use and I/I
 since it covers extensive repairs and not minor,
 normal maintenance.  In addition, they point out
 that the need is great in areas that cannot
 easily finance it.  Proponents of a high prior-
 ity for rehabilitation make statements such as:

"What good does it do to build a fancy treatment
 plant and leave a deteriorating infrastructure?"

"The total need is not that large ($4.9 billion)
 and the communities that need rehabilitation
 are often urban centers hard-pressed for money."

 Opponents feel rehabilitation is a local re-
 sponsibility and that the current needs esti-
 mate greatly underestimates the likely demand
 if rehabilitation is given high priority.
 Representative statements of their position
 include:

"Why should the federal government pay any por-
 tion at all of the price of poor management and
 maintenance on the part of local government?

"If we give high priority to funding rehabilita-
 tion, the demand will dwarf the $4.9 billion
 needs estimate—that is just for critical proj-
 ects and does not account for major problems
 with existing infrastructures in older cities."

 New Collectors and New Interceptors.  Sup-
 porters of the funding of new collectors and
 new interceptors point out that these pipe-
 related projects are often necessary to the
 integrity of the system.  Others feel it is
 also appropriate for the Construction Grants
 Program to fund collectors and interceptors
 that facilitate growth.  Representative state-
 ments of this position include:

"If we restrict funding of new collectors and
 interceptors, what will happen to the rural
 areas where these pipes are necessary to an
 effective system?"

"Why not fund growth-related projects—the eco-
 nomic benefits will far outweigh the costs."

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                     VI-7
 Opponents generally  feel  that  these projects
 should be a  local  responsibility and may be
 used to promote  growth  rather  than  to correct
 problems.  They  typically point  out:

"We already build too many pipe projects; we
 need to restrict them,  not  encourage them."

"Collectors and interceptors  would  be built  even
 if no federal dollars were  available—let's
 spend our money  where we  can make  a differ-
 Combined Sewer Overflow.   CSO  projects  are
 systems meant to prevent  the periodic  bypassing
 of wastes from sewers  to  surrounding  bodies  of
 water during periods of  large  flows  (e.g.,
 during heavy rains).   Those who  support  a high
 funding priority for CSOs  feel  that  in  many
 instances CSOs can have  the greatest  impact  on
 water quality of any of  the needs  categories.
 Moreover, they point out  that  due  to  the large
 expense involved, CSOs may not  be  constructed
 if they are not federally  funded.  Their argu-
 ments include statements  such  as  the  following:

"CSO funding is important—they  often  have a
 tremendous impact on water quality and  this  is
 an area where the availability  of  federal money
 can really make a difference."

 Opponents argue that CSOs  should  be  deferred
 unless water quality analyses  can  justify their
 use.  They are also viewed as  another way to
 use up funds subject to  reallocation.

 Stormwater.  The supporting arguments here are
 very similar to those  for  CSOs.   Opponents
 debate the frequency of water  quality impact
 and point to the huge  need as  a  reason  for low
 priority or no eligibility.  Furthermore,  they
 cite one basis for EPA's  present  policy  which
 is that the stormwater problem  really requires
 a major program effort all its  own.  The oppo-
 nents' typical statements  include:

"Our total funding available until  1990 would
 just about meet the stormwater  demand—leaving
 virtually no funds for anything else."

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                             VI-8
         "Money spent on stormwater could be better spent
          on treatment."

     Obviously, many different interpretations of the impor-
tance of each of the needs categories are possible depending
on individual judgment.  Advocates of Option 2 argue, however,
that faced with funding insufficient to meet all needs, the
explicit promotion of certain project types over others is
necessary.  They argue, as detailed earlier, that certain
categories are generally more important in affecting water
quality and/or that certain categories are more properly local
responsibilities and should therefore be funded through local
financial means.

     Advocates comment:

    "We won't get enough money to get the whole job
     done; we will have to decide on priorities."

    "The only way to ensure equity among communities and
     states is to have the federal goverment rank
     project categories."

Opponents argue that in particular local situations any of the
needs categories (including those not being promoted) may
provide the most beneficial water quality impacts, and Option
2 would not provide enough flexibility.  Typical comments from
opponents are:

    "The federal government is too far removed from
     local conditions to know what is most critical for
     water quality—we need the flexiblity of the cur-
     rent system."
Option 3—Select Projects on the
Basis of Water Quality Effects

     Option 3 would allow individual states to decide what
types of projects should be eligible.  The eligibilities could
include such projects as interceptors or collectors in growth
areas, or any other types of projects that the particular
state feels are necessary for it to achieve CWA goals, even if
the project would not be eligible for funding under present
EPA policies.  Projects would be ranked on the state priority
lists by their water quality impacts.

     Advocates of this option generally focus on the water
quality basis of the program, and support state's rights and
respect the knowledge of the states in the area.  They also

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                             VI-9
feel that this option provides the flexibility needed to
account for exigencies of local conditions, thereby making a
more effective program.  Their comments include the follow-
ing:

    "Whether a project is secondary treatment, AST, or
     stormwater shouldn't matter.  What we are trying to
     do is improve water quality.  Let's build whatever
     it takes, regardless of its classification."

    "States know better than the Feds what is needed for
     water quality in their own areas."

    "Flexibility is the key to an effective program."

Opponents argue that such a system would be difficult to im-
plement and control.  They also note that EPA is legally re-
sponsible for the program and therefore must maintain some
control to avoid the possibility of abuse by the states.
Those opposing this option typically comment:

    "If left up to the states,  everything under the sun
     would become eligible.  We'll have no way to ensure
     that the quality of water, on a national level, is
     improving."

    "It's too difficult to predict which projects will
     actually result in the greatest total water quality im-
     provement.  How do you measure it—the total pollutant
     loadings removed, or the percentage improvement in am-
     bient water quality, or the attainment of water quality
     standards?"
IN WHAT TYPES OF COMMUNITIES
SHOULD FACILITIES BE BUILT?

     In addition to deciding what kinds of facilities to
build, it is also necessary to decide the types of communities
in which to build them.  Interested parties advocate wide
ranging priorities or combinations of priorities when discuss-
ing this issue.  The following four basic options are repre-
sentative of the positions often taken in discussions:

       •  Option 1—Current Program, Few Explicit Deci-
          sions.  The current program makes few distinc-
          tions among types of communities, except the
          rural set-aside.

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                            VI-10
       •  Option 2—Focus on SMSAs or Major Population
          Centers.  The program would fund projects  in
          SMSAs and major population centers  before  other
          projects.

       •  Option 3—Classification of Communities  Based
          on Need.  A tiered classification could  be
          developed where those communities with a finan-
          cial need and/or a serious water quality prob-
          lem receive funding priority.

       •  Option 4—Administrative Criteria.  Projects
          which are ready to proceed and/or where  the
          community has the demonstrated ability to  run
          and maintain completed plants will  receive
          priority.

     Each of these options and its supporting and  detracting
arguments are presented in the following sections.
Option I—Current Program, Few
Explicit Decisions

     Under the present program projects are  funded  anywhere —
without explicit consideration of  their locations  (except  for
the use of rural set-asides), with the following  results:

       •  Large cities (100,000 in population)  have  re-
          ceived approximately half  the grant money
          awarded to date;

       •  Regions II, V, and  IX have received over  half
          the grant money;

       •  Over $75 million in rural  set-asides  has  been
          obligated; and

       •  New York and California  have received more
          money than any other states, accounting  for  20
          percent of all funds awarded.

These relationships closely follow population concentration
and are the result of the present  system  of  allocations to
states and obligations to projects based  on  state  priority
lists and rural and I/A set-asides.

     Advocates of this option feel that decisions  at the na-
tional and state level concerning  such areas  as allocations

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                            VI-11
and priority lists are appropriate and sufficient.  The flexi-
bility at both levels of government facilitates dollars going
where they are needed most.  Comments made by advocates in-
clude:

    "The state priority list and the allocation formula
     make all the necessary decisions."

    "Any major changes in the present system will result
     in major dislocations of present funding patterns—
     and those states, regions, etc. that get less money
     will be very vocal critics of the new policies."

Opponents are generally dissatisfied with the current program
because national water quality goals are not being met in the
fastest, most cost-effective manner.  Some comments are:

    "Currently, it's a real hodge-podge.  There's no way
     to assure a uniform national level of water quality."

    "If Uncle Sam foots the bill, he should have the
     loudest voice in determining how money is spent."

Some opponents are also displeased with the current share of
funds received by one group or another.  Typical remarks in-
clude:

    "Rural and small communities don't get their fair
     share."

    "Urban areas have more people and deserve more
     money."
Option 2—Focus on SMSAs or
Major Population Centers

     Supporters of this option generally feel that not only is
improvement in water quality important, but also the number of
people benefiting from improved water quality is a factor to
be considered.  Supporters are also often sensitive to the
political power of these groups in Congress.  Representative
comments in support of this option include:

    "Let's use the money where the most people will
     benefit."

Opponents generally favor emphasizing some other group, or
they feel no explicit decisions of this type should be made.
For example, supporters of rural funding say:

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                            VI-12
     'Many small communities significantly impact ground
     water quality, and in many ways ground water is a
     more important resource than some streams."
Option 3—Classification of
Communities Based on Need

     Under this option serious water quality problems and
financial need would be the determinants of a project's fund-
ing priority.  Communities with serious difficulties in both
areas would receive top priority, with communities experienc-
ing only one of the problems receiving the next priority.  For
example, small communities might receive attention because of
limited financial capabilities.  This classification scheme
would be performed by the states, probably with some EPA over-
sight.

     The proponents of this approach feel that this classi-
fication scheme is consistent with the philosophical underpin-
nings of the CWA.  Typical comments include:

    "Communities with the most serious water quality
     problems are the ones that should be funded."

    "Grant money should go to those communities that
     could not afford to build the facilities without
     the grant money.  Those that can afford to should
     build the plants themselves."

    "If there isn't going to be enough money to build
     all the plants needed everywhere, then let's put
     the federal money where it's really needed."

Opponents point out the difficulty in developing and imple-
menting such a ranking system.  Some comments are:

    "How do you define and measure water quality bene-
     fits?"

    "Data collection for use in the ranking process
     would be formidable."
Option 4—Administrative Criteria

     This option promotes the completion and successful oper-
ation of plants—regardless of water quality or community
characteristics.  Advocates maintain that in order for the
Construction Grants Program to be effective, funds should go

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                            VI-13
to applicants who are ready to proceed or who can assure
operation.  Advocates maintain that this option would control
one of the major reasons for noncompliance—local capability.
A typical comment is:

    "If we are ever going to see any progress in this
     program and its goals, let's give the money to
     communities that are ready—there are many—and
     defer attention to the sluggish or recalcitrant
     communities."

Opponents argue that the fact that a community is ready to
proceed does not ensure that it will be able to build and
operate a treatment plant successfully and that the ability to
operate is difficult to prove.  Opponents' comments include:

    "Just because a community is ready to proceed
     doesn't tell you very much about its ability to
     handle the next phase of the process."

    "How can you really be sure they can operate the
     system under a wide variety of conditions?"
WHAT MECHANISMS SHOULD BE USED TO
ACHIEVE THESE OBJECTIVES?

     Once the decisions have been determined concerning what
should be constructed and where the facilities should be con-
structed, it is necessary to determine what mechanisms would
be most effective for achieving those objectives.  The struc-
ture of the Construction Grants Program allows for many oppor-
tunities to initiate changes.  Five basic options describing
the mechanisms for implementation are presented here:

       •  Option 1—Project Eligibilities.  Change in the
          program can be accomplished by restricting,
          redefining, deferring, or ranking eligibilities
          that determine what may be funded.

       •  Option 2—Federal Share.  The federal share for
          projects could be lowered uniformly for all
          projects or could be varied for different cate-
          gories or certain situations.

       •  Option 3—Set-Asides.  The set-aside mechanism
          could be expanded or eliminated.  Certain types
          of projects or communities could be targeted to
          receive a share of available funds or the en-
          tire program could be eliminated.

       •  Option 4—Priority Lists.  A uniform national
          priority system could be imposed on states to

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                            VI-14
          provide consistency toward national goals.  A
          less extreme way to encourage consistency would
          be to require states to adopt an expanded list
          of national criteria in developing their prior-
          ity lists.

       •  Option 5—Funding Distribution.  Changes in the
          allotment formula could provide more money to
          states with certain types of need, with commun-
          ities that have certain characteristics (e.g.,
          population size), or with a good administrative
          record.

It is important to note that these options are not mutually
exclusive; they can be used in conjunction to promote certain
behavior or choices on the part of the grantees and/or the
states.  Each of these options and the position of advocates
and opponents are discussed in the following sections.
Option 1—Project Eligibilities

     Eligibilities determine what the federal government will
and will not pay for through the Construction Grants Program.
Proponents of this method of implementation argue that this
centralized decision provides uniformity within the wide-
reaching Construction Grants Program.  The statements made by
supporters include:

    "This program is active in 50 states and the terri-
     tories—if there is going to be any consistency, we
     have to have strong eligibility decisions at the
     federal level."

Opponents argue that major eligibility changes would be too
disruptive to the program and that a system based on eligibil-
ities may be too inflexible.  Opponents' comments include:

    "If we make a formerly ineligible category eligible,
     it's unfair to all those communities who have al-
     ready built a facility of that type—and had to pay
     for it themselves."

Option 2—Federal Share

     The federal share can be used to promote certain types of
projects, promote more projects, or target more aid to needy
communities.  There are three basic federal share options:

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                            VI-15
       •  Lowered share across all eligibilities.

       •  Variable share based on project type (needs
          categories or special type such as I/A) or
          based on financial need (greater share to areas
          not otherwise able to sustain costs).

       •  Allow states to lower the federal share across
          project types within their borders.

     Using this mechanism, the federal share focuses on using
incentives to influence community behavior.  Advocates argue
that more projects could be started if the federal share were
lowered to 50 percent from 75 percent (i.e. leveraging) they
also say that the variable shares alternative may provide the
best method to get communities to build what is desired.
Representative statements include:

    "A larger federal share in some project types or
     where the need is greatest (or lower shares else-
     where) will have communities doing what we want.
     They'll go where the dollars are."

    "Lower shares will leverage the federal money.
     For a given level of funding it will get more proj-
     ects started and get us closer to our water quality
     goals."

Opponents doubt the effectiveness of lowered shares and feel
that a variable share has equity problems.

    "The financial capability of local governments will
     not allow them to take on a larger federal share—
     and the states will not necessarily step in to
     help."

    "Even if more projects are started, EPA, the states,
     and the engineering community could not effectively
     handle the increased load."

    "If we change the share in any way, is that fair to
     projects already completed or in the pipeline?  Or
     would this only affect new projects?"

    "It's not fair for a community to receive fewer
     funds just because it builds a certain type of
     project—it may not really have a choice."

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                            VI-16
Option 3—Set-Asides

     Set-asides can be used to promote where or to which com-
munities aid is channeled and/or what types of projects are
being constructed.  The current use of rural and I/A set-
asides are examples of its use.  Similarly, set-asides could
be used to provide funding for SMSAs.  Proponents argue that
set-asides are the best way to assure the results desired.
Typical of proponents' comments are:

    "Without set-asides the federal government has little
     ability to face the issue of funding equity for
     particular groups--political pressures at the state
     level may bias the priority lists so that certain
     groups/projects don't receive their fair share."

Opponents point to the present rural and I/A set-asides that
have resulted in frequent reallotment.  They also point out
that high quality data are needed to determine the proper
level for set-asides.  They have suggested that the program be
reduced or eliminated.  Some opponents say:

    "Set-asides have never worked--what makes you think
     things will be different this time?"

    "The whole concept of set-asides undermines states'
     rights in compiling the priority lists."

There have even been compromise suggestions, such as dropping
set-asides for alternative projects but retaining them for
innovative projects.


Option 4—Priority Lists

     Priority lists can also provide a vehicle for affecting
what to build and/or where to build it.  An expanded national
set of criteria and/or a uniform national system could be
developed to be used in the determination of state priority
lists (e.g., high priority to SMSAs or category I) rather than
continuing the present system whereby individual states de-
velop their own priority systems.  For example, these changes
could involve including criteria based on enforceable require-
ments under the Municipal Management System (MMS) or water
quality/ beneficial use criteria.  Typical proponent arguments
are:

    "National priorities would result in facilities more
     in line with specific objectives."

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                            VI-17
    "MMS would be a way to establish national priorities
     without statutory changes."

    "The present system is too political at the state
     level."

    "Not all states develop priority lists using the
     same criteria."

Opponent arguments include:

    "The priority list is—and should be—a state right.
     They need the flexibility and decentralized
     structure."

    "Congress would never go along with such a legis-
     lative change considering their strong 1977 posi-
     tion in favor of state determination."
Option 5—Funding Distribution

     The funding distribution could be changed by altering the
allotment formula or by varying the reallotment system.  Al-
teration of the allotment formula provides a way to implement
desired changes.  The present allotment formula is a rela-
tively complex weighting of needs in certain categories, over-
all needs, and population.  The result is a weighting which
slightly favors needs over population.  Also, there are large
unobligated balances in some states due to the current allot-
ment system.

     Changes in the allotment formula would basically shift
funds from state to state.  The particular alteration would
depend upon exactly what the desired result is.  For example,
the allotment formula could be altered to:

       •  Award allotments based on the aggregate amount
          of needs ready to proceed in the state;

       •  Award allotments based on needs of certain
          community types (e.g., rural or SMSAs); or

       •  Award allotments based on needs in certain
          categories (e.g., secondary treatment or CSO).

     Reallotment is another vehicle that could affect funding
distribution.  This could take the form of two-tier funding or
state borrowing.  Under two-tier funding, states would face
two rounds of allotments.  There would be an initial allotment

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                            VI-18
followed by a second round of awards for redistribution of
forfeited state allotments.  The other method, interstate
borrowing, could involve states loaning non-applied allotted
funds to other states, thereby obviating forfeiture of the
funds.  In future years, the states that borrow funds would
reimburse the lender states.

     Proponents of changes in the funding distribution system
believe that the federal government could better target par-
ticular needs, communities, or focus on specific desired ac-
tions.  In this way, money would go to those states that would
use it in the desired way.  Opponents of Option 5 maintain
that just getting the money to states will not ensure that it
will be spent "properly."  Comments from opponents about spe-
cific parts of Option 5 are:

    "The political problems resulting from changing the
     allotment formula would be enormous.  It would be a
     real can of worms."

    "Reallotment sounds like a good idea but the estab-
     lishment of a workable system, such as an inter-
     state borrowing program, would take a lot of time."

-------
     Exhibit VI-1



  1978 NEEDS SURVEY1



(mill Ions of dollars)
                                        Page 1  of 2
EPA Region
REGION 1
Rl
MA
NH
CT
VT
ME
Total
REGION II
NY
NJ
PR
VI
Total
REGION II 1
DC
DE
MD
PA
VA
WV
Total
REGION IV
AL
FL
GA
KY
MS
NC
X
TN
Total
REGION V
IL
IN
Ml
MN
OH
Wl
Total
CAT
1

144
776
197
207
86
121
1,489

2,393
924
336
16
3,669

0
0
20
506
439
271
1,236

150
468
126
84
55
149
158
168
1,358

86
46
171
12
86
100
501
CAT
II

96
250
95
139
85
22
687

1,291
866
20
0
2,177

15
94
843
1,132
328
113
2,525

195
1,405
541
373
260
456
63
387
3,680

1,293
536
976
705
1,656
636
5,802
CAT
MIA

10
3
6
31
2
13
65

103
137
14
0
254

0
2
7
10
11
1
31

86
70
78
74
98
67
51
124
648

144
36
43
28
256
76
583
CAT
1 MB

2
61
16
18
10
14
121

2,762
1
9
0
2,772

0
0
1,347
0
1
0
1,348

2
0
1
0
0
0
0
0
3

3
15
32
12
8
143
213
CAT
IVA

260
754
269
405
77
220
1,985

2,436
655
257
11
3,359

0
41
221
982
438
514
2,196

331
1,560
378
575
157
479
314
512
4,306

162
338
987
153
683
269
2,592
CAT
IVB

100
543
295
182
31
154
1,305

1,863
601
320
16
2,800

0
120
323
529
515
189
1,676

180
1,462
410
385
168
438
251
365
3,659

282
311
671
247
825
301
2,637
CAT
V

329
1,036
272
398
208
1,092
3,335

3,305
1,009
19
0
4,333

170
128
147
2,198
272
754
3,669

0
8
218
592
33
67
0
198
1,116

2,131
2,920
1,602
187
3,261
268
10,369
Total

945
3,426
1,154
1,383
460
1,638
9,006

14,156
4,196
977
44
19,373

186
389
2,910
5,358
2,008
1,845
12,696

947
4,976
1,755
2,085
774
1,657
840
1,757
14,791

4,105
4,205
4,485
1,347
6,777
1,797
22,716

-------
                                  Exhibit VI-1
                                                                      Page 2 of 2
EPA Region
REGION VI
AR
LA
NM
OK
TX
Total
REGION VII
IA
KS
MO
NB
Total
REGION VIII
CO
MT
ND
SO
UT
WY
Total
REGION IX
AZ
CA
GU
HI
NV
PT
SA
Marl annas
Total
REGION X
AL
ID
OR
WA
Total
NATIONAL
TOTAL
CAT
1

65
405
62
33
4
569

181
294
779
159
1,413

236
37
48
43
6
49
419

182
2,691
38
330
65
41
22
17
3,386

333
79
21
590
1,023

15,090
CAT
II

171
57
20
212
1,214
1,674

316
123
23
2
464

316
6
0
99
230
3
654

9
1,979
1
11
121
0
0
0
2,121

5
98
403
192
6,983

20,507
CAT
IMA

29
45
0
36
214
324

80
48
59
1
188

10
2
0
3
40
7
62

1
75
0
0
1
0
0
0
77

30
14
51
83
178

2,437
CAT
1MB

2
12
1
20
67
102

0
16
7
0
23

90
1
1
1
0
0
93

0
84
0
0
0
0
1
0
85

0
0
38
60
98

4,877
CAT
IVA

134
320
42
139
566
1,201

123
121
228
32
504

28
23
3
5
61
1
121

118
1,415
0
198
38
32
9
17
1,827

40
112
287
460
899

19,022
CAT
IVB

99
294
32
129
1,002
1,556

201
289
678
50
1,218

266
20
14
29
57
9
395

199
1,627
3
319
33
15
23
21
2,240

95
84
301
481
961

18,474
CAT
V

0
0
0
0
39
39

192
209
757
70
1,228

0
33
13
24
2
3
75

0
167
0
0
0
0
0
0
167

9
57
431
893
1,390

25,472
Total

501
1,136
158.
572
3,110
5,477

1,096
1,103
2,535
317
5,051

948
125
82
207
399
75
1,836

512
8,041
44
859
260
90
57
56
9,919

515
446
1,536
2,761
5,258

106,153
Note:  Sum of entries may not equal  total  due to rounding.

1 Needs Categories:   (I) Secondary, (II)  AST/AWT, (IMA)  I/I, (1MB)  Rehabilitation,
 (IVA) Collectors,  (IVB) Interceptors, (V) CSOs.
Source:  1978 Needs Survey, Cost Estimates for Construction of POTW Facilities.
         Table 1.

-------
CHAPTER VII
OPERATIONS

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-------
      VII. OPERATIONS—MAKING THE GRANTS PROCESS WORK BETTER
     The grants process is the administrative vehicle for
approving projects and distributing funds in the Construction
Grants Program.  This occurs during the three steps of build-
ing POTWs:  planning, detailed specifications, and construc-
tion.  Currently, it takes between seven and eleven years to
complete the process.  This requires substantial administra-
tive responsibility at the federal, state, and local levels.
In addition, as noted in Chapter V, many POTWs do not comply
with permits even when the process is followed.  The goal of
this chapter is to focus on the central issues involved in
improving the administrative grants process:  how to shorten
the time and lighten the administrative loads while at the
same time maintaining or improving quality.  In addition,
there is also a need to determine how to provide needed policy
direction to communities that are trying to design and con-
struct facilities under the program.

     The following sections examine the major options avail-
able in each topic area.  More detailed information can be
found in the background materials cited in Appendix A.
HOW TO SHORTEN THE TIME,
LIGHTEN THE ADMINISTRATIVE
LOAD. AND IMPROVE QUALITY?

     Suggestions on how to improve the administrative pro-
cesses in the Construction Grants Program have come from all
quarters—grantees, states, EPA's Regional Offices, and EPA's
headquarters staff.  It seems to be in everyone's interest to
make the grants process easier and shorter.  Yet, each admin-
istrative requirement in the process has also seemed justified
at the time to ensure that the large sums invested in the
program are being spent wisely.

     The perspective may differ with the size and experience
of the community.  For many small communities, especially, the
bids received and the contracts managed in conjunction with
this program are the largest ever administered by the com-
munity, so the administrative and review requirements of the

-------
                            VII-2
program can be quite helpful and certainly justified.  Large
cities, on the other hand, may be quite capable of assuming
full responsibility for much of the process themselves.

     All communities, however, large and small alike, seem to
feel there is room in the process for improvement.  The sug-
gestions offered range broadly and seem to fall into the four
major categories listed below.  These four generic options are
not mutually exclusive.  It is certainly possible to recommend
adopting more than one approach.

       •  Option 1—Optimize the Present Grants Process.
          Make it more efficient and effective by perform-
          ing more activities in parallel to shorten the
          total elapsed time.

       •  Option 2—Shorten, Simplify, and Improve the
          Planning and Review Process.  Eliminate redun-
          dancy and refine the review process.

       •  Option 3—Increase Local Responsibility.  Give
          local municipalities a more active responsi-
          bility for the process and reduce or eliminate
          the state and federal review and approval
          activities correspondingly.

       •  Option 4—Simplify, Reduce Requirements.
          Streamline the grants process by reducing re-
          quirements and/or making requirements less
          complex in areas other than the review process.

     Each of these options is discussed in more detail below,
accompanied by representative views from interested parties.
Option 1—Optimize the Present
Grants Process

     The grants process is a complex and lengthy procedure
that currently takes seven to eleven years to complete.  Some
have suggested that an optimization approach be taken to
shorten the process time required.  One such approach is the
Critical Path Method (CPM), which is a widely used technique
for analyzing engineering and construction projects in order
to reduce the elapsed time requirements.  In fact, CPM is
probably used on the construction phase of all construction
grants projects.  The object in applying CPM to the adminis-
trative process would be to shorten the time required through
a concurrent processing of individual steps until a point were
reached where time could not be further reduced.  In one case,

-------
                            VII-3
using data compiled in California and Pennsylvania for a
"well-planned" project costing $10 million to $50 million, the
theoretical grants process time was reduced to 7.75 years from
9.9 years —a reduction of over 20 percent—using this method
of analysis.

     Proponents of CPM point to the benefits of optimization
of time and costs.  In addition, it does not require the de-
velopment of a new grants process; the existing framework
remains.  Examples of supportive comments are:

    "Concurrent reviews at each step are an easy way to
     shorten the administrative time."

    "Not all requirements in the grants process need to
     be performed sequentially as they are now."

Opponents of the option feel that while the optimization con-
cept may be appealing, it is difficult to implement.  Typical
statements are:

    "Optimization ideas like concurrent reviews will
     make things worse—the review process is already
     backlogged, and with this we'd end up having to
     re-review a project because something changed in
     the concurrent activity."

    "There's a big difference between what is optimized
     on paper and what really happens.  If you don't make
     some structural changes to the program it will slip
     right back to where it is today."
Option 2—Shorten, Simplify,
and Improve the Planning and
Review Process

     While Option 1 recommends shortening the existing pro-
gram, Option 2 focuses on refining and improving the program,
which may involve structural alterations.  This option refers
only to the planning and review activities involved in the
grants process.

     Supporters of this option have suggested two types of
actions.  First, changes in the review process, such as im-
proved communication throughout the process, and elimination
of redundant review.  Improvement in communications could help
to ensure that grantees are "on target" with their facility
plans.  Preapplication and mid-course reviews would be
vehicles to facilitate such communications.

-------
                            VII-4
     Elimination of redundant reviews would save time and
simplify the process.  Currently, in EPA's role as project
manager, it acts as a reviewer after the state has performed
similar reviews.  In this way, there is double review—a pro-
cess that some feel is wasteful with no proven benefit to
project quality.  Typical comments about communications and
redundant review are:

    "With preapplication and mid-course reviews, other
     types of after-the-fact review could be eliminated."

    "Improved communications doesn't have to mean more
     time spent on the process.  In the final analysis
     some time invested up-front making sure everyone's
     on the right track would really save time later."

    "Reducing reviews would lighten everyone's load."

Opponents feel that while the review process could be improved
at the federal and state levels, it does nothing to simplify
the process for the grantee.  Moreover, many feel any redun-
dancies are justifiable on a quality assurance basis.  Repre-
sentative comments are:

    "Preapplication and mid-course reviews will only add
     another layer of complications and meetings and time
     requirements."

    "Review is needed for quality control.  Even if
     everyone does start out in the right direction there
     is no guarantee that they'll get the final product
     absolutely right."

     A second type of action that proponents have discussed is
direct assistance to states or grantees.  Specific types of
aid could include:

       •  Providing model generic facility plans that
          would improve quality and shorten the time
          needed to complete facility plans.

       •  Assisting in the training of reviewers to en-
          sure their quality and to facilitate the promu-
          lgation of procedures and technical information.

     Supporters of these types of assistance contend:

     "Well-trained reviewers can mean the difference
      between night and day to the program.  If they know
      what they're looking for and can spot potential
      problems early, they'll not only speed up the pro-
      cess but also improve its quality."

-------
                            VII-5
    "Generic plans can be very helpful, especially to a
     small community, as a starting point for design.
     After all, they don't usually have much experience
     in this area and such plans can speed this education
     process and give them confidence in their own
     engineers."

Opponents of direct assistance have raised questions about the
concept itself and the specific actions listed above:

    "It's not the federal government's responsibility to
     lead the municipalities by the hand."

    "Quality assurance rests with the POTWs."

    "Generic plans are useful only in very narrow con-
     texts."

    "Training manuals cost a lot and many are never even
     opened."
Option 3—Increase Local Responsibility

     Proponents believe that municipalities could take more
significant responsibility in the administration of the grants
process.  Two suggested actions are:

       •  Certification of qualified communities to
          "manage" much of the grant process themselves.
          Grantees who have shown a history of competent
          management of previous grants would not need EPA
          or state review of specific activities and func-
          tions associated with individual projects.
          EPA's required statutory functions of oversight
          would be done concurrently with the grantees'
          management of projects, i.e., projects would not
          be detained subject to EPA or state review as is
          currently the case.

       •  Allowance of advanced work on future activities
          to save time (i.e., let localities—at their
          own risk—begin work on Step 2 or Step 3 before
          that grant is signed).  Currently no major
          design work (Step 2) can be done by grantees
          until the Facilities Plan has been approved by
          EPA and state review authorities.  Several
          months of "nonproductive" time, for the gran-
          tees, are consumed in this review process.
          Grantees may prepare and submit the Step 2
          grant application before the Facilities Plan is
          approved, but this is rarely done.

-------
                            VII-6
Examples of supporting views are:

    "Certification would save time and money for EPA,
     states, and locals."

    "Many grantees have extensive experience in the
     grants process—let's use it."

    "Advanced work on steps would shorten the process
     without sacrificing quality."

Opponents feel that while locals should play a role in the
administration of the process, states would not save time,
save money, or improve quality by significantly increasing
local responsibility.  Some comments that have been received
are:

    "Locals are already too burdened with the process—
     don't make things worse by increasing their respon-
     sibilities."

    "You may not be able to maintain national standards
     of quality unless the federal government is actively
     involved."

    "Advance work sounds great but what if a plan isn't
     approved after work has already begun on it?  Who
     will pay?  Most grantees couldn't afford the finan-
     cial risks of advance work on steps."
Option 4—Simplify, Reduce Requirements

     Option 4 seeks to trim the requirements other than those
associated with planning and review (discussed in Option 2) as
a means to shorten the time involved in the process and
lighten the administrative load on all levels of government.
Sample actions that could be taken are:

       •  Streamline the National Environmental Policy
          Act (NEPA) to the extent possible.

       •  Incorporate flexibility into the planning and
          evaluation activities so that not all require-
          ments have to be applied to all projects.
          Examples include waiving the requirement for
          certain large cities to evaluate land treatment
          if land is simply not available, and waiving
          the requirement that small systems consider
          very sophisticated advanced treatment processes
          when they would never have the staff to run
          such a plant.

-------
                            VII-7
       •  Optimize the Infiltration/Inflow program to cut
          costs and reduce the length of time required in
          the program.  Currently the I/I program con-
          sists of four major components:  an I/I test
          and analysis of sewer systems to identify the
          existence of I/I; a sewer system evaluation
          survey (SSES) where excessive I/I is identi-
          fied; a sewer rehabilitation which, in some
          cases, extends past the plant start-up date;
          and an ongoing program for sewer maintenance.
          A recent EPA study of 18 sewer systems showed
          that the average time needed to complete Step 1
          projects with I/I and SSES programs was 34
          months.

       •  Expedite the procurement process for the gran-
          tees through such actions as approving grantee
          certification for procurement, using state and
          grantee procurement agreements, or providing
          model procurement ordinances for local govern-
          ments to adopt.

       •  Shorten the final audit and project closeout
          process.

     Advocates of Option 4 emphasize that a reduction in re-
quirements could streamline the grants process and reduce the
administrative load while still ensuring quality.  Some com-
ments on specific actions are:

    "If we can start an Environmental Impact Statement
     early and do it concurrently with the facility plan,
     we could save over a year."

    "The I/I program has not lived up to expectations;
     it needs revamping."

    "Many grantees are capable of performing procurement
     functions—certify them."

    "Flexibility is really crucial.  Don't make everyone
     do exactly the same things.  Have state staff who
     can exercise judgment as to when certain require-
     ments are important and when they're not."

    "Let states expend their resources pursuant to their
     own procurement requirements—it would save a lot of
     time."

    "It takes a year or more for the final audit and
     project closeout after the facility starts up—
     that's excessive!"

-------
                            VII-8
Opponents of reducing or simplifying existing requirements
state:

    "There's a danger of sacrificing the programs' qual-
     ity if streamlining becomes the dominant goal."
HOW TO PROVIDE NEEDED POLICY DIRECTION?

     The Agency has the opportunity to decide how it plans to
approach several programs that directly affect the operations
of POTWs.  The options in this area are not mutually exclu-
sive.  Three topics constitute the policy areas:

       •  Option 1—Modify the Innovative/Alternative (I/A)
          Program.  This could affect many small POTWs.

       •  Option 2--Develop an Integrated Waste Manage-
          ment (IWM) Strategy within the CGP.Waste
          treatment/disposal problems at POTWs are com-
          plex and affect many regulations and acts.

       •  Option 3—(Future) Develop CSO/Stormwater
          Strategy.

Each of the options and its supporting rationale is described
below.


Option 1—Modify the Innovative/
Alternative (I/A) Program

     Currently, the I/A program is not used extensively in all
states.  Since October 1978, only 31 innovative and 221 alter-
native projects have been funded.  In addition, some states
have obligated little or no money to such projects.

     Several actions have been suggested for modification of
the I/A program:

       •  Establish a set-aside for innovative, but not
          for alternative, projects.

       •  Fund alternative and innovative projects at 85
          percent of the total cost of the projects.

       •  Modify project eligibilities under the rural
          set-asides to allow the funding of nonalter-
          native projects if they are more cost-effective
          than alternative types.

-------
                            VII-9
Comments from proponents of these types of modifications are:

    "There's no incentive to go through all the hassles
     of the I/A program if only the I/A portion of a
     project is eligible for 85 percent funding—that
     portion of the project is usually so small that the
     increase in funding dollars is negligible."

    "We want the most cost-effective functional programs
     we can get in the rural areas—even if they aren't
     'alternative' projects, if they are cost-effective
     they should be eligible for set-aside funds."

Opponents of altering I/A say:

    "I/A has been a failure—let it expire when funding
     stops on September 30, 1981."

    "Obviously, many states don't care about I/A, so why
     should the federal government try to increase the
     number of grants?"
Option 2—Develop an Integrated
Waste Management (IWM) Strategy
Within the CGP

     The Agency recognizes the need to coordinate programs
dealing with waste management:

       •  Among different media (e.g., air, surface,
          water, land, oceans),

       •  Among multiple waste sources (e.g., industrial,
          POTW, non-point sources),

       •  Among various waste types, and

       •  To encourage reuse and recycling.

IWM is a complex series of tradeoffs that affects many EPA
programs, offices, and legislative acts and, therefore, cannot
be dealt with comprehensively through the 1990 strategy.

     Two areas, however, where the 1990 strategy does provide
an opportunity to deal with IWM are in implementing local
pretreatment programs and in developing a sludge management
policy.  Some interested parties have advocated a greater em-
phasis on pretreatment.  They believe that the pretreatment of
industrial wastes would greatly enhance the effectiveness of
POTWs in treating wastes.  Compliance rates would increase

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                            VII-10
because the toxics occurring in many industrial wastes that
can adversely affect treatment processes would be reduced or
eliminated.  In addition, pretreatment could conserve energy
and produce recyclable sludges.  Statements from advocates of
specific actions for pretreatment are:

    "Pretreatment can be very effective in making POTW
     operation more consistent and reliable, but we need
     guidance from above on how to do it."

Those opposing further use of pretreatment at local levels
say:

    "Pretreatment really isn't going to accomplish much.
     There are lots of toxics in household and commercial
     wastes."

    "How are you going to enforce pretreatment?  By fin-
     ing the POTW?"

     Sludge management is another area where IWM can be exam-
ined within the context of the 1990 strategy.  POTWs must deal
with sludge on a daily basis.  It is the Agency's intent to
promote the reuse and recycling of sludges where possible.
Some vehicles for this could be landspreading, landfilling,
and other land disposal practices.  However, one by one, regu-
lations have been adopted that reduce the number of options
available for the disposal of sludge—regulations on land-
spreading, land disposal, ocean dumping, the use of open
dumps, and air pollution from combustion.

     Those who support the development of a sludge management
policy ask:

    "Should the government use 201 funds from the Con-
     struction Grants Program to study sludge management
     broadly, including sludges from POTWs, industries, and
     industrial pretreatment operations?"

Opponents of these actions state:

    "Sludge management should be a local responsibility."

    "If grantees were forced to handle sludge problems,
     maybe they would enforce pretreatment standards."

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                            VII-11
Option 3—(Future) Develop
CSO/Stormwater StrategJ

     Runoff from stormwater has been and continues to be a
major problem for POTWs.  Two significant problems exist re-
lated to water quality.  First, many facilities are unable to
treat large volumes of stormwater, which occur at times of
heavy precipitation (e.g., municipalities with combined waste
and storm sewers).  In some cases significant flows have to be
diverted and discharged directly to the receiving waterway
with little or no treatment.  In other cases such diversion is
not possible and the added volume of combined stormwater and
wastewater simply overwhelms the plant and washes away sub-
stantial portions of the plant's activated sludge.

     The second water quality problem related to stormwater is
only indirectly related to POTW facilities.  It is that non-
point source runoff at times of precipitation can result in
significant levels of suspended solids, minerals, pesticides,
and other substances in the water, which results in nonattain-
ment of water quality standards.  In such cases, even if the
POTW facility performs perfectly, the waterway will still not
meet its use and water quality designations.

     While the present Combined Sewer Overflow program at-
tempts to correct some of these plant problems, they are so
pervasive that the current program is insufficient.  Since the
long-term water quality problems associated with stormwater
are so significant, a separate effort is needed to deal with
stormwater through CSOs and other stormwater programs.  In the
meantime, however, proposals have been made to allow high flow
variations for CSOs, so they will be encouraged to divert
stormwater when necessary and to treat the regular wastewater
as much as possible.

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CHAPTER VIII
MANAGEMENT

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                 VIII. MANAGEMENT AND OVERSIGHT
                 —RUNNING A DELEGATED PROGRAM
     EPA is now delegating substantial elements of the Construc-
tion Grants Program to state agencies, in accordance with a Con-
gressional mandate in Section 205(g) of the Clean Water Act.   With
the advent of delegation,  regional EPA offices are in the pro-
cess of shifting from directly operating the Construction Grants
Program to overseeing state management of the program.  This
shift has resulted in the use of a wide variety of oversight
practices in different regional offices.

     The furtherance of extensive delegation will require a re-
examination of and changes in EPA's management and oversight
activities.  Additional changes may also be warranted to remedy
weaknesses in the program, such as the lack of financial experi-
ence or sophistication characteristic of many prospective grantees,

     This chapter focuses on four major issues involved in the
management of the Construction Grants Program.  These four
issues are:

       •  What should be the federal role under dele-
          gation to states?

       •  How should a transition to a new role be made?

       •  What structure is best for technical assistance?

       •  How to ensure sound local financial management?

     These issues, together with the major options associated
with each issue, are discussed in turn in individual sections
below.
WHAT SHOULD BE THE
FEDERAL ROLE UNDER
DELEGATION TO THE STATES?

     As noted, EPA's management role is changing as the day-to-
day operation of the Construction Grants Program is delegated
to the states.  The key options identified in the research for
the 1990 strategy are described below:

-------
                          VIII-2
       •  Option 1—"Supervisor"  or Project Manager.   EPA would
          delegate certain activities and procedures  to the
          states but would continue to exert direct management
          control over the states.   EPA would still require
          consistent procedures among state grant projects.

       •  Option 2—-"Franchiser"  or Program Manager.   EPA would
          recede from direct supervision, but would provide
          states and grantees with  extensive support  to improve
          technical quality, fiscal planning, and administra-
          tion of the program.  EPA would continue to conduct
          "quality control" monitoring of state operations to
          ensure that procedures  are adequate to achieve
          program success, and would intervene in program
          administration when significant deficiencies were
          discovered.  Variation  among state systems  would
          be allowed.

       •  Option 3--Environmental Manager or Regulator.  EPA
          would delegate to the state all authority for POTW
          construction with the stipulation that certain
          treatment capacity or environmental quality targets
          be met.  The primary mechanism for ensuring acceptable
          state performance would be enforcement action against
          POTWs failing to meet discharge limitations or
          failing to stay on a compliance schedule.

       •  Option 4--Selective Oversight.  EPA would single out
          certain high priority (e.g. , SMSA projects) and other
          projects for close supervision and give the states a
          free hand with the others.

     The historical role for EPA is most closely described by
Option 1, the supervisor role.

     The research and discussion on the 1990 project has led
EPA to tentatively favor Option 2,  the franchiser role.  This
option is often explained by its supporters using an analogy
to an automobile dealership franchise.  The franchiser (EPA)
would provide technical and management assistance but very
little direct management or supervision.  The franchisee (the
state) would be responsible for most details of daily operation.
The review and oversight function would primarily comprise the
tracking of franchise performance,  rather than the direct
review and approval of specific actions or decisions.

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                          VIII-3
     Typical comments in support of the franchiser option are;

    "The states ought to be left alone to run the program
     in their own ways—they know best what will work for
     them and as long as general criteria of performance
     are met, EPA shouldn't get involved."

    "The program will benefit from freeing up EPA staff's
     time to apply more attention to program results and
     improving program performance."

Comments favoring the other options include:

    "EPA ought to maintain some active review and approval
     functions, in order to bring consistency to the
     program's administration across the 50 states."

    "I think selective oversight is a more realistic
     option.  The political reality is that EPA needs to
     know what's happening on the major grants in each
     region.  EPA should pick out the high priority
     projects, manage them very closely, and leave the
     rest all to the states."
HOW SHOULD A TRANSITION
TO A NEW ROLE BE MADE?

     If a change from EPA's present role as "supervisor" of the
state programs is to be recommended from the preceding consider-
ations, then one must also consider how a transition to that
new role ought to be made.  Should it be phased in as a
continuation of present policy, or should regulatory or even
legislative changes be sought to make the transition swifter
and more complete?  Four major options have emerged:

       •  Option 1—Little Change—Phase In State Delegation
          Under the Current Policy.  States would gradually
          assume more delegable responsibilities.

       •  Option 2—Regulatory Change—Allow More Activities
          to Be Delegated.  States would become responsible for
          more delegable activities than can be done under
          current regulations.

       •  Option 3--Legislative or Administrative Change—
          Delegate Almost All Responsibility.  States would
          assume almost all responsibility and liability for
          project-specific requirements.

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                          VIII-4
       •  Option 4—Change Program to Block Grants—Delegate
          All Responsibility.   States would assume total
          responsibility for the program.

     Each option is described  below with accompanying proponent
and opponent comments.
Option 1—Little Change—
Phase In State Delegation
Under the Current Policy

     Currently, EPA maintains a role as supervisor of the Con-
struction Grants Program.  In this capacity it maintains strict
oversight of states' activities.  This has been accomplished
through the development and implementation of standardized
procedures for grantees to ensure uniformity of action across
states.  While some responsibilities have been delegated to
states, this has been done on a gradual and careful basis with
the specific responsibilities varying state by state.

     Advocates of continuing this gradual transition agree that
EPA should delegate responsibility to states, and that the phased
approach is preferred.  A typical comment is:

    "Few states are currently ready to take full
     responsibility for the Construction Grants
     Program, if we force it on them too quickly,
     there could be deleterious results."

Opponents of this option feel that it does not go far enough in
the assignment of responsibility to states in the near-term.
Typical comments are:

    "Even if states assumed the maximum level of
     delegable responsibility now under the current
     program, EPA would still be heavily involved in
     the process—there's no way under current
     regulations that states could be fully respon-
     sible for the whole program."

    "The program would be more effective if states
     were given more responsibility."

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                          VIII-5
Option 2—Regulatory
Change—Allow More
Activities to Be Delegated

     Under Option 2, EPA would step up its phased approach to
state delegation by modifying the regulations governing
the CGP to allow states to take more responsibility in the
program's management.  Most activities, with the exception of
ones such as grant offers, would be delegated to the state.
Examples of types of activities in which states would become
increasingly more involved are:

       •  Program Operations

          —Basic quality reviews

          —Day-to-day operations responsibilities
            ranging from pre-application to project
            closeout.

       •  Policy—national and regional policy
          development in cooperation with EPA.

       •  Record keeping—hard copy project files
          with up-to-date information.

EPA would still retain responsibility for some specific components
of the program, including non-EPA federal requirements, e.g.,
NEPA, Minority Business Enterprises, and federal wage rate
requirements.  These components would require the Agency to
remain an active member of the program.  EPA estimates 50 to
60 percent of the program would become effectively delegated.

     Proponents of Option 2 feel that modifications to the
regulatory structure would allow states to make the transition
to having more control in running their programs, and it would
free EPA to focus on improving the program through national-
level program directives.  Some comments are:

    "EPA could make a more significant contribution
     to the CGP by making a substantial transition,
     primarily by leaving the operation of the program
     to the states and concentrating its efforts on
     the 'big1 issues."

    "States might be more interested in accepting
     delegated responsibility if they knew that they
     were going to run more of the show."

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                          VIII-6
Opponents of Option 2 tend to feel either that EPA would be
giving away too little or too much.  Comments include:

    "EPA is responsible for running the program and this
     means it's still retaining a significant amount
     of control."

    "The states can't handle a quick transition.  EPA
     should take it slower, one step at a time."
Option 3—Legislative or
Administrative.Change—Delegate
Almost All Responsibility

     Option 3 comprises legislative and/or administrative
changes to the current program that would enable entire project
responsibilities to be transferred to states.  State responsi-
bilities would dramatically increase for the daily oversight
of projects, and states would accept responsibility for grant
offers, resolution of audit exceptions, and making payments.
Under this option the states would be more responsible for
non-EPA federal programs that affect the CGP, such as NEPA and
MBE.

     The Agency would retain responsibility for national-level
objectives (i.e., would have to answer to Congress for achieving
the national goals).  However, states would also be held legally
responsible and accountable for proper operation of the CGP.

     Proponents of the option say:

    "Getting the federal government out of the
     program would greatly simplify things for the
     states."

    "States would finally be able to run the program
     in ways which are most effective for them."

Opponents feel that the success of the CGP may be threatened
if states are given such power through legislative amendments.
Comments are:

    "Fifty states will have fifty different programs—you'll
     never reach a uniform national goal of water quality."

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                          VIII-7
    "Municipalities would rather see EPA in control—there is
     a feeling that some states are not fully competent to
     accept almost total responsibility."
Option 4—-Change Program
to Block Grant—Delegate
All Responsibility

     Under this form of transition, the federal government
would quickly move out of active involvement in state Construc-
tion Grants Programs.  EPA would allocate and distribute funds
to such states in a "block," and leave the ultimate decisions
on disposition of the funds up to the states.  There would no
longer necessarily be federal project eligibilities for the
program or federal requirements on grantee eligibilities.
Comments include:

    "If there's going to be delegation, then it ought to be
     complete.  There's no other way to guarantee that the
     states will truly become responsible for such planning and
     resource decisions until they have to go it alone."

    "No, it doesn't make sense for EPA to just 'hand out
     money.'  If these projects are being funded at the 75
     percent level, then the federal government should keep an
     active hand in the process."
WHAT STRUCTURE IS BEST
FOR TECHNICAL ASSISTANCE?

     Many people feel that since the effective performance of the
Construction Grants Program is dependent upon expertise in a
number of very specialized areas, it is EPA's responsibility
to maintain that expertise at the state-of-the-art level and
also to make it available to state program offices and to local
grantees.  Considerable debate, however, surrounds the topics
in which the expertise is needed, the form that technical
assistance should take, and what type of personnel should be
used to provide the assistance.  Each of these topics and its
associated options is detailed the following sections.
Areas of Expertise in Whi,ch
Technical Assistance is Needed

     The areas of expertise in which technical assistance could
be provided are numerous.  The areas most often mentioned in-
clude the following:

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                          V1II-8



       •  Financial management

       •  Municipal finance

       •  Integrated waste management

       •  User charge system development

       •  Project management

       •  Alternative treatment design

       •  Public participation

       •  O&M quality control

       •  Water conservation and energy efficiency

       •  Infiltration and inflow

     Those who feel that technical assistance is needed in one
or most of these areas point out that delegation and EPA's
changing role will create a greater dependence on the abilities
of state and local personnel in these topic areas.  Their
comments typically include:

    "With more management of the program by the states,
     the staff can't also keep up to date and educate
     grantees on all the areas of expertise required--and
     these areas are critical to the success of the
     program."

Opponents of providing assistance in particular areas generally
feel the need is not sufficient to justify the effort at the
national level or feel that such programs have not been success-
ful in the past.  Those who oppose technical assistance in
general feel that this expertise would prove more effective in
the long run if it were developed at a local or state level
(i.e., closer to the projects), and that technical asssistance
at the national level will keep that from happening.


Form of Technical Assistance

     The major options in this area include:

       •  Option 1-—Seminars and Training

       •  Option 2—Third-Party Management

       •  Option 3—Guidance, Models^ and Prototypes

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                          VIII-9
Typical comments with respect to these options include;

    "It's fine with us if EPA or the state wants to
     send out more reports, but we probably won't
     use them.  What helps the most is if somebody
     comes down here and works with us for a
     couple of days."

    "The treatment systems that have people who can
     use the literature EPA sends out aren't the
     ones that need help the most.  The systems that
     do need help don't even have anyone to read the
     books—they need personnel help."

    "The seminars are really pretty good.  Our
     problem is that once we get an operator well-
     trained, then he gets a better job offer and
     leaves.  We would really be interested in
     having somebody else run our system for us
     under contract."
Personnel to Provide
Technical Assistance

     The three major options covering who should be used to pro-
vide technical assistance are:

       •  Option l--Technical Support Centers.  Experts in one
          or more of the areas of expertise would staff the
          centers and provide training of state and local
          personnel, conduct seminars, and/or provide training
          materials in needed areas.

       •  Option 2—Interagency Personnel Agreements (IPAs).
          Experts on loan from EPA would serve at the local or
          state level for one or two years to provide training
          of personnel in the needed areas of expertise.  In
          addition, IPAs could provide the project management
          expertise needed.

       •  Option 3--Outside  Contractors.  Contractors on a
          national or state  contract could be brought in to
          manage construction grants projects at the local
          level and provide  the needed project management
          expertise, or to provide training and expertise on
          an as needed basis.

     Typical comments on these options include:

-------
                          VIII-10
    "Technical support centers would just create
     another bureaucracy—we need something more
     responsive."

    "IPAs are a good solution for local level,
     relatively short-term situations such as project
     management."

    "No one wants to be an IPA these days—it's too
     disruptive to move with the real estate markets
     the way they are.  Also, it's hard to go back to
     find good placement in the Agency when the
     assignment is over."

    "Contractors are a good source of expertise and
     provide the flexibility to use them on an as-
     needed basis."
Location and Number of
Technical Support Centers

     Technical support centers are currently favored by EPA.
There remains, however, a major issue concerning their location,
if they are, in fact, to be established.  There are two major
choices with respect to both how many such centers to have and
where to locate them.  The major options are:

       •  Option 1.  One center

       •  Option 2.  Multiple centers—in Regional EPA offices or
                                     —elsewhere.

     Each option, of course, has its merits, and EPA, so far,
is neutral on this question.  Advocates of the one-center con-
cept feel it would be advantageous to have all the national
experts centrally located with access to the policy and broader
program expertise in EPA's headquarters.  Being in one location
would allow the experts to consult with one another easily.

     In contrast, the supporters of the multiple-center approach
feel that such centers would benefit from specialized reputa-
tions in their functional areas.  In addition, multiple centers
would allow for more interaction and cross-fertilization with
state and regional program staff, who are closer to firsthand
acquaintance with the problems.

     Finally, there is another school of thought that argues
that each of the regional EPA offices needs expertise in many
areas in order to serve its region effectively.  That group

-------
                          VIII-11
claims that many of those skills already reside in the regional
offices, and it would be relatively easy to add the few skills
that are lacking, such as municipal finance.  Moreover, regional
technical support centers could emphasize those areas of
expertise most important to the region.  Supporters of regional
centers also fear that the creation and staffing of technical
support centers could draw off their best current support staff.
HOW TO ENSURE SOUND
LOCAL FINANCIAL MANAGEMENT?

     There is a recognized need for POTWs to acquire improved
financial management capabilities and related management systems
as they assume the responsibilities of managing a construction
grants project and,  later, the routine operation of a sewage
treatment system.  Attention to these needs is necessary to help
ensure t.hat:

       •  POTWs are operated in compliance with permit
          standards;

       •  POTWs are designed and operated in a cost-effective
          manner; and

       •  POTWs are managed as self-sustaining operations,
          with sufficient concern for operations and
          maintenance,  expansion, upgrading, and eventual
          rehabilitation.

     The types of systems that might be appropriate for a
grantee POTW include:

       •  Supporting accounting systems

       •  Financial analysis

       •  Budgetary control, financial planning, and
          reporting

       •  Grant management systems

       •  User charge systems

       •  Pretreatment  information systems

       •  Fixed asset management systems

       •  Preventive maintenance and spare-parts inventory
          systems

-------
                          VIII-12
     There are three major options for stimulating improved
local financial management capability on the part of the
grantees:

       •  Option 1—Require Financial Systems and Reporting.
          Require every grantee to adopt a CGP-approved formal
          record-keeping and tracking system for financial
          data.  The necessary system development work could  be
          made grant-eligible.

       •  Option 2—Encourage Financial Management Systems.
          Provide model system information in the hopes that
          every system will recognize its needs and tailor
          designs accordingly.

       •  Option 3—Focus on Results Only.  Verify that budgets
          and revenues are adequate, and leave the information
          system for achieving those results up to the grantee.
          This review would occur at the time of permit renewal.

     Typical comments on these options have included:

    "Do you want systems or performance?  I'd rather not
     add another set of paperwork requirements on anyone—I
     just want to see the results.  I want to see that they've
     got enough of a budget to stay solvent."

    "EPA shouldn't, and doesn't have the resources to, get
     involved in the annual budget process of POTWs after the
     grants are closed."

    "Unless you ensure that the right accounting and other
     systems are in place, you're probably not going to see a
     lot more POTWs in good financial health than you see now.
     It's better to spend the time and money up front in this
     area—or we will pay a lot more when systems come running
     back for help later."

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CHAPTER IX
PLANNING

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                                                                                                                           10
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                                                                                                                           10

                                                                                                                           II

                                                                                                                           9

-------
              IX.  IMPLICATIONS FOR PLANNING AND
           THE WATER QUALITY MANAGEMENT PROCESS
     The recommendations and, ultimately, the decisions that
will be made on the subjects of the preceding chapters will
have significant implications for state and federal planning
and the broader water quality management process.  This chapter
is a beginning at making those connections in order to make
the best resource decisions at all levels of the Construction
Grants Program.

     There are three major questions addressed in this chapter:

       •  How to aid local and state priority setting
          for decisions in the Construction Grants
          Program?

       •  How to relate BPWTT1 standards and the
          level of treatment to water quality stan-
          dards?

       •  How to aid the ongoing decision-making
          processes associated with the CGP at the
          federal, state, and local levels?

     Each of these is explored in turn in the following sections
HOW TO AID LOCAL AND STATE PRIORITY SETTING?

     This issue addresses what EPA can and should do to support
the states and localities in their efforts to set project
priorities in a meaningful way.  Assuming that positive recom-
mendations have resulted and been implemented on the previous
topics, there still could be difficulties at the state and
local levels making individual project decisions which carry
out the intent of those broader programmatic decisions.

     There are three important approaches to this need.  One is
to ensure that each application conforms with a higher-level
plan, another is to provide better data, and a third is to
provide guidance on part of the decision-making process.  More
specifically, the three options are:


J-BPWTT, Best Practicable Waste Treatment Technology, refers
 to whatever level of treatment is required on a specific
 waterway.

-------
                       IX-2
•  Option I—Ensure that Grant Applications and Grantee.
   Eligibilities Conform to the Statewide Water Quality
   Management Plan.  This is a combination of efforts to
   aid state and local priority setting which rests on
   assigning responsibility, establishing specific ex-
   pectations, and ensuring consistency with the State
   Water Quality Management Plan.   Under this option
   the responsibility for obtaining better data or tech-
   nical guidance rests on the local or state government.

•  Option 2—Improve Databases.  This options assumes
   that the motivation of the localities and states is
   not lacking, but that access to better information
   is the main thing which would improve decision-mak-
   ing at that level.  Three major types of data have
   been suggested for additional attention:
     (a) water quality monitoring data, to better de-
     fine the status of water quality in specific
     areas, in terms of the types and levels of con-
     taminants present, and the variations throughout
     the year at high and low flow periods;
     (b) population projections, to strive for consis-
     tency in design and construction with respect to
     future growth, so that the capacity of each sys-
     tem is neither too large nor too small;
     (c) financial data, covering historical financing
     patterns (sources of financing and costs) for
     POTWs, so that localities and states are better
     able to plan their own financing programs which
     are suited to the local community and system fi-
     nancial position.

•  Option 3—Provide Criteria for WQ Standards Attain-
   ability .  This approach implies that states and
   localities want to make the right decisions in est-
   ablishing priorities and have or can get the data
   they need, and therefore the primary way EPA can
   aid them is to provide clearer, more definitive meth-
   ods of determining where water quality standards will
   ultimately be attainable and where they will not.
   There are three bases for such determinations, each
   of which can be a matter of professional judgment:
     (a) technological—that the plant performance,
     in combination with other controls, will be suf-
     ficient to result in attainment of the water qual-
     ity standards under a range of conditions (load-
     ings and flow) which can be expected at the plant;
     (b) environmental—that the other conditions af-
     fecting the waterway, such as nonpoint sources
     and natural stream conditions, will not prevent
     attainability;

-------
                            IX-3
            (c) economic—that the per household user charge
            associated with the treatment facility will not
            impose an undue burden on the local community.

     Comments on this topic indicate that people tend to favor
one approach as the most important, while generally acknowledg-
ing value in all.  Typical views on the first option include:

    "As of September 1980, there were 194 approved
     state and areawide water quality plans in place.
     Those represent valuable information and thought
     on the water quality problems throughout the
     country.  EPA should make every effort to guaran-
     tee that new grant applications have drawn on that
     same body of knowledge and are consistent with it."

    "Since 1976 the states have received $126 million
     from EPA to develop their Statewide Water Quality
     Management Plans, which extend the earlier areawide
     plans to cover states from 'border to border.'
     Each not only defines the problems but also identi-
     fies responsible governmental organizations—they
     should be the eligible grantees for this program,
     to assure consistency.  Further, by basing POTW
     grant funds decisions on these plans, EPA will pro-
     vide an incentive for states to keep them current."

Some representative comments citing the need for improved data-
bases include:

    "There is a lack of standardization in monitoring
     and analytical methods.  State monitoring
     networks rarely include gathering of biological
     data for conducting 'general1 assessments of stream
     quality.  In addition, EPA has not set priorities
     for information needs and hence has no clear moni-
     toring strategy."

    "Population projections suffer from a lack of
     consistency among planning efforts—they are
     often inconsistent among facility plans, area-
     wide WQM plans, and state plans for water
     quality, solid waste, air quality, and trans-
     portation."

    "Since the financial soundness of communities can
     play such an important part in whether or not a
     plant gets financed, is built on time, and then
     is operated professionally, EPA and the states

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                            IX-4
     should pay a lot more attention to financial
     data on communities early in the process, even
     as one basis for setting priorities."

     Concerns regarding the need for guidance in the reexami-
nation of WQ standards attainability was represented by these
comments:

    "Organizationally, many states held the WQS-
     setting process outside the WQM process, so that
     necessary feedback on such issues as standards
     attainability did not take place.  They set high
     goals regarding stream uses, but seldom considered
     environmental, technological, or economic con-
     straints.  Now it's unrealistic for them to use
     those same standards as a basis for priority
     setting—they aren't meaningful."

    "The present water quality standards vary all
     over the map—some are solid, but many are
     just 'wishes' and couldn't be used as the basis
     for important decisions on priorities.  In many
     cases they were established without in-depth
     stream-by-stream analysis, detailed guidance
     from EPA, or knowledge of changes in stream flow
     or discharges resulting from diversions, popula-
     tion growth, and industrial relocation and
     expansion."

    "There is so much that needs to be done—and with
     so few resources—we have to reexamine the WQS
     process to provide a better basis for the needed
     decisions."
HOW TO RELATE BPWTT STANDARDS AND LEVEL
OF TREATMENT TO WATER QUALITY?

     The Construction Grants Program has an ultimate environ-
mental focus:  to improve and maintain water quality in the
nation's navigable waters.  However, the connection between
individual plants funded under the program and attainment of
those goals is often tenuous.  For one thing, the basic level
of treatment required of POTWs everywhere, secondary treatment,
is a uniform, national standard.  That is based on the concept
of a two-phased approach:  first, that the uniform standards
would be applied everywhere; and second, that additional
controls, BPWTT, would be required where needed.  Even with

-------
                            IX-5
that two-phased approach, however, it appears that many water-
ways will not attain water quality standards because of other
sources of pollution, such as agricultural nonpoint source and
stormwater.

     Since many areas may not attain water quality standards
with the current approach, suggestions have been made about
changing the basis for treatment standards in the Construction
Grants Program.  The major suggestions have been the following:

       •  OptiQn 1—Continue Current Technology-Based Standards;
          Promote WQ "Enhancement" Everywhere.  This philosophy
          is that uniform treatment everywhere still makes good
          sense and, in areas which will not achieve water
          quality standards, at least water quality will be
          enhanced.

       •  Option 2—Expand Technology-Based Standards to Dif-
          ferent Classes of Receiving Water (e.g., ocean, large
          river, lake).This point of view still supports
          national uniform standards, but offers different
          standards for each type of waterway in order to
          account for the major differences in water quality
          dynamics among them.

       •  Option 3—Restrict Funding to Locations with Attain-
          ability of WQ Standards and Uses.  This viewpoint
          places ultimate importance on attainability of the
          standards and would disallow funds for any other
          projects.

       •  Option 4—Withhold Funding of Projects Where Other
          Pollutant Sources (e.g., nonpoint) Will Prevent
          Attainment of WQ Standards.  This, like the previous
          option, puts great emphasis on ultimately meeting
          water quality standards.  The difference is that
          this is designed to establish an incentive for action
          to be taken on other pollutant sources.  This option
          would allow projects to be proposed and approved and
          would simply delay the actual funding until EPA or
          the state (in a delegated area) is satisfied that
          further reasonable progress toward control of the
          other pollution sources which would otherwise prevent
          attainment is taking place.

     Comments in favor of the technology-based alternatives
include:

    "We should guarantee a uniform level of municipal waste

-------
                            IX-6
     treatment everywhere,  as a basic principle in water
     quality management and as a preventive step in the
     removal of toxics, even though we don't have specific
     standards set for most toxics yet."

    "We have to go with technology as our first round,
     because the water quality standards  are not all
     as good as they should be.  States generally set
     those standards upon passage of the  1972 Act,
     often without considering economic or technical
     attainability or environmental justification.
     The standards have since become fixed reference
     points rather than integral parts of the water
     quality management and planning process."

    "The states have not consistently pulled together
     their WQM plans as the WQM regulations require.
     The plans should include not only water quality
     standards, total maximum daily loads, and waste
     load allocations, but  also municipal and industrial
     treatment needs, controls for nonpoint sources,
     urban storm water, residual wastes,  land disposal,
     dredge and fill operations, and a water conser-
     vation plan.  The result of the failure to
     consolidate state plans has been to  make the
     phrase 'consistency with WQM plans'  unclear and
     an impractical basis for program decisions."

On the other hand, supporters of the two  options based on
water quality standards make the following arguments:

    "We need a change in the way projects are identi-
     fied, ranked, and funded.  Both the  Needs Survey
     and the state priority lists do not  generally
     contain strong links to water quality problems."

    "EPA and the states should set priorities so that
     they review the most critical stream segments
     first and conduct the analysis of attainability
     before the state makes decisions on  construction
     grants or permit conditions."

    "If we don't have enough money to pay for every-
     thing, why should we spend any of it where we
     aren't going to achieve the standards and
     beneficial uses we want.  In the final analysis,
     if the water won't qualify for the uses we want
     of it, then the money's gone for naught."

-------
                             IX-7
HOW TO AID THE ONGOING
DECISION-MAKING PROCESS?

     As states take on increasing responsibility for the
Construction Grants Program in the future, EPA should not merely
retire into a review role, but should aid the states by taking
actions to support the states in their ongoing decision-making
activities.  Some of these actions could involve information
interchange with the states—a management information assist-
ance analogy to the more familiar technical assistance function.
Other actions could include establishing state-federal-local
responsibilities in such a way that states are well-positioned
to make the ongoing decisions they will need to make regarding
establishing priorities among communities or certifying certain
cities for self-administration of the program.

     Four major approaches to aiding these ongoing processes
have been identified for discussion:

       •  Option 1—Expand State Role to Emphasize Grantee
          Financial and Management Capabilities.  This is
          focused on stimulating states to become more deeply
          involved in assuring financial and management capa-
          bilities of their grantees.  These two areas signifi-
          cantly influence the ability of a system to operate
          consistently in compliance with its permit requirements

       •  Option 2—Establish Management Tracking System.  EPA
          would aid the development and distribution of infor-
          mation and management systems that are focused on
          tracking results rather than just process.  The
          objective would be to enable states to track the
          management of their POTWs on a broad scale as a means
          of guaranteeing that these systems will remain sound,
          viable institutions which are capable of meeting
          their technical and other requirements.

       •  Option 3—Develop Methodologies for Considering Point
          and Nonpoint Source Impacts on Water Quality.  State
          and communities need analytical and methodological
          support if they are to make significant progress
          toward assessing priorities and making facility
          decisions increasingly on water quality bases.

       •  Option 4—Establish National Priorities and Guidance
          (e.g., toxics criteria).Particularly if states may
          be allowed more flexibility in the future under the
          Construction Grants Program to make distinctions among
          levels of treatment based on water quality, it will

-------
                        IX-8
      be increasingly necessary to consider issues such as
      the importance of and appropriate levels for toxic
      criteria.   Other issues will also be significant,
      including  some issues which are currently outside the
      traditional wastewater treatment area.   EPA could aid
      the decision-making process at  the state and local
      level by providing guidance on  the relative importance
      of relevant issues and methods  of dealing with them.
      For example, to date, toxics are understood to be re-
      moved to some degree by secondary treatment, and are,
      of course, a major target of industrial pollution con-
      trol regulations.  However, there is currently no uni-
      form analytical basis for states to evaluate such
      tradeoffs  between POTWs and industrial  sources.

 Representative  comments in these areas include:

"Many states haven't viewed their role broadly
 enough to realize that they should be reviewing
 on a regular basis not only grantee  technical
 performance but also their financial and manage-
 ment positions—and that's ultimately where
 many systems are weak, and why they're not
 performing as well as you'd like."

"Tracking of performance is uncoordinated and
 duplicative.  Tracking tends to focus on mile-
 stones and activities rather than on the quality
 of results."

"The timing of evaluations is often poor; the
 quality of evaluations is inconsistent."

"Fiscal, financial, and institutional aspects of
 the problem-solving process are weak.  This
 shows up especially in the poor operations and
 maintenance of  POTWs."

"The problem-solving process must give more
 consideration to nonpoint source controls when
 making point source control decisions.  However,
 there are not real requirements in the Act or
 elsewhere for nonpoint source implementation."

"Toxics have emerged as a significant problem.
 Because of the high costs of toxics monitoring
 and analysis, their persistence in aquatic

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                        IX-9
 ecosystems, and questions about pathways,  fates,
 and environmental effects, the present water
 quality management program has been unable to
 define or resolve the toxics problem."

"Nothing can really be done about the toxics
 problem until EPA develops ambient criteria
 which are legally defensible and defines the
 state-of-the-art in toxics control for point and
 nonpoint sources."

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APPENDICES

-------
                            Appendix A


             LIST OF 1990 ISSUE PAPERS AND DRAFT STRATEGIES
      Funding Strategy

      1.   First Concept Paper (February)
      2.   Second Concept Paper (June)
      3.   Draft Funding Strategy
 II.   Management Strategy

      1.   Roles of EPA
      2.   Third Party Management Options for Small Communities
      3.   State Resources Under 205(g)
      4.   Current Program Management
III.   Operations Strategy

      1.  Background and Problem Definition Paper on Grants
            Process
      2.  Small Alternative Wastewater Systems Strategy
      3.  Streamlining Option Papers and Overview
      4.  Facility Planning Process
      5.  Integrated Waste Management
      6.  Innovative and Alternative Program
      7.  Quality Assurance
      8.  Inflow/Infiltration
      9.  Federal Laws
     10.  Generic Plans for Small Communities
     11.  Certification
     12.  Simplification of A/E Procurement Procedures
     13.  Economic Incentives for POTW
     14.  Procedures for Reviewing the Profit Element of
            Architectural/Engineering Contracts
 For copies, contact Barry Jordan, U.S. Environmental Protection
 Agency, Facilities Requirements Division (WH-595), 401 M Street,
 Washington, D.C. 20460.

-------
                             A-2
     15.   Regional Authority for Deviation to Title  II
            Regulations
     16.   Small and Alternative Wastewater Systems
     17.   Peer Review
     18.  'Simplifying Eligibility of Grantee Administration,
            Legal, and Fiscal Costs
     19.   Compliance with Enforceable Schedules
     20.   Extended Use of Step 2 and 3 Grant Awards
     21.   Implementation of  Attachment 0 to OMB Circular A-102
            of the Construction Grants Program
IV.   Compliance Strategy

      1.   Background and Problem Definition Paper on Compliance
      2.   Operational Aspects of Compliance
      3.   Financial Management
      4.   Enforcement Aspects of Compliance
      5.   Manpower
      6.   Compliance—Existing Plants


 V.   Planning Strategy

      1.   Water Quality Standards Strategy
      2.   Policy Statement  Water Quality Standards Attainability
            and Upgrading
      3.   Economic Guidance for Water Quality Standards  Down-
            grading
      4.   Background Paper  on Planning

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                            Appendix B

               GLOSSARY OF KEY WORDS AND ACRONYMS
A/E

AJE
AST/AWT
BAT
BPWTT
CGP

Circuit Riders
- Architectural and Engineering

- Alternative Justifiable Expenditures
  is a method of allocating the costs of a
  multiple-purpose project to the individual
  project purposes.

- Advanced Secondary Treatment and Advanced
  Wastewater Treatment are required where
  treatment more stringent than secondary
  treatment is needed.  These treatments
  remove such pollutants as phosphorous,
  ammonia, nitrates, or organic and other
  substances.

- Best Available Technology is defined as
  the wastewater treatment method that most
  effectively achieves the effluent standard
  set for a particular facility.

- Best Practicable Wastewater Treatment
  Technology is the method of wastewater
  treatment that is most economically
  feasible in attaining a certain effluent
  standard.  At present, BPWTT requires
  secondary treatment as a minimum for
  treatment and discharge.

- Construction Grants Program

- Circuit riders are government-sponsored
  technical staff who would be available to
  a number of treatment plants within a
  region to aid in the management of a fa-
  cility or help in the correction of an
  operational or compliance problem.

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                             B-2
Collectors
CPM
CSO
CWA
DMR
GAO

GIGS
- Collectors are the part of the sewer sys-
  tem designed to transport wastewater from
  individual buildings to the main inter-
  ceptor sewerage lines.  New collectors are
  necessary to correct violations caused by
  raw discharges and the seepage of waters
  from septic tanks.

- Critical Path Method is a method of opera-
  tions analysis designed to optimize the
  time spent on and the costs of any process
  or operation.  This method could be used
  on the Construction Grants Program to
  eliminate redundancies in the process and
  expedite the processing of individual
  steps.

- Combined Sewer Overflows are sewer system
  designs that allow for the bypassing,
  during high flow periods, of untreated
  wastes directly into surrounding bodies of
  water.  Monies directed to this category
  are for the purpose of preventing or con-
  trolling this periodic bypassing.

- The Clean Water Act (P.L. 92-500) passed
  in 1972 is the major legislative author-
  ization for many of EPA's water quality
  initiatives, including the Construction
  Grants Program.  It was amended again in
  1977.

- Discharge Monitoring Report is a quarterly
  report filed by all treatment plants to
  the state or other authority giving the
  results of effluent quality tests per-
  formed during the testing period.  The DMR
  is the method through which compliance
  with NPDES permits is ascertained.

- General Accounting Office

- The Grants Information and Control System
  is an agencywide computer-oriented manage-
  ment system that contains general purpose
  information on all EPA grant programs,
  whether the program is administered
  through EPA headquarters or through the
  Regions.

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                             B-3
Hydraulic Overload- Hydraulic overload refers to the state of
                    a treatment facility when incoming flows
                    of wastewater are too large in volume to
                    be adequately handled and treated by the
                    facility.  This state may be due to infil-
                    tration problems, especially after rain
                    storms or excessive domestic flows, to
                    cite two possible explanations.

I/A               - Innovative or Alternative.  Innovative
                    project designs are those that incorporate
                    new technologies in the treatment process.
                    Alternative project designs, on the other
                    hand,  step away from the conventional
                    treatment methods for wastewater and util-
                    ize site-specific characteristics which
                    produce new methods of waste treatment;
                    usually alternative projects are most
                    feasible in low density areas.  These two
                    types  of designs are provided with funding
                    for 85 percent of their eligible project
                    costs  by the Construction Grants Program.

ICR               - Industrial Cost Recovery refers to the
                    plan each facility must develop during the
                    application process, through which indus-
                    tries  served by the facility must repay
                    their  fair share of the project's capital
                    costs  (part of which goes to the U.S.
                    Treasury).  However, the clause was post-
                    poned  by Congress in the 1977 Amendments
                    to the Clean Water Act.

I/I               - Infiltration/Inflow.  Infiltration is
                    ground water entering a sewer system
                    through defective sewer pipes, joints,
                    connections, or manhole walls.  Inflow is
                    caused by cross connections from storm
                    sewers and combined sewers, manhole
                    covers, and yards, cellars, and foundation
                    drains.  Because of I/I problems, flow
                    greater than the capacity of the treatment
                    plant  can result in wastes bypassing the
                    treatment process.

Interceptors      - Interceptors are the part of the sewer
                    system designed to transport bulk waste-
                    water  from the collector system to the
                    treatment plant.  Transmission pumping
                    stations are also part of the interceptor
                    system.

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                             B-4
I PA
IWM
Land Treatment
MGD

Needs Categories
Needs Survey
NEPA
Non-Point Source
  Programs
- Interagency Personnel Agreements loan EPA
  experts to the state or local levels for
  one or two years in order to provide
  training of personnel and expertise in
  needed areas:

- Integrated Waste Management.  The plan-
  ning, design, and construction of facili-
  ties for the treatment and disposal/util-
  ization of all wastes (e.g.  municipal
  solid wastes, hazardous wastes, radio-
  active waste).

- The application of treated wastewater to
  land surfaces for ultimate disposal either
  with or without the use of this waste for
  irrigation purposes.

- Millions of gallons per day

- Needs Categories are the seven major types
  of projects funded by the Construction
  Grants Program.  They are:  (I) Secondary
  Treatment; (II) Advanced Secondary Treat-
  ment/Advanced Wastewater Treatment;
  (IIIA) Infiltration/Inflow; (IIIB) Reha-
  bilitation; (IVA) Collectors; (IVB) Inter-
  ceptors; and (V) CSOs.

- The 1978 Needs Survey is a detailed esti-
  mate of the costs of construction of all
  needed publicly owned treatment works in
  all of the states.  This survey was com-
  pleted in order to provide a basis for the
  Congressional allotment of funds to the
  Construction Grants Program.

- The National Environmental Policy Act
  dictates that federal agencies must take
  into consideration the environmental af-
  fects of any proposed actions when making
  decisions.  Its most conspicuous require-
  ment is the introduction of the Environ-
  mental Impact Statement in all agency
  decision making.
  Non-point source programs are policy at-
  tempts to control pollutants from areawide
  sources, such as runoff from agricultural
  and forest lands, runoff from mining and
  construction, and storm runoff from urban
  areas.

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                             B-5
NPDES
O&M

Pipeline




Pipes
POMS and PRMS
POTWs
Replacement and
  Rehabilitation
Secondary
  Treatment
Set-aside
- The National Pollutant Discharge Elimina-
  tion System is a national permit program
  designed to control the discharge of pol-
  lutants into waterways from all specific
  point sources including industrial and
  municipal treatment facilities and commer-
  cial activities.  It is administered by
  EPA or an EPA-approved state agency.  The
  permits are enforceable and must be
  renewed at least every five years.

- Operations and Maintenance

- The status of projects that have begun the
  Construction Grants Process but have not
  yet completed it is often referred to as
  "in the pipeline."

- Pipes are those project types relating
  more to the delivery of wastewater to the
  treatment plant than to the actual treat-
  ing of the wastewater.  Specific cate-
  gories in the "pipes" class are (IIIB)
  Rehabilitation, (IVA) Collectors, and
  (IVB) Interceptors.

- Program Operations Memorandum and Program
  Requirements Memorandum state EPA's  in-
  terpretation of portions of the CWA and
  EPA's related policy statements.

- Publicly owned treatment works is the
  general term used to refer to all treat-
  ment facilities funded under the Construc-
  tion Grants Program.
  Replacement and Rehabilitation is the
  project category name for the correction
  of structural problems in existing sewer
  systems.
  Secondary treatment is the treatment of
  wastewater by biological methods after
  primary treatment by sedimentation.

  A set-aside is the mechanism for specify-
  ing the particular amount of money to be
  used for a particular type of project,
  such as I/A or rural.

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                             B-6
Sludge Management - Sludge management is the management of the
                    disposal of solid waste products from a
                    wastewater treatment plant.
SMS As
Step 1
Step 2
Step 3
Step 4
Stormwater
Standard Metropolitan Statistical Areas
are defined by the U.S. Department of
Commerce either as one city of 50,000 or
more inhabitants or as a city with at
least 25,000 inhabitants which, together
with contiguous places, has a combined
population of 50,000 inhabitants and is
for all general purposes considered a
single economic and social community.

Step 1 of the Construction Grants Program
initiates the planning and engineering of
a POTW.  Often Step 1 is a combination of
what has come to be known as a pre-Step 1
and Step 1.  Pre-Step 1 planning includes
expected costs, work schedules, and proj-
ect compatability with regional plans.
Step 1 itself produces a facility plan
which defines the problem, examines al-
ternative solutions, and selects one solu-
tion for implementation.

Step 2 of CGP develops the detailed plans
for the treatment plants based on the
facilities plan produced in Step 1.  Both
technical and administrative requirements
must be addressed in the plans along with
cost estimates from which bids for con-
struction can be judged.

Step 3 of CGP is the combination of Step 3
and post-Step 3.  In Step 3 the plant is
actually constructed and put into opera-
tion.  Post-Step 3 involves the final
project reviews, reports, and financial
audits.

Step 4 is the combination of Steps 2 and 3
of the Construction Grants Program.  Step
4 grants are awarded to facilities whose
total project cost will not amount to over
$2 million.

Stormwater is water that flows over hard
surfaces, such as roads and parking lots,
and into municipal drainage systems as a
result of rainfall or other precipitation.

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                              B-7
TMDL
User charges
WLA
WQM
WQS
Total Maximum  Daily  Loads  are the greatest
amounts of  pollutants  that an individual
facility may discharge into a body of
water on a  daily  basis.  This level is
defined in  each facility's NPDES permit.

User charges are  the rates whereby users
of the treatment  facility  are charged for
the service so that  all  operating and
maintenance as well  as any capital repay-
ment costs  of  the  facility are collected
from the system's  users.   User charges are
usually based  on metered water usage.

Waste Load  Allocations allocate pollutant
loads that  may be  imposed  on a water body
by individual  dischargers  and also help
identify point source  permit conditions.

Water Quality Management is the attempt to
control and manage all factors that affect
the quality of a body  of water.  Included
in this is  the control of  both point and
non-point sources  of pollutants.

Water Quality  Standards  are legal desig-
nations of  the desired use for a given
water body  and of  the  water quality cri-
teria appropriate  for  that use.
  •D.S. aovEnmnn ramma OFFICE: 1980-0-335-591/6909

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